<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

                 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

    /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

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

               FOR THE TRANSITION PERIOD FROM         TO

                       COMMISSION FILE NUMBER: 000-21261

                                  VIATEL, INC.

             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                                           <C>
                          DELAWARE                                          13-3787366
      (State or Other Jurisdiction of Incorporation or         (I.R.S. Employer Identification No.)
                       Organization)

            685 THIRD AVENUE, NEW YORK, NEW YORK                              10017
          (Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 350-9200

          Securities registered pursuant to Section 12(b) of the Act:

                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $0.01 per share

    Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes  / / No

    Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K /X/.

    The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 10, 2000, was approximately $1,783,712,670.00. As of
April 10, 2000 50,034,866 shares of the registrant's common stock, $0.01 par
value, were outstanding.

    Documents Incorporated by Reference. None.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     PAGE
                                                                                   --------
<S>       <C>        <C>                                                           <C>
Part I...........................................................................      1

          Item 1.    Business....................................................      1
                     Overview....................................................      1
                     Strategy....................................................      2
                     Our Network.................................................      2
                     Products and Services.......................................      5
                     Sales and Marketing; Customer Service.......................      7
                     Information Systems.........................................      8
                     Competition.................................................      9
                     Government Regulation.......................................     12
                     Employees...................................................     24

          Item 2.    Properties..................................................     24

          Item 3.    Legal Proceedings...........................................     25

          Item 4.    Submission of Matters to a Vote of Securities Holders.......     25

Part II..........................................................................     26

          Item 5.    Market for Registrant's Common Equity and Related
                     Stockholder Matters.........................................     26

          Item 6.    Selected Consolidated Financial Data........................     27

          Item 7.    Management's Discussion and Analysis of Financial Condition
                     and Results of Operations...................................     29

          Item 7A.   Quantitative and Qualitative Disclosures About Market
                     Risks.......................................................     47

          Item 8.    Financial Statements and Supplementary Data.................     48

          Item 9.    Changes in and Disagreements with Accountants on Accounting
                     and Financial Disclosure....................................     76

Part III.........................................................................     76

          Item 10.   Directors and Executive Officers of the Registrant..........     76

          Item 11.   Executive Compensation......................................     81

          Item 12.   Security Ownership of Certain Beneficial Owners and
                     Management..................................................     87

          Item 13.   Certain Relationships and Related Transactions..............     88

Part IV..........................................................................     89

          Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form
                     8-K.........................................................     89
</TABLE>

                                       i
<PAGE>
                                     PART I
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This report contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by forward-looking
words such as "anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "should," "will," and "would" or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial position or state other "forward-looking" information. We believe that
it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control. The factors listed below in "Part II--Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--Risk
Factors," as well as any cautionary language in this report, provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.

ITEM 1. BUSINESS

OVERVIEW

    We are a rapidly growing provider of "ALL DISTANCE," integrated
telecommunications services in Europe and North America. We operate one of
Europe's largest pan-European networks, with international gateways in New York
City and London, direct sales forces in 12 Western European cities and New York
City and an indirect sales force in numerous locations in Western Europe and
North America. We have full public telecommunications operator licenses in each
of Austria, Belgium, Canada, France, Germany, Ireland, Italy, The Netherlands,
Spain, Switzerland, the United Kingdom and the continental United States, and
interconnection agreements with the incumbent telecommunications provider(s) in
each of these countries.

    Our principal asset is our high-capacity fiber optic network. To date, our
network consists of 4,700 route kilometers of long-haul fiber linking cities in
the United Kingdom, The Netherlands, Belgium, France and Germany. Our network is
expected to reach over 10,400 route kilometers in Europe by the end of 2000, and
is connected to our trans-Atlantic cable capacity and U.S. fiber assets. Our
network has been designed to allow customers to seamlessly exchange voice, data
and video content between North America and Europe, and within Europe. Our
technologically advanced network employs fully protected, self-healing, ring
architecture and synchronous digital hierarchy systems to provide high
reliability and redundancy.

    Our network currently connects New York with 40 cities in Europe. In the
second half of 2000, it is expected to connect Boston, Chicago, New York,
Philadelphia and Washington, DC with 59 cities in Belgium, France, Germany, The
Netherlands, Switzerland and the United Kingdom. Our European network operates
at a speed of 20 gigabits per second but can be upgraded, without service
interruptions, to at least 640 gigabits per second per fiber pair through the
further application of dense wave division multiplexing technology, to support
Europe's growing demand for bandwidth intensive data services.

    We recently announced our entry into the competitive local exchange carrier,
or CLEC, business. Through a combination of self-constructed assets and fiber
exchanges, we will be deploying 22,000 fiber kilometers of metropolitan fiber,
in London, Amsterdam, Paris, Berlin, Frankfurt and Dusseldorf as well as in the
New York metropolitan area. We will soon be able to link our pan-European, North
American and trans-Atlantic broadband networks with high-speed local fiber
networks to offer customers a wide array of local and long-distance voice and
data services over a single seamless, multinational, integrated network.

                                       1
<PAGE>
STRATEGY

    Our goal is to provide integrated end-to-end, "ALL DISTANCE," solutions for
our customers' voice and data communications needs over our own network. We plan
to deliver these solutions primarily through networks that we have built, are in
the process of building or will build or acquire through fiber exchanges. Key
components of our strategy to achieve this goal are:

    - CREATE AN INTEGRATED, CONTINUOUSLY UPGRADEABLE PAN-EUROPEAN NETWORK WITH
      LONG-HAUL AND LOCAL ACCESS CAPABILITY

    We will use our pan-European long-haul network to offer inter-city and
cross-border services primarily over our own facilities, rather than lines
leased from others. This network will use dense wave division multiplexing
technology and asynchronous transfer mode protocol to operate at very high
speeds in order to meet our customers' current and future broadband data
requirements. We will complement our long-haul network with extensive
metropolitan fiber networks in key cities in Europe and North America to provide
end-to-end connectivity solutions.

    - INCREASE CUSTOMER "LAST MILE" CONNECTIONS USING MULTIPLE ACCESS
      TECHNOLOGIES

    Since early 1998, we have focused on building our high-capacity, inter-city
fiber optic networks, wherever possible building into the central business
district to permit future direct connectivity to a high percentage of the area's
commercial buildings. Beginning in the second quarter of 2000, we will add
broadband "last mile" connections through a combination of direct fiber
connectivity and wireless links. In addition to broadband fiber and wireless
links, we intend to deploy xDSL technology, beginning in Germany in the second
half of 2000, as an additional means of providing "last mile" connectivity to
our existing and prospective customers.

    - CONFIGURE OUR NETWORK FOR THE PROVISION OF SERVICES OVER INTERNET PROTOCOL

    We have installed Internet protocol routers and asynchronous transfer mode
switches in our network to meet our customers' growing data needs. We believe
that over time Internet protocol will replace asynchronous transfer mode as the
primary network protocol and emerge as the standard for data, video and voice
communications.

    - INTRODUCE ADDITIONAL INTERNET SERVICES

    In addition to expanding Internet access, which we currently offer on a
trial basis in three markets, we plan to offer complex Internet hosting,
e-commerce and hosted applications solutions ("netsourcing") through a strategic
alliance with Intira Corporation beginning in the third quarter of this year.
Under this strategic alliance, we will provide data center infrastructure and
connectivity for Intira's netsourcing activities, and will resell Intira
netsourcing solutions to our small- and medium-sized business customer base.

    - BUILD ON OUR CUSTOMER BASE, EMPLOYEE BASE AND SYSTEMS TO SUCCEED IN THE
      DATA SERVICES MARKET

    We will apply the strategies and skills we have developed in the long
distance market to the growing European data services market. These include
special focus on small- and medium-sized business customers, decentralized local
management, close attention to customer care and effective, reliable back-office
systems. Additionally, we will exploit our market knowledge and sales channels
to bring data services to selected existing voice customers and to identify and
target new customers for data services.

OUR NETWORK

    Our principal asset is our high-capacity fiber optic network, which will be
connected to our own trans-Atlantic cable system and U.S. fiber assets. We began
constructing our European fiber network in 1998. To date, we have completed
construction of the first two phases of our network build, consisting of over
3,000 route kilometers linking 40 cities in the United Kingdom, The Netherlands,
Belgium, France and

                                       2
<PAGE>
Germany. The third phase of our network build, which will add eleven German
cities to our network, is nearing completion. We currently anticipate that the
fourth and fifth phases of our network build, which will extend into southern
and western France and Switzerland, will be completed during the second half of
2000. Due to our recent acquisition of AT&T Communications UK, Ltd.
("AT&T UK"), a provider of voice and data communications solutions primarily to
enterprise level corporate customers, we have added 1,700 route kilometers of
fiber linking 18 additional cities within England and Scotland to our existing
network.

    Our technologically advanced network employs ring configurations and
self-healing synchronous digital hierarchy systems to provide high reliability
and redundancy. The network is equipped with technologically advanced fiber and
optical transmission systems, and consists of a uniform configuration of dense
wave division multiplexing optronics and Lucent fiber optic cable. We believe
that this uniform configuration allows us to ensure very high levels of service
quality while maintaining low operating costs and ease of upgradeability. Our
network was designed from the outset to support Internet protocol, asynchronous
transfer mode and traditional circuit switched services.

    The long-haul network which we are constructing in Europe has at least
48 fibers installed throughout, with between 72 and 96 fibers in one conduit on
most terrestrial segments. In addition, we have laid at least one additional
spare conduit on most terrestrial segments. While we are constructing our
European long-haul network primarily for our own use, we have sold and expect to
continue to sell and exchange dark fibers and wavelengths on segments of our
network. Such capacity sales reduce our construction costs and such exchanges
help us expand our network footprint. We believe we have sufficient fibers to
meet our capacity needs for the foreseeable future and enough existing
additional fibers, as well as duct in which to lay additional fibers, to enable
us to engage in substantial additional fiber sales and exchanges.

    LOCAL FIBER OPTIC NETWORKS

    Through a combination of self-constructed assets and fiber exchanges, we
will be deploying 22,000 fiber kilometers of metropolitan fiber in London,
Amsterdam, Paris, Berlin, Frankfurt, Dusseldorf and the New York City
metropolitan area. We will soon be able to link customers to our pan-European,
North American and trans-Atlantic networks with broadband local fiber
connectivity enabling high speed integrated data, video and voice communication
with higher quality and lower cost, compared to leasing all of our "last mile"
lines from others.

    TRANS-ATLANTIC CAPACITY

    On April 10, 2000, we executed a definitive agreement with Level 3
Communications under the terms of which we acquired a 25% ownership interest in
the trans-Atlantic fiber optic cable project being developed by Level 3. This
four fiber pair, 1.28 terabit system, is currently under construction and is
scheduled to be in service by October 2000. The landing stations for this cable
are on Long Island in the United States and on the west coast of the United
Kingdom. As part of this acquisition, we also obtained 128 STM-1s of capacity on
the Atlantic Crossing 1 cable system operated by Global Crossing.

    In addition to our proposed fiber pair on Level 3's trans-Atlantic fiber
optic cable, we also have significant capacity on the Atlantic Crossing 1 cable
system and additional capacity on the Gemini cable system, used primarily to
provide multi-path redundancy.

    BROADBAND WIRELESS

    We intend to reduce our reliance on "last mile" connections leased from the
incumbent carrier or other competitive local exchange carriers by increasing the
number of customers connected to our network. In some cases, we will construct a
fiber optic extension from the customer's premises to our network. In other
cases, we will deploy a high-bandwidth wireless connection between an antenna on
the customer's premises and an antenna at a central location that is directly
connected to our network. These

                                       3
<PAGE>
point-to-point wireless connections offer high quality broadband capacity and
frequently cost less to install than direct fiber connections. We expect to
deploy wireless last mile extensions in most of our key European markets during
2000.

    A wireless connection typically consists of paired antennas generally placed
at a distance of approximately four to six kilometers from one another with a
direct, unobstructed line of sight. The antennas are typically installed on
rooftops, towers or windows.

    The wireless local loop technologies that we intend to use in our CITYCONNEX
SERVICE-TM- uses point-to-point radio transmissions having narrow beam width,
reducing the potential for channel interference and allowing dense deployment
and channel re-use. In some of our markets, such point-to-point services may be
deployed on unrestricted frequency bands requiring only limited permits. The
large amount of capacity in each channel permits the simultaneous use of
multiple voice and data applications. Properly deployed, wireless local loop
technology can substantially reduce the cost of connecting customers to a
network.

    DIGITAL SUBSCRIBER LINE

    DSL solutions are an important tool to provide broadband access to customers
who are not located near our city fiber rings or in areas not served by our
CITYCONNEX SERVICE-TM-. We are currently negotiating arrangements to co-locate
our DSL access multiplexers in approximately 600 of Deutsche Telekom's central
offices and we expect to initiate commercial DSL service in three German cities
by the end of 2000.

    CIRCUIT SWITCHING VS. PACKET SWITCHING

    There are two widely used switching technologies currently deployed in
communications networks: circuit-switching systems and packet-switching systems.
Circuit switch-based communications systems, which currently dominate the public
telephone network, establish a dedicated channel for each communication (such as
a telephone call for voice or fax), maintain the channel for the duration of the
call, and disconnect the channel at the conclusion of the call.

    Packet-switch based communications systems, which format the information to
be transmitted into a series of shorter digital messages called "packets," are
the preferred means of data transmission. Each packet consists of a portion of
the complete message plus the addressing information to identify the destination
and return address. A key feature that distinguishes Internet architecture from
the public telephone network is that on the packet-switched network, a single
dedicated channel between communication points is not required.

    Packet switch-based systems offer several advantages over circuit
switch-based systems, particularly the ability to commingle packets from several
communications sources together simultaneously onto a single channel. For most
communications, particularly those with bursts of information followed by
periods of "silence," the ability to commingle packets provides for superior
network utilization and efficiency, resulting in more information being
transmitted through a given communication channel.

    Internet protocol technology, an open protocol that allows unrelated
computer networks to exchange data, is the technological basis of the Internet.
The Internet's explosive growth in recent years has focused intensive efforts
worldwide on developing Internet protocol-based networks and applications. In
contrast to protocols like asynchronous transfer mode, which was the product of
elaborate negotiations between the world's monopoly telephone companies,
Internet protocol is an open standard, subject to continuous improvement.

    We believe that a form of Internet protocol-based switching will eventually
replace both asynchronous transfer mode and circuit switched technologies, and
will be the foundation of integrated networks that treat all
transmissions--including voice, fax and video--simply as forms of data
transmission. Current implementations of Internet protocol technology over the
Internet lack necessary quality of service to

                                       4
<PAGE>
support real-time applications like voice and fax at commercially acceptable
quality levels. We expect that a combination of increased bandwidth and improved
technology will correct these deficiencies in the future.

    We are in the process of configuring our network to add packet switch-based
technology to our current circuit switch-based systems. We believe that the
Internet protocol deployment currently under way on our network will enable us
to implement new services based on current Internet protocol technology, and
position us to adopt future Internet protocol technology implementations as they
evolve to support fully integrated communications networks. We anticipate
remaining flexible in our use of technology, however, so that as underlying
communications technology changes, we will have the ability to take advantage of
and implement these new technologies.

    NETWORK OPERATIONS CENTERS

    We currently monitor the activity of our network from international network
operations centers in Egham, England, Somerset, New Jersey and St. Louis,
Missouri (which facility will be closed effective June 30, 2000). These
international network operations centers have been fitted with sophisticated
surveillance and control capability, fraud detection and real time transmission
quality enhancements. Each of the Egham and Somerset network operations centers
is capable of acting as a full backup to the other and allow full capability to
remotely monitor, test and perform diagnostics on key elements of our network.

    Our international network operations centers use a portfolio of network
management operations support systems from Lucent Technologies. The Lucent
systems are expected to be functionally integrated into one platform supporting
multi-vendor network elements. The Lucent operations support systems provide us
with technologically advanced service activation, service assurance and network
management capabilities.

PRODUCTS AND SERVICES

    We provide products and services in three categories: basic services,
advanced services and capacity sales. Our basic products and services include
switched and dedicated long distance, 800 services, prepaid, postpaid and debit
calling cards, conference calling, and enhanced fax services. We provide many of
our basic services on a wholesale as well as a retail basis. Our advanced
services include domestic and international private line services, Internet
access, frame relay, asynchronous transfer mode and Internet protocol services
and managed bandwidth. These services are provided on a wholesale basis to
communication carriers, Internet service providers and other wholesale customers
as well as to end-users. Capacity sales include sales of dark fiber and leases
of capacity that qualify for sales-type accounting. Our services are discussed
below.

    BASIC SERVICES

    INTERNATIONAL AND DOMESTIC LONG DISTANCE SERVICE. International and domestic
long distance service is service that is accessed from a customer's billing
location, I.E., their home or office, using "1xxx" access in the United Kingdom
and Belgium or "1+" access in the United States and Canada. In France and
Switzerland, long distance service is accessed by using either "1+" access or by
dialing "1xxxx" access. In Germany, long distance service is accessed by using
either "1+" access or by dialing "01099" prior to dialing "0+".

    CALLING CARD SERVICES.  Our calling card services are sold in all of our
principal markets and can be used in over 65 countries. In continental Europe,
we believe that a substantial portion of our calling card customers use this
service from their home or office as an alternative to the incumbent carrier for
international calls. In contrast, in the United Kingdom and the United States,
our calling cards are sold to customers primarily for convenience when
traveling.

                                       5
<PAGE>
    PREPAID SERVICES.  Our prepaid card services provide similar features and
manner of use as our calling cards. Our prepaid cards generally can be used from
the United Kingdom, the United States, Belgium, Canada, Germany, France, Israel,
Greece, The Netherlands and Switzerland. We also sell prepaid cards that can be
used only from the country in which they are sold.

    We seek to introduce services that capitalize on the growing popularity of
the Internet for everyday commercial transactions. During the fourth quarter of
1998, we introduced Presto! Card-TM- in the United States. During March 1999, we
introduced presto phone-TM- in the United Kingdom. Presto! Card-TM- and presto
phone allow users to establish a virtual prepaid account that is purchased and
recharged exclusively over the Internet at WWW.PRESTOCARD.COM and
WWW.PRESTOPHONE.COM, respectively. These services enable users to make
international and domestic long distance calls from over 35 countries at
competitive rates and to view their call records on a real-time basis. We
believe that Presto! Card-TM- and presto phone are the first international
prepaid services that can be purchased and recharged instantly over the
Internet. We intend to offer these services in our continental European markets
and to develop additional Internet enabled services that take advantage of the
growing use of the Internet.

    OTHER BASIC SERVICES.  We also provide the additional retail services
described below.

    - WIRELESS SERVICE. In the United Kingdom, we currently offer wireless
      services to business customers through Wavetech Limited. In the New York
      metropolitan area, we offer domestic and international long distance
      services to cellular telephone users who access this service by dialing a
      local access number or, in the case of Bell Atlantic Mobile customers in
      certain area codes, by selecting us as their long distance provider.

    - CONFERENCING SERVICE. We provide an audio conference service which allows
      automatic, manual or operator assisted establishment of conference calls
      24-hours-a-day, seven-days-a-week.

    - TOLL-FREE SERVICE. We provide toll-free service, I.E., "800", "888" or
      "877" service, to customers in the United States, the United Kingdom,
      Belgium, Germany, Switzerland and The Netherlands. We also provide
      international toll-free services for our customers in Europe.

    ADVANCED SERVICES

    We provide the advanced data services described below.

    - SWITCHED DATA SERVICES. We offer frame relay, Internet protocol and
      asynchronous transfer mode services that allow for the effective
      transmission of large quantities of data between different sites. These
      advanced services are used for wide area network connections and in text,
      image and video communications that require greater transmission speed,
      capacity and reliability than traditional telephony services. We are able
      to offer asynchronous transfer mode, Internet protocol and frame relay in
      the United Kingdom as part of a seamless service.

    - MANAGED BANDWIDTH.  Our managed bandwidth service provides capacity of
      2 megabits per second, 34 megabits per second, 45 megabits per second and
      155 megabits per second. Larger bandwidths up to 2.5 gigabits per second
      may also be obtained upon request. Our managed bandwidth product is
      designed for customers that require large transport capacity between
      cities, including carrier customers who use the bandwidth to service their
      end-user customers, as well as large corporate customers and
      Internet-related customers.

    - INTERNET ACCESS SERVICE. We began offering Internet access to retail
      customers in Switzerland in February 1999 and in Belgium and Berlin,
      Germany in September 1999. In Switzerland and Berlin, Germany, we
      introduced a promotional program offering free Internet access and a
      designated amount of toll-free Internet access each day to customers who
      purchase our long distance services on a pre-select basis. In Belgium, we
      offer 100 minutes of free Internet access to all customers who use our
      "1xxx" service to access the Internet. We believe offering Internet access
      will increase usage

                                       6
<PAGE>
      of our services, provide us with additional revenue and further enhance
      our ability to attract and retain customers. Because retail customers in
      these countries pay for the local call that originates the Internet
      connection, we receive compensation on a per minute basis for our Internet
      access services. We intend to offer Internet access during 2000 in
      selected additional European countries in which we have interconnection,
      such as Austria, France and the United Kingdom, as well as additional
      cities in Germany. The regulatory regime concerning Internet access
      services in Europe is currently under development.

    - LOCAL ACCESS SERVICE. This year we began offering our CITYCONNEX
      SERVICE-TM- which enables companies to bypass local loop connections of
      incumbent operators through technologically advanced highly reliable "last
      mile" wireless connectivity. This offering is available within and between
      cities that are currently linked to our European network. Connectivity is
      provided in a variety of ways: a single E1-voice and data; two E1s-all
      voice, all data, or a combination of voice and data; and 10 megabits per
      second local-area-network to local-area-network connectivity.

    - DEDICATED ACCESS SERVICE. Customers using this service lease a
      transmission line that connects the customer's business directly to one of
      our switches or points of presence. This service is marketed to
      high-volume customers in the United States and Europe and can be used for
      voice, data, video and the Internet.

    CAPACITY SALES

    While we are constructing our network primarily for our own use, we have
sold capacity and expect to sell capacity in the future. Such sales include
sales of dark fiber, long term leases of capacity which qualify for sales-type
accounting treatment, and wavelength services. The dense wave division
multiplexing technology used in our network allows us to offer optical wave or
"wavelength" services to our customers, which provides 2.5 gigabits per second
or 10 gigabits per second of capacity. This service is designed for customers
who require large transport capacities between cities, but who do not wish to
purchase dark fiber and invest in the optronics required to enable the fiber to
carry traffic. We believe that the demand for this service will continue to
grow, as optical Internet protocol interfaces proliferate.

    We sell capacity to third parties that offer their own branded products and
service. We believe that certain of these customers buy transmission from us not
only for our prices, but also for access to our software platform, which, among
other things, allows them to utilize our software technology to process calls
made with calling cards and prepaid cards and perform specialized billing
functions. In addition, we also sell capacity to resellers who in turn sell its
long distance services to their customers. For a discussion of the accounting
treatment associated with capacity sales see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--The Viatel Network."

SALES AND MARKETING; CUSTOMER SERVICE

    We reach a broad range of customer groups through a variety of marketing
channels, including a direct sales force, independent sales agents, multilevel
marketing, customer incentive programs, advertising, affinity programs and the
Internet. As part of our multichannel marketing approach, we tailor our
marketing to specific geographic markets and services. We believe this is an
especially cost-effective means of marketing to our target customers.

    We market our services at the local level through both independent sales
agents and an internal sales force, depending upon the particular geographic
market, customer group and service. Currently, we have a direct sales force in
12 Western European cities and New York and have established indirect sales
offices, through arrangements with independent sales representatives and
telemarketing agents, in more than 180 additional locations throughout Western
Europe and North America.

                                       7
<PAGE>
    In both the U.S. and Europe, our sales and marketing staff is currently
divided into two categories: direct sales representatives and indirect sales
representatives. Direct sales representatives are primarily responsible for
face-to-face sales efforts to larger accounts and sales to commercial accounts,
wholesale customers and other carriers. Our local internal sales forces also
typically advertise locally and provide support for our independent sales
representatives. Indirect sales representatives are primarily responsible for
telesales to smaller accounts and residential sales.

    Our direct sales personnel are currently compensated on a salary and
commission basis, with potential commissions being paid on the basis of revenues
generated by new customers solely during their first three months as a customer.
After this three month period, the customer is turned over to proactive account
managers who manage the account and are compensated based on the monthly growth
of such account above certain minimum requirements. We believe that this
compensation structure provides maximum incentive to our direct sales force to
continue to grow our customer base and revenue.

    Many of our independent sales representatives are retained on a
non-exclusive/commission-only basis, with commissions being subject to
charge-back for revenues not collectible by us. We believe that our relationship
with our independent sales representatives is good.

    CUSTOMER SUPPORT

    We are committed to providing our customers with superior customer service
and believe that we have developed the infrastructure necessary to serve both
our existing customer base and accommodate substantial growth with minimal
additional investment. At each of our customer service facilities, our customer
service representatives handle both service and billing inquiries.

    We have also developed our own proprietary software systems to serve better
our customers. For example, in each of our network countries, our monthly bills
are in the customer's native language and local currency (and we have the
ability to bill in Euros). We also provide detailed billing information for
commercial customers that includes itemized breakdowns of usage by account code
and department. In addition, we have implemented an interactive voice response
system that permits customers to obtain up-to-date information concerning their
account and their most recent invoice. We believe that our customer-oriented
philosophy, backed by the strength of our customer support infrastructure,
allows us to differentiate ourself from many of our competitors.

INFORMATION SYSTEMS

    We believe that integrated and reliable billing and information systems are
key elements for growth and success in the telecommunications industry.
Accordingly, we have made significant investments to acquire and implement
sophisticated information systems which are designed to enable us to:

    -  monitor and respond to customer needs by developing new and customized
      services;

    -  manage least cost routing;

    -  provide customized billing information;

    -  provide high quality customer service;

    -  detect and control fraud;

    -  verify payables to suppliers; and

    -  rapidly integrate new customers.

    We believe that our network intelligence, billing and financial reporting
systems enhance our ability to meet competitively the increasingly complex and
demanding requirements of the international and

                                       8
<PAGE>
national long distance markets. While we believe that these systems are
currently sufficient for our operations, these systems will require routine
upgrades and ongoing investments.

    We currently have a turnaround time of approximately 48 hours for new
account entry, subject to credit approval. However, commencement of service can
take substantially longer. Our billing system provides multicurrency billing,
itemized call detail, city level detail for destination reporting and electronic
output for select accounts. Customers are provided with several payment options,
including automated credit card processing and automated direct debiting.

    We have developed software to provide telecommunications services and render
customer support. Each switch has a call detail recording function which is
designed to enable us to: (1) achieve accelerated collection of call records;
(2) detect fraud and unauthorized usage; and (3) permit rapid call detail record
analysis.

    We also use software to assist in analyzing traffic patterns and determining
network usage and busy hour percentage, originating traffic by switching center,
terminating traffic by supplier and originating traffic by customer. This data
is utilized to provide least cost routing, which may result in call traffic
being transmitted over our transmission facilities, other carriers' transmission
facilities or a combination of such facilities. If traffic cannot be handled
over the least cost route due to overflow, the least cost routing system is
designed to transmit the traffic over the next least cost route. The least cost
routing system chooses among the several variables to minimize the cost of a
long distance call over multiple suppliers and multiple choices of terminating
carrier per country. The performance of the least cost routing system is
verified based on a daily overflow report generated by our network traffic
management and a weekly/ monthly average termination cost report generated by
our billing system.

    We have developed a proprietary integrated customer service database and
billing system, called SERVICE ONE-TM-, which is currently in use for our retail
U.S. services. SERVICE ONE-TM- will afford greater flexibility as we increase
service offerings and will accommodate greater customer volume. In addition, we
have implemented an interactive voice response system that will permit customers
to obtain up-to-date information concerning their account and their most recent
invoice by telephone.

    Our systems development group has internally developed sophisticated
proprietary software and intranet systems to manage better business and
appropriately price our services in many of our markets on a real-time basis.
For example, we have developed an interface with our network switches that
allows us to compile network information on a real-time basis, including the
number of minutes being routed through its switch (and corresponding revenue),
points of origination and termination, sources of traffic, by area code, city
and carrier, and other traffic information. We use this information every day in
connection with least cost routing, pricing, cost and margin analysis,
identifying market opportunities and developing our sales and marketing and
network expansion strategies, among other things. We believe that these
analytical tools allow our management team to quickly identify new market growth
and cost saving opportunities as well as control the retail business in an
environment of rapid growth. We believe that we are one of the few competitive
communications companies that have these types of analytical tools and to have
integrated them into its daily operations.

COMPETITION

    EUROPE

    The European telecommunications industry is highly competitive and
significantly affected by regulatory changes, marketing and pricing decisions of
the larger industry participants and the introduction of new services and
transmission methods made possible by technological advances. We believe that as
the international telecommunications markets continue to deregulate, competition
in these markets will increase, similar to the competitive environment that has
developed in the United States following the AT&T divestiture in 1984. Our
success depends on our ability to compete with a variety of communications

                                       9
<PAGE>
providers, including those providing competing voice services, competing
value-added services and competing networks.

    In voice services, we have three main categories of competitors. The first
group consists of the incumbent telecommunications operators in each country in
which we operate. This group includes British Telecom, Cable & Wireless,
Deutsche Telekom, and France Telecom. The second category of competitors
consists of global alliances among some of the world's largest
telecommunications carriers. This group includes Concert, a joint venture
between British Telecom and AT&T.  The third main category of competitors in
voice services is comprised of the new entrants, such as Storm
Telecommunications, KPN/ Qwest, Versatel, Energis plc, Carrier1, and Interoute
Telecommunications.

    With regard to our bandwidth services, we are currently facing competition
from KPN/Qwest and GTS, each of which currently has broadband networks in
operation. We will also experience significant additional competition over the
next ten to twelve months as other broadband networks become operational. These
include networks being constructed by Global Crossing, Interoute and Concert. In
addition, Colt Telecom Group and Level 3 Communications are sharing the costs of
constructing two networks--one to link the German cities of Berlin, Koln,
Dusseldorf, Frankfurt, Hamburg, Munich and Stuttgart and the other linking
Paris, Frankfurt, Amsterdam, Brussels and London.

    In value-added services, we compete with two main types of competitors--the
incumbent telecommunications operators and traditional value-added Internet
service providers. Major Internet service providers include EUNET, a subsidiary
of MCI WorldCom, Ebone, InfoNet and PSINet.

    Many of our current and potential competitors have substantially greater
financial, marketing and other resources than we do and may be able to deploy
more extensive networks or may be better able to withstand pricing and other
market pressures. In addition, incumbent telecommunications operators generally
have additional competitive advantages, such as control access to local
networks, significant operational economies and close ties with national
regulatory authorties.

    NORTH AMERICA

    UNITED STATES.  In the United States, which is among the most competitive
and deregulated long distance markets in the world, competition is based
primarily upon pricing, customer service, network quality, and the ability to
provide value-added services. As such, the long distance industry is
characterized by a high level of customer attrition or "churn," with customers
frequently changing long distance providers in response to the offering of lower
rates or promotional incentives by competitors. We compete with major carriers
such as AT&T, MCI WorldCom and Sprint, as well as other national and regional
long distance carriers and resellers, many of whom are able to provide services
at costs that are lower than our current costs. Many of these competitors have
greater financial, technological and marketing resources than we do. If any of
our competitors were to devote additional resources to the provision of
international or domestic long distance telecommunications services to our
target customer base, there could be a material adverse effect on our business.
Several companies have recently introduced flat rate long distance calling plans
with very low per-minute charges. We cannot predict the effect that these plans
will have on the industry generally and on us in particular.

    As a result of the 1996 Telecommunications Act, the regional Bell operating
companies can compete with us in the long distance telecommunications industry,
both outside of their service territory and, upon satisfaction of certain
conditions, within their service territory. The 1996 Telecommunications Act
prospectively eliminated the restrictions on incumbent local exchange carriers,
such as the regional Bell operating companies, from providing long distance
service. These provisions permit a regional Bell operating company to enter an
"out-of-region" long distance market immediately upon the receipt of any state
and/or federal regulatory approvals otherwise applicable in the provision of
long distance service. Regional Bell operating companies must satisfy certain
procedural and substantive requirements, including obtaining Federal
Communications Commission approval upon a showing that, in certain instances,

                                       10
<PAGE>
facilities-based competition is present in its market, that it has entered into
interconnection agreements that satisfy a 14-point "checklist" of competitive
requirements and that its entry into the "in-region" long distance market is in
the public interest before they are authorized to offer long distance service in
their regions. On December 22, 1999, Bell Atlantic was granted a license to
provide long distance service in New York. Because a substantial portion of our
customer base and traffic originates in the New York metropolitan area, Bell
Atlantic is a particularly formidable competitor. For long distance calls, Bell
Atlantic has a substantial cost advantage, because it does not have to pay
access fees to a local carrier to originate the call. Access fees constitute a
large portion of a long distance carrier's cost of services, including ours.
Moreover, should Bell Atlantic's proposed acquisition of GTE be consummated,
Bell Atlantic will have even greater resources to compete in its service
markets. In addition, SBC has a pending application at the Federal
Communications Commission for the provision of long distance service in Texas.

    The continuing trend toward business combinations and alliances in the
telecommunications industry is also creating significant new or more powerful
competitors. The proposed acquisition of Teleglobe Inc. by Bell Canada, the
proposed acquisition of Sprint Corporation by MCI Worldcom, the proposed
acquisition of GTE by Bell Atlantic, the proposed acquisition of US West by
Qwest, the acquisition of Ameritech by SBC, the merger of WorldCom and MCI,
AT&T's acquisitions of Telecommunications, Inc. and Teleport Communications
Group, Global Crossing's acquisition of Frontier Communications, the primary
provider of our U.S. transmission capacity, Teleglobe's acquisition of Excel
Communications and SBC's acquisition of SNET are examples of some of the
business combinations that are being formed. Many of these combined entities
have, or will have, resources far greater than ours. These combined entities
may, now or in the future, be able to provide bundled packages of
telecommunications products, including local and long distance services, data
services and prepaid services, in direct competition with the products offered
or to be offered by us, and may be capable of offering these products sooner and
at more competitive rates than us.

    During 1998, the World Trade Organization concluded an agreement on trade in
basic telecommunications services, known as the WTO Agreement, that has resulted
in additional competitors entering the U.S. telecommunications markets. Under
the WTO Agreement, the U.S. and other members of the World Trade Organization
committed themselves to, among other things, opening their telecommunications
markets to foreign carriers. The Federal Communications Commission has adopted
streamlined procedures for processing market entry applications from foreign
carriers, making it easier for such carriers to compete in the U.S. There can be
no assurance that the WTO Agreement will not have a material impact on our
business.

    We also expect increasing competition from Internet telephony service
providers, including Internet service providers. The use of the Internet to
provide telephone service is a recent development. To date, the Federal
Communications Commission has determined not to subject such services to Federal
Communications Commission regulation as telecommunications services.
Accordingly, Internet service providers are, today, not subject to universal
service contributions, access charge requirements, or traditional common carrier
regulation. On April 5, 1999, US West filed a petition with the Federal
Communications Commission asking the Federal Communications Commission to find
that Internet telephony services are telecommunications services, not enhanced
services or information services, and therefore should be subject to access
charge and universal service obligations. On April 7, 1999, US West filed
similar petitions with the Colorado and Nebraska Commissions. Viatel cannot
predict how the Federal Communications Commission or any state public service
commissions will rule on US West's petition. If the Federal Communications
Commission or state public service commissions were to determine that certain
services are subject to Federal Communications Commission regulations as
telecommunications services, the service providers could be required to make
universal service contributions, pay access charges or be subject to traditional
common carrier regulation. We cannot predict the impact that this continuing
lack of regulation will have on our business.

                                       11
<PAGE>
    CANADA.  The Canadian telecommunications market is highly competitive and is
dominated by a few established carriers whose marketing and pricing decisions
have a significant impact on the other industry participants, including us. We
compete with facilities-based carriers, other resellers and rebillers, primarily
on the basis of price. The principal facilities-based competitors include the
former Stentor partner companies, in particular, Bell Canada, the dominant
supplier of local and long distance services in the provinces of Ontario and
Quebec, BC Tel and Telus Communications, the next largest Stentor companies
merged their operations earlier this year as well as non-Stentor companies, such
as AT&T Canada, Teleglobe Canada, and Sprint Canada. Earlier this year, Bell
Canada announced its intent to acquire Teleglobe Inc. We also compete with ACC
TelEnterprises which, until its recent merger with AT&T Canada, was one of the
largest resellers in Canada. The former Stentor partner companies discontinued
their partnership on January 1, 1999 and are now competing against one another.

GOVERNMENT REGULATION

    OVERVIEW

    Regulation of the telecommunications industry is changing rapidly both
domestically and globally. National and local laws and regulations governing the
provision of telecommunications services differ significantly among the
countries in which we currently operate and intend to operate. The
interpretation and enforcement of these laws and regulations varies and could
limit our ability to provide certain telecommunications services in certain
markets. We cannot provide any assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on us, that domestic
or international regulators or third parties will not raise material issues with
regard to our compliance with applicable laws and regulations, or that other
regulatory activities will not have a material adverse effect on our business,
financial condition and results of operations.

    INTERNATIONAL TRAFFIC

    Under the WTO Agreement, 69 countries comprising 95% of the global market
for basic telecommunications services agreed to permit competition from foreign
carriers. In addition, 59 of these countries have subscribed to specific
pro-competitive regulatory principles. The WTO Agreement became effective on
February 5, 1998 and has been implemented, to varying degrees, by the signatory
countries. We believe that the WTO Agreement will increase opportunities for us
and our competitors. However, we cannot provide any assurance that the WTO
Agreement will result in beneficial regulatory liberalization in all signatory
countries.

    On November 26, 1997, the Federal Communications Commission adopted the
Foreign Participation Order to implement the U.S. obligations under the WTO
Agreement. In this order, the Federal Communications Commission adopted an open
entry standard for carriers from World Trade Organization member countries,
generally facilitating market entry for such applicants by eliminating certain
existing tests. These tests remain in effect, however, for carriers from
non-member countries.

    International carriers serving the United States, including Viatel, are
subject to the Federal Communications Commission's international settlements
policy which, as discussed below, has been substantially relaxed. The
international accounting rate system allows a U.S. facilities-based carrier to
negotiate an accounting rate with a foreign carrier for handling each minute of
international telephone service. Each carrier's portion of the accounting rate,
usually one-half, is referred to as the settlement rate. Historically,
international settlement rates have vastly exceeded the cost of terminating
telecommunications traffic. The Federal Communications Commission's
international settlements policy requires: (1) the equal division of the
accounting rate between the U.S. and foreign carrier, (2) nondiscriminatory
treatment of U.S. carriers, and (3) proportionate return of inbound traffic. To
enforce the international settlements policy, the Federal Communications
Commission has required carriers to file publicly available copies of their
international settlement arrangements.

                                       12
<PAGE>
    The Federal Communications Commission adopted rules regarding specific rate
levels for international settlements rates, which became effective on
January 1, 1998 and which were substantially affirmed by the Federal
Communications Commission on reconsideration on June 11, 1999. Many parties
appealed the International Settlement Rates Order to the U.S. Court of Appeals
for the D.C. Circuit. On January 12, 1999, the U.S. Court of Appeals for the
D.C. Circuit issued an order resolving this appeal, upholding the International
Settlement Rates Order in all respects.

    The International Settlement Rates Order generally requires U.S.
facilities-based carriers to negotiate settlement rates with their foreign
correspondent at no greater than Federal Communications Commission-established
benchmark prices. In addition, the International Settlement Rates Order imposed
new conditions upon certain carriers, including us. First, as amended on
reconsideration, the Federal Communications Commission conditioned
facilities-based authorizations for service on a route on which a carrier has a
foreign affiliate with market power upon the foreign affiliate offering all
other U.S. carriers a settlement rate at or below the relevant benchmark. None
of our foreign affiliates have market power. Second, the Federal Communications
Commission conditioned any authorization to provide switched services over
either facilities-based or resold international private lines upon the condition
that at least half of the facilities-based international message telephone
service traffic on the subject route is settled at or below the relevant
benchmark rate. This condition applies whether or not the licensee has a foreign
affiliate on the route in question.

    In the Foreign Participation Order described above, however, if the subject
route does not comply with the benchmark requirement, a carrier can demonstrate
that the foreign country provides "equivalent" resale opportunities.
Accordingly, since the February 9, 1998 effective date of the Foreign
Participation Order, we have been permitted to resell private lines for the
provision of switched services, also known as international simple resale, to
any country that either has been found by the Federal Communications Commission
to comply with the benchmarks or has been determined to be equivalent. We,
however, remain subject to prior Federal Communications Commission approval in
order to provide resold private lines to any country in which an affiliated
carrier that has not been found by the Federal Communications Commission to lack
market power.

    In rules released on May 6, 1999, and which became effective on July 29,
1999, the Federal Communications Commission removed the international
settlements policy for: (1) all settlement arrangements between U.S. carriers
and foreign carriers that lack market power, and (2) all settlement arrangements
on routes where U.S. carriers are able to terminate at least 50 percent of their
traffic in the foreign market at rates that are at least 25 percent below the
applicable benchmark settlement rate. In this international settlement policy
order, the Federal Communications Commission also eliminated the requirement
that carriers file the settlement arrangements where the international
settlements policy has been eliminated. Finally, the international settlement
policy order expanded its rules to permit carriers to provide international
simple resale on any route where the resale carrier exchanges switched traffic
with a foreign carrier that lacks market power.  Accordingly, we will have more
flexibility in negotiating settlement arrangements with many carriers on many
routes, which we expect will lower costs of terminating international traffic,
although our competitors will benefit from these new rules in the same way. On
routes where we are still subject to the international settlement policy, the
Federal Communications Commission could find that, absent a waiver, certain
terms of our foreign carrier agreements or our actions do not meet the
requirements of the international settlement policy. Although the Federal
Communications Commission generally has not issued penalties in this area, it
has issued a Notice of Apparent Liability against a U.S. company for violating
the international settlement policy, and it could take other action against a
carrier violating the international settlement policy, including issuing a cease
and desist order or imposing fines. If the Federal Communications Commission
were to impose such fines or other penalties on us, we do not believe that it
would have a material adverse effect on our business.

    Increasing regulatory liberalization in many countries' telecommunications
markets now permits more flexibility in the way we can route calls. Although
certain Federal Communications Commission rules limit

                                       13
<PAGE>
the way in which some international calls can be routed, we do not believe that
our network configuration, specifically the way in which traffic is routed
through its facilities in the U.K., is specifically prohibited by, or undermines
in any way, the intent of these rules. It is possible, however, that the Federal
Communications Commission could find that our network configuration violates
these rules. If we were found to be in violation of these routing restrictions,
and if the violation were sufficiently severe, it is possible that the Federal
Communications Commission could impose sanctions and penalties upon us.

    EUROPEAN UNION

    The European Union consists of the following member states: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
The Netherlands, Portugal, Spain, Sweden and the United Kingdom. The European
Union was established by the Treaty of Rome and subsequent treaties. European
Union member states are required to implement directives issued by the European
Commission, the European Council and the European Parliment by passing national
legislation. If a European Union member state fails to effect such directives
with national (or, as the case may be, regional, community or local) legislation
or fails to render the provisions of such directives effective within its
territory, the European Commission may take action against the European Union
member state to enforce the directive, including proceedings before the European
Court of Justice. Private parties may also bring actions against European Union
member states for failing to implement such legislation.

    In an effort to promote competition and efficiency in the European Union
telecommunications market, the European Commission, European Council and the
European Parliment have issued a number of key directives establishing basic
principles for the liberalization of the European Union telecommunications
market. The general framework for this liberalized environment has been set out
in the European Commission's Services Directive and its subsequent amendments,
including, in particular, the Full Competition Directive, adopted in
March 1996. These directives require European Union member states to permit
competition in all telecommunications services and had set January 1, 1998 as
the date by which all restrictions on the provision of telecommunications
services and telecommunications infrastructure were to be removed, except in
member states receiving special derogations. These directives have been
supplemented by various harmonizing directives, which include the Open Network
Provision Directives, as well as the 1997 Licensing Directive.

    The Licensing Directive established a framework for the granting of national
authorizations and licenses related to telecommunications services. It permits
European Union member states to establish different categories of licenses for
providers of infrastructure and services, but requires the overall scheme to be
transparent and non-discriminatory. The Interconnection Directive requires
member states to remove restrictions preventing negotiation of interconnection
agreements. It imposes certain rights and obligations on all operators deemed by
the National Regulatory Authorities to be covered by the directive. It also
imposes additional obligations on operators deemed by the National Regulatory
Authorities to have significant market power. These include obligations on fixed
operators to offer cost oriented interconnection charges on non-discriminatory
and transparent terms to other operators granted interconnection rights under
the directive. The objective of the directive is to ensure adequate and
efficient interconnection for public telecommunications networks and publicly
available telecommunications services. The Interconnection Directive was amended
to provide for carrier pre-selection and number portability on or before
January 1, 2000. Carrier pre-selection would enable a customer to access our
network over the fixed public telephone network of operators with significant
market power without dialing an access code, by "preselecting" Viatel as its
long distance carrier. In December 1999, the European Commission permitted the
United Kingdom to postpone until April 1, 2000 the introduction of carrier
pre-selection in British Telecommunications' network. Number portability would
enable customers to retain their existing telephone numbers when switching to
alternative carriers and is already available, although not universally, in the
United Kingdom. Some European Union member states have been granted temporary
waivers from

                                       14
<PAGE>
implementing certain European Union liberalization requirements and have only
fully liberalized recently. Greece continues to have a derogation until
December 31, 2000.

    In October 1997, the European Commission adopted a recommendation on how the
cost-orientation obligation on fixed operators with significant market power
should be interpreted. The European Commission recommends that cost oriented
interconnection charges should be based on long run incremental costs. The
European Commission published benchmark interconnection rates derived from some
of the long range incremental cost-based charges being offered at the time, for
example, in the United Kingdom. These rates were intended to provide guidance to
member states of what should be considered to be an acceptable level of
interconnection charging by fixed operators with significant market power. They
could be adopted in lieu of true long range incremental cost-based charges until
such time as an operator with significant market power, actual long range
incremental costs could be established using adequate accounting systems.

    Several European Union member states have chosen to apply the provisions of
the Interconnection Directive within their jurisdictions in such ways as to give
more favorable treatment to infrastructure providers and network operators than
to carriers and resellers that have made no infrastructure investment. Such
distinctions must be objectively justified on the grounds of the type of
interconnection provided or because of relevant licensing conditions. The
Licensing Directive does not provide a clear definition of an infrastructure
investment, and many European Union member states have adopted inconsistent
approaches with respect to the level and type of infrastructure investment
required to justify differences in interconnection charges. The European
Commission is actively seeking to minimize these disparities in national
interconnection policies. There can be no assurance, however, that these
disparities will be eliminated or significantly reduced or that any such
differences in regulatory treatment will not have a material adverse effect on
us. To the extent incumbent telecommunications operators deny or delay granting
us interconnection, even if only for a limited period of time, in any of the
countries in which we have or will have points of presence, we will be forced to
terminate traffic through refile or resale agreements with other carriers,
resulting in higher costs.

    The current European Union rules are likely to remain in force until
2002/2003, at which time a revised European Union framework is likely to be
introduced which reflects the growth of competition since 1998. The European
Commision is currently considering what the new framework should look like. It
is too early to say what the impact might be on our activities. However, the
European Commission sees the structure of the new regulatory framework for
communications infrastructure and associated services as consisting of three key
elements: binding sector-specific legistlation; complementary non-binding
sector-specific measures, such as recommendations; and competition law. In
parallel, the existing Article 86 (formerly Article 90) Directives will be
consolidated and simplified into one Liberalization Directive. In addition,
existing harmonization directives will be consolidated into five directives,
namely a Framework Directive, a Licensing & Authorization Directive, an Access
and Interconnection Directive, a Universal Service Directive and a Telecoms Data
Protection Directive.

    Each European Union member state in which we currently conduct our business
has a different regulatory regime and such differences are expected to continue.
The requirements for us to obtain necessary approvals vary considerably from
country to country, although entry barriers continue to fall.

    BELGIUM.  In December 1997, the Belgian Federal Parliament provided for full
liberalization of the provision of telecommunications services. However, all of
the secondary legislation needed to implement the regulatory framework of
December 1997 has yet to be adopted.

    Under the existing licensing scheme, public network license applicants must,
in principle, commit to invest 400 million Belgian Francs or to deploy 500
kilometers of transmission infrastructure within three years of the date the
license is granted. Notwithstanding this, we obtained a license for the
provision of voice telephony over the entire country on December 8, 1998, and a
license for the establishment and

                                       15
<PAGE>
operation of a public telecommunications network, which covers virtually the
entire country, on February 1, 1999. One of our operating subsidiaries also has
a permanent voice telephony license which expires in 2014, but which is capable
of being extended.

    Belgacom (Belgium's incumbent telecommunications operator) is currently
offering carrier pre-selection for calls to all geographic numbers belonging to
a different zone than the one in which the calling party is located. As from
March 1, 2000, Belgacom will offer carrier pre-selection and carrier selection
for calls to value-added services numbers and, starting on the last quarter of
the year 2000, for calls to mobile numbers. Carrier selection and carrier
pre-selection for calls to value-added services numbers will be fully available
beginning June 30, 2000 and carrier pre-selection for calls to mobile numbers
will be fully available by December 31, 2000.

    We have entered into an interconnection agreement with Belgacom, which
currently extends until May 1, 2000, and are able to originate and terminate
traffic throughout Belgium.

    The modified Belgian Telecommunications Law also provides for the creation
of a Universal Service Fund, to be managed by the Belgian Institute for Postal
Services and Telecommunications, to which operators may be required to
contribute funds in proportion to their revenues from the Belgian
telecommunications market. However, the Universal Service Fund system will only
be triggered if: (i) Belgacom claims compensation for being the "universal
service provider", (ii) the Belgian Institute for Postal Services and
Telecommunications considers that the net cost of universal service provision
represents an unfair burden for Belgacom, and (iii) the Belgian Federal
Government takes a formal decision to create the Universal Service Fund. Since
1998, the Belgian Institute for Postal Services and Telecommunications has
"dry-run" the universal service costing model and kept operators informed of the
contributions that they may be required to make if and when the Universal
Service Fund is activated. Belgacom has thus far not asserted any claim to
compensation because of its status as the universal service provider.

    FRANCE.  In July 1996, legislation was enacted providing for the
liberalization of all telecommunications activities in France by January 1,
1998.

    The establishment and operation of public telecommunications networks and
the provision of voice telephony services to the public are subject to
individual licenses granted by the Minister in charge of telecommunications upon
recommendation of France's independent regulatory authority, the Autorite de
Regulation des T elecommunications ("ART").

    On June 5, 1998, we were granted a regional license to be a public
telecommunications network operator (under Article L33.1 of the French Code des
Postes et T elecommunications) and a national license to be a provider of voice
telephony services to the public (under Article L34.1 of the French Code des
Postes et T elecommunications). An extension of the network operator license has
been requested by us in order to obtain a nationwide license. The application
was sent to ART on June 21, 1999. On October 26, 1999, ART recommended that our
nationwide license be granted and on November 22, 1999 the Minister granted
Viatel a nationwide license. In September 1998, an interconnection agreement was
signed with France Telecom. However, this agreement became operational in the
greater Paris region only in March 1999 and in the Strasbourg and Amiens regions
only in August 1999. One of our operating subsidiaries also has obtained a voice
telephony license.

    We are subject to certain requirements in the operation of our public
telecommunications network, most notably in terms of non-discriminatory
treatment of customers and an obligation to accept reasonable requests for
interconnection from other carriers.

    France is also one of the European Union member states which differentiates
between interconnection for public telecommunications network operators, holding
a L33.1 license, and voice telephony service providers, holding a L34.1 license.
The interconnection tariffs of France Telecom, which have been officially
approved by ART, provide substantially more favorable interconnection rates for
public telecommunications network operators than for voice telephony service
providers. As a result of the construction of our network, we qualify for these
more favorable rates.

                                       16
<PAGE>
    Although carrier pre-selection currently has been available in France since
mid-February 2000, no carriers have yet offered this as an additional service.
Customers can currently access the public switched telephone network using
either 4-digit or 1-digit access codes. In addition, six carriers (including
France Telecom) that have agreed to geographic coverage conmitments and roll-out
schedules have been granted single digit access for their customers. Customers
of other carriers, including us, must dial a 4-digit code in order to access the
public switched telephone network in France.

    GERMANY.  The German Telecommunications Act of July 25, 1996 provided for
the liberalization of all telecommunications activities by January 1, 1998. The
German Telecommunications Act has been supplemented by several ordinances
concerning, among other things, license fees, rate regulation, interconnection,
universal service, frequencies and customer protection. The German
telecommunications sector is overseen by the Regulatory Authority for
Telecommunications and Post ("RegTP") that operates under the supervision of the
Ministry of Economics.

    Pursuant to the German Telecommunications Act, licenses are required for the
operation of transmission lines going beyond the limits of a property and used
to provide telecommunications services for the public as well as for the
offering of voice telephony to the public on the basis of self-operated
telecommunications networks. For the operation of transmission lines the
following types of licenses have been created: mobile radio licenses (class 1
licenses), satellite licenses (class 2 licenses), and licenses for the operation
of transmission lines other than mobile radio and satellite (class 3 licenses).
For the offering of voice telephony to the public a class 4 license is required.
We have been issued a nationwide class 3 infrastructure license and two
nationwide class 4 licenses, one in our name and one in the name of our
subsidiary, EconoPhone. Through our interconnection arrangement with Deutsche
Telekom and on the basis of our carrier identification code, our customers are
able to pre-select Viatel as their carrier for certain services.

    On December 22, 1999, we signed a new interconnection agreement with
Deutsche Telekom which replaced our prior interconnection agreement. At present,
interconnection between our subsidiary, EconoPhone, and Deutsche Telekom is
realized based on an order of RegTP issued in May 1999. Although the order is
not restricted regarding its duration, RegTP requested that the order be
replaced by an interconnection agreement. Therefore, EconoPhone is currently
negotiating an interconnection agreement similar to ours. The EconoPhone
interconnection agreement is expected to be signed in the near future.

    ITALY.  From 1995 to 1997, the Italian authorities enacted a legislative
framework for the full liberalization of telecommunications services by January
1, 1998. On February 12, 1999, we received a license to provide voice telephony
as well as to own and operate infrastructure.

    On July 24, 1998, Telecom Italia published its Reference Interconnect Offer,
which was amended earlier this year due to decisions by the Italian regulator.
The offer allows interconnection at one point of interconnect and has brought
interconnection rates down to a level much closer to the European Union
benchmarks. We initiated interconnection negotiations towards the end of 1998
and obtained an interconnection agreement with Telecom Italia on April 30, 1999.
As a result of an expansion of our license, our interconnection agreeement with
Telecom Italia was amended on October 13, 1999 and January 28, 2000.

    In Italy, providers of network infrastructure and switched voice services as
well as national mobile operators, with a number of specific exceptions, may be
required to contribute to a universal service fund. This requirement took effect
in 1999. However, no contribution was required for 1999. Whether a contribution
will be required in 2000 will depend upon whether Telecom Italia can
demonstrate, on the basis of audited reports, that its universal service
obligations impose on it net losses. Even in these circumstances, the Italian
regulator can exempt new entrants from an obligation to contribute to such a
universal service fund.

    Carrier pre-selection was introduced in Italy for calls between different
districts, international calls and mobile calls on January 1, 2000 and will be
introduced for calls within the same district starting May

                                       17
<PAGE>
2000 for Milan, June 2000 for Rome and July 2000 for the other local areas. On
January 12, 2000, we filed an application with Telecom Italia requesting
authorization to activate carrier pre-selection.

    Effective January 1, 2000, number portability was introduced in Italy for
calls within the same local area. The technical solution envisaged for immediate
implementation are those of "Onward Routing" (for geographical numbers) and of
"Always Query" (for non-geographical numbers).

    THE NETHERLANDS.  In The Netherlands, the incumbent telecommunications
operator's monopoly regarding voice telephony was abolished effective July 1,
1997. Other European Union liberalization obligations, which took effect on
January 1, 1998, were implemented through the new Netherlands Telecommunications
Act as of December 15, 1998. With the exception of the use of radio frequencies
(e.g. for mobile telecommunications networks or services), all licensing
requirements have been abolished and replaced by mandatory registration
requirements with the Independent Post and Telecommunications Authority. In
principle, there are no barriers to registration, but there must be a public
offer of infrastructure or services which must be shown to the Independent Post
and Telecommunications Authority in order to qualify for registration.
Furthermore, registered parties must comply with all relevant obligations under
the Telecommunications Act. In February 1999, we transferred our existing
authorization to a registration to provide a public telecommunications service
and to install and provide a public telecommunications network with the
Independent Post and Telecommunications Authority. In April 1999, we obtained
registration to install and provide leased lines.

    SPAIN.  Spain was required, under applicable European Union directives, to
implement full liberalization of public switched telephone services by
December 1, 1998. In accordance with this requirement, the liberalization
process began in April 1998 with the approval of the General Telecommunications
Act, and was completed by the December 1, 1998 deadline, with the approval of
subsequent regulations. Our subsidiary operating in Spain was granted a
nationwide infrastructure and voice telephony license in March 1999. In
September 1999, we were granted a type C authorization to be an Internet service
provider and we signed an interconnection agreement with Telefonica de Espana.
Carrier pre-selection is fully operational in Spain and number portability is
expected to be operational in the near future.

    SWITZERLAND.  A new Telecommunications Act was adopted by the Swiss
Parliament in April 1997 and came into effect on January 1, 1998, together with
certain ordinances containing more detailed regulations covering
telecommunications services, frequency management, numbering, terminal equipment
and license fees. The new Telecommunications Act provides for liberalization of
the Swiss telecommunications market as of January 1, 1998.

    The Swiss telecommunications regulatory framework facilitates market entry
by: (i) applying a notification procedure for resellers, (ii) applying a
procedure for operators wishing to be granted a concession for the establishment
and operation of transmission facilities and (iii) providing rights-of-way,
subject to a procedure of authorization, over the public domain to
facilities-based carriers. Pro-competitive regulation is also applicable in the
area of numbering.

    On July 13, 1999, OFCOM, the Swiss Office of Telecommunications, awarded us
a concession to own and operate our own telecommunications infrastructure in
Switzerland. The concession allows us to operate our own telecommunications
infrastructure in the country and to provide telecommunications services to
third parties.

    Our Swiss subsidiary, Econophone AG, has signed an interconnection agreement
with Swisscom, the dominant Swiss carrier, on May 20, 1998, which was recently
replaced by a new interconnection agreement dated February 7, 2000. Our
interconnection with Swisscom enables its customers to pre-select our Swiss
subsidiary as their long distance carrier in Switzerland.

    Switzerland is not a member of the European Union and, accordingly,
directives do not apply as such. Switzerland is, however, a party to the WTO
Agreement.

                                       18
<PAGE>
    AUSTRIA.  In March, 1999, the Austrian regulator,
Telekom-Control-Kommission, granted one of our subsidiaries the license for
fixed network public voice telephony throughout Austria for an unlimited time
period. We signed an interconnection agreement with Austria Telekom in June 1999
and expect to implement interconnection in the second quarter of 2000.

    UNITED KINGDOM.  The United Kingdom has been progressively liberalizing the
United Kingdom communications market since 1984 when British Telecommunications
was privatized. There are now more than 400 licensed operators. Competition is
effective in some market sectors including many international routes. In other
sectors, such as local access, British Telecommunications continues to have
market power.

    Our UK subsidiaries hold the following authorizations under Section 7 of the
Telecommunications Act 1984, as issued by the Department of Trade and Industry
on the advice of the Office of Telecommunications (OFTEL) in accordance with the
provisions of the Telecommunications (Licensing) Regulations 1997
(SI 1997/2930), and the Licensing Directive 97/13/EC:

    - Viatel UK Limited has a fixed PTO license with code powers which
      authorizes the running of a telecommunications system, provision of a
      broad range of publicly available telecommunications services to customers
      within the UK and international facilities based services and
      international conveyance services to and from the UK. Viatel UK Limited
      also has an International Simple Voice Resale license which authorizes the
      provision of international simple voice resale services to customers in
      the UK. Viatel UK Limited has been granted rights to interconnect with
      British Telecommunications and to negotiate interconnection with other UK
      operators;

    - Destia Network Services Limited holds a fixed PTO license without code
      powers and an Internal Simple Voice Resale registration. Destia Network
      Services Limited has been granted rights to interconnect with British
      Telecommunications and to negotiate interconnection with other UK
      operators;

    - Viatel Global Communications Limited (formerly AT&T Communications (UK)
      Limited) holds a fixed PTO license with code powers. This subsidiary has
      been granted rights to interconnect with British Telecommunications and to
      negotiate interconnection with other UK operators.

    In the absence of any determination by the National Regulatory Authority,
OFTEL, that the above named licensees have market power, there are few
regulatory constraints on our UK commercial activities although we must respect
UK and European Commission competition laws.

    Because British Telecommunications, the former United Kingdom monopolist,
still controls over 80% of all access lines, we must compete primarily against
British Telecommunications' retail prices. There is significant downward
pressure on retail prices from other UK operators and service providers. Most of
British Telecommunications' retail prices are price controlled by OFTEL, except
its prices on multi-line businesses which are lightly regulated and open to
competition. The current retail price cap, which covers the lowest 80% of
customers by spend, most of whom are residential and small businesses, is due to
be reviewed in July 2001. It is not yet clear whether it will be replaced by a
further price cap, although it is likely that any future cap would only cover
the lower spending residential customers, thus opening up to more competition,
the higher spending market. British Telecommunications' prices may go up or
down. British Telecommunications' residential line rental is not fully
rebalanced, which means that retail call charges above cost subsidize retail
line rental charges which are set below cost. British Telecommunications'
business line rental is more or less fully rebalanced, i.e., call charges may
more closely reflect call costs because line rental is fully paid for in the
line rental retail charge.

    We must purchase certain interconnection services from British
Telecommunications. Unlike the former incumbent in most other European Union
member states, British Telecommunications sets its own interconnection charges
according to a formula agreed with OFTEL. It has considerable freedom in the
more competitive interconnection markets such as inter-tandem, or long distance,
conveyance. Call origination and call termination are regulated more strictly.
Both are of particular importance to us, because we currently use indirect
access to access customers. OFTEL has announced a review of both in 2001. There
are indications that charges for call origination will rise, thus reducing the
revenues available to indirect access operators.

                                       19
<PAGE>
    Separately from its price control review, OFTEL is currently conducting a
full review of the regulatory framework relating to national leased lines. OFTEL
has announced an intention to complete the review and publish a statement by
October 2000. OFTEL's proposals for regulation are likely to primarily affect
British Telecommunications. However, operators such as us who may compete with
British Telecommunications in the provision of leased line services and who use
leased lines provided by other licensed operators may be affected if the prices
that British Telecommunications charges are reduced by regulation.

    British Telecommunications is in the process of introducing an unmetered
tariff for access to the Internet. This may have an impact on the terms on which
we are able to provide our own Internet services.

    Provision of wireless local loop services for direct access to customers in
the UK will depend, among other things, on the UK Radiocommunications Agency
granting to us a license under the Wireless Telegraphy Acts which authorizes use
of the radio spectrum. Radio spectrum is treated in the UK as a scarce resource
for regulatory purposes. As a result, licensing of use of the radio spectrum is
subject to the provisions of the Licensing Directive which require procedures to
be proportionate, transparent and non-discriminatory. There is no guarantee that
we or our subsidiaries would be granted such a license.

    It is expected that carrier pre-selection will be introduced in the United
Kingdom in April 2000. This is expected to expand the market for indirect access
operators. It is also anticipated that local loop unbundling will be introduced
by British Telecommunications in the United Kingdom in 2001 at a date yet to be
determined, access to which must be provided to competitors on a basis which is
consistent with British Telecommunications' regulatory obligations. British
Telecommunications is currently upgrading much of its network with ADSL
technology. British Telecommunications' charges for use of its ADSL network have
not yet been determined. Its charges will affect the retail prices which we are
able to charge our customers if we use its ADSL network.

    Through one of our UK subsidiaries, we are a fixed link Public Telecom
Operator, and we are licensed for the provision of international simple voice
resale and international facilities based services. This subsidiary has been
granted rights to interconnect with British Telecommunications and other
operators.

    OTHER EUROPEAN MARKETS.  Our ability to expand into other countries will be
affected by the degree to which liberalization has been implemented in those
countries. If, for strategic reasons, we decide to build out infrastructure in a
particular market prior to full liberalization and liberalization is delayed or
not fully implemented, we could sustain a loss on our infrastructure investment.

    UNITED STATES

    In the United States, our services are subject to the provisions of the
Communications Act of 1934, as amended by the 1996 Telecommunications Act, the
regulations of the Federal Communications Commission thereunder, as well as the
applicable laws and regulations of the various states administered by the
relevant public service commission. The recent trend in the United States for
both federal and state regulation of telecommunications service providers has
been in the direction of reduced regulation. Although this trend facilitates
market entry and competition by multiple providers, it has also given AT&T, the
largest international and domestic long distance carrier in the United States,
increased pricing and market entry flexibility that has permitted it to compete
more effectively with smaller carriers, such as us. In addition, the 1996
Telecommunications Act has opened the United States market to increased
competition from the regional Bell operating companies. We cannot be certain
whether future regulatory, judicial and legislative changes in the United States
will materially affect our business.

    The Federal Communications Commission currently regulates us as a
non-dominant carrier with respect to both our international and domestic
interstate long distance services. Although the Federal Communications
Commission has generally chosen not to closely regulate the charges, practices
or classifications of non-dominant carriers, the Federal Communications
Commission has broad authority which includes the power to impose more stringent
regulatory requirements on us, to change its regulatory

                                       20
<PAGE>
classification, to impose monetary forfeiture, and to revoke our authority. In
this increasingly deregulated environment, however, we believe that the Federal
Communications Commission is unlikely to do so.

    In May 1994, the Federal Communications Commission authorized us pursuant to
Section 214 of the Communications Act to resell public switched
telecommunications services of other United States carriers. This authorization
requires that services be provided in a manner that is consistent with the laws
of countries in which we operate. Additionally, in September 1996 we received
final approval for another Section 214 authorization from the Federal
Communications Commission to provide both facilities-based services and resale
services (including both the resale of switched services and the resale of
private lines for the provision of switched services) to all permissible
international points. Through our acquisitions of Flat Rate Communications and
Destia Communications, we also have additional Section 214 licenses to provide
global facilities-based and global resale services.

    FCC DOMESTIC INTERSTATE.  We are considered a non-dominant domestic
interstate carrier subject to minimal regulation by the Federal Communications
Commission. We are not required to obtain Federal Communications Commission
authority to provide domestic interstate telecommunications services, but are
required to maintain, and do maintain, a domestic interstate tariff on file with
the Federal Communications Commission. The Federal Communications Commission
presumes the tariffs of non-dominant carriers to be lawful. Therefore, the
Federal Communications Commission does not carefully review such tariffs. The
Federal Communications Commission could, however, investigate our tariffs upon
its own motion or upon complaint by a member of the public. As a result of any
such investigation, the Federal Communications Commission could order us to
revise our tariffs, or the Federal Communications Commission could prescribe
revised tariffs.

    In late 1996, the Federal Communications Commission ruled that interexchange
carriers are no longer permitted to file their tariffs for domestic interstate
interexchange services. In August 1997, the Federal Communications Commission
affirmed its decision to end tariff filing requirements for domestic interstate
long distance services provided by non-dominant carriers. The Federal
Communications Commission also eliminated the requirement that non-dominant long
distance carriers disclose information on rates and terms of their products.
These detariffing orders have been stayed by the U.S. Court of Appeals for the
District of Columbia. Most recently, on March 18, 1999, the Federal
Communications Commission adopted an order that would permit the alternative of
posting rates on a carrier's web site. This order will not become effective
until the Court affirms the Federal Communications Commission's mandatory
detariffing scheme.

    The 1996 Telecommunications Act is intended to increase competition in the
U.S. telecommunications markets. Among other things, the legislation contains
special provisions that eliminate the restrictions on incumbent local exchange
carriers such as the regional Bell operating companies from providing long
distance service. These provisions permit a regional Bell operating company to
enter an "out-of-region" long distance market immediately upon the receipt of
any state or federal regulatory approvals otherwise applicable in the provision
of long distance service. The provisions also permit a regional Bell operating
company to enter the "in-region" long distance market if it satisfies procedural
and substantive requirements, including showing that facilities-based
competition is present in its market, that it has entered into interconnection
agreements which satisfy a 14-point "checklist" of competitive requirements and
that its entry into the "in-region" long distance market is in the public
interest. On December 22, 1999, Bell Atlantic was granted a license to provide
long distance service in New York. Bell Atlantic competitors have appealed this
decision to the Court of Appeals for the D.C. Circuit. In addition, SBC has a
pending application at the FCC for the provision of long distance service in
Texas. A decision on this application is expected sometime during the second
half of 2000.

    The 1996 Telecommunications Act also addresses a wide range of other
telecommunications issues that may potentially impact our operations. On
August 1, 1996, the Federal Communications Commission adopted an Interconnection
Order implementing the requirements that incumbent local exchange carriers

                                       21
<PAGE>
make available to new entrants interconnection and unbundled network elements,
and offer retail local services for resale at wholesale rates. However, on
January 25, 1999, the U.S. Supreme Court upheld most of the challenged rules,
finding that the Federal Communications Commission has significant jurisdiction
to establish rules to promote competition for competitive local exchange
services but required the Federal Communications Commission to re-evaluate the
standard it uses to determine which network elements the incumbent local
exchange carriers must unbundle. On September 15, 1999, the Federal
Communications Commission adopted an order setting forth a revised standard and
reaffirming that incumbent local exchange carriers must provide access to six of
the original seven network elements.

    The Federal Communications Commission has also significantly revised the
universal service subsidy regime. Beginning January 1, 1998, interstate
carriers, such as us, as well as certain other entities, became obligated
pursuant to the 1996 Telecommunications Act to contribute to universal service
funds based upon interstate and international revenues. These funds subsidize
the provision of telecommunications services in high cost areas and to
low-income customers, as well as the provision of telecommunications and certain
other services to eligible schools, libraries and rural health care providers.
Contribution factors vary quarterly and we and other carriers are billed
monthly. Because the contribution factors do vary quarterly, the annual impact
cannot be estimated at this time, although we do not expect it to be material.
There can be no assurance as to how the orders will be ultimately implemented or
enforced or what effect the orders will have on competition within the
telecommunications industry or specifically on our competitive position. On
July 30, 1999, the United States Court of Appeals for the Fifth Circuit released
its decision reviewing the Federal Communications Commission's UNIVERSAL SERVICE
ORDER. Although the Fifth Circuit upheld the basic tenets of the Federal
Communications Commission's universal service program, its decision to reverse
or remand certain aspects of the program could have a significant impact on
carriers' universal service obligations. In particular, the Fifth Circuit found
that the Federal Communications Commission does not have the authority to
include intrastate revenues in the calculation of universal service
contributions and reversed and remanded the Federal Communications Commission's
decision to include the international revenues of interstate carriers in the
universal service contribution base. On October 8, 1999, the Federal
Communications Commission issued an order implementing the Fifth Circuit's
decision. The contribution factor for the first quarter of 2000 was 5.877% and
the contribution factor for the second quarter of 2000 is 5.71%.

    Our costs of providing long distance services will also be affected by
changes in the access charge rates imposed by local exchange carriers for
origination and termination of calls over local facilities. The Federal
Communications Commission has significantly revised its access charge rules in
recent years to permit incumbent local exchange carriers greater pricing
flexibility and relaxed regulation of new switched and special access services
in those markets where there are other providers of access services. The most
recent pricing flexibility rules, which were adopted August 5, 1999, would,
among other things, grant certain local exchange carriers the ability to file
access tariffs on a streamlined basis. The Federal Communications Commission has
also restructured the charges certain local exchange carriers assess for
switched access, moving from usage-sensitive to non-usage sensitive charges to
recover certain costs. For example, the Federal Communications Commission
created a new presubscribed interexchange carrier charge rate element. The
presubscribed interexchange carrier charge is a flat-rate, per line charge that
is recovered by certain local exchange carriers from interexchange providers.
Effective July 1, 1999, the initial maximum permitted interstate presubscribed
interexchange carrier charge increased to $1.04 per month for primary
residential lines and single-line business lines and $2.53 per month for second
and additional residential lines. The initial maximum interstate presubscribed
interexchange carrier charge for multi-line businesses is $4.36 per month, per
line. The ceilings will continue to increase yearly. The Federal Communications
Commission continues to adjust its access charge rules and has indicated that it
will consider proposals to reform the access charge regime this year.

    While we currently intend to pass through the costs of both the
presubscribed interexchange carrier charge and our universal service fund
contributions to our customers, there can be no assurance that we

                                       22
<PAGE>
will be able to do so or that doing so will not result in a loss of customers.
Additionally, we currently have agreements to terminate, originate or exchange
traffic with a variety of carriers who, in turn, may be subject to similar
agreements with other carriers or local exchange carriers. Any change in any of
these agreements, whether by operation of law or otherwise, may affect our costs
or could disrupt our ability to terminate, originate or exchange traffic and,
therefore, have a material adverse effect on us.

    The 1996 Telecommunications Act also requires interexchange carriers to
compensate payphone owners when a payphone is used to originate a telephone call
using a calling card. In orders issued in September and October of 1996, the
Federal Communications Commission established a compensation scheme that
required all carriers to begin compensating payphone owners on a per-call basis
beginning October 7, 1997 at a rate of $.35 per call. This rate has been
appealed to the D.C. Circuit and reversed and remanded to the Federal
Communications Commission twice for a revised rate calculation. In its most
recent remand decision, on February 4, 1999 the Federal Communications
Commission released an order which lowered the payphone compensation rate to
$.240, effective April 21, 1999. For amounts already due, the Federal
Communications Commission determined that the payphone owners should be
compensated at a rate of $.238. MCI WorldCom, Sprint, the regional Bell
operating companies and the American Public Communications Council have filed
Petitions for Review of this latest order with the United States Court of
Appeals for the District of Columbia Circuit. The court recently heard oral
agrument on this appeal. Additionally, a coalition comprised of the regional
Bell operating companies, SNET and GTE have filed a Petition for Clarification
with the Federal Communications Commission, seeking clarification as to which
long distance carriers are responsible for payment of per-call compensation and
urging that the obligation be placed on the entity identified by the Carrier
Identification Code used to route the call from the local exchange network. As a
result of many factors, including a complex and shifting regulatory scheme, many
long distance carriers have been the subject of compensation claims by payphone
service providers. In August 1999, Destia settled a lawsuit filed by payphone
service providers alleging that Destia Communications owed such payphone service
providers compensation for completed access code and toll free calls that have
been made since October 9, 1997 using the plaintiffs' payphones and carried over
Destia's network.

    The Federal Communications Commission also imposes requirements for the
marketing of telephone services and for obtaining customer authorization for
changes in a customer's primary long distance carriers. The Federal
Communications Commission has recently imposed severe penalties on a number of
carriers for "slamming." Under an order recently issued by the Federal
Communications Commission, carriers such as us are required to take certain
additional steps to prevent slamming. The Federal Communications Commission is
continuing to reexamine its slamming rules.

    STATES.  Many states also impose various reporting and other requirements. A
number of state public service commissions have adopted rules governing the
marketing of telephone services and obtaining customer authorizations for
changes of a customers' primary long distance carrier. State public service
commissions also regulate access charges and other pricing for
telecommunications services within each state. We may also be required to
contribute to universal service funds in some states. State public service
commissions generally retain the right to sanction a carrier or to condition,
modify, cancel, terminate or revoke authorization to provide telecommunications
services within the state for failure to comply with state law and/or rules,
regulations and policies of the state regulatory authorities.

    REGULATION OF THE INTERNET.  The use of the Internet to provide telephone
service is a recent development. Currently, the Federal Communications
Commission is considering whether or not to impose surcharges or additional
regulations upon certain providers of Internet telephony. In an April 1998
report to Congress, the Federal Communications Commission indicated that it
would examine the question of whether certain forms of "phone-to-phone" Internet
protocol telephony are information services or telecommunications services. It
noted that certain forms of phone-to-phone Internet telephony appeared to have
the same functionality as non-Internet protocol telecommunications services and
lacked the characteristics that would render them information services. On
April 5, 1999, US West filed a petition

                                       23
<PAGE>
with the Federal Communications Commission asking the Federal Communications
Commission to find that Internet telephony services are telecommunications
services, not enhanced services or information services, and therefore should be
subject to access charge and universal service obligations. On April 7, 1999, US
West filed similar petitions with the Colorado and Nebraska Commissions. No
significant action has been taken on these petitions, although it should be
noted that the Federal Communications Commission has recently initiated a public
inquiry on the separate subject of access to Internet telephony by the disabled.
We cannot predict how the Federal Communications Commission or state public
service commissions will rule on US West's petition. If the Federal
Communications Commission or state public service commissions were to determine
that certain services are subject to Federal Communications Commission
regulations as telecommunications services, these service providers could be
required to make universal service contributions, pay access charges or be
subject to traditional common carrier regulation. State public service
commissions may also retain jurisdiction to regulate the provision of intrastate
Internet telephony services and could initiate proceedings to do so.

    PATENT RIGHTS RELATING TO PREPAID SERVICES.  Various parties have claimed
that certain prepaid card providers are infringing upon patent rights held by
these parties relating to the provision of prepaid card services. We do not
expect that our prepaid card services will be found to infringe upon any
third-party patent rights, although there can be no assurance that we would
prevail if a claim were asserted by a third party. If we were unable to provide
our prepaid card services in the manner in which they currently are provided, it
could have a material adverse effect on our business and the price of our common
stock.

EMPLOYEES

    As of December 31, 1999, we had 1,760 full-time employees, approximately 780
of whom were engaged in sales, marketing and customer service. None of our
employees are represented by a labor union or covered by a collective bargaining
agreement. We believe that our relationship with our employees is generally
good.

ITEM 2. PROPERTIES

    Our tangible assets include a substantial investment in telecommunications
equipment. Our network and its component assets are the principal properties we
own. We own a significant portion of the telecommunications equipment required
for our business. Our network includes installed fiber optic cable consisting of
lighted (used) and dark (not used) fibers, which is either owned or leased and
is laid pursuant to various rights-of-way. Other fixed assets are located at
various locations in our service areas.

    We currently occupy five sites in New York City, one of which serves as our
principal executive office, and one of which serves as one of our international
gateway switching centers. We also lease space in Somerset, New Jersey, which
serves as our U.S. Network Operations Center; Egham, England, which serves as
our European Network Operations Center; Brooklyn, New York, which serves as a
research center; Omaha, Nebraska, where our billing and operations center is
currently located; and St. Louis, Missouri, the former network operations center
for Destia. Our facilities in Omaha and St. Louis are being consolidated into a
new facility being constructed in College Station, Texas. In addition, we also
lease space at two locations in London, England, which serve as our European
headquarters. We lease locations pursuant to the terms of the respective leases
which expire at different times beginning in May 2004.

    We have leased sales offices in several U.S. cities and leased European
sales offices in the following locations: London, England; Paris, Lyon,
Marseilles, Nantes, Nice and Toulouse, France; Brussels and Antwerp, Belgium;
Amsterdam, The Netherlands; Frankfurt, Berlin, Munich, Hamburg and Dusseldorf,
Germany; Milan and Rome, Italy; Athens, Greece; Vienna, Austria; Zurich,
Switzerland; and Barcelona and Madrid, Spain; all of which are leased.

    We also maintain switching and transmission sites in several U.S. cities and
numerous countries throughout Europe. In general, these locations are leased for
a minimum term of 20 years, including

                                       24
<PAGE>
renewal options. We attempt to structure our leases of space for our network
switching centers and rights-of-way for our fiber optic networks with initial
terms and renewal options so that the risk of relocation is minimized. We
anticipate that prior to termination of any of the leases, we will be able to
renew such leases or make other suitable arrangements.

ITEM 3. LEGAL PROCEEDINGS

    We are involved from time to time in litigation that arises in the ordinary
course of our business. We believe that any potential adverse determination in
any pending action will not have a material adverse effect on our business,
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    On November 19, 1999, we held a special meeting of our stockholders at which
our stockholders were requested to approve the terms of the Agreement and Plan
of Merger, dated as of August 27, 1999, pursuant to which we agreed to acquire
Destia Communications, Inc. At the special meeting, a total of 22,453,191 shares
of our common stock, or 68.75% of the 32,656,644 shares outstanding and eligible
to vote at the meeting, were present, either in person or by proxy. The
Agreement and Plan of Merger was approved by the following vote:

<TABLE>
<CAPTION>
   VOTES CAST FOR       VOTES CAST AGAINST   ABSTENTIONS
---------------------   ------------------   -----------
<S>                     <C>                  <C>
  22,294,695               133,591            24,905
</TABLE>

                                       25
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Our common stock is listed on the Nasdaq National Market under the ticker
symbol "VYTL". As of April 10, 2000, there were 50,034,866 shares of our common
stock outstanding. We believe we have in excess of 500 beneficial owners of our
common stock. The following table shows, for the calendar quarters indicated,
based on published sources, the high and low closing sale prices per share of
our common stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                                   VIATEL COMMON
                                                                       STOCK
                                                              ------------------------
                                                                 HIGH          LOW
                                                              ----------   -----------
<S>                                                           <C>          <C>
1997
  Second Quarter............................................  $        7   $         6
  Third Quarter.............................................           6 5/8           4 1/4
  Fourth Quarter............................................           7             5

1998
  First Quarter.............................................      13 3/4             5
  Second Quarter............................................          17             7
  Third Quarter.............................................          20 3/4           8 1/8
  Fourth Quarter............................................          23 1/2           7 1/4

1999
  First Quarter.............................................          28 5/8          17
  Second Quarter............................................          52 7/8          28 1/8
  Third Quarter.............................................          57 1/2          23 5/16
  Fourth Quarter............................................          54 5/8          27 1/16

2000
  First Quarter.............................................          75 3/8          33 3/8
</TABLE>

    On April 10, 2000, the reported last sale price of our common stock on the
Nasdaq National Market was $40.375 per share.

    We have not paid any cash dividends on our common stock to date. The payment
of dividends, if any, in the future is within the discretion of our board and
will depend on our earnings, capital requirements and financial condition. It is
our present intention to retain future earnings, if any, to finance growth of
our business. Our ability to pay cash dividends is currently restricted under
the terms of the various indentures relating to our existing indebtedness.

                                       26
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The following selected consolidated financial data should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements,
including the notes thereto, and the other consolidated financial data included
elsewhere in this report. The consolidated statement of operations data, other
consolidated financial data and consolidated balance sheet data as of and for
the years ended December 31, 1995, 1996, 1997, 1998 and 1999 are derived from
our consolidated financial statements and the notes related thereto, which were
audited by KPMG LLP, independent certified public accountants. The consolidated
financial statements as of December 31, 1998 and 1999 and for each of the years
in the three-year period ended December 31, 1999 and the report of KPMG LLP
thereon, are included elsewhere in this report. We capitalize interest costs
that relate to debt to finance the network, until the related portion of the
network is placed into service. In 1995, 1996, 1997, 1998 and 1999, we
capitalized $.5 million, $.1 million, $.2 million, $3.3 million and
$10.1 million, respectively, of interest costs. EBITDA consists of earnings
before interest, income taxes, restructuring and impairment charges,
extraordinary loss, dividends on preferred stock and depreciation and
amortization. Capital additions for each period consist of capital expenditures,
the net change in payables for property and equipment purchases, assets acquired
under capital lease obligations and capitalized interest during the period.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                             ---------------------------------------------------------
                                               1995        1996        1997        1998        1999
                                             --------    --------    --------   ----------   ---------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                          <C>         <C>         <C>        <C>          <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Communication services revenue...........  $ 32,313    $ 50,419    $ 73,018   $  131,938   $ 248,600
  Capacity sales...........................     --          --          --           3,250      84,501
                                             --------    --------    --------   ----------   ---------
    Total revenue..........................    32,313      50,419      73,018      135,188     333,101
Operating expenses:
  Cost of services and sales...............    27,648      42,130      63,504      122,109     250,574
  Selling, general and administrative......    24,370      32,866      36,077       44,893     100,559
  Depreciation and amortization............     2,637       4,802       7,717       16,268      75,911
  Restructuring and impairment.............       560       --          --          --          13,206
                                             --------    --------    --------   ----------   ---------
    Total operating expenses...............    55,215      79,798     107,298      183,270     440,250
                                             --------    --------    --------   ----------   ---------
Operating loss.............................   (22,902)    (29,379)    (34,280)     (48,082)   (107,149)
Interest income............................     3,282       1,852       3,686       28,259      26,722
Interest expense...........................    (8,856)    (10,848)    (12,450)     (79,177)   (137,409)
                                             --------    --------    --------   ----------   ---------
Loss before extraordinary loss.............   (28,476)    (38,375)    (43,044)     (99,000)   (217,836)
Extraordinary loss on debt prepayment......     --          --          --         (28,304)         --
                                             --------    --------    --------   ----------   ---------
Net loss...................................   (28,476)    (38,375)    (43,044)    (127,304)   (217,836)
Dividends on redeemable convertible
  preferred stock..........................     --          --          --          (3,301)     (1,341)
                                             --------    --------    --------   ----------   ---------
Net loss attributable to common
  stockholders.............................  $(28,476)   $(38,375)   $(43,044)  $ (130,605)  $(219,177)
                                             ========    ========    ========   ==========   =========
Net loss per common share attributable to
  common stockholders......................  $  (2.09)   $  (2.47)   $  (1.90)  $    (5.67)  $   (7.43)
                                             ========    ========    ========   ==========   =========
Weighted average common shares outstanding,
  basic and diluted........................    13,641      15,514      22,620       23,054      29,518
                                             ========    ========    ========   ==========   =========
</TABLE>

                                       27
<PAGE>

<TABLE>
<CAPTION>
                                                                AS OF DECEMBER 31,
                                             ---------------------------------------------------------
                                               1995        1996        1997        1998        1999
                                             --------    --------    --------   ----------   ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                          <C>         <C>         <C>        <C>          <C>

OTHER CONSOLIDATED FINANCIAL DATA:
EBITDA.....................................  $(19,705)   $(24,577)   $(26,563)  $  (31,814)  $ (18,032)
Net cash used in operating activities......   (18,489)    (26,331)    (22,525)     (60,318)   (134,825)
Net cash used in investing activities......   (37,057)     (1,592)    (43,164)    (349,992)   (405,971)
Net cash (used in) provided by financing
  activities...............................    (2,306)     94,772      11,286      729,035     589,391
Capital additions..........................    11,887       9,800      40,214      220,903     546,259

OTHER OPERATING DATA:
Billable minutes (000s)....................    25,932      62,249     140,918      383,875   1,595,658
Switches...................................        10          13          14           15          50

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..................   $35,066    $ 92,982    $ 47,143   $  329,511   $ 373,044
Restricted cash equivalents and restricted
  marketable securities, current and
  non-current..............................     --          --          --         144,523     197,760
Cash securing letters of credit for network
  construction.............................     --          --          --          --          50,165
Working capital............................    26,214      79,434       7,667      428,657     278,858
Property and equipment, net................    16,218      21,886      54,918      267,316     884,328
Intangible assets, net.....................     4,999       4,210       3,515       45,908   1,011,659
Total assets...............................    65,613     134,664     126,809    1,009,111   2,704,097
Total long-term liabilities................    67,283      77,904      99,610      921,139   1,767,548
Series A redeemable convertible preferred
  stock....................................     --          --          --          47,121      --
Stockholders' equity (deficiency)..........   (17,618)     38,483      (8,564)    (137,292)    537,391
</TABLE>

                                       28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

    THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. THE
FOLLOWING DISCUSSION INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS. FOR A
DISCUSSION OF IMPORTANT FACTORS, INCLUDING, BUT NOT LIMITED TO, OUR SUBSTANTIAL
LEVERAGE, THE CONTINUED DEVELOPMENT OF OUR BUSINESS, ACTIONS OF REGULATORY
AUTHORITIES AND COMPETITORS, PRICE DECLINES AND OTHER FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS REFERRED TO IN THE
FORWARD-LOOKING STATEMENTS, SEE "--RISK FACTORS."

OVERVIEW

    We are a rapidly growing provider of "ALL DISTANCE," integrated
telecommunications services to individuals, corporations, internet service
providers, applications service providers and other communications carriers in
Europe and North America. We operate one of Europe's largest pan-European
networks, with international gateways in New York City and London, direct sales
forces in 12 Western European cities and New York City, and an indirect sales
force in numerous locations in Western Europe and North America. We have full
public telecommunications operator licenses in ten Western European countries,
Canada and the United States and interconnection agreements with the incumbent
telecommunications provider in each of these countries.

    Since our inception in 1991, we have invested heavily in developing our
ability to provide international communications services within and between
Western Europe and North America and to expand our market presence. During the
past eight years, we have systematically expanded mainly through internal growth
by creating both direct and indirect sales organizations. Furthermore, we have
created an extensive commercial telecommunications network in Western Europe
which we believe is necessary to render economically the data and voice services
that we offer and intend to offer.

    In 1999, we also continued to expand our network capabilities and services
and our ability to generate revenues through our strategic acquisition of Destia
Communications, a facilities-based provider of domestic and international long
distance telecommunications services in Europe and North America. On
February 29, 2000, we acquired all of the outstanding share capital of AT&T UK,
a provider of voice and data communications services to enterprise level
corporate customers. This acquisition should help accelerate our entry into the
provision of data services, such as frame relay, asynchronous transfer mode and
Internet protocol services.

    REVENUE

    Historically, our revenues have been derived primarily from the provision of
long distance telecommunications services in Europe and more recently in North
America. Increasingly, our revenue mix includes advanced services such as data
and Internet services.

    Currently, our revenues also include revenues from capacity sales. Each
revenue source has a different impact on our results of operations. Revenue from
capacity sales will continue to vary substantially from period-to-period and
will result in fluctuations in our operating results. For a discussion of the
effects of our network on communications services revenue and capacity sales
revenue, as well as other line items, see "--The Viatel Network."

    During 1999, our communications services revenue was based primarily on
billed minutes of use and, to a lesser extent, on the additional services and
products provided through our network. We derived our communications services
revenue principally from long distance telecommunications services.

                                       29
<PAGE>
    The table set forth below presents our communications services revenue, as a
percentage of total revenue, from different regions, based on where calls
originated on our network:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                              --------------------------------------
                                                                1997           1998           1999
                                                              --------       --------       --------
<S>                                                           <C>            <C>            <C>
Western Europe..............................................    44.7%          46.6%          66.8%
North America...............................................    21.8%          41.6%          30.3%
Latin America...............................................    22.2%          10.8%           2.8%
Asia/Pacific Rim and Other..................................    11.3%           1.0%           0.1%
</TABLE>

    We have experienced, and expect to continue to experience, declining revenue
per minute in all of our markets, in part as a result of increasing worldwide
competition within the telecommunications industry. We believe, however, that
the impact on our results of operations from price decreases will be at least
partially offset by (1) continuing decreases in our cost of providing
telecommunications services, particularly those decreases resulting from our
continued efforts to convert from leased to owned infrastructure and reduced
interconnection costs through the use of our network as it is expanded, (2) the
introduction of new products and services and (3) our ability to provide "last
mile" connections over our own facilities or through entering into additional
interconnection agreements to obtain more cost-effective access and termination
from incumbent telecommunications operators. We cannot assure you, however, that
the results referred to in the foregoing forward-looking statements, including a
decline in our cost of communications services, can be achieved.

    In December 1999, we completed our acquisition of Destia. As a result, our
1999 consolidated financial statements include the results of operations of
Destia solely for the month of December 1999.

    COST OF SERVICES AND SALES

    Our cost of services and sales can be classified into four general
categories: access costs, network costs, termination costs and cost of capacity
sales. Access costs generally represent the costs associated with transporting
the traffic from a customer's premises to the closest access point on our
network. Access costs vary depending upon the distance from our network to the
customer's premises and from country-to-country. We currently expect that our
effective per minute access costs will be reduced as deregulation continues and
competition accelerates, as certain European Union directives requiring
cost-oriented pricing (i.e., costs that an effectively competitive market would
yield) by incumbent telecommunications operators are enforced and as we are able
to obtain cost-effective interconnection agreements. However, we can provide no
assurance regarding the extent or timing of such cost decreases or whether they
will occur. If such access costs do not fall as fast as we expect, or at all,
our gross margins could be adversely affected.

    Network costs represent the costs of transporting calls over our network
from its point of entry to its point of exit. Network costs generally consist of
leased line rental costs and facility/network management costs. These costs are
expected to decrease substantially as each additional portion of our constructed
network is placed into service and we secure infrastructure ownership on other
routes, which will enhance gross margins. However, there will be an associated
increase in depreciation and amortization expense (which is not included in
network costs). See "--Depreciation and Amortization." In order to succeed, we
will need our per minute network costs to decline substantially compared to our
per minute revenue.

                                       30
<PAGE>
    We use least cost routing designed to terminate traffic in the most
cost-effective manner. We believe that local termination costs should decrease
as we (1) add additional switches and points of presence, (2) interconnect with
additional incumbent telecommunications operators and other infrastructure
providers, (3) construct or purchase additional transmission facilities and
(4) provide "last mile" connections over our own facilities. Local termination
costs should also decrease as new telecommunications service providers emerge
and, in Western Europe, as European Union member states implement and enforce
regulations requiring incumbent telecommunications operators to establish rates
which are set at the forward-looking, long run economic costs that would be
incurred by an efficient provider using state-of-the-art technology. We cannot
provide any assurance regarding the results referred to in the foregoing
forward-looking statements, including the extent or timing of cost decreases.
See "--Risk Factors" and "Item 1. Business--Competition" and "Item 1.
Business--Government Regulation."

    Termination costs currently represent the costs which we are required to pay
to other carriers from the point of exit from our network to the point of
destination. Termination costs are generally variable with traffic volume and
traffic mix. If a call is terminated in a city in which we have a switch or
point of presence, the call is usually transferred to the public switched
telephone network for local termination. If the call is to a location in which
we do not have a switch or point of presence, then the call must be transferred
to another carrier with which we are interconnected.

    For a description of cost of capacity sales, see "--The Viatel Network."

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

    Our selling, general and administrative expenses include advertising and
promotional costs, commissions paid to sales representatives and overhead costs
associated with our headquarters, back-office and network operations centers and
sales offices. Our selling, general and administrative expenses have continued
to increase since our inception as we have developed and expanded our business,
although these expenses have fallen as a percentage of revenue. We anticipate
that these expenses will continue to increase as our business is expanded in the
future. We anticipate that these expenses will continue to be incurred in
advance of anticipated related communications services revenue.

    DEPRECIATION AND AMORTIZATION

    Depreciation and amortization expense includes charges relating to
depreciation of property and equipment, which consist principally of
telecommunications-related equipment such as switches and points of presence,
indefeasible rights-of-use and minimum investment units, furniture and
equipment, leasehold improvements, and amortization of intangible assets,
including goodwill and costs associated with acquired customer bases, employee
bases and sales forces. We depreciate our network over periods ranging from five
to 20 years and amortize our goodwill and acquired customer base and employee
base over periods ranging from three to seven years. We expect depreciation and
amortization expense to increase as we further expand our network, particularly
as each portion of our constructed network is placed into service, at least
until significant portions of the network are sold.

    As a result of our acquisition of Destia, amortization expense will increase
significantly in 2000. The purchase price for Destia was $901.9 million and was
allocated based on estimated fair values at the date of acquisition, pending
final determination. This preliminary allocation has resulted in intangible
assets and goodwill of approximately $131.0 million and $822.3 million,
respectively, which are being amortized on a straight-line basis over their
estimated useful lives which are four to seven years and seven years,
respectively.

    RESTRUCTURING AND ASSET IMPAIRMENTS

    As a direct result of our acquisition of Destia Communications and the
overlap of some of our business activities, we decided during 1999 to streamline
our organizational structure and strategically

                                       31
<PAGE>
reposition certain operations in both North America and Western Europe. As a
result of these actions, we recognized, during the fourth quarter of 1999,
certain restructuring and asset impairment charges. We also decided to
accelerate depreciation of certain assets which are currently in use but will be
taken out of service in 2000.

    Restructuring charges were composed primarily of anticipated costs to
terminate leases and other contract cancellation costs, as well as severance
costs associated with workforce reductions. Asset impairments consisted of
non-cash charges for asset write-offs related to assets no longer in service at
December 31, 1999. In total, we estimate that the restructuring, impairment and
accelerated depreciation charges will be approximately $21.3 million. We
recognized approximately $4.1 million in restructuring charges and approximately
$9.1 million in asset impairments during 1999, and expect to recognize the
balance of these charges during the first half of 2000. We may also incur
restructuring charges related to the acquisition of AT&T UK. The magnitude of
these charges cannot be currently estimated.

THE VIATEL NETWORK

    During the first quarter of 1999, we began selling capacity on our network.
Our network is expected to have significant effects on our results of
operations. Capacity sales will vary substantially from period-to-period and, as
a result, may result in fluctuations in our operating results. These sales
substantially increase our gross profit (I.E., total revenue less cost of
services and sales) because our cost of communication services as a percentage
of communications service revenue is currently higher than the cost of capacity
sales as a percentage of capacity sales. Due to the timing of capacity sales and
the higher margin associated with such sales, our gross profits and gross margin
may also fluctuate substantially in the future, in ways that will not
necessarily reflect the trends in our communication services business. We
capitalize all of the costs associated with designing, building, funding and
placing each portion of our constructed network into service.

    Revenue from capacity sales consists mainly of revenues recognized when we
deliver indefeasible rights-of-use that qualify for sales-type lease accounting.
Transactions that do not meet the criteria for sales-type lease accounting are
accounted for as operating leases and revenue is recognized over the term of the
lease and is included in communication services revenue.

    Cost of capacity sales represents non-cash charges of the PRO RATA cost of
the network asset and is determined based upon the ratio of total network
capacity sold to total estimated network capacity, multiplied by the total
capitalized costs of the related network. The portion of the total capitalized
cost of the network used to provide communication services is included in
property and equipment and is being charged to depreciation and amortization
over its useful life.

    In June 1999, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 43, "Real Estate Sales, an interpretation of
FASB Statement No. 66" ("FIN 43") which is applicable to all contracts entered
into after June 30, 1999. FIN 43 requires that a lease of property improvements
or integral equipment include a provision allowing title to transfer to the
lessee in order for that lease to be accounted for as a sales-type lease.

    We recognize revenue in accordance with FIN 43 and the SEC Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements". However,
accounting practices and guidance for sales of indefeasible rights-of-use are
evolving. Standard setting bodies are currently reviewing a number of issues
related to FIN 43 and other related issues will probably be referred to these
bodies. Changes in the accounting treatment as a result of the foregoing could
affect the way that we recognize revenues and costs associated with capacity
sales in the future.

    We exchange capacity on our network for capacity on other cable systems.
Depending on the structure of these transactions, we generally do not recognize
any revenue or expense, so there is no effect on our statement of operations. We
will continue to incur sales and marketing and related expenses that will not

                                       32
<PAGE>
be capitalized and will affect our results of operations, particularly while
portions of our network are being designed, built and placed into service. In
addition, we will continue to incur additional operating and maintenance
expenses as additional portions of our network become operational. As a result
of financing our network with debt, we are capitalizing a portion of the
interest incurred that relates to the construction of our network until it is
placed in service and will incur increases in interest expense thereafter.

    Our network will continue to have a beneficial effect on our costs of
services and sales as well as net income (loss). This will occur as we continue
to bring traffic "on-net," to facilities we own, as opposed to facilities that
we lease from other carriers. A large portion of the expenses associated with
facilities we own is accounted for as depreciation and amortization, while
leased capacity is accounted for as a cost of services and sales. As a result,
we expect that our gross margins and profit will be improved as we continue to
bring traffic "on-net." However, net income (loss) will not improve to the same
extent. The effect of bringing traffic "on-net" will be somewhat delayed because
our leased line agreements require minimum notification to terminate our
obligations.

RESULTS OF OPERATIONS

    The following table summarizes the breakdown of our results of operations as
a percentage of revenue. Our revenue, and therefore these percentages, could
fluctuate substantially from period to period due to revenues from capacity
sales, which have a substantially different impact on margins than revenues from
communications services.

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                  ------------------------------------
                                                                    1997          1998          1999
                                                                  --------      --------      --------
<S>                                                               <C>           <C>           <C>
Cost of services and sales..................................         87.0%         90.3%         75.2%
Selling, general and administrative expenses................         49.4%         33.2%         30.2%
Depreciation and amortization...............................         10.6%         12.0%         22.8%
Restructuring and impairment................................           --            --           4.0%
EBITDA loss (1).............................................        (36.4%)       (23.5%)        (5.4%)
</TABLE>

------------------------

(1) As used herein "EBITDA" consists of earnings before interest, income taxes,
    restructuring and impairment charges, extraordinary loss, dividends on
    convertible preferred stock and depreciation and amortization. EBITDA is a
    measure commonly used in the telecommunications industry to analyze
    companies on the basis of operating performance. EBITDA is not a measure of
    financial performance under generally accepted accounting principles, is not
    necessarily comparable to similarly titled measures of other companies and
    should not be considered as an alternative to net income as a measure of
    performance nor as an alternative to cash flow as a measure of liquidity.

    1999 COMPARED TO 1998

    TOTAL REVENUE.  Total revenue increased by 146.4% from $135.2 million for
1998 to $333.1 million for 1999. This growth was attributable to an 88.4%
increase in communications services revenue from $131.9 million on
383.9 million billable minutes in 1998 to $248.6 million on 1.596 billion
billable minutes in 1999. Capacity sales increased from $3.3 million or, 2.4% of
revenue, in 1998 to $84.5 million, or 25.4% of revenue, in 1999. Revenue growth
in 1999 was generated primarily by growth from European operations, capacity
sales, and as a result of the Destia acquisition.

    Although there was a substantial increase in billable minutes from 1998 to
1999, the effects of such growth were partially offset by a decline in revenue
per billable minute, as it declined by 54.5% from $.33 in 1998 to $.15 in 1999,
primarily because of (1) a higher percentage of lower-priced intra-European and
national long distance traffic on our network and (2) reductions in prices in
response to price reductions by incumbent telecommunications operators and other
carriers in many of our markets. Communications

                                       33
<PAGE>
services revenue per billable minute excludes fixed monthly fees associated with
our other products and service offerings.

    Communication services revenue per billable minute from the sale of services
to retail customers, which represented 41.7% of revenue in 1998, compared to
39.4% in 1999, decreased 65.8% from $.38 in 1998 to $.13 in 1999. Communication
services revenue per billable minute from the sale of services to carriers and
other resellers decreased 33.3% from $.30 in 1998 to $.20 in 1999.

    During 1999, as compared to 1998, our wholesale sales to carriers grew on an
absolute basis, but decreased as a percentage of revenue because our other
services grew at a faster rate. The wholesale sales to carriers represented
approximately 55.9% of revenue and approximately 62.0% of billable minutes for
1998 as compared to approximately 35.2% of revenue and approximately 34.5% of
billable minutes for 1999.

    COST OF SERVICES AND SALES.  Cost of services and sales increased from
$122.1 million in 1998 to $250.6 million in 1999. As a percentage of revenue,
however, cost of services and sales decreased from approximately 90.3% in 1998
to approximately 75.2% in 1999, due to our migration from leased infrastructure
to our own network and because of capacity sales and as a result of the Destia
acquisition. The effect of bringing traffic on-net, however, will be somewhat
delayed because our leased line agreements require minimum notification to
terminate our obligations.

    Cost of services and sales for 1999 includes costs associated with capacity
sales. The cost of capacity sales represents non-cash charges of the PRO RATA
cost of the network assets and is determined based upon the ratio of total
network capacity sold to total estimated network capacity, multiplied by the
total capitalized costs of the related network.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $44.9 million in 1998 to $100.6 million
in 1999 and, as a percentage of revenue, decreased from approximately 33.2% in
1998 to approximately 30.2% in 1999. Much of these expenses are attributable to
overhead costs associated with our headquarters, back-office and operations as
well as maintaining a physical presence in multiple jurisdictions. We expect to
incur additional expenses as we continue to invest in operating infrastructure
and actively market our products and services. Salaries and commissions, as a
percentage of total selling, general and administrative expenses, were
approximately 49.3% and 41.4% in 1998 and 1999, respectively. Advertising and
promotion expenses have increased substantially and will continue to be a
significant component of selling, general and administrative expenses. As a
percentage of total selling, general and administrative expenses, advertising
and promotion expenses were approximately 3.6% and 7.6% in 1998 and 1999,
respectively.

    EBITDA LOSS.  EBITDA loss decreased from $31.8 million in 1998 to
$18.0 million in 1999. As a percentage of revenue, EBITDA loss decreased from
approximately 23.5% in 1998 to approximately 5.4% in 1999.

    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense, which
includes depreciation of our network, increased from approximately
$16.3 million in 1998 to approximately $75.9 million in 1999. The increase was
due primarily to the $666.5 million increase in gross property and equipment
from $293.8 million at December 31, 1998 to $960.3 million at December 31, 1999,
and an increase in amortization of goodwill related to our acquisition of
Destia.

    RESTRUCTURING AND IMPAIRMENT.  Restructuring and impairment charges of
$13.2 million were recognized in 1999, consisting of anticipated costs to
terminate leases and other contract cancellation costs, severance costs and
charges for asset write-offs and write downs of underutilized assets.
Restructuring and impairment charges were approximately 4.0% as a percentage of
revenues. There were no restructuring and impairment charges in 1998.

                                       34
<PAGE>
    INTEREST.  Interest expense increased from approximately $79.2 million in
1998 to approximately $137.4 million in 1999, primarily as a result of increases
in our outstanding indebtedness, which includes notes and capital lease
obligations, which increased from $930.1 million at December 31, 1998 to
$1.8 billion at December 31, 1999. During 1999, we capitalized approximately
$10.1 million of interest costs. Interest income decreased from approximately
$28.3 million in 1998 to approximately $26.7 million in 1999, primarily as a
result of the decrease in the balance of our outstanding investments.

    1998 COMPARED TO 1997

    TOTAL REVENUE.  Total revenue increased by 85.1% from $73.0 million on
140.9 million billable minutes in 1997 to $135.2 million on 383.9 million
billable minutes in 1998. Total revenue growth in 1998 was generated primarily
from increased European retail traffic and growth in our carrier business in
Western Europe and in North America which was partially offset by decreased
revenue in our Pacific Rim and Latin American operations. Total revenue in 1998
also included $3.3 million of trans-Atlantic capacity sales.

    The overall increase of 172.4% in billable minutes from 1997 to 1998 was
partially offset by declining revenue per billable minute, primarily because of
(1) a higher percentage of lower-priced intra-European and national long
distance traffic on our network as compared to intercontinental traffic, (2) a
higher percentage of lower-priced carrier traffic as compared to retail traffic
and (3) reductions in certain rates charged to retail customers in response to
price reductions enacted by incumbent telecommunications operators and other
carriers in many of our markets.

    Communications services revenue per billable minute from the sale of
services to retail customers, which represented 72.1% of total revenue for 1997,
compared to 41.7% for 1998, decreased 44.1% from $.68 in 1997 to $.38 in 1998.
Communication services revenue per billable minute from the sale of services to
carriers and other resellers increased by 3.4% from $.29 in 1997 to $.30 in 1998
due primarily to changes in traffic mix. The number of contracted customers
billed declined 30.2% from 21,515 at December 31, 1997 to 15,010 at
December 31, 1998. This decline in contracted customers billed is primarily
attributable to our Pacific Rim operations where the number of customers billed
declined 93.2% from 5,424 at December 31, 1997 to 369 at December 31, 1998,
representing a net loss of 5,055 customers, as a result of currency fluctuations
caused by the Asian economic crisis, which made our rates noncompetitive.

    During 1998 as compared to 1997, we significantly increased our wholesale
carrier business through which we sell switched minutes, private lines and ports
to carriers, Internet service providers and other resellers. The wholesale
carrier business has enabled us to recover partially the costs associated with
increased capacity in advance of demand from retail customers. The resulting
economies of scale have allowed us to use our network more profitably for
network originations and terminations within Europe. The wholesale carrier
business represented approximately 27.9% of total revenue and approximately
46.1% of billable minutes in 1997 as compared to approximately 55.9% of total
revenue and approximately 62.0% of billable minutes in 1998. The increase in
total revenue derived from carriers and other resellers is partially
attributable to the acquisition of Flat Rate Communications on February 27, 1998
which also significantly increased our North American revenues.

    COST OF SERVICES.  Cost of services increased from $63.5 million in 1997 to
$122.1 million in 1998 and, as a percentage of total revenue, increased from
approximately 87.0% to approximately 90.3%. Our gross margin decreased, as a
percentage of total revenue, from 13.0% in 1997 to 9.7% in 1998. This decrease
was primarily due to (1) decreased revenue per minute resulting from price
competition and foreign currency fluctuations which was not offset by
corresponding decreases in infrastructure costs, (2) increased sales to carrier
customers which generate substantially lower margins and (3) an increase in
intra-European and national long distance traffic compared to higher margin
international traffic. This decrease in gross margin, as a percentage of
revenue, is one of the principal reasons we initiated a strategy to own key
elements of our network infrastructure.

                                       35
<PAGE>
    Cost of services increased in 1998 in part because of the relatively high
cost of leased infrastructure. These costs are expected to decrease as a
percentage of total revenue as we continue to migrate from leased to owned
infrastructure. From 1997 to 1998, we increased our private line circuit
capacity and, as a result, costs for private line circuits increased from
approximately $9.6 million in 1997 which is approximately 13.1% of total
revenue, to approximately $17.1 million in 1998 which is approximately 12.6% of
total revenue.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses increased from $36.1 million in 1997 to $44.9 million in
1998 and, as a percentage of total revenue, decreased from approximately 49.4%
in 1997 to approximately 33.2% in 1998. Much of these expenses are attributable
to overhead costs associated with our headquarters, back-office and network
operations as well as maintaining sales offices. Salaries and commissions, as a
percentage of total selling, general and administrative expenses, were
approximately 51.6% and 49.3% for 1997 and 1998, respectively. Advertising and
promotion expenses, as a percentage of total selling, general and administrative
expenses, were approximately 1.2% and 3.6% in 1997 and 1998, respectively. We
expect to incur additional expenses as we continue to invest in our sales and
marketing infrastructure and actively market our products and services.

    EBITDA LOSS.  EBITDA loss increased from $26.6 million in 1997 to
$31.8 million in 1998. As a percentage of total revenue, EBITDA loss decreased
from approximately 36.4% in 1997 to approximately 23.5% in 1998. These losses
resulted from lower gross margins as a percentage of total revenue due to the
relatively high cost of intra-European leased lines which was compounded by the
impact on revenue of aggressive price reductions implemented by incumbent
telecommunications operators.

    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense, which
includes depreciation of our network, increased from approximately $7.7 million
in 1997 to approximately $16.3 million in 1998. The increase was due primarily
to (1) the depreciation of equipment related to network expansion and fiber
optic cable systems placed in service during 1997 and (2) the amortization of
goodwill associated with the acquisition of Flat Rate Communications in February
1998. Depreciation expense will increase substantially as each constructed
portion of our network becomes operational.

    INTEREST.  Interest expense increased from approximately $12.5 million in
1997 to approximately $79.2 million in 1998 primarily as a result of our 1998
high yield offering. Interest income increased from approximately $3.7 million
in 1997 to approximately $28.3 million in 1998 primarily as a result of the
interim investment of the net proceeds from our 1998 high yield offering. During
1998, we capitalized $3.3 million of interest costs.

LIQUIDITY AND CAPITAL RESOURCES

    We have incurred losses from operating activities in each year of operations
since our inception and expect to continue to incur operating and net losses for
the next several years. Since inception, we have used cash provided by financing
activities to fund operating losses, interest expense and capital expenditures.
The sources of this cash have primarily been through private and public equity
and debt financings and, to a lesser extent, equipment-based financing. As of
December 31, 1999, we had $423.2 million of cash, cash equivalents and cash
securing letters of credit for network construction and $197.8 million of
restricted cash equivalents and other restricted marketable securities, which
primarily secure interest payments on our notes through April 2001. The
following private and public equity and debt financing provided funds to satisfy
our liquidity needs.

    On February 1, 2000, we executed a securities purchase agreement pursuant to
which we agreed to sell, and affiliates of Hicks, Muse Tate & Furst and Chase
Capital Partners committed to buy, $325 million in Series B cumulative
convertible preferred stock for net proceeds to us of $307.1 million. The
transaction closed on March 9, 2000, following receipt of Hart-Scott-Rodino
Antitrust Improvements Act clearance.

                                       36
<PAGE>
The net proceeds of this private placement are being used for network expansion,
services development and general corporate purposes.

    As part of the Destia acquisition, on December 8, 1999, the holders of all
of Destia's 11% senior discount notes due 2008 ($213.3 million in accreted
principal amount) exchanged their Destia notes, and all accreted but unpaid
interest on these notes through the date of the acquisition, for $205.8 million
in aggregate principal amount at maturity of our 11.5% senior notes due 2009 and
an aggregate cash payment of $21.4 million. In connection with this exchange
offer, we also completed a private placement of $63.7 million in gross principal
amount of our 11.5% senior dollar notes. A portion of the proceeds from this
private placement were used to purchase U.S. government securities which were
pledged as security for the first three interest payments on the notes.

    Destia's credit facility with NTFC Capital Corporation, under which Destia
had borrowed approximately $32.3 million as of December 31, 1999, required
Destia to obtain NTFC's consent or prepay the borrowed amounts outstanding,
prior to any change in control transaction. Since our acquisition of Destia was
considered a change in control, Destia obtained a waiver from NTFC which
extended until March 8, 2000 and which has been subsequently extended until
May 8, 2000. Before May 8, 2000, we will be required either to (i) obtain a
further waiver from NTFC, (ii) prepay the outstanding amounts owed at a premium
of not more than 102% of the amount outstanding or (iii) negotiate a new
facility.

    On June 29, 1999, we completed an offering of 4,315,000 shares of our common
stock at $47.00 per share. The net proceeds of the offering were approximately
$191.9 million.

    On May 13, 1999, our series A preferred stock and subordinated convertible
debentures issued in 1998 were mandatorily converted into shares of our common
stock.

    On February 29, 2000, we acquired the entire issued and outstanding share
capital of AT&T UK for $125 million in cash. In connection therewith, AT&T, Inc.
and we agreed to make certain post-closing payments if the working capital in
AT&T UK at closing was not $5 million.

    During the second quarter of 2000, we intend to file a universal shelf
registration statement that will enable us to issue, from time to time,
additional shares of our common stock and preferred stock or debt securities. At
this time, we have not determined the dollar amount of securities that will be
registered for future offerings. We have no current intention to issue any
securities pursuant to this shelf registration in the immediate future.

    We have very substantial interest expense. Although we have restricted cash
available to make our interest payments on high yield debt instruments through
April 15, 2001, thereafter we need to pay our interest expense from operating
income or borrowings. In 1999, we had an operating loss of $107.1 million and we
have no commitment from any lender to make funds available.

    On April 12, 2000, Viatel Financing Trust I, a Delaware statutory trust and
subsidiary of ours, sold $180 million of 7 3/4% trust convertible preferred
securities. The proceeds from the offering of convertible preferred securities
have been loaned by the trust to us. We will use the net proceeds from this
offering, estimated to be $173.7 million, to further develop and enhance our
network, to make selective acquisitions and investments and for working capital
and general corporate purposes.

    On April 14, 2000, we executed a placement agreement under the terms of
which we agreed to sell [EURO]300 million of 12 3/4% senior euro notes due 2008.
The transaction is expected to be completed on April 20, 2000.

                                       37
<PAGE>
    We believe that the net proceeds from the offerings discussed above together
with cash and marketable securities on hand and future capacity sales on our
network will provide sufficient funds for us to expand our business as planned
and to fund operating losses for the next 12 to 18 months. However, the amount
of our future capital requirements will depend on a number of factors, including

    - the success of our business,

    - any acquisitions or investments we make,

    - the start-up dates of each additional segment of our network,

    - the dates on which we further expand our network,

    - whether our network build-out is on-time and on-budget,

    - the types of services we offer,

    - staffing levels, and

    - customer growth

as well as other factors that are not within our control, including competitive
conditions, government regulatory developments and capital costs. Depending on
the factors listed above, we may need more capital or may be required to delay
or abandon some or all of our development and expansion plans or we may be
required to seek additional sources of financing earlier than currently
anticipated. If we are required to seek additional financing, there can be no
assurance that such financing will be available on acceptable terms or at all.
See "--Capital Additions; Commitments."

    CAPITAL ADDITIONS; COMMITMENTS

    The development of our business has required substantial capital. Capital
additions consist of capital expenditures, the net increase in property and
equipment purchases payable, assets acquired under capital lease obligations and
capitalized interest during the period. During 1998, capital additions totaled
$220.9 million and consisted of capital expenditures of approximately $94.7
million, a net increase of $92.5 million in property and equipment purchases
payable, $30.4 million of assets acquired under capital lease obligations and
capitalized interest of $3.3 million. For 1999, we had capital additions of
approximately $546.2 million, which consisted of capital expenditures of
approximately $527.3 million, a net decrease of $9.5 million in property and
equipment payable, $18.3 million of assets acquired under capital lease
obligations and capitalized interest of approximately $10.1 million. We have
also entered into certain agreements associated with our network, purchase
commitments for network expansion and other items aggregating approximately
$147.9 million at December 31, 1999. We expect to continue to have substantial
capital expenditures in the future. On April 10, 2000, we executed a definitive
agreement with Level 3 Communications under the terms of which we acquired a 25%
ownership interest in the trans-Atlantic fiber optic cable project being
developed by Level 3. Our required commitment in 2000 to fund this purchase is
approximately $140 million. See "Item 1. Business--Our Network--Trans-Atlantic
Capacity."

    FOREIGN CURRENCY

    We have exposure to fluctuations in foreign currencies relative to the U.S.
Dollar as a result of billing portions of our communications services revenue in
the local European currency in countries where the local currency is relatively
stable while many of our obligations, including a substantial portion of our
transmission costs, are denominated in U.S. dollars. In countries with less
stable currencies, we bill in U.S. dollars. Debt service on certain of the notes
issued by us is currently payable in Euros. A substantial portion of our capital
expenditures is and will continue to be denominated in various European
currencies, including the Euro. Most of the European currencies in which we do
business converged effective January 1, 1999, with the exception of the British
Pound Sterling. See "--Euro."

    A significant portion of our assets are foreign-denominated and, as such,
are subject to fluctuations in value due to movements in foreign exchange rates.
With the continued expansion of our network, a

                                       38
<PAGE>
substantial portion of the costs associated with the network, such as local
access and termination charges and a portion of the leased line costs, as well
as a majority of local selling expenses and debt service related to the Euro
denominated notes, are charged to us in the same currencies as revenue is
billed. These developments create a natural hedge against a portion of our
foreign exchange exposure. Our financial position as of December 31, 1999 and
our results of operations for the fiscal year 1999 were not significantly
affected by fluctuations in the U.S. Dollar in relation to foreign currencies.

YEAR 2000

    Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately distinguish 21st century dates from 20th
century dates due to the two-digit fields used by many systems. As was the case
with many companies, we did not experience any material business disruption as a
result of the Year 2000 issue due to the remediation work we accomplished prior
to such date. The amount spent in connection with our Year 2000 remediation
efforts was not significant. Due to a belief by certain computer experts that
there may still be residual consequences of the change in centuries, we intend
to continue to monitor our mission criticial systems and those of our suppliers
and vendors over the course of this year.

EURO

    On January 1, 1999, eleven of the fifteen member countries of the European
Union established irrevocable fixed conversion rates between their existing
sovereign currencies and a single currency called the Euro. The sovereign
currencies are scheduled to remain legal tender as denominations of the Euro
during a transition period from January 1, 1999 to January 1, 2002.

    We have completed an internal analysis regarding business and systems issues
related to the Euro conversion and, as a result, made necessary modifications to
our business processes and software applications. Throughout most of 1999, we
have been able to conduct business in both the Euro and sovereign currencies on
a parallel basis, as required by the European Union.

    We believe that the Euro conversion has not and will not have a significant
impact on our business in Europe. The costs to convert all systems to be Euro
compliant did not have a significant impact on our results of operations.

INFLATION

    We do not believe that inflation has had a significant effect on our
operations to date.

RECENT ACCOUNTING PRONOUNCEMENTS

    SFAS NO. 133 AND SFAS NO. 137.  Statement of Financial Accounting Standards
No. 133 ("SFAS 133,") "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. SFAS 133 standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, by requiring recognition of those instruments as assets and
liabilities and to measure them at fair value. In June 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS 133,"
which amends SFAS 133 to delay the date by which all companies must comply with
SFAS 133. Companies must comply with SFAS 133 for all fiscal years beginning
after June 15, 2000. We have not completed our analysis of the impact of these
statements on our consolidated financial statements.

RISK FACTORS

    WE MAY ENCOUNTER DIFFICULTIES IN COMBINING OPERATIONS AND REALIZING
     SYNERGIES

    In the past four months, we have completed two major acquisitions with the
expectation that these transactions will result in certain benefits, including
operating efficiencies, cost savings and synergies. Achieving the benefits of
these transactions will depend in part upon the integration of our businesses in

                                       39
<PAGE>
an efficient manner, which requires considerable effort. In addition, the
consolidation of operations requires substantial attention from management. The
diversion of management attention and any difficulties encountered in the
transition and integration process could harm us. Furthermore, employees and
customers of our acquired companies may leave. We cannot assure you that we will
succeed in integrating the operations of the acquired companies into our
operations in a timely manner or that the expected efficiencies, cost savings
and synergies of these transactions will be realized.

    WE HAVE INCURRED AND WILL CONTINUE TO INCUR SIGNIFICANT MERGER-RELATED
     CHARGES

    As a result of our two recent acquisitions, we have incurred related costs
such as financial advisory, legal and accounting fees, financial printing and
other related charges. In addition, we have incurred and will continue to incur,
integration costs associated with consolidating corporate headquarters and other
administrative functions, terminating certain leases and severance and facility
closing costs associated with consolidating certain product lines. In addition,
in connection with the Destia transaction we have also recorded a substantial
amount of goodwill and intangible assets that will decrease our earnings as they
are amortized over the next four to seven years. See "--Depreciation and
Amortization."

    OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO RUN OUR
     BUSINESS

    We have now and will continue to have a significant amount of indebtedness.
As of December 31, 1999, we had approximately $1.8 billion of indebtedness. Our
substantial indebtedness could have important consequences. For example, it
could:

    - limit our ability to obtain additional financing for working capital,
      capital expenditures, acquisitions, joint ventures and general corporate
      purposes;

    - require us to dedicate a substantial portion of our cash flow from
      operations to payments on our indebtedness, thereby reducing the funds
      available to us for other purposes;

    - make us more vulnerable to economic downturns, limiting our ability to
      withstand competitive pressures and reducing our flexibility in responding
      to changing business and economic conditions;

    - limit our flexibility in planning for, or reacting to, changes in our
      business and the industry in which we operate; and

    - place us at a competitive disadvantage compared to our competitors that
      have less debt.

    TO DATE, WE HAVE INCURRED SUBSTANTIAL NET LOSSES AND NEGATIVE CASH FLOW FROM
    OPERATIONS AND, IF THIS CONTINUES, WE WILL BE UNABLE TO MEET OUR WORKING
    CAPITAL AND FUTURE DEBT SERVICE REQUIREMENTS

    Our operating loss and net loss have increased for each of the last four
years. In 1998, we had an operating loss of $48.1 million, negative EBITDA of
$31.8 million and a net loss of $127.3 million. In 1999, we had an operating
loss of $107.1 million, negative EBITDA of $18.0 million and a net loss of
$217.8 million and, on a pro forma basis, after giving effect to our acquisition
of Destia as if it had occurred on January 1, 1999, would have had an operating
loss of $306.8 million, negative EBITDA of $71.3 million and a net loss of
$465.0 million. In 1998, we had interest expense of $79.2 million. In 1999, we
had interest expense of $137.4 million and, on a pro forma basis, after giving
effect to the combination with Destia as if it had occurred on January 1, 1999,
would have had interest expense of $191.3 million.

    We are likely to have negative EBITDA and negative cash flow beyond 2001 if:

    - we extend our expansion plans,

    - prices charged to end-users for capacity sales or communications services
      decline faster than we anticipate,

    - interconnection rates and wholesale prices paid by us do not decline as
      quickly as we anticipate or

    - any of the other risks described in this report materialize.

                                       40
<PAGE>
Accordingly, we cannot assure you that we will achieve or sustain profitability
or positive cash flows from operating activities in the future. If we cannot
achieve profitability or positive cash flows from operating activities, we may
be unable to meet our working capital and future debt service requirements,
which would harm our business, financial condition and results of operations.

    WE MUST OBTAIN CONSENTS AND WAIVERS UNDER THE TERMS OF DESTIA'S CREDIT
     FACILITY

    Destia's credit facility with NTFC Capital Corporation, under which Destia
had borrowed approximately $32.3 million as of December 31, 1999, required
Destia to obtain NTFC's consent or prepay the borrowed amounts outstanding,
prior to any change in control transaction. Since our acquisition of Destia was
considered a change in control, Destia obtained a waiver from NTFC which
extended until March 8, 2000 and which has been subsequently extended until
May 8, 2000. Before May 8, 2000, we will be required either to (i) obtain a
further waiver from NTFC, (ii) prepay the outstanding amounts owed at a premium
of not more than 102% of the amount outstanding or (iii) negotiate a new
facility. We cannot assure you that NTFC will grant an additional waiver, if one
is necessary, or that it will grant such a waiver on terms that are acceptable
to us. If NTFC does not grant the waiver and we do not prepay the amount owed or
negotiate a new facility, then we will be in default under the NTFC credit
facility which, in turn, would be an event of default with respect to all of our
senior indebtedness. An event of default on our senior indebtedness would enable
the holders of such indebtedness to accelerate payment. As of December 31, 1999,
we had total senior indebtedness of approximately $1.8 billion, and the
obligation to repay this amount would have a material and adverse effect on us,
as described above under "--To Date, We Have Incurred Substantial Net Losses and
Negative Cash Flow From Operations and, If This Continues, We Will Be Unable to
Meet Our Working Capital and Future Debt Service Requirements."

    OUR OPERATING RESULTS MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATIONS

    Our quarterly operating results have fluctuated in the past, primarily as a
result of the evolution of our business, and may fluctuate substantially in the
future as a result of a variety of factors, including:

    - pricing changes in the industry;

    - the start-up and ready-for-service dates of each phase of our network
      expansion;

    - timing of capacity sales;

    - changes in the mix of services sold or channels through which those
      services are sold;

    - changes in user demand, customer terminations of service, capital
      expenditures and other costs relating to the expansion of our network;

    - the timing and costs of any acquisitions of customer bases and businesses,
      services or technologies;

    - the timing and costs of marketing and advertising efforts;

    - the effects of government regulation and regulatory changes; and

    - specific economic conditions in the communications industry.

    Variability in our operating results could have a material adverse effect on
our business, financial condition and results of operations. Any significant
shortfall in demand for our services in relation to our expectations, or the
occurrence of any other factor which causes revenue to fall significantly short
of our expectations, would also have a material adverse effect on our business,
financial condition and results of operations. In addition, the uncertainty of
revenue growth coupled with substantial planned increases in operating expenses
and the continued evolution in our transmission methodology from switchless
resale to use of our network may result in substantial quarterly fluctuations in
our operating results.

    DUE TO RESTRICTIONS IN OUR INDENTURES, WE MAY NOT BE ABLE TO OPERATE OUR
     BUSINESS AS WE DESIRE

    The indentures under which our long-term debt was issued contain a number of
conditions and limitations on the way in which we can operate our business.
These limitations may force us to pursue less

                                       41
<PAGE>
than optimal business strategies or forego business arrangements which could
have been financially advantageous to us and our stockholders. The indentures
restrict, and in some cases significantly limit or prohibit, among other things,
our ability and the ability of our respective subsidiaries to:

    - incur additional indebtedness,

    - create liens,

    - engage in sale-leaseback transactions,

    - pay dividends or make distributions with respect to our capital stock,

    - make certain investments,

    - sell assets,

    - redeem capital stock,

    - issue or sell stock of restriced subsidiaries, or

    - enter into transactions with stockholders or affiliates or effect a
      consolidation or merger.

    OUR FUTURE GROWTH WILL REQUIRE SUBSTANTIAL ADDITIONAL CAPITAL WHICH COULD
    EXCEED BUDGETED AMOUNTS AND CAUSE US TO DELAY OR ABANDON EXPANSION PROJECTS

    Our future growth will require substantial additional capital which may
exceed budgeted amounts. If we do not have sufficient cash to fund our growth as
planned, we may be required to delay or abandon some or all of our development
and expansion plans or we may have to seek additional money earlier than
anticipated. We cannot provide any assurance that additional financing
arrangements will be available to us on acceptable terms or at all. Moreover,
the amount of our outstanding indebtedness may adversely affect our ability to
engage in additional financings.

    FAILURE TO CONTINUE TO IMPLEMENT OUR STRATEGY OF OWNING FACILITIES COULD
    SIGNIFICANTLY IMPACT OUR FINANCIAL PERFORMANCE

    If we are unable to continue to successfully implement our strategy of
owning, rather than leasing, communications facilities, we could experience a
significant decrease in margins which we make on communications services
transmitted on our network. Unless we are able to significantly increase the
number of billable minutes which we carry or the amount we can charge for
additional services, this decrease in margins would have a material adverse
effect on our business, financial condition and results of operations.

    FAILURE TO SELL CAPACITY ON OUR NETWORK OR PRICE REDUCTIONS FOR CROSS-BORDER
    CAPACITY IN EUROPE COULD HARM OUR BUSINESS

    Our success and ability to achieve our business objectives depends, in part,
upon the sale of capacity on our network. The market for capacity has
experienced significant price reductions, which are expected to continue.
Although we have been successful in meeting capacity sales objectives to date,
we cannot assure you that such success will continue. Furthermore, even if
capacity sales projections are realized, price declines for cross-border
capacity may limit operating profitability or the ability to generate sufficient
cash flow to service our indebtedness. If we are unable to sell capacity
effectively on our network, it would harm our business, financial condition and
results of operations.

    CHANGE IN ACCOUNTING POLICIES COULD HAVE AN ADVERSE EFFECT ON OUR OPERATING
     RESULTS

    In June 1999, FASB issued FIN 43 which is applicable for all contracts
entered into after June 30, 1999. FIN 43 requires that a lease of property
improvements or integral equipment include a provision allowing title to
transfer to the lessee in order for that lease to be accounted for as a
sales-type lease.

                                       42
<PAGE>
    We recognize revenue in accordance with FIN 43 and the SEC's Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements".
However, accounting practices and guidance for indefeasible rights-of-use is
evolving, and standard setting bodies are currently reviewing a number of issues
related to FIN 43 and other related issues will probably be referred to these
bodies. Changes in the accounting treatment as a result of the foregoing could
affect the way that we recognize revenue and expenses associated with these
capacity sales in the future. We cannot assure you that any such changes will
not have an adverse effect on our financial condition and results of operations.

    WE MAY NOT BE ABLE TO PROVIDE DATA TRANSMISSION SERVICES EFFECTIVELY

    Prior to our acquisition of AT&T UK, we had limited experience in providing
data transmission services and, consequently, we can provide no assurance that
we will be successful in expanding this aspect of our business. Our ability to
successfully expand our data transmission business will depend upon, among other
things, our ability to:

    - select new equipment and software and integrate these into our network;

    - hire and train additional qualified personnel;

    - enhance our billing, back-office and information systems to accommodate
      data transmission services; and

    - obtain customer acceptance of our service offerings.

If we are not successful, our business may be materially adversely affected.

    The data transmission business is also extremely competitive and prices have
declined substantially in recent years and are expected to continue to decline.
In providing these services, we will be dependent upon vendors for assistance in
the planning and deployment of our data product offerings, as well as ongoing
training and support. Our vendors may not have adequate experience in providing
equipment and configuring data networks in our various markets. We may also
experience technical difficulties in integrating our equipment and handling
differing data transmission protocols in our various markets.

    Unlike some of our competitors, we are not currently carrying voice
communications using Internet protocol technology on our network outside of the
U.K. While we currently carry portions of our traffic using Internet protocol
overlay, there is a risk that we will not be able to develop this Internet
protocol technology well enough to be able to use it for voice traffic and,
therefore, will not be able to realize the anticipated cost reductions
associated with using Internet protocol for voice transmissions.

    OUR ABILITY TO USE OUR NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED

    As of December 31, 1999, we had federal income tax net operating loss
carryforwards of $577.2 million, which begin to expire in 2007. This amount
includes acquired net operating loss carryforwards of approximately $228.7
million from our acquisition of Destia. A tax asset related to this loss
carryforward does not appear on our balance sheet because it is unclear if we
will generate taxable income prior to the expiration of the net operating loss
carryforwards. Our ability to use our net operating loss carryforwards to reduce
future tax payments would be limited if a 50% ownership change, were to occur
over a three-year period. As a result of an ownership change in October 1996,
certain of our net operating loss carryforwards from before such time are
subject to this limitation. It is possible that our acquisition of Destia, when
combined with prior or subsequent direct or indirect changes in the ownership of
our common stock within the relevant three-year period, could trigger this
limitation.

    THE TELECOMMUNICATIONS INDUSTRY IS HIGHLY COMPETITIVE WITH PARTICIPANTS THAT
    HAVE GREATER RESOURCES THAN WE DO, AND WE MAY NOT BE ABLE TO COMPETE
    SUCCESSFULLY

    Our success depends upon our ability to compete with other communications
providers in each of our markets, many of whom have substantially greater
financial, marketing and other resources than we have. The markets in which we
offer and intend to offer our services are extremely competitive and competition

                                       43
<PAGE>
is expected to intensify. Although our recent acquisitions of Destia and AT&T UK
are expected to create a company with increased revenues, purchasing power and
product offerings, if our competitors devote significant additional resources to
the provision of communications services to our target customer base, this
action could harm our business, financial condition and results of operations.
We cannot assure you that we will be able to compete successfully.

    In Europe, we compete with different companies depending on the products and
services being offered. In voice services, our competitors consist of the
incumbent telecommunications operators in each country in which we operate,
global alliances among some of the world's largest telecommunications carriers
and new entrants. With regard to our bandwidth services, we are currently facing
competition from KPN/Qwest and GTS, each of which has broadband networks in
operation in Europe. We will also experience significant additional competition
over the next ten to twelve months as other broadband networks become
operational. These include networks being constructed by Global Crossing,
Interoute and Concert, the joint venture between British Telecom and AT&T. In
addition, Colt Telecom Group and Level 3 Communications are sharing the costs of
constructing two networks--one to link certain German cities and another linking
Paris, Frankfurt, Amsterdam, Brussels and London. In the area of value-added
services, we compete with two main types of competitors--the incumbent
telecommunications operators and traditional value-added Internet service
providers, such as EUNet, a subsidiary of MCI WorldCom, Ebone, InfoNet and
PSINet.

    In the United States, which is among the most competitive and deregulated
long distance markets in the world, competition is based primarily upon pricing,
customer service, network quality, and the ability to provide value-added
services. As such, the long distance industry is characterized by a high level
of customer attrition or "churn," with customers frequently changing long
distance providers in response to the offering of lower rates or promotional
incentives by competitors. We compete with major carriers such as AT&T, MCI
WorldCom and Sprint, as well as other national and regional long distance
carriers and resellers, many of whom are able to provide services at costs that
are lower than our current costs. Many of these competitors have greater
financial, technological and marketing resources than we do. If any of our
competitors were to devote additional resources to the provision of
communications services to our target customer base, there could be a material
adverse effect on our business. Several companies have recently introduced flat
rate long distance calling plans with very low per-minute charges. We cannot
predict the effect that these plans will have on the industry generally and on
us in particular.

    As a result of the 1996 Telecommunications Act, the regional Bell operating
companies can compete with us in the long distance telecommunications industry,
both outside of their service territory and, upon satisfaction of certain
conditions, within their service territory. The 1996 Telecommunications Act
prospectively eliminated the restrictions on incumbent local exchange carriers,
such as the regional Bell operating companies, from providing long distance
service. These provisions permit a regional Bell operating company to enter an
"out-of-region" long distance market immediately upon the receipt of any state
or federal regulatory approvals otherwise applicable in the provision of long
distance service. Regional Bell operating companies must satisfy certain
procedural and substantive requirements, including obtaining Federal
Communications Commission approval upon a showing that, in certain instances,
facilities-based competition is present in its market, that it has entered into
interconnection agreements that satisfy a 14-point "checklist" of competitive
requirements and that its entry into the "in-region" long distance market is in
the public interest before they are authorized to offer long distance service in
their regions. On December 22, 1999, Bell Atlantic was granted a license to
provide long distance service in New York. Because a substantial portion of our
customer base and traffic originates in the New York metropolitan area, Bell
Atlantic is a particularly formidable competitor. For long distance calls, Bell
Atlantic has a substantial cost advantage, because it does not have to pay
access fees to a local carrier to originate the call. Access fees constitute a
large portion of a long distance carrier's cost of services, including ours.
Moreover, should Bell Atlantic's proposed acquisition of GTE be consummated,
Bell Atlantic will have even greater resources to compete in its service
markets. In addition, SBC has a pending application at the Federal Communication
Commission for the provision of long distance service in Texas.

                                       44
<PAGE>
    NETWORK CONSTRUCTION DELAYS AND SYSTEM DISRUPTIONS OR FAILURES COULD
    ADVERSELY AFFECT OUR BUSINESS

    Our success depends, in part, on our ability to continue to expand our
network and on our ability to provide seamless technical operation of this
network. Furthermore, as we continue to expand our network to increase our
capacity and reach, we will face increasing demands and challenges including:

    - effectively managing the construction of new fiber routes, obtaining any
      necessary rights-of-way and required licenses for such construction, and
      completing any such construction on budget and on time;

    - increasing traffic volume on our network; and

    - selling capacity on our network.

    If the costs of construction projects significantly exceed the budget for
those projects, we may be required to obtain additional financing, proceed on a
joint build basis or to abandon or curtail portions of those projects. Our
build-out costs have exceeded budget in the past and may exceed budget in the
future. If we encounter construction delays, we will not be able to route our
traffic over our owned facilities as soon as we have planned, which could have a
detrimental effect on our ability to increase traffic volumes and gross margins.
In addition, construction delays could negatively affect our ability to sell
indefeasible rights-of-use or capacity to other carriers. We have experienced
delays in the past and may experience them in the future. Our network is also
subject to several risks which are outside of our control, such as the risk of
damage to software and hardware resulting from:

    - fire,

    - power loss,

    - natural disasters, and

    - general transmission failures caused by a number of additional factors.

    Any failure of our network or other systems or hardware that causes
significant interruptions to our operations could harm our business, financial
condition and results of operations.

    Our operations are also dependent on our ability to successfully integrate
new and emerging technologies and equipment into the network, which could
increase the risk of system failure and result in further strains upon our
network. In the event of a system disruption, we could seek to minimize customer
inconvenience by routing traffic to other circuits and switches which may be
owned by other carriers. However, prolonged or significant system failures, or
difficulties for customers in accessing and maintaining connection with our
network, could seriously damage our reputation and result in customer attrition,
reduced margins and financial losses. Additionally, any damage to our switching
centers could have a material adverse effect on our ability to manage our
network operations, generate accurate call detail reports and monitor our
systems.

    The continued expansion and development of our network will require the
significant expenditure of resources in projecting growth in traffic volume and
routing preferences and determining the most cost-effective means of growing the
network, for example, through variable or fixed lease arrangements, the purchase
of capacity or minimum investment units on digital fiber optic cables or digital
microwave equipment, the purchase of dark fiber or the further construction of
transmission infrastructure. Failure to project traffic volume and route
preferences correctly or to determine the optimal means of expanding our network
would result in less than optimal utilization of our network and could have a
material adverse effect on our business, financial condition and results of
operations.

    FOREIGN CURRENCY EXCHANGE RATES COULD HAVE ADVERSE EFFECTS ON OUR BUSINESS

    Our payment obligations with respect to our outstanding indebtedness are
denominated in U.S. Dollars and the Euro, but certain of our revenues are
denominated in Pound Sterling. Any appreciation in the value of the U.S. Dollar
or the Euro relative to the Pound Sterling could have a material adverse effect
on our ability to make payments on such obligations.

                                       45
<PAGE>
    In the future, we may elect to manage exchange rate exposure presented by
our Euro-denominated obligations through the use of hedging transactions. There
can be no assurance that exchange rate fluctuations will not have a material
adverse effect on our ability to make payments on our outstanding indebtedness.

    In addition, we cannot provide any assurance that the laws or administrative
practices relating to taxation, foreign exchange or other matters in countries
within which we operate will not change in a manner that could have a material
adverse effect on our business, financial condition and results of operations.

    OUR DEPENDENCE UPON THIRD PARTIES FOR LEASED CAPACITY AND INTERCONNECTION
    ARRANGEMENTS MAY RESULT IN SUBOPTIMAL UTILIZATION OF OUR NETWORK

    We currently lease capacity for point-to-point circuits with fixed monthly
payments and buy minutes of use under agreements with maximum twelve-month terms
and are vulnerable to changes in our lease arrangements, capacity limitations
and service cancellations. These lease arrangements present us with high fixed
costs, while revenues generated by the utilization of these leases will vary
based on traffic volume and pricing. Accordingly, if we are unable to generate
sufficient traffic volume over particular routes or are unable to charge
appropriate rates, we could fail to generate revenue sufficient to meet the
fixed costs associated with the lease and may incur negative gross margins with
respect to those routes. A deterioration of our relationship with one or more
carriers could have a material adverse effect on our cost structure, service
quality, network coverage, financial condition and results of operations.

    Our ability to access customers and to utilize effectively our network is
dependent upon our ability to secure operative interconnection agreements,
providing access to and an exit from the public switched telephone network, with
the respective incumbent telecommunications operator in each market in which we
operate. Difficulties or delays in obtaining necessary operative
interconnections in a satisfactory or timely manner may significantly delay or
prevent the maximum utilization of our network, which could have a material
adverse effect on us.

    WE ARE DEPENDENT UPON THIRD-PARTY SALES ORGANIZATIONS OVER WHICH WE CAN
    EXERCISE ONLY LIMITED CONTROL

    We sell a substantial portion of our services through indirect channels of
distribution, which consist of independent sales agents, distributors and, to a
lesser extent, resellers. We do not have control over such agents, distributors
and resellers and, therefore, are not able to ensure that they will perform in a
satisfactory manner or that their interests will be aligned with our interests.
In addition, such entities also may terminate their business relationships with
us at any time, with little or no prior notice. We have found this risk to be
especially pronounced in our multilevel marketing program in the United Kingdom,
where a master agent could decide to terminate its business relationship, and
that of its sub-agents, and conduct business with a competitor. Unsatisfactory
performance by such entities, or the termination by them of their business
relationship with us, would hinder our ability to grow and could harm our
business.

    LOSS OF SIGNIFICANT CARRIER CUSTOMERS WOULD RESULT IN A SIGNIFICANT LOSS OF
    REVENUES

    We currently derive a significant portion of our revenues from a relatively
small number of carrier customers. During 1999, carrier customers accounted for
35.2% of our total revenue. Carrier customers generally are extremely price
sensitive and move their traffic from carrier to carrier based on small price
changes. In the markets in Western Europe, this risk is particularly acute.
Accordingly, the loss of revenue from significant carrier customers would harm
our business, financial condition and results of operations.

    OUR BUSINESS WILL SUFFER IF WE LOSE CERTAIN KEY PERSONNEL OR FAIL TO ATTRACT
    AND RETAIN OTHER QUALIFIED PERSONNEL

    The continued success of our business is dependent, to a significant extent,
upon the abilities and continued efforts of our senior management, and
particularly upon the abilities and efforts of Michael J.

                                       46
<PAGE>
Mahoney, Chairman and Chief Executive Officer, Alfred West, Vice Chairman, and
William C. Murphy, President. We have employment agreements with only certain
members of key management including: Mr. Mahoney; Mr. West; Mr. Murphy; Allan L.
Shaw, Chief Financial Officer; Sheldon M. Goldman, Executive Vice President,
Corporate Development; Lawrence G. Malone, Executive Vice President, Wholesale
Sales and Marketing; and Francis J. Mount, Chief Technology Officer. Except for
a $3.0 million key-man life insurance policy on the life of Mr. Mahoney, we do
not maintain and do not currently contemplate obtaining such life insurance
policies on any of our employees.

    The success of our business will depend on our ability to attract, retain
and motivate qualified management, marketing, technical and sales executives and
other personnel who are in high demand and who often have multiple employment
options. In addition, the labor market for software engineers and central office
technicians has been extremely competitive recently and we may lose key
employees or be forced to increase their compensation. The loss of the services
of key personnel, or the inability to attract, retain and motivate qualified
personnel, could harm our business, financial condition and results of
operations.

    WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION WHICH MAY AFFECT OUR
    ABILITY TO OFFER CERTAIN SERVICES AND WHICH MAY BE CHANGED IN A MANNER
    ADVERSE TO US

    National and local laws and regulations governing the provision of
telecommunications services differ significantly among the countries in which we
currently operate and intend to operate. See "Item 1. Business--Government
Regulation."

    The interpretation and enforcement of such laws and regulations varies and
could limit our ability to provide telecommunications services in certain
markets. We cannot assure you that:

    - future regulatory, judicial and legislative changes will not harm us;

    - domestic or international regulators or third parties will not raise
      material issues with regard to our compliance with applicable laws and
      regulations; or

    - other regulatory activities will not harm our business, financial
      condition and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

    We are subject to foreign currency exchange rate risk relating to receipts
from customers, payments to suppliers and interest and principal payments on the
outstanding Euro denominated senior notes and senior discount notes in foreign
currencies. We do not consider the market risk exposure relating to foreign
currency exchange to be material. See "Management's Discussion and Analysis of
Financial Condition and Result of Operations--Liquidity and Capital
Resources--Foreign Currency."

    We have financial instruments that are subject to interest rate risk,
principally short-term investments and debt obligations issued at a fixed rate.
Historically, we have not experienced material gains or losses due to interest
rate changes when selling short-term investments and typically hold these
securities until maturity. Based on our current holdings of short-term
investments, our exposure to interest rate risk is not material. Fixed-rate debt
obligations issued by us are generally not callable until maturity.

                                       47
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following statements are filed as part of this report:

<TABLE>
<CAPTION>
                                                                   FORM 10-K
                                                                      PAGE
                                                              --------------------
<S>                                                           <C>
Independent Auditors' Report................................                    49

Consolidated Balance Sheets as of December 31, 1998 and
  1999......................................................                    50

Consolidated Statements of Operations for the Years Ended
  December 31, 1997, 1998 and 1999..........................                    51

Consolidated Statements of Comprehensive Loss for the Years
  Ended
  December 31, 1997, 1998 and 1999..........................                    52

Consolidated Statements of Stockholders' Equity (Deficiency)
  for the
  Years Ended December 31, 1997, 1998 and 1999..............                    53

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1997, 1998 and 1999..........................                    54

Notes to Consolidated Financial Statements for the Years
  Ended December 31, 1997, 1998 and 1999....................                    55

II. Valuation and Qualifying Accounts.......................                    75
</TABLE>

    All other schedules have been omitted because the required information
either is not applicable or is shown in the consolidated financial statements or
notes thereto.

                                       48
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Viatel, Inc.:

    We have audited the consolidated financial statements of Viatel, Inc. and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Viatel, Inc. and subsidiaries as of December 31, 1998 and 1999, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements, taken as
a whole, presents fairly, in all material respects, the information set forth
therein.

                                          /s/ KPMG LLP

New York, New York
March 1, 2000

                                       49
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1999

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                 1998         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
                           ASSETS

Current Assets:
  Cash and cash equivalents.................................  $  329,511   $  373,044
  Restricted cash equivalents...............................      10,310        9,632
  Restricted marketable securities..........................      50,870      125,581
  Marketable securities.....................................     171,771           --
  Trade accounts receivable, net of allowance for doubtful
    accounts of $4,722 and $10,034, respectively............      28,517      115,103
  VAT receivables, net......................................      12,561       37,867
  Prepaid expenses and other current assets.................       3,260       16,789
                                                              ----------   ----------
    Total current assets....................................     606,800      678,016

Restricted marketable securities, non-current...............      83,343       62,547
Property and equipment, net.................................     267,316      884,328
Cash securing letters of credit for network construction....          --       50,165
Intangible assets, net......................................      45,908    1,011,659
Other assets................................................       5,744       17,382
                                                              ----------   ----------
  Total assets..............................................  $1,009,111   $2,704,097
                                                              ==========   ==========
     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
  Accrued telecommunications costs..........................  $   26,518   $   77,333
  Accounts payable and other accrued expenses...............      23,656      156,218
  Property and equipment purchases payable..................      97,288       87,810
  Accrued interest..........................................      12,240       37,545
  Liability under joint construction agreement..............       9,523        4,918
  Current installments of notes payable.....................       3,199       24,997
  Current installments of obligations under capital
    leases..................................................       5,719       10,337
                                                              ----------   ----------
    Total current liabilities...............................     178,143      399,158
                                                              ----------   ----------
Long-term liabilities:
  Long-term debt, excluding current installments............     896,503    1,680,885
  Notes payable and obligations under capital leases,
    excluding current installments..........................      24,636       86,663
                                                              ----------   ----------
    Total long-term liabilities.............................     921,139    1,767,548
                                                              ----------   ----------
Series A Redeemable Convertible Preferred Stock, $.01 par
  value; Authorized 718,042 Shares; issued and outstanding
  461,258 shares and none, respectively.....................      47,121       --
                                                              ----------   ----------
Commitments and contingencies
Stockholders' equity (deficiency):
  Preferred Stock, $.01 par value. Authorized 1,281,958
    shares, no shares issued and outstanding................      --           --
  Common Stock, $.01 par value. Authorized 150,000,000
    shares; issued and outstanding 23,184,465 and 47,093,361
    shares, respectively....................................         232          471
  Additional paid-in capital................................     128,357    1,066,964
  Unearned compensation.....................................      --           (5,768)
  Accumulated other comprehensive loss......................      (6,246)     (45,464)
  Accumulated deficit.......................................    (259,635)    (478,812)
                                                              ----------   ----------
    Total stockholders' equity (deficiency).................    (137,292)     537,391
                                                              ----------   ----------
    Total liabilities and stockholders' equity
      (deficiency)..........................................  $1,009,111   $2,704,097
                                                              ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       50
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                1997       1998        1999
                                                              --------   ---------   ---------
<S>                                                           <C>        <C>         <C>
Revenue:
  Communication services revenue............................  $ 73,018   $ 131,938   $ 248,600
  Capacity sales............................................        --       3,250      84,501
                                                              --------   ---------   ---------
    Total revenue...........................................    73,018     135,188     333,101
                                                              --------   ---------   ---------
Operating expenses:
  Cost of services and sales................................    63,504     122,109     250,574
  Selling, general and administrative.......................    36,077      44,893     100,559
  Depreciation and amortization.............................     7,717      16,268      75,911
  Restructuring and impairment..............................        --          --      13,206
                                                              --------   ---------   ---------
    Total operating expenses................................   107,298     183,270     440,250
                                                              --------   ---------   ---------
Other income (expense):
  Interest income...........................................     3,686      28,259      26,722
  Interest expense..........................................   (12,450)    (79,177)   (137,409)
                                                              --------   ---------   ---------
Loss before extraordinary loss..............................   (43,044)    (99,000)   (217,836)
  Extraordinary loss on debt prepayment.....................        --     (28,304)         --
                                                              --------   ---------   ---------
Net loss....................................................   (43,044)   (127,304)   (217,836)
  Dividends on redeemable convertible preferred stock.......        --      (3,301)     (1,341)
                                                              --------   ---------   ---------
Net loss attributable to common stockholders................  $(43,044)  $(130,605)  $(219,177)
                                                              ========   =========   =========
Loss per common share, basic and diluted:
    Before extraordinary item...............................  $  (1.90)  $   (4.44)  $   (7.43)
    From extraordinary item.................................  $     --   $   (1.23)  $      --
                                                              --------   ---------   ---------
    Net loss per common share attributable to common
      stockholders..........................................  $  (1.90)  $   (5.67)  $   (7.43)
                                                              ========   =========   =========
  Weighted average common shares outstanding,
    basic and diluted.......................................    22,620      23,054      29,518
                                                              ========   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       51
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                1997       1998        1999
                                                              --------   ---------   ---------
<S>                                                           <C>        <C>         <C>
Net loss....................................................  $(43,044)  $(127,304)  $(217,836)
  Foreign currency translation adjustments..................    (4,494)       (890)    (39,218)
                                                              --------   ---------   ---------
Comprehensive loss..........................................  $(47,538)  $(128,194)  $(257,054)
                                                              ========   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       52
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                      NUMBER OF                                            ACCUMULATED
                                        COMMON                ADDITIONAL                      OTHER
                                        STOCK       COMMON     PAID-IN       UNEARNED     COMPREHENSIVE   ACCUMULATED
                                        SHARES      STOCK      CAPITAL     COMPENSATION       LOSS          DEFICIT       TOTAL
                                      ----------   --------   ----------   ------------   -------------   -----------   ---------
<S>                                   <C>          <C>        <C>          <C>            <C>             <C>           <C>
BALANCE AT JANUARY 1, 1997..........  22,513,226     $225     $  125,236     $  (130)       $   (862)      $ (85,986)   $  38,483
Stock options exercised.............     122,041        1            425      --              --              --              426
Earned compensation.................      --         --           --              65          --              --               65
Foreign currency translation
  adjustment........................      --         --           --          --              (4,494)         --           (4,494)
Net loss............................      --         --           --          --              --             (43,044)     (43,044)
                                      ----------     ----     ----------     -------        --------       ---------    ---------
BALANCE AT DECEMBER 31, 1997........  22,635,267      226        125,661         (65)         (5,356)       (129,030)      (8,564)
Stock options exercised.............     174,198        2            945      --              --              --              947
Issuance costs of Series A
  Redeemable Convertible Preferred
  Stock.............................      --         --           (1,620)     --              --              --           (1,620)
Issuance of common stock related to
  business purchase.................     375,000        4          3,371      --              --              --            3,375
Earned compensation.................      --         --           --              65          --              --               65
Foreign currency translation
  adjustment........................      --         --           --          --                (890)         --             (890)
Dividends on Series A Redeemable
  Convertible Preferred Stock.......      --         --           --          --              --              (3,301)      (3,301)
Net loss............................      --         --           --          --              --            (127,304)    (127,304)
                                      ----------     ----     ----------     -------        --------       ---------    ---------
BALANCE AT DECEMBER 31, 1998........  23,184,465      232        128,357      --              (6,246)       (259,635)    (137,292)
Conversion of Series A Redeemable
  Convertible Preferred Stock.......   3,671,316       37         48,425          --              --              --       48,462
Conversion of subordinated debt.....     943,916        9         12,320          --              --              --       12,329
Stock options exercised.............     436,344        4          2,850          --              --              --        2,854
Issuance of common stock for
  acquisition.......................  14,299,969      143        560,559          --              --              --      560,702
Options and warrants issued for
  acquisition.......................          --       --        111,573          --              --              --      111,573
Restricted shares issued............     152,351        2          6,550      (6,552)             --              --           --
Earned compensation.................          --       --             --         784              --              --          784
Issuance of common stock for
  services..........................      90,000        1          4,499          --              --              --        4,500
Common stock offering...............   4,315,000       43        191,831          --              --              --      191,874
Foreign currency translation
  adjustment........................          --       --             --          --         (39,218)             --      (39,218)
Dividends on Series A Redeemable
  Convertible Preferred Stock.......          --       --             --          --              --          (1,341)      (1,341)
Net loss............................          --       --             --          --              --        (217,836)    (217,836)
                                      ----------     ----     ----------     -------        --------       ---------    ---------
BALANCE AT DECEMBER 31, 1999........  47,093,361     $471     $1,066,964     $(5,768)       $(45,464)      $(478,812)   $ 537,391
                                      ==========     ====     ==========     =======        ========       =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       53
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                1997        1998        1999
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net loss..................................................  $ (43,044)  $(127,304)  $(217,836)
  Adjustments to reconcile net loss to net cash used in
      operating
      activities:
    Depreciation and amortization...........................      7,717      16,268      75,911
    Accreted interest expense on long term debt.............     12,479      35,417      38,047
    Provision for losses on accounts receivable.............      2,733       4,225      11,511
    Asset impairments.......................................         --          --       9,098
    Restructuring accrual...................................         --          --       3,905
    Extraordinary loss on debt prepayment...................         --      28,304          --
    Earned stock compensation...............................         65          65         784
  Changes in operating assets and liabilities, net of effect
      of
      acquisitions:
    Increase in accounts receivable and accrued interest....     (6,221)    (20,302)    (27,292)
    Increase in notes receivable............................         --          --      (7,862)
    Increase in accrued interest expense on Senior Notes....         --      11,969      15,715
    Increase in prepaid expenses and other receivables......     (3,482)     (8,291)    (36,071)
    Increase in other assets and intangible assets..........     (1,022)    (12,625)     (1,303)
    Increase in accrued telecommunications costs, accounts
      payable, and other accrued expenses...................      8,250      11,956         568
                                                              ---------   ---------   ---------
      Net cash used in operating activities.................    (22,525)    (60,318)   (134,825)
                                                              ---------   ---------   ---------
  Cash flows from investing activities:
    Capital expenditures....................................    (34,190)    (94,674)   (527,327)
    Cash paid for acquisitions, net of cash acquired........         --      (5,000)     39,998
    Purchase of marketable securities.......................    (49,098)   (310,625)   (217,519)
    Proceeds from maturity of marketable securities.........     40,124      60,307     349,042
    Cash securing letters of credit for network
      construction..........................................         --          --     (50,165)
                                                              ---------   ---------   ---------
      Net cash used in investing activities.................    (43,164)   (349,992)   (405,971)
                                                              ---------   ---------   ---------
  Cash flows from financing activities:
    Proceeds from issuance of senior notes,
      senior discount notes and convertible debentures......         --     845,752     425,635
    Proceeds from issuance of subordinated
      convertible preferred stock...........................         --      42,198          --
    Repayment of senior discount notes......................         --    (119,282)         --
    Deferred financing costs................................         --     (31,547)    (22,166)
    Proceeds from exercise of stock options.................        426         947       2,854
    Proceeds from common stock offering.....................         --          --     191,874
    Borrowings on notes payable.............................     11,121          --          --
    Payments under capital leases...........................       (525)     (5,480)     (4,322)
    Repayment of notes payable and bank credit line.........       (336)     (3,553)     (4,484)
    Borrowings under bank credit line.......................        600          --          --
                                                              ---------   ---------   ---------
      Net cash provided by financing activities.............     11,286     729,035     589,391
                                                              ---------   ---------   ---------
Effects of exchange rate changes on cash....................       (297)         --      (5,740)
                                                              ---------   ---------   ---------
Net (decrease) increase in cash and cash equivalents........    (54,700)    318,725      42,855
Cash and cash equivalents at beginning of year..............     75,796      21,096     339,821
                                                              ---------   ---------   ---------
Cash and cash equivalents at end of year....................  $  21,096   $ 339,821   $ 382,676
                                                              =========   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       54
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1997, 1998 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (A) DESCRIPTION OF BUSINESS

    Viatel, Inc. and subsidiaries (collectively, the "Company") is a provider of
ALL DISTANCE communication services to individuals, corporations, internet
service providers and other communications carriers in Europe and North America.
The Company is a licensed provider of telecommunications services in ten
European countries and the United States. The Company owns and operates
international telecommunications networks and is also the owner, operator and
builder of a Western European fiber optic network.

    (B) PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its majority-owned and controlled subsidiaries from their respective dates
of acquisition. All significant inter-company balances and transactions have
been eliminated in consolidation.

    (C) CASH AND CASH EQUIVALENTS

    The Company's policy is to maintain its uninvested cash at minimum levels.
Unrestricted cash equivalents include highly liquid debt instruments purchased
with an original maturity of three months or less.

    (D) REVENUE AND COST OF SERVICES AND SALES

    The Company records communication services revenue as earned at the time
services are provided. The related cost of communication services is reported in
the same period.

    Revenue from capacity sales mainly represents indefeasible-rights-of-use
("IRUs") for portions of the network that qualify for sales-type lease
accounting. Transactions that do not meet the criteria for sales-type lease
accounting are accounted for as operating leases and revenue is recognized over
the term of the lease.

    Cost of capacity in any period is determined based upon the ratio of total
capacity sold and total anticipated capacity to be utilized multiplied by the
related total costs of the relevant portion of the Company's network.

    In June 1999, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 43, "Real Estate Sales, an interpretation of FASB Statement
No. 66" ("FIN 43") which is applicable for all contracts entered into after
June 30, 1999. FIN 43 requires that a lease of property improvements or integral
equipment include a provision allowing title to transfer to the lessee in order
for that lease to be accounted for as a sales-type lease.

    The Company recognizes revenue in accordance with FIN 43 and the Securities
and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements". However, accounting practices and guidance for sales
of IRUs is evolving. Standard setting bodies are currently reviewing a number of
issues related to FIN 43 and other related issues will probably be referred to
these bodies. Changes in the accounting treatment as a result of the foregoing
could affect the way that the Company recognizes revenue and costs associated
with these capacity sales in the future.

    (E) PROPERTY AND EQUIPMENT

    Property and equipment consists principally of telecommunications related
equipment such as switches, fiber optic cable systems, remote nodes and related
computer software and is stated at cost. Assets acquired under capital leases
are stated at the present value of the future minimum lease payments. The
Company also capitalizes certain software development costs for internal use.
Maintenance and repairs are expensed as incurred.

                                       55
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets. Leasehold improvements are amortized over
the life of the lease or useful life of the improvement, whichever is shorter.
The estimated useful lives are as follows:

<TABLE>
<S>                                                           <C>
Communications systems......................................  5 to 7 years
Fiber optic cable systems...................................  10 to 20 years
Leasehold improvements......................................  2 to 5 years
Furniture, office and computer equipment and other..........  2 to 5 years
</TABLE>

    (F) INTANGIBLE ASSETS

    Deferred financing and registration fees represent costs incurred to issue
and register debt and are being amortized over the term of the related debt.

    Costs of licenses issued by governing bodies are being amortized on a
straight-line basis over the lesser of 25 years or the term of the license.

    Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefitted, which is five to seven years.

    Acquired customer base and acquired employee base represent intangible
assets associated with acquisitions and are being amortized on a straight-line
basis over three to seven years.

    (G) INCOME TAXES

    Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income or expense in the period it occurs.

    (H) FOREIGN CURRENCY TRANSLATION

    A significant portion of the Company's assets are foreign currency
denominated and as such are subject to fluctuations in value due to movements in
foreign exchange rates. Foreign currency assets and liabilities are translated
using the exchange rates in effect at the balance sheet date. Results of
operations are translated using the average exchange rates prevailing throughout
the year. The effects of exchange rate fluctuations on translating foreign
currency assets and liabilities into U.S. dollars are accumulated as part of the
foreign currency translation adjustment in stockholders' equity. Gains and
losses from foreign currency transactions are included in selling, general and
administrative expenses in the period in which they occur. For the years ending
December 31, 1997, 1998 and 1999, the Company experienced no material exchange
transaction gains or losses.

    (I) NET LOSS PER SHARE

    Basic earnings per share ("EPS") is computed by dividing income or loss
attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
from the exercise or conversion of securities into common stock.

    Net loss and weighted average shares outstanding used for computing diluted
loss per common share were the same as that used for computing basic loss per
common share for each of the years ended December 31, 1997, 1998 and 1999.

                                       56
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    The Company had potentially dilutive securities of 1.1 million (consists of
stock options), 7.2 million (consists of 2.6 million of stock options;
3.7 million of convertible preferred stock on an "as if" converted basis; and
 .9 million subordinated convertible debt on an "as if" converted basis) and 6.0
million (consists of 5.7 million of stock options and .3 million of warrants)
for the years ended December 31, 1997, 1998 and 1999, respectively. These
potentially dilutive securities were not included in the computation of diluted
net loss per common share because they were antidilutive for the periods
presented.

    (J) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

    At December 31, 1998 and 1999, the company's financial instruments included
cash, cash equivalents, investments, receivables, accounts payable, accrued
interest and borrowings. The fair values, at December 31, 1998 and 1999, of cash
and cash equivalents, receivables, accounts payable and accrued interest
approximated their carrying values because of the short-term nature of these
instruments. The estimated fair values of other financial instruments subject to
fair value disclosures, determined based on broker quotes or quoted market
prices or rates for the same or similar instruments and the related carrying
costs are as follows (in thousands):

<TABLE>
<CAPTION>
                                          1998                    1999
                                   -------------------   -----------------------
                                   CARRYING     FAIR      CARRYING       FAIR
                                    AMOUNT     VALUE       AMOUNT       VALUE
                                   --------   --------   ----------   ----------
<S>                                <C>        <C>        <C>          <C>
Investments (see Note 2).........  $305,984   $305,984   $  188,128   $  188,128
Borrowings (see Note 8)..........  $896,503   $868,017   $1,680,885   $1,665,462
</TABLE>

    Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of temporary cash investments and trade
receivables. The Company restricts investment of temporary cash investments to
financial institutions with high credit standing. The Company does not believe
there is any concentration of credit risk on trade receivables as a result of
the large and diverse nature of the Company's worldwide customer base.

    During 1998, one customer, LD Exchange.com, accounted for 10.6% of the
Company's revenues. No one customer represented more than 10% of the Company's
total revenues for 1999 and 1997.

    (K) USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

    (L) STOCK OPTION PLAN

    The Company accounts for its stock option plans in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 123 which allows entities to
continue to apply the provisions of Accounting Principles Board ("APB") Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method, as defined in SFAS No. 123, had been applied. The
Company has elected to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure required by SFAS No. 123. See Note 13.

                                       57
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    (M) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

    Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

    (N) ADDITIONAL ACCOUNTING POLICIES

    Additional accounting policies are incorporated into the notes herein.

    (O) RECLASSIFICATIONS

    Certain reclassifications have been made to the prior years' financial
statements to conform to the current year's presentation.

(2) INVESTMENTS IN DEBT SECURITIES

    Management determines the appropriate classification of its investments in
debt securities at the time of purchase and classifies them as held to maturity
or available for sale. These investments are diversified among high credit
quality securities in accordance with the Company's investment policy. Debt
securities that the Company has both the intent and ability to hold to maturity
are carried at amortized cost. Debt securities for which the Company does not
have the intent or ability to hold to maturity are classified as
available-for-sale. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. The Company does not invest in securities for
trading purposes and as such does not classify any securities as trading.

    The cost of debt securities classified as held to maturity is adjusted for
amortization of premiums and accretion of discounts to maturity over the
estimated life of the security. Such amortization and accretion are included in
interest income. There were no securities classified as available-for-sale as of
December 31, 1998 and 1999.

    The following is a summary of the amortized cost, which approximates fair
value, of securities held to maturity at December 31 (in thousands):

<TABLE>
                                                            1998       1999
                                                          --------   --------
European corporate debt securities......................  $122,299   $     --
<S>                                                       <C>        <C>
U.S. corporate debt securities..........................    49,472         --
                                                          --------   --------
    Total...............................................  $171,771   $     --
                                                          ========   ========
</TABLE>

    The following is a summary of the amortized cost, which approximates fair
value, of restricted securities held to maturity at December 31 (in thousands):

<TABLE>
                                                            1998       1999
                                                          --------   --------
U.S. Treasury obligations...............................  $105,508   $147,586
<S>                                                       <C>        <C>
German government obligations...........................    28,705     40,542
                                                          --------   --------
    Total...............................................  $134,213   $188,128
                                                          ========   ========
</TABLE>

                                       58
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(2) INVESTMENTS IN DEBT SECURITIES (CONTINUED)
    The amortized cost, which approximates fair value, of restricted securities
held to maturity at December 31, are shown below (in thousands):

<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Due within one year.........................................  $ 50,870   $125,581
Due after one year through two years........................    54,328     62,547
Due after two years.........................................    29,015         --
                                                              --------   --------
    Total...................................................  $134,213   $188,128
                                                              ========   ========
</TABLE>

    There were no changes in the classification of any securities held to
maturity or securities available for sale from the time of purchase to the time
of maturity or sale. Restricted marketable securities are restricted for use in
semi-annual interest payments of certain long term debt and are invested in U.S.
and German government securities maturing on a schedule which approximates the
required interest payments.

(3) PROPERTY AND EQUIPMENT

    Property and equipment consists of the following as of December 31 (in
thousands):

<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Communications systems......................................  $ 96,193   $698,483
Construction in progress....................................   172,630    210,671
Furniture, office and computer equipment and other..........    16,450     25,707
Software....................................................     1,859     13,481
Leasehold improvements......................................     6,651     11,926
                                                              --------   --------
                                                               293,783    960,268
Less accumulated depreciation and amortization..............    26,467     75,940
                                                              --------   --------
                                                              $267,316   $884,328
                                                              ========   ========
</TABLE>

    At December 31, 1998 and 1999, construction in progress primarily represents
construction of the Western European fiber optic network. For the years ended
December 31, 1997, 1998 and 1999, $0.2 million, $3.3 million and $10.1 million,
respectively, of interest was capitalized.

(4) INTANGIBLE ASSETS

    Intangible assets consist of the following as of December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1998        1999
                                                              --------   ----------
<S>                                                           <C>        <C>
Goodwill....................................................  $ 8,744    $  842,555
Acquired customer base and employee base....................    --          130,956
Deferred financing..........................................   31,547        53,714
Licenses, trademarks and servicemarks.......................   10,237         9,495
                                                              -------    ----------
                                                               50,528     1,036,720
Less accumulated amortization...............................    4,620        25,061
                                                              -------    ----------
                                                              $45,908    $1,011,659
                                                              =======    ==========
</TABLE>

                                       59
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(4) INTANGIBLE ASSETS (CONTINUED)
    During 1999, the Company recognized and paid its obligation for contingent
consideration for its 1998 acquisition of Flat Rate Communications, Inc. ("Flat
Rate") based upon key operating performance targets met during the period ended
March 31, 1999. Such contingent consideration has been recorded as goodwill and
is being amortized over the remaining useful life.

(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

    Accounts payable and accrued expenses consists of the following as of
December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Accounts payable............................................  $ 5,566    $ 78,677
Accrued expenses............................................   18,090      77,541
                                                              -------    --------
                                                              $23,656    $156,218
                                                              =======    ========
</TABLE>

(6) ACQUISITIONS

    FLAT RATE COMMUNICATIONS, INC.

    On February 27, 1998, the Company acquired Flat Rate Communications, Inc., a
long distance telecommunications reseller, for $5.0 million of cash, 375,000
shares of the Company's common stock and a $12.0 million cash contingent payment
paid in 1999 based upon key operating performance targets achieved. The Company
recorded the acquisition under the purchase method of accounting. The purchase
price was allocated to the assets acquired and liabilities assumed, based upon
the estimated fair values at the date of acquisition. The excess purchase price
was approximately $20.4 million and is being amortized on a straight-line basis
over its estimated useful life which is five years.

    DESTIA COMMUNICATIONS, INC.
    On August 27, 1999, the Company agreed to acquire Destia Communications,
Inc. ("Destia") through a merger of Destia with one of the Company's
subsidiaries. On December 8, 1999, the Company completed the merger and Destia
became a wholly-owned subsidiary of the Company. Destia is a facilities-based
provider of domestic and international long distance telecommunications services
in Europe and North America. Its customer base consists of residential
customers, commercial customers, ethnic groups and other telecommunications
carriers. Destia offers a variety of retail telecommunications services,
including international and domestic long distance, Internet access and wireless
services.

    Holders of Destia common stock received 0.445 shares (the exchange ratio) of
the Company's common stock for each share of Destia common stock. In connection
with the acquisition, the Company issued 14,299,969 shares of its common stock
valued at $39.21 per share (total value of $560.7 million). Each outstanding
option and warrant to acquire shares of Destia common stock was converted into
an option or warrant to acquire shares of the Company on the basis of the
exchange ratio described above.

    The purchase price for Destia was $901.9 million and was comprised of the
issuance of common stock, the fair value of existing Destia options and warrants
exchanged, issuance of 11.5% senior notes, the cash portion of the debt exchange
offer and transaction costs. The options and warrants have been valued at their
fair value using the Black-Scholes option pricing model. The acquisition has
been accounted for under the purchase method of accounting. The purchase price
has been preliminarily allocated based on estimated fair values at the date of
acquisition, pending final determination of certain acquired balances. This
preliminary allocation has resulted in intangible assets and goodwill of
approximately $131.0 million

                                       60
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(6) ACQUISITIONS (CONTINUED)
and $822.3 million, respectively, which are being amortized on a straight-line
basis over their estimated useful lives which are four to seven years and seven
years, respectively. In connection with the Company's integration plan, the
Company recorded liabilities related to the closing and termination of Destia
facilities and lease and other contract costs of $9.6 million and severance
related to Destia employees, of $2.2 million. The results of operations of
Destia for December 1999 were included in the consolidated financial statements.

    The preliminary allocation of the purchase price is as follows (in
thousands):

<TABLE>
<S>                                                           <C>
Current assets..............................................  $ 147,083
Property, equipment and leasehold improvements..............    163,389
Identifiable intangibles....................................    130,956
Other non-current assets....................................     15,982
Accounts payable and accrued expenses.......................   (139,153)
Debt........................................................   (238,629)
                                                              ---------
Fair value of net assets acquired...........................     79,628
Purchase price..............................................    901,898
                                                              ---------
Goodwill....................................................  $ 822,270
                                                              =========
</TABLE>

    The following unaudited pro forma financial information presents the
combined results of operations of Viatel, Destia, and Flat Rate, as if the
acquisitions had occurred as of the beginning of 1998 and 1999, after giving
effect to certain adjustments, including amortization of goodwill, depreciation
expense, and increased interest expense on debt related to the acquisition. The
unaudited pro forma financial information does not necessarily reflect the
results of operations that would have occurred had Viatel, Destia, and Flat Rate
constituted a single entity during such periods.

        (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31
                                                        -----------------------
                                                           1998         1999
                                                        ----------   ----------
                                                              (UNAUDITED)
<S>                                                     <C>          <C>
    Revenue...........................................  $ 333,225    $ 618,915
    Loss before extraordinary loss....................   (319,942)    (465,032)
    Net loss attributable to common stockholders......   (351,547)    (466,373)
    Net loss per common share attributable to common
      stockholders....................................  $   (9.41)   $  (10.87)
</TABLE>

                                       61
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(7) NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES

    The Company was obligated under the following debt arrangements primarily in
connection with equipment and capacity acquisitions:

        (in thousands)

<TABLE>
<CAPTION>
                                                                        DECEMBER 31, 1999
                                                                 -------------------------------
                                                                 CURRENT    LONG-TERM    TOTAL
                                                                 --------   ---------   --------
        <S>                                                      <C>        <C>         <C>
        Obligations under capital leases (a)...................  $10,337     $37,164    $ 47,501
        Notes payable (b)......................................   16,954      25,211      42,165
        NTFC note (c)..........................................    8,043      24,288      32,331
                                                                 -------     -------    --------
                                                                 $35,334     $86,663    $121,997
                                                                 =======     =======    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                          DECEMBER 31, 1998
                                                                  ----------------------------------
                                                                  CURRENT       LONG-TERM    TOTAL
                                                                  --------      ---------   --------
        <S>                                                       <C>           <C>         <C>
        Obligations under capital leases (a)....................   $5,719        $20,004    $25,723
        Notes payable (b).......................................    3,199          4,632      7,831
                                                                   ------        -------    -------
                                                                   $8,918        $24,636    $33,554
                                                                   ======        =======    =======
</TABLE>

    (a) The Company has various lease agreements for IRUs, buildings housing
switch sites, rights of way and other property.

    (b) The Company has assumed the obligations of six notes payable related to
the purchase of cable lines and acquisitions entered into by Destia prior to its
acquisition by the Company. These notes with an aggregate value of
$37.9 million at December 31, 1999 bear interest at rates ranging from 5% to 12%
and have final maturity dates from May 2001 to November 2008.

                                       62
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(7) NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES (CONTINUED)

    The Company has entered into Loan and Security Agreements pursuant to which
the Company had outstanding borrowings of $7.8 million and $4.3 million at
December 31, 1998 and 1999, respectively. Under the terms of these agreements,
the Company is required to satisfy certain covenants and restrictions. As of
December 31, 1999, the Company had received waivers to these convants.
Obligations under these Loan and Security Agreements are secured by the grant of
a security interest in certain telecommunications equipment as well as a portion
of the payment obligations also being secured by letters of credit.

    (c) The Company has assumed the obligations of a credit facility with NTFC
previously entered into by Destia prior to its acquisition by the Company. This
credit facility provides for borrowings to fund certain equipment acquisition
costs and related expenses. The facility provides for an aggregate commitment of
NTFC of $49.0 million. Loans under the NTFC facility accrue interest at a rate
equal to the 90-day commercial paper rate plus 395 basis points, subject to
certain quarterly adjustments depending on financial performance. The loans have
final maturity dates from July 2001 to November 2004. All of the equipment
purchased with the proceeds of the NTFC note has been pledged to NTFC. The terms
of the NTFC facility require the company to maintain certain Debt Service
Coverage Ratios, EBITDA (both as defined in the terms of the NTFC facility), and
minimum cash balances. A waiver of these covenants was obtained until May 8,
2000. Before May 8, 2000, the Company will be required to either (i) obtain a
further waiver or (ii) prepay the outstanding amounts owed at a premium of not
more than 102% of the amount outstanding or (iii) negotiate a new facility.

    Maturities of notes payable and obligations under capital lease arrangements
over the next five years are as follows (in thousands):

<TABLE>
<S>                                                         <C>
2000......................................................  $ 35,334
2001......................................................    38,472
2002......................................................     9,095
2003......................................................     6,811
2004......................................................     7,092
Thereafter................................................    25,193
                                                            --------
Total.....................................................  $121,997
                                                            ========
</TABLE>

                                       63
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(8) LONG-TERM DEBT AND CONVERTIBLE SECURITIES

    Long-term debt consists of the following as of December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1998         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
11.25% Senior Notes(a)......................................   $400,000    $  400,000
12.50% Senior Discount Notes, less discount of $202,716 and
  $164,393, respectively(a).................................    297,284       335,607
11.50% Senior Notes, less discount of $3,486(a)(c)..........         --       265,986
11.50% Senior Notes(a)......................................         --       200,000
13.50% Senior Notes(b)......................................         --       158,300
11.50% Senior Notes (E150,000)..............................         --       151,027
11.15% Senior Notes (DM178,000) and (E91,010),
  respectively(a)...........................................    106,015        91,633
12.40% Senior Discount Notes (DM134,916) and (E115,552),
  less discount of $54,249 (DM91,084) and $38,011,
  (E37,752), respectively(a)................................     80,355        78,332
10% Subordinated Convertible Debentures (DM21,573)(a).......     12,849            --
                                                               --------    ----------
                                                               $896,503    $1,680,885
                                                               ========    ==========
</TABLE>

    (a)  On March 19, 1999, the Company completed a high yield offering through
which we raised approximately $352.6 million of net proceeds in a combination of
senior dollar notes and senior Euro notes due 2009.

    On April 8, 1998, the Company completed an offering of units (the "Units
Offering") consisting of senior notes and senior discount notes due 2008 and
shares of 10% Series A Redeemable Convertible Preferred Stock due 2010
("Series A Preferred") (see Note 9), $.01 par value per share, of the Company
and units consisting of senior notes and senior discount notes due 2008 and
subordinated convertible debentures due 2011 (the "Subordinated Debentures")
(see Note 9) through which it raised approximately $889.6 million of gross
proceeds ($856.6 million of net proceeds). The Company utilized $118.9 million
of the proceeds from the Units Offering to retire its 15% Senior Discount Notes
due 2005 resulting in an extraordinary loss of $28.3 million. A portion of the
proceeds from the senior notes was used to purchase U.S. government and German
government securities which were pledged as security for the first six interest
payments on the Senior notes due 2008 and four interest payments on the Senior
notes due 2009. The amount of restricted securities remaining pledged as
security for these notes at December 31, 1999 is $176.7 million. The interest on
the senior notes is payable in semi-annual installments. The senior discount
notes accrete through April 15, 2003 and interest becomes payable in cash in
semi-annual installments thereafter.

    The indentures pursuant to which the notes were issued contain certain
covenants that, among other things, limit the ability of the Company to incur
additional indebtedness, pay dividends or make certain other distributions,
enter into transactions with stockholders and affiliates and create liens on its
assets. In addition, upon a change of control, the Company is required to make
an offer to purchase the senior notes and the senior discount notes at a
purchase price equal to 101% of the principal amount, in the case of the senior
notes, and 101% of the accreted value of the notes, in the case of the senior
discount notes.

                                       64
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(8) LONG-TERM DEBT AND CONVERTIBLE SECURITIES (CONTINUED)
    (b)  In conjunction with the Destia acquisition, the Company assumed
Destia's 13.5% 1997 notes which have an aggregate principal value of
$150.8 million. The Company determined the fair value of this debt to be
$158.3 million and is amortizing the premium over the remaining term. These
notes were unsecured obligations of Destia and mature in 2007. A portion of the
proceeds from the senior notes due 2007 was used by Destia to purchase U.S.
government securities and cash equivalents which were pledged as security for
the first six interest payments on such notes. The amount of restricted
securities and cash equivalents remaining pledged as security for these notes at
December 31, 1999 is $21.1 million.

    The indentures pursuant to which the Destia 13.5% notes were issued contain
substantially similar covenants to the ones the Company has on its senior notes,
which among other things limit the ability of the Company to incur additional
indebtedness, pay dividends or make certain other distributions, enter into
transactions with stockholders and affiliates and create liens on its assets. In
addition, as a result of our acquisition of Destia, the Company was required to
offer to repurchase the notes at a purchase price equal to 101% of the
outstanding principal amount, together with accrued and unpaid interest. The
Company launched this required offer to purchase on December 22, 1999. In
connection therewith, the Company repurchased an aggregate amount of
$.6 million.

    (c)  In connection with the Destia acquisition, the holders of all of
Destia's 11% senior discount notes due 2008 ($213.3 million in accreted
principal amount) exchanged their Destia notes and all accreted but unpaid
interest on these notes through the date of the acquisition for $205.8 million
in aggregate principal amount at maturity of 11.5% senior notes due 2009 from
the Company. In connection with the exchange offer, the Company also completed a
private placement of $63.7 million in gross principal amount of its 11.5% senior
dollar notes. A portion of the proceeds from the private placement was used to
purchase U.S. government securities which were pledged as security for the first
three interest payments.

(9) STOCKHOLDERS' EQUITY (DEFICIENCY)

    At the Company's 1999 Annual Meeting of Stockholders, the stockholders
approved an increase in the Company's capital stock from 52 million to 152
million. This increase reflected an increase in the available shares of common
stock from 50 million to 150 million.

    On May 13, 1999, the conditions for mandatory conversion were met for both
the Series A Preferred and the Subordinated Debentures. The conversion rates for
the Series A Preferred and Subordinated Debentures were $13.20 and DM24.473,
respectively, at the then applicable exchange rates. Accordingly, the Company
issued 4,615,232 shares of its common stock and paid cash for any fractional
shares due upon conversion.

    On June 1, 1999 the Company granted certain members of senior management a
total of 152,351 shares of its common stock subject to certain restrictions
("restricted shares"). Such shares have been valued at approximately
$6.6 million which was based on the closing market price of the Company's common
stock on the date of issue. The $6.6 million has been recorded as unearned
compensation in the consolidated statement of stockholder's equity (deficit) and
is being amortized as earned over the restricted period. Until the restrictions
lapse (which is 5 years from grant date), the restricted shares are not deemed
to vest other than that restricted shares do give an immediate right to normal
common stock voting rights. As of December 31, 1999 none of the restricted
shares issued in 1999 had satisfied the necessary conditions for the
restrictions to lapse.

                                       65
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(9) STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
    On June 29, 1999, the Company completed an offering of 4,315,000 shares of
its common stock at $47.00 per share. The net proceeds of the offering were
approximately $191.9 million and are being used primarily to fund the further
development of the Company's network as well as for working capital and general
corporate purposes.

    As detailed in Note 13 below, the Company has in place a Stock Incentive
Plan which grants options to its employees. During 1999 and 1998 a total of
436,344 and 174,198, respectively, shares of common stock of the Company were
issued as a result of such options being exercised at an average exercise price
of $6.68 and $5.44 per share, respectively.

    On December 16, 1999, the Company issued 90,000 shares of its common stock,
valued at $4.5 million to a contractor as part of its consideration for
construction work being performed on the Company's network. Such shares have
been valued based upon the closing market price on the date of issue.

(10) INCOME TAXES

    The statutory Federal tax rate for the years ended December 31, 1997, 1998
and 1999 was 35%. The effective tax rate was zero for the years ended December
31, 1997, 1998 and 1999 due to the Company incurring net operating losses for
which no tax benefit was recorded.

    For Federal and foreign income tax purposes, the Company has unused net
operating loss carryforwards of approximately $577.2 million expiring in 2007
through 2019. This amount includes acquired net operating loss carryforwards of
approximately $228.7 million from the Company's acquisition of Destia. The
availability of the net operating loss carryforwards to offset income in future
years is restricted as a result of the Company's issuance of its Common Stock
and may be further restricted as a result of future sales of Company stock and
other events. In addition, the availability of the net operating loss
carryforwards acquired from Destia will be limited due to Destia's change in
ownership.

    The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets are as follows as of December 31 (in
thousands):

<TABLE>
<CAPTION>
                                                           1998       1999
                                                         --------   ---------
<S>                                                      <C>        <C>
Accounts receivable principally due to
  allowance for doubtful accounts......................  $  1,506   $   3,198
Restructuring reserve..................................        --       2,796
OID Interest not deductible in current period..........    11,125      27,826
Federal net operating loss carryforwards...............    68,579     142,611
Foreign net operating loss carryforwards...............     7,989      59,399
Fixed assets...........................................        --       5,797
                                                         --------   ---------
      Total gross deferred tax assets..................    89,199     241,627
Customer base..........................................        --     (42,673)
Workforce..............................................        --      (3,162)
                                                         --------   ---------
      Total gross deferred tax liabilities.............        --     (45,835)
Total deferred tax assets..............................    89,199     195,792
Less valuation allowance...............................   (89,199)   (195,792)
                                                         --------   ---------
      Net deferred tax assets..........................  $  --      $  --
                                                         ========   =========
</TABLE>

                                       66
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(10) INCOME TAXES (CONTINUED)
    In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. During 1998 and 1999, the
valuation allowance increased by $44.6 million and $106.6 million, respectively.

(11) SEGMENT AND GEOGRAPHIC DATA

    While the Company's chief decision maker monitors the revenue streams of the
various products and geographic locations, operations are managed and financial
performance is evaluated based on the delivery of multiple, integrated services
to customers over a single network. As a result, there are many shared expenses
generated by the various revenue streams and management believes that any
allocation of the expenses incurred to multiple revenue streams or geographic
locations would be impractical and arbitrary. Management does not currently make
such allocations internally.

    The Company groups its products and services by wholesale, retail and
capacity. The information below summarizes revenue by customer type for the
years ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Retail......................................................  $52,621    $ 56,411   $131,769
Wholesale...................................................   20,397      75,527    116,831
Capacity....................................................       --       3,250     84,501
                                                              -------    --------   --------
  Consolidated..............................................  $73,018    $135,188   $333,101
                                                              =======    ========   ========
</TABLE>

    The information below summarizes revenue by geographic area for the years
ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Western Europe..............................................  $ 32,647   $ 62,946   $222,589
North America...............................................    15,936     56,172    100,925
Latin America...............................................    16,240     14,653      9,460
Asia/Pacific Rim and other..................................     8,195      1,417        127
                                                              --------   --------   --------
  Consolidated..............................................  $ 73,018   $135,188   $333,101
                                                              ========   ========   ========
</TABLE>

    The information below summarizes long-lived assets by geographic area as of
December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1998        1999
                                                              --------   ----------
<S>                                                           <C>        <C>
Western Europe..............................................  $237,443   $  746,107
North America(1)............................................    46,837    1,103,129
Latin America...............................................       289          201
                                                              --------   ----------
  Consolidated..............................................  $284,569   $1,849,437
                                                              ========   ==========
</TABLE>

                                       67
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(11) SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
(1) Included in the long-lived assets as of December 31, 1999 is net goodwill
    and other identifiable intangibles of approximately $942 million related to
    the acquisition of Destia.

(12) RESTRUCTURING AND ASSET IMPAIRMENTS

    Restructuring and asset impairments represent charges related to the
streamlining of the Company's organizational structure and the strategic
repositioning of certain operations, primarily as a result of the merger with
Destia. The Company recognized $4.1 million in restructuring charges and $9.1
million in asset impairments in the fourth quarter of 1999. There were no
restructuring charges in 1997 and 1998.

    Restructuring charges were composed primarily of anticipated costs to
terminate lease and other contract cancellation costs in connection with the
company's streamlining activities, as well as severance costs associated with
workforce reductions. The Company identified approximately 175 employees who
would be separated as a result of actions taken during 1999 to streamline the
organizational structure. The charge included cash charges of $2.7 million for
lease and other contract cancellation costs, and $1.4 million for severance
costs. Asset impairments consist of non-cash charges for asset write-offs
related to assets no longer in service at December 31, 1999. At December 31,
1999, the Company had accruals for restructuring of approximately $3.9 million,
primarily related to severance and lease and other contract cancellation costs.
The Company has also accelerated depreciation on certain assets which are
currently in use but will be taken out of service in 2000. The Company
anticipates that action required to complete the plan will be completed by
December 2000.

(13) STOCK OPTION PLAN

    At the 1999 Annual Meeting of Stockholders, the Company's stockholders
approved an amendment to the Stock Incentive Plan that increased the number of
shares of common stock available for future issuance thereunder from 3.6 million
to 5.3 million shares. The Company had approximately 1.7 million shares
available as of December 31, 1999 for future grant.

    The Company has adopted an Amended Stock Incentive Plan (the "Stock
Incentive Plan"), the Amended and Restated 1999 Flexible Incentive Plan (the
"1999 Flexible Incentive Plan") (previously a Destia plan) and the Amended and
Restated 1996 Flexible Incentive Plan (previously a Destia plan) (the "1996
Flexible Incentive Plan," and collectively with the Stock Incentive Plan and the
1999 Flexible Incentive Plan, the "Plans"). Pursuant to the Plans,
"non-qualified" stock options to acquire shares of common stock may be granted
to employees, directors and consultants of the Company and
"incentive" stock options to acquire shares of common stock may be granted to
employees, including employee-directors. The Plans also provide for the grant of
stock appreciation rights and shares of restricted common stock to the Company's
employees, directors and consultants.

    The Plans are currently administered by the Compensation Committee of the
Board of Directors of the Company. The Stock Incentive Plan allows for the
issuance of up to a maximum of 5,300,000 shares of common stock. The 1999
Flexible Incentive Plan allows for the issuance of up to a maximum of 2,670,000
shares of common stock, provided, however, that no individual may receive awards
of more than 445,000 shares of common stock in any calendar year. The 1996
Flexible Incentive Plan allows for the issuance of up to a maximum of 2,447,500
shares of common stock, of which 2,336,250 shares may be in the form of voting
stock and 111,250 shares may be in the form of non-voting stock. As a result of
the Company's

                                       68
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(13) STOCK OPTION PLAN (CONTINUED)
acquisition of Destia, virtually all options granted by Destia prior to the
merger vested and became exercisable. Any options granted under the 1999
Flexible Incentive Plan and the 1996 Flexible Incentive Plan after the Destia
acquisition will be subject to accelerated vesting only as described below.
Under the Plans, the option price of any incentive stock option may not be less
than the fair market value of a share of common stock on the date on which the
option is granted. The option price of a non-qualified stock option may be less
than the fair market value on the date the non-qualified stock option is granted
if the Company's board so determines. An incentive stock option may not be
granted to a "ten percent stockholder" (as that term is defined in Section 422A
of the Internal Revenue Code of 1986) unless the exercise price is at least
110.0% of the fair market value of the common stock and the term of the option
may not exceed five years from the date of grant. Each option granted pursuant
to the Plans is evidenced by a written agreement, which contains the terms,
provisions and conditions of the grant. Stock options may not be assigned or
transferred during the lifetime of the holder except as may be required by law
or pursuant to a qualified domestic relations order. Common stock subject to a
restricted stock purchase or bonus agreement is transferable only as provided in
that agreement. The maximum term of each stock option granted to persons other
than ten percent stockholders is ten years from the date of grant.

    On December 8, 1999, each outstanding option previously granted by Destia to
acquire shares of Destia common stock was converted into an option to acquire
the Company's common stock. The number of shares that the new option was
exercisable for and the exercise price of the new option was adjusted to reflect
the 0.445 exchange ratio in the merger (see Note 6 above). Excluding the options
related to the Destia acquisition, the per share weighted average fair value of
stock options granted during 1997, 1998 and 1999 was $5.99, $6.40 and $14.98,
respectively, on the date of grant using the Black-Scholes option pricing model
with the following assumptions: (1) a risk free interest rate of 5.0% in 1997
and 1998 and 6.0% in 1999; (2) an expected life of 10 years for 1997 and 1998
and 7 years for 1999; (3) volatility of approximately 52.2% for 1997, 92.7% for
1998 and 50.0% for 1999; and (4) an annual dividend yield of 0% for all years.

    The Company applies the provisions of APB Opinion No. 25 in accounting for
its Stock Incentive Plan and, accordingly, no compensation cost has been
recognized for its stock options in the financial statements since the exercise
price was equal to or greater than the fair market value at the date of grant.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net loss
would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                               --------------------------------
                                                 1997       1998        1999
                                               --------   ---------   ---------
<S>                                            <C>        <C>         <C>
Net loss, as reported (in thousands).........  $(43,044)  $(130,605)  $(219,177)
Net loss, pro forma (in thousands)...........   (44,171)   (135,458)   (227,003)
Net loss per common share, as reported.......     (1.90)      (5.67)      (7.43)
Net loss per common share, pro forma.........     (1.95)      (5.88)      (7.69)
</TABLE>

    Pro forma net loss reflects only options granted since January 1, 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts because
compensation cost is reflected over the options' vesting period of three years
and compensation cost for options granted prior to January 1, 1995 is not
considered.

                                       69
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(13) STOCK OPTION PLAN (CONTINUED)
    Stock option activity, including activity related to the acquisition of
Destia under the Stock Incentive Plan, is shown below:

<TABLE>
<CAPTION>
                                                              WEIGHTED
                                                              AVERAGE      NUMBER OF
                                                              EXERCISE       SHARES
                                                               PRICES    (IN THOUSANDS)
                                                              --------   --------------
<S>                                                           <C>        <C>
Outstanding at January 1, 1997..............................   $ 6.18           970
Granted.....................................................     8.61           428
Forfeited...................................................     6.68          (197)
Expired.....................................................     5.46           (27)
Exercised...................................................     3.49          (122)
                                                               ------        ------
Outstanding at December 31, 1997............................     7.40         1,052
Granted.....................................................     7.19         1,794
Forfeited...................................................     7.14           (64)
Expired.....................................................     5.05           (14)
Exercised...................................................     5.44          (174)
                                                               ------        ------
Outstanding at December 31, 1998............................     7.41         2,594
Granted.....................................................    16.68         3,641
Forfeited...................................................     9.52           (57)
Expired.....................................................     5.85            (1)
Exercised...................................................     6.68          (436)
                                                               ------        ------
Outstanding at December 31, 1999............................   $13.33         5,741
                                                               ======        ======
</TABLE>

    The following table summarizes weighted-average option exercise price
information:

<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING
                                          -------------------------------------       OPTIONS EXERCISABLE
                                              NUMBER                              ----------------------------
                                          OUTSTANDING AT   WEIGHTED    WEIGHTED        NUMBER         WEIGHTED
                RANGE OF                   DECEMBER 31,     AVERAGE    AVERAGE     EXERCISABLE AT     AVERAGE
                EXERCISE                       1999        REMAINING   EXERCISE   DECEMBER 31, 1999   EXERCISE
                 PRICES                   (IN THOUSANDS)     LIFE       PRICE      (IN THOUSANDS)      PRICE
       --------------------------         --------------   ---------   --------   -----------------   --------
       <S>                                <C>              <C>         <C>        <C>                 <C>
            $ 0.15 - $ 5.00                     433         7 Years     $ 4.38            198          $ 3.66
              5.01 -  10.00                   2,080         4 Years       5.94          1,575            5.89
             10.01 -  15.00                   1,361         4 Years      11.68            897           12.37
             15.01 -  25.00                   1,473         3 Years      21.17          1,087           20.66
             25.01 -  55.00                     394         3 Years      38.55            282           37.40
                                              -----                     ------          -----          ------
                                              5,741                     $13.33          4,039          $13.40
                                              =====                     ======          =====          ======
</TABLE>

    The exercise price of all options approximates the fair market value of the
Common Stock on the date of grant.

(14) STOCKHOLDER RIGHTS PLAN

    Effective December 6, 1999, the Company adopted a Stockholder Rights Plan
(the "Rights Plan"). Under the Rights Plan, each stockholder of record on
December 24, 1999, received one preferred share

                                       70
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(14) STOCKHOLDER RIGHTS PLAN (CONTINUED)
purchase right (a "Right") for each outstanding share of common stock. Each
share of common stock issued after the distribution is accompanied by a Right.

    When a right becomes exercisable it entitles the holder to buy one
two-hundred thousandth of a share of a new series of preferred stock for $210.
The Rights are subject to adjustment upon the occurrence of certain dilutive
events. The Rights will become exercisable only when a person or group becomes
the beneficial owner of 15% or more of the outstanding shares of common stock or
10 days after a person or group announces a tender offer to acquire beneficial
ownership of 15% or more of the outstanding shares of common stock. No
certificates representing the Rights will be issued unless the Rights become
exercisable.

    Under certain circumstances, holders of Rights, except a person or group
described above, and certain related parties, will be entitled to purchase
shares of common stock at 50% of the price at which the common stock traded
prior to the acquisition or announcement. In addition, if the Company is
acquired after the Rights become exercisable, the Rights will entitle those
holders to buy the acquiring company's shares at a similar discount.

    The Company is entitled to redeem the Rights for one cent per Right under
certain circumstances. If not redeemed, the Rights will expire on December 5,
2009. The preferred stock issuable upon exercise of Rights consists of Series A
Junior Participating Preferred Stock of the Company.

(15) LETTER OF CREDIT

    The Company has a revolving line of credit agreement which provides for
secured borrowings of up to $25.0 million, as amended. At December 31, 1998 and
1999, the Company had no borrowings under this line of credit. At December 31,
1998 and 1999, standby letters of credit of approximately $3.3 million and
$15.4 million, respectively, have been issued under this line of credit
agreement.

    In connection with the Company's joint construction of the civil works
associated with a national communications network being constructed in Germany
during 1999, the Company was required to obtain a letter of credit of
approximately $112.8 million (DM219.1 million) in support of its obligation. At
December 31, 1999, the total amount outstanding relating to this letter of
credit was approximately $50.2 million (DM97.4 million) and was collateralized
by cash deposits.

                                       71
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(16) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
                                                     1997       1998       1999
                                                   --------   --------   --------
                                                           (IN THOUSANDS)
<S>                                                <C>        <C>        <C>
Cash used in operating activities included:
Interest paid....................................   $  134    $31,560    $ 82,363
Noncash investing and financing activities
  included:
  Assets acquired under capital lease
    obligations..................................    1,122     30,359      18,335
  Common stock issued for network construction...       --         --       4,500
  Conversion of preferred stock and convertible
    debentures...................................       --         --      60,791
  Common stock issued for acquisitions...........       --      3,375     560,702
  Value of options and warrants exchanged for
    options and warrants of Destia...............       --         --     111,573
  Exchange of senior debt........................       --         --     205,790
</TABLE>

(17) COMMITMENTS AND CONTINGENCIES

    (A) LEASES

    At December 31, 1999, the Company was committed under non-cancelable
operating and capital leases for the rental of office space, network locations
and communication systems.

    The Company's future minimum capital and operating lease payments are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                           CAPITAL    OPERATING
                                                           --------   ---------
<S>                                                        <C>        <C>
2000.....................................................  $ 13,780    $10,940
2001.....................................................    12,439     10,285
2002.....................................................     3,645      9,609
2003.....................................................     2,936      8,050
2004.....................................................     2,932      7,308
Thereafter...............................................    56,201     31,781
                                                           --------    -------
      Total minimum lease payments.......................    91,933    $77,973
                                                                       =======
Less amounts representing interest.......................   (44,432)
                                                           --------
                                                           $ 47,501
                                                           ========
</TABLE>

    Total rent expense amounted to $1.3 million, $1.8 million and $6.1 million
for the years ended December 31, 1997, 1998 and 1999, respectively.

    (B) PURCHASE COMMITMENTS

    The Company continues to build its advanced broadband network that will link
40 major cities in Western Europe and is continually upgrading and expanding its
network and its switching facilities. In connection therewith, the Company has
entered into purchase commitments to spend approximately $147.9 million.

                                       72
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(17) COMMITMENTS AND CONTINGENCIES (CONTINUED)
    (C) LITIGATION

    From time to time, the Company is subject to litigation in the normal course
of business. The Company believes that any adverse outcome from litigation would
not have a material adverse effect on its financial position or results of
operations.

    (D) 401(K) PLAN

    The Company established a 401(k) Plan on January 1, 1996 that is available
to all employees for enrollment on the first day of the quarter following 90
days of service. Employees may contribute up to 15 percent of their salary. At
the discretion of management, the Company can make matching contributions to the
401(k) Plan up to 6% of the employees' salary. The Company contributed
$.2 million and $.4 million for 1998 and 1999, respectively.

(18) REGULATORY MATTERS

    The Company is subject to regulation in countries in which it does business.
The Company believes that an adverse determination as to the permissibility of
the Company's services under the laws and regulations of any such country would
not have a material adverse long-term effect on its business.

(19) RELATED PARTY TRANSACTIONS

    On June 3, 1998, the Company entered into a Mutual Cooperation Agreement
with Martin Varsavsky, then a greater than ten percent stockholder of the
Company, and Jazz Telecom S.A. pursuant to which Mr. Varsavsky agreed to lock-up
his Viatel shares for a specified period, and the Company agreed to release any
past claims which the Company had against either Jazz Telecom S.A. and Mr
Varsavsky in exchange for their respective release of any claims against the
Company. On November 13, 1998, Mr. Varsavsky entered into an additional lock-up
agreement with the Company pursuant to which Mr. Varsavsky agreed that he would
not sell, contract to sell, announce an intention to sell, pledge or otherwise
dispose of his shares of the Company's common stock, either directly or
indirectly, without the prior written consent of the Company until after
August 12, 1999.

    During 1998 and 1999, the Company entered into agreements with Cignal Global
Communications, Inc. ("Cignal"), pursuant to which the Company sold network
transmission systems. Consideration received was in the form of 650,000 and
350,000 shares of Cignal's common stock, respectively. The Company recognized
$3.25 million and $1.75 million of revenue in 1998 and 1999, respectively, the
fair value of the network transmission systems. The Company's Chairman and Chief
Executive Officer is a director of Cignal.

    During 1999, the Company entered into agreements with Sonic
Telecommunications International ("Sonic") pursuant to which the Company sold
network transmission systems. Consideration received was in the form of notes
receivable amounting to approximately $7.1 million at December 31, 1999. The
Company recognized $6.7 million of revenue in 1999, which represents the fair
value of the network transmission systems. The Company's Chairman and Chief
Executive Officer is a director of Sonic.

                                       73
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1997, 1998 AND 1999

(20) SUBSEQUENT EVENTS

    ACQUISITION

    On February 29, 2000, the Company acquired the entire issued and outstanding
share capital of AT&T Corporation's U.K. subsidiary, AT&T Communications (UK)
Limited ("AT&T UK"). The Company paid $125 million in cash for AT&T UK. As a
result of the transaction, AT&T UK became a wholly-owned subsidiary of the
Company. The transaction will be accounted for as a purchase.

    ISSUANCE OF CONVERTIBLE PREFERRED STOCK -- UNAUDITED

    On February 1, 2000, the Company executed a securities purchase agreement
pursuant to which the Company agreed to issue, and certain investors identified
therein committed to buy, $325 million in Series B Cumulative Convertible
Preferred Stock for net proceeds to the Company of $307.1 million. The Series B
preferred accrues interest at an annual rate of 7.50%, may be converted at the
option of the holder at a conversion price of $46.25 per share and is
mandatorily redeemable in 2015. As part of this financing, the Company also
issued warrants to purchase 753,116 shares of common stock, 50% of which are
exercisable for 5 years at a price of $75 per share, and 50% of which are
exercisable for 7 1/2 years at a price of $100 per share. In addition, the
Company issued warrants to purchase 7,532 shares of its Series C preferred stock
(each share of which is convertible into 100 shares of the Company's common
stock), 50% of which are exercisable for 5 years at a price of $7,500 per share
and 50% of which are exercisable for 7 1/2 years at a price of $10,000 per
share. The transaction closed on March 9, 2000, following receipt of Hart-
Scott-Rodino Antitrust Improvements Act clearance.

    OFFERING OF TRUST CONVERTIBLE PREFERRED SECURITIES -- UNAUDITED

    On April 12, 2000, Viatel Financing Trust I, a Delaware trust and subsidiary
of the Company (the "Trust"), sold $180 million of 7 3/4% trust convertible
preferred securities. The trust convertible preferred securities were sold
pursuant to a private placement transaction.

    DEBT OFFERING -- UNAUDITED

    On April 14, 2000, the Company executed a placement agreement under the
terms of which it agreed to sell [EURO]300 million of 12 3/4% senior euro notes
due 2008. The transaction is expected to be completed on April 20, 2000.

    TRANS-ATLANTIC CAPACITY--UNAUDITED

    On April 10, 2000, the Company executed a definitive agreement with Level 3
Communications ("Level 3"), under the terms of which the Company acquired a 25%
ownership interest in the trans-Atlantic fiber optic cable project being
developed by Level 3. The Company's required commitment in 2000 to fund this
purchase is approximately $140 million.

                                       74
<PAGE>
                         VIATEL, INC. AND SUBSIDIARIES
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                               BALANCE    ADDITIONS
                                                 AT       CHARGED TO                              BALANCE
                                              BEGINNING    COST AND                    OTHER      AT END
                DESCRIPTION                   OF PERIOD    EXPENSES    RETIREMENTS    CHANGES    OF PERIOD
                -----------                   ---------   ----------   -----------   ---------   ---------
<S>                                           <C>         <C>          <C>           <C>         <C>
Reserves and allowances deducted from asset
  accounts:

Allowances for uncollectible accounts
  receivable

  Year ended December 31, 1997..............      602        2,733        2,294            --      1,041

  Year ended December 31, 1998..............    1,041        4,225          544            --      4,722

  Year ended December 31, 1999..............    4,722       11,511        6,199            --     10,034

Allowances for asset impairment

  Year ended December 31, 1997..............      560           --           --            --        560

  Year ended December 31, 1998..............      560           --           --            --        560

  Year ended December 31, 1999..............      560           --           --            --        560
</TABLE>

                                       75
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

    None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The following table sets forth certain information with respect to our
directors and executive officers as of March 28, 2000.

<TABLE>
<CAPTION>
NAME                                            AGE                        POSITION
----                                        -----------   ------------------------------------------
<S>                                         <C>           <C>
Michael J. Mahoney(1)(2)..................           40   Chairman of the Board and Chief Executive
                                                            Officer
Alfred West...............................           38   Vice Chairman of the Board
William C. Murphy.........................           45   President and Director
Allan L. Shaw(1)..........................           36   Chief Financial Officer and Director
Sheldon M. Goldman........................           40   Executive Vice President, Corporate
                                                          Development and Director
Francis J. Mount..........................           57   Chief Technology Officer and Director
Lawrence G. Malone........................           48   Executive Vice President, Wholesale Sales
                                                          and Marketing
Abe Grohman...............................           40   Chief Information Officer
James P. Prenetta.........................           37   Senior Vice President and General Counsel
Glenn Davidson............................           46   Senior Vice President, Corporate
                                                          Communications and External Affairs
Ellen Rudin...............................           37   Senior Vice President, Global Real Estate
                                                            Acquisition and Administration
Julie Partridge...........................           36   Senior Vice President, Human Resources
Wayne Myers...............................           46   President, European Operations
Jan Sarro.................................           45   Acting President, North American
                                                          Operations
John G. Graham(1)(2)(3)...................           61   Director
Paul G. Pizzani(1)(2)(3)..................           40   Director
Edward C. Schmults........................           69   Director
John R. Muse..............................           49   Director
</TABLE>

------------------------

(1) Member of the Directors Committee.

(2) Member of the Compensation Committee.

(3) Member of the Audit Committee.

    MICHAEL J. MAHONEY.  Mr. Mahoney has served as Chairman of the Board of
Viatel since September 1998 and as its Chief Executive Officer since
September 1997. Mr. Mahoney has been a director of Viatel since 1995. Mr.
Mahoney was also Viatel's President from September 1996 to February 2000, Chief
Operating Officer from September 1996 to September 1997, Executive Vice
President, Operations and Technology of Viatel from July 1994 to September 1996
and Managing Director, Intercontinental of Viatel from January 1996 to September
1996. From August 1990 to June 1994, Mr. Mahoney was employed by SITEL
Corporation, a teleservices company, most recently as President, Information
Services Group. From August 1987 to August 1990, Mr. Mahoney was employed by
URIX Corporation, a manufacturer of telecommunications hardware and software, in
a variety of sales and marketing positions.

    ALFRED WEST.  Mr. West has served as Vice Chairman of the Board of Viatel
since December 1999. Prior to Viatel's acquisition of Destia in December 1999,
Mr. West served as Destia's Chairman of the Board

                                       76
<PAGE>
and Chief Executive Officer from its founding in 1992. Prior to founding Destia,
Mr. West managed a family-owned textile trading company.

    WILLIAM C. MURPHY.  Mr. Murphy has served as President of Viatel since
February 2000 and as a Director of Viatel since March 2000. From 1988 to January
2000, Mr. Murphy was employed by British Telecom, most recently as its Director
of Customer Service, Sales and Marketing, United Kingdom Corporate Clients
Business Division. Before joining British Telecom, Mr. Murphy worked for ITT
WorldCom for eight years.

    ALLAN L. SHAW.  Mr. Shaw has served as Chief Financial Officer of Viatel
since January 1996 and as a director of Viatel since June 1996. Mr. Shaw was
Senior Vice President of Viatel from December 1997 to January 2000, Vice
President, Finance of Viatel from January 1996 to December 1997 and Treasurer of
Viatel from September 1996 to April 1998. Prior to becoming Vice President,
Finance and Chief Financial Officer, Mr. Shaw served as Corporate Controller
from November 1994 to December 1995. From August 1987 to November 1994,
Mr. Shaw was employed by Deloitte & Touche LLP, most recently as a Manager.
Mr. Shaw is a Certified Public Accountant and a member of the American
Institute, United Kingdom Society and New York State Society of Certified Public
Accountants.

    SHELDON M. GOLDMAN.  Mr. Goldman has served as Executive Vice President,
Corporate Development of Viatel since January 2000 and as a director of Viatel
since December 1999. From August 1999 to January 2000, Mr. Goldman served as
Senior Vice President, Business and Legal Affairs of Viatel. Prior to becoming
Senior Vice President, Business and Legal Affairs, Mr. Goldman served as Senior
Vice President, Business Affairs and General Counsel from December 1997 to
August 1999. Prior to becoming Senior Vice President, Business Affairs and
General Counsel of Viatel, Mr. Goldman served as Vice President, Business and
Legal Affairs from December 1996 to December 1997 and as United States General
Counsel of Viatel from April 1996 to December 1996. From January 1987 to
March 1996, Mr. Goldman was associated with the law firm of Wien, Malkin &
Bettex. Since March 1996, Mr. Goldman has been Of Counsel to the law firm of
Brief Kesselman Knapp & Schulman, LLP.

    FRANCIS J. MOUNT.  Mr. Mount has served as Chief Technology Officer of
Viatel since March 2000 and as a director of Viatel since June 1998. Prior to
becoming Chief Technology Officer of Viatel, Mr. Mount served as Senior Vice
President, Engineering and Network Operations from December 1997 to March 2000.
From December 1997 to December 1999, Mr. Mount served as Viatel's Senior Vice
President, Engineering and Network Operations. Prior to joining Viatel,
Mr. Mount was Senior Vice President, Business Initiatives of Primus
Telecommunications Group from October 1997 to December 1997, responsible for
Internet telephony, European operations and network quality. From June 1997 to
October 1997, Mr. Mount was Executive Vice President and Chief Operating Officer
of Telepassport, Inc. and was Vice President and Chief Operating Officer of
Telepassport, Inc. from January 1996 to June 1997. From 1990 to January 1996,
Mr. Mount was employed by MCI, most recently as Director, Global Technical
Services, responsible for international development, alliance management and all
technical operations and services outside the United States, including the
construction and maintenance of large networks such as Hyperstream, "Concert"
and private networks for large accounts such as J.P. Morgan, Procter and Gamble
and I.B.M. From March 1967 to December 1989, Mr. Mount was employed by AT&T in
various positions.

    LAWRENCE G. MALONE.  Mr. Malone has served as Executive Vice President,
Wholesale Sales and Marketing since March 2000. Prior to becoming Executive Vice
President, Wholesale Sales and Marketing, Mr. Malone served as Senior Vice
President, Global Sales and Marketing of Viatel from May 1997 to March 2000, as
Vice President and Managing Director, Intercontinental of Viatel from
September 1996 to May 1997 and as its Vice President of Sales for
Carriers/Wholesale from January 1995 to September 1996. From December 1993 to
December 1994, Mr. Malone was employed by Frame Relay Technologies, a
communications equipment manufacturer, as Director of Sales. From December 1987
to November 1993, Mr. Malone was employed by Republic Telcom Systems, a
voice/data networking company, where he most recently served as Vice President
of Sales and Marketing.

                                       77
<PAGE>
    ABE GROHMAN.  Mr. Grohman has served as Chief Information Officer of Viatel
since March 2000. Prior to Viatel's acquisition of Destia, Mr. Grohman served as
Destia's Chief Information Officer from October 1997 to December 1999. From
September 1994 to September 1997, Mr. Grohman was the Director of Management
Information Systems for LDM Systems Inc., a switchless reseller. From May 1986
to September 1994, Mr. Grohman was President of DBA Consulting, an independent
data processing consulting company.

    JAMES P. PRENETTA.  Mr. Prenetta has served as Senior Vice President and
General Counsel of Viatel since March 2000. Prior to becoming Senior Vice
President and General Counsel, Mr. Prenetta served as Vice President and General
Counsel of Viatel from August 1999 to March 2000. Mr. Prenetta has also served
as Secretary since December 1999. Prior to joining Viatel, Mr. Prenetta was a
partner at the law firm of Kelley Drye & Warren LLP from January 1998 to August
1999, where he specialized in a variety of areas of corporate representation,
including securities, venture capital, finance and mergers and acquisitions.
Prior to becoming a partner at Kelley Drye & Warren LLP, Mr. Prenetta was an
associate at that firm from November 1995 to January 1998. From September 1987
to November 1995, Mr. Prenetta was an associate at the law firm of Mudge Rose
Guthrie Alexander & Ferdon. Since August 1999, Mr. Prenetta has been Of Counsel
to the law firm of Kelley Drye & Warren LLP.

    GLENN K. DAVIDSON.  Mr. Davidson has served as Senior Vice President,
Corporate Communications & External Affairs since March 2000. Prior to becoming
Senior Vice President, Corporate Communications & External Affairs,
Mr. Davidson served as Vice President, Corporate Communications & External
Affairs from August 1998 to March 2000. Prior to joining Viatel, Mr. Davidson
was employed by the Computer & Communications Industry Association as Executive
Vice President, Chief Operating Officer and Corporate Secretary from
September 1995 to July 1998. From November 1994 to September 1995, Mr. Davidson
was an independent consultant. From May 1994 to November 1994, Mr. Davidson was
the Campaign Manager for Douglas Wilder's bid for election to the United States
Senate. From August 1991 to January 1994, Mr. Davidson was employed by the
Office of Governor, Commonwealth of Virginia, most recently as Chief of Staff.
From January 1990 to August 1991, Mr. Davidson was the Director of the Virginia
Liaison Office, Commonwealth of Virginia. From 1985 to 1990, Mr. Davidson was
employed by Computer & Communications Industry Association in various
capacities, most recently as Vice President and Chief of Staff.

    ELLEN S. RUDIN.  Ms. Rudin has served as Senior Vice President, Global Real
Estate Acquisition and Administration since March 2000. Prior to becoming Senior
Vice President, Ms. Rudin served as Vice President and Deputy General Counsel of
Viatel from September 1998 to March 2000 and as Assistant Secretary from
September 1997 to March 2000. Prior to becoming Vice President and Deputy
General Counsel, Ms. Rudin served as Assistant General Counsel from October 1997
to September 1998, as Counsel from March 1997 to October 1997 and as a staff
attorney from August 1996 to March 1997. From September 1987 to August 1996,
Ms. Rudin was associated with the law firm of Wien, Malkin & Bettex.

    JULIE PARTRIDGE.  Ms. Partridge has served as Senior Vice President, Human
Resources of Viatel since March 2000. Prior to Viatel's acquisition of AT&T
Communications (UK) Limited on February 29, 2000, Ms. Partridge served as Human
Resources Director of New Comms UK from November 1998 to March 2000. Prior to
becoming Human Resources Director of New Comms UK, Ms. Partridge served as Human
Resources Manager for Business Communications Services--Europe for AT&T Business
Communications Services--Europe from January 1994 to October 1998.
Ms. Partridge is a corporate member of Institute of Personnel and Development
(IPD).

    WAYNE MYERS.  Mr. Myers has served as President, European Operations of
Viatel since March 2000. Prior to becoming President, European Operations,
Mr. Myers served as Vice President, European Sales of Viatel from January 1999
to March 2000 and as General Manager, European Sales of Viatel from July 1997 to
January 1999. From February 1996 to June 1997, Mr. Myers was Channel Sales
Director of PSI Net. From November 1994 to February 1996, Mr. Myers was a Sales
Director for LDDS/WorldCom.

                                       78
<PAGE>
From June 1993 to November 1994, Mr. Myers was President of the Gold Club, a
direct mail Company. From February 1988 to June 1993, Mr. Myers was employed by
Cable & Wireless Communications, Inc. in various capacities, most recently as a
National Account Director.

    JAN S. SARRO.  Ms. Sarro has served as Acting President, North American
Operations since March 2000. From January 1999 to March 2000, Ms. Sarro served
as Viatel's Vice President, Carrier Sales. Prior to becoming Vice President,
Carrier Sales, Ms. Sarro served as Viatel's General Manager, Carrier Sales from
January 1998 to January 1999. Prior to joining Viatel, Ms. Sarro was a Vice
President of Primus Telecommunications Group from October 1997 to December 1997.
From September 1995 to October 1997, Ms. Sarro was a Vice President, Sales and
Marketing of Telepassport, Inc. From 1987 to August 1995, Ms. Sarro served in
various positions at a predecessor of WorldCom, most recently as Vice President
of Product Development and Carrier Sales. From 1983 until 1987, Ms. Sarro was
Director of Sales Administration and Customer Service for Argo Communications.

    JOHN G. GRAHAM.  Mr. Graham has served as a director of Viatel since
June 1998. Mr. Graham has been the President and Chief Operating Officer of
Utilities Mutual Insurance Company since May 1, 1999, a position he assumed
following his retirement from GPU Service, Inc. From December 1998 to May 1999,
Mr. Graham was an Executive Vice President of GPU Service, Inc. and from 1987 to
December 1998, was Senior Vice President and Chief Financial Officer of
GPU, Inc., a domestic and international electric utility and independent power
generation company. Mr Graham was employed by GPU in various other capacities
from 1976 to 1987. From 1970 to 1976, Mr. Graham was a Partner in the law firm
of Ruprecht and Graham, Newark, New Jersey. From 1993 to 1997, Mr. Graham served
as a Director and Chairman of the Audit Committee of Edisto Resources, Inc.,
which was engaged in the exploration, production and marketing of natural gas
and oil.

    PAUL G. PIZZANI.  Mr. Pizzani has served as a director of Viatel since
April 1996. Mr. Pizzani is currently a partner at eVentures LLC. From November
1997 to March 1999, Mr. Pizzani served as a Managing Director of Wasserstein
Perella Emerging Markets L.P. where he had been employed since November 1997.
Prior to November 1997, Mr. Pizzani was associated with COMSAT Corporation and
its subsidiaries in various capacities from November 1985 to October 1997, most
recently as Treasurer.

    EDWARD C. SCHMULTS.  Mr. Schmults has served as a director of Viatel since
December 1999 and was a director of Destia prior to its acquisition by Viatel.
Mr. Schmults served as Senior Vice President and General Counsel of GTE
Corporation from February 1984 to June 1994. Mr. Schmults has held various
positions in government, including Deputy Attorney General of the United States
and Under Secretary of the U.S. Treasury Department. Mr. Schmults was a partner
with White & Case, a law firm in New York City. Mr. Schmults is a Director of
Greenpoint Financial Corp., The Germany Fund, The Central European Equity Fund
and BT Insurance Funds, Inc. Mr. Schmults is also Chairman of the Board of
Trustees of The Edna McConnell Clark Foundation, a charitable foundation.

    JOHN R. MUSE.  Mr. Muse has been a Director of Viatel since March 2000.
Mr. Muse is a Managing Director and Principal of Hicks, Muse, Tate & Furst, a
private investment firm. Before joining Hicks Muse in 1989, Mr. Muse was with
Prudential Securities, heading its investment/merchant banking activities for
the Southwest region of the United States. Prior to joining Prudential
Securities, from 1980 to 1984, Mr. Muse served as a Senior Vice President and
Director of Schneider, Bemet & Hickman, Inc. and was responsible for its
investment banking activities. Mr. Muse serves as a director of International
Home Foods and of several portfolio companies in which Hicks Muse has invested,
including Arena Brands Holding Corp., Arnold Palmer Golf Management Co., Glass's
Information Services, Olympus Real Estate 4 Corporation, Regal Cinemas, Inc.,
Sunrise Television Corp., and Suiza Foods Corporation. Mr. Muse also serves as a
director of the Southern Methodist University Edwin L. Cox School of Business.

                                       79
<PAGE>
BOARD OF DIRECTORS

    Our board of directors currently is comprised of ten directorships. The
board consists of three classes: Class A, Class B and Class C. One of the three
classes, comprising approximately one-third of the directors, is elected each
year to succeed the directors whose terms are expiring. Class C directors were
elected at our 1999 annual meeting of stockholders, Class A directors will be
elected at our annual meeting of stockholders in 2000 and Class B directors will
be elected at our annual meeting to be held in the year 2001. In connection with
our March 2000 $325 million private placement of shares of preferred stock,
certain holders of such shares were granted the right to elect, as a class, one
director to our board. This director has been elected as a Class C director.
Directors hold office until the annual meeting for the year in which their terms
expire and until their successors are elected and qualified unless, prior to
that date, they have resigned, retired or otherwise left office.

    Our board has established three committees, a Compensation Committee, an
Audit Committee and a Directors Committee. The current members of the
Compensation Committee are Messrs. Mahoney, Graham and Pizzani; the current
members of the Audit Committee are Messrs. Graham and Pizzani; and the current
members of the Directors Committee are Messrs. Mahoney, Shaw, Graham and
Pizzani. The Compensation Committee reviews general policy matters relating to
compensation and benefits of our employees and officers and administers our
stock incentive plans. The Audit Committee recommends to our board the firm of
independent public accountants to audit our financial statements, reviews with
management and the independent accountants our interim and year-end operating
results, considers the adequacy of our internal controls and audit procedures
and reviews the nonaudit services to be performed by the independent
accountants. The Directors Committee searches for and interviews prospective
directors, makes recommendations to the our board regarding the size of the
board and candidates to fill vacancies on the board, including vacancies created
by reason of an increase in the size of the board and nominates candidates for
election to the board.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act requires our directors, certain
officers and persons holding more than 10% of a registered class of our equity
securities to file reports of ownership and reports of changes in ownership with
the SEC and the Nasdaq National Market. Directors, certain officers and greater
than 10% stockholders are also required by SEC regulations to furnish us with
copies of all reports that they file. Based on our review of copies of such
forms provided to us, we believe that all filing requirements were complied with
during the fiscal year ended December 31, 1999.

                                       80
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

    The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by, or paid to our chief executive
officer during 1999, and our other four most highly compensated executive
officers during 1999 whose aggregate cash and cash equivalent compensation
exceeded $100,000.

<TABLE>
<CAPTION>
                                                 ANNUAL COMPENSATION              LONG TERM COMPENSATION
                                        --------------------------------------   -------------------------
                                                                     OTHER
                                                                     ANNUAL       RESTRICTED    SECURITIES          ALL
                                                                  COMPENSATION      STOCK       UNDERLYING         OTHER
NAME AND PRINCIPAL POSITION    YEAR     SALARY($)   BONUS($)(1)      ($)(2)      AWARDS($)(3)   OPTIONS(#)    COMPENSATION(4)
---------------------------  --------   ---------   -----------   ------------   ------------   ----------   -----------------
<S>                          <C>        <C>         <C>           <C>            <C>            <C>          <C>
Michael J. Mahoney,......      1999     $367,833      $425,000         (2)        $2,351,939      90,474     $          10,000
  President and Chief          1998      289,583       260,000          --                --     360,771                10,000
  Executive Officer            1997      212,500       125,000          --                --          --                 9,500

Allan L. Shaw,...........      1999      231,750       252,000         (2)           864,596      42,642                10,000
  Senior Vice President,       1998      172,917       107,500          --                --     195,019                10,000
  Finance and Chief            1997      140,000        60,000          --                --      60,666                 8,400
  Financial Officer

Lawrence G. Malone,......      1999      232,850       245,000         (2)           864,596      42,642                10,000
  Senior Vice President,       1998      155,833       110,000          --                --     138,140                 9,350
  Global Sales and             1997      141,750        35,588          --                --      73,533                 8,505
  Marketing

Sheldon M. Goldman,......      1999      238,325       257,200         (2)           864,596      42,642                10,000
  Senior Vice President,       1998      182,917       112,000          --                --     162,500                10,000
  Business and Legal           1997      143,750        60,000          --                --      40,200                 9,000
  Affairs

Francis J. Mount(5),.....      1999      228,417       250,000         (2)           864,596      42,642                10,000
  Senior Vice President,       1998      175,000       107,500          --                --     122,500                10,000
  Engineering and
  Network Operations
</TABLE>

------------------------

(1) Includes the following amounts for Messrs. Mahoney, Shaw, Malone, Goldman
    and Mount taken in the form of shares of restricted common stock, $39,000,
    $55,200, $43,720, $51,440 and $50,000, respectively.

(2) The aggregate value of the perquisites and other personal benefits received
    by each named executive has not been reported because such amount was below
    the SEC's required reporting threshold.

(3) Calculated based on a value of $53.625, the fair market value of our common
    stock on December 31, 1999. The stock performance criteria associated with
    these shares of restricted stock vested on March 29, 2000 when our common
    stock traded at or above $60 per share for a twenty (20) consecutive
    business day period. These shares remain subject to a minimum two year
    employment requirement but would vest upon a change of control or a
    termination of the named executive without cause.

(4) Represents matching contributions under our 401(k) plan.

(5) Mr. Mount began his employment with us in December 1997.

STOCK OPTION GRANTS

    The following table sets forth information regarding grants of options to
purchase common stock made by us during the fiscal year ended December 31, 1999
to each of the executives named in the summary compensation table. No stock
appreciation rights were granted during 1999.

                                       81
<PAGE>
                             OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
                                                  INDIVIDUAL GRANTS                        POTENTIAL REALIZABLE VALUE
                             -----------------------------------------------------------       AT ASSUMED ANNUAL
                              NUMBER OF         PERCENT OF                                    RATES OF STOCK PRICE
                             SECURITIES        TOTAL OPTIONS                                    APPRECIATION FOR
                             UNDERLYING         GRANTED TO       EXERCISE                       OPTION TERM (3)
                               OPTIONS         EMPLOYEES IN       PRICE       EXPIRATION   --------------------------
NAME                         GRANTED (#)         1999 (1)      ($/SHARE)(2)      DATE         (5%)           (10%)
----                         -----------       -------------   ------------   ----------   -----------    -----------
<S>                          <C>               <C>             <C>            <C>          <C>            <C>
Michael J. Mahoney.........   52,278(4)(5)          6.2%         $ 22.875      01/01/09    $  752,071     $1,905,899
                              38,196(4)(6)          4.6            43.00       06/01/09     1,032,820      2,617,572

Allan L. Shaw..............   38,519(4)(5)          4.6            22.875      01/01/09       554,137      1,392,511
                               4,123(4)(6)          0.5            43.00       06/01/09       111,486        287,549

Lawrence G. Malone.........   38,519(4)(5)          4.6            22.875      01/01/09       554,139      1,392,511
                               4,123(4)(6)          0.5            43.00       06/01/09       111,436        284,549

Sheldon M. Goldman.........   38,519(4)(5)          4.6            22.875      01/01/09       554,174      1,392,511
                               4,123(4)(6)          0.5            43.00       06/01/09       111,486        289,549

Francis J. Mount...........   38,519(4)(5)          4.6            22.875      01/01/09       554,139      1,392,511
                               4,123(4)(6)          0.5            43.00       06/01/09       111,486        289,549
</TABLE>

------------------------

(1) We granted options to purchase a total of 837,709 shares of our common stock
    during 1999.

(2) The exercise price was equal to the fair market value of the shares of
    common stock underlying the options on the grant date.

(3) Amounts reported in these columns represent amounts that may be realized
    upon exercise of options immediately prior to the expiration of their term
    assuming the specified compounded rates of appreciation (5% and 10%) on the
    common stock over the term of the options. These assumptions are based on
    rules promulgated by the SEC and do not reflect our estimate of future stock
    price appreciation. Actual gains, if any, on the stock option exercises and
    common stock holdings are dependent on the timing of such exercise and the
    future performance of the common stock. There can be no assurance that the
    rates of appreciation assumed in this table can be achieved or that the
    amounts reflected will be received by the option holder.

(4) Options granted to the executives named in the summary compensation table
    vest upon a change in control. See "--Employment Agreements."

(5) Options to purchase shares of our common stock vested and became exercisable
    as to 33.34% of these options on January 1, 2000 and the remainder will vest
    and become exercisable on each successive anniversary date thereafter to the
    extent of 33.33% of these options.

(6) Options to purchase shares of our common stock will vest and become
    exercisable as to 33.34% of these options on June 1, 2000 and the remainder
    will vest and become exercisable on each successive anniversary date
    thereafter to the extent of 33.33% of these options.

                                       82
<PAGE>
YEAR-END OPTION VALUES

    The following table sets forth information regarding the number and year-end
value of unexercised options held at December 31, 1999 by each of the executives
named in the summary compensation table. No stock appreciation rights were
exercised by these executives during fiscal 1999.

                       FISCAL 1999 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                            SHARES                          UNDERLYING UNEXERCISED            "IN-THE-MONEY"
                           ACQUIRED                            OPTIONS AT FISCAL             OPTIONS AT FISCAL
                              ON           VALUE                 YEAR-END (#)                  YEAR-END ($)
NAME                     EXERCISE (#)   REALIZED ($)       EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE (1)
----                     ------------   ------------       -------------------------   -----------------------------
<S>                      <C>            <C>                <C>                         <C>
Michael J. Mahoney.....         --               --              308,089/368,470          $15,436,113/$14,654,551
Allan L. Shaw..........     20,000       $852,500(2)             131,127/197,866              6,030,293/8,410,111
                             6,000        276,750(5)
Lawrence G. Malone.....     20,000        835,500(2)             113,409/164,239              5,257,128/6,869,187
Sheldon M. Goldman.....     19,999        757,962(3)              75,976/169,367              3,505,237/7,165,441
Francis J. Mount.......     13,333        593,319(4)              15,590/126,558                714,530/5,208,790
                             3,667        161,348(4)
                             6,000        276,750(5)
</TABLE>

------------------------

(1) Options are "in-the-money" if the fair market value of the underlying
    securities exceeds the exercise price of the options. The amounts set forth
    represent the difference between $53.625 per share, the fair market value of
    our common stock issuable upon exercise of options at December 31, 1999 and
    the exercise price of the option, multiplied by the applicable number of
    options.

(2) The amount set forth represents the difference between $47.625 per share,
    the fair market value of our common stock issuable upon exercise of these
    options at June 23, 1999, and the exercise price of the option, multiplied
    by the applicable number of options.

(3) The amounts set forth represent the difference between $43.750 per share,
    the fair market value of our common stock issuable upon exercise of these
    options at June 22, 1999, and the exercise price of the option, multiplied
    by the applicable number of options.

(4) The amounts set forth represent the difference between $49.50 per share, the
    fair market value of our common stock issuable upon exercise of these
    options at June 7, 1999, and the exercise price of the option, multiplied by
    the applicable number of options.

(5) The amount set forth represents the difference between $51.625 per share,
    the fair market value of our common stock issuable upon exercise of these
    options at June 24, 1999, and the exercise price of the option, multiplied
    by the applicable number of options.

EMPLOYMENT AGREEMENTS

    We have executed new employment agreements with Messrs. Mahoney, Shaw and
Goldman, pursuant to which Mr. Mahoney serves as our Chief Executive Officer,
Mr. Shaw serves as our Chief Financial Officer and Mr. Goldman serves as our
Executive Vice President, Corporate Development. In addition, we have executed
employment agreements with Alfred West, William Murphy, Lawrence Malone and
Francis Mount, pursuant to which Mr. West serves as Vice Chairman of our board,
Mr. Murphy serves as President, Mr. Malone serves as Executive Vice President,
Wholesale Sales and Marketing and Mr. Mount serves as our Chief Technology
Officer. The term of the Mahoney employment agreement extends for a period of
three years, and the term of the employment agreement of each of Messrs. Shaw,
Goldman, West, Murphy, Malone and Mount extends for a period of two years, in
each case unless earlier terminated in accordance with the terms of the
respective agreement. Pursuant to the respective employment agreements,
Mr. Mahoney is entitled to receive an annual base salary of $450,000 (subject to
adjustments), Mr. West is entitled to receive an annual base salary of $400,000,
Mr. Murphy is entitled to receive an annual base salary of $395,000, Mr. Shaw is
entitled to receive an annual base salary of $299,000, Mr. Goldman is entitled
to receive an annual base salary of $304,200 and Messrs. Malone and Mount are
each entitled to receive an annual base salary of $250,000, subject, in each
case, to increases approved from

                                       83
<PAGE>
time to time by the compensation committee of our board in its sole discretion.
In addition, Mr. Mahoney's employment agreement provides for an annual cash
bonus payment equal to 100% of his base salary, Mr. West's employment agreement
provides for an annual cash bonus payment equal to 90% of his base salary,
Mr. Murphy's agreement provides for an annual cash bonus payment equal to 85% of
his base salary and each of Messrs. Shaw's, Goldman's, Mount's and Malone's
employment agreements provides for an annual cash bonus payment equal to 80% of
their respective base salaries, in each case multiplied by a bonus multiple
ranging from 0.6 to 2.0 determined based upon a comparison of actual versus
budgeted EBITDA and revenue figures. Each of these employment agreements also
(1) provides that the executive is entitled to receive annual grants of stock
options or restricted stock in amounts to be determined by the our board (or any
committee thereof) in its sole and absolute discretion, except that Mr. West is
entitled to receive a minimum of 20,000 shares of restricted stock with respect
to each of calendar years 2000 and 2001, (2) provides that following a change in
control (defined therein), we will be obligated to pay the executive an amount
equal to the severance amount (defined therein), together, in the case of
Messrs. Mahoney, Murphy, Shaw, Goldman, Mount and Malone, any applicable excise
tax gross up on such amount, if the executive's employment is terminated, and
(3) with respect to each executive, includes a non-competition covenant and
contains a prohibition on the solicitation of our employees.

    For purposes of each of the foregoing employment agreements, "change in
control" is defined to mean such time as (1) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act, becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act) of more than 50% of the total voting power of our then outstanding
voting stock on a fully diluted basis or (2) individuals who at the beginning of
any period of two consecutive calendar years constituted our board (together
with any new directors whose election by our board or whose nomination for
election by our stockholders was approved by a vote of at least two-thirds of
the members of the Viatel board then still in office who either were members of
our board at the beginning of this period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of our board then in office.

STOCK INCENTIVE PLANS

    We have adopted an Amended Stock Incentive Plan (the "Stock Incentive
Plan"), the Amended and Restated 1999 Flexible Incentive Plan (the "1999
Flexible Incentive Plan") (previously a Destia plan) and the Amended and
Restated 1996 Flexible Incentive Plan (previously a Destia plan) (the "1996
Flexible Incentive Plan," and collectively with the Stock Incentive Plan and the
1999 Flexible Incentive Plan, the "Plans"). Pursuant to the Plans,
"non-qualified" stock options to acquire shares of common stock may be granted
to our employees, directors and consultants and "incentive" stock options to
acquire shares of common stock may be granted to our employees, including
employee-directors. The Plans also provide for the grant of stock appreciation
rights and shares of restricted common stock to our employees, directors and
consultants.

    The Plans are currently administered by the compensation committee of our
board. The Stock Incentive Plan allows for the issuance of up to a maximum of
5,300,000 shares of common stock. The 1999 Flexible Incentive Plan allows for
the issuance of up to a maximum of 2,670,000 shares of common stock, provided,
however, that no individual may receive awards of more than 445,000 shares of
common stock in any calendar year. The 1996 Flexible Incentive Plan allows for
the issuance of up to a maximum of 2,447,500 shares of common stock, of which
2,336,250 shares may be in the form of voting stock and 111,250 shares may be in
the form of non-voting stock. As a result of our acquisition of Destia,
virtually all options granted by Destia prior to the merger vested and became
exercisable. Any options granted under the 1999 Flexible Incentive Plan and the
1996 Flexible Incentive Plan after our acquistion of Destia will be subject to
accelerated vesting only as described below. Under the Plans, the option price
of any incentive stock option may not be less than the fair market value of a
share of common stock on the date on which the option is granted. The option
price of a non-qualified stock option may be less than the fair market value on
the date the non-qualified stock option is granted if our board so determines.
An incentive stock option may not be granted to a "ten percent stockholder" (as
that term is defined in Section 422A of the

                                       84
<PAGE>
Internal Revenue Code of 1986) unless the exercise price is at least 110.0% of
the fair market value of the common stock and the term of the option may not
exceed five years from the date of grant. Each option granted pursuant to the
Plans is evidenced by a written agreement, which contains the terms, provisions
and conditions of the grant. Stock options may not be assigned or transferred
during the lifetime of the holder except as may be required by law or pursuant
to a qualified domestic relations order. Common stock subject to a restricted
stock purchase or bonus agreement is transferable only as provided in that
agreement. The maximum term of each stock option granted to persons other than
ten percent stockholders is ten years from the date of grant.

    For options to qualify as incentive stock options, the aggregate fair market
value, determined on the date of grant, of the shares with respect to which the
incentive stock options are exercisable for the first time by the grantee during
any calendar year may not exceed $100,000. Payment by option holders upon
exercise of an option may be made in cash or, with the consent of our board, in
whole or in part,

    -  with shares of common stock,

    -  by irrevocable direction to an approved securities broker to sell shares
       and deliver all or a portion of the proceeds to us,

    -  by delivery of a promissory note with any provisions that our board
       determines appropriate, or

    -  in any combination of these three possibilities.

    In addition, our board, in its sole discretion, may authorize the surrender
by an optionee of all or part of an unexercised stock option and authorize a
payment in consideration thereof of an amount equal to the difference between
the aggregate fair market value of the shares of common stock subject to the
stock option and the aggregate option price per share of such common stock. In
the discretion of the board, this payment may be made in cash, shares of common
stock with a fair market value on the date of surrender equal to the payment
amount or some combination of the two.

    The Plans provide that outstanding options, restricted shares of common
stock or stock appreciation rights vest in their entirety and become
exercisable, or with respect to restricted common stock, are released from
restrictions on transfer and repurchase rights, in the event of a "corporate
transaction," unless assumed by the successor corporation. For purposes of the
Plans, a corporate transaction includes any of the following
stockholder-approved transactions to which Viatel is a party:

    -  a merger or consolidation in which Viatel is not the surviving entity,
       other than a transaction the principal purpose of which is to change the
       state of Viatel's incorporation, or a transaction in which Viatel's
       stockholders immediately prior to the merger or consolidation hold (by
       virtue of securities received in exchange for their shares in Viatel)
       securities of the surviving entity representing more than 50.0% of the
       total voting power of that entity immediately after the transaction,

    -  the sale, transfer or other disposition of all or substantially all of
       the assets of Viatel unless Viatel's stockholders immediately prior to
       the sale, transfer or other disposition hold (by virtue of securities
       received in exchange for their shares in Viatel) securities of the
       purchaser or other transferee representing more than 50.0% of the total
       voting power of that entity immediately after the transaction, or

    -  any reverse merger in which Viatel is the surviving entity but in which
       Viatel's stockholders immediately prior to the merger do not hold (by
       virtue of their shares in Viatel held immediately prior to such
       transaction) securities of Viatel representing more than 50.0% of the
       total voting power of Viatel immediately after the transaction.

EMPLOYEE STOCK PURCHASE PLAN

    We have adopted an Employee Stock Purchase Plan (the "ESPP") which we intend
to implement during the second quarter of 2000.

                                       85
<PAGE>
    Under the plan, eligible employees will be permitted to authorize payroll
deductions of 1% to 20% of his or her base salary for the purpose of purchasing
shares of our common stock. The amounts deducted during each six-month period
will be accumulated and, at the end of such period, will be used to purchase
shares of our common stock at the lower of 85% of the closing market price on
the first trading day of the relevant participation period or 85% of the closing
market price on the exercise date.

    The ESPP, which will be administered by the Compensation Committee of our
board, allows for the issuance of up to a maximum of five hundred thousand
(500,000) shares of common stock. Under the ESPP, a participant will have no
rights as a stockholder until he or she acquires the stock at the end of the
relevant participation period.

    The ESPP provides that in the event of any reorganization, recapitalization,
stock split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of Viatel, the administrator of the plan may make such adjustment, if
any, as it deems appropriate in the number, kind and purchase price of the
shares available for purchase under the plan and in the maximum number of shares
that may be issued under the plan, subject to the approval of the board of
directors. If we are acquired in a transaction whereby we are not the surviving
entity or all or substantially all of its assets are acquired, the administrator
of the plan will be permitted to determine a plan termination date. This date
must precede the expected effective date of such acquisition by not more than
sixty (60) days. In the event the ESPP is terminated and the acquisition
transaction is not consummated, the plan may be reactivated on a date determined
by the Employee Stock Purchase Plan Committee.

    The ESPP is designed to qualify as an "employee stock purchase plan" within
the meaning of Section 423 or any successor provisions of the Internal Revenue
Code and related regulations.

MANAGEMENT SEVERANCE PLAN

    On December 8, 1999, we implemented a Management Severance Plan, which
provides that any of our employees who hold the title of director or above and
are selected to participate in the plan shall be entitled to receive at least
six months base salary and accelerated vesting of options and restricted stock
in the event the employee is terminated without "cause" within eighteen (18)
months following a change in control of Viatel. For purposes of this plan, a
termination without "cause" includes a voluntary termination due to a reduction
in the employee's base pay and a forced relocation of the employee to a site in
excess of sixty (60) miles from his or her worksite. For purposes of this plan,
change in control has the same meaning described above under "Employment
Agreements." Decisions of the plan administrator concerning eligibility and
entitlement to benefits are final and binding on all parties.

COMPENSATION OF DIRECTORS

    We pay an annual fee to non-employee directors consisting of $15,000 in
cash, paid in quarterly installments, $15,000 worth of restricted stock, and
1,000 options to purchase shares of common stock. In addition, non-employee
directors also receive $1,200 for each board meeting attended and held
separately and $600 for each board meeting or committee meeting participated in
by telephone. Directors who are also our employees are not separately
compensated for serving on our board. All directors are reimbursed for
out-of-pocket expenses incurred in attending board meetings and committee
meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    During 1999, the members of our Compensation Committee were
Messrs. Mahoney, Pizzani and Graham. Mr. Mahoney is our Chairman of the Board
and Chief Executive Officer. None of our executive officers currently serves on
the compensation committee of another entity or any other committee of the board
of directors of another entity performing functions similar to the compensation
committee. No interlocking relationships exist between our board of directors or
our compensation committee and the board of directors or compensation committee
of any other company.

                                       86
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The following table sets forth certain information regarding the beneficial
ownership of our common stock, as of March 28, 2000, by (1) each person known to
us to own beneficially more than 5% of our outstanding shares of common stock,
(2) each of our directors, (3) each person named in the summary compensation
table, and (4) all of our executive officers and directors, as a group. All
information with respect to beneficial ownership has been furnished to us by the
respective stockholders.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF                                            AMOUNT AND NATURE OF     PERCENTAGE
BENEFICIAL OWNER                                              BENEFICIAL OWNERSHIP(1)    OF CLASS
-------------------                                           -----------------------   ----------
<S>                                                           <C>                       <C>
College Retirement Equities Fund(2) ........................         2,630,179               5.5%
  730 Third Avenue
  New York, NY 10017
Alfred West(3)..............................................         5,092,144              10.6
Michael J. Mahoney(4).......................................           571,302               1.2
Allan L. Shaw(4)............................................           245,307             *
Lawrence G. Malone(4).......................................           214,463             *
Sheldon M. Goldman(4)(5)....................................           180,198             *
Francis J. Mount(4).........................................           135,943             *
Edward C. Schmults(4).......................................             7,869             *
John G. Graham(4)...........................................             3,497             *
Paul G. Pizzani(4)..........................................             2,497             *
John R. Muse(6).............................................                --             *
William Murphy..............................................            49,075             *
Thomas O. Hicks ............................................         4,519,599(7)            9.4
  200 Crescent Court
  Dallas, Texas 75201
Chase Equity Associates, LLC ...............................         3,185,875(8)            6.6
  380 Madison Avenue
  12th Floor
  New York, New York 10017
All directors and executive
  officers as a group (18 persons)..........................         6,747,860              13.9%
</TABLE>

------------------------

*   Represents beneficial ownership of less than 1% of our outstanding shares of
    common stock.

(1) Beneficial ownership is determined in accordance with the rules of the SEC.
    In computing the number of shares beneficially owned by a person and the
    percentage ownership of that person, shares of common stock subject to
    options and warrants held by that person that are currently exercisable or
    exercisable within 60 days of March 28, 2000 are deemed outstanding. Such
    shares, however, are not deemed outstanding for the purpose of computing the
    percentage ownership of any other person. Except as indicated in the
    footnotes to this table, the stockholder named in the table has sole voting
    and investment power with respect to the shares set forth opposite such
    stockholder's name. Except as otherwise indicated, the address of each
    person listed in the table is c/o Viatel, Inc., 685 Third Avenue, New York,
    New York 10017. Attn: General Counsel.

(2) Includes 900 shares held by TIAA Separate Account VA-1; 90,655 shares held
    by TIAA-CREF Mutual Funds; 6,479 shares held by TIAA-CREF Institutional
    Mutual Funds; and 100 shares held by TIAA-CREF Life Funds.

(3) Includes 397,593 shares held by AT Econ Ltd. Partnership and 39,297 shares
    held by AT Econ Ltd. Partnership No. 2.

(4) Includes shares of common stock which these individuals have the right to
    acquire through the exercise of options within 60 days of March 28, 2000, as
    follows: Michael J. Mahoney, 286,033; Allan

                                       87
<PAGE>
    L. Shaw, 139,187; Lawrence G. Malone, 104,202; Sheldon M. Goldman, 93,215;
    Francis J. Mount, 0; Edward C. Schmults, 5,340; John G. Graham, 1,463; and
    Paul G. Pizzani, 1,463.

(5) Includes 1,000 shares owned by Mr. Goldman's wife. Mr. Goldman disclaims
    "beneficial ownership" of such shares within the meaning of Rule 13d-3 under
    the Securities Exchange Act.

(6) Mr. Muse, one of our directors, was appointed to our board of directors on
    behalf of the holders of our Series B-1 7.50% cumulative convertible
    preferred stock.

(7) The amount shown for Mr. Hicks is based upon a Schedule 13D filed on
    March 20, 2000 by Mr. Hicks, chief executive officer of Hicks, Muse, Tate &
    Furst Incorporated, Hicks, Muse, Tate & Furst Europe Fund, L.P.; HMEU Viatel
    Qualified Fund LLC; Hicks, Muse, Tate & Furst Europe Private Fund, L.P.;
    HMEU GP LLC; HMEU Viatel I-EQ Coinvestors, LLC; HMEU I-EQ Coinvestors, L.P.;
    HMEU Viatel I-SBS Coinvestors, LLC; HMEU I-SBS Coinvestors, L.P.; HMEU
    Intermediate Partners I-C, L.P.; Viatel PG Europe LLC; HM PG Europe I, C.V.;
    HMEU Fund I-C, Inc.; HMTF Bridge Viatel, LLC; HMTF Bridge Partners, L.P.;
    and HMTF Bridge Partners, LLC. The amount shown assumes conversion of all of
    our Series B-1 7.50% cumulative convertible preferred stock beneficially
    owned by such entities. The shares shown are subject to shared voting and
    investment power.

(8) The amount shown assumes conversion of all Series B-2 7.50% cumulative
    convertible preferred stock beneficially owned by Chase Equity Associates,
    LLC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Through August 1999, James Prenetta, Senior Vice President and General
Counsel of Viatel, was a partner at the law firm of Kelley Drye & Warren LLP,
Viatel's primary U.S. outside counsel. Mr. Prenetta is currently Of Counsel to
Kelley Drye & Warren LLP and, in such capacity, continues to receive certain
payments from such firm.

    Destia had outstanding loans of $308,000 due to Mrs. Rose West, the mother
of Messrs. Alfred West and Steven West. Destia has repaid these loans in full.

    Alfred West has borrowed approximately $234,000 from Destia pursuant to
unsecured, interest bearing notes, repayable upon demand.

    Sonja Gross, the sister of Alfred West, previously owned a 28% interest in
Destia's Swiss subsidiary, Econophone Services GmbH. On March 30, 1999, Destia
acquired Ms. Gross' interest in such company in exchange for 103,981 shares of
restricted voting common stock of Destia.

                                       88
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) 1. Financial Statements.

    The financial statements are included in Part II, Item 8 of this report.

    2. Financial Statement Schedules and Supplementary Information Required
    to be Submitted.

    Any required financial statement schedules are included in Part II,
    Item 8 of this report.

(B) Report on Form 8-K.

    Viatel filed a Report on Form 8-K dated November 3, 1999, pursuant to
    Item 5 thereof.

    Viatel filed a Report on Form 8-K dated December 9, 1999, pursuant to
    Item 7 thereof.

    Viatel filed a Report on Form 8-K dated December 17, 1999, pursuant to
    Item 2 thereof.

    Viatel filed a Report on Form 8-K dated December 24, 1999, pursuant to
    Item 5 thereof.

    Viatel filed a Report on Form 8-K dated December 29, 1999, pursuant to
    Item 7 thereof.

(C) Index to Exhibits.

    The following is a list of all Exhibits filed as part of this report:

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
           2.1          Agreement and Plan of Merger, dated as of August 27, 1999,
                        by and among Viatel, Inc., Viatel Acquisition Corp. and
                        Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 2.1 to Viatel, Inc.'s Registration
                        Statement on Form S-4, filed on October 15, 1999,
                        Registration No. 333-89143) ("Viatel's October 1999 Form
                        S-4").

           2.2          Agreement for the sale and purchase of the entire issued
                        share capital of AT&T Communications (UK) Limited, by and
                        among AT&T Communications Services International, Inc.,
                        Global Card Holdings Inc., Viatel, Inc. and Viatel Global
                        Communications Limited, dated February 29, 2000
                        (incorporated herein by reference to Exhibit 2.2 to Viatel,
                        Inc.'s Form 8-K, filed on March 13, 2000, File
                        No. 000-21261).

         3.1(i)*        Amended and Restated Certificate of Incorporation of Viatel,
                        Inc. (incorporated herein by reference to Exhibit 3.1(i)(b)
                        to Viatel, Inc.'s Registration Statement on Form S-1,
                        Registration No. 333-09699, filed on August 7, 1996
                        ("Viatel's Form S-1")); Certificate of Designations,
                        Preferences and Rights of 10% Series A Redeemable
                        Convertible Preferred Stock, $.01 par value per share
                        (incorporated herein by reference to Exhibit 3(i)(b) to
                        Viatel, Inc.'s Registration Statement on Form S-4, filed on
                        July 10, 1998, File No. 333-58921 ("Viatel's 1998
                        Form S-4")); Certificate of Amendment to Viatel, Inc.'s
                        Amended and Restated Certificate of Incorporation
                        (incorporated herein by reference to Exhibit 4.9 to Viatel,
                        Inc.'s quarterly report on Form 10-Q for the quarter ended
                        September 30, 1998, File No. 000-21261); Second Certificate
                        of Amendment to Viatel, Inc.'s Amended and Restated
                        Certificate of Incorporation (incorporated herein by
                        reference to Exhibit 3.1(i) to Viatel's October 1999 Form
                        S-4); Certificate of Designations of Series A Junior
                        Participating Preferred Stock of Viatel, Inc. (incorporated
                        herein by reference to Exhibit 3(i)(2) to Viatel, Inc.'s
                        Form 8-K, filed on December 29, 1999, File No. 000-21261);
                        Certificate of Designations, Preferences and Rights of 7.50%
                        Cumulative Convertible Preferred Stock Series B-1 Due 2015
                        (filed herewith); Certificate of Designations, Preferences
                        and Rights of 7.50% Cumulative Convertible Preferred Stock
                        Series B-2 Due 2015 (filed herewith); and Certificate
</TABLE>

                                       89
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
                        of Designations, Preferences and Rights of Convertible
                        Preferred Stock Series C (filed herewith).

        3.1(ii)         Third Amended and Restated Bylaws of Viatel, Inc.
                        (incorporated herein by reference to Exhibit 3.1(ii) to
                        Viatel's October 1999 Form S-4).

           4.1          Specimen of Viatel common stock certificate (incorporated by
                        reference to Exhibit 4.4 of Viatel's Form S-1).

           4.2          Indenture, dated as of April 8, 1998, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s 12.50% Senior Discount Notes Due 2008 (including form
                        of 12.50% Senior Discount Note) (incorporated herein by
                        reference to Exhibit 4.1 to Viatel's 1998 Form S-4).

           4.3          Indenture, dated as of April 8, 1998, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s 11.25% Senior Notes Due 2008 (including form of
                        11.25% Senior Note) (incorporated herein by reference to
                        Exhibit 4.2 to Viatel's 1998 Form S-4).

           4.4          Indenture, dated as of April 8, 1998, among Viatel, Inc.,
                        The Bank of New York, as Trustee, and Deutsche Bank,
                        Aktiengesellschaft, as German Paying Agent and Co-Registrar,
                        relating to Viatel, Inc.'s 12.40% Senior Discount Notes Due
                        2008 (including form of 12.40% Senior Discount Note)
                        (incorporated herein by reference to Exhibit 4.3 to Viatel's
                        1998 Form S-4).

           4.5          Indenture, dated as of April 8, 1998, among Viatel, Inc.,
                        The Bank of New York, as Trustee, and Deutsche Bank,
                        Aktiengesellschaft, as German Paying Agent and Co-Registrar,
                        relating to Viatel, Inc.'s 11.15% Senior Notes Due 2008
                        (including form 11.15% Senior Note) (incorporated herein by
                        reference to Exhibit 4.4 to Viatel's 1998 Form S-4).

           4.6          Indenture, dated as of March 19, 1999, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s U.S. dollar denominated 11.50% Senior Notes Due 2009
                        (including form of 11.50% Senior Dollar Note) (incorporated
                        herein by reference to Exhibit 4.9 to Viatel, Inc.'s
                        Registration Statement on Form S-3, filed on February 12,
                        1999, File No. 333-72309 ("Viatel's February 1999
                        Form S-3")).

           4.7          Indenture, dated as of March 19, 1999, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s Euro denominated 11.50% Senior Notes due 2009
                        (including form of 11.50% Senior Euro Note) (incorporated
                        herein by reference to Exhibit 4.10 of Viatel's February
                        1999 Form S-3).

           4.8          Indenture, dated as of July 1, 1997, between Destia
                        Communications, Inc. and The Bank of New York, as Trustee,
                        relating to Destia Communications Inc.'s 13.50% Senior Notes
                        due 2007 (including form of 13.50% Senior Note)
                        (incorporated herein by reference to Exhibit 4.5 of Destia
                        Communication's Registration Statement on Form S-4, File No.
                        333-47711 filed on August 7, 1997).

           4.9          Indenture, dated as of December 8, 1999, between Viatel,
                        Inc. and The Bank of New York, as Trustee, relating to
                        Viatel, Inc.'s U.S. dollar denominated 11.50% Senior Notes
                        due 2009 (including form of 11.50% Senior Dollar Note)
                        (incorporated herein by reference to Exhibit 4.13 to
                        Viatel's Current Report on Form 8-K filed on December 9,
                        1999, File No. 000-21261).

          4.10          Rights Agreement, dated as of December 6, 1999, between
                        Viatel, Inc. and The Bank of New York, as Rights Agent
                        (incorporated herein by reference to Viatel, Inc.'s
                        Registration Statement on Form 8-A, filed on December 24,
                        1999, File No. 000-21261).
</TABLE>

                                       90
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
          10.1          Stockholder Agreement, dated as of August 27, 1999, among
                        Alfred West, AT Econ Limited Partnership, AT Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.1 to Viatel's October 1999 Form
                        S-4).

          10.2          Stockholder Agreement, dated as of August 27, 1999, among
                        Steven West, SS Econ Limited Partnership, SS Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.2 to Viatel's October 1999 Form
                        S-4).

          10.3          Stockholder Agreement, dated as of August 27, 1999, among
                        Gary Bondi, GS Econ Limited Partnership, GS Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.3 to Viatel's October 1999 Form
                        S-4).

          10.4          Mercury Carrier Services Agreement, dated as of March 1,
                        1994, between Viatel, Inc. and Mercury Communications
                        Limited (incorporated herein by reference to Exhibit 10.8 to
                        Viatel's 1995 Form S-4, filed on May 24, 1995 ("Viatel's
                        1995 S-4")).

          10.5          Commercial Lease Agreement, dated as of November 1, 1993,
                        and Addendum, dated as of December 8, 1994, between Viatel,
                        Inc. and 123rd Street Partnership in connection with Viatel,
                        Inc.'s premises located in Omaha, Nebraska (incorporated
                        herein by reference to Exhibit 10.24 to Viatel's 1995
                        Form S-4).

          10.6          Facilities Management and Services Agreement, dated as of
                        August 4, 1995, between Viatel U.K. Limited and Telemedia
                        International Ltd. (incorporated herein by reference to
                        Exhibit 10.32 to Viatel's 1995 Form S-4).

          10.7          Agreement of Lease, dated August 7, 1995, between Viatel,
                        Inc. and Joseph P. Day Realty Corp. (incorporated herein by
                        reference to Exhibit 10.33 to Viatel's 1995 Form S-4).

         10.8+          Viatel, Inc. 1999 Amended Stock Incentive Plan (incorporated
                        herein by reference to Exhibit 10.12 to Viatel's October
                        1999 Form S-4).

         10.9+          Viatel, Inc. Amended and Restated 1999 Flexible Stock
                        Incentive Plan (incorporated herein by reference to Exhibit
                        4.11 to Viatel's Registration Statement on Form S-8,
                        Registration No. 333-92339, filed on December 8, 1999 (the
                        "1999 S-8").

        10.10+          Viatel, Inc. 1996 Flexible Stock Incentive Plan
                        (incorporated herein by reference to Exhibit 4.12 to the
                        1999 S-8).

         10.11*+        Employment Agreement between Viatel, Inc. and Michael J.
                        Mahoney.

         10.12*+        Employment Agreement between Viatel, Inc. and Allan L. Shaw.

         10.13*+        Employment Agreement between Viatel, Inc. and Sheldon M.
                        Goldman.

         10.14*+        Employment Agreement between Viatel, Inc. and Francis J.
                        Mount.

         10.15*+        Employment Agreement between Viatel, Inc. and Lawrence
                        Malone.

         10.16+         Employment Agreement between Viatel, Inc. and Alfred West
                        (incorporated herein by reference to Exhibit 10.44 to
                        Viatel's October 1999 Form S-4).

         10.17*+        Employment Agreement between Viatel, Inc. and William
                        Murphy.

         10.18          Equipment Purchase Agreement, dated June 29, 1998, between
                        Viatel, Inc. and Nortel PLC (incorporated herein by
                        reference to Exhibit 10.16 to Viatel's 1998 Form S-4).
</TABLE>

                                       91
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
         10.19          Agreement of Lease, dated June 24, 1998, between 685
                        Acquisition Corp. and Viatel, Inc., as amended by a letter
                        agreement, dated July 27, 1998 (incorporated herein by
                        reference to Exhibit 10.17 to Viatel's 1998 Form S-4).

         10.20          Lease, dated June 23, 1998, between VC Associates and Viatel
                        New Jersey, Inc. (incorporated herein by reference to
                        Exhibit 10.18 to Viatel's 1998 Form S-4).

         10.21          Software License Agreement, dated October 22, 1998, between
                        Viatel, Inc. and Lucent Technologies Inc. (incorporated by
                        reference to Exhibit 10.19 to Viatel Inc.'s Annual Report on
                        Form 10-K for the year ended December 31, 1998 ("Viatel's
                        1998 Form 10-K")).

        10.22*          Equipment Purchase Agreement, dated December 31, 1998,
                        between Viatel, Inc. and Nortel plc. (incorporated by
                        reference to Exhibit 10.21 to Viatel's 1998 Form 10-K).

        10.23*          Project Services Agreement, dated as of January 11, 1999,
                        between Viatel, Inc. and Bechtel Limited (incorporated by
                        reference to Exhibit 10.22 to Viatel, Inc.'s Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1999
                        ("Viatel's March 1999 Form 10-Q")).

        10.24*          Development Agreement by and among Vicaine Infrastructure
                        Development GMBH, Viatel German Asset GMBH, Carrier 1 Fiber
                        Network GMBH &Co. OH, Metromedia Fiber Network GMBH, Viatel,
                        Inc. and Metromedia Fiber Network, Inc., dated as of
                        February 19, 1999 (incorporated by reference to
                        Exhibit 10.23 to Viatel's March 1999 Form 10-Q).

         10.25          Third Amended and Restated Equipment Loan and Security
                        Agreement, dated as of November 5, 1999, between Destia
                        Communications, Inc. and NTFC Capital Corporation
                        (incorporated herein by reference to Exhibit 10.36 to
                        Viatel, Inc.'s Form 8-K filed December 29, 1999).

         10.26          Securities Purchase Agreement, dated as of February 1, 2000,
                        by and among Viatel, Inc. and HMTF Europe Acquisition Corp.
                        and Chase Equity Associates LLC (incorporated herein by
                        reference to Exhibit 4.13 to Viatel, Inc.'s Form 8-K filed
                        on February 16, 2000, File No. 000-21261).

         10.27          Viatel Employee Stock Purchase Plan (incorporated herein by
                        reference to Exhibit 4.9 to Viatel, Inc.'s Registration
                        Statement on Form S-8, Registration No. 333-92339, filed on
                        December 8, 1999).

         10.28*+        Viatel, Inc. Management Severance Plan (filed herewith).

         10.29          Telecommunications Services Agreement between Frontier
                        Communications of the West, Inc. and Destia Communications,
                        Inc., dated November 17, 1998 (incorporated herein by
                        reference to Exhibit 10.16 of Destia's Registration
                        Statement on Form S-1, Registration No. 333-70463, filed on
                        January 29, 1999).

          11.1*         Statement of Computation of Earnings Per Share (filed
                        herewith).

          21.1*         Subsidiaries of Viatel, Inc. (filed herewith).

          23.1*         Consent of KPMG LLP (filed herewith).

          24.1          Power of Attorney (included on the signature page).

          27.1          Financial Data Schedule (incorporated herein by reference to
                        Exhibit 27 to Viatel, Inc.'s Form 8-K, filed on April 3,
                        2000, File No. 000-21261).
</TABLE>

------------------------

*   Filed herewith.

+   Management contract or compensatory plan or arrangement.

                                       92
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City and State
of New York, on the 14(th) day of April, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       VIATEL, INC.

                                                       By:            /s/ MICHAEL J. MAHONEY
                                                            -----------------------------------------
                                                                        Michael J. Mahoney
                                                            Chairman of the Board and Chief Executive
                                                                             Officer
</TABLE>

    KNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Allan L. Shaw and James P. Prenetta, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or their or his substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 14(th) day of April, 2000.

<TABLE>
<CAPTION>
                  SIGNATURE                                      TITLE(S)
                  ---------                                      --------
<C>                                            <S>
           /s/ MICHAEL J. MAHONEY              Chief Executive Officer and Director
--------------------------------------------     (Principal Executive Officer)
             Michael J. Mahoney

            /s/ WILLIAM C. MURPHY              President and Director
--------------------------------------------
              William C. Murphy

              /s/ ALLAN L. SHAW                Chief Financial Officer and Director
--------------------------------------------
                Allan L. Shaw

               /s/ ALFRED WEST                 Vice Chairman and Director
--------------------------------------------
                 Alfred West

            /s/ FRANCIS J. MOUNT               Chief Technology Officer and Director
--------------------------------------------
              Francis J. Mount

           /s/ SHELDON M. GOLDMAN              Executive Vice President and Director
--------------------------------------------
             Sheldon M. Goldman
</TABLE>

                                       93
<PAGE>

<TABLE>
<CAPTION>
                  SIGNATURE                                      TITLE(S)
                  ---------                                      --------
<C>                                            <S>
             /s/ PAUL G. PIZZANI               Director
--------------------------------------------
               Paul G. Pizzani

             /s/ JOHN G. GRAHAM                Director
--------------------------------------------
               John G. Graham

                                               Director
--------------------------------------------
               Edward Schmults

                                               Director
--------------------------------------------
                  John Muse
</TABLE>

                                       94
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
           2.1          Agreement and Plan of Merger, dated as of August 27, 1999,
                        by and among Viatel, Inc., Viatel Acquisition Corp. and
                        Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 2.1 to Viatel, Inc.'s Registration
                        Statement on Form S-4, filed on October 15, 1999,
                        Registration No. 333-89143) ("Viatel's October 1999 Form
                        S-4").

           2.2          Agreement for the sale and purchase of the entire issued
                        share capital of AT&T Communications (UK) Limited, by and
                        among AT&T Communications Services International, Inc.,
                        Global Card Holdings Inc., Viatel, Inc. and Viatel Global
                        Communications Limited, dated February 29, 2000
                        (incorporated herein by reference to Exhibit 2.2 to Viatel,
                        Inc.'s Form 8-K, filed on March 13, 2000, File
                        No. 000-21261).

         3.1(i)*        Amended and Restated Certificate of Incorporation of Viatel,
                        Inc. (incorporated herein by reference to Exhibit 3.1(i)(b)
                        to Viatel, Inc.'s Registration Statement on Form S-1,
                        Registration No. 333-09699, filed on August 7, 1996
                        ("Viatel's Form S-1")); Certificate of Designations,
                        Preferences and Rights of 10% Series A Redeemable
                        Convertible Preferred Stock, $.01 par value per share
                        (incorporated herein by reference to Exhibit 3(i)(b) to
                        Viatel, Inc.'s Registration Statement on Form S-4, filed on
                        July 10, 1998, File No. 333-58921 ("Viatel's 1998
                        Form S-4")); Certificate of Amendment to Viatel, Inc.'s
                        Amended and Restated Certificate of Incorporation
                        (incorporated herein by reference to Exhibit 4.9 to Viatel,
                        Inc.'s quarterly report on Form 10-Q for the quarter ended
                        September 30, 1998, File No. 000-21261); Second Certificate
                        of Amendment to Viatel, Inc.'s Amended and Restated
                        Certificate of Incorporation (incorporated herein by
                        reference to Exhibit 3.1(i) to Viatel October 1999 Form
                        S-4); Certificate of Designations of Series A Junior
                        Participating Preferred Stock of Viatel, Inc. (incorporated
                        herein by reference to Exhibit 3(i)(2) to Viatel, Inc.'s
                        Form 8-K, filed on December 29, 1999, File No. 000-21261);
                        Certificate of Designations, Preferences and Rights of 7.50%
                        Cumulative Convertible Preferred Stock Series B-1 Due 2015
                        (filed herewith); Certificate of Designations, Preferences
                        and Rights of 7.50% Cumulative Convertible Preferred Stock
                        Series B-2 Due 2015 (filed herewith); and Certificate of
                        Designations, Preferences and Rights of Convertible
                        Preferred Stock Series C (filed herewith).

        3.1(ii)         Third Amended and Restated Bylaws of Viatel, Inc.
                        (incorporated herein by reference to Exhibit 3.1(ii) to
                        Viatel's October 1999 Form S-4).

           4.1          Specimen of Viatel common stock certificate (incorporated by
                        reference to Exhibit 4.4 of Viatel's Form S-1).

           4.2          Indenture, dated as of April 8, 1998, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s 12.50% Senior Discount Notes Due 2008 (including form
                        of 12.50% Senior Discount Note) (incorporated herein by
                        reference to Exhibit 4.1 to Viatel's 1998 Form S-4).

           4.3          Indenture, dated as of April 8, 1998, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s 11.25% Senior Notes Due 2008 (including form of
                        11.25% Senior Note) (incorporated herein by reference to
                        Exhibit 4.2 to Viatel's 1998 Form S-4).

           4.4          Indenture, dated as of April 8, 1998, among Viatel, Inc.,
                        The Bank of New York, as Trustee, and Deutsche Bank,
                        Aktiengesellschaft, as German Paying Agent and Co-Registrar,
                        relating to Viatel, Inc.'s 12.40% Senior Discount Notes Due
                        2008 (including form of 12.40% Senior Discount Note)
                        (incorporated herein by reference to Exhibit 4.3 to Viatel's
                        1998 Form S-4).
</TABLE>

                                       95
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
           4.5          Indenture, dated as of April 8, 1998, among Viatel, Inc.,
                        The Bank of New York, as Trustee, and Deutsche Bank,
                        Aktiengesellschaft, as German Paying Agent and Co-Registrar,
                        relating to Viatel, Inc.'s 11.15% Senior Notes Due 2008
                        (including form 11.15% Senior Note) (incorporated herein by
                        reference to Exhibit 4.4 to Viatel's 1998 Form S-4).

           4.6          Indenture, dated as of March 19, 1999, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s U.S. dollar denominated 11.50% Senior Notes Due 2009
                        (including form of 11.50% Senior Dollar Note) (incorporated
                        herein by reference to Exhibit 4.9 to Viatel, Inc.'s
                        Registration Statement on Form S-3, filed on February 12,
                        1999, File No. 333-72309 ("Viatel's February 1999
                        Form S-3")).

           4.7          Indenture, dated as of March 19, 1999, between Viatel, Inc.
                        and The Bank of New York, as Trustee, relating to Viatel,
                        Inc.'s Euro denominated 11.50% Senior Notes due 2009
                        (including form of 11.50% Senior Euro Note) (incorporated
                        herein by reference to Exhibit 4.10 of Viatel's February
                        1999 Form S-3).

           4.8          Indenture, dated as of July 1, 1997, between Destia
                        Communications, Inc. and The Bank of New York, as Trustee,
                        relating to Destia Communications Inc.'s 13.50% Senior Notes
                        due 2007 (including form of 13.50% Senior Note)
                        (incorporated herein by reference to Exhibit 4.5 of Destia
                        Communication's Registration Statement on Form S-4, File No.
                        333-47711 filed on August 7, 1997).

           4.9          Indenture, dated as of December 8, 1999, between Viatel,
                        Inc. and The Bank of New York, as Trustee, relating to
                        Viatel, Inc.'s U.S. dollar denominated 11.50% Senior Notes
                        due 2009 (including form of 11.50% Senior Dollar Note)
                        (incorporated herein by reference to Exhibit 4.13 to
                        Viatel's Current Report on Form 8-K filed on December 9,
                        1999, File No. 000-21261).

          4.10          Rights Agreement, dated as of December 6, 1999, between
                        Viatel, Inc. and The Bank of New York, as Rights Agent
                        (incorporated herein by reference to Viatel, Inc.'s
                        Registration Statement on Form 8-A, filed on December 24,
                        1999, File No. 000-21261).

          10.1          Stockholder Agreement, dated as of August 27, 1999, among
                        Alfred West, AT Econ Limited Partnership, AT Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.1 to Viatel's October 1999 Form
                        S-4).

          10.2          Stockholder Agreement, dated as of August 27, 1999, among
                        Steven West, SS Econ Limited Partnership, SS Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.2 to Viatel's October 1999 Form
                        S-4).

          10.3          Stockholder Agreement, dated as of August 27, 1999, among
                        Gary Bondi, GS Econ Limited Partnership, GS Econ Ltd.
                        Partnership No. 2, Viatel, Inc., Viatel Acquisition Corp.
                        and Destia Communications, Inc. (incorporated herein by
                        reference to Exhibit 10.3 to Viatel's October 1999 Form
                        S-4).

          10.4          Mercury Carrier Services Agreement, dated as of March 1,
                        1994, between Viatel, Inc. and Mercury Communications
                        Limited (incorporated herein by reference to Exhibit 10.8 to
                        Viatel's 1995 Form S-4, filed on May 24, 1995 ("Viatel's
                        1995 S-4")).
</TABLE>

                                       96
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
          10.5          Commercial Lease Agreement, dated as of November 1, 1993,
                        and Addendum, dated as of December 8, 1994, between Viatel,
                        Inc. and 123rd Street Partnership in connection with Viatel,
                        Inc.'s premises located in Omaha, Nebraska (incorporated
                        herein by reference to Exhibit 10.24 to Viatel's 1995
                        Form S-4).

          10.6          Facilities Management and Services Agreement, dated as of
                        August 4, 1995, between Viatel U.K. Limited and Telemedia
                        International Ltd. (incorporated herein by reference to
                        Exhibit 10.32 to Viatel's 1995 Form S-4).

          10.7          Agreement of Lease, dated August 7, 1995, between Viatel,
                        Inc. and Joseph P. Day Realty Corp. (incorporated herein by
                        reference to Exhibit 10.33 to Viatel's 1995 Form S-4).

         10.8+          Viatel, Inc. 1999 Amended Stock Incentive Plan (incorporated
                        herein by reference to Exhibit 10.12 to Viatel's October
                        1999 Form S-4).

         10.9+          Viatel, Inc. Amended and Restated 1999 Flexible Stock
                        Incentive Plan (incorporated herein by reference to Exhibit
                        4.11 to Viatel's Registration Statement on Form S-8,
                        Registration No. 333-92339, filed on December 8, 1999 (the
                        "1999 S-8").

        10.10+          Viatel, Inc. 1996 Flexible Stock Incentive Plan
                        (incorporated herein by reference to Exhibit 4.12 to the
                        1999 S-8).

         10.11*+        Employment Agreement between Viatel, Inc. and Michael J.
                        Mahoney.

         10.12*+        Employment Agreement between Viatel, Inc. and Allan L. Shaw.

         10.13*+        Employment Agreement between Viatel, Inc. and Sheldon M.
                        Goldman.

         10.14*+        Employment Agreement between Viatel, Inc. and Francis J.
                        Mount.

         10.15*+        Employment Agreement between Viatel, Inc. and Lawrence
                        Malone.

         10.16+         Employment Agreement between Viatel, Inc. and Alfred West
                        (incorporated herein by reference to Exhibit 10.44 to
                        Viatel's October 1999 Form S-4).

         10.17*+        Employment Agreement between Viatel, Inc. and William
                        Murphy.

         10.18          Equipment Purchase Agreement, dated June 29, 1998, between
                        Viatel, Inc. and Nortel PLC (incorporated herein by
                        reference to Exhibit 10.16 to Viatel's 1998 Form S-4).

         10.19          Agreement of Lease, dated June 24, 1998, between 685
                        Acquisition Corp. and Viatel, Inc., as amended by a letter
                        agreement, dated July 27, 1998 (incorporated herein by
                        reference to Exhibit 10.17 to Viatel's 1998 Form S-4).

         10.20          Lease, dated June 23, 1998, between VC Associates and Viatel
                        New Jersey, Inc. (incorporated herein by reference to
                        Exhibit 10.18 to Viatel's 1998 Form S-4).

         10.21          Software License Agreement, dated October 22, 1998, between
                        Viatel, Inc. and Lucent Technologies Inc. (incorporated by
                        reference to Exhibit 10.19 to Viatel Inc.'s Annual Report on
                        Form 10-K for the year ended December 31, 1998 ("Viatel's
                        1998 Form 10-K")).

         10.22*         Equipment Purchase Agreement, dated December 31, 1998,
                        between Viatel, Inc. and Nortel plc. (incorporated by
                        reference to Exhibit 10.21 to Viatel's 1998 Form 10-K).

         10.23*         Project Services Agreement, dated as of January 11, 1999,
                        between Viatel, Inc. and Bechtel Limited (incorporated by
                        reference to Exhibit 10.22 to Viatel, Inc.'s Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1999
                        ("Viatel's March 1999 Form 10-Q")).
</TABLE>

                                       97
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
<C>                     <S>
         10.24*         Development Agreement by and among Vicaine Infrastructure
                        Development GMBH, Viatel German Asset GMBH, Carrier 1 Fiber
                        Network GMBH &Co. OH, Metromedia Fiber Network GMBH, Viatel,
                        Inc. and Metromedia Fiber Network, Inc., dated as of
                        February 19, 1999 (incorporated by reference to
                        Exhibit 10.23 to Viatel's March 1999 Form 10-Q).

         10.25          Third Amended and Restated Equipment Loan and Security
                        Agreement, dated as of November 5, 1999, between Destia
                        Communications, Inc. and NTFC Capital Corporation
                        (incorporated herein by reference to Exhibit 10.36 to
                        Viatel, Inc.'s Form 8-K filed December 29, 1999).

         10.26          Securities Purchase Agreement, dated as of February 1, 2000,
                        by and among Viatel, Inc. and HMTF Europe Acquisition Corp.
                        and Chase Equity Associates LLC (incorporated herein by
                        reference to Exhibit 4.13 to Viatel, Inc.'s Form 8-K filed
                        on February 16, 2000, File No. 000-21261).

         10.27          Viatel Employee Stock Purchase Plan (incorporated herein by
                        reference to Exhibit 4.9 to Viatel, Inc.'s Registration
                        Statement on Form S-8, Registration No. 333-92339, filed on
                        December 8, 1999).

         10.28*+        Viatel, Inc. Management Severance Plan (filed herewith).

         10.29          Telecommunications Services Agreement between Frontier
                        Communications of the West, Inc. and Destia Communications,
                        Inc., dated November 17, 1998 (incorporated herein by
                        reference to Exhibit 10.16 of Destia's Registration
                        Statement on Form S-1, Registration No. 333-70463, filed on
                        January 29, 1999).

          11.1*         Statement of Computation of Earnings Per Share (filed
                        herewith).

          21.1*         Subsidiaries of Viatel, Inc. (filed herewith).

          23.1*         Consent of KPMG LLP (filed herewith).

          24.1          Power of Attorney (included on the signature page).

          27.1          Financial Data Schedule (incorporated herein by reference to
                        Exhibit 27 to Viatel, Inc.'s Form 8-K, filed on April 3,
                        2000, File No. 000-21261).
</TABLE>

------------------------

*   Filed herewith.

+   Management contract or compensatory plan or arrangement.

                                       98