U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                      _____________________________________

                                    FORM 10-K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                         COMMISSION FILE NUMBER 0-24622

                          TELSCAPE INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

                      TEXAS                                 75-2433637
          (State or other jurisdiction of                (I.R.S.  employer
          incorporation  or organization)               identification no.)

          2700 POST OAK BLVD., SUITE 1000
                 HOUSTON, TEXAS                                77056
      (Address of principal executive offices)              (Zip  Code)

     Registrant's  telephone  number,  including area code:  (713) 968-0968

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:



                        COMMON  STOCK  ($.001  PAR  VALUE)
                        ----------------------------------
                                (TITLE OF CLASS)

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

Indicate  by  check mark if the 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.  [ ]

The  aggregate  market  value  of  common  stock  held  by non-affiliates of the
registrant (based on the closing price as reported on the Nasdaq National Market
on  March  15,  2000,  was  approximately $91,560,000.  Shares  of  common stock
held by each executive officer and director and by  ach  stockholder  affiliated
with  a  director  have  been  excluded  from  this  calculation  because  such
persons  may  be deemed to be affiliates.  The determination of affiliate status
is not necessarily a conclusive determination for other purposes.  The number of
outstanding  shares  of  the  registrant's Common Stock as of March 15, 2000 was
7,989,762.


<PAGE>
                          TELSCAPE INTERNATIONAL, INC.
                                TABLE OF CONTENTS
                                FORM 10-K REPORT
                                DECEMBER 31, 1999

                                                                            Page
                                                                            ----
Part  I

     Item  1.     Business.                                                    1

     Item  2.     Properties.                                                 18

     Item  3.     Legal  Proceedings.                                         18

     Item  4.     Submission of Matters to a Vote of Security Holders.        18

Part  II

     Item  5.     Market  for  Registrant's  Common  Equity  and  Related
                  Stockholder  Matters.                                       19

     Item  6.     Selected  Financial  Data.                                  20

     Item  7.     Management's  Discussion  and  Analysis  of
                  Financial  Condition  and  Results  of Operations.          21

     Item  7A.    Quantitative  and  Qualitative
                  Disclosures  about  Market  Risk                            31

     Item  8.     Financial  Statements  and  Supplementary  Data.            33

     Item  9.     Changes  in  and  Disagreements  with  Accountants
                  on  Accounting  and  Financial  Disclosure.                 62

Part  III

     Item  10.    Directors and Executive Officers of the Registrant.         63

     Item  11.    Executive  Compensation.                                    68

     Item  12.    Security  Ownership  of  Certain
                  Beneficial  Owners  and  Management.                        71

     Item  13.    Certain Relationships and Related Transactions.             72

Part  IV

     Item  14.    Exhibits, Financial Statement Schedules and Reports
                  on Form 8-K.                                                74


<PAGE>
     The  statements  contained  in this Annual Report on Form 10-K that are not
historical  facts  are  "forward-looking statements" (as such term is defined in
the  Private  Securities Litigation Reform Act of 1995), which can be identified
by  the use of forward-looking terminology such as "believes," "expects," "may,"
"estimates,"  "will," "should," "plans" or "anticipates" or the negative thereof
or  other  variations  thereon  or  comparable terminology, or by discussions of
strategy.  Such statements include, but are not limited to, statements under the
captions  "Business",  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations" and elsewhere in this Annual Report on Form
10-K  as  to  our  plans to implement its growth strategy, improve its financial
performance,  expand  its  infrastructure,  develop  new  products and services,
expand  its  sales  force,  expand  its  customer  base  and enter international
markets.  In addition, from time to time, we or our representatives have made or
may  make  forward-looking  statements,  orally or in writing. Furthermore, such
forward-looking  statements  may be included in, but are not limited to, various
filings  made  by  us  with  the  Securities  and  Exchange  Commission  (the
"Commission"), or press releases or oral statements made by or with the approval
of  an  authorized  executive  officer  of  ours.

     Management wishes to caution the reader that the forward-looking statements
referred  to  above  and contained  in this Annual Report on Form 10-K regarding
matters  that  are  not  historical  facts  involve  and  are  based on numerous
assumptions  and  predictions about future conditions that could prove not to be
accurate.  No  assurance  can be given that the future results will be achieved;
actual  events,  transactions  or  results  may differ materially as a result of
risks  facing  us. Such risks include, but are not limited to, the effectiveness
of  management's  strategies  and  decisions,  changes  in  business conditions,
changes in the telecommunications industry and the general economy, competition,
changes  in  service  offerings  and risks associated with our limited operating
history,  entry  into  developing  markets, managing rapid growth, international
operations,  dependence  on effective information systems, ability to consummate
acquisitions  or enter into joint ventures with companies on terms acceptable to
us  and  development  of  its network, as well as regulatory developments any of
which  could  cause  actual  results  to vary materially from the future results
indicated,  expressed  or  implied,  in  such  forward-looking  statements.  No
assurance can be given that these are all of the factors that could cause actual
results to vary materially from the forward-looking statements.  Statements with
respect  to  acquisitions  and  continued trends are forward-looking and involve
risks and uncertainties.  Furthermore, we have significant operations in Mexico,
subjecting  us  to  certain  political  and  commercial  risk.  We  undertake no
obligation and do not intend to update, revise or otherwise publicly release the
result  of any revisions to these forward-looking statements that may be made to
reflect  future  events  or  circumstances.

                                     PART I

ITEM  1.     BUSINESS.
                                     GENERAL


     We  are  a  U.S.-based,  fully integrated communications company. We supply
voice,  video,  data and Internet services principally to, from and within Latin
America.  Telereunion,  one  of  our  subsidiaries, has built a state-of-the-art
fiber  optic  network in Mexico that will reach the vast majority of the Mexican
population.  We  also  own  and operate a satellite teleport facility in Silicon
Valley,  which  delivers  an  array  of  communications  services  to  customers
throughout  North,  Central  and  South  America. In addition, we provide a full
range  of  advanced  services and products in Mexico to major public and private
sector  customers.

     We  are  currently engaged in two primary business segments: Voice Services
and  Advanced  Services.

     Our  Voice  Services  segment  supplies  international  and  domestic voice
services,  via  switched and dedicated networks, principally to, from and within
Latin  America. Revenues in the Voice Services segment are generated on a retail
and  wholesale  basis.

     Our  Advanced  Services  segment  is  made  up  of  three distinct lines of
business:  network  solution  services,  customer  relationship  management  and
broadband  services  and  other  products.  Advanced  Services  are  provided to
customers  principally  in Latin America. Our network solutions services offer a
full  range  of  network systems integration services. Our customer relationship
management  provides  value  added telecommunications services primarily through
delivering  custom  developed  solutions  to  client's  call  center  needs. Our
broadband services provides satellite teleport services to customers in the U.S.
and  Latin  America.

     We  believe  we  are  well  positioned  to  capitalize on the opportunities
presented  by  the  large  and  growing voice, video, data and Internet services
market.  We  are  in the process of significantly expanding our facilities-based


<PAGE>
telecommunications  operations and over the next 12 months intend to broaden our
service  offerings in markets where we have established, or expect to establish,
a  significant  presence.  To  enhance  delivery  of  our services at the lowest
possible cost, we have completed the construction of a 636 kilometer fiber optic
and  microwave network in Mexico.  We have taken a "smart build" approach to the
Mexican  market.  Through  swapping  fiber optic on that portion of our network,
which  we  have  constructed  with that available from other concessionaires, we
plan  to  have  a  network covering approximately 4,000 kilometers in Mexico. We
have  reached  formal  agreements  or letters of intent to exchange fiber optic,
bringing  the  total  under some form of agreement to 3,300 kilometers as of the
date  of  this filing.  Our network is one of the largest in Mexico. Our Mexican
network  is  a  combined  fiber-optic  and  microwave  long  distance  network,
connecting  the  United  States,  the Gulf region of Mexico and targeted Mexican
cities.  We  believe  our network in Mexico will allow us to enhance our service
offerings  to  business  customers  in  Mexico  while  also reducing our cost of
terminating  voice  traffic  into, out of and within Mexico. Our Mexican network
will  also  include  metropolitan  fiber  rings in some of the largest cities in
Latin  America,  including  Mexico City, Leon and Guadalajara.  In those cities,
which  will  have  metropolitan fiber, we will more effectively address the last
mile issue and provide a bundle of advanced networking services at a lower cost.
Our  Mexican  network  is  currently  being  tested.

     Telereunion,  S.A. de C.V., a subsidiary of ours, owns the Mexican network.
Because of the unique ownership structure that we have employed, we believe that
we are one of the only companies that can operate both in the U.S. and Mexico as
one  company,  providing  a  unique competitive advantage.  In November 1999, we
issued  400,000  shares  of our common stock and 100,000 warrants exercisable at
$7.50  per  share to the minority shareholders of Telereunion in exchange for an
additional  27%  of  the  economic  interests  of  Telereunion. This transaction
brought  our  economic  interest  up to 92% while our voting interest remains at
49%. However, three of our directors, who are Mexican citizens, collectively own
another  18%  of the voting interest of Telereunion, giving us effective control
of  Telereunion.

     In January 2000, we and Pointe Communications Corporation jointly announced
a  merger  of our companies in an all-stock transaction.  Pointe common stock is
traded on the over-the-counter bulletin board under the symbol ''PCOM''.  Pointe
provides a wide array of telecommunications and network services, including CLEC
operations,  long  distance,  data,  Internet,  prepaid  calling  cards, carrier
wholesale,  and  telecommuting  services.  Although we can provide no assurance,
as  of  the  time  of  this  filing,  it  is  expected  that  the  merger  with
Pointe  will  be  finalized  during  the  second  quarter  of 2000 at which time
the  companies  will  begin  operating  under  the  common  name  of  Telscape.
The  terms  of  the  original  merger  agreement  called  for  us  to  issue
our common stock  to Pointe shareholders  at  an exchange ratio  of 0.215054  of
a share of our common stock  for  every  share of Pointe common stock. Also, for
each share of Pointe  convertible preferred stock outstanding, we will issue one
share  of  our  convertible  preferred  stock  (with  rights  and  preferences
substantially the same as  the Pointe convertible preferred stock). On March 30,
2000,  Telscape  and  Pointe  agreed  to an adjustment of the exchange  ratio of
approximately  4%.  The  adjusted  ratio  of  shares  is  the result of a Pointe
subsidiary, TeleCommute Solutions ("TCS"), which recently  received  $19 million
in  new  financing led by the MCI WorldCom Venture Fund and others, remaining in
the  combined  companies.  The merger agreement had previously provided that TCS
was  to  be  spun  off  to  Pointe  shareholders prior to the consumation of the
merger.  Consequently, each share of Pointe stock will be exchanged for 0.223514
shares of our common stock.


INDUSTRY  BACKGROUND  AND  MARKET  DEMAND

Overview

     The  international  telecommunications  industry  is undergoing a period of
fundamental  change that has resulted, and is expected to continue to result, in
significant  growth  in  international  telecommunications traffic and revenues.
According to the World Telecommunication Development Report 1996/97 published by
the  International  Telecommunications Union (''ITU'') on February 20, 1997 (the
''ITU  Report''),  the 1998 revenue of the global telecommunications industry is
projected  to  exceed  $1  trillion.  According  to TeleGeography 1999, revenues
generated  from  the provision of international long distance services increased
to  $65.9  billion  in 1997 from $26.8 billion in 1988, a compound annual growth
rate of 10.6%. We believe that Latin American traffic, including traffic between
the  United  States  and  Latin  America,  will continue to grow faster than the
international telecommunications market as a whole as a result of (i) underlying
economic  growth within Latin America, (ii) growth of regional trade as a result
of  free  trade  initiatives  such as NAFTA, Mercosur and the Andean Pact, (iii)
deregulation  and  privatization  of  telecommunications carriers in the region,
(iv) projected regional increases in telephone density and (v) increasing demand
for  bandwidth-intensive  applications.

     We  believe  that  numerous  factors  have  driven the growth in demand for
international  telecommunications  products and services. Those factors include:
(i)  the  globalization  of the world's economies and the worldwide trend toward
deregulation of the telecommunications sector, (ii) declining prices and a wider
selection  of products and services driven by greater competition resulting from
deregulation,  (iii)  increased  telephone  accessibility  resulting  from
technological  advances  and  greater  investment  in  telecommunications
infrastructure,  including  deployment  of  wireless  networks,  (iv)  increased
international  business  and  leisure  travel  and  (v)  growth  of computerized


                                        2
<PAGE>
transmission  of voice and data information. These trends have sharply increased
the  use  of,  and  reliance  upon,  telecommunications  products  and  services
throughout  the  world.  We  expect these trends to continue for the foreseeable
future.

     The  growth  in  the  use  of  telecommunications  services and the rapidly
changing  international  telecommunications  market  have  created a significant
opportunity  for  carriers  such  ourselves who can offer high quality, low cost
comprehensive telecommunications products, systems and services. We believe that
a  high percentage of the world's business and residential consumers continue to
be  subject to high prices with poor quality and lack of availability of service
which  have  been  characteristic of many of the traditional monopolies in mail,
telephony  and  telegraphy  (PTT-Post,  Telephone  & Telegraph administrations).
Demand  for  improved  service  and  lower  prices has created opportunities for
private  companies to compete in the international telecommunications market and
has  spurred  a  broadening  of  products  and  services.  New technologies have
contributed  to  improved quality and increased transmission capacity and speed.
We therefore believe that recent and on-going deregulation and increasing access
to  telecommunications facilities in emerging markets will bring a high level of
growth  in the demand for telecommunications services outside the United States,
particularly  in  Latin  America.

     By  eroding  the  traditional  monopolies  held  by  PTT (Post, Telephone &
Telegraph  administrations),  many  of  which  are  or  were wholly or partially
government owned, deregulation is providing U.S.-based providers the opportunity
to negotiate more favorable agreements with both the traditional administrations
and  emerging  foreign  providers.  In addition, deregulation in certain foreign
countries  is  enabling  U.S.-based  providers  to establish local switching and
transmission  facilities  to terminate their own traffic and carry international
long  distance  traffic  originating  in  those  countries.  Deregulation,
privatization,  the  expansion of the resale market and other trends influencing
the  international  telecommunications  market  are  resulting  in  decreased
termination costs, a proliferation of routing options and increased competition.

     Advances  in  technology  have created multiple ways for telecommunications
carriers  to  provide  customer  access to their networks and services. Overall,
these  changes  have  resulted  in  a  trend  towards  bypassing  traditional
international  long distance operating agreements as international long distance
companies seek to operate more efficiently. In markets that have not deregulated
or  are in the process of implementing deregulation, international long distance
carriers  have  used  advances  in  technology to develop innovative alternative
methods  to  meet  customer  demand.

     Recent  legislation  and  the  World  Trade  Organization  agreement  among
numerous  countries  are  expected  to  lead  to increased liberalization of the
majority  of  the  world's  telecommunication  markets.  Specifically,  the  WTO
Agreement  created  a framework under which 69 countries committed to liberalize
their  telecommunications  laws  to  permit  increased  competition and, in most
cases, foreign ownership in their telecommunications markets, beginning in 1998.
The  Telecommunications  Act  of  1996  established  a  framework for increasing
competition  in  the  U.S.  telecommunications  services market and the European
Union's Services Directive abolished exclusive rights for the provision of voice
telephony  services  throughout the European Union and the local Public Switched
Telephone  Network  of  any  member  country  of  the  EU  by  January  1, 1998.

     We  believe  that the initiatives mentioned in the prior paragraph, as well
as  other  proposed  legislation  and  agreements,  will  provide  increased
opportunities  for  emerging  competitive  carriers  such as Telscape to provide
telecommunications  services  in  targeted  markets. Deregulation has encouraged
competition,  which  in turn has prompted carriers to offer a wider selection of
services  and  reduce  prices.  The  industry's  projections  for  substantially
increased  international minutes of use and revenue by 2000 are based in part on
the belief that reduced pricing as a result of deregulation and competition will
result  in  a substantial increase in the demand for telecommunications services
in  most  markets.

Latin  America

     The  telecommunications  market  in Latin America is undergoing a period of
deregulation,  privatization,  increased competition and rapid growth. According
to  TeleGeography  1999,  growth  in  the demand for telecommunications services
across  Latin  America  in  1996-1997  increased  at  a  rate  of  7.6%.

     We seek to focus on opportunities created by deregulation and market growth
in  the  rapidly  changing  international  telecommunications  markets  in Latin
America.  Countries  in  the  Latin American region generally are experiencing a
solid  period of economic, business and infrastructure growth, reduced inflation
and  economic  and  political  stability.  Substantial  opportunities  exist for
providers  of  telecommunications  equipment,  system  integration,  value-added
services  and  voice  and  data services as Latin American countries move toward
privatization  and  greater  liberalization of their telecommunications markets.


                                        3
<PAGE>
     We  believe  that  the small-to medium-sized business segment is the target
market  in  many  countries  in  Latin  America  for  advanced  services such as
Internet,  e-commerce,  virtual  private  networks,  teleconferencing,  advanced
phone, unified messaging, frame relay and asynchronous transfer mode technology.
Unlike  larger  businesses that have the resources and traffic volume to support
the  internal  development  of a wide range of advanced services, developing and
maintaining such services is not economical for smaller businesses. Accordingly,
to  meet  these  needs  smaller  businesses may either purchase such services or
outsource  their  telecommunications  services  to third parties specializing in
such services, such as Telscape. We believe that our experience and expertise in
providing  these  services  will  enable  us  to  compete  in  this  market.

     We believe that we are well positioned to capitalize on these opportunities
by  providing  high quality, low-cost comprehensive telecommunications services.
As  a  rule,  Latin American countries have historically suffered from extremely
low  telephone  density, and the markets have been subject to characteristically
inefficient,  poor-quality  service,  as  well  as the unavailability of new and
innovative  systems  and  services.  In  addition, the Latin American markets in
which  we  offer  services  or  in  which  we  seek  to  compete  generally  are
characterized  by a lack of fiber optic cable capacity. Existing satellite-based
capacity  offers  limited  capability  to  meet  the  increasing  demand  for
bandwidth-intensive  applications in our targeted countries in the region. There
exists  a  critical  and growing demand for the type of high-quality, innovative
systems,  products  and  services  that  we  are currently providing and seek to
provide  in expanding in our current markets and exploiting the opportunities in
new  markets  throughout  Latin  America.

     We  believe  that  the  Latin  American  region  is  poised  for  growth in
telecommunications  usage  based  on  the political and economic changes in many
Latin  American  countries  that  have  modernized  their  economies,  increased
transparency in business and governmental practice and sustained strong economic
growth.  In  addition,  telecommunications growth will be spurred as a result of
the  recent  and  ongoing  privatizations  by many Latin American governments of
their  previously  state-owned telecommunications monopolies, as well as ongoing
liberalization  of  the regulatory frameworks in many countries in the region to
promote  competition  in  telecommunications  services.

Mexico

     The  market  for  telecommunications services in Mexico is undergoing rapid
expansion.  According  to  TeleGeography  1999,  the volume of telecommunication
traffic  to  Mexico  increased  16.2%  in 1996 and 58% in 1997. The 1997 traffic
along the U.S.-Mexico route accounted for 12.1% of the U.S. international market
and 88.6% of the Mexican international telecommunications market. According to a
report  issued  by  the  Federal  Communications  Commission's  (''FCC'') Common
Carrier  Bureau  in  November  1998, revenues for sales on the U.S.-Mexico route
exceeded  $1.1  billion  in  1997.

     As  a  result  of  legislation enacted in 1995, Mexico began the process of
opening the telecommunications market to competition. National and international
long distance services were opened to competition in August 1996, subject to the
issuance  of  individual  concessions. Pure switched international resale is not
allowed  in  Mexico to date. Advanced services are fully open to competition and
subject  to  a  simple  registration  process.

     We  believe  we are well positioned to take advantage of the growing demand
for  telecommunications  services  between  the  United  States  and  Mexico. We
currently  provide  a full range of systems integration and value-added services
to  major public and private customers. In June 1998, our subsidiary Telereunion
S.A.,  received  a  concession  from  the national telecommunications regulatory
agency,  the Secretaria de Comunicaciones de Telecomunicaciones (''SCT''), which
had  allowed  us  to  construct  our  Mexican  network.

Other  Latin  American  Markets

     We  intend  to  focus  on  opportunities  created  by  deregulation  of
telecommunications  services  in  other  telecommunications  markets  in  Latin
America.  Latin  American  markets have undergone rapid expansion as a result of
regional  and  global  deregulation.

     Countries  within  Latin America have different national regulatory schemes
and are in varying stages of deregulation. The requirements for us to obtain the
necessary  approvals  to  offer  value-added  services  and  various  other
telecommunications  services,  including  voice  telephony, vary from country to
country. In 1999 we entered into several transactions in Latin America including
the provision of Internet services via satellite to Guatemala, Costa Rica and El
Salvador,  and  the signing of interconnection and correspondent agreements with
Telefonica  de  El  Salvador.


                                        4
<PAGE>
Strategy

     Our  objective  is  to  become  a  leading  provider  of  high  quality,
competitively  priced,  voice, video, data and Internet services principally to,
from  and  within  Latin  America.  Key  elements  of  our  strategy  are  to:


     -    Expand Network Services.  We intend to continue  expanding our network
          by acquiring  switching and  transmission  facilities  and  additional
          fiber optic and satellite  transmission  capacity for the provision of
          voice,  video,  data and Internet  services to complement our existing
          U.S. and Mexico networks.  We also intend to deploy  Metropolitan Area
          Fiber  where   appropriate  and  the  investment  is  justified.   Our
          objectives  in making  these  investments  are to: (i) provide  on-net
          capacity to allow growth in our voice services business; (ii) increase
          profitability  for  switched  services by  reducing  the amount of our
          traffic  terminated by other long distance carriers pursuant to resale
          arrangements;  and (iii) use the  expanded  network as a  platform  to
          support advanced, bandwidth-intensive data and Internet applications.

     -    Provide an Integrated Suite of Service  Offerings.  We plan to provide
          our  commercial  customers  in Mexico  with a  comprehensive  suite of
          telecommunications services, including international and domestic long
          distance  services,  systems  integration,  call  centers,  conference
          calling, Internet access and other broadband data services. We believe
          that providing  multiple service offerings improves customer retention
          and the profitability of individual customer relationships. We believe
          that  Telscape  is one of the few  companies  to offer a wide array of
          high quality and competitively priced  telecommunications  services to
          commercial  customers in Mexico, and we expect to pursue opportunities
          to provide  similar  services as we expand  into other Latin  American
          markets.

     -    Expand Scope of Advanced Services Offerings. By leveraging our Mexican
          network and teleport assets and our extensive  integration  experience
          and customer base, we are  implementing a strategy to become a leading
          Enabling  Service  Provider  ("ESP").  As an ESP, we are  creating the
          telecom  and data  center  infrastructure  for  businesses  to conduct
          electronic  business and  commerce.  We will  continue to provide on a
          more  network-centric  basis the e-business services that companies in
          Latin America need to conduct their  internal  communications.  We are
          also  currently  launching  e-commerce  services for  businesses  that
          involve the  next-generation  communications and transactions with the
          external world. Some of these e-commerce  services include enhanced IP
          transport  and  content  delivery,  network  and  systems  management,
          hosting and  collocation,  security and  customer  care  services.  We
          believe  that the  Company  will be in a position  to become a premier
          e-commerce platform for companies, e-exchanges, content providers, and
          ASP's  (applications  service  providers)  interested  in pursuing the
          Latin American and Hispanic markets.

     -    Expand  Scale  and  Scope of  Retail  Business.  We  believe  that our
          Telefiesta prepaid cards position us for expanded growth in the retail
          sector  of  the  international   telecommunications  market.  We  have
          recently  launched a prepaid card in the Mexican market,  providing us
          with a cost  effective  and  efficient  means of targeting  the retail
          market.    We   are   also   in   the   process   of   launching   our
          ''Telefiesta-Amigo'' program, a unique, one-plus long distance service
          in the United States targeted at Hispanic customers that not only call
          Mexico frequently but would also like to provide their counterparts in
          Mexico with a card to make  Northbound  calls at relatively  favorable
          rates by using a Telefiesta card that is billed directly to their home
          telephone bill.

     -    Pursue  Strategic  Alliances,  Joint  Ventures  and  Acquisitions.  We
          continue  to  pursue   strategic   alliances,   joint   ventures   and
          acquisitions  to expand our business,  increase our customer base, add
          network and circuit capacity, enter additional markets and develop new
          products and services.  We seek to acquire interests in companies that
          have  network  facilities,  service  offerings  or  technologies  that
          complement  ours.  Since 1996,  we have  completed  six  acquisitions,
          including  a  U.S.-based  provider  of  satellite   telecommunications
          services with access to satellites covering Central and South America,
          a U.S.-based  prepaid card provider  focused on Hispanic  consumers in
          the United States and Latin American  markets,  three data and systems
          integration  businesses  in Mexico and a  U.S.-based  reseller of long
          distance services. In December 1999, we signed a merger agreement with
          Pointe Communications of Atlanta, Georgia.


                                        5
<PAGE>
                                    SERVICES

     Telscape  currently  operates in two  primary  businesses  segments:  Voice
Services and Advanced  Services.  Our business  lines within these  segments are
designed to serve our  targeted  commercial  and consumer  customers.  Financial
information  about  our  business  segments  for each of the three  years  ended
December 31, 1997,  1998 and 1999,  are  disclosed in Footnote 9 in the Notes to
the Consolidated Financial Statements.

                                 VOICE SERVICES

Retail

     We  provide  national and international long distance services to consumers
in the U.S., primarily first and second generation Hispanic individuals, through
prepaid  cards  under  our Telefiesta  brand name. We believe that prepaid cards
are  the  most  effective vehicle in the short-term to provide long distance and
other  telecommunications services to our targeted Hispanic residential customer
segment,  as  well as benefiting customers by enabling them to purchase the card
anonymously  and in various fixed dollar amounts. In 1998, we added dual-country
capabilities  to  our prepaid cards, offering usage in both the U.S. and Mexico,
and,  we  plan to add other countries throughout Latin America. Late in 1999, we
started  distribution  of our cards directly to retail outlets throughout select
cities  in  both  Mexico  and  the  U.S.  Additionally, we are in the process of
launching  our  Telefiesta-Amigo  program,  a  unique  residential long distance
product  based  in  the  U.S.  for  this  same  target  market.  We believe that
Telefiesta  is  one  of  the most widely recognized brand names for prepaid card
services among the 30 million Hispanics in the U.S. and that it has historically
enjoyed  a  market  share  of  approximately  10% of the total U.S. prepaid card
market  to  Latin  America.  Through  our  Telefiesta-Amigo  program, we plan to
leverage  the  brand  recognition  that  Telefiesta  enjoys  in  the  Hispanic
community.  Our  Telefiesta-Amigo  program  is  an  important  initiative for us
because  it  created  subscribers.

Wholesale

     We  provide wholesale carrier services to first and second-tier carriers in
the  U.S.  to  complement  our retail traffic pattern. Providing both retail and
wholesale  services  on  our network allows us to maximize efficiency and better
utilize  our  network.  In  addition,  we  negotiated  advantageous rates in our
targeted Latin American countries by leveraging our extensive relationships with
local  carriers. We market our wholesale capacity through a direct sales effort.

     We had fiscal 1999 revenues of  approximately  $77.3 million from our voice
services,  representing 72.4% of our consolidated  revenues. One customer within
this line of business represented $12.2 million, or 11.45%, of 1999 consolidated
revenues.

                                ADVANCED SERVICES

     We  provide  a  full range of advanced services to major public and private
customers  in  Latin  America  .

Network  Solutions

     We  are  one  of  the  largest  systems  integrators  in  Mexico, providing
customized and turnkey solutions to corporations and institutions under the same
management  team  since  1986. Services include developing, building, installing
and  servicing  corporate  voice,  video  and  data networks. Post-sales support
consists  of  maintenance  contracts,  outsourcing,  network  management  and
monitoring  services.  Although we expect that systems integration revenues will
not  increase  as  rapidly  as  those  from our other lines of business, it will
remain  an  important  part of our strategy to introduce commercial customers to
our  other  telecommunications services and essential in our strategy to provide
our  customers  with  a  comprehensive  suite  of  telecommunications  services.

     Since  1992,  we have  been one of five  distributors  in  Mexico of Nortel
telecommunications  equipment.  We also  distribute  voice and  teleconferencing
products manufactured by Polycom, Centigram and VTEL and distribute, install and
maintain data and networking equipment manufactured by 3Com Corporation, Nortel,
Newbridge  Networks,  ADC Kentrox and Cisco.  We are the largest Nortel and 3Com
distributor in Mexico and are consistently  recognized as the industry leader in
systems integration.

     We anticipate that  traditional  long distance and local exchange  services
will increasingly involve sophisticated,  application-oriented  services such as
audio,  data  and  video  conferencing,   enhanced   facsimile,   telemarketing,
interactive voice response,  help-desk,  advanced Internet and other content and


                                        6
<PAGE>
service intensive  value-added  services.  We have provided advanced services in
Mexico since 1995,  giving us both technical and marketing  experience needed to
compete in the advanced services market.

     Our sales and  technical  personnel  are  organized  as teams that  combine
strong sales capabilities with specialized  technical expertise in cutting-edge,
product-specific  areas  such as  asynchronous  transfer  mode and  frame  relay
networks,  virtual private  networks and  telemedicine-distance  learning,  help
desks and teleconferencing  solutions. For example, we were the first company in
Mexico to offer conference call services.  Our systems integration business also
provides a natural  channel to  introduce,  with a high  degree of  credibility,
commercial customers to our other products and services,  further broadening our
relationships with our customers.  For example, we now offer our Mexican clients
the opportunity to take advantage of advanced  bandwidth-on-demand  and disaster
recovery services through our teleport in Mountain View, California.  We believe
that much of the expertise  developed in Mexico can be replicated in other Latin
American  countries.  Network solutions  customers in Mexico include the Mexican
Stock  Exchange,  Pepsico  (Frito Lay),  Hewlett  Packard,  and Mabe (a GE joint
venture).

Customer  Relationship  Management

     As  traditional  telecommunications services become more of a commodity, we
believe  that  advanced services will become an increasingly important component
of our service offerings. We have leveraged our systems integration expertise to
provide  outsourced  network  services, including help desk support and customer
relationship  management  services.

     Our  expanding  presence  in  advanced  services resulted in an outsourcing
contract, signed  in  the third quarter of 1997, with the U.S. Embassy in Mexico
City. The contract is a one-year contract and the U.S. government has the option
to renew the contract for up to four additional one-year terms. The contract has
been  renewed  for  the first additional year through the fourth quarter of 1999
and was again  renewed  for  another year in the first quarter of 2000. The U.S.
Embassy system is designed to automate delivery of visa applications and enables
callers to request visa information from either a live operator or from an
automated touch-tone system.  In connection with this contract, we established a
call  center  in Mexico City,  which  we  believe  will  serve as a platform for
additional growth.  In  the  fourth quarter of fiscal 1998, we received approval
from the Mexican Ministry of Foreign Affairs to provide passport information and
other information to the Mexican public via our  help  desk  operations. During
1999, we obtained a contract to provide assistance to Hertz Car Rental for their
reservation  system  needs.

     During  the first quarter of 2000, we moved into a new, larger facility for
our customer relationship management business.  Our  new  premises  consist of a
22,000 square feet building equipped  with  a  training  and  recruiting  area,
quality assurance areas, 240 fiber optic telephone lines, an E1/T1 connection to
the United  States, dedicated lines connecting our facility to the U.S.  Embassy
and, among other security features, back-up electrical power.  Our new  premises
presently  host  160  attendant  positions  and  can  be  expanded  to up to 400
positions.  By  way  of  comparison,  our prior facility was approximately 4,000
square  feet  in  size  and had reached its capacity of 120 attendant positions.

     On  March  6,  2000,  the  U.S. Embassy announced that its Border Crossing
Cards program has been modified.  This program modification will  result  in the
substitution of approximately 5 million identification cards. Our new facilities
will allow us to manage this additional traffic while maintaining our high level
of service to the U.S. Embassy. We are presently investing in additional systems
including  state-of-the-art  workforce  management  and  customer  relationship
management software. We plan on continuing our efforts to diversify our customer
base  and  are  moving a larger proportion of our U.S. customer service areas to
our  call  center  in  Mexico,  where  we  enjoy  a  relative  cost advantage in
comparison  to  our  U.S.-based  customer  service  facilities.

Broadband  Services

     Through  our subsidiary, INTERLINK, we own and operate a satellite teleport
facility in Mountain View, California. INTERLINK provides voice, video, data and
Internet  transport  services  including fractional and full T-1 data broadcast,
dedicated  circuits  and  private  line  up-link and down-link services to Latin
America  and  other  parts of the world. INTERLINK's satellite teleport has been
operational  for more than a decade and we believe it is among the most reliable
in  the  U.S. INTERLINK's satellite teleport services both our network needs for
our  international  long  distance  customers  as  well as INTERLINK's customers
mainly  in  the telecommunications, broadcasting and weather service industries.
In  addition,  INTERLINK has introduced Bandwidth-on-Demand, Integrated Services
Digital  Network  videoconferencing  and Internet-through-satellite services and
also  serves  as  an  Internet  backbone  provider to Internet service providers
(''ISPs'')  in  remote areas where access to high speed fiber optics is limited,
as  is  the  case  in  most  Latin American countries. We believe that INTERLINK
enjoys  an  excellent  reputation  within  the  industry for our reliability and
services and has positioned us as a natural ''conduit'' to provide services from
and  to  the  United  States  with an emphasis on Latin America. We believe that
INTERLINK  has  the  ability  to  significantly  expand  our services and future
revenue.  INTERLINK  also  produces  radar detectors, VSATs (Very Small Aperture


                                        7
<PAGE>
Terminals)  and  telecommunications  amplifiers,  which  represent less than one
fourth  of  INTERLINK's projected revenues for 2000.  See discussion below under
recent  developments  concerning  the discontinuation of the production of these
products.

     We  had  fiscal  1999  revenues  of  approximately  $29.5  million from our
Advanced services businesses,  representing  27.6% of our consolidated revenues.
No single customer  within  this  line  of  business  represented  10%  or  more
of  1999 consolidated  revenues.

                                     NETWORK

     We  currently  manage  our  own  telecommunications network and utilize the
transmission  capacity  of  several  carriers.  We  believe  that increasing the
percentage  of  traffic  we  carry on-net will enable us to increase margins and
profitability  and  ensure  quality.  In  addition, our use of multiple carriers
increases  cost  efficiencies  by establishing additional routing capability and
enables  us  to  obtain  sufficient  capacity  to  support  our  rapid  growth.

     Our present network is comprised of  leased  and owned switches, fixed cost
point-to-point  fiber  optic  cable leases, leased satellite capacity to provide
connectivity  for  many  Central and South American cities and owned fiber optic
cable  in  Mexico.  We intend to expand our network primarily by (i) moving from
the  traditional  circuit-based  technology  to  packet-based technology as more
advance  voice  applications  are  available  and  IP  traffic  demands it, (ii)
acquiring  additional  satellite and fiber optic transmission capacity and (iii)
installing  switching equipment in targeted U.S. and Latin American markets.  We
expect  that  we  will be able to realize significant cost savings by routing an
increasing portion of our traffic on-net.  Please see a more complete discussion
of  our  network  in  Mexico  below.

Switching  Facilities

     We  own  and  operate  a Nortel DMS-250, state-of-the-art digital switch in
Houston,  Texas  with  11,520  ports.  In addition to utilizing this switch as a
tandem  switch,  we also utilize it to provide prepaid calling card services. We
are  currently installing a Lucent 5ESS international gateway switch in Houston,
Texas,  which will have 9,780 ports. We also have two Excel switches in Houston,
which  are  being  utilized  both in a tandem mode as well as to provide prepaid
calling  card  services  and  have  approximately  3,100  ports  each.

     In Monterrey, Mexico we have installed  a Lucent 5ESS international gateway
switch  with  8,700  ports.  We  have also purchased a Lucent 5ESS international
gateway  switch with 7,620 ports to be installed in Mexico City. In addition, we
have three Excel switches operational in Mexico with ports ranging from 1,440 to
3,744.

Satellite  Facilities

     In  connection  with  our  acquisition  of INTERLINK in 1998, we acquired a
teleport facility in Mountain View, California. We believe that this acquisition
enhanced  our  position  as an integrated telecommunications provider, and helps
assure  satellite  capacity  to  our  targeted  markets  in  Latin  America.

Network  Capacity

     We  purchase  transmission  services  on  a  per  minute  basis  and  lease
transmission  capacity  on  a  fixed cost basis from a variety of local and long
distance  carriers.  We are currently expanding our leased on-net capacity in an
attempt to lower costs in our largest distribution areas. We obtain private line
capacity  from  local  domestic  and international carriers. Our agreements with
these  carriers  fix  the  private  line  cost  for  a  minimum of one year. Our
agreements  with  carriers  provide that some international per minute rates may
fluctuate  with  rate change notice periods varying from five days to one month.
The  variable  nature  of  the  cost  of  services and many of our contracts and
agreements subject us to the possibility of unanticipated cost increases and the
loss  of  cost-effective  routing  alternatives.

     We have signed a contract  with a third party for the third party vendor to
provide  telecommunications  services to us including the origination of inbound
800 dialed  phone  calls for our  prepaid  cards,  and the  termination  of U.S.
domestic long distance and  international  long  distance.  The contract term is
through June 1, 2001, and provides for a minimum monthly purchase  commitment of
$750,000  and a total  purchase  commitment  of  $31,110,000.  We can cancel the
minimum monthly  purchase  commitment with 30 days notice upon meeting our total
minimum  purchase  commitment.  We estimate that total purchases from this third
party shall continue to exceed the minimum contractual requirements.


                                        8
<PAGE>
Telecommunications  Network  Management  and  Information  Systems

     Our  network  management  and  information  systems  enable  us  to  (i)
economically  and efficiently route traffic over our network and the networks of
other carriers, (ii) offer reliable services with high call completion rates and
voice  quality  and (iii) manage an advanced voice, data and video multi-service
platform.  We  believe that these systems, particularly their ability to provide
flexible,  high quality service to international destinations, provide us with a
competitive  advantage  relative  to  many other providers of telecommunications
services.  We  monitor  our  network  and initiate changes to our overall switch
network  and  traffic routing where appropriate to optimize routing and minimize
costs.  Because  a  substantial  portion of the traffic carried by us terminates
internationally  and  call  completions  vary  by  carrier,  we monitor the call
completion  efficiencies  of  our  suppliers.  We intend to continue configuring
large  portions of our network with Common Channel Signaling System 7 (''SS7'').
SS7  reduces  voice  call  setup and connect time delays and provides additional
technical  capabilities  and  efficiencies  for  call  routing  and  network
engineering.

Network  Operations  Center

     We have a network operations center (''NOC'') in Mexico City, Mexico, which
we will use to monitor and control all switches and other transmission equipment
used  in  our network. The NOC operates seven days a week, 24 hours per day, 365
days  a  year.  This  NOC  will  be greatly enhanced by the state-of-the-art OSS
(Operation  Support  Systems)  tools acquired in connection with the buildout of
the  Mexican  network,  and  will  allow  us  to  provide  advanced  billing,
provisioning,  customer  care-  help  desk and network, systems and applications
management  services  to  voice,  data  and  Internet  customers.

Our  Mexican  network

     Our  network  philosophy  is  to invest in network facilities only after we
have  developed a customer base and to the extent such an investment can improve
our  network  cost  structure  and  services  provided to our customers. We have
developed  a substantial presence in Mexico over the last 13 years, and, in June
1998,  we,  through  Telereunion,  received  a  concession,  a  30-year,
facilities-based  carrier  license,  from the Mexican government. Telereunion is
one  of  only  16  concession  holders  in  Mexico.  We  have  now completed the
construction  of  our  network  in  Mexico.

     Our Mexican network provides us with the following: (i) additional capacity
to allow growth in our voice services business;  (ii) increased profitability by
bringing   traffic   on-net;   and  (iii)  the  ability  to  provide   advanced,
packet-based, bandwidth-intensive data and multimedia networking applications to
commercial customers in Mexico.

     We built the first stage of our Mexican  network,  consisting  of 636 km of
fiber optic cable and  microwave,  circuit  switched  type of  transmission  and
switching  facilities,  in the Gulf  region of  Mexico.  The fiber  optic  cable
consists of 48 strands.  The first stage  provides  connectivity  from Puebla to
Veracruz to Poza Rica.

     We have taken a "smart build" approach to expanding our network coverage in
Mexico.  Due to the fact that we  selected a very  desirable  region in which to
construct our Mexican network, other carriers are interested in exchanging fiber
on their own networks for fiber on our network.  For  instance,  in May 1999, we
signed an agreement to exchange  eight strands of fiber on our network  covering
636 kilometers for four strands of fiber on another  carrier's  network covering
1100 km. This  exchange  had the effect of tripling  our  network  coverage  for
relatively little additional investment. In November 1999, we signed a letter of
intent to exchange fiber with another carrier,  which, upon  consummation,  will
increase our network  coverage by 550  kilometers.  In December 1999, we entered
into an agreement with another carrier to exchange fiber.  Upon  consummation of
this December 1999 agreement as well as the other agreements described above, we
will  have a  fiber  optic  network  in  Mexico  of  approximately  3,300  route
kilometers,  resulting in one of the largest networks in the country.  The fiber
obtained  through this December 1999 agreement will connect the important cities
of Puebla, Mexico City, Toluca, Queretaro, Leon and Guadalajara.  In combination
with our own buildout and the agreements  described  above,  our Mexican network
will  connect  Guadalajara,   Leon,  Queretaro,  Toluca,  Mexico  City,  Puebla,
Veracruz, Poza Rica, Ciudad Victoria,  Matamoros,  Reynosa,  Monterrey, San Luis
Potosi and several other smaller cities in Mexico. The network will also include
metropolitan  fiber  rings  in some of the  largest  cities  in  Latin  America,
including  Mexico City, Leon and Guadalajara.  In those cities,  which will have
metropolitan  fiber,  we will more  effectively  address the last mile issue and
provide a bundle of advanced networking services at a lower cost.

     We selected Lucent to engineer,  furnish and install our network in Mexico.
In August of 1999, we signed a loan  agreement in which Lucent agreed to provide
us with up to $40 million of long term financing. In January 2000, Lucent agreed


                                        9
<PAGE>
to expand  this  commitment  by $20  million,  subject  to  certain  conditions,
including the merger with Pointe.

                        SALES, MARKETING AND DISTRIBUTION

VOICE  SERVICES

Retail

     We  market  our  prepaid  cards  under  the  Telefiesta  brand  name.  Our
Telefiesta  prepaid  cards  are  sold through distributors to independent retail
outlets throughout the United States. In the U.S., we have traditionally focused
on  building  a  substantial  network  of  wholesale  distributors  that sell to
sub-distributors  and directly to retail outlets. The sub-distributors generally
sell  only  to retail outlets. We intend to expand our internal sales department
in order to sell directly to large retail chains, department stores, the tourist
industry,  airport  and  hotel gift shops, gas stations and other retail outlets
owned  or  franchised  by  larger  companies,  both  in  the  U.S.  and  Mexico.

     In the United States, we target heavily populated  metropolitan  areas with
substantial Hispanic populations that generate significant international calling
volume.  Many of our  distributors  are  members of such ethnic  communities  or
otherwise  have  personal  or business  relationships  in such  communities.  In
developing relationships with distributors,  we also focus on expansion into new
geographic and metropolitan  areas with  substantial  Hispanic  populations.  We
believe  that the success of our prepaid  cards has  created  significant  brand
loyalty and encourages  distributors  and retail outlets to actively  market our
products.

     We regularly provide distributors and retail outlets with point of purchase
advertising  and  explanatory  materials.  We  frequently  add new prepaid  card
products to our service offerings, and adjust our pricing for particular traffic
segments in order to target  certain  customer  groups,  respond to  competitive
pressures and otherwise increase market share.

     In Mexico, in conjunction with the launch of our Telereunion  prepaid card,
we  established  a  sales   department  at  one  of  our  subsidiaries  to  more
aggressively develop  distribution  channels in which we are selling directly to
the retail  outlet,  rather  than  through  wholesale  distributors  as has been
traditionally done in the U.S.

     We are launching  our  Telefiesta-Amigo  program using direct  distribution
channels and have hired  commissioned  based sales teams to generate the initial
sales for this product. We intend to engage in an extensive telemarketing effort
whereby  we will mine our  present  customer  databases  to  solicit  their long
distance business.  This telemarketing  effort will take advantage of leads that
we  have  obtained  from  several  prepaid  card   promotions   requesting  user
information as well as databases we have developed  containing telephone numbers
of callers  that have  shown  past  patterns  including  calls from the U.S.  to
Mexico.

Wholesale

     Our  carrier  resale department markets our international outbound switched
and  dedicated  services  on  a  wholesale  basis  to  other  telecommunications
companies  through  a direct sales effort. To provide a more complete package of
international  rates  to  our  customers,  we  intend  to  establish  strategic
relationships with entities that have gateways to international destinations, to
complement  the  capacity we have with our Mexican network. When appropriate, we
may establish in-country relationships for the termination of international long
distance.

ADVANCED  SERVICES

Network  Solutions

     To  serve the complex needs of our customers, we formed a team of sales and
technical  personnel  that  combines  strong sales capabilities with specialized
technical  expertise  in  product-specific areas such as Private Branch Exchange
(''PBX''),  voice  processing,  Internet,  video  conferencing  and asynchronous
transfer  mode  and  frame  relay  networks. We believe that this sales approach
allows  us  to  provide  innovative  solutions  to  complex  systems integration
projects.

     In Mexico, we promote our network solutions  services through a combination
of  advertising,  trade shows,  direct mail and  telemarketing.  We historically
utilized our own direct sales force but have recently developed a dealer network
to broaden our distribution  channel.  Our product managers focus on cultivating
relationships  with one or more vendors and with coordinating  sales efforts for
their specific product lines.


                                       10
<PAGE>
     We market our  network  solutions  services  through  advertising  in trade
magazines, telemarketing, direct mail and attending trade shows. We believe that
our systems  integration  service base  provides an  excellent  platform for the
follow-up  sales of  advanced  telecommunications  services,  since  many of our
customers  have  developed  confidence  in  our  ability  to  implement  complex
projects.

     Our direct sales effort begins with understanding the customer's  business.
Sales personnel then identify  potential areas where our advanced services could
improve the customer's business, suggesting specific services, customizing those
services to meet the customer's specific needs,  implementing  network solutions
and monitoring the results and potential changes in the customer's needs.

Customer Relationship  Management

     Until  the recent expansion of our call center facilities, our capacity was
largely  utilized under our contract with the U.S. Embassy. Given the additional
capacity,  we  intend to market and sell our bilingual capabilities to customers
in  the  United  States  and  Mexico  through  a  direct  sales  effort.

Broadband  Services

     Our broadband services business markets with satellite teleport services to
other  telecommunications  companies  through a direct sales effort. Our service
offerings  include voice, video and data transport services including fractional
and  full  T-1  data  broadcast, dedicated circuits and private line up-link and
down-link  services  to Latin America and other parts of the world. We have also
introduced  Bandwidth-on-Demand,  ISDN  videoconferencing  and
Internet-through-satellite  services  and  also  serve  as  an Internet backbone
provider  to  ISPs  in  remote  areas where access to high speed fiber optics is
limited,  as  is  the  case in most Latin American countries. We have also begun
cross-selling our teleport services through our network solutions sales force in
Mexico  and our international long distance wholesale carrier sales force in the
U.S.

                                    CUSTOMERS

VOICE  SERVICES

Retail

     We  market  our prepaid cards primarily to Hispanic communities in the U.S.
that  generate  high  levels of international traffic to targeted Latin American
countries  where  we  have favorable termination agreements. We sell our prepaid
cards  through  a  network  of distributors, who distribute the prepaid cards to
independent  retail  outlets  in 100 cities throughout the U.S.  During the year
ended  December 31, 1998, no single distributor represented more than 10% of our
overall  revenues.  During  the  year  ended  December 31, 1999, one distributor
represented $12.2 million or 11.45% of our consolidated sales for the year ended
December  31,  1999.

Wholesale

     Our  wholesale  customers  are  primarily other international carriers that
seek  termination  services  in one or more Latin American countries. During the
year  ended  December 31, 1999, no single wholesale carrier customer represented
more  than  10%  of  our  consolidated  revenues.

ADVANCED  SERVICES

Network  Solutions  and  Customer  Relationship  Management

     We  perform  substantially  all  of  our  network  solutions  and  customer
relationship  management  services for business customers located in Mexico. Our
network solutions business has worked with over 2,500 corporate customers in the
last  thirteen  months.  During  the  year  ended  December  31, 1999, no single
network  solutions or customer relationship management customer represented more
than  10%  of  our  overall  revenues.

Broadband  Services

     Customers  for  our broadband services include other international carriers
both  in the U.S. and in Latin America which utilize our services as a low cost,
dependable  and  high  speed alternative to fiber optic connectivity between the
U.S. and Latin America; private and public corporate companies which utilize our
private  line,  dedicated  circuits  and bandwidth on demand services; and Latin
American ISPs which utilize our services as a source for high-speed connectivity
to  Tier  I  Internet  backbone  providers  in  the  U.S. During the years ended
December  31,  1998,  and  1999,  no single satellite teleport services customer


                                       11
<PAGE>
represented  more  than  10%  of  our  consolidated revenues over the respective
period  then  ended or of our consolidated for the years ended December 31, 1998
or  1999,  respectively.

                          CUSTOMER SUPPORT AND BILLING

     We  believe  that  reliable,  sophisticated  and  flexible  billing  and
information  systems  are  essential to our ability to remain competitive in the
global  telecommunications  market.  Accordingly, we upgraded our billing system
this  year  and  are  using  a  Compaq  Proliant 5000 Server with Highland Lakes
Billing  Software.  As  part of our Mexico network construction, we have entered
into  a  contract  for  the  provision  of  a turnkey state-of-the-art operating
support  system  (OSS)  from  a  major  U.S.  vendor.

     Our billing system enables us to (i) accurately  analyze  network  traffic,
revenues and margins by customer and by route on a daily  basis,  (ii)  validate
carrier  settlements,  and (iii) monitor least cost routing of customer traffic.
These reports  produce  efficiencies  by reducing the need for monitoring by our
employees.  We  believe  that the  accuracy  and  efficiency  of our  management
information systems provide us with a significant strategic advantage over other
emerging carriers.

                                   COMPETITION

     The  international  and  national  telecommunications  industry  is  highly
competitive,  is  subject to rapid change precipitated by advances in technology
and  deregulation  and  is significantly influenced by the pricing and marketing
decisions  of larger industry participants. Our success depends upon our ability
to  compete  with a variety of other telecommunications providers in each of our
markets,  including  the  respective  PTT  in each country in which we operates.
Other  competitors  of  ours  include  large,  facilities-based,  multinational
carriers  and smaller facilities-based wholesale long distance service providers
in the United States and overseas that have emerged as a result of deregulation,
switched-based  resellers  of international long distance services, providers of
systems  integration and/or advanced services, prepaid card providers and global
alliances  among  some  of  the  world's largest telecommunications carriers. We
anticipate  that  we  will  encounter  additional competition as a result of the
formation  of  global alliances among large telecommunications providers. Recent
examples  of  such  alliances  include  AT&T's alliance with Unisource, known as
''Uniworld'',  Cable  & Wireless Plc's recent alliance with Italy's STET/Telecom
Italia  to  serve  international  customers  with  a  primary focus on the Latin
American  and  European  regions,  WorldCom's merger with MCI, Sprint's alliance
with Deutsche Telekom and France Telecom, known as ''Global One'', and the joint
venture  between  Sprint  and  Telmex.  Consolidation  in the telecommunications
industry  may  create  even  larger competitors with greater financial and other
resources.  The  effect  of  the  aforementioned  or  other  similar mergers and
alliances  could create increased competition in the telecommunications services
market  and  potentially  reduce the number of customers that purchase wholesale
international  long  distance services from us. In the prepaid card business, we
currently compete with all of the first tier telecommunications carriers as well
as  emerging  multinational  carriers such as Star Telecommunications, Inc., RSL
Communications,  Ltd.  and IDT Corporation, many of which have greater financial
resources  than us. Because certain of our current competitors also are or could
be  our  customers,  our  business would be materially adversely affected to the
extent that a significant number of such customers limit or cease doing business
with  us  for  competitive  or  other  reasons.

     International  telecommunications providers such as Telscape compete on the
basis of price,  customer  service,  transmission  quality,  breadth  of service
offerings and value-added  services,  and our carrier and prepaid card customers
are especially  price  sensitive.  In addition,  many of our  competitors  enjoy
economies of scale that can result in a lower cost structure for termination and
network  costs,  which  could cause  significant  pricing  pressures  within the
international communications industry. In recent years, prices for international
and other  telecommunications  services have  decreased  substantially,  and are
expected to continue to  decrease,  in most of the markets in which we currently
compete or intend to compete.  The  intensity of such  competition  has recently
increased, and we expect that such competition will continue to intensify as the
number  of  new  entrants   increases  as  a  result  of  the  new   competitive
opportunities created by the 1996  Telecommunications Act, implementation by the
FCC of the  U.S.  commitment  to the WTO  and  privatization,  deregulation  and
changes in legislation  and regulation in various of our foreign target markets.
There can be no assurance  that we will be able to compete  successfully  in the
future, or that such intense competition will not have a material adverse effect
on our business, financial condition and results of operations.

     Many  of our  competitors  are  significantly  larger,  have  substantially
greater  financial,  technical and marketing  resources,  larger  networks and a
broader  portfolio of services than ours.  Additionally,  many  competitors have
strong name recognition and ''brand'' loyalty,  long-standing relationships with
our target  customers and economies of scale that can result in a lower relative
cost structure for transmission and related costs.  These  competitors  include,
among others, AT&T, MCI WorldCom and Sprint which provide long distance services


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<PAGE>
in the U.S., Telmex,  concessionaires and other registered  value-added services
providers  in Mexico,  as well as PTTs and emerging  competitors  in other Latin
American markets where we seek to compete.

     In Mexico,  the  regulatory  authorities  have  granted  concessions  to 16
companies,  including  Telmex and  Telereunion  S.A.,  to construct  and operate
public, long distance  telecommunications  networks in Mexico. Some of these new
competitive  entrants  have as  their  partners  major  U.S.  telecommunications
providers,  including AT&T (Alestra),  MCI WorldCom  (Avantel) and Bell Atlantic
(Iusatel).  Mexican regulatory  authorities have granted  concessions to several
competitive  local exchange  providers,  such as Telinor,  Megacable,  Amaritel,
Unitel,  MetroNet,  and Red de Servicios  and several of Mexico's  long distance
concessionaires.  With regard to the provision of services in Mexico, we compete
or will compete in Mexico with numerous other systems  integration,  value-added
services  and voice  and data  services  providers,  some of which  focus  their
efforts on the same customers  targeted by us. In addition to these competitors,
recent and  pending  deregulation  in Mexico and various  other  Latin  American
countries may encourage new entrants.  Moreover,  while the WTO Agreement  could
create opportunities for us to enter new foreign markets,  implementation of the
accord by the United States and other  countries could result in new competition
from PTTs  previously  banned or limited from  providing  services in the United
States. For example,  the joint venture between Sprint and Telmex was granted by
the  FCC  for  authority  to  enter  the  U.S.  market  and  to  provide  resold
international switched services between the United States and Mexico, subject to
various conditions.  Increased  competition in such countries as a result of the
foregoing, and other competitive developments,  including entry by ISPs into the
long-distance  market,  could have a material  adverse  effect on our  business,
financial condition and results of operations.

     We believe that PTTs generally have certain  competitive  advantages due to
their control over local  connectivity  and close ties with national  regulatory
authorities.  We also believe that, in certain  instances,  some regulators have
shown a reluctance to adopt policies and grant  regulatory  approvals that would
result in increased competition for the local PTT. If a PTT were to successfully
pressure national regulators to prevent us from providing our services, we could
be denied  regulatory  approval in certain  jurisdictions  in which our services
would  otherwise be  permitted,  thereby  requiring us to seek judicial or other
legal  enforcement  of our right to provide  services or to abandon our proposed
market entry.  Any delay in obtaining  approval,  or failure to obtain approval,
could have a material  adverse effect on our business,  financial  condition and
results of operations. If we encounter anti-competitive behavior in countries in
which we operate  or intend to operate or if the PTT in any  country in which we
operate uses our  competitive  advantages to the fullest  extent,  our business,
financial  condition  and results of operations  could be  materially  adversely
affected.

                              GOVERNMENT REGULATION

General

     The global telecommunications industry is subject to international treaties
and agreements and to laws and  regulations  which vary from country to country.
Enforcement  and  interpretation  of  these  treaties,   agreements,   laws  and
regulations  can be  unpredictable  and are often  subject to informal  views of
government  officials and ministries  that regulate  telecommunications  in each
country.  In certain  countries,  including certain of our target Latin American
markets, such government officials and ministries may be subject to influence by
the local PTT.

     We have  pursued and expect to  continue to pursue a strategy of  providing
our services to the maximum extent we believe to be permissible under applicable
laws and regulations.  To the extent that the  interpretation  or enforcement of
applicable laws and regulations is uncertain or unclear, our aggressive strategy
may result in our (i) providing services or using transmission  methods that are
found to violate the laws or regulations of those  countries where we operate or
plan to operate or (ii) failing to obtain approvals or make filings subsequently
found to be required under such laws or regulations.  If our  interpretation  of
applicable laws and regulations proves incorrect, we could lose, or be unable to
obtain,  regulatory approvals necessary to provide certain of our services or to
use  certain  of our  transmission  methods,  or lose  our  investments  in that
country.  There  can be no  assurance  that we will  not be  subject  to  fines,
penalties or other  sanctions,  including  being denied the ability to offer our
products and  services,  as a result of  violations  regardless  of whether such
violations are knowing or willful and regardless of whether such  violations are
corrected.

     In numerous  countries  where we operate or plan to operate,  local laws or
regulations  limit  the  ability  of  telecommunications  companies  to  provide
telecommunications  services in competition with state-owned or state-sanctioned
monopoly carriers.  There can be no assurance that future regulatory,  judicial,
legislative  or political  considerations  will permit us to offer all or any of
our products and services in such  countries,  that  regulators or third parties
will not raise material issues  regarding our compliance with applicable laws or
regulations,  or  that  such  regulatory,  judicial,  legislative  or  political
decisions  will not have a  material  adverse  effect on us. If we are unable to
provide the services  that we  presently  provide or intend to provide or to use


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our existing or contemplated transmission methods due to our inability to obtain
or retain the requisite governmental approvals for such services or transmission
methods,   or  because  we  are   subjected  to  adverse   regulatory   inquiry,
investigation  or  action,  or  for  any  other  reason  related  to  regulatory
compliance  or lack thereof,  such  developments  could have a material  adverse
effect on our business, financial condition and results of operations.

     On February 15, 1997, the United States and 68 other  countries  signed the
WTO Agreement,  agreeing to open their respective  telecommunications markets to
competition and foreign  ownership and to adopt  regulatory  measures to protect
market  entrants  against   anticompetitive   behavior  by  dominant   telephone
companies. FCC rules implementing the WTO Agreement became effective in February
1998. The FCC also adopted  streamlined license granting procedures for carriers
from WTO Agreement signatory  countries,  pursuant to which the FCC granted more
than 200  international  applications in the first 90 days after the streamlined
procedures became effective. The FCC adopted additional streamlining measures on
March 18, 1999. Although we believe that the WTO Agreement could provide us with
significant  opportunities  to  compete  in  markets  that  were not  previously
accessible,  reduce our costs and provide more reliable services,  it could also
provide similar opportunities to our competitors. There can be no assurance that
the  pro-competitive  effects  of the WTO  Agreement  will not  have a  material
adverse effect on our business, financial condition and results of operations or
that members of the WTO will implement the terms of the WTO Agreement.

United  States

     In  the  United  States, to the extent that we offer services as a carrier,
the provision of our services is subject to the provisions of the Communications
Act  of 1934, as amended, the Telecommunications Act of 1996 and the regulations
of  the  FCC  thereunder.  There  can  be  no  assurance that future regulatory,
judicial  and legislative changes will not have a material adverse effect on our
business, financial condition and results of operations. Moreover, to the extent
that  the  interpretation  or  enforcement of applicable laws and regulations is
uncertain  or  unclear,  our aggressive strategy may result in our (i) providing
services  or  using  transmission  methods  that  are  found  to  violate  the
Communications  Act,  the  Telecommunications Act of 1996 or FCC regulations, or
(ii)  failing  to  obtain  approvals  or  make  filings subsequently found to be
required under such laws or regulations. The FCC has the authority to condition,
modify,  cancel,  terminate or revoke licenses and authorizations for failure to
comply  with  federal laws or the rules, regulations and policies of the FCC. If
our interpretation of applicable laws and regulations proves incorrect, we could
lose,  or be unable to obtain, regulatory approvals necessary to provide certain
of  our services or to use certain of our transmission methods. While we believe
we  are  in  compliance  with  applicable  laws and regulations, there can be no
assurance  that we will not be subject to fines, penalties or other sanctions as
a  result  of  violations  regardless  of whether such violations are knowing or
willful and regardless of whether such violations are corrected. There can be no
assurance that  if  our interpretation of applicable laws and regulations proves
incorrect and/or  if  we  are  subject to fines, penalties or other sanctions as
a result, that  these  events  will  not  have  a material adverse effect on our
business, financial  condition  and  results  of  operations.

U.S.  International  Long  Distance  Services

     To  the extent we offer services as a common carrier, we are subject to FCC
rules  requiring  authorization  from  the  FCC  prior  to leasing international
capacity,  acquiring  international  facilities,  and/or  purchasing  switched
minutes,  and  initiating  international  service  between the United States and
foreign  points,  as well as to FCC rules that also regulate the manner in which
our  international  services  may be provided, including the circumstances under
which  we  may provide international switched services by using private lines or
routing  traffic  through  third  countries.  FCC  rules  also  require  prior
authorization  before  transferring  control of or assigning FCC authorizations,
and  impose  various  reporting  and  filing requirements on companies providing
international  services  under  an  FCC  authorization.  In  order  to  offer
international  long  distance  services,  we  are also required to file and have
filed  with  the  FCC  a  tariff  containing  the  rates,  terms  and conditions
applicable  to  our  international  telecommunications  services.  We  have  a
continuing  obligation  to  ensure that the tariffs accurately reflect the terms
and  conditions  associated  with our service offerings. We are also required to
file  certain  carrier to carrier agreements with the FCC. The FCC also requires
carriers  such  as  Telscape  to report any affiliations, as defined by the FCC,
with foreign carriers. The FCC may also impose restrictions on affiliations with
certain  foreign  telecommunications companies. Failure to comply with the FCC's
rules  could result in fines, penalties or forfeiture of our FCC authorizations,
each  of  which  could have a material adverse effect on our business, financial
condition  and  results  of  operations.

The  FCC's  Private  Line  Resale  Policy

     The  FCC's  private  line  resale policy currently prohibits a carrier from
reselling  international  private  leased  circuits to provide switched services
(known  as  ''ISR'')  to  or  from  a country unless the FCC has designated that
country  as one that affords U.S. carriers equivalent opportunities to engage in
similar  activities  in  that country or that the country is a member of the WTO
and  the  local  PTT  offers  U.S. carriers rates at or below the FCC-prescribed


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<PAGE>
benchmark  for  terminating  the  U.S.  carriers'  traffic.  There  can  be  no
assurance,  however,  that  the  FCC or any other country's regulatory authority
will change their policies in a way that would have a beneficial impact on us or
that  would  not  have  a  material  adverse  effect  on our business, financial
condition  and  results of operations. Furthermore, it is possible, that the FCC
could  take the view that certain arrangements by which we provide international
services do not comply with the existing Private Line Resale Policy. If the FCC,
on  its  own  motion  or  in  response  to  a  challenge filed by a third party,
determines  that  such  arrangements  do  not comply with FCC rules, among other
measures,  it  may  issue  a  cease and desist order, impose fines on us, or, in
extreme  circumstances,  revoke  or  suspend  our  FCC  authorizations.

International  Settlements  Policy

     The  International  Settlements  Policy establishes the framework governing
U.S.  carriers'  relationships  with  their  foreign  correspondents  who  are
designated as dominant, on routes that have not yet been found to be competitive
by  the  FCC.  The  FCC revised its International Settlements Policy in an order
released  May  6, 1999. Specifically, the current policy governs the exchange of
traffic  and  settlements  between  U.S.  carriers  and  dominant  foreign
correspondents  on  non-competitive  routes,  including  the cost of terminating
traffic  over  each other's networks and prevents dominant foreign carriers from
discriminating  among  U.S.  carriers  in  the  rates  they  charge to terminate
international  traffic.

     The FCC revisions to the International  Settlements  Policy also impact the
FCC's rules on International  Simple Resale  (sometimes  called ''ISR''),  which
permits U.S.  carriers to provide  international  switched services over private
lines interconnected with the public switched  telecommunications network on the
current  FCC-authorized  routes.  The FCC  declined to remove the  International
Settlements  Policy  completely  on  all  International  Simple  Resale-approved
routes,  and will continue to maintain a distinction  between routes it approves
for International Simple Resale and routes on which it removes the International
Settlements  Policy.  However,  as a result of  revisions  to the  International
Settlements Policy, U.S. carriers may now enter into International Simple Resale
arrangements  with  non-dominant  foreign carriers on any route. On those routes
where  the  International  Settlements  Policy  continues  to apply to  dominant
carriers,  U.S.  carriers may exchange traffic via  International  Simple Resale
arrangements  with such carriers only on the routes authorized for International
Simple Resale by the FCC.

     To the extent that the International  Settlements Policy still applies, the
FCC could  find that we do not meet  certain  International  Settlements  Policy
requirements with respect to certain of our foreign carrier agreements. Although
the FCC generally has not issued  penalties in this area, it has issued a Notice
of Apparent  Liability to a U.S.  company for  violations  of the  International
Settlements  Policy and it could,  among other things,  issue a cease and desist
order,  impose fines or allow the  collection of damages if it finds that we are
not in compliance with the International Settlements Policy. Any of these events
could have a material  adverse  effect on our business,  financial  condition or
results of operations.

U.S.  Domestic  Long  Distance  Services

     Our  ability to provide domestic long distance service in the United States
is  subject  to  regulation  by  the  FCC  and  relevant  state  Public  Utility
Commissions  that  regulate  the  offering  of  interstate  and  intrastate
telecommunications  services,  respectively.  Although  no  formal  authority is
required  for the offering of interstate services, we are required by the FCC to
file  tariffs  listing the rates, terms and conditions of domestic long distance
services  provided.

     If  the   stay   is   lifted   and  the  FCC   order   becomes   effective,
telecommunications  carriers,  such as us, will no longer be able to rely on the
filing of tariffs  with the FCC as a means of  providing  notice to customers of
prices, terms and conditions on which they offer their interstate services.  The
obligation to provide  non-discriminatory,  just and  reasonable  prices remains
unchanged under the Communications Act of 1934, as amended.

     Our costs of providing  long distance  services will be affected by changes
in the "access  charge" rates imposed by incumbent  local  exchange  carriers on
long  distance  carriers for  origination  and  termination  of calls over local
facilities.  The FCC has made major  changes  in the  interstate  access  charge
structure.  In a December  24,  1996  order,  the FCC  removed  restrictions  on
incumbent  local  exchange   carrier's   ability  to  lower  access  prices  and
implemented  certain  access charge reforms and sought  comments on others.  The
order provides certain  immediate  regulatory relief to incumbent local exchange
carriers  subject to the FCC's price cap  regulation,  and sets a  framework  or
''trigger'' to provide those companies with greater  pricing  flexibility to set
interstate  access rates as  competition  increases.  The order also initiated a
rulemaking to determine  whether the FCC should  regulate the access  charges of
competitive  local  exchange  carriers.  A May 16, 1997 FCC order  substantially
increased the amounts that  incumbent  local  exchange  carriers  subject to the
FCC's  price cap rules  could  recover  through  monthly  flat-rate  charges and
substantially  decreased the amounts that these local  exchange  carriers  could
recover through traffic sensitive  (per-minute) access charges.  Several parties
appealed the May 16th order.  On August 19, 1998,  the U.S. Court of Appeals for
the Eighth Circuit upheld the FCC's access charge reform rules.


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<PAGE>
Universal  Service

     On  May  8,  1997,  the  FCC  issued  an order establishing a significantly
expanded  federal  universal service subsidy regime (the ''May 8th Order''). For
example,  the  FCC  established  new  universal  service  funds  to  support
telecommunications  and  information services provided to qualifying schools and
libraries  (with  an  annual  cap  of  $2.25  billion)  and to rural health care
providers  (with  an  annual  cap  of  $400  million). The FCC also expanded the
federal  subsidies  for local exchange telephone services provided to low-income
consumers  and  recently  doubled  the  size of the high cost fund for non-rural
LECs.  Providers  of interstate telecommunications services, such as us, as well
as  certain  other  entities,  must  pay for these programs. Our contribution to
these  universal  service  funds  is  based  on  our  telecommunications service
end-user  revenues.  Currently, the FCC assesses such payments on the basis of a
provider's  revenue  for  the  previous  year.  They  are  currently  5.877%  of
interstate  and  international  end-user  telecommunications revenues. We cannot
predict  what  the amount of universal service fund contributions will be in the
future,  as  the  FCC  issues  contribution  factors  on  a  periodic  basis.

     Several parties  appealed the May 8th Order.  The U.S. Court of Appeals for
the Fifth Circuit  recently  upheld the FCC May 8th Order in most respects,  but
rejected the FCC's effort to base  contributions  on  intrastate  revenues.  The
FCC's universal  service program may also be altered as a result of the agency's
reconsideration of its policies, or by future Congressional action.

State  Regulation

     Prior  to  the initiation of intrastate long distance service, we generally
must  obtain  certification  from  or  register  with  the relevant state Public
Utilities Commission. Providers of intrastate long distance services may also be
required  to  file  tariffs  or  rate  schedules,  and may be subject to certain
reporting  and  fee  payment obligations with the relevant commission including,
for  pre-paid or debit card operators, the filing of a surety bond. In addition,
intrastate  long  distance  providers  may  be  subject to service standards and
consumer  protection  rules.  If  any  state Public Utilities Commission were to
conclude  that  we  are  or  were  providing  intrastate  services  without  the
appropriate  authority,  the  agency  could  initiate enforcement actions, which
could  include  the  imposition of fines, a requirement to disgorge revenues, or
the refusal to grant the regulatory authority necessary for the future provision
of  intrastate  communications services. Failure to comply with state law and/or
the  rules,  regulations  and  policies  of  the  state  commissions,  including
compliance  with  state  reporting  and  fee  payment obligations, may result in
challenges  by  third  parties,  and/or  actions  by  state commissions or other
government  authorities,  including  conditioning,  modifying  or revoking state
authorization to provide telecommunications services within the respective state
and/or  subjecting  the  provider  to  fines,  penalties,  or  other  sanctions.

     Many  states  also  require  prior  approval  for  transfers  of control of
certified    carriers,     corporate     reorganizations,     acquisitions    of
telecommunications  operations,  assignment  of carrier  assets,  carrier  stock
offerings and incurrence of  significant  debt  obligations.  The merger between
Telscape and Pointe will generate an  obligation on the newly created  entity to
file  applications  for prior approvals or notifications to the Public Utilities
Commission  in each and  every  state  where  either  Telscape,  Pointe or their
affiliates are certificated. Telscape and Pointe have begun preparation of these
filings, and anticipate that some, but not all of the required approvals will be
obtained on or before the anticipated date of closing.  At this time, we can not
assure  you that all of the  required  approvals  will be  obtained  in a timely
fashion,  or that the respective  Public Utilities  Commissions will approve the
transaction.  If any State  Public  Utilities  Commission  does not  approve the
transaction,  we  may  lose  our  certification  to  provide  telecommunications
services  in  that  state  and/or  be  subject  to  the  imposition  of  license
conditions,  fines or other sanctions. As a result of Telscape,  Pointe or their
affiliates'   past  or  current   failure  to  comply   with  state   regulatory
requirements, it is possible that one or more State Public Utilities Commissions
may reject or condition the requested  approval of the merger,  or may otherwise
subject Telscape, Pointe or the newly created entity to regulatory sanctions.

Mexico

     In  June  1998,  our  subsidiary   Telereunion  S.A.,  received  a  30-year
facilities-based  carrier  license from the SCT,  allowing it to  originate  and
terminate  long  distance  services  and to provide  data and other  value-added
services in Mexico. The Foreign Investment Law and Telecom Law of Mexico ("FTL")
opened  the  local  and long  distance  telecommunications  service  markets  to
competition    and   imposed   varying   levels   of   regulation   on   Mexican
telecommunications  providers.  Pursuant  to the FTL,  the SCT and the  Comision
Federal de  Telecomunicaciones  ("COFETEL") implement the provisions of the FTL.
The  FTL  imposes  regulations  on  public  carriers.   Facilities-based  public
carriers,  those  that use the radio  spectrum,  satellite  links or any form of
land-based   cables  to  provide   telecommunications   services,   must  obtain


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<PAGE>
concessions  prior to  providing  service.  Concessionaires  may also resell the
facilities  and  services  of  other  concessionaires.  Vendors  (resellers)  of
telecommunications  services  may not own  their  own  facilities  but need only
obtain a permit to provide service.  Although the FTL provides for the existence
of resellers,  the Mexican  government has not issued the implementing rules and
regulations to allow their entry into the market. Consequently, Mexican law does
not currently  permit pure switched  international  resale.  Carriers wishing to
offer   value-added   services   need   only   register   with   the   COFETEL's
Telecommunications Registry.

     In  addition  to  the  FTL,  the  Mexican Long Distance International Rules
establish  the  specific  regulatory  framework  that governs international long
distance services. Among other matters, the rules (i) mandate uniform accounting
rate  and  proportionate  return  for three years for all international traffic;
(ii)  require  concessionaires  to  obtain  additional specific authorization to
install  and  operate  international gateways; (iii) implicitly prohibit ISR for
three  years;  and  (iv)  regulate international correspondent agreements, which
must  reflect  the  uniform  accounting rate and proportionate return rules. The
International  Rules  prohibit  all  telecommunications  operators, except those
concessionaires  that have obtained the specific authorization from the COFETEL,
to  install  and  operate  international gateway switches. Those concessionaires
that  have  not  received  such  specific  authorization,  as  well as any other
companies  that  provide  telecommunications  services,  such  as  providers  of
value-added  services,  cellular  concessionaires  and  paging service providers
cannot  directly  transmit  international switched traffic. To date, the SCT and
the  COFETEL  have  granted 16 companies, including Telmex and Telereunion S.A.,
concessions  for  the  installation, operation and exploitation of long distance
public  telecommunications  networks, of which eight have received authorization
to  install  and  operate international gateway facilities. In addition, the SCT
and  the  COFETEL  have granted eight concessions for local switched services as
well  as  numerous  registrations  for  value-added  services.

     Pursuant  to the FTL, concessions for public telecommunication networks may
only be granted to Mexican citizens or Mexican companies. Foreign investors  may
own minority interests in concessionaires, but may not own more than 49% of  the
voting  ownership  interest  of  we  except  for companies that provide cellular
service.  NAFTA  removed  certain Mexican restrictions on foreign investment and
U.S.  companies  may  now  maintain  100%  ownership interests in companies that
provide  value-added  services  in Mexico. Pursuant to Mexican law, only Mexican
citizens  or  companies  incorporated  and  domiciled  in Mexico can register as
providers  of  value-added  services.

Other  Latin  American  Markets

     Our  provision  of  services  elsewhere  in Latin America is subject to the
developing  laws  and  regulations  governing  the  competitive  provision  of
telecommunications  services in each Latin American country in which it provides
or  seeks  to  provide  services.  Each  such Latin American country in which we
currently  conduct  or  intend  to  conduct  business  has  a different national
regulatory scheme.  Historically, Latin American countries have prohibited voice
telephony  except  by  the PTT. The available opportunities and the requirements
for  we  to  obtain  necessary  approvals to offer value-added services, systems
integration  or  the  full range of telecommunications services, including voice
telephony,  vary  considerably  from  country  to  country. We currently plan to
provide  a  limited  range  of  services in certain Latin American countries, as
permitted  by  regulatory  conditions  in  those  markets,  and  to  expand  our
operations  as  these  markets implement liberalization to permit competition in
the  full range of telecommunications services. The nature, extent and timing of
the  opportunity for us to compete in these markets will be determined, in part,
by  the  actions  taken  by  the  governments  in  these  countries to implement
competition  and  the response of incumbent carriers to these efforts. There can
be  no  assurance  that any of these countries will implement competition in the
near  future  or  at  all,  that  we  will be able to take advantage of any such
liberalization  in  a  timely manner, or that our operations in any such country
will  be  successful.  There  can  be  no  assurance  that  we have received all
necessary  approvals,  filed  applications  for such approvals, received comfort
letters  or  obtained  all  necessary  licenses  from  the applicable regulatory
authorities to offer telecommunications services in the Latin American countries
where  it  currently  provides  services  or  those in which it seeks to provide
services  in  the  future,  or  that it will do so in the future. Our failure to
obtain,  or  retain  necessary approvals could have a material adverse effect on
our  business,  financial  condition  and  results  of  operations.

     Liberalization  in Latin America is proceeding  rapidly and we seek to keep
pace with  competition  even where PTTs  retain a legally  mandated  monopoly on
voice  telephony.  We are currently  offering or plan to offer  certain  systems
integration,  enhanced  services,  or value-added  services in a number of Latin
American  countries where the PTT retains the legally mandated monopoly on voice
telephony.  While we  believe  that we will not be  found to be  offering  voice
telephony in these  countries  prior to the  expiration of the PTT's monopoly on
such services,  we have received no assurance  from the respective  PTTs or from
the respective regulating authorities that this will be the case. It is possible
that  we  could  be  fined,  or  that  our  facilities  or  equipment  could  be
confiscated,  or that we would not be allowed to provide  specific  services  in
these countries,  among other sanctions,  if we were found to be providing voice
telephony before the date in which the PTT's monopoly on Voice Telephony ceases.
Any of such  actions  could  have a  material  adverse  impact on our  business,
financial condition and results of operations.


                                       17
<PAGE>
     Moreover,  we  may  be  incorrect  in  our  assumption  that (i) each Latin
American  country will abolish, on a timely basis, the respective PTT's monopoly
to provide voice telephony within and between other countries, (ii) deregulation
will  continue to occur, and (iii) we will be allowed to continue to provide and
to  expand  our  services  in  the  Latin  American  countries.  There can be no
assurance that any or all of the Latin American countries will not adopt laws or
regulatory  requirements that will adversely affect our interests. Additionally,
there  can  be  no  assurance  that  future  regulatory, judicial or legislative
changes  in  any or all of the Latin American countries will not have a material
adverse effect on us or that regulators or third parties will not raise material
issues  with regard to our compliance with applicable laws or regulations. If we
are  unable  to  provide  the  services  we are presently providing or intend to
provide  or  to use our existing or contemplated transmission methods due to our
inability to receive or retain formal or informal approvals for such services or
transmission  methods,  or for any other reason related to regulatory compliance
or  the  lack  thereof,  such events could have a material adverse effect on our
business,  financial  condition  and  results  of  operations.

Intellectual  Property

     We  use  the  names  ''Telscape  International,''  ''Telscape''  and ''TSCP
International''  as  our  primary business names, and received federal trademark
protection for the ''Telscape'' name and distinctive logo on September 14, 1999.
In  2000  we  also  filed  for  a trademark on one of our new subsidiary's name,
''Enable  Commerce''.  This  filing is pending, and we have no assurance that it
will be granted. We own a federal trademark registration for the ''Telefiesta ''
prepaid  cards. Telereunion S.A. has a national trademark registration in Mexico
for  ''Telereunion.''  We  regard our trademarks, service marks, trade names and
logos  as  valuable  assets  and believe they have value in the marketing of our
products  and  services. We intend to protect and defend our name, service marks
and  trademarks  in  the  United  States  and  internationally.

Employees

     As  of December 31, 1999, we had 644 full-time employees, with 540 residing
in  Mexico  and  the  remainder  residing  in  the  United  States. Of the total
employees,  there  are  181  in  sales  and  marketing,  138  in  general  and
administrative  and  325 in operations, engineering, manufacturing and assembly.
None  of  our employees are subject to a collective bargaining agreement, and we
have  not  experienced  any  work  stoppage.  We  believe our relations with our
employees  are  good.

ITEM  2.     PROPERTIES.

     Our  international  headquarters  are  located  in Houston, Texas, where we
lease  approximately  10,000 square feet of an office building. The Company also
leases  additional  facilities  in  Houston, Texas totaling an additional 10,000
square  feet  relating  to  our  prepaid  card  operations  and  to  house
telecommunications  equipment relating to its long distance services operations.
We lease facilities in Mexico City, Guadalajara, Tijuana and Monterrey, totaling
approximately  71,000  square  feet  and  consisting  of  office and warehousing
facilities.  We  lease  facilities  in  Sunnyvale  and Mountain View, California
totaling  80,000  square  feet.

ITEM  3.     LEGAL  PROCEEDINGS.

     From  time  to  time,  we  have been involved in certain legal proceedings.
Currently,  we  are not a party to any material pending legal proceedings, other
than  ordinary  routine  litigation  incidental  to  our  business.

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

     There  were  no  matters submitted to a vote of security holders during the
fourth  quarter  of  the  fiscal  year  ended  December  31,  1999.


                                       18
<PAGE>
                                     PART II

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

     Telscape's common stock was traded on the Nasdaq Small Cap Market under the
symbol  "PTMC"  from  August 10, 1994 until June 28, 1996, when it began trading
under  the  symbol  "TSCP."  Telscape's common stock began trading on the Nasdaq
National  Market ("Nasdaq NM") on July 31, 1998.  The following table sets forth
the  range  of  the quarterly high and low sales prices for the common stock, as
reported  by  the  Nasdaq  Small  Cap  Market and the Nasdaq NM for each quarter
within  the  last  two  fiscal  years.

<TABLE>
<CAPTION>
                 High      Low
                -------  -------
1998
-------
<S>             <C>      <C>
First Quarter   $17.625  $  8.25
Second Quarter   23.188   14.125
Third Quarter    16.375    7.000
Fourth Quarter   10.250    6.688

1999
-------
First Quarter   $10.000  $ 6.313
Second Quarter    8.563    5.375
Third Quarter     9.375    5.875
Fourth Quarter   13.313    5.688
</TABLE>

     As  of  March  15,  2000,  there were approximately 93 holders of record of
Telscape's  common  stock.

     Telscape  has never paid any cash dividends on its common stock.  We expect
that  we  will retain all available earnings generated by our operations for the
development  and  growth  of  our business and do not anticipate paying any cash
dividends  in the foreseeable future.  In addition, our ability to pay dividends
may  be  adversely  affected  if,  in the future, the Mexican government were to
impose  restrictions  on  our  ability  to  repatriate  profits.


                                       19
<PAGE>
ITEM  6.  SELECTED  FINANCIAL  DATA.

     The  following  table sets forth certain historical financial data relating
to  Telscape.  The  information set forth below is not necessarily indicative of
the  results of future operations and should be read in conjunction with "Item 7
-  Management's  Discussion  and  Analysis of Financial Condition and Results of
Operations"  and  the  consolidated  financial  statements and the notes thereto
included  in  Item  8  of  this  Annual  Report  on  Form  10-K.

<TABLE>
<CAPTION>
                                                             For  the  Year  Ended  December  31,
                                         ---------------------------------------------------------------------------------
                                               1995            1996             1997             1998            1999
                                         ----------------  -------------  ----------------  ---------------  -------------
STATEMENT OF OPERATIONS DATA
<S>                                      <C>               <C>            <C>               <C>              <C>
      Revenues                           $     1,108,000   $  5,705,000   $    36,154,000   $  132,179,000   $106,833,000
      Cost of revenues                           619,000      3,041,000        24,396,000      111,892,000     93,394,000
                                         ----------------  -------------  ----------------  ---------------  -------------
      Gross profit                               489,000      2,664,000        11,758,000       20,287,000     13,439,000
      Selling, general and
         administrative expenses               1,349,000      4,159,000         8,154,000       13,774,000     24,357,000
                                         ----------------  -------------  ----------------  ---------------  -------------
      Operating income (loss) before
         depreciation and amortization
         and impairment loss                    (860,000)    (1,495,000)        3,604,000        6,513,000    (10,918,000)
      Depreciation and amortization               49,000        264,000           622,000        3,316,000      6,335,000
      Impairment loss on long-lived
         assets                                      ---            ---               ---        1,026,000        715,000
                                         ----------------  -------------  ----------------  ---------------  -------------
      Operating income (loss)                   (909,000)    (1,759,000)        2,982,000        2,171,000    (17,968,000)
      Other income (expense), net                229,000        114,000          (232,000)      (2,413,000)    (4,935,000)
                                         ----------------  -------------  ----------------  ---------------  -------------
      Income (loss) before income
         taxes and minority interests           (680,000)    (1,645,000)        2,750,000         (242,000)   (22,903,000)
      Income tax benefit (expense)                     -         53,000           (84,000)        (822,000)     3,428,000
                                         ----------------  -------------  ----------------  ---------------  -------------
      Income (loss) before minority
         interests                               (680,000)    (1,592,000)       2,666,000       (1,064,000)   (19,475,000)
      Minority interests                           7,000         (6,000)            6,000           34,000            ---
                                         ----------------  -------------  ----------------  ---------------  -------------
      Net income (loss)                  $      (673,000)  $ (1,598,000)  $     2,672,000   $   (1,030,000)  $(19,475,000)
                                         ================  =============  ================  ===============  =============


     Net income (loss) per share-Basic   $         (0.36)  $      (0.52)  $          0.68   $        (0.20)  $      (2.92)
     Weighted average shares
         outstanding                           1,890,442      3,046,594         3,903,470         5,052,096     6,669,987
     Net income (loss) per share-
         Diluted (1)                                 n/a            n/a   $          0.53               n/a           n/a
     Diluted weighted average shares
         outstanding (1)                             n/a            n/a         5,152,211               n/a           n/a

                                                                               At December 31,
                                         ---------------------------------------------------------------------------------
                                                    1995           1996              1997             1998           1999
                                         ----------------  -------------  ----------------  ---------------  -------------
BALANCE SHEET DATA
     Cash, cash equivalents and short
         term investments                $     3,645,000   $    495,000   $     4,734,000   $    9,631,000   $  5,419,000
     Current assets                            4,294,000      4,665,000        18,506,000       32,746,000     29,997,000
     Property and equipment, net                 154,000        983,000         2,679,000       14,576,000     58,468,000
     Goodwill and other intangibles,
         net                                         ---      3,246,000        17,674,000       31,416,000     32,342,000
     Total assets                              4,498,000      9,371,000        39,635,000       80,331,000    127,140,000
     Notes payable, convertible
         debentures  and capital lease
         obligations                                 ---            ---         3,184,000       13,133,000     38,761,000
    Stockholders' equity                 $     3,590,000   $  5,764,000   $    22,088,000   $   34,926,000   $ 27,044,000
<FN>

       (1)     Inclusion of additional shares under a dilutive analysis  is inappropriate due to the anti-dilutive effect.
</TABLE>


                                       20
<PAGE>
ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

                                    OVERVIEW

     Telscape is a U.S.-based fully integrated communications company. We supply
voice,  video,  data and Internet services principally to, from and within Latin
America.  Telereunion,  S.A.,  a  subsidiary, has built a state-of-the-art fiber
optic  network  in  Mexico  that  will  reach  the  vast majority of the Mexican
population.  We  also  own  and operate a satellite teleport facility in Silicon
Valley,  which  delivers  an  array  of  communications  services  to  customers
throughout  North,  Central  and  South  America. In addition, we provide a full
range  of  advanced  services and products in Mexico to major public and private
sector  customers.

     The  markets  in  which  Telscape operates are characterized by significant
growth.  Telscape  will  continue to take advantage of the cash flows associated
with  the  voice  component of our business as we also continue building for the
future, which will be characterized by explosive growth in the demand for video,
data  and Internet. In our voice business, we are focusing our efforts on retail
as  we  constantly  strive  to  move  closer and closer to the customer. We will
continue  to  be opportunistic on the wholesale business but are relying on this
business  to  maximize  utilization  of  our  network. We have recently launched
additional  retail  voice  services  in  both  the  U.S.  and  Mexico.

     In  the  data  and  Internet  area,  we  are  focusing  on  higher  margin,
broadband-based  products  and  services. Telscape is well positioned to address
and  facilitate our business customers in the natural evolution from the private
network  world  to  the  virtual  private  network world, which is now available
through  advanced  switched-data  public IP services. With the completion of our
fiber optic network in Mexico, the sophistication of our in-country team and our
seasoned  teleport in Silicon Valley, we are well positioned to provide advanced
data  and  Internet  services  to,  from  and within Latin America.  Our Mexican
network  will  also  provide  us a platform to provide certain advanced services
such  as  virtual  private  networks, cache, streaming, collocation and hosting.

     In  June  1998, Telereunion S.A., a Mexican corporation and a subsidiary of
ours, was granted the Mexican Concession by the Mexican government.  The Mexican
Concession  is a 30-year, facilities-based carrier license, which has allowed us
to  construct  and  operate a network over which we can carry voice, video, data
and  Internet  traffic.  The  Mexican  network, a fiber-optic long haul network,
connects  the  United  States,  the  Gulf  region of Mexico and targeted Mexican
cities.

     In  May  1996, we began to focus on providing telecommunication services to
and  from  Latin America. We acquired all of the stock of Telereunion, Inc., the
owner  of  97.0%  of  Vextro  de  Mexico  S.A.  de  C.V. ("Vextro"). Vextro is a
Mexico-based  systems  integration company, with an emphasis on voice solutions.
In  September  1996,  we  expanded  our operations to include international long
distance  by acquiring Orion Communications, Inc., a U.S.-based reseller of long
distance  services  ("Orion").  In  1997,  we  expanded  our systems integration
service  offerings  by  acquiring Integracion de Redes, S.A. de C.V. ("Integraci
n") and N.S.I., S.A. de C.V. ("N.S.I."), both focused on data services and based
in Mexico City, Mexico.  In 1998, Integracion was renamed as Telscape de Mexico,
S.A.  de  C.V.

     In  January 1998, we acquired MSN, a leading provider of prepaid cards that
are  marketed under the Telefiesta  brand name to Hispanic consumers residing in
the  United States. The MSN acquisition enhances our voice business by providing
a  retail  platform,  enhancing  our  ability  to market additional products and
services  to  Hispanic  customers  and  increasing  our  ability  to  generate
significant  returns of U.S.-outbound traffic to Latin America.   Effective June
1,  1998, we, through our newly-formed subsidiary INTERLINK Communications, Inc.
("INTERLINK")  acquired  California  Microwave Services Division, Inc. for  $8.8
million  in  cash. INTERLINK provides us with a teleport facility in California,
thereby  enhancing  our  position  as  an integrated communications provider and
contributing to our ability to provide voice, video, data and Internet solutions
to  our  targeted  markets  in  Latin  America.

     We  are  capitalizing  on  the  deregulating  markets  of  Latin America by
providing  international  long  distance  services  to  and  from targeted Latin
American  countries.  We  have  also  positioned  ourselves to become one of the
leading  integrated  communications providers in Mexico through the construction
of  our  Mexican  network  and  the  sophistication  of  our  in-country  team.

     The  Mexican  network  links  22  cities  and  towns  and covers, including
interconnection  agreements, a majority of the population in Mexico. The Mexican
network  will  provide  us  with  the backbone for our strategy to be a complete
telecommunications  service  provider  for  the Latin American market, beginning
with  Mexico.  The  Mexican  network  will  provide  us  with  significant,
carrier-class,  cost-effective  capacity  from  which  we  can grow our existing
retail and wholesale voice business and serve as an important platform to expand
our  data  and  Internet  strategies.


                                       21
<PAGE>
                                    REVENUES

     The  revenue mix between voice services and advanced services for the years
ended  1999  and  1998  remained  almost  the  same.  In  1999,  voice  services
represented  72.4%  of  our  consolidated revenues while in 1998, voice services
represented  70.5%  of  consolidated  revenues.  In  voice  services,  we expect
revenue  growth  to  come principally from higher margin, one-plus long distance
services  through  our  recently  launched  Telefiesta-Amigo program and prepaid
calling  cards  in  Mexico.  In  advanced  services,  we  expect  growth to come
principally  from  broadband  services,  customer  relationship  management  and
bundled  services  to  small  and  medium  size  enterprises  in  Mexico.

     As  part  of  our  advanced  services,  we  provide value-added and systems
integration  services to private and public sector customers in Mexico. Revenues
are  derived  from  providing  value-added  services  and the sale of equipment.
Revenues  from this business grew significantly through both internal growth and
strategic  acquisitions  in  1996,  1997 and 1998.  The revenues in this line of
business  are subject to economic conditions in  Mexico.  Revenues  relating  to
this part of our  advanced services  in  1999  decreased  by  56% as a result of
weakening  economic conditions in Mexico, Y2K worries that encouraged our client
base  to  delay investments in their network systems,  and our decision in early
1999 to reduce sales of lower margin equipment sales to certain distributors and
increase  efforts  on  higher  margin  value-added  services.

     With  our  acquisition  of  INTERLINK  in  the  second  quarter of 1998, we
expanded  our  advanced  services  offerings.  We  provide  satellite  teleport
services,  including  voice,  video  and  data  transport  services  including
fractional  and  full  T-1  data  broadcast, dedicated circuits and private line
up-link  and  down-link services Bandwidth-on-Demand, ISDN videoconferencing and
Internet-through-satellite  services  to  the  U.S. and Latin America. INTERLINK
also  works  with  its  customers  in Latin America to develop the sophisticated
systems  necessary  to  utilize  these  services.

     Through  our  call  center  in  Mexico  City,  we  also  provide  customer
relationship  management  services.  Our largest customer is the U.S. Embassy in
Mexico  City  and  the various U.S. consulates throughout the country of Mexico.
Revenues  are  derived  by  providing  information  about  U.S. visas to Mexican
nationals  and  facilitating  appointments,  both  through  the  call  center.

     We  provide voice services on both a wholesale and retail basis.  Wholesale
voice  services are provided mainly to other carriers. Revenues are derived from
the number of minutes of use (or fraction thereof) billed by us and are recorded
upon  completion  of  calls.

     Retail  voice  services  are provided through the sale of prepaid cards. We
have  in  the  past  entered  into arrangements with third parties whereby these
parties  provided,  at  a fixed cost to us, the long distance telecommunications
services  for  the  prepaid cards that we sell.  We recognized revenues from the
sale  of prepaid cards under these agreements at the time of shipment.  In other
cases,  we  entered  into  arrangements  whereby  third  parties provide certain
telecommunications services for the prepaid cards and bills us for such services
based  on  customer usage.  We recognize revenues from the sale of prepaid cards
under  these  agreements  at  the  time  of  customer  usage.

     In  early  1998,  we  discontinued  the  fixed  cost arrangement with third
parties.  As  a result, revenues were recognized beginning in the second half of
1998  on  the  prepaid  cards  at  the  time  of  customer  usage.

                                  GROSS PROFIT

     During 1999,  our gross profit as a percentage of revenues  declined.  This
decline was largely due to decreasing margins from our sale of prepaid cards and
wholesale  voice  services  offset  principally  by  increased  margins from our
customer relationship management revenues.

     Our strategy to improve gross margins in  voice services is to (i) increase
our efforts in the retail market where it can provide product identification and
differentiation,  (ii) decrease our dependency on third party service providers,
and  (iii) increase the amount of traffic we process over our own network, under
direct  operating  agreements  we  establish  with  other  carriers and over the
Mexican  network.

     In  the  fourth  quarter  of  1999, we began distributing our prepaid cards
through  our  own  distribution  network in Mexico.  We believe we are the first
company  offering  prepaid  cards  on  a country-wide scale in Mexico.  In early
2000,  we  opened  up  a  direct  distribution  office  for prepaid cards in Los
Angeles,  California.  We  expect  that  the  margins  from our prepaid cards in
Mexico  will be significantly higher than our cards in the more competitive U.S.
market.  We also expect that our margins from our direct distribution efforts in
Los  Angeles  will  be  higher  than  those  we  gain  through  our traditional,
distributor-focused  distribution  channels.


                                       22
<PAGE>
     During 1999, we expended substantial capital resources in our network, both
in  the  U.S. and in Mexico.  Our total investments in 1999 reached $46 million,
the majority of which was related to our Mexico Network.  We intend to terminate
a  significant  portion  of  both our retail and wholesale traffic on our Mexico
Network  in the year 2000, which we expect will improve our overall gross margin
levels.  As  mentioned  above,  we also intend to offer Advanced Services to the
small  and medium size enterprises in Mexico, utilizing the Mexican network as a
foundation.  We expect that many of these services will have higher margins than
traditional  Voice  Services.

     We expect that gross profits from equipment sales will decline over time as
the  market  becomes  more  competitive.  Our strategy for maintaining the gross
profits  we  have  enjoyed  from this business line in the past is to enter into
additional  outsourcing  contracts  and  to  refocus  our sales efforts from the
simple  provision  of network equipment to the bundling of network equipment and
the  provision  of telecommunications services on our Mexican network.  Our call
center  operations  in Mexico have historically provided relatively higher gross
margins  than  our  other  lines of business.  We intend to shift several of the
support  functions provided to our retail lines of business in the U.S. from our
call  center in the U.S. to our call center in Mexico in order to take advantage
of  the relatively lower cost structure afforded by our Mexican operations.   In
March 2000, we relocated our call center in Mexico to increase our capacity from
120  positions  to  up  to  400  positions.

     We  expect that gross profits as a percentage of revenues as well as actual
gross  profit  will  increase  in  2000 primarily because of our ability  to run
 an increasing percentage of the traffic we manage over our own facilities.

                              RESULTS OF OPERATIONS

     The following tables sets forth for the periods indicated certain financial
data  as  a  percentage  of  revenues:

<TABLE>
<CAPTION>
                                                         PERCENTAGE OF REVENUES
                                                         YEAR ENDED DECEMBER 31,
                                                           1997    1998    1999
                                                         -----------------------
<S>                                                       <C>     <C>     <C>
Revenues                                                  100.0%  100.0%  100.0%
Cost of revenues                                           67.5    84.7    87.4
                                                          ------  ------  ------
Gross profit                                               32.5    15.3    12.6
Selling, general and administrative expense                22.6    10.4    22.8
Depreciation and amortization                               1.7     2.5     5.9
Impairment loss on long-lived assets                          -     0.8     0.7
                                                          ------  ------  ------
Operating income (loss)                                     8.2     1.6   (16.8)
Other income (expense), net                                (0.6)   (1.8)   (4.6)
                                                          ------  ------  ------
Income (loss) before income taxes and minority interest     7.6    (0.2)  (21.4)
Income tax benefit (expense)                               (0.2)   (0.6)    3.2
                                                          ------  ------  ------
Income (loss) before minority interest                      7.4    (0.8)  (18.2)
Minority interest in subsidiaries                           0.0     0.0     0.0
                                                          ------  ------  ------
Net income (loss)                                           7.4    (0.8)  (18.2)
                                                          ======  ======  ======
</TABLE>


Year  Ended  December  31,  1999  Compared  To  Year  Ended  December  31,  1998

     Revenues  decreased  from $132.2 million in 1998 to $106.8 million in 1999.
This decrease of $25.4 million, or 19.2%, was due principally to our decision to
reduce sales to distributors of low margin equipment in Mexico, a decline in our
voice  services  revenues  in  our  wholesale  segment, and the relatively lower
prices  we are obtaining from the sale of our prepaid cards. These declines were
offset  by  an  increase  in  revenues from our customer relationship management
services and the incremental broadband services and other products revenues from
our  INTERLINK  subsidiary,  which  was acquired in May 1998.  Network solutions
revenues  in  Mexico decreased $16.9 million from $30.2 million in 1998 to $13.3
million  in  1999.  This  decline  is  largely attributable to our refocusing on
higher  margin  products and a general slowdown in the market caused by weakened
economic conditions in Mexico and concerns about the Y2K virus.  Wholesale voice
services  revenues  decreased $16.4 million from $33.0 million for 1998 to $16.6
million  for  1999.  Retail voice services revenues  increased $0.6 million from
$60.1  million  in  1998  to  $60.7  million  in  1999.  Customer  relationship
management services revenues increased $5.0 million from $2.7 million in 1998 to
$7.7  million  in  1999  as  we  increased our operator positions to accommodate
higher  demand for our services.  Broadband services and other products revenues
increased  $2.4  million  from  $6.1  million  in  1998 to $8.5 million in 1999.


                                       23
<PAGE>
     Cost  of Revenues decreased from $111.9 million in 1998 to $93.4 million in
1999,  or  $18.5  million.  The  16.5%  decrease  in  cost  of  revenues was due
principally  to  the  decrease  of  revenues  offset  by  the  increased  costs
associated  with the voice services.  This decrease in cost of revenues was also
offset  by  the  incremental cost of revenues associated with the acquisition of
INTERLINK.  The  cost  of  revenues  as  a percentage of revenues increased from
84.7%  to  87.4%,  or  2.7%, due principally to the higher cost of revenues as a
percentage  of  revenues  associated with our voice services.  This increase was
offset partially by the decrease in cost of revenues as a percentage of revenues
associated  with  the  customer  relationship  management  services.

     Selling,  General and Administrative Expenses ("SG&A") increased from $13.8
million in 1998 to $24.4 million in 1999, or $10.6 million.  The 77% increase in
SG&A  was  due  to the incremental SG&A related to the acquisition of INTERLINK,
the  increased  staffing  associated  with  the  Mexican  network  build out and
increased  staffing  at  existing  operations  to  meet  the additional resource
requirements  associated  with  these  operations and the  overhead necessary to
support  the  growth  in  our  customer  relationship  management  operations.
Additionally,  we  recorded  an additional reserve for doubtful accounts of $1.6
million  and  a  $400,000  provision  for  inventory  obsolescence  in  Mexico.

     Overall  SG&A as a percentage of revenues increased from 10.4% to 22.8%, or
12.4%,  due  to  the  factors  stated  above.

     Depreciation  and  amortization increased from $3.3 million in 1998 to $6.3
million  in  1999,  or  $3.0 million.  Depreciation increased as a result of our
continuing  expansion of our communications network, which includes purchases of
switches  and  other  telecommunications  equipment  and  facilities.  We expect
depreciation expense to increase as we continue to expand our telecommunications
network.  In  addition,  goodwill  amortization  increased  as  a result of  the
acquisitions  of  Telereunion  and  INTERLINK  in  1998.

     Impairment  Loss  on  Long-lived Assets.     During the year ended December
31,  1998,  we determined that the carrying value of certain equipment and other
long-lived assets deployed under certain operating arrangements in Latin America
were  impaired,  resulting  in a charge to operating costs of approximately $1.0
million.  During  the  year  ended  December  31,  1999,  we  determined that an
additional  $715,000  in  carrying  value of certain equipment deployed in Latin
America  was  impaired,  resulting  in  a  charge  to  operating  costs.

     Interest  Income  (Expense),  net  increased from ($1.5) million in 1998 to
($2.9)  million  in 1999, or ($1.4) million.  This increase was mainly due to an
increase  in  our  level  of  borrowings,  including  the Deere Park Convertible
Debentures  and Gordon Brothers Convertible Debentures issued in connection with
the  INTERLINK  acquisition,  the  Senior  Notes,  the  $2 Million Senior Notes,
various  bridge  financings  and  the  Lucent  Credit  Agreement.

     The  Gordon  Brothers  Convertible Debentures provided for an "exit fee" of
$1.1 million, which was paid at the time of the repayment of the Gordon Brothers
Convertible  Debentures in May 1999.  In addition, we repaid $1.0 million of the
Deere  Park  Convertible  Subordinated Debentures in May 1999.  We paid an "exit
fee"  to  Deere  Park  of  $120,000  upon  the  repayment.

     Lastly, we recognized additional interest expenses related to our equipment
financing  agreements  and  the  Lucent  Credit  agreement.

     Other  Income (Expense) increased from ($948,000) in 1998 to ($2.0) million
in 1999, or ($1.1) million.  The increase in other expenses was due primarily to
an  increase in the amortization of debt offering costs of $1.4 million in 1999.
We also benefited from a foreign exchange gain of $207,000 in 1999 versus a loss
of  $639,000  in  1998 as the Mexican Peso remained relatively stable throughout
1999.

     Income  Tax  Benefit  (Expense)  changed  from  an  income  tax  expense of
($822,000)  in  1998  to  an  income  tax  benefit of $3.4 million in 1999.  Our
overall effective tax benefit for 1999 was 15.0% which reflects the tax benefits
on  losses  realized  offset  by  a  valuation  allowance of $3.3 million and by
permanent  differences between financial and tax reporting, the most significant
of  which  is  the  non-deductible  nature  of  goodwill  amortization.

     Net  Income  (Loss). We experienced a net loss of ($1.0) million in 1998 as
compared  to  a  net loss of ($19.5) million in 1999 due to a combination of the
factors  discussed  above.

Year  Ended  December  31,  1998  Compared  To  Year  Ended  December  31,  1997

     Revenues  increased  from  $36.2 million in 1997 to $132.2 million in 1998.
This  increase of $96.0 million, or 266%, was due principally to the acquisition
of  MSN completed in the first quarter of 1998, which provided revenues of $60.1
million for the year ended December 31, 1998.  Wholesale voice services revenues
increased  $15.7  million from $17.4 million for 1997 to $33.1 million for 1998.
In  addition, revenues from advanced services increased $14.2 million from $18.8
million  for 1997 to $33.0 million for 1998.  This increase in advanced services
revenues  is  due  to  the  acquisitions  of  Integracion de Redes, S.A. de C.V.
("Integracion")  and N.S.I., S.A. de C.V. ("NSI"), the overall growth in demand
for  these  services and the growth in revenues from the call center operations.
Services  provided  by  INTERLINK,  following  our  acquisition  of  INTERLINK,
generated  an  additional  $6.0  million  in  revenues.


                                       24
<PAGE>
     Cost  of Revenues increased from $24.4 million in 1997 to $111.9 million in
1998,  or  $87.5  million.  The  359%  increase  in  cost  of  revenues  was due
principally  to the incremental cost of revenues associated with the acquisition
of  MSN,  the  increase  in  the  sale  of wholesale voice services and advanced
services  and, to a lesser extent, the incremental cost of revenues attributable
to  the  acquisition  of  INTERLINK.  The  cost  of  revenues as a percentage of
revenues  increased from 67.5% to 84.7%, or 17.2%, due principally to the higher
cost of revenues as a percentage of revenues associated with the sale of prepaid
cards  and  the  higher  cost  of  revenues  on  wholesale  voice  services.

     Selling,  General  and Administrative Expenses ("SG&A") increased from $8.2
million  in 1997 to $13.8 million in 1998, or $5.6 million.  The 69% increase in
SG&A  was  due  principally to the incremental SG&A related to the operations of
the  acquisitions  of  MSN  and  INTERLINK  and  increased  staffing at existing
operations  of  the  advanced services business and the wholesale voice services
business to meet the additional resource requirements associated with the growth
of  these  operations.

     In  addition, SG&A was negatively impacted by the write off of receivables,
of  approximately  $541,000,  due  from  a  customer who filed for bankruptcy as
discussed  above.  Included  in  SG&A are approximately $115,000 associated with
pre-operating  costs  on Telereunion S.A., our subsidiary which has been granted
the  long  distance  concession  in  Mexico.

     Overall  SG&A as a percentage of revenues decreased from 22.6% to 10.4%, or
12.2%.  This  decrease  was  due  principally  to  the  lower SG&A expenses as a
percentage of revenues associated with MSN and to the growth in overall revenues
rapidly  outpacing  the  growth in SG&A expenses. This improvement was partially
offset  by  the  write  off  of  receivables  from the customer, which filed for
bankruptcy  as  discussed above, and the pre-operating expenses with the Mexican
network.

     Depreciation  and  amortization  increased  from  $622,000  in 1997 to $3.3
million  in  1998,  or  $2.7  million.  This  increase  is due to an increase in
goodwill amortization primarily due to the vesting of performance based warrants
issued  in  connection  with  the  Telereunion  acquisition,  which  resulted in
additional  goodwill  being  recognized  on  December 31, 1997 and in the fourth
quarter  of  1998 and goodwill recognized on the MSN and INTERLINK acquisitions.
In  addition,  depreciation increased as a result of our continuing expansion of
its  international  wholesale  long distance network which includes purchases of
switches  and  other  telecommunications  equipment  and  facilities.  We expect
depreciation  expense  to  increase  as  it  continues  to  expand  its
telecommunications  network.

     Impairment  Loss  on  Long-lived Assets.     During the year ended December
31,  1998,  we determined that the carrying value of certain equipment and other
long-lived assets deployed under certain operating arrangements in Latin America
were  impaired,  resulting  in a charge to operating costs of approximately $1.0
million.

     Interest  Income  (Expense), net increased from ($95,000) in 1997 to ($1.5)
million in 1998, or ($1.4) million.  This increase was mainly due to an increase
in  our  level  of  borrowings,  including  notes  issued in connection with the
Integracion and MSN acquisitions, and the Deere Park Convertible Debentures and
Gordon  Brothers  Convertible Debentures issued in connection with the INTERLINK
acquisition.

     The  Gordon Brothers Convertible Debentures provide for an "exit fee" which
is  payable if the obligation is settled in a cash payment rather than converted
into Common Stock.  Included in interest expense for the year ended December 31,
1998,  is an accrual of approximately $470,000 related to exit fees we expect to
pay  once  the  Gordon  Brothers  Convertible Debentures are paid in fiscal year
1999.

     Other  Income  (Expense) increased from ($137,000) in 1997 to ($812,000) in
1998,  or  ($675,000).  This  increase  is  primarily  due  to  foreign exchange
translation  losses  of  $639,000  resulting  from  the translation of financial
statements  of  our  Mexican  operations.  The  Mexican peso experienced a 22.1%
devaluation  in  the  exchange  rate  to  the  U.S.  dollar  during  1998.

     Income Tax Benefit (Expense) increased from ($84,000) in 1997 to ($822,000)
in  1998.  Income  tax expense in 1997 was lower than income tax expense in 1998
as  a  result  of  our  utilization  of our loss carryforwards to offset taxable
income  and the recognition of a portion of the deferred tax benefits related to
our  tax  loss carryforward.  The effective tax rate for 1998 is higher than the
U.S.  and  Mexico  statutory  rate of 34% due to permanent differences, the most
significant  of  which  is  the  nondeductible  nature of goodwill amortization.


                                       25
<PAGE>
     Net  Income  (Loss).  We  experienced net income of $2.7 million in 1997 as
compared  to  a  net  loss of ($1.0) million in 1998 due to a combination of the
factors  discussed  above.

                         LIQUIDITY AND CAPITAL RESOURCES

     Net  cash  provided  by (used in) operating activities was $6.6 million and
($10.3)  million  for  the  years ended December 31, 1998 and December 31, 1999,
respectively.  The  decrease  in  net  cash  provided  by  operations in 1999 as
compared  to  1998  was  due  primarily to decreased level of revenues and lower
gross  margins  and  higher levels of SG&A incurred to support expanding and new
operations.   In  addition,  our  working  capital  position  was impacted by an
increase  in  accounts  payable  of  $1.2  million  and  an  increase in accrued
liabilities  of  $5.3  million.

     Net  cash  used  in  investing  activities  was ($17.7) million and ($18.3)
million  for  the  years  ended  December  31,  1998  and  December  31,  1999,
respectively.  In  1999, we expended approximately $18.3 million in constructing
our  network  in Mexico and expanding our switching, transmission and processing
platforms  required  to provide international wholesale and retail long distance
services.  We  also  incurred  additional  obligations for $24.6 million for the
construction  of  our  Mexican  network.  This amount is expected to be financed
with long term debt under the Lucent credit facility and is included in Accounts
Payable  and  Construction  in  Progress  on  the December 31, 1999 consolidated
balance  sheet.  Additionally,  we  incurred  obligations  for  $2.8 million for
switching  equipment which is expected  to be financed through long term debt in
2000  and  is  included  in  Accounts  Payable and Property and Equipment on the
December  31,  1999  consolidated  balance  sheet.

     Net  cash  provided  by  financing  activities  was $16.0 million and $24.4
million  for  the  years  ended  December  31,  1998  and  December  31,  1999,
respectively.  During  1999,  we had proceeds of approximately $3.3 million (net
of  commissions)  from  sales  of  our  common stock and exercise of options and
warrants.  We  also  received $15.4 million from notes payable and $23.9 million
in  financing  under  the  Lucent  credit  facility.  We  made payments of $10.5
million  on  our  notes  payable,  $6.0 million on our convertible debt and $1.7
million  on  our  revolving  line  of  credit.

     As  of  December 31, 1999, we had cash and cash equivalents of $5.4 million
and  negative  working  capital  of  $42.5 million. Of this $42.5 million, $24.6
million represents accounts payable incurred in connection with the construction
of the Mexican network and $2.8 million represents accounts payable incurred for
switching  equipment.  We  plan  to  finance  the  network construction accounts
payable  under  the Lucent credit agreement subject to availability as discussed
below  and  the  equipment  accounts  payable  under  long  term  financing.
Additionally, we have classified as current $5.6 million in notes payable due to
non-compliance of certain financial covenants under a loan facility as discussed
below.  We  also have classified as current $1.2 million under the Lucent credit
facility.

     In  the  fourth  quarter  of 1998, we signed a financing arrangement with a
finance company, which provides for funding of equipment purchases of up to $6.0
million  through  May 1999.  The financing is structured as loans maturing three
years  from funding at interest rates 550 basis points above the Federal Reserve
Treasury Constant Maturity Rate.  We drew approximately $2.0 million during 1999
under  this  facility.

     In  the  fourth quarter of 1998, we entered into a stock purchase agreement
with  third  parties, which allowed us to sell at our option  up to $5.0 million
of our common stock. During the fourth quarter of 1998 and the fiscal year 1999,
we  utilized  this facility entirely. In connection therewith, we issued a total
of  783,338  shares  of  our  common  stock.

     On  January  11,  1999,  we  signed  a financing arrangement with a finance
company, which provides for funding of equipment purchases of up to $7.0 million
through  December  31,  1999.  The  financing  is  structured as long-term loans
maturing  January  1,  2005.  The  loans  provide  for payments of interest only
through January 1, 2000.  Thereafter, payments of principal and interest are due
quarterly.  Interest  is  calculated on available basis during the interest only
period  at  425  basis  points above the 90 day commercial paper rate.  Interest
thereafter is calculated at 500 basis points above the five year Federal Reserve
Treasury Constant Maturity Rate.  We have drawn approximately $5.6 million under
this  facility  through  December  31,  1999,  of which $2.5 million resulted in
refinancing equipment, which was previously financed through an operating lease.
We  are  not  in  compliance  with  certain  financial covenants under this loan
facility  and  have  secured  a  waiver from the finance company of their rights
under  the  agreement  to  enforce default provisions due to non compliance with
these  financial  covenants  for  the fourth quarter of 1999. We are not able to
draw  down  additional  financing  under  this  facility  until such time as the
finance  company  allows  us  to do so. The finance company has also issued us a
forbearance letter informing us that they will not enforce acceleration of their
facility  until the earlier of March 31, 2000 or the date our merger with Pointe


                                       26
<PAGE>
is  completed.  The  finance company has agreed to extend the forbearance period
through  May  15,  2000.  The  amounts  outstanding  under this facility of $5.6
million  have  been  classified  as  current  in  the financial statements as of
December  31,  1999.  We may have to request additional waivers from the finance
company  due to non compliance with financial covenants in future quarters or we
may have to request an extension of the forbearance letter provisions should our
merger  with  Pointe not be completed by May 15, 2000.  We cannot guarantee that
the  finance company would provide us with additional waivers or that they would
extend  their  forbearance  letter  in which case they could enforce the default
provisions  and accelerate the maturity date.  Should that be the case, there is
no  guarantee that we would be able to obtain a replacement facility.  A default
under  this  agreement  would  trigger  cross  defaults  under the Lucent credit
facility.

     On May 7, 1999, we issued $6,850,000 in senior notes originally maturing on
May  6,  2000.  E.  Scott  Crist,  CEO  of  Telscape, is holder of the remaining
$850,000 balance of the senior notes. These senior notes are subject to optional
prepayment  provisions allowing us to prepay a portion or all of the outstanding
principal  amount  without  premium  or  penalty.  Under the terms of the senior
notes,  Mr.  Crist  received on November 6, 1999, 31,805 warrants at an exercise
price of $6.685. In the event that the senior notes are not paid by May 5, 2000,
then  Mr.  Crist will be issued an additional 31,805 warrants, in which case the
maturity  date  is  extended  until November 6, 2000. The maturity of the senior
notes  can  be  extended  unilaterally  by  us  through  January 4, 2001 with no
additional  consideration.  As  a  result,  the  senior  notes are classified as
long-term  in  the  financial  statements  as  of  December 31, 1999.  We repaid
$6,000,000  of  the  senior  notes  on  August 27, 1999, upon the funding of the
Lucent  credit  facility.  The loan from Mr. Crist bears interest at 8% from May
through  November  6,  1999.  The  interest rate increases by 1 percent for each
month  thereafter.  Pursuant  to  the  terms  of  the senior notes, we initially
issued  to  the  holders  of  the senior notes a total of 256,315 warrants at an
exercise  price  of  $6.68  per  share.  The proceeds from the senior notes were
utilized to repay the entire principal amount of the Gordon Brothers Convertible
Debentures  plus  $1.1 million in exit fees.  We estimated the fair value of the
warrants  by utilizing the Black-Scholes option pricing model with the following
assumptions:  dividend  yield  of  0%,  expected  volatility  of  54%, risk free
interest  rate  of  5% and expected life of one year.  The resulting cost of the
initial  256,315  warrants  of  approximately  $398,000 was amortized over three
months,  the  expected  term  of  the  notes  at  the time they were issued. The
resulting cost of the 31,805 warrants of approximately $49,000 will be amortized
over  one  year.

     On June 18,  1999,  we issued  $2,000,000  in a different  series of senior
notes  maturing  June 19,  2000.  These  senior  notes are  subject to  optional
prepayment  provisions allowing us to prepay a portion or all of the outstanding
principal amount without premium or penalty. These senior notes bear interest at
8% from June through December 17, 1999. The interest rate increases by 1 percent
for each month  thereafter.  We also  initially  issued to the  holders of these
senior  notes a total of 62,501  warrants  with an  exercise  price of $8.00 per
share and a term of three  years.  On December  18,  1999,  the  holders  became
entitled to an additional 62,501 warrants.  In the event that these senior notes
are not paid by June 18,  2000,  then the holders  will be issued an  additional
62,501  warrants in which case the maturity date is extended  until December 18,
2000.  The  maturity  of the senior  notes can be  extended  unilaterally  by us
through February 16, 2001 with no additional  consideration.  As a result, these
senior  notes are  classified  as long-term in the  financial  statements  as of
December 31, 1999.  We estimated the fair value of the warrants by utilizing the
Black-Scholes  option  pricing  model with the following  assumptions:  dividend
yield of 0%,  expected  volatility  of 54%,  risk free  interest  rate of 5% and
expected life of one year. The resulting cost of the initial 62,501  warrants of
approximately  $116,000 was amortized over two months,  the expected term of the
notes at the time they were  issued.  The  resulting  cost of the second  62,501
warrants of approximately  $143,000 will be amortized over one year. The holders
of these senior notes have provided us with a letter indicating their agreement,
subject to  definitive  documentation,  to convert  their notes into the Class F
Preferred described below.

     In July 1999,  our  revolving  credit  facility  expired  and we repaid all
amounts outstanding at that time.

     On  July  28,  1999,  the  Company  issued  an  unsecured  and subordinated
promissory  note  in  the amount of $576,000 maturing on November 24, 1999.  The
Company  may  prepay  this  note  with  no  penalty  subject  to  the  following
limitations.  In  the event that the Company's common stock closes above $11 per
share  for  the  five  consecutive  trading days prior to November 24, 1999, the
Company  may  elect  to pay the holder the principal amount in cash plus accrued
interest  at  a  rate  of  15%  per  annum.  In  the event that the price of the
Company's  stock  is greater than $5.25 per share and less than $11 per share at
the  time  of  maturity,  the  Company  must provide the holder of the note with
91,042  shares  of  the  Company's  common  stock  as payment of the note and no
interest  shall  be  owing.  In the event that the price of the Company's common
stock  is  less than $5.25 per share, the Company agrees to pay the note in cash
at  maturity  plus accrued interest at 15% per annum.  On November 24, 1999, the
Company  issued  91,042  shares  of the Company's common stock as payment of the
note  per  the  agreement.

     Also  in  July 1999, we received a bridge loan of $3.0 million from Lucent.
The  Lucent  bridge  loan  was  repaid  upon  the  funding  of the Lucent credit
facility.  In  connection  with the bridge loan, we issued to Lucent warrants to
purchase  an  aggregate of 85,000 shares of common stock at an exercise price of
$8.50  per  share.  The  warrants  have  a  term  of  three  years.


                                       27
<PAGE>
     On  August  27,  1999,  Telscape International, Inc., the registrant, along
with  its  subsidiaries,  Telereunion  S.A. de C.V. ("Telereunion"), Telereunion
International,  S.A.  de  C.V.,  Telereunion,  Inc.,  Telscape  USA,  Inc.,  MSN
Communications,  Inc., Interlink Communications, Inc., TSCP International, Inc.,
Vextro  De  Mexico  S.A.  de  C.V., Servicios Corporativos Vextro, S.A. de C.V.,
Telscape  de  Mexico S.A. de C.V., N.S.I. S.A. de C.V., Lan and Wan S.A. de C.V.
and  M.S.  Noticias y Telecomunicaciones, S.A. de C.V. signed a credit agreement
with  Lucent  Technologies, Inc.  The Lucent credit agreement provides for up to
$40  million  in financing.  In March 2000, Lucent signed a commitment letter to
increase  the  size  of the facility from $40 million to $60 million, subject to
certain conditions including the merger with Pointe.   We borrowed $23.9 million
under  the  credit  agreement  on  August  27,  1999,  of which $9.0 million was
utilized to repay the $3.0 million Lucent bridge loan and $6.0 million of senior
notes  and  $14.9  million  was  utilized  to  pay for costs directly related to
construction  of  the  Mexican  network  and  some  related debt offering costs.
Subsequent  loans  under  the  Lucent  credit  agreement  are  subject  to  the
satisfaction  of  certain  conditions  precedent,  one  of  which  has  not been
satisfied as of the date of this filing and is dependent upon the cooperation of
a  third  party.  We  expect,  however, to resolve this issue.  We have incurred
additional  obligations  to  Lucent  in  the construction of our Mexican network
totaling  $24.6  million  at  December  31,  1999.  We  expect  to  fund  these
obligations  and  other  obligations  under the facility, with proceeds from the
facility,  upon  consummation  of the merger with Pointe and the increase of the
Lucent  credit  facility  from  $40  million  to  $60  million.

     As of December 31, 1999, we were in default of  certain financial covenants
under  the  Lucent  credit  agreement.  In  conjunction  with  the  March  2000
commitment  for an additional $20 million, Lucent waived these defaults  and all
other  defaults  through  April  15,  2000  and  has  agreed  to renegotiate the
financial  covenants  that  will  be  used to measure our performance under this
facility.  We cannot guarantee that we will be able to secure additional waivers
from  Lucent,  should  they  be  necessary,  or  that we can negotiate financial
covenants  that  will  be  more favorable than the ones contained in the initial
credit  agreement.

     On  October 22, 1999, we signed a loan agreement with Lennox Invest Ltd., a
BVI  Corporation,  which provided for funding of up to $10.0 million. A total of
$1.5  million  has been funded on this facility, which bears interest at 10% per
annum. Interest on each note is to be paid at maturation of the respective note,
which  occurs six months after the date of each note. Of the $1.5 million funded
under  the  facility,  $1.0  million matures on April 19, 2000, and $0.5 million
matures  on  April 26, 2000. As part of this transaction, certain members of the
board  of  directors agreed to pledge shares of Telscape stock as collateral. We
have  agreed  to  indemnify these directors for the loss of their shares for any
reason  other  than  the  non-payment  of  these  loans, and to compensate these
directors as discussed below. In December 1999, we informed Lennox that we would
not  be  drawing  any  further  funding  under  this facility due to a breach of
contract  on  the  part  of  Lennox.

     As of December 31, 1999 and the date of this report, we have an outstanding
receivable  of  $1.4  million from a customer of our network solutions business.
This  receivable  has  been  outstanding  since December 31, 1998.  We have been
forced  to  utilize  legal  resources  to  enforce collection of this amount and
recorded  an  allowance  for  doubtful  accounts  of $700,000 against the amount
outstanding  during the fourth quarter of 1999.   In the event that we determine
that  this  amount or a portion of the amount is uncollectible in the future, we
may be forced to incur a charge in excess of the reserve already established for
the  account.

     As  of  December  31,  1999, our debt totaled $38.8 million, resulting in a
debt to equity ratio of 143% as compared to $13.1 million and 38%, respectively,
as  of  December  31,  1998.  Fully  funding  the  Lucent  credit  facility will
significantly increase our leverage.  In addition, we estimate that there are an
additional $10 to $15 million in expenditures related to the Mexican network and
our  network  expansion  which  will  be funded with a combination of the Lucent
facility  and  other  debt.  During  fiscal  1999,  we  incurred  losses and had
negative  cash  flow  from  operations.  We  do  not  expect that cash flow from
operations  will be sufficient to meet anticipated capital expenditures and debt
repayments  requirements  when  they  are  due without additional financing.  We
intend  to finance our growth, principal and interest obligations under existing
debt  obligations  and  additional capital investments required for our  planned
facilities  expansion  through  vendor  financing and the sale of debt or equity
securities (or a combination of both). There can be no assurance that we will be
able to obtain additional financing on commercially reasonable terms, if at all,
to  fund losses generated from operations, to fund capital expenditures, to fund
debt  service  obligations  as  they  become due or to fund strategic investment
alternatives.

     On November 18, 1999, we entered into an agreement to sell approximately $5
million  worth  of excess fiber optic capacity on our Mexican network to another
Mexican  carrier.  Under  the terms of the agreement, the carrier has provided a
non-refundable deposit of $500,000. The Mexican carrier is to provide 40% of the
purchase price on or before March 31, 2000 and the balance of the purchase price
by  June  8,  2000.  In  the  event that the Mexican carrier does not meet these
payment  dates  then  it  is  subject  to  certain  penalty  provisions.


                                       28
<PAGE>
     On November 24, 1999, we signed a letter of intent to merge with Pointe. In
connection with the letter of intent, Pointe agreed to lend us $1.5 million that
was  evidenced  by a short term promissory note ("Promissory Note").  As part of
this  transaction,  certain  members  of the board of directors agreed to pledge
shares  of  Telscape  stock  as  collateral.  We  have agreed to indemnify these
directors for the loss of their shares for any reason other than the non-payment
of  these  loans,  and  to  compensate  these  directors as discussed below.  On
December  31,  1999,  we  signed  a definitive merger agreement with Pointe.  In
addition,  Pointe  agreed  to  lend  us  $10  million,  which was evidenced by a
convertible  promissory note.  In early January, Pointe funded $8.5 million into
escrow.  On  January  10,  2000,  we  drew  down  $1 million from escrow and the
Promissory  Note  was  increased accordingly. On February 7, 2000, we executed a
replacement  convertible  promissory  note  ("Replacement Note") for $10,000,000
with  an  interest  rate of 12% and a maturity of June 30, 2000. The Replacement
Note extinguishes the $2.5 million of indebtedness under the Promissory Note. As
of  March 27, 2000, we have drawn down $4.7 million from escrow, creating a $7.2
million  obligation  to Pointe under the Replacement Note. Certain circumstances
relating to the merger agreement may affect our obligations and rights under the
Replacement Note.  See further discussion of the Replacement Note in the Amended
and  Restated  Agreement and Plan of Merger filed as Exhibit 2.1 to this report.

     Although  we  can  provide  no  assurance,  as  of the date of this filing,
it  is  expected  that  the  merger  with  Pointe  will  be  finalized  during
the  second  quarter  of  2000  at  which  time  the  companies  will  begin
operating  under  the  common  name  of  Telscape.  The  terms  of  the
original  merger  agreement  called  for  us  to  issue  our  common  stock  to
Pointe  shareholders  at  an  exchange  ratio  of  0.215054  of  a  share of our
common  stock  for  every  share  of  Pointe  common  stock.   Also,  for  each
share  of  Pointe  convertible  preferred  stock  outstanding, we will issue one
share  of  our  convertible  preferred  stock  (with  rights  and  preferences
substantially the same as  the Pointe convertible preferred stock). On March 30,
2000,  Telscape  and  Pointe  agreed  to an adjustment of the exchange  ratio of
approximately  4%.  The  adjusted  ratio  of  shares  is  the result of a Pointe
subsidiary, TeleCommute Solutions ("TCS"), which recently  received  $19 million
in  new  financing led by the MCI WorldCom Venture Fund and others, remaining in
the  combined  companies.  The merger agreement had previously provided that TCS
was  to  be  spun  off  to  Pointe  shareholders prior to the consumation of the
merger.  Consequently, each share of Pointe stock will be exchanged for 0.223514
shares of our common stock.

     The commitment  by  Lucent  to provide an additional $20 million under the
credit  agreement  and  the Class F Convertible Preferred Stock described below,
are  contingent  on  our  merger  with Pointe. Should the Company not be able to
consummate  the  merger  with  Pointe,  the Company's financial condition may be
adversely  affected.  The  merger  may  not be approved by both of our company's
shareholder  groups,  a  regulatory  agency  or  other  outside party, or we may
face  undue  delays  affecting  the  timeliness  in which  we can consummate the
merger.  Should  we  not  be  able  to  consummate  the  merger  in  a  timely
manner,  the  commitments  mentioned  above  may  expire.  We  cannot  guarantee
that  such  commitments  could  be  replaced  on  similar  terms,  if  at  all.
Should  the  merger  not  be  approved,  we  may have to continue our efforts to
identify parties interested and able to consummate an investment in our company.
There  can  be  no  assurance  that we will be able to identify any future joint
ventures,  acquisitions,  mergers or strategic alliances or that, if identified,
we  will  be able to successfully execute these transactions. If necessary funds
are  not  available,  our  business  and  results  of  operations and the future
expansion  of  our  business  could  be  materially  adversely  affected.

     Should  our  merger be approved by Telscape's and Pointe's shareholders, we
intend  to  jointly finance our growth, principal and interest obligations under
existing  debt  obligations, and additional capital investments required for our
planned  facility expansions through cash flow from operations, vendor financing
and the sale of debt or equity securities (or a combination of both).  There can
be  no  assurance  that the cash generated from operations will be sufficient to
fund  such  expenditures  or  that  we  will  be  able  to  obtain  financing on
commercially reasonable terms, if at all.  If necessary funds are not available,
our  business and results of operations and the future expansion of our business
could  be  materially  adversely  affected.

     Also in January 2000, we converted $500,000 in notes payable due January 1,
2000,  originally  incurred in connection with the Integracion acquisition, into
47,619  shares  of  common  stock  at  a  price  of  $10.50  per  share.

     Upon  the  signing  of  the  letter  of intent, we and Pointe began a joint
effort to raise capital for the combined companies. In March 2000, we completed
a  $31,575,000  private  placement  consisting  of  315,750  shares  of  Class F
Convertible  Senior  Preferred  Stock,  par value $.001 per share (the ''Class F
Preferred  Stock''),  together  with  five  year  warrants to purchase 1,925,306
shares  of  common  stock.  The  Class  F  Preferred  Stock  is convertible into
3,850,610  shares  of  our common stock at a conversion price equal to $8.20 per
share,  and  the exercise price of the warrants is $10.00 per share. The Class F
Preferred Stock earns dividends at a rate of 12% per annum, which are cumulative
and  payable  in  either  cash  or  shares  of  Class  F  Preferred Stock at our
discretion.  Pricing  for this  transaction  was established based on a trailing
thirty  day  average of the closing price of our common  stock as of December 7,
1999.  The  proceeds of  the  Class  F  Preferred have been placed  into  escrow
and  release  of escrow  is  subject  to  the  consummation  of  the merger with
Pointe.


                                       29
<PAGE>
     We  may  require the conversion of all of the outstanding Class F Preferred
Stock (i) in conjunction with a qualified offering or (ii) at any time after the
first  year  anniversary  of the first issue date if: (1) our common stock shall
have been listed for trading on the New York Stock Exchange, the Nasdaq National
Market  System  or  the  American  Stock Exchange (each, an "Exchange"); (2) our
common  stock  shall  have  traded  on such Exchange for a period of at least 20
consecutive  trading  days  at  a price per share of at least $15.00 (subject to
appropriate  adjustment  for  recapitalization  events);  and (3) the cumulative
average  daily  trading  volume  of  our common stock during such 20 consecutive
trading  day  period shall be at least $3,000,000; provided, that, the shares of
common stock issuable upon such conversion shall have been registered and listed
on  each  securities exchange, over-the-counter market or on the Nasdaq National
Market  on  which similar securities issued by us are then listed.  For purposes
of  this paragraph, qualified offering shall mean the sale by us of common stock
or  other equity interests in a public offering at a purchase price per share in
excess  of  $15.00  per  share  (subject  to  appropriate  adjustment  for
recapitalization  events)  yielding gross proceeds of not less than $30,000,000.

     Telscape  will  be  required  to file a registration statement with the SEC
within  150  days of closing the sale of the Class F Preferred Stock to register
the  shares of common stock issued or issuable upon  conversion of all the Class
F Preferred Stock (including shares issued as dividends) and the exercise of the
related  warrants.

                        FOREIGN CURRENCY TRANSLATION RISK

     The  general  economic  conditions  of  Mexico  are greatly affected by the
fluctuations  in  exchange  rates  and  inflation.  Our foreign currency risk in
Mexico  has  traditionally  been  mitigated  due  to  the  fact that many of our
customers  are  multinational  firms  that  pay  in  United  States dollars.  In
addition,  most of our customers that pay in pesos pay at the spot exchange rate
in effect at the time of payment as opposed to the exchange rate at the time the
receivable  is  created.  Our functional currency in Mexico is the United States
dollar  because  the majority of its transactions are in such currency. However,
given the recent completion of construction of the Mexican network and our plans
to  record  dollar-denominated  debt  on our Mexican subsidiaries' books, we may
incur some significant translation gains and losses in the future. We may choose
to  limit  our  exposure to translation gains and losses through the purchase of
forward  foreign exchange contracts or similar hedging strategies.  There can be
no  assurance  that any foreign currency hedging strategy would be successful in
avoiding  translation  related  gains  or  losses.

     We  do  not  currently  hedge  against  the  risk  of foreign exchange rate
fluctuations.  See  further discussion in Item 7A - Quantitative and Qualitative
Disclosures  about  Market  Risk  -  Foreign  Currency  Exchange  Risk.

                              YEAR 2000 COMPLIANCE

     To  date,  year  2000  problems  have had a minimal effect on our business.
However,  we  may  not  have identified and remediated all significant year 2000
problems.

     Further  remediation  efforts may involve significant time and expense, and
unremediated  problems may have a material adverse effect on our business. Also,
we  sell  telecommunications  products  to companies in a variety of industries,
each  of which is experiencing different year 2000 issues. Customer difficulties
with year 2000 issues might require us to devote additional resources to resolve
underlying  problems.  Finally,  although  we  have not been made a party to any
litigation  or arbitration proceeding to date involving our products or services
and  related to year 2000 compliance issues, we may in the future be required to
defend our products or services in such proceedings, or to negotiate resolutions
of  claims  based on year 2000 issues. The costs of defending and resolving year
2000-related  disputes,  regardless  of  the  merits  of  such disputes, and any
liability  for year 2000 related damages, including consequential damages, would
negatively  affect  our business, results of operations, financial condition and
liquidity,  perhaps  materially.

                        RECENT ACCOUNTING PRONOUNCEMENTS

     SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities," requires companies to recognize all derivatives contracts as either
assets or liabilities in the balance sheet and to measure them at fair value. If
certain  conditions  are  met,  a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on  the  hedging  derivative with the recognition of (i) the changes in the fair
value  of the hedged asset or liability that are attributable to the hedged risk
or  (ii)  the  earnings  effect  of  the  hedged  forecasted  transaction. For a
derivative  not  designated  as  a  hedging  instrument,  the  gain  or  loss is
recognized  in income in the period of change. SFAS No. 133 is effective for all
fiscal  quarters  of  fiscal  years  beginning  after  June  15,  2000.


                                       30
<PAGE>
     Historically,  we  have  not  entered  into derivatives contracts either to
hedge  existing risks or for speculative purposes. Accordingly, we do not expect
adoption  of  the  new  standard  to  have  a  material  effect on our financial
statements.

     SOP  98-5,  "Reporting  on  the Costs of Start-up Activities," requires all
start-up  and organizational costs to be expensed as incurred.  It also requires
all  remaining  historically  capitalized amounts of these costs existing at the
date  of  adoption  to  be  expensed  and reported as the cumulative effect of a
change  in  accounting  principles.  SOP  98-5 is effective for all fiscal years
beginning after December 31, 1998.  Adoption of SOP 98-5 did not have a material
effect  on  our  prior  years  financial  statements.  We  incurred and expensed
significant  costs  in  connection with the start-up of the network in Mexico in
1999.

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

     We  are subject to financial market risks, including interest rate risk and
foreign  currency  exchange  risk.

                               INTEREST RATE RISK

     As  of  December  31,  1999,  we  had  a mix of variable and fixed interest
bearing notes.  All of our debt obligations are denominated in U.S. dollars and,
represent  interest  rate  risk.  All  of our debt obligations are segregated in
fixed  and  variable  rate  instruments  as shown on the table below.  The table
shows  the amounts of principal payments due on our various debt instruments and
the weighted average rate for the principal payments then due using the rates in
effect  at  December  31,  1999.  Our  Lucent  facility  has  an  interest  rate
calculated  as  a  base rate plus a margin.  The base rate is established at the
time of funding and the margins are pre-determined fixed margins as contained in
the  Lucent  credit  agreement.  As  the  rate  for  Lucent  notes  is known and
determinable  at  the time of funding, all Lucent notes are categorized as fixed
in  the  table  below.

     The  table  set forth below summarizes the fair values and payment terms of
financial  instruments  subject  to  interest  rate  risk maintained by us as of
December  31,  1999.

<TABLE>
<CAPTION>
                                                                                          Fair Value
DEBT               2000         2001        2002        2003        2004     Total        at 12/31/99
-------------  ------------  ----------  ----------  ----------  ----------  -----------  ------------
<S>            <C>           <C>         <C>         <C>         <C>         <C>          <C>
Non-Interest
Bearing or
Fixed Rate     $ 4,870,000   4,553,000   5,489,000   6,615,000   7,180,000   28,707,000   28,707,000
Wtd. Avg.
Interest Rate        10.30%      11.22%      11.93%      12.28%      12.80%      11.84%          ---

Variable       $ 1,777,000   4,702,000   1,342,000   1,116,000   1,117,000   10,054,000   10,054,000
Wtd. Avg.
Interest Rate        10.54%      12.56%      10.52%      10.50%      10.50%       11.48%         ---
               ---------------------------------------------------------------------------------------
Total          $ 6,647,000   9,255,000   6,831,000   7,731,000   8,297,000   38,761,000   38,761,000
               =======================================================================================
</TABLE>

     We  have  not  entered  into  any  derivative  contracts  or used any other
interest  rate  risk  management  techniques to attempt to minimize the interest
rate risk inherent in each of our debt instruments.  At the time of this filing,
we  have  no  plans  in  place  to  actively  manage  this  risk.

     As  we  do  not  have  a  significant  amount  of  variable  interest  rate
obligations, we have not entered into derivative transactions to hedge our risk.

                         FOREIGN CURRENCY EXCHANGE RISK

     We  conduct a significant amount of its operations in countries outside the
United  States.  Our  foreign  currency  exchange  risk  includes the following:

     The  Mexican  economy  has  historically  had  periods  of  exchange  rate
instability  and peso devaluation.  1999 was the first year in recent history in
which not only did the peso not decline but appreciated slightly year over year.
Our  advanced  services  business  is  conducted  in Mexico. The majority of our
revenues in the advanced services business are contracted in dollars or in pesos
indexed to the dollar at the time of settlement.  The products and services that


                                       31
<PAGE>
we  sell  in the advanced services business line are generally imported from the
U.S.  or  other  countries  and are payable in dollars.  Our remaining operating
costs  in  this  segment  are  generally  paid  in pesos.  Our major outsourcing
contracts  with  the  U.S.  Embassy and the Ministry of Foreign Affairs generate
revenues  which  are  collected  in  pesos  and  costs  which are paid in pesos.
Additionally,  we  anticipate  receiving  a  greater  portion of our revenues in
Mexican  pesos  as  our  voice  services,  network  operations  and  customer
relationship  management  services  expand.  We  also  anticipate incurring more
peso-denominated  costs as our operations in Mexico expand in line with revenues
therefrom.  As  examples, the prepaid cards that we started selling in late 1999
in  Mexico  are peso-denominated, the provision of telecommunication services in
tandem  with  the  operation  of  our  Mexican network is likely to be primarily
peso-denominated and our call center services, which we anticipate will continue
to  grow  are  all  presently  peso-denominated.

     In our  broadband  services  business  segment,  we  generally  collect our
revenues in U.S. dollars and pay for our costs to provide these services in U.S.
dollars

     In our voice services business  segment,  we sell our services to customers
in the U.S. and thus our revenues have been collected in U.S. dollars. Our costs
of providing  these  services are paid to vendors both in the U.S. and in Mexico
or other Latin American countries. A significant portion of our costs to provide
these services are structured under operating agreements with carriers in Mexico
under which the costs  historically  have been settled in pesos. We entered into
additional  agreements with carriers in Mexico which provided us with additional
termination   capacity  in  Mexico  in  1999.  These  arrangements  provide  for
settlement in U.S. dollars.

     Nonetheless,  as stated above, we anticipate having an increasingly  larger
portion of our business in Mexico,  and  conducting  that business  primarily as
peso-denominated.

     We  do  not  have  a  hedging policy in place but do plan to consider using
derivatives  to mitigate the risk of paying off our dollar denominated debt with
increasingly  Mexican  operations.  We  have  not entered into any derivative or
futures contracts or used any other such exchange rate risk management technique
as  of  the  date  of  this  filing.


                                       32
<PAGE>
ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA.

Index  to  Consolidated  Financial  Statements:

                                                                       Page
                                                                       ----
Report of Independent Certified Public Accountants                       34

Consolidated Balance Sheets - At December 31, 1998 and 1999              35

Consolidated Statements of Operations - For the years ended
December 31, 1997, 1998 and 1999                                         36

Consolidated Statements of Stockholders' Equity - For the
years ended December 31, 1997, 1998 and 1999                             37

Consolidated Statements of Cash Flows - For the years ended
December 31, 1997, 1998 and 1999                                         38

Notes to Consolidated Financial Statements                               40

Schedule II Valuation and Qualifying Accounts                            75


                                       33
<PAGE>
               Report of Independent Certified Public Accountants
               --------------------------------------------------

Telscape  International,  Inc.
Houston,  Texas

We  have  audited  the  accompanying  consolidated  balance  sheets  of Telscape
International,  Inc.  and subsidiaries as of December 31, 1998 and 1999, and the
related  consolidated  statements  of operations, stockholders' equity, and cash
flows for each of the years in the three year period ended December 31, 1999. We
have  also  have  audited  the  financial  statement schedule for the year ended
December  31 1999, listed in the accompanying index.  These financial statements
and  schedule  are  the  responsibility  of  the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these financial statements and
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 and the schedule. 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  financial  position  of  Telscape
International,  Inc.  and  subsidiaries  at  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 financial statement schedule presents fairly, in all
material  respects,  the  information  set  forth  therein.



                                             /s/ BDO  SEIDMAN,  LLP

Houston,  Texas
March  10,  2000


                                       34
<PAGE>
<TABLE>
<CAPTION>
                        TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS

ASSETS
                                                                               December 31,
                                                                       --------------------------
                                                                           1998           1999
                                                                       -------------  ------------
CURRENT ASSETS:
<S>                                                                    <C>            <C>
  Cash and cash equivalents                                            $   9,631,000  $  5,419,000
  Accounts receivable, less allowance for doubtful accounts of
    $500,000 and $2,110,000,  respectively                                14,387,000    12,283,000
  Inventories                                                              4,581,000     5,838,000
  Prepaid expenses and other                                               3,519,000     4,203,000
  Deferred income taxes                                                      628,000     2,254,000
                                                                       -------------  ------------
       Total current assets                                               32,746,000    29,997,000
PROPERTY AND EQUIPMENT, net of accumulated depreciation                   14,576,000    58,468,000
GOODWILL AND OTHER INTANGIBLES, net of accumulated amortization           31,416,000    32,342,000
DEFERRED INCOME TAXES                                                         35,000     2,587,000
OTHER ASSETS                                                               1,558,000     3,746,000
                                                                       -------------  ------------
            Total assets                                               $  80,331,000  $127,140,000
                                                                       =============  ============


                            LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
  Accounts payable                                                       $22,090,000  $ 45,841,000
  Accrued expenses                                                        10,182,000    15,494,000
  Current portion of notes payable and capital lease obligations           2,714,000    11,112,000
  Convertible debentures                                                   4,996,000           ---
                                                                        ------------  -------------
 Total current liabilities                                                39,982,000    72,447,000
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS, net of current portion        1,488,000    27,649,000
CONVERTIBLE SUBORDINATED DEBENTURES                                        3,935,000           ---
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 5,000,000 shares authorized;
  without defined preference rights                                              ---           ---
  Series A preferred stock, $.001 par value, 1,000,000 shares authorized         ---           ---
  Common stock, $.001 par value, 25,000,000 shares authorized;
  6,048,909  and  7,975,837 issued, respectively                               6,000         8,000
  Additional paid-in capital                                              39,398,000    51,142,000
  Accumulated deficit                                                     (3,881,000)  (23,356,000)
  Treasury stock                                                            (480,000)     (480,000)
  Capital subscriptions receivable                                          (117,000)     (270,000)
                                                                        ------------  -------------
              Total stockholders' equity                                  34,926,000    27,044,000
                                                                        ------------  -------------
              Total liabilities and stockholders' equity                 $80,331,000  $127,140,000
                                                                        ============  =============
</TABLE>

      The accompanying notes are an integral part of these financial statements.


                                       35
<PAGE>
<TABLE>
<CAPTION>
                                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                           Year Ended December 31,
                                                                 ---------------------------------------------
                                                                       1997          1998          1999
                                                                 --------------  --------------  -------------
<S>                                                              <C>            <C>              <C>
REVENUES                                                         $ 36,154,000   $  132,179,000   $106,833,000
COST OF REVENUES                                                   24,396,000      111,892,000     93,394,000
                                                                 --------------  --------------  -------------
GROSS PROFIT                                                       11,758,000       20,287,000     13,439,000

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                                             8,154,000       13,774,000     24,357,000

DEPRECIATION AND AMORTIZATION                                         622,000        3,316,000      6,335,000
IMPAIRMENT LOSS ON LONG-LIVED ASSETS                                      ---        1,026,000        715,000
                                                                 --------------  --------------  -------------

OPERATING INCOME (LOSS)                                             2,982,000        2,171,000    (17,968,000)
OTHER INCOME (EXPENSE):
  Interest income                                                     171,000          195,000        268,000
  Interest expense                                                   (266,000)      (1,660,000)    (3,155,000)
  Amortization of debt offering costs                                     ---         (136,000)    (1,365,000)
  Foreign exchange gain (loss)                                       (126,000)        (639,000)       207,000
  Other, net                                                          (11,000)        (173,000)      (890,000)
                                                                 --------------  --------------  -------------
  Total other expense, net                                           (232,000)      (2,413,000)    (4,935,000)
                                                                 --------------  --------------  -------------
INCOME (LOSS) BEFORE INCOME TAXES AND  MINORITY INTERESTS           2,750,000         (242,000)   (22,903,000)


INCOME TAX BENEFIT (EXPENSE)                                          (84,000)        (822,000)     3,428,000
                                                                 --------------  --------------  -------------
INCOME  (LOSS) BEFORE MINORITY INTERESTS                            2,666,000       (1,064,000)   (19,475,000)

MINORITY INTERESTS IN SUBSIDIARIES                                      6,000           34,000            ---
                                                                 --------------  --------------  -------------
NET INCOME (LOSS)                                                $  2,672,000   $   (1,030,000)  $(19,475,000)
                                                                 ==============  ==============  =============
EARNINGS (LOSS) PER SHARE:
 Basic                                                           $       0.68   $        (0.20)  $      (2.92)
 Diluted  (1)                                                    $       0.53   $          N/A   $        N/A

WEIGHTED AVERAGE SHARES OUTSTANDING:
 Basic                                                              3,903,470        5,052,096      6,669,987
 Diluted (1)                                                        5,152,211              N/A            N/A

<FN>
(1)     Inclusion of additional shares under a diluted analysis is inappropriate due to the anti-dilutive effect
</TABLE>

     The accompanying notes are an integral part of these financial statements.

                                       36
<PAGE>
<TABLE>
<CAPTION>
                                          TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                          YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

                                           COMMON STOCK       ADDITIONAL                                CAPITAL        TOTAL
                                         ------------------    PAID-IN     ACCUMULATED    TREASURY   SUBSCRIPTIONS   STOCKHOLDERS'
                                          SHARES    AMOUNT     CAPITAL       DEFICIT       STOCK       RECEIVABLE      EQUITY
                                         ---------  -------  -----------  -------------  ----------  -------------  --------------
<S>                                      <C>        <C>      <C>          <C>            <C>         <C>            <C>
Balance, December 31, 1996               3,935,969  $ 4,000  $11,884,000  $ (5,523,000)        ---   $   (600,000)  $   5,765,000
Issuance of stock in connection with
   warrants and options exercised          148,058      ---    1,004,000           ---         ---            ---       1,004,000
Compensation related to common stock
   and warrants granted                     20,000      ---      188,000           ---         ---             ---        188,000
Repurchase of treasury shares                  ---      ---          ---           ---    (297,000)            ---       (297,000)
Release of stock in escrow                     ---      ---          ---           ---         ---         600,000        600,000
Additional consideration recognized
    upon  vesting of warrants                  ---      ---   12,156,000           ---         ---             ---     12,156,000
Net income                                     ---      ---          ---     2,672,000         ---             ---      2,672,000
                                         ---------  -------  -----------  -------------  ----------  --------------  -------------
Balance, December 31, 1997               4,104,027    4,000   25,232,000    (2,851,000)   (297,000)            ---     22,088,000
Issuance of stock in connection with
   warrants and options exercised        1,242,151    2,000    5,052,000           ---         ---             ---      5,054,000
Issuance of stock and warrants  in
   connection with acquisition             100,000      ---      980,000           ---         ---             ---        980,000
Issuance of stock in connection with
   debt  conversion                        333,000      ---      888,000           ---         ---             ---        888,000
Additional consideration recognized
   upon vesting of  warrants                  ---       ---    5,479,000           ---         ---             ---      5,479,000
Issuance of warrants with convertible
   debt placement                              ---      ---      479,000           ---         ---             ---        479,000
Sale of common stock                       269,731      ---    1,288,000           ---     107,000        (117,000)     1,278,000
Repurchase of treasury shares                  ---      ---          ---           ---    (290,000)            ---       (290,000)
Net loss                                       ---      ---          ---    (1,030,000)        ---             ---     (1,030,000)
                                         ---------  -------  -----------   ------------  -----------  -------------  -------------
Balance, December 31, 1998               6,048,909    6,000   39,398,000    (3,881,000)   (480,000)       (117,000)    34,926,000
Issuance of stock in connection with
   warrants and options exercised          400,445      ---      382,000           ---         ---             ---        382,000
Issuance of stock and warrants  in
   connection with acquisition of
    minority interest                      400,000      ---    3,305,000           ---         ---             ---      3,305,000
Issuance of stock in connection with
    debt conversion                        567,359    1,000    3,671,000           ---         ---             ---      3,672,000

Issuance of warrants in connection with        ---             1,275,000
    financings and services provided                    ---                        ---         ---             ---      1,275,000
Sale of common stock                       559,124    1,000    3,111,000           ---         ---        (153,000)     2,959,000
Net loss                                       ---      ---          ---   (19,475,000)        ---             ---    (19,475,000)
                                         ---------  -------  -----------  -------------  ----------  --------------  -------------
Balance, December 31, 1999               7,975,837  $ 8,000  $51,142,000  $(23,356,000)  $(480,000)  $    (270,000)  $ 27,044,000
                                         =========  =======  ===========  =============  ==========  ==============  =============
</TABLE>

     The accompanying notes are an integral part of these financial statements.


</PAGE>
<TABLE>
<CAPTION>
                               TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                      Year Ended December 31,
                                                             -------------------------------------------
                                                                  1997          1998           1999
                                                             -------------  -------------  -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>            <C>            <C>
  Net income (loss)                                          $  2,672,000   $ (1,030,000)  $(19,475,000)
  Adjustments to reconcile net  income (loss) to net cash
    provided by operating activities:
  Provision for doubtful accounts                                 277,000        560,000      1,996,000
  Provision for inventory obsolescence                             53,000         22,000        450,000
  Depreciation and amortization                                   622,000      3,316,000      6,335,000
  Write-off of investment in operating venture                    196,000            ---            ---
  Deferred income taxes                                        (1,566,000)      (339,000)    (4,178,000)
  Impairment loss on long-lived assets                                ---      1,026,000        715,000
  Interest accrued on non-interest bearing notes and
    amortization of debt offering costs                           136,000        270,000      1,588,000
  Minority interest in subsidiaries' loss                          (6,000)       (34,000)           ---
  Equity in income from unconsolidated subsidiary                     ---        198,000         97,000
  Refinancing charges of operating lease                              ---            ---        327,000
  Expenses for warrants issued to third parties                       ---            ---        163,000
  Changes in assets and liabilities:
    Accounts receivable                                        (1,623,000)    (6,404,000)       108,000
    Inventories                                                (2,359,000)       493,000     (1,707,000)
    Prepaid and other assets                                   (2,634,000)    (1,345,000)    (3,202,000)
    Accounts payable                                            6,954,000      6,296,000      1,157,000
    Accrued liabilities                                         1,866,000      3,582,000      5,312,000
                                                             -------------  -------------  -------------
Net cash provided by (used in)  operating activities            4,588,000      6,611,000    (10,314,000)
                                                             -------------  -------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                          (1,682,000)    (6,159,000)   (18,268,000)
  Acquisition of Integracion, net of cash acquired                117,000            ---            ---
  Mandatory redemption of preferred stock                             ---       (380,000)           ---
  Acquisition of N.S.I., net of cash acquired                     (49,000)           ---            ---
  Acquisition of MSN, net of cash acquired                            ---     (2,353,000)           ---
  Acquisition of INTERLINK, net of cash acquired                      ---     (8,805,000)           ---
  Investment in BCH Holdings                                     (185,000)           ---            ---
                                                             -------------  -------------  -------------
Net cash used in investing activities                          (1,799,000)   (17,697,000)   (18,268,000)
                                                             -------------  -------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligations                          (104,000)       (66,000)      (144,000)
  Payments on notes payable                                       (50,000)      (681,000)   (10,500,000)
  Proceeds from notes payable                                        ---             ---     15,426,000
  Proceeds from capital subscriptions                             600,000            ---            ---
  Purchase of treasury shares                                         ---       (290,000)           ---
  Borrowings on line of credit                                        ---      1,948,000            ---
  Payments on line of credit                                          ---       (260,000)    (1,688,000)
  Borrowings under Lucent Credit Facility                             ---           ---      23,935,000
  Proceeds from warrants and options exercised                  1,004,000      5,054,000        382,000
  Proceeds from issuance of convertible debts                         ---     10,000,000            ---
  Payments on convertible debts                                       ---     (1,000,000)    (6,000,000)
  Proceeds from sale of common stock                                  ---      1,278,000      2,959,000
                                                             -------------  -------------  -------------
Net cash provided by financing activities                       1,450,000     15,983,000     24,370,000
                                                             -------------  -------------  -------------
Net increase (decrease) in cash and cash equivalents            4,239,000      4,897,000     (4,212,000)

Cash and cash equivalents at beginning of period                  495,000      4,734,000      9,631,000
                                                             -------------  -------------  -------------
Cash and cash equivalents at end of period                  $   4,734,000   $  9,631,000   $  5,419,000
                                                            ==============  =============  ==============
</TABLE>

The  accompanying  notes  are  an  integral  part of these financial statements.


<PAGE>
<TABLE>
<CAPTION>
                           TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                             Year Ended December 31,
                                                     -------------------------------------
                                                        1997         1998        1999
                                                     ----------    ----------  -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S>                                                  <C>           <C>         <C>
  Interest paid                                      $  121,000    $  855,000  $ 2,477,000
  Income taxes paid                                     505,000     1,657,000    1,001,000

NON-CASH TRANSACTIONS:
Property and equipment acquired by execution of
capital lease obligation                                329,000        45,000      318,000

Issuance of common stock, warrants and promissory
notes in connection with acquisition of MSN:
      Promissory notes                                      ---       672,000          ---
      Common stock and warrants                             ---       980,000          ---

Issuance of notes and acquisition of treasury
shares in litigation settlement :
       Litigation settlement                             (3,000)          ---          ---
       Treasury stock                                  (297,000)          ---          ---
       Notes payable                                    300,000           ---          ---

Issuance of common stock and warrants in
exchange for services provided in connection
with severance agreement                                188,000           ---          ---

Issuance of promissory notes in connection with
the acquisition of Integracion                        2,555,000           ---          ---

Additional contingent consideration recorded:
2,175,000 in 1997 and 500,000 in 1998 warrants
issued in connection with Telereunion and
Integracion acquisitions vesting upon achievement
of certain operating performance measures            12,156,000     5,479,000          ---

Issuance of common stock and warrants in
Exchange for additional economic interests
of Telereunion SA de CV                                     ---           ---    3,305,000

Accrual of redemption of 380,000 shares of
Series B preferred stock to be redeemed based
Upon achievement of certain operating
performance measures                                    380,000           ---          ---

Debt issuance costs in connection with
financings and convertible debentures                       ---       479,000    1,275,000

Issuance of common stock in connection with
conversion of notes and convertible debentures              ---       888,000    3,672,000

Network construction costs and equipment purchases
incurred and included as accounts payable
expected to be financed through long-term loans
or lease finance arrangement                                ---     3,500,000   27,464,000
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       39
<PAGE>
                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  THE  COMPANY  AND  SIGNIFICANT  ACCOUNTING  POLICIES

BUSINESS

     Telscape  International,  Inc.  (collectively  with  its  subsidiaries, the
"Company")  is  an  emerging,  fully-integrated  telecommunications company. The
Company  supplies  U.S.-originated  international  long  distance  services on a
wholesale  and  retail  basis,  via  switched  and  dedicated  networks, with an
emphasis  on  Latin  America.  In addition, the Company provides a full range of
advanced services and systems integration services in Mexico to major public and
private  sector  customers.

     Through  its  Telscape  USA,  Inc. ("Telscape USA") and TSCP International,
Inc.  ("TSCP")  subsidiaries,  the  Company  is a facilities-based long distance
telecommunications  services  company  providing  international  long  distance
services  for  calls  originating  in the United States and terminating in other
countries,  primarily  in  Latin  America.  Through  its  subsidiary,  MSN
Communications,  Inc.  ("MSN"),  the  Company is engaged in the distribution and
sale  of  prepaid  phone  cards across the United States, targeted mainly at the
Hispanic  community.

     Through  its  Mexican  subsidiaries,  Vextro  de  Mexico,  S.A.  de  C.V.
("Vextro"),  Telscape  de  Mexico,  S.A. de C.V. (formerly Integracion de Redes,
S.A.  de  C.V.) ("Integracion") and N.S.I., S.A. de C.V. ("N.S.I."), the Company
is  engaged in the distribution and sale of voice, data and networking equipment
and  provides value-added services in network integration. Each of these Mexican
entities  is  owned  principally  by  Telereunion,  Inc.  ( "Telereunion" ),  a
wholly-owned  subsidiary  of  the Company.  The Company established Servicios de
Comunicacion  Popular  S.  de R.L. ("SCP") in 1999, a wholly-owned subsidiary of
the  Company,  to  sell  and  distribute  prepaid  cards  throughout  Mexico.

     Through  its  subsidiary, INTERLINK Communications, Inc. ("INTERLINK"), the
Company  provides  satellite  teleport  services including voice, video and data
transport  services  to  customers in the U.S., Latin America and other parts of
the  world.

     In  June  1998, Telereunion S.A. de C.V. ("Telereunion S.A."), a subsidiary
of  the  Company,  received a 30-year, facilities-based carrier license from the
Mexican government allowing it to construct and operate a network over which the
Company  can  carry  voice,  video,  data  and  Internet  traffic in Mexico (the
"Mexican  Concession").  Through  its  wholly-owned  subsidiary,  Telereunion
International,  S.A,  de  C.V.  ("Telereunion  International"), the Company owns
approximately  92%  of the economic interests and 49% of the voting interests of
Telereunion  S.A.  In addition, three directors of the Company own an additional
18%  of  the  voting  interests  and 1% of the economic interests of Telereunion
S.A.,  resulting  in  the Company and such directors together controlling 93% of
the economic interests and 67% of the voting interests of Telereunion S.A. Under
Mexican  law,  foreign  investors  may  own more than a majority of the economic
interests  in  a  concessionaire  but  may  not  own more than 49% of the voting
ownership  of  any  concessionaire.  The  Company  did  not  have  significant
operations  from  Telereunion, S.A. in 1998.  In the second quarter of 1999, the
Company began the construction of a combined fiber-optic and microwave long haul
network  which  was  still  in  process  at  December  31,  1999.

     In  1999,  the  Company incorporated enablecommerce.com Inc. ("Enable"), to
launch  a  business  to business electronic commerce  platform in Latin America.
The  Company  did  not  have  significant  operations  from  Enable  in  1999.

PROPOSED  MERGER

     In  January  2000,  the  Company and Pointe Communications, Inc. ("Pointe")
jointly  announced  a  merger  of the companies in an all-stock transaction.  In
conjunction  with the merger agreement, the $1.5 million note extended by Pointe
in  December  1999  was  converted into a $1.5 million note convertible into the
Company's  preferred  stock  under terms contained in the merger agreement.  The
merger  agreement  calls  for  funding  of up to $10 million in such convertible
notes.  It  is expected that the merger with Pointe will be finalized during the
second  quarter  of  2000 at which time the companies will begin operating under
the common name of Telscape.  The terms of the original merger  agreement called
for  the  Company  to  issue  the  Company's common stock to Pointe shareholders
at  an  exchange  ratio  of  0.215054  of  a  share  of  the  Company's  common
stock  for  every  share  of  Pointe  common  stock.  Also,  for  each  share of
Pointe  convertible  preferred  stock  outstanding,  the  Company will issue one
share of the Company's convertible preferred stock (with rights and  preferences
substantially the same as  the Pointe convertible preferred stock). On March 30,
2000, the Company and  Pointe agreed  to an adjustment of the exchange  ratio of
approximately  4%.  The  adjusted  ratio  of  shares  is  the result of a Pointe
subsidiary, TeleCommute Solutions ("TCS"), which recently  received  $19 million
in  new  financing led by the MCI WorldCom Venture Fund and others, remaining in
the  combined  companies.  The merger agreement had previously provided that TCS
was  to  be  spun  off  to  Pointe  shareholders prior to the consumation of the
merger.  Consequently, each share of Pointe stock will be exchanged for 0.223514
shares of the Company's common stock.


                                       40
<PAGE>
FINANCIAL  CONDITION

     As  of December 31, 1999, the Company had negative working capital of $42.5
million,  primarily resulting from the Company's loss from operations and to the
substantial  resources  expended  on  the  construction  of  the  Company's
telecommunications  network  in  Mexico.  The  Company does not expect that cash
flows  from  operations  will  be  sufficient  to  meet  anticipated  capital
expenditures  and  debt  repayment  requirements  as  they  become  due  without
additional  financing.  Such efforts by the Company are described in Notes 4 and
11.  Should  the  proposed  merger  be  approved  by  the Company's and Pointe's
shareholders,  the  Company intends to jointly finance the Company's growth, the
principal  and  interest  obligations  under  existing  debt, and the additional
capital  investments  required  for  the  Company's  planned facility expansions
through  cash  flows  from  operations, vendor financing and the sale of debt or
equity  securities  (or  a combination of both). While management of the Company
believes  that  the  merger will be approved, there can be no assurance that the
cash  generated  from  the  combined  operations will be sufficient to fund such
expenditures  or  that  the  Company  will  be  able  to  obtain  financing  on
commercially  reasonable terms, if at all. If necessary funds are not available,
the Company's business  and  results  of  operations and the future expansion of
the Company's business  could  be  materially  adversely  affected.

SIGNIFICANT  ACCOUNTING  POLICIES

Principles  of  Consolidation

     The  consolidated financial statements include the accounts of the Company,
all  wholly  and  majority owned subsidiaries, as well as entities over which it
exercises  voting  control. The Company recognizes the minority interests in the
financial  statements  ,  which  represents  the  portion  of  majority  owned
subsidiaries attributable to minority owners. Investments in affiliates in which
the  Company  owns  a  20%  to  50% ownership interest, and in which the Company
exercises  significant  influence  over  operating  and  financial policies, are
accounted  for  by the equity method. Investments of less than 20% ownership are
recorded  at  cost,  which does not exceed the estimated net realizable value of
such  investments.  All  significant intercompany transactions and balances have
been  eliminated  in  consolidation.

Reclassifications

     Certain  prior  year  amounts  have been reclassified to conform to current
year  presentation.

Management's  Estimates  and  Assumptions

     The  accompanying  financial  statements  are  prepared  in conformity with
generally  accepted  accounting  principles  which  requires  management to make
estimates  and  assumptions  that  effect  the  reported  amounts  of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and  the  reported  amounts of revenues and expenses
during  the  reporting  period.  The  Company  reviews all significant estimates
affecting  the  financial statements on a recurring basis and records the effect
of  any  necessary adjustments prior to their issuance. The actual results could
differ  from  those  estimates.

Revenue  Recognition

     The  Company  recognizes  revenue  from  long  distance  telecommunications
services  at  the  time  of  customer usage. Revenue from sales of equipment are
recognized  at  time  of  shipment.  Revenue  from  data and network integration
value-added  services  are  recognized  when  services are performed. In certain
cases,  the  Company  had  entered  into arrangements with third parties whereby
these parties provide long distance telecommunication services for prepaid phone
cards  sold  at  a  fixed  cost.  As the earnings process is complete at time of
shipment  under those arrangements, the Company recognized revenues (and cost of
revenues)  from  the  sale  of  cards  at the time of shipment of its cards. The
Company  discontinued these types of arrangements in the second quarter of 1998.
In  other  cases,  the  Company has entered into arrangements with third parties
whereby  these  parties provide certain of  the long distance telecommunications
services for prepaid phone cards and bills the Company for these services as the
cards  are  utilized.  Under  these  arrangements,  the  earnings process is not
complete  until  the  cards  are utilized, and, accordingly,  the Company defers
revenues at time of shipment and recognizes revenues (and cost of revenues) from
the  sale  of  cards  as  the  cards  are  utilized  and  the  costs  measured.


                                       41
<PAGE>
Receivables

     The  Company  maintains  an  allowance  for  doubtful accounts based on the
expected  collectbility  of  all  consolidated  trade  accounts receivable.  The
allowance  for  doubtful  accounts as of December 31, 1998 and December 31, 1999
was  $500,000  and  $2,110,000,  respectively.  In  1998,  the Company wrote off
$541,000 in receivables from a customer which filed for bankruptcy.  The Company
increased  its  allowance  for  doubtful  accounts in the fourth quarter of 1999
primarily  resulting from a disputed accounts receivable balance of $1.4 million
from  a  major  customer  in  Mexico.

Cash  and  Cash  Equivalents

     The  Company  considers  cash  in  banks  and  short-term  investments with
original  maturities  of  three  months  or  less  as cash and cash equivalents.

Financial  Instruments

     The  Company  assesses  and  discloses  the  fair  value  of  its financial
instruments; however, this information does not represent the aggregate net fair
value  of  the  Company. Some of the information used to determine fair value is
subjective and judgmental in nature; therefore, fair value estimates, especially
for  less  marketable securities may vary. The amounts actually realized or paid
upon  settlement  or  maturity  could  be  significantly  different.

     Unless quoted market price indicates otherwise, the fair values of cash and
cash  equivalents,  short-term  investments,  escrowed  deposits and investments
(certificates  of  deposit)  generally  approximate  market value because of the
short  maturity  of  these  instruments.  The  Company's  notes  payable  also
approximate  market value as the underlying borrowing rates are similar to other
financial  instruments  with  similar  maturities  and  terms.

Inventories

     Inventories  consist  principally  of telecommunications equipment acquired
from  manufacturers  for  distribution  and  are  stated  at  the  lower of cost
(first-in,  first-out) or market.  The Company maintains a reserve for inventory
obsolescence.  The  reserve  as  of December 31, 1998 and December 31, 1999, was
$1,047,000  and  $1,313,000,  respectively.

Property  and  Equipment

     Property  and  equipment are stated at cost. The cost of major renewals and
betterments  is  capitalized;  repairs  and  maintenance costs are expensed when
incurred.  Upon  retirement  or sale, the cost of the assets disposed of and the
related  accumulated  depreciation  are  removed  from  the  accounts,  with any
resultant  gain  or  loss  being  reflected  in  the  Consolidated  Statement of
Operations. In 1998 and again in 1999, the Company recognized an impairment loss
of  $1.0  million and $715,000, respectively, as it determined that the carrying
value  of  certain  equipment  and  long-lived  assets  deployed  under  certain
operating arrangements in Latin America were impaired.  Depreciation of property
and  equipment  for  financial  reporting  purposes  is  computed  using  the
straight-line  method  over  the estimated useful lives of the assets. Leasehold
improvements and capital leases are amortized over the lesser of the life of the
lease  or  the  useful  life  of the asset. For income tax purposes, accelerated
methods  of  depreciation  are used. The Company capitalized interest related to
the  construction  of  its  Mexican  network  for  a  total of $638,000 in 1999.


                                       42
<PAGE>
The following is a summary of the Company's property and equipment and their
Estimated useful lives:

<TABLE>
<CAPTION>
                                       AS OF DECEMBER 31,        ESTIMATED
                                  ---------------------------  USEFUL LIVES
                                       1998          1999        (YEARS)
                                  -------------  ------------   -----------
<S>                               <C>            <C>            <C>
 Land                             $        ---   $    190,000
Computer equipment and software      2,419,000      3,465,000             3
Telecommunications equipment         9,918,000     17,497,000          5-10
Furniture and Fixtures                 932,000      1,141,000          5-10
Leasehold improvements               1,085,000      1,336,000          3-20
Transportation equipment               371,000        417,000             4
Teleport equipment                   3,947,000      4,328,000          5-15
Call center equipment                   47,000         65,000             3
Network construction in progress           ---     38,588,000
                                  -------------  -------------
                                  $ 18,719,000   $ 67,027,000
Less accumulated depreciation       (4,143,000)    (8,559,000)
                                  -------------  -------------
                                  $ 14,576,000   $ 58,468,000
                                  =============  =============
</TABLE>

Goodwill  and  Other  Intangibles

     The  major  classes  of  intangible  assets  are  summarized  below:

<TABLE>
<CAPTION>
                                    As of December 31,       Amortization
                               ----------------------------     Period
                                   1998          1999          (Years)
                               -------------  -------------  ------------
<S>                            <C>            <C>            <C>
Goodwill                       $ 33,760,000    $36,815,000           15
Other                                73,000        373,000            5
Less accumulated amortization    (2,417,000)    (4,846,000)
                               -------------  -------------
                               $ 31,416,000    $32,342,000
                               =============  =============
</TABLE>

     Intangible  assets are amortized using the straight-line method for periods
noted above.  Goodwill is recognized for the excess of the purchase price of the
various  business combinations over the estimated fair value of the identifiable
net  tangible  and intangible assets acquired. In connection with certain of the
Company's  acquisitions,  the  Company  issued  performance-based  warrants. The
Company  records  such  contingent  consideration at the time the contingency is
resolved  and  the  consideration  becomes  issuable  or when the outcome of the
contingency  is  determinable  beyond  a reasonable doubt. During the year ended
December  31, 1998, the remaining 500,000 warrants issued in connection with the
Telereunion  acquisition vested resulting in the Company recording $5,479,000 in
additional  consideration  with  this  acquisition.  See  Note  2  for  further
discussion  regarding  the  Company's  acquisitions.  Realization  of long-lived
assets,  including  goodwill,  is periodically assessed by the management of the
Company.  Accordingly,  in  the event that facts and circumstances indicate that
property  and  equipment,  and  intangible  or  other assets may be impaired, an
evaluation  of  recoverability would be performed. If an evaluation is required,
the  estimated  future  undiscounted  cash  flows  associated with the asset are
compared  to  the asset's carrying amount to determine if a write-down to market
value  is  necessary.  In  connection  with  such  assessment by management, the
Company  recorded  an  impairment loss of $1.0 million and $715,000 for the year
ended  December  31,  1998 and 1999 respectively, relating to certain long-lived
assets  in  Latin  America.

     In November 1999, the Company issued 400,000 shares and 100,000 warrants to
the  minority  shareholders of its subsidiary, Telereunion S.A., in exchange for
an additional 27% of the economic interests in Telereunion, S.A.   This resulted
in  the  Company's economic ownership interest in Telereunion S.A. increasing to
92%  while the Company's voting interest remains at 49%.  Three of the Company's
directors  own an additional 1% of the economic  interests and 18% of the voting
interests  in  Telereunion  S.A.  resulting  in a combined control of 93% of the
economic  interests and 67% of the voting interests.  The Company determined the
fair  value  of  the shares issued to the minority interest holders based on the
closing  price  of  the  Company's  common  stock  on the date the agreement was
signed.  The  Company  estimated the fair value of the warrants by utilizing the
Black-Scholes  option  pricing  model  with  the following assumptions: dividend
yield  of  0%,  expected  volatility  of  54%, risk free interest rate of 5% and
expected  life  of  one  year.  The  resulting  cost totaling approximately $3.3
million  was  recorded  as  goodwill  in  the  fourth  quarter  of  1999.


                                       43
<PAGE>
Warranty  Reserves

     The  Company  generally provides its network solutions customers a warranty
on  each  sale of equipment and related products and accrues warranty expense at
the  time  of  sale  based  upon  actual  claims  history. Actual warranty costs
incurred  are  charged  against  such  accrual  when  paid.

Prepaid  expenses  and  other  current  assets:

     Prepaid  expenses  and  other  current  assets  include  the  following:

<TABLE>
<CAPTION>
                                         AS OF DECEMBER 31,
                                      -----------------------
                                         1998         1999
                                      -----------  ----------
<S>                                   <C>          <C>
Value-added taxes receivable          $ 1,748,000  $2,142,000
Deposits                                  322,000     106,000
Prepaid insurance and other expenses      963,000   1,537,000
Other                                     486,000     418,000
                                      -----------  ----------
                                      $ 3,519,000  $4,203,000
                                      ===========  ==========
</TABLE>

Accrued  expenses:

     Accrued  expenses  include  the  following:

<TABLE>
<CAPTION>
                                               AS OF DECEMBER 31,
                                           -------------------------
                                               1998         1999
                                           ------------  -----------
<S>                                        <C>           <C>
Customer prepayments                       $  1,369,000  $ 3,946,000
Deferred Revenues                             5,497,000    2,877,000
Accrued interest                                584,000    1,439,000
Accrued wages                                 1,041,000      797,000
Taxes payable                                   745,000      423,000
Telecommunications taxes and fees payable       324,000    4,411,000
Other                                           622,000    1,601,000
                                           ------------  -----------
                                           $ 10,182,000  $15,494,000
                                           ============  ===========
</TABLE>

Foreign  Currency  Translation  and  Transactions

     The  Company has determined that the U.S. dollar is the functional currency
for  its  operations  outside  the U.S. As such, gains and losses resulting from
foreign  exchange  transactions  are  included in the Consolidated Statements of
Operations.   The  Company  recognized  a  foreign  exchange  gain  (loss)  of
($126,000),  ($639,000) and $207,000 for the years ended December 31, 1997, 1998
and  1999,  respectively.

Income  Taxes

     Income taxes are calculated using the liability method.  Under this method,
deferred  tax assets and liabilities are determined based on differences between
the  financial  reporting and income tax bases of assets and liabilities and are
measured  using  the  enacted  tax  rates  and  laws that will be in effect when
differences  are  expected  to  reverse. A valuation allowance is used to reduce
deferred  tax  assets to the amount that is more likely than not to be realized.


                                       44
<PAGE>
Earnings  (Loss)  Per  Share

     Earnings  (loss)  per  share  is  calculated  as  follows:

<TABLE>
<CAPTION>
                                             FOR THE YEAR ENDED DECEMBER 31,
                                      ------------------------------------------
                                          1997          1998          1999
                                      -------------  ------------  -------------
<S>                                   <C>            <C>           <C>
Basic
Net income (loss) as reported         $   2,672,000  $(1,030,000)  $(19,475,000)
Weighted average common shares
   Outstanding                            3,903,470    5,052,096      6,669,987
Basic earnings (loss) per share       $        0.68  $     (0.20)  $      (2.92)

Diluted
Net income (loss) as reported         $   2,672,000  $(1,030,000)  $(19,475,000)
Interest expense on convertible debt         42,000          ---            ---
                                      -------------  ------------  -------------
Net income (loss) applicable
   to common stockholders             $   2,714,000  $(1,030,000)  $(19,475,000)
Weighted average common
   Shares outstanding                     3,903,470    5,052,096      6,669,987
Options                                     430,969      891,211        901,220
Warrants                                    651,272    1,945,848      1,588,970
Convertible debt                            166,500          ---            ---
                                      -------------  ------------  -------------
Total weighted average
Dilutive potential common
   shares outstanding                     1,248,741    2,837,059      2,490,190
                                      -------------  ------------  -------------
Weighted average common
   and dilutive potential
   common shares outstanding              5,152,211    7,889,155      9,160,177
Diluted net income (loss) per share   $        0.53  $     (0.13)  $      (2.13)
</TABLE>

     Diluted  EPS  for  the  years  ended  December  31,  1998 and 1999, was not
disclosed  on  the  Consolidated  Statement  of  Operations  as  the  effect  is
anti-dilutive.  Certain  performance  based warrants vested at December 31, 1997
and  during  the  year  ended  December 31, 1998 upon the achievement of certain
operating  performance measures (See Note 2). These contingently issuable shares
were  included  in  the  calculation  of  diluted  EPS  when  all  the necessary
conditions  were met. If all the necessary conditions have not been satisfied by
the  end  of  the  period, the number of contingently issuable shares that would
have  been  issued if the reporting period was the end of the contingency period
are  included in the calculation as if those shares were issued at the beginning
of  that  period.  For year to date calculations, contingent shares are weighted
for the interim periods in which they are included in the computation of diluted
EPS. Accordingly, 1,000,000 warrants were included in the calculation of diluted
EPS  for the year ended December 31, 1997 as if those shares were issued on July
1,  1997  and 1,175,000 warrants were included as if those shares were issued on
October 1, 1997.   In addition, 500,000 warrants are included in the calculation
of  diluted  EPS  for  the  year ended December 31, 1998 as if those shares were
issued  July 1, 1998.  At December 31, 1997,  1998 and 1999, there were 500,000,
0  and  0  performance  based warrants, respectively, which had not vested which
were  not  included  in  the  calculation of diluted EPS. Additionally, 666,270,
95,619  and  930,101 options and warrants outstanding at December 31, 1997, 1998
and  1999,  respectively, were not included in the calculation of diluted EPS as
their  exercise  prices  were  greater  than  the  average  market  price of the
Company's  Common  Stock  during the period and inclusion of these securities in
the  calculation  would  result  in  an  anti-dilutive  effect.

Recent  Accounting  Pronouncements

     SFAS  No. 133, Accounting for Derivative Instruments and Hedging Activities
requires  companies  to  recognize all derivatives contracts as either assets or
liabilities  in  the balance sheet and to measure them at fair value. If certain
conditions  are met, a derivative may be specifically designated as a hedge, the
objective  of  which  is  to match the timing of gain or loss recognition on the
hedging  derivative with the recognition of (i) the changes in the fair value of
the  hedged  asset or liability that are attributable to the hedged risk or (ii)
the  earnings  effect of the hedged forecasted transaction. For a derivative not
designated  as a hedging instrument, the gain or loss is recognized in income in
the  period  of  change.  SFAS  No.  133 is effective for all fiscal quarters of
fiscal  years  beginning  after  June  15,  2000.

     Historically, the Company has not entered into derivatives contracts either
to  hedge  existing  risks or for speculative purposes. Accordingly, the Company
does  not  expect  adoption of the new standard to have a material effect on its
financial  statements.


                                       45
<PAGE>
     SOP  98-5,  "Reporting  on  the Costs of Start-up Activities," requires all
start-up  and organizational costs to be expensed as incurred.  It also requires
all  remaining  historically  capitalized amounts of these costs existing at the
date  of  adoption  to  be  expensed  and reported as the cumulative effect of a
change  in  accounting  principles.  SOP  98-5 is effective for all fiscal years
beginning after December 31, 1998.  Adoption of SOP 98-5 did not have a material
effect  on the Company's prior years financial statements.  The Company incurred
and expensed significant costs in connection with the start-up of the network in
Mexico  in  1999.

2.  MERGERS  AND  ACQUISITIONS

Telereunion  Acquisition

     On  May  17, 1996, the Company acquired all of the outstanding common stock
of  Telereunion,  which  had  previously acquired a 97% ownership of Vextro in a
triangular  reverse  acquisition, accounted for as a purchase. Vextro is engaged
in  the  distribution  and  sale  of  voice,  data  and networking equipment and
provides  value-added  telecommunications  services  and  network  integration
services  in  Mexico.

     Under the terms of the acquisition,  the Company issued to the shareholders
of Telereunion  1,605,000 shares of Common Stock of the Company,  380,000 shares
of  non-voting,  non-participatory  Series B  preferred  stock and  warrants  to
purchase up to 2,595,000  additional  shares of Common Stock at $2.19 per share.
The warrants vest and become  exercisable upon Vextro meeting certain  operating
performance  measures and expire seven years after closing.  The preferred stock
was mandatorily redeemable at $380,000 in the aggregate upon the Company meeting
certain operating performance  measures. In addition,  the Company converted and
amended certain  non-qualified  options  outstanding  under the Telereunion 1995
Stock Option and Appreciation Rights Plan to provide for the right to acquire an
aggregate of 216,618  shares of Common Stock of the Company at an exercise price
of $1.35 per share.  The purchase price was allocated to the acquired  company's
assets and  liabilities  based upon an  estimate  of fair  values at the date of
acquisition  and resulted in  $3,312,000 of goodwill,  which is being  amortized
over 15 years. During the year ended December 31, 1997, certain of the operating
performance  measures were met resulting in 2,095,000  warrants  vesting and the
380,000  preferred shares being  mandatorily  redeemable at $1.00 per share. The
preferred  shares  were  redeemed  in the first  quarter  of 1998.  As a result,
$12,114,000 in additional contingent  consideration and the related goodwill was
recognized  relating to the  acquisition  of  Telereunion  at December 31, 1997.
During the year ended December 31, 1998, the remaining  500,000  warrants vested
resulting in an additional $5,479,000  additional  contingent  consideration and
the related goodwill being recognized.

     In November 1999, the Company issued 400,000 shares and 100,000 warrants to
the  minority shareholders of our subsidiary Telereunion S.A. in exchange for an
additional 27% of the economic interests in Telereunion, S.A.   This resulted in
the  Company's economic ownership interest in Telereunion S.A. increasing to 92%
while  the  Company's  voting  interest  remains at 49%.  Three of the Company's
directors  own an additional 1% of the economic  interests and 18% of the voting
interests  in  Telereunion  S.A.  resulting  in a combined control of 93% of the
economic  interests and 67% of the voting interests.  The Company calculated the
fair  value  of  the shares issued to the minority interest holders based on the
closing  price  of  the  Company's  common  stock  on the date the agreement was
signed.  The  Company  estimated the fair value of the warrants by utilizing the
Black-Scholes  option  pricing  model  with  the following assumptions: dividend
yield  of  0%,  expected  volatility  of  54%, risk free interest rate of 5% and
expected  life  of  3  years.  The  resulting  cost  totaling approximately $3.3
million  was  recorded  as  goodwill  in  the  fourth  quarter  of  1999.

Integracion  Acquisition

     Effective July 1, 1997, pursuant to a stock purchase agreement, the Company
acquired  all of the outstanding shares of Integracion. Integracion is a systems
integrator  engaged  in  the distribution and sale of data and network equipment
and  also  provides  value-added  services  in  network  integration  in Mexico.

     Under  the  terms of the transaction, the Company paid the following to the
selling  shareholders  of  Integracion:  i) the sum of $130,000 in cash, ii) an
aggregate  of  $2,201,000  in  non-interest bearing promissory notes maturing at
various  dates  through  January  1,  2001,  iii)  an  aggregate  of $999,000 in
non-interest  bearing convertible notes maturing on September 1, 1999, which are
convertible  into  333,000  shares  of Common Stock of the Company at a price of
$3.00  per  share,  representing the quoted market price of the Company's Common
Stock  on  the  date  of the transaction, iv) warrants for the purchase of up to
100,000  shares  of  Common  Stock  of  the Company based on Integracion meeting
certain  performance  requirements  and  v)  a covenant by the Purchasers to pay
$280,000  in  the  event that Integracion meets certain performance requirements
over  the  cumulative  periods beginning January 1, 1997 and ending December 31,
2000. The acquisition was accounted for under the purchase method of accounting.
The  financial  position  and  results  of  operations  of Integracion have been
included  in the Company's consolidated financial statements since the effective
date  of  the  acquisition.


                                       46
<PAGE>
     The consideration paid for Integracion measured at the acquisition date was
$2,745,000 and consisted of cash of $130,000, promissory notes with a discounted
value  of  $2,555,000  and  transaction costs of $60,000. The purchase price was
allocated  to  the  acquired  company's  assets  and  liabilities  based upon an
estimate of fair values at the date of acquisition and resulted in $1,756,000 of
goodwill,  which  is  being  amortized  over  15  years.

     During  the  year  ended  December  31,  1997,  certain  of  the  operating
performance  measures  were  met  resulting  in  80,000  warrants  vesting.  The
remaining  20,000  warrants  were forfeited. As a result, $422,000 in additional
contingent  consideration  and  the  related  goodwill  was  recognized  on  the
acquisition  of  Integracion  at  December  31,  1997.

N.S.I.  Acquisition

     On  October  1,  1997,  pursuant to a stock purchase agreement, the Company
acquired  all of the outstanding shares of N.S.I. N.S.I. is a systems integrator
engaged  in  the  distribution  and  sale of data and network equipment and also
provides  value-added  services  in  network  integration  in  Mexico.

     Under  the terms of the acquisition, the Company paid cash of $1,000 to the
shareholders  of  N.S.I.  and agreed to guarantee the repayment of approximately
$260,000  of N.S.I. debt to one of the sellers. The purchase price was allocated
to  the acquired company's assets and liabilities based upon an estimate of fair
values at the date of acquisition and resulted in $430,000 of goodwill, which is
being  amortized  over  15  years.  The  acquisition was accounted for under the
purchase  method of accounting. The financial position and results of operations
of  N.S.I. have been included in the Company's consolidated financial statements
since  the  effective  date  of  the  acquisition.

MSN  Acquisition

     Effective  January  1,  1998,  the  Company acquired all of the outstanding
common  stock  of  MSN.  MSN,  through  its  Telefiesta  brand,  markets prepaid
telephone  calling  cards  across  the  United  States primarily to the Hispanic
community. Under the terms of the transaction, the Company paid the following to
the  shareholders  of  MSN:  i)  the  sum of $3,250,000 in cash, ii) $750,000 in
non-interest  bearing  promissory  notes  payable  in  eight  equal  quarterly
installments,  and  iii)  100,000  shares  of  the  Company's  Common  Stock. In
addition,  the  two  selling  shareholders  were  each granted 50,000 options to
purchase  the  Company's  Common  Stock  at $7.50 per share. The acquisition was
accounted  for  under  the purchase method of accounting. The financial position
and  results  of  operations  of  MSN  are  included  in the Company's financial
statements  from  the  effective  date  of  the  acquisition.

     The  consideration  paid  for  MSN  measured  at  the  acquisition date was
$4,880,000  and consisted of cash of $3,250,000, non-interest bearing promissory
notes  with  a discounted value of $672,000, Common Stock and warrants valued at
$980,000  and  transaction costs of $80,000. The purchase price was allocated to
the  acquired  company's  assets  and liabilities based upon an estimate of fair
values  at the date of acquisition and resulted in $6,193,000 of goodwill, which
is being amortized over 15 years. The purchase price of the acquisition has been
allocated  as  follows:

                                                                    FAIR
                                                                    VALUE
                                                                 ------------
                    Cash                                         $ 3,250,000
                    Promissory Notes (discounted value)              672,000
                    Common Stock                                     980,000
                    Transaction Costs                                 80,000
                                                                 ------------
                    Purchase consideration                         4,982,000
                    Cash                                             977,000
                    Accounts receivable                            1,042,000
                    Other assets                                      90,000
                    Accounts payable and accrued liabilities      (1,323,000)
                    Deferred revenue                              (1,997,000)
                                                                 ------------
                    Excess of liabilities assumed over fair
                        value  of  net  assets  acquired          (1,211,000)
                                                                 ============
                    Goodwill                                     $ 6,193,000
                                                                 ============


                                       47
<PAGE>
INTERLINK  Acquisition

     Effective  June  1,  1998,  pursuant  to  an  asset purchase agreement, the
Company  acquired substantially all of the assets and certain of the liabilities
of  California  Microwave  Services  Division,  Inc.  ("CMSD"),  a subsidiary of
California Microwave, Inc., for approximately $8.8 million in cash.   As part of
the  acquisition,  the  Company  formed  INTERLINK  Communications,  Inc.
("INTERLINK"),  to  acquire CMSD.  The primary asset of INTERLINK is a satellite
teleport  facility  in  Mountain  View,  California.

     The  purchase  price  was allocated to the acquired assets and  liabilities
Based upon  an  estimate  of fair values at the date of acquisition resulting in
$3.6 million in goodwill, which is being amortized over 15 years. In addition, a
covenant not to compete of $250,000 was recognized which is being amortized over
5  years.  The  acquisition  was  accounted  for  under  the  purchase method of
accounting.  The  financial  results  and  operations  of  INTERLINK  have  been
included  in the Company's consolidated financial statements since the effective
date  of  acquisition.

The  purchase  price of the acquisition of the acquisition has been allocated as
follows:

                                                               FAIR VALUE
                                                              ------------
                 Cash                                         $ 8,612,000
                 Transaction Costs                                262,000
                                                              ------------
                 Purchase Consideration                         8,874,000
                 Cash                                              69,000
                 Accounts Receivable                            1,438,000
                 Property and Equipment                         4,542,000
                 Other assets                                     896,000
                 Accounts payable and accrued liabilities      (1,423,000)
                 Deferred revenue                                (471,000)
                                                              ------------
                 Fair value of net assets acquired              5,051,000
                                                              ============
                 Goodwill                                     $ 3,573,000
                                                              ============
                 Covenant not to compete                      $   250,000
                                                              ============

     The following presents the unaudited pro forma results of operations of the
Company for the year ended December 31, 1997 and 1998, as if the acquisitions of
Integracion,  N.S.I.,  MSN  and  INTERLINK  had  occurred  on  January 1, 1997:

<TABLE>
<CAPTION>
                                                FOR THE YEAR ENDED DECEMBER 31,
                                               --------------------------------
                                                      1997        1998
                                                  -----------  -------------
                                                         (Unaudited)
<S>                                               <C>          <C>
Pro forma revenues                                $78,730,000  $135,415,000
Pro forma operating income                          1,755,000       971,000
Pro forma net income (loss)                         1,010,000    (2,407,000)
Pro forma basic net income (loss)  per share      $      0.25  $      (0.48)
Pro forma diluted net income (loss) per share(1)  $      0.20           N/A
<FN>

(1)     Inclusion  of  additional  shares  under  a diluted analysis for 1998 is
inappropriate  due  to  the  anti-dilutive  effect.
</TABLE>

     The  information is not necessarily indicative of the results of operations
and  financial  position  of the Company as they may be in the future or as they
might  have been had the business combinations been consummated as of January 1,
1997.

BCH

     The  Company  owns  24%  of  the  common  stock  outstanding in BCH Holding
Company,  Inc.  ("BCH"),  a  Nevada  corporation  with  a  full  service
telecommunications operation based in Warsaw, Poland. Accordingly, the Company's
investment  in  BCH  is  accounted  for  under  the  equity  method.

     In  January  1999,  BCH  approved the issuance to an investor of 20% of its
outstanding  shares for $1.2 million, and warrants for another 20% of its common
stock  with  an  exercise  price  equal to the same price per share as the stock
issuance.  In  addition,  BCH  can borrow an additional $2.5 million under a 13%
senior  secured  convertible  note  with  the  investor.  Under the terms of the
senior  secured  convertible  note,  the  Company  has pledged all of its common
stock  in BCH to the investor.  The Company's carrying amount of this investment
at  December  31,  1999  is  not  material.


                                       48
<PAGE>
Pointe  Communications  Merger

     In  January  2000, the Company and Pointe jointly announced a merger of the
companies  in  an  all-stock  transaction.  In  conjunction  with  the  merger
agreement,  the  $1.5  million  note  extended  by  Pointe  in December 1999 was
converted  into  a  $1.5  million note convertible into Telscape preferred stock
under  terms  contained in the merger agreement.  The merger agreement calls for
funding  of up to $10 million in such convertible notes. It is expected that the
merger  with Pointe will be finalized during the second quarter of 2000 at which
time  the companies will begin operating under the common name of Telscape.  The
terms  of  the  original  merger  agreement called  for the Company to issue the
Company's common stock to Pointe shareholders at an exchange  ratio  of 0.215054
of a share of the Company's common stock for every share of Pointe common stock.
Also,  for  each  share  of  Pointe  convertible  preferred  stock  outstanding,
the Company will issue one  share  of  the Company's convertible preferred stock
(with rights and preferences substantially the same as  the  Pointe  convertible
preferred stock).  On  March 30,  2000,  the Company  and  Pointe  agreed  to an
adjustment of the exchange ratio of approximately  4%.  The  adjusted  ratio  of
shares  is  the  result  of  a Pointe subsidiary, TeleCommute Solutions ("TCS"),
which recently  received  $19 million in  new  financing led by the MCI WorldCom
Venture  Fund  and  others,  remaining  in the  combined  companies.  The merger
agreement  had  previously  provided that TCS was  to  be  spun  off  to  Pointe
shareholders  prior  to the consumation of the merger.  Consequently, each share
of  Pointe  stock  will be exchanged for 0.223514 shares of the Company's common
stock.  No assurance can be given that the merger with Pointe will be completed.

3.  CONCENTRATION  OF  RISK

Concentration  of  Risk  -  Mexico

     Mexico has experienced periodic economic crises in the  past  recent  years
resulting from sudden, significant devaluations of the Mexican  peso.  The  last
such  devaluation  of  the  Mexican  peso  in  late   1994  caused   Mexico  to
experience  an  economic  crisis  characterized  by  exchange  rate instability,
increased  inflation,  high domestic interest rates, reduced consumer purchasing
power and high unemployment. Consequently, the Mexican government has exercised,
and  continues  to  exercise,  significant  influence  over the Mexican economy.
Accordingly,  Mexican  governmental  actions  could have a significant effect on
Mexican  companies,  including  the  Company's  customers,  and  overall  market
conditions.   For  the  years  ended  December  31,  1997  and  1998, the peso
experienced devaluations in exchange rates versus the dollar of 2.9% and  22.1%,
respectively.  In the year ended December 31, 1999, the peso appreciated 3.5% in
exchange  rates  versus  the  dollar.

     The  Company's foreign currency risk is mitigated in Mexico due to the fact
that  many  of  the Company's customers are multinational firms that pay in U.S.
dollars. In addition, most of the customers that do pay in pesos pay at the spot
exchange  rate  in effect at the time of payment as opposed to the exchange rate
at the time the receivable is created. Nevertheless, significant adverse effects
from  any  material  devaluation  in the Mexican peso could result in an adverse
effect  on  the  Company's  operations.  In addition, the Company anticipates an
increasing  number  of  peso denominated receivables from customers in Mexico as
its  network  in  Mexico  becomes  operational.

Significant  Customers  and  Receivables

     The  Company's  credit  risks primarily consist of accounts receivable from
its customers,  many of which are located in Mexico. Management performs ongoing
credit  valuations  of  its  customers and provides allowances for credit losses
when  necessary.  The Company maintains an allowance for doubtful accounts based
on  the  expected  collectibility of all consolidated trade accounts receivable.
The  allowance  for  doubtful  accounts as of December 31, 1998 and December 31,
1999  was $500,000 and $2,110,000, respectively.  In 1998, the Company wrote off
$541,000  in receivables from a customer which filed for bankruptcy. The Company
increased  its  allowance  for  doubtful  accounts in the fourth quarter of 1999
primarily  resulting from a disputed accounts receivable balance of $1.4 million
from  a  major  customer  in  Mexico.

     Major  customers  are  those that individually account for more than 10% of
the Company's total revenues. For the year ended December 31, 1997, one customer
accounted for 28% of the Company's total revenues and 56% of the Company's voice
services  revenues.  For  the  year  ended  December  31,  1998,  no  customer
represented  greater  than  10%  of revenues.   For  the year ended December 31,
1999,  one  customer  accounted  for  11%  of  the  Company's  total  revenues.


                                       49
<PAGE>
4.    Notes Payable and Capital Lease Obligations
<TABLE>
<CAPTION>
                                                                             AS OF DECEMBER 31,
                                                                         -------------------------
                                                                             1998          1999
                                                                         ------------  -----------
<S>                                                                      <C>           <C>
Deere Park Convertible Subordinated Debentures,
bearing interest at 8%,  convertible into Common Stock,
maturing three years from closing                                        $  3,935,000          ---

Gordon Brothers Convertible Debentures, bearing
interest at 8%, convertible into Common Stock,
secured by substantially all assets of Interlink
Communications, Inc. and stock of Telereunion, Inc.,
matured on May 29, 1999                                                     4,996,000          ---

Non-interest bearing promissory notes, imputed
interest at 10%, unamortized discount of $228,000
and $73,000, respectively, issued in connection with
Integracion acquisition, maturing at various dates
through January 1, 2001                                                     1,713,000    1,328,000

Promissory note issued to repurchase common stock,
payable in six semi-annual installments through May 20,
2000, and bearing interest at 6% , secured by common
shares repurchased                                                            150,000       50,000

Capital lease obligations payable in monthly installments
of $13,258 including principal and interest,  maturing at
various dates through December 1, 2003, secured by
equipment and furniture                                                       221,000      395,000

Non-interest bearing promissory note, imputed interest
at 10%, unamortized discount of $49,000 and $0,
respectively, issued in connection with MSN acquisition,
matured on June 17, 1999                                                      430,000          ---

Revolving credit facility  bearing interest at prime plus 1%,
secured by accounts receivable, matured July 31, 1999                       1,688,000          ---

Promissory note, interest at 10.62%, payable in 36 equal
monthly installments of $52,234 including principal and
interest, maturing April 1, 2002, secured by equipment                            ---    1,250,000

Promissory note, interest at 10.93%, payable in 36 equal
monthly installments of $14,700 including principal and
interest, maturing June 1, 2002, secured by equipment                             ---      373,000

Promissory note, interest and payment terms described
below, maturing
January 1, 2005, secured by equipment                                             ---    5,581,000

Senior Notes, interest and payment terms described below,
maturing January 4, 2001                                                          ---      850,000

2.0 Million Senior Notes, interest and payment terms
described below, maturing February 16, 2001                                       ---    2,000,000

Promissory notes, interest and payment terms described
below, maturing August 27, 2004, secured as described below                       ---   23,934,000

Lennox promissory note, interest and payment terms described below                ---    1,500,000

Pointe promissory notes, bearing interest at 10%,
maturing February 28, 2000, secured as described below                            ---    1,500,000
                                                                         ------------  -----------

Total notes payable and capital leases                                     13,133,000   38,761,000

Current portion                                                             7,710,000   11,112,000
                                                                         ------------  -----------
Long-term portion                                                        $  5,423,000  $27,649,000
                                                                         ============  ===========
</TABLE>


                                       50
<PAGE>
     The  annual  maturities  of  the  debt  indicated  above for the five years
following  December  31,  1999,  are  $6,647,000  in  2000,  $9,255,000 in 2001,
$6,831,000 in 2002, $7,731,000 in 2003 and $8,297,000 in 2004.   Included in the
current  portion  of  debt at December 31, 1999, is $4.5 million related  to the
note  which  is  not in compliance with certain financial covenants as described
below.

     In  May  and  June  1998,  the  Company issued $5,000,000 in 8% Convertible
Subordinated  Debentures (the "Deere Park Convertible Debentures") to Deere Park
Capital  Management,  LLC  ("Deere Park") through three separate draws, with all
issuances  maturing  three  years  from  their  respective  closing  dates.  In
connection  with  these  issuances,  Deere Park received warrants to purchase an
aggregate  of  8,952  shares  of  common  stock  at an exercise price of $16.76,
warrants  to purchase an aggregate of 2,427 shares of common stock at $20.60 per
share  and  warrants to purchase an aggregate of 6,382 shares of common stock at
$15.67  per  share.  These  warrants  have  a  term  of  three  years  from  the
effectiveness  of  a  registration statement covering such warrants.  On October
26,  1998, the Company issued an additional 8,000 warrants to Deere Park with an
exercise  price  at the then current market prices in return for a restructuring
of  the  conversion terms and, in addition, repaid $1,000,000 of the convertible
debentures  at 107% plus accrued interest.  At various dates in 1999, $3,000,000
of the convertible debentures was converted into 476,317 shares of the Company's
common  stock.  The per share value for all transactions was computed based upon
the  average  of  the  three  highest  of  the five lowest closing prices of the
Company's common stock for the 20 days preceding the conversion date, as per the
agreements.  The  remaining  $1,000,000 was paid on May 11, 1999.  In connection
with the payment of the debentures, the Company paid "exit fees" of $120,000, as
per  the  agreement.

     In  May  1998,  the  Company issued $5,000,000 in 8% Convertible Debentures
(the "Gordon Brothers Convertible Debentures") maturing one year from closing to
Gordon  Brothers  Capital,  LLC  ("Gordon  Brothers").  In  connection with this
issuance,  Gordon  Brothers received warrants to purchase an aggregate of 12,136
shares  of  common stock at an exercise price of $20.60 per share with a term of
three  years  from the effectiveness of the registration statement covering such
warrants.  On  October 26, 1998 an agreement was reached with Gordon Brothers to
fix  the conversion price at $15 per share in exchange for reducing the exercise
price  of  the  warrants  to  purchase  12,136 shares of common stock to $15 per
share.  In  May  1999,  the Company repaid the $5,000,000 of debentures and paid
$1,100,000  of  "exit  fees",  as  per  the  agreement.

     In  connection  with  the issuance of the Deere Park Convertible Debentures
and  the  Gordon  Brother  Convertible  Debentures,  the  Company  issued to the
placement agent warrants to purchase 59,340 shares of common stock with exercise
prices  ranging from $16.76 to $20.60 per share.  The warrants have terms of two
years.

     The  Company  estimated the fair value of the warrants issued in connection
with  the  Deere  Park  Convertible  Debentures  and Gordon Brothers Convertible
Debentures  by  utilizing  the  Black-Scholes  option  pricing  model  with  the
following  assumptions:  dividend  yield of 0%, expected volatility of 50%, risk
free  interest  rate  of  5% and expected lives of an average of two years.  The
resulting  fair  value  of  the warrants of approximately $570,000 was amortized
over the life of the debentures as interest expense and deferred offering costs.

     In  July 1998, holders of the non-interest bearing convertible notes issued
in  connection  with  the  Integracion  acquisition  converted these notes into
333,000  shares  of  Common  Stock.

     In  the  fourth quarter of 1998, the Company signed a financing arrangement
with  a  finance company which provided for funding of equipment purchases of up
to $6.0 million through May 1999.  The financing is structured as loans maturing
three  years  from  funding at interest rates 550 basis points above the Federal
Reserve  Treasury  Constant  Maturity Rate.  The Company has drawn approximately
$2.0  million  under  this  facility  through  December  31,  1999.

     On  January  11,  1999,  the  Company signed a financing arrangement with a
finance  company which provided for funding of equipment purchases of up to $7.0
million  through  December  31,  1999.  The financing is structured as long-term
loans maturing January 1, 2005.  The loans provide for payments of interest only
through January 1, 2000.  Thereafter, payments of principal and interest are due
quarterly.  Interest  is  calculated,  during  the  interest only period, at 425
basis  points  above  the  90 day commercial paper rate.  Interest thereafter is
calculated  at  500  basis  points  above the five year Federal Reserve Treasury
Constant  Maturity  Rate.  The  interest rate in effect at December 31, 1999 was
9%.  The  Company  has  drawn  approximately  $5.6  million  under this facility
through  December  31,  1999,  of  which  $2.5  million  resulted in refinancing
equipment which was previously financed through an operating lease.  The Company
was  not in compliance with certain financial covenants under this loan facility
and  has  secured  a  waiver  from  the  finance company of its rights under the
agreement  to  enforce  default  provisions  due  to  non  compliance with these
financial  covenants for the fourth quarter of 1999.  The Company is not able to
draw  down  additional  financing  under  this  facility  until such time as the
finance  company allows it to do so.  The finance company has also issued to the
Company  a  forbearance  letter indicating that it will not enforce acceleration
of  the  facility  until the earlier of March 31, 2000 or the date the Company's
proposed  merger  with  Pointe  is completed.  The finance company has agreed to
extend  the  forbearance  period  through May 15, 2000.  The amounts outstanding


                                       51
<PAGE>
under  this  facility  of  $5.6  million  have been classified as current in the
financial  statements  as of December 31, 1999.  The Company may have to request
additional waivers from the finance company due to non compliance with financial
covenants  in future quarters or the Company may have to request an extension of
the  forbearance  letter  provisions  should  the  merger  with  Pointe  not  be
completed  by  May  15,  2000.  The  Company  cannot  guarantee that the finance
company  would  provide  the  Company with additional waivers or that they would
extend  their  forbearance  letter  in which case they could enforce the default
provisions  and accelerate the maturity date.  Should that be the case, there is
no guarantee that the Company would be able to obtain a replacement facility.  A
default  under  this  agreement  would  trigger  cross defaults under the Lucent
credit  facility.

     On  May  7,  1999, the Company issued $6,850,000 in senior notes originally
maturing  on  May  6,  2000  (the  "Senior  Notes").  E. Scott Crist, CEO of the
Company,  is  holder  of the remaining $850,000 balance of the Senior Notes. The
Senior  Notes are subject to optional prepayment provisions allowing the Company
to  prepay  a portion or all of the outstanding principal amount without premium
or penalty.  Under the terms of the Senior Notes, Mr. Crist received on November
6,  1999, 31,805 warrants at an exercise price of $6.685.  In the event that the
Senior  Notes  are  not  paid  by May 5, 2000, then Mr. Crist  will be issued an
additional  31,805  warrants, in which case the  maturity date is extended until
November 6, 2000.  The maturity of the Senior Notes can be extended unilaterally
by  the  Company  through January 4, 2001 with no additional consideration. As a
result, the Senior Notes are classified as long-term in the financial statements
as  of  December  31, 1999. The Company repaid $6,000,000 of the Senior Notes on
August  27,  1999,  upon  the  funding  of  the Lucent Credit Agreement (defined
below).  The loan from  Mr. Crist bears interest at 8% from May through November
6,  1999.  The  interest  rate increases by 1 percent for each month thereafter.
Pursuant  to  the terms of the Senior Notes, the Company initially issued to the
holders  of the senior notes a total of 256,315 warrants at an exercise price of
$6.68  per share.  The proceeds from the Senior Notes were utilized to repay the
entire  principal amount of the Gordon Brothers Convertible Debentures plus $1.1
million  in  exit fees.  The Company estimated the fair value of the warrants by
utilizing the Black-Scholes option pricing model with the following assumptions:
dividend  yield of 0%, expected volatility of 54%, risk free interest rate of 5%
and  expected  life  of  one  year.  The  resulting  cost of the initial 256,315
warrants of approximately $398,000 was amortized over three months, the expected
term  of  the  notes  at  the  time they were issued.  The resulting cost of the
31,805  warrants  of  approximately  $49,000  will  be  amortized over one year.

     On  June 18, 1999,  the  Company issued $2,000,000 in a different series of
Senior  notes  maturing June 18, 2000 (the "$2 Million Senior Notes").  These $2
Million Senior  Notes are subject to optional prepayment provisions allowing the
Company to  prepay  a portion or all of the outstanding principal amount without
premium or penalty.  These $2 Million Senior Notes bear interest at 8% from June
through  December  17,  1999.  The interest rate increases by 1 percent for each
month thereafter.  The Company also initially issued to the  holders of these $2
Million  Senior Notes a total of 62,501 warrants with an exercise price of $8.00
per  share  and  a  term  of  three years. The holders were issued an additional
62,501 warrants in December 1999.  In the event that the $2 Million Senior Notes
are  not  paid  by  June 18, 2000, then the holders will be issued an additional
62,501  warrants  in which case the maturity date is extended until December 18,
2000.  The  maturity of the $2 Million Senior Notes can be extended unilaterally
by the Company through February 16, 2001 with no additional consideration.  As a
result, the $2 Million Senior Notes are classified as long-term in the financial
statements as of December 31, 1999.  The Company estimated the fair value of the
warrants  by utilizing the Black-Scholes option pricing model with the following
assumptions:  dividend  yield  of  0%,  expected  volatility  of  54%, risk free
interest  rate  of  5% and expected life of one year.  The resulting cost of the
initial 62,501 warrants of approximately $116,000 was amortized over two months,
the  expected  term  of  the notes at the time they were issued.   The resulting
cost  of  the second 62,501 warrants of approximately $143,000 will be amortized
over  one year. The holders of these senior notes have provided the Company with
a  letter  indicating  their  agreement, subject to definitive documentation, to
convert  their  notes  into  the  Class  F  Preferred.

     In  July  1999,  the  Company's  revolving credit  facility expired and the
Company repaid  all  amounts  outstanding  at  that  time.

     On  July  28,  1999,  the  Company  issued  an  unsecured  and subordinated
promissory  note  in  the amount of $576,000 maturing on November 24, 1999.  On
November 24, 1999, the Company  issued  91,042  shares  of the Company's common
stock as payment of the note  per  the  agreement.


                                       52
<PAGE>
     Also  in July 1999, the Company received a bridge loan of $3.0 million from
Lucent  Technologies,  Inc.  (the "Lucent Bridge Loan").  The Lucent Bridge Loan
was  repaid upon the funding of the Lucent Credit Agreement (defined below).  In
connection  therewith,  the  Company  issued  to  Lucent warrants to purchase an
aggregate  of  85,000  shares  of Common Stock at an exercise price of $8.50 per
share.  The  warrants have a term of three years. The Company estimated the fair
value  of  the warrants by utilizing the Black-Scholes option pricing model with
the  following  assumptions:  dividend  yield of 0%, expected volatility of 54%,
risk  free  interest rate of 5% and expected life of 1 year.  The resulting cost
of  approximately  $168,000  will  be amortized over five years, the term of the
Lucent  Credit  Facility.

     On  August  27, 1999, the Company, along with its subsidiaries, Telereunion
S.A.  de  C.V.,  Telereunion  International,  S.A.  de  C.V., Telereunion, Inc.,
Telscape  USA,  Inc.,  MSN Communications, Inc., Interlink Communications, Inc.,
TSCP  International,  Inc.,  Vextro De Mexico S.A. de C.V., and its wholly-owned
subsidiary, Servicios Corporativos Vextro, S.A. de C.V., Telscape de Mexico S.A.
de  C.V.,  N.S.I.  S.A.  de  C.V.,  Lan and Wan S.A. de C.V. and M.S. Noticias y
Telecomunicaciones,  S.A.  de  C.V.  signed  a  credit  agreement  with  Lucent
Technologies,  Inc.  (the  "Lucent  Credit  Agreement").

     The  Lucent  Credit  Agreement  provides for up to $40 million in financing
under long-term repayment terms.  In March 2000, Lucent extended its commitment,
subject  to certain conditions precedent including the merger with Pointe, by an
additional  $20  million.  The  Company  borrowed $23.9 million under the Lucent
Credit Agreement on August 27, 1999, of which $9.0 million was utilized to repay
the  $3.0  million  Lucent  Bridge Loan and $6.0 million of the Senior Notes and
$14.9  million was utilized to pay for costs directly related to construction of
the  network  in Mexico and related debt offering costs.  Subsequent loans under
the  Lucent  Credit  Agreement  are  subject  to  the  satisfaction  of  certain
conditions  precedent.  The Company has incurred obligations in the construction
of  the  network  in  Mexico  totaling  $24.6 million at December 31, 1999.  The
Company  intends  to  fund  these obligations and capitalize some of the initial
interest  payments due on amounts outstanding under this facility, with proceeds
from  the  facility,  upon  consummation  of  the  merger  with  Pointe.

     As of December 31, 1999, the Company was in default of a financial covenant
under  the  Lucent  Credit  Agreement.  In  conjunction  with  the  March  2000
commitment  for  an  additional $20 million, Lucent waived this covenant and all
other  financial  covenants  through  April  15,  2000.  In addition, Lucent has
committed,  subject  to  certain conditions, to long-term repayment arrangements
and  to  renegotiate  the  financial  covenants  under its  facility.  Since the
Company  believes  that  it  is  probable  that such credit arrangements will be
achieved, it has classified $22.7 million of debt to Lucent at December 31, 1999
as  long-term.  However,  the  Company cannot guarantee that it will be able to
secure  additional  waivers  from  Lucent, should they be necessary, or that the
Company  can  negotiate financial covenants that will be more favorable than the
ones  contained  in  the  initial  credit  agreement.

     The Lucent Credit Agreement provides for principal payments on each loan to
be  made  in  nine  installments  with  the  first  installment due on the first
anniversary  of  the  closing  date  with each succeeding installment due in six
month  increments.  The  amount  of  the  payment on each installment shall be a
percentage  of the total aggregate amount of each loan, as follows: installments
1-2:  5%; installments 3-4: 10%; installments 5-6: 12.5%; installments 7-9: 15%.
In  addition,  the  Lucent  Credit  Agreement  provides  for  annual  mandatory
prepayments beginning in the year ended December 31, 2000 equal to 50% of Excess
Cash Flow of such year.  Excess Cash Flow is defined in the Credit Agreement and
includes  EBITDA (as defined) less certain items including capital expenditures,
payments  of  indebtedness,  income  tax  payments,  and  equity  investments in
telecommunications  companies.

     Interest under the Lucent Credit Agreement is calculated, at the borrowers'
option,  at  either the London interbank offered rates plus an Applicable Margin
or  the  Bank  of  America,  N.A.  prime lending rate plus an Applicable Margin.
Applicable  Margin  is defined as follows: Year 1: 5.75%; Year 2: 6.00%; Year 3:
6.25%;  Year  4:  6.75%, Year 5: 7.25%.  The Company has the option of borrowing
under  the  Lucent  Credit  Facility  for  interest  payments  until  the  first
anniversary  date  of  the closing date.  There is a 0.75% commitment fee on the
unutilized  and  undrawn commitment until the commitment termination date, which
is  on the first anniversary of the closing date of the Lucent Credit Agreement.

     The  Lucent  Credit Agreement is secured by substantially all of the assets
of  the  Company  including the network assets, accounts receivable, the capital
and equity interests of the subsidiaries of the Company,  and all other tangible
and  intangible assets of the Company excluding encumbered assets at the time of
signing.


                                       53
<PAGE>
     On October 22, 1999, the Company signed a loan agreement with Lennox Invest
Ltd.,  a  BVI  Corporation, which provides for funding of up to $10.0 million. A
total  of $1.5 million has been funded on this facility, which bears interest at
10%  per  annum.  Interest  on  each  note  is  to  be paid at maturation of the
respective  note,  which  occurs  six months after the date of each note. Of the
$1.5  million funded under the facility, $1.0 million matures on April 19, 2000,
and $0.5 million matures on April 26, 2000. As part of this transaction, certain
members  of  the board of directors agreed to pledge shares of Telscape stock as
collateral.  In  December 1999, the Company informed Lennox that it would not be
drawing  any  further funding under this facility due to a breach of contract on
the  part  of  Lennox.

     The  Company's  debt at  December 31, 1999 totaled $38.8 million, resulting
in  a  debt  to  equity  ratio  of  143%  as  compared to $13.1 million and 38%,
respectively,  as  of  December  31,  1998.  Fully  funding  the  Lucent  Credit
Agreement  will significantly increase the Company's leverage.  In addition, the
Company  estimates  that  there  are  an  additional  $10  to  $15  million  in
expenditures  related  to  the  Mexican network and its  network expansion which
will  be  funded  with  a  combination  of  the  Lucent facility and other debt.

     On  November  24, 1999, the Company signed a letter of intent to merge with
Pointe.  In  connection  with  the  letter  of intent, Pointe agreed to lend the
Company  $1.5  million  that  was  evidenced  by  a  short  term promissory note
("Promissory  Note").  As  part  of  this  transaction,  certain  members of the
board  of directors agreed to pledge shares of Telscape stock as collateral.  On
December 31, 1999, the Company signed a definitive merger agreement with Pointe.
In  addition, Pointe agreed to lend the Company $10 million, which was evidenced
by  a convertible promissory note.  In early January, Pointe funded $8.5 million
into  escrow.  On January 10, 2000, the Company drew down $1 million from escrow
and  the  Promissory  Note  was increased accordingly.  On February 7, 2000, the
Company  executed a replacement convertible promissory note ("Replacement Note")
for  $10,000,000  with  an interest rate of 12% and a maturity of June 30, 2000.
The  Replacement  Note  extinguishes  the $2.5 million of indebtedness under the
Promissory  Note.

     Certain  of the funding agreements that the Company has obtained, including
the  additional  $20 million available under the Lucent Credit Agreement and the
Class  F  Convertible  Preferred  Stock  (see  Note  11),  are contingent on the
Company's  merger  with Pointe. Should the Company not be able to consummate the
merger  with  Pointe  in  a  timely  manner, the commitments mentioned above may
expire.   The  Company  cannot guarantee that such commitments could be replaced
on  similar  terms,  if  at  all.

     In  January  2000,  the holders of $500,000 in notes payable due January 1,
2000,  originally  incurred  in  connection  with  the  Integracion acquisition,
converted  these  obligations  into  47,619 shares of common stock at a price of
$10.50  per  share.

5.  INCOME  TAXES

     Deferred  income taxes reflect the net tax effects of temporary differences
between  the  carrying amounts of assets and liabilities for financial reporting
purposes  and the amounts used for income tax purposes. A significant difference
relates  to  the  treatment of inventories under the Mexican Tax Law. Under this
law,  the  cost  of sales for financial statement purposes is not deductible for
income  tax purposes. Instead, inventory purchases are deductible for income tax
purposes  in  the  year  the  purchases  are  made.

     Significant components of the Company's deferred tax liabilities and assets
at  December  31,  1998  and  1999  are  as  follows:

<TABLE>
<CAPTION>
                                                          1998                       1999
                                               --------------------------  ---------------------------
Current:                                       UNITED STATES    FOREIGN    UNITED STATES     FOREIGN
                                               -------------  -----------  --------------  -----------
<S>                                            <C>            <C>          <C>             <C>
Operating loss carryforwards and tax credits   $     417,000  $  311,000   $          ---  $  698,000
Accrued expenses                                     159,000         ---           68,000     143,000
Other assets                                             ---         ---              ---         ---
Allowance for doubtful accounts                       26,000      74,000          185,000     583,000
Inventories                                           14,000    (812,000)         256,000    (918,000)
Customer prepayments                                     ---     439,000              ---   1,239,000
                                               -------------  -----------  --------------  -----------
Net current deferred tax asset (liability)     $     616,000  $   12,000   $      509,000  $1,745,000
                                               -------------  -----------  --------------  -----------
</TABLE>

<TABLE>
<CAPTION>
                                                        1998                     1999
                                               ----------------------  -------------------------
Long-term:                                     UNITED STATES  FOREIGN  UNITED STATES    FOREIGN
                                               -------------  -------  -------------  ----------
<S>                                            <C>            <C>      <C>            <C>
Operating loss carryforwards and tax credits   $         ---  $   ---  $  5,922,000   $     ---
Basis differences in assets                            4,000   14,000        37,000    (182,000)
Accrued employee benefits and other                      ---   17,000        36,000      26,000
Valuation allowance                                      ---      ---    (3,252,000)        ---
                                               -------------  -------  -------------  ----------
Net long term deferred tax asset (liability)   $       4,000  $31,000  $  2,743,000   $(156,000)
                                               -------------  -------  -------------  ----------
</TABLE>


                                       54
<PAGE>
     The  Company  records  valuation  allowances based upon judgments as to the
future  realization of deferred tax benefits supported by demonstrated trends in
the  Company's  operating  results.   No  valuation  allowance  was  recorded at
December  31,  1998  and  $3,252,000  was  recorded  at December 31, 1999.  This
valuation  allowance  reduced  the  deferred tax asset to a net amount which the
Company  believes more  likely  than  not  that  it  would realize, based on the
Company's  estimates  of  its  future  earnings.

     Significant  components  of the provision (benefit) for income taxes are as
follows:

<TABLE>
<CAPTION>
                                           FOR THE YEAR ENDED DECEMBER 31,
                                       ---------------------------------------
                                           1997         1998          1999
                                       ------------  -----------  ------------
<S>                                    <C>           <C>          <C>
            Current:
            Federal                    $ 1,146,000   $      ---   $    57,000
            Foreign                        504,000    1,161,000       693,000
                                       ------------  -----------  ------------
            Total current              $ 1,650,000   $1,161,000   $   750,000
            Deferred:
            Federal                     (1,545,000)     (97,000)   (2,632,000)
            Foreign                        (21,000)    (242,000)   (1,546,000)
                                       ------------  -----------  ------------
            Total deferred             $(1,566,000)  $ (339,000)  $(4,178,000)
                                       ------------  -----------  ------------
            Total provision (benefit)  $    84,000   $  822,000   $(3,428,000)
                                       ------------  -----------  ------------
</TABLE>

     The  following  is  a  reconciliation  of  income  taxes calculated  at the
United States federal  statutory  rate  to  the  income tax provision (benefit):

<TABLE>
<CAPTION>
                            FOR THE YEAR ENDED DECEMBER 31,
            ------------------------------------------------------------
                                                     1997   1998   1999
                                                     -----  -----  -----
<S>                                                  <C>    <C>    <C>
            Provision (benefit) for income taxes
                at U.S. statutory rate                 34%  (34)%  (34)%
            Non-deductible amortization of
               intangible assets                        7    252       3
            Non-deductible litigation loss              2    ---     ---
            Non-deductible warrant expense            ---    ---       1
            Other items, net                            4    108     ---
            Effect of utilization of net operating
                loss carryforwards, tax credits and
                reversal/recording of valuation
                allowance                             (44)    14      15
                                                     -----  -----  -----
            Income tax provision (benefit)              3%   340%  (15)%
                                                     =====  =====  =====
</TABLE>

     At December 31, 1999, the Company had available for U.S. federal income tax
purposes  unused  net  operating loss carryforwards of approximately $16,964,000
which  may  provide  future  tax  benefits  and  which will expire in years 2005
through  2019.  The  Company  recognized  the  deferred tax benefits, net of the
valuation  allowance  of  $3,252,000  at December 31, 1999.  Additionally, as of
December 31, 1999, the Company had approximately $154,000 in alternative minimum
tax  and  foreign  tax  credits  which  can  be  utilized  to  offset future tax
liabilities.

     In accordance with Mexican Tax Law, effective January 1, 1999, a company is
subject  to income taxes based upon the greater of 35% (34% in 1998 and 1997) of
taxable income and 1.8% of net assets, as defined in the tax law.   For Mexican
tax  purposes, companies may carryforward an income tax loss for ten years.  Any
tax  on  assets  paid is recoverable and can be carried forward for ten years in
the  event  a  company  begins paying taxes on income. At December 31, 1999, the
Company  had  available  for  Mexican  income  tax  purposes  operating  loss
carryforwards  of  approximately  $1,993,000  which expire in 2009 and net asset
taxes  credits  of  approximately  $410,000  which  expire  in  2009.


                                       55
<PAGE>
6.  STOCK  OPTIONS  AND  WARRANTS

Stock  Options

1993  Stock  Option  Plan

     Under  the  terms  of  its  1993  Stock  Option Plan, the Company may grant
incentive  and  non-qualified  stock options to purchase up to 218,145 shares of
its  Common  Stock to the Company's employees, directors or consultants. Options
must  be  granted at not less than the fair market value of the Company's Common
Stock  at  the  date  of grant as determined by the Company's Board of Directors
(110%  of fair market value for stockholders owning 10% or more of the Company's
Common  Stock)  for  incentive  stock  options, or not less than 85% of the fair
market  value  for  non-qualified stock options. Options granted under this plan
may be for a term of up to 10 years (5 years for incentive stock options granted
to  stockholders  owning  10%  or  more  of  the Company's Common Stock) and are
exercisable  as  determined  by  the  Board  of  Directors.

1994  Directors  Stock  Option  Plan

     Effective June 1, 1994, the Company adopted the 1994 Directors Stock Option
Plan,  which  provides  that  the  Company  may  grant  non-qualified options to
directors  of  the Company or any majority-owned subsidiary who are not salaried
employees  to  purchase up to 31,163 shares of its Common Stock. Options must be
granted  by  June  1, 2004, at prices not less than the fair market value of the
Company's  Common  Stock  at  the date of grant and must be exercised within ten
years of the date of grant. Upon a change of control of the Company, all granted
but  unvested  options  under  the  plan  will  vest  immediately.

Telereunion  1995  Stock  Option  Plan

     As stated in Note 2, the Company assumed Telereunion's Stock Option Plan in
connection  with  the  acquisition of Telereunion. Under the terms of this Plan,
the  Company  may  grant  non-qualified or incentive stock options to employees,
directors  and  consultants.  Options  must be granted at not less than the fair
market value of the Company's Common Stock at the date of grant as determined by
the  Company's  Board  of  Directors (110% of fair market value for stockholders
owning  10%  or more of the Company's Common Stock) for incentive stock options,
or  not  less than 85% of the fair market value for non-qualified stock options.
The terms of the options are determined by the Company's Board of Directors. Any
options granted must be exercised within ten years of the date of grant (5 years
for  incentive  stock  options granted to stockholders owning 10% or more of the
Company's  Common  Stock).

1996  Stock  Option  and  Appreciation  Rights  Plan

     During  1996,  the  Company  adopted the 1996 Stock Option and Appreciation
Rights  Plan,  which  provides  that  the  Company  may  grant  non-qualified or
incentive  stock  options to purchase up to 1,200,000 shares of its Common Stock
to the Company's employees, directors or consultants. The plan also provides for
grants  of  stock  appreciation  rights  in connection with the grant of options
under  the  plan. Options must be granted at not less than the fair market value
of  the  Company's  Common  Stock  at  the  date  of  grant as determined by the
Company's  Board of Directors (110% of fair market value for stockholders owning
10%  or  more of the Company's Common Stock) for incentive stock options, or not
less  than  85%  of  the  fair market value for non-qualified stock options. The
terms  of  the  options  are determined by the Company's Board of Directors. Any
options granted must be exercised within ten years of the date of grant (5 years
for  incentive  stock  options granted to stockholders owning 10% or more of the
Company's  Common  Stock).

1998  Stock  Option  and  Appreciation  Plan

     During  June  1998,  the  Company  adopted  the  "1998  Stock  Option  and
Appreciation  Rights  Plan."  Pursuant  to  the  Company's 1998 Stock Option and
Appreciation  Rights  Plan,  the  Company  may  grant  the  Company's employees,
directors and consultants non-qualified options to purchase up to 800,000 shares
of  Common  Stock.  The  maximum  number  of  shares of Common Stock that may be
granted  to  any  individual  under  this  plan  may  not exceed 250,000 shares.
Incentive  stock  options must be granted at not less than the fair market value
of  the  Company's  Common  Stock  at  the  date  of  grant as determined by the
Company's  Board of Directors (110% of fair market value for stockholders owning
10%  or  more  of  the  Company's  Common  Stock).  The terms of the options are
determined  by  the  Company's  Board  of Directors. Any options granted must be
exercised  within  ten  years of the date of grant or within five years from the
date  of  grant  for  options  granted to stockholders owning 10% or more of the


                                       56
<PAGE>
Company's  Common  Stock.  Unexercised  vested  and  unvested  options terminate
immediately  if  the employment or service of an option holder is terminated for
cause.  Unvested  options  terminate  if  the employment or service of an option
holder is terminated without cause or for disability. The Company may also grant
SARs  in  connection  with  any  option, which permits cashless exercises of the
options.  SARs  allow an option holder to surrender an option and to receive the
difference  between  the  exercise  price of the option and the then fair market
value  of the Common Stock. The Company may also make loans to any option holder
in  order to permit the option holder to pay the purchase price upon exercise of
the  option.

1998  MSN  Stock  Option  and  Appreciation  Rights  Plan

     During  June  1998,  the  Company  adopted  the  "1998 MSN Stock Option and
Appreciation  Rights Plan."  Pursuant to the Company's 1998 MSN Stock Option and
Appreciation  Rights  Plan,  the  Company  may  grant  the  Company's employees,
directors and consultants non-qualified options to purchase up to 100,000 shares
of  Common  Stock.  The  maximum  number  of  shares of Common Stock that may be
granted  to  any  individual  under this plan may not exceed 50,000 shares.  The
terms  of  the  options are determined by the Company's Board of Directors.  Any
options  granted  must  be  exercised  within  ten years of the date of grant or
within  five  years  from  the date of grant for options granted to stockholders
owning  10%  or  more  of  the  Company's  Common Stock.  Unexercised vested and
unvested options terminate immediately if the employment or service of an option
holder is terminated for cause.  Unvested options terminate if the employment or
service of an option holder is terminated  without cause or for disability.  The
Company  may  also  grant  SARs  in  connection  with  any option, which permits
cashless  exercises of the options.  SARs allow an option holder to surrender an
option  and  to  receive the difference between the exercise price of the option
and  the  then fair market value of the Common Stock.  The Company may also make
loans  to  any  option  holder  in  order to permit the option holder to pay the
purchase  price  upon  exercise  of  the  option.

     A summary of the Company's fixed option plans as of December 31, 1997, 1998
and  1999  is  presented  below:

<TABLE>
<CAPTION>
                                                                                     MSN                               WTD. AVG.
                                            1993      1994     1995       1996       1998       1998         TOTAL       EXER.
                                            PLAN      PLAN     PLAN       PLAN       PLAN       PLAN       ALL PLANS     PRICE
                                          --------  -------  --------  ----------  --------- ----------  ------------  ---------
<S>                                       <C>       <C>      <C>       <C>         <C>       <C>         <C>           <C>
Options outstanding at December 31 ,1996   86,032   10,000   145,809   1,120,000        ---         ---    1,361,841        3.95
Max. shares exercisable                    86,032   10,000   145,809     225,000        ---         ---      466,841        3.16
Options granted                           115,500      ---       ---     440,000        ---         ---      555,500        5.74
Options exercised                         (15,828)     ---       ---     (25,000)       ---         ---      (40,828)       1.87
Options cancelled                          (9,700)     ---       ---    (420,000)       ---         ---     (429,700)       4.50
                                          --------  -------  --------  ----------  ---------  ---------- ------------
Options outstanding at December 31,1997   176,004   10,000   145,809   1,115,000        ---         ---    1,446,813        4.51
Max. shares exercisable                    70,204   10,000   145,809     393,333        ---         ---      619,346        3.60
Options granted                               ---   18,125       ---      60,000    100,000   1,045,142    1,223,267       11.49
Options exercised                         (50,204)     ---       ---    (140,554)       ---         ---     (190,758)       2.57
Options cancelled                         (20,000)     ---       ---      (5,000)       ---    (527,250)    (552,250)      16.48
                                          --------  -------  --------  ----------  ---------  ---------- ------------
Options outstanding at December 31,1998   105,800   28,125   145,809   1,029,446    100,000     517,892    1,927,072        5.67
Max. shares exercisable                    35,267   10,000   145,809     725,988     27,776       5,000      949,840        4.43
Options granted                               ---      ---    69,316      23,000    100,000     353,000      545,316        8.22
Options exercised                             ---      ---   (70,809)    (90,834)       ---         ---     (161,643)       2.70
Options cancelled                          (9,500)  (8,500)      ---     (15,834)  (100,000)    (86,625)    (220,459)       7.76
                                          --------  -------  --------  ----------  ---------  ---------- ------------
Options outstanding at December 31,1999    96,300   19,625   144,316     945,778    100,000     784,267    2,090,286        6.37
                                          ========  =======  ========  ==========  =========  ==========  ===========
Max. shares exercisable                    57,533   19,625    75,000     540,861        ---     132,979      825,998        5.25
</TABLE>

     SFAS  No.  123  requires  the  Company  to  provide  pro  forma information
regarding  net income (loss) applicable to common stockholders and income (loss)
per  share  as  if compensation cost for the Company's stock options granted had
been  determined  in  accordance  with the fair value based method prescribed in
that Statement. The Company estimates the fair value of each stock option at the
grant  date  by  using the Black-Scholes option pricing model with the following
weighted  average  assumptions  used for grants in 1997, 1998 and 1999: dividend
yield  of  0% for all years; expected volatility ranging from 80% to 90%, 55% to
65%  and 55% to 65%; risk-free interest rates ranging from 5.65% to 5.80%, 5% to
5.15% and 5% to 5.15%; and expected lives averaging 8.5 years, 5.0 years and 5.0
years,  respectively.


                                       57
<PAGE>
     Under  the  accounting provisions of SFAS No. 123, the Company's net income
(loss)  applicable to common stockholders and income (loss) per share would have
been  revised  to  the  pro  forma  amounts  indicated  below:

<TABLE>
<CAPTION>
                                   For the Year Ended December 31,
                              -----------------------------------------
                                  1997          1998          1999
                              ------------  ------------  -------------
Net income (loss):
<S>                           <C>           <C>           <C>
      As reported             $  2,672,000  $(1,030,000)  $(19,475,000)
      Pro Forma               $  1,955,000  $(2,700,000)  $(21,234,000)
Net income (loss) per share:
  Basic
      As reported             $       0.68  $     (0.20)  $      (2.92)
      Pro Forma               $       0.50  $     (0.53)  $      (3.18)
  Diluted
      As reported             $       0.53          n/a            n/a
      Pro Forma               $       0.38          n/a            n/a
</TABLE>

Warrants

     Following  is  a  description  of  the  Company's  warrants  outstanding at
December  31,  1999:

<TABLE>
<CAPTION>
                        Description of warrants:                                             # outstanding
                        ------------------------                                             -------------
<S>                                                                                          <C>

     Series A Warrants (unregistered) issued in connection with
     the  acquisition of Telereunion on May 17, 1996, exercisable
     at $2.19 at stated percentages only upon achieving certain
     operating performance measures or fully vesting upon maintaining
     a $12 share price for 90 consecutive trading days; expiration date
     of May 16, 2003, 2,000,000 of which vested at December 31, 1997
     and 500,000 of which vested during the year ended December 31, 1998
     (See Note 2)                                                                                1,731,385

     Series B Warrants (unregistered) issued in connection
     with the  acquisition of Telereunion on May 17, 1996,
     currently exercisable at $2.19 as certain operating
     performance measures were achieved during the year
     ended December 31, 1997, expiration date May 16, 2003 (See Note 2)                             10,000

     Warrants (unregistered) issued on February 29, 1996, in
     connection with former officer's severance agreement exercisable
     at any time at $2.94 prior to expiration on February 28, 2001                                  72,000

     Warrants (unregistered) issued on November 17, 1999 to
     the minority shareholders of Telereunion S.A. de C.V. in
     exchange for an additional 27% of the economic interests
     of  Telereunion,  S.A.  de  C.V. Term of three years and
     exercisable at $7.50 per share                                                                100,000

     Warrants (unregistered) issued on January 5, 1999 to
     Strategic Growth International in connection with investor
     relations services agreement exercisable at any time at
     $6.813-$7.4375 prior to expiration on January 5, 2002 or
     two years from termination of agreement, whichever is sooner                                  110,000

     Warrants (unregistered) issued to bridge lenders exercisable
     at any time at $6.68 - $9.85 per share, with three year terms                                 569,550

     Registered warrants issued to debenture holders and placement
     agent in connection with issuance of Deere Park Convertible
     Debentures and Gordon Brothers Convertible Debentures exercisable
     at any time at $8.50 - $20.60 per share, with two to three year
     terms (See Note 4).                                                                           138,619
                                                                                             -------------
                 Total warrants outstanding                                                      2,731,554
                                                                                             =============
</TABLE>

7.  STOCK  ISSUANCES

     In  the  fourth  quarter of 1998, the Company entered into a stock purchase
agreement  with  third  parties (the "Stock Purchase Commitment"), which allowed
the  Company  to  sell  at  the  Company's option (subject to certain conditions
precedent), up to $5.0 million of the Company's Common Stock.  During the fourth
quarter  of  1998  and  the fiscal year 1999, the Company utilized this facility
entirely.  In connection therewith, the Company issued a total of 783,338 shares
of  the  Company's  Common  Stock.


                                       58
<PAGE>

8.  COMMITMENTS  AND  CONTINGENCIES

Commitments

     As  of  December 31, 1999, the Company is obligated under certain long-term
non-cancelable  operating  lease  agreements for equipment, office and warehouse
space  as  follows:

                         Year Ended     AMOUNT
                         ----------   -----------
                            2000      $ 2,894,000
                            2001        2,664,000
                            2002        2,331,000
                            2003          467,000
                            2004          126,000
                                      -----------
                                      $ 8,482,000
                                      ===========

     Total  rent  expense under such operating leases was $229,000, $914,000 and
$2,168,000,  respectively, for the years ended December 31, 1997, 1998 and 1999.

     At  December  31, 1999, the Company has employment agreements with   eleven
officers,  which  expire  in  2002.  Future  minimum  commitments  under  these
agreements,  excluding  incentive  bonuses  or stock options, as of December 31,
1999,  are  as  follows:

                         Year Ended      AMOUNT
                         ----------   -----------
                            2000          849,000
                            2001          360,000
                            2002          125,000
                                      -----------
                                      $ 1,334,000
                                      ===========

     The  Company  has  signed  a  contract with a third party vendor to provide
telecommunications  services to the Company including the origination of inbound
800  dialed phone calls for its prepaid phone cards, and the termination of U.S.
domestic  long  distance  and international long distance.  The contract term is
through  June 1, 2001, and provides for a minimum monthly purchase commitment of
$750,000 and a total purchase commitment of $31,110,000.  The Company can cancel
the  minimum  monthly  purchase  commitment with 30 days notice upon meeting its
total  minimum  purchase  commitment.

     The  Company  is  in  the process of negotiating certain significant supply
contracts  for  its  Operating  Support  Systems  in  Mexico and an interconnect
agreement with the National Telephone Company of Mexico (Telefonos de M xico, or
Telmex).  The  Company  is  presently  unable to estimate the contingencies that
might  be agreed to, if any, as part of the inter-connect agreement with Telmex.

     The  Company  is liable to the Internal Revenue Service ("IRS") for federal
excise  taxes  totaling  $1.4  million related to such taxes due for the periods
December  1998, March 1999 and June 1999.  The Company has contacted the IRS and
has been negotiating a payment plan for the payment of these taxes due and for a
waiver  of  interest  and  penalties  due.  An agreement has not been reached to
date.  The Company has accrued the amounts outstanding for such taxes to the IRS
on  its  consolidated  balance  sheet  as  of  December  31,  1999.

     On September 29, 1996, the Federal Communications Commission ("FCC") issued
order  FCC96-388,  11FCC  Rcd.  20541,  requiring telecommunications carriers to
reimburse  operators  of  public payphones for the use of such payphones for the
origination  of  toll  free telephone calls from payphones.  On the December 31,
1999 consolidated balance sheet, the Company has accrued a total of $1.1 million
as  an  estimate  of  such  fees  payable  to  payphone  operators.

     The  Company  has signed several agreements in which it is swapping some of
the  capacity  available on its Mexican network with capacity available on other
carriers  networks.  Some  of these swap agreements require that the Company pay
some  additional  monies  in  addition  to  the actual facilities exchange.  The
Company  has  committed  to  a total payment of $4,279,000 and $2,140,000 in the
years  2000  and  2001,  respectively,  under  such  swap  agreements.


                                       59
<PAGE>
9.  SEGMENT  INFORMATION

     The  Company  has  two  reportable  segments:  Voice  Services and Advanced
Services.  Revenues  in the Voice Services segment are generated on a retail and
wholesale  basis.  Revenues  in the Advanced Services segment are generated from
network  solutions  services,  customer  relationship  management  and broadband
services  and products.  The Company provides Voice Services to customers in the
United  States and in Mexico. Advanced Services are provided to customers in the
United  States, Mexico and other parts  of  Latin America.  The Company measures
segment profit as earnings  before  interest,  depreciation,  amortization  of
intangibles, other income  and  taxes  (EBITDA).

Revenues,  operating information and identifiable assets by business segment are
as  follows:

<TABLE>
<CAPTION>
                                                      FOR THE YEAR ENDED DECEMBER 31,
                                                ------------------------------------------
                                                    1997          1998            1999
                                                ------------  -------------  -------------
<S>                                             <C>           <C>            <C>
Revenues
  Voice services:

    Retail                                      $       ---   $ 60,127,000   $ 60,682,000
    Wholesale                                    17,390,000     33,029,000     16,636,000
  Advanced services:
    Network solutions                            18,764,000     30,220,000     13,298,000
    Customer relationship management                    ---      2,744,000      7,692,000
    Broadband services  and products                    ---      6,058,000      8,525,000
                                                ------------  -------------  -------------
Total revenues                                  $36,154,000   $132,179,000   $106,833,000
                                                ------------  -------------  -------------

Operating income (loss) before interest,
depreciation and amortization

  Voice services, including impairment loss     $ 3,823,000   $  3,505,000   $ (8,838,000)
  Advanced services                                (107,000)     2,153,000     (2,417,000)
  Corporate and other                              (112,000)      (171,000)      (378,000)
                                                ------------  -------------  -------------
Total operating income (loss) before interest,
depreciation and amortization                     3,604,000      5,487,000    (11,633,000)
     Depreciation and amortization                  622,000      3,316,000      6,335,000
                                                ------------  -------------  -------------
Consolidated Operating income (loss) as
reported on the Statements of Operations        $ 2,982,000   $  2,171,000   $(17,968,000)
                                                ------------  -------------  -------------

Capital Expenditures
  Voice services                                $   734,000   $  5,813,000   $ 16,552,000
  Advanced services                                 940,000        298,000      1,648,000
  Corporate and other                                 8,000         48,000         68,000
                                                ------------  -------------  -------------
                Total capital expenditures      $ 1,682,000   $  6,159,000   $ 18,268,000
                                                ------------  -------------  -------------
Identifiable Assets
  Voice services                                $ 5,978,000   $ 25,578,000   $ 64,619,000
  Advanced services                              17,619,000     32,427,000     37,611,000
  Corporate and other                            16,038,000     22,326,000     24,910,000
                                                ------------  -------------  -------------
               Total identifiable assets        $39,635,000   $ 80,331,000   $127,140,000
                                                ------------  -------------  -------------
</TABLE>


                                       60
<PAGE>
<TABLE>
<CAPTION>
                                                        FOR THE YEAR ENDED DECEMBER 31,
                                                    ---------------------------------------
                                                       1997          1998          1999
                                                    -----------  ------------  ------------
<S>                                                 <C>          <C>           <C>
Revenues
     United States                                  $17,390,000  $ 97,903,000  $ 83,316,000
     Mexico                                          18,031,000    32,965,000    20,990,000
     Latin America                                          ---     1,311,000     2,527,000
     Poland                                             733,000           ---           ---
                                                    -----------  ------------  ------------
Total revenues                                      $36,154,000  $132,179,000  $106,833,000
                                                    -----------  ------------  ------------

Fixed assets,  net of accumulated depreciation
     United States                                  $   692,000  $  7,297,000  $ 13,523,000
     Mexico                                           1,987,000     5,174,000    44,439,000
     Latin America                                          ---     2,105,000       506,000
                                                    -----------  ------------  ------------
Total fixed assets                                  $ 2,679,000  $ 14,576,000  $ 58,468,000
                                                    -----------  ------------  ------------
</TABLE>

10.  QUARTERLY  INFORMATION  (UNAUDITED)

<TABLE>
<CAPTION>
                                          FIRST         SECOND        THIRD         FOURTH         YEAR
                                       ------------  ------------  ------------  ------------  -------------
1997
<S>                                    <C>           <C>           <C>           <C>           <C>
Revenues                               $ 3,771,000   $ 6,170,000   $12,193,000   $14,020,000   $ 36,154,000
Operating income (loss)                   (386,000)      696,000     1,169,000     1,503,000      2,982,000
Income (loss) before taxes and
  minority interests                      (359,000)      402,000     1,110,000     1,597,000      2,750,000
Net income (loss)                         (324,000)      538,000     1,202,000     1,256,000      2,672,000
Basic EPS                              $     (0.08)  $      0.14   $      0.31   $      0.32   $       0.68
Diluted EPS (1)                        N/A           $      0.13   $      0.22   $      0.18   $       0.53

                                          FIRST         SECOND        THIRD         FOURTH         YEAR
                                       ------------  ------------  ------------  ------------  -------------
1998
Revenues                               $33,399,000   $32,378,000   $36,529,000   $29,873,000   $132,179,000
Operating income (loss)                  2,219,000      (461,000)    2,182,000    (1,769,000)     2,171,000
Income (loss) before taxes and
  minority interests                     2,089,000      (672,000)    1,507,000    (3,166,000)      (242,000)
Net income (loss)                        1,114,000      (622,000)      869,000    (2,391,000)    (1,030,000)
Basic EPS                              $      0.25   $     (0.13)  $      0.16   $     (0.42)  $      (0.20)
Diluted EPS (1)                        $      0.15   N/A           $      0.11   N/A           N/A

                                          FIRST         SECOND        THIRD         FOURTH        YEAR
                                       ------------  ------------  ------------  ------------  -------------
1999
Revenues                               $27,019,000   $29,709,000   $26,613,000   $23,492,000   $106,833,000
Operating loss                          (2,685,000)   (2,271,000)   (4,539,000)   (8,473,000)   (17,968,000)
Loss before taxes and
  minority interests                    (3,840,000)   (4,353,000)   (4,983,000)   (9,727,000)   (22,903,000)
Net loss                                (2,864,000)   (3,078,000)   (3,695,000)   (9,838,000)   (19,475,000)
Basic EPS                                    (0.47)        (0.47)        (0.53)        (1.36)         (2.92)
Diluted EPS (1)                        N/A           N/A           N/A           N/A           N/A

<FN>
(1)     Inclusion  of  additional  shares  under  a  diluted  analysis  for  loss
         period  is  inappropriate  due to the anti-dilutive  effect.
</TABLE>

11.  SUBSEQUENT  EVENTS  (UNAUDITED)

     In  March  2000,  the  Company  completed  a  $31,575,000 private placement
consisting  of 315,750 shares of Class F Convertible Senior Preferred Stock, par
value $.001 per share (the ''Class F Preferred Stock''), together with five year
warrants  to  purchase  1,925,306  shares of common stock. The Class F Preferred


                                       61
<PAGE>
Stock  is  convertible  into  3,850,610  shares  of  Company  common stock  at a
conversion  price  equal  to  $8.20  per  share,  and  the exercise price of the
warrants  is  $10.00 per share. The Class F Preferred Stock earns dividends at a
rate of 12% per annum, which are cumulative and payable in either cash or shares
of  Class  F  Preferred  Stock at the  Company's  discretion.  Pricing  for this
transaction  was established based on a  trailing  thirty  day  average  of  the
closing price of the common stock as of December 7, 1999.  The  proceeds  of the
Class  F Preferred have been placed into escrow and release of escrow is subject
to  the consummation of  the merger  with  Pointe.

     The  Company will be required to file a registration statement with the SEC
within  150  days of closing the sale of the Class F Preferred Stock to register
the  shares of Common Stock issued or issuable upon  conversion of all the Class
F Preferred Stock (including shares issued as dividends) and the exercise of the
related  warrants.

     In March 2000, the Company's executive management team decided to shut down
the  Company's  manufacturing  facilities at its Interlink subsidiary.  The shut
down, which is expected to both reduce the Company's cost structure and increase
its  margins with respect to sales, is intended to focus the Company's attention
on  its  core  voice  and data services' strategies.  The shut down includes the
elimination  of  certain  products,  termination  of employees, vacating certain
facilities  and  the possible cancellation of real estate leases.  As of the end
of  March 1999, the Company expected to terminate between 20 and 25 employees as
a  result  of  the  shut  down.  Shut  down  charges  to be incurred in 2000 are
estimated  at  $1.6  million.


ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE.

     None.


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<PAGE>
PART  III

ITEM  10.  Directors  and  Executive  Officers  of  the  Registrant

                   OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES

The  officers, directors and other key employees of the Company, and their ages,
as  of  March  15,  2000  are  as  follows:

Name                   Age    Position
----                   ---    --------
E.  Scott  Crist        35    Director;  Chief  Executive  Officer

Manuel  Landa           39    Chairman of the Board; Chief  Operating Officer;

Todd  M.  Binet  (1)    35    Director;  President;  Chief  Financial Officer;
                              Secretary;  Treasurer

Oscar Garcia            38    Director; Executive Vice President of
                              International Long Distance  Operations

Ricardo  Orea           39    Director;  President  of Systems Integration and
                              Value  Added  Services

Carlos  de  Lara        40    Chief  Technology  Officer

Stephen  A.  Strohman   62    President  of  INTERLINK

Jose  Luis  Apan        37    Director of Value Added Services of Mexico

Paul  Freudenthaler     35    Chief  Accounting  Officer

Marco  A.  Castilla     33    Vice President of International Affairs
                              and  Corporate Counsel

Jesse  E.  Morris       32    Vice  President  of  Strategic  Development

Darrel O. Kirkland      60    Director
 (1)(2)

Jack  M.  Fields,  Jr.  48    Director
 (1)(2)

(1)     Member  of  the  Audit  Committee  of  the  Board  of  Directors.
(2)     Member  of  the  Compensation  Committee  of  the  Board  of  Directors.

E.  Scott  Crist  has  served  as Chief Executive Officer of Telscape since July
1996.  Mr. Crist also serves on the board of directors of Billserve.com (NASDAQ:
BLLS), SalvageSale.com, Bynari, Inc. and RealUse.com. Prior to joining Telscape,
Mr.  Crist  was  President  and  Chief  Executive  Officer for Matrix Telecom, a
long-distance  company  which  ranked  #7  on  THE INC. MAGAZINE list of the 500
fastest  growing  private  companies in 1995. He also founded DNS Communications
(''DNS''),  a long-distance reseller. He served as DNS's Chief Executive Officer
from  its  inception until DNS's merger with Matrix Telecom. Formerly, he served
as  Vice President of Acquisitions for Trammell Crow Group, where he specialized
in  U.S.  capital  market  transactions.  Mr.  Crist has an M.B.A. from the J.L.
Kellogg  School  at Northwestern University, and received a B.S. MAGNA CUM LAUDE
in  Electrical  Engineering  with  an emphasis on telecommunications design from
North  Carolina  State  University.

Manuel Landa has served as Telscape's Chief Operating Officer since January 1999
and as Chairman of the Board and as a member of the Board of Directors since May
1996.  From  1986  until  he  joined  Telscape, Mr. Landa served as Export Sales
Manager  for  Condumex,  the largest Mexican manufacturer of electrical products
with  exports  to  the United States, Canada, Latin America and Europe. While at
Condumex,  Mr. Landa also served as Plant Manager, in which capacity he directed
the  Insulating  Materials Division. Prior to joining Condumex, Mr. Landa worked
in the consumer and industrial electronics business of Philips, a Dutch company,
where  he served as Design Engineer for its Industrial Audio-Video Division. Mr.
Landa  received  a  degree  in Electronic and Communications Engineering from La
Salle University in Mexico City, where he graduated MAGNA CUM LAUDE. He also has
a diploma in Total Quality Management from the Instituto Tecnologico de Estudios
Superiores  Monterrey.


                                       63
<PAGE>
Todd  M.  Binet  has  served as Telscape's President and Chief Financial Officer
since  January  1999.  Prior  to  that,  he  served as Telscape's Executive Vice
President  and  Chief Financial Officer since January 1997. Mr. Binet has been a
member  of  the Board of Directors since March 1997. Mr. Binet has over 10 years
of  business  and management experience. Prior to joining Telscape, he served as
an  officer  and director of St. James Capital Corp., the general partner to St.
James  Capital  Partners, a merchant banking fund, from January 1996 to December
1996.  Prior to his service with St. James, from July 1992 to December 1995, Mr.
Binet  served  as  Treasurer  and  Corporate  Counsel  for  Alamo Group Inc., an
international  company listed on the New York Stock Exchange. Mr. Binet received
a  B.B.A. in finance from Southern Methodist University and graduated CUM LAUDE.
He  also received an M.B.A. from the Wharton School of Business and holds a J.D.
from  the University of Pennsylvania. Mr. Binet also holds a license to practice
law  in  the  state  of  Texas,  although  the  license  is  currently inactive.

Oscar  Garcia  has  served  as  Telscape's  Vice President of International Long
Distance Operations and Value Added Services since December 1998 and as a member
of  the  Board  of  Directors  of Telscape since May 1996. Mr. Garcia co-founded
Vextro and served as Vextro's Vice President of Operations since 1988. From 1987
until  he  co-founded  Vextro,  Mr.  Garcia  served  as  Engineering Manager for
Infosistemas,  which  at  that  time  was the exclusive AT&T telephone equipment
distributor  in  Mexico. Prior to that, Mr. Garcia was Sales Support Manager for
Macrotel  de  Mexico  S.A.  de  C.V.,  a subsidiary of Macrotel, Inc., a Florida
telephone  key  systems company with exports to Mexico and Latin America. Before
that,  Mr. Garcia held the position of design engineer for the R&D department of
GTE,  at  that  time the leading U.S. telecommunications company involved in PBX
and  KSU  manufacturing  in  Mexico. Mr. Garcia holds an undergraduate degree in
Electronic  and  Communications  Engineering  from La Salle University in Mexico
City,  a  diploma in Marketing from La Salle University and a degree in Business
Administration  from the University of California at Berkeley, extension program
in  Mexico  City.

Ricardo Orea has served as President of Telscape's Systems Integracion Services,
since  December  1998  and  has  served as a member of the Board of Directors of
Telscape  since May 1996. Mr. Orea co-founded Vextro and served as Vextro's Vice
President  of  Sales and Marketing since 1988. Prior to joining Vextro, Mr. Orea
was  Electronic  Control  Systems Plant Manager for Asea Brown Boveri, a Swedish
electrical  control and switchgear equipment manufacturer. Before that, Mr. Orea
worked  for  GTE in its Purchasing and Logistics Department as System Integrator
and  Supplier Development Manager. Earlier, he was Technical Service Manager for
MISA,  a  Mexican computer mainframes and telecommunications maintenance service
company  which  served  major  financial  accounts  and  universities.  Mr. Orea
received  an  undergraduate  degree in Electronic and Communications Engineering
from  La  Salle  University  in  Mexico  City  and  has  a  diploma  in Business
Administration  from the University of California at Berkeley, extension program
in  Mexico  City.

Carlos  J.  de Lara has served as Telscape's Chief Technology Officer since June
1998.  Prior  to that, he served as Telscape's Director of Metropolitan Networks
since  October 1997. Mr. de Lara has over 20 years of experience in the computer
and  communications industries. Prior to joining Telscape, he served as director
of  NSI,  a  network  integration  company  acquired by Telscape in 1997. He was
co-founder  on NSI, specialized in big corporate networks, WANs, MANs and access
technologies,  from  February  1994  to  August  1997. Prior to founding NSI, he
served  for  several  companies  distributing  3Com equipment, from July 1987 to
January  1994.  Prior  to  that,  he  served  as  an  independent  consultant in
communications, data networking and software development from March 1983 to June
1987.  Prior  to  that,  he served as Manager of Operational Optimization and as
Modeling  Developer in Multibanco Comermex, from November 1979 to February 1983.
He  also  has  served as Director and Faculty member in the Graduate Program for
Data Networking and Communications, in Universidad Anahuac, in Mexico City, from
June  1992  to  August 1995. He also served as advisor in data networking to Dr.
Enrique  Melrose,  then  Director  of  Research  in  the  Mexican  Institute  of
Communications,  from  July  1993  to  July  1995.  (Dr.  Melrose  is  currently
Commissioner  of  Engineering  and  Technology in the COFETEL, which is Mexico's
telecommunications  regulatory  body).  He  received a B.S. degree in Industrial
and  Systems  Engineering  from  the  Universidad  Anahuac  in  Mexico  City.

Stephen  A.  Strohman  has served as President of Interlink Communications, Inc.
since  it  was  founded  in May 1998.  In 1996, Mr. Strohman joined the Services
Division  of  California  Microwave,  Inc.  (CMI)  as  Vice  President, Business
Development.   Prior  to  this,  Mr.  Strohman  was the founder and president of
Strohman  Associates,  Inc.  (SAI).  SAI  was  formed  in  1984  to focus on the
satellite  telecommunications  industry  and  technology.  SAI performed network
analysis,  design,  and  systems integration for a number of telecommunications,
manufacturing  and  services companies.  SAI also consulted with investment fund


                                       64
<PAGE>
managers  in  telecommunications  strategies,  joint  ventures,  and mergers and
acquisitions.  Mr.  Strohman's  clients  included  Xerox,  AT&T,  Sprint and STM
Wireless.  In 1985, Mr. Strohman directed the implementation of the first shared
hub,  satellite-based  VSAT  network for Xerox.  Mr. Strohman has also served as
Senior  Vice  President  of  STM  Wireless, where he led the company's 1992 IPO.
Prior  to  that,  Mr.  Strohman  was  Vice  President  of  marketing at TRW, and
President  of  an international subsidiary of Sprint.  Mr. Strohman holds a B.A.
from  California  State  University.

Jose  Luis  Apan  has  served as Director of Value Added Services since December
1998. Prior to that, he served as Telscape's Director of Marketing since joining
Telscape on July 1, 1996. Prior to joining Telscape, he was co-founder and Chief
Executive  Officer  of Integracion from 1992 to 1997. From 1986 until he founded
Integracion,  Mr.  Apan  served  as  Regional  Telecommunications  Manager  for
Hewlett-Packard  Latin America where he was responsible for the installation and
operation  of  the  Voice,  Data and Video Digital Network for the Latin America
Region.  Mr.  Apan  has an MBA from the Instituto Tecnologico Autonomo de Mexico
and  holds  an undergraduate degree in Chemical Engineering from the Universidad
Iberoamericana  in  Mexico  City.  Mr.  Apan is also a Registered Communications
Distribution  Designer  from  the Building Institute of Construction Industry in
Tampa,  Florida.

Paul  D.  Freudenthaler  has served as Telscape's Chief Accounting Officer since
September  1999. Prior to joining Telscape, Mr. Freudenthaler worked as Director
of International Lending at Bank United and Irwin Mortgage Corporation from June
1994  to  August  1999.  Prior  to  that  Mr.  Freudenthaler worked as Corporate
Controller  for  Arvin  Sango  and as a senior auditor at KPMG Peat Marwick. Mr.
Freudenthaler  earned  his M.B.A. in Finance from the Wharton School of Business
in May 1994, his Bachelor's of Commerce degree from the University of Calgary in
May  1997,  and  is  a  Certified  Public  Accountant  with  the State of Texas.

Marco  A.  Castilla  has  served  as Vice President of International Affairs and
Corporate  Counsel  since  July  1998.  Prior  to joining Telscape, Mr. Castilla
worked  as  Foreign  Legal  Advisor at Swidler & Berlin, Chartered. At Swidler &
Berlin, Mr. Castilla practiced in the telecommunications group, representing and
advising  several  U.S.  and international telecommunications companies in their
entry  into  newly competitive markets, including with respect to regulatory and
transactional matters and in structuring their foreign operations. From December
1995  to  September  1996,  Mr.  Castilla  worked  as a Foreign Associate at the
international  law firm Rogers & Wells in Washington D.C. At Rogers & Wells, Mr.
Castilla  devoted  most  of  his  practice  to capital market financing, project
financing  and  mergers  and  acquisitions.  Mr. Castilla holds law degrees from
Harvard  Law School (L.L.M.) and with honors from the Universidad Iberoamericana
in  Mexico  City  (J.D.).  Mr.  Castilla  is  a member of the Inter-American Bar
Association  and  the  Harvard  International  Law  Society.

Jesse  E.  Morris  has served as Telscape's Vice President of Strategic Planning
since  September  of 1999. Prior to that, he served as Vice President of Finance
and  Corporate  Controller  since  January  1999 and as the Corporate Controller
since  October  1997.  Prior  to joining Telscape Mr. Morris worked from January
1992  until  October  1997 with Arthur Andersen LLP, a multi-national accounting
and  consulting  professional services firm, where he last served as Experienced
Audit  Manager. Mr. Morris received his B.B.A. in Accounting and Finance and his
Masters  in Professional Accountancy from the University of Texas. Mr. Morris is
a  Certified  Public  Accountant  with  the  State  of  Texas.

Darrell O. Kirkland has served as a member of the Board of Directors of Telscape
since  March  1996.  Mr.  Kirkland  is  a  principal  consultant with Kirkland &
Associates,  a  management consulting firm specializing in telecommunications. A
registered  Professional  Engineer, Mr. Kirkland has many years of experience in
long  distance,  microwave,  wireless, fiber and local transmission services. He
has  held  general  management  and marketing positions with MCI Air Signal, CPI
Microwave, and Discovery Communications. Current and recent clients include MCI,
Skytel,  IXC  Communications,  Prime  Cable  and  Winstar Wireless. Mr. Kirkland
received  a  B.B.A.  from  the  University  of  Texas  and an M.S. in Industrial
Engineering  from  the  University  of  Houston.

Jack M. Fields, Jr. has served as a member of the Board of Directors of Telscape
since November 1998. Mr. Fields served as a U.S. Congressman representing Texas'
8th  Congressional  District  in  the United States House of Representative from
1981  to  1997, retiring as chairman of the House Telecommunications and Finance
subcommittee. Under his leadership, Congress enacted the 1996 Telecommunications
Act.  Mr.  Fields served on the Telecommunications and Finance Subcommittee from
1985  until  his  retirement.  During  his  years  of  service, the subcommittee
maintained  jurisdiction  over  interstate and international telecommunications,
the Federal Communications Commission, as well as the telephone, cellular, cable
and  broadcast industries. In addition, the subcommittee maintained jurisdiction
over  the  Securities  and  Exchange  Commission,  including  the  activities of
investment  bankers, stock brokers, investment advisors, stock exchanges and the
mutual  fund industry. After retiring in 1997, Mr. Fields founded two companies;
Texana  Global,  Inc.  and  international  trading corporation, and Twenty-First
Century Group, Inc., a Washington, D.C.-based governmental affairs and strategic
planning  company.  Mr.  Fields currently serves on the boards of AIM Management
Group,  Inc.  and  Administaff,  Inc., as well as the Houston Metropolitan Study
Group.


                                       65
<PAGE>
     Each  officer  of  Telscape  holds office until such officer's successor is
chosen  and  qualified  in such officer's stead or until such officer's death or
until  such  officer's resignation or removal from office. Certain officers have
employment  contracts  with  Telscape  (See  Employment  Agreements).

     Each  of the directors were elected at the Company's Annual Meeting held on
June  21,  1999  and  currently hold office until the next annual meeting of the
Company's  stockholders  or  until  their  successors are elected and qualified.

             SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act requires the Company's executive officers
and  directors  and  persons  who own more than 10% of a registered class of the
Company's  equity  securities  to  file  reports  of  ownership  and  changes in
ownership with the Securities and Exchange Commission and the Nasdaq.  Executive
officers,  directors  and  greater than 10% stockholders are required by certain
regulations  to  furnish the Company with copies of all Section 16(a) forms they
file.

     Based  solely  on its review of the copies of Forms 3 and 4,  as  furnished
to the Company, pursuant to the Exchange Act during its most recent fiscal year,
and Forms 5 with respect  to  its  most recent  fiscal year, it is the Company's
belief that any such forms required to be filed pursuant to Section 16(a) of the
Exchange  Act  were  timely  filed,  as necessary by the officers, directors and
security holders required to file the same during the fiscal year ended December
31,  1999  with the two exceptions.  Mr. Binet did not timely file the necessary
Form 4 for a transaction effectively occurring on December 30, 1999.  The Form 5
for  this transaction was subsequently filed on February 17, 2000.  Mr. Kirkland
did  not timely file the necessary Form 4 for transactions effectively occurring
on  March  19,  1996,  October  9, 1998 and June 21, 1999.  The Form 5 for these
transactions  was  subsequently  filed on  February  9,  2000.

ITEM  11.  Executive  Compensation

                        Report on Executive Compensation
                        --------------------------------

     In  March  1997,  the Company established the Compensation Committee of the
Board  which  is  responsible  for  administering  the  Company's  executive
compensation  programs  and  policies.  The  Company's  executive  compensation
programs  are  designed  to  attract,  motivate  and retain the executive talent
needed  to optimize stockholder value in a competitive environment. The programs
are  intended  to  support  the  goal  of  increasing  stockholder  value  while
facilitating  the  business  strategies  and  long-range  plans  of the Company.

     The  following  is  the  Compensation  Committee's  report  addressing  the
compensation  of  the  Company's  executive  officers.

                       Compensation Policy and Philosophy
                       ----------------------------------

     The  Company's  executive  compensation  policy is designed to establish an
appropriate  relationship  between  executive  pay  and  the  Company's  annual
performance,  its  long  term  growth  objectives and its ability to attract and
retain qualified executive officers. The Company's policy is based on the belief
that  the  interests  of  the  executives  should  be  closely  aligned with the
Company's  stockholders.  The  Compensation  Committee attempts to achieve these
goals  by  integrating  annual  base  salaries with (i) annual incentive bonuses
based  on  corporate  performance,  based  on  the  achievement  of  specified
performance objectives set forth in the Company's financial plan for such fiscal
year,  and  based  on individual performance, and (ii) stock options through the
Company's  stock  option  plans.  The  Compensation Committee's philosophy is to
review  salaries  paid to executive officers with comparable responsibilities in
comparable  businesses  and  offer  salaries  to its executives which are in the
lower  range  of  those offered by such comparable businesses.  In addition, the
components of each executive officer's compensation is weighted to the bonus and
option  components.  This  results  in  a meaningful portion of each executive's
compensation  being  placed at-risk and linked to the accomplishment of specific
results  that  are  expected  to lead to the creation of value for the Company's
stockholders  from  both the short-term performance and long term success of the
Company.  The  Compensation Committee considers all elements of compensation and
the  compensation  policy  when  determining  individual  components  of  pay.

     The  Compensation  Committee believes that leadership and motivation of the
Company's employees are critical to achieving the objectives of the Company. The
Compensation  Committee  is responsible for ensuring that its executive officers
are  compensated  in  a  way that furthers the Company's business strategies and
which  aligns  their  interests  with those of the stockholders. To support this
philosophy,  the  following  principles  provide  a  framework  for  executive
compensation:  (i) offer compensation opportunities that attract the best talent
to  the  Company;  (ii) motivate individuals to perform at their highest levels;
(iii)  reward  outstanding  achievement;  (iv)  retain  those  with  leadership
abilities  and  skills  necessary  for building long-term stockholder value; (v)
maintain  a  significant portion of executives' total compensation at risk, tied
to  both  the  annual and long-term financial performance of the Company and the
creation  of  incremental  stockholder  value;  and (iv) encourage executives to
manage  from  the  perspective  of  owners  with an equity stake in the Company.


                                       66
<PAGE>
                        Executive Compensation Components
                        ---------------------------------

     As  discussed  below,  the  Company's  executive  compensation  package  is
primarily  comprised  of three components: base salary, annual incentive bonuses
and  stock  options.

     Base  Salary. For fiscal 1999, the Compensation Committee approved the base
salaries  of  the  Named  Executive  Officers  (as  defined  below) based on (i)
salaries paid to executive officers with comparable responsibilities employed by
companies with comparable businesses, (ii) performance and accomplishment of the
Company  in fiscal 1999 which is the most important factor, and (iii) individual
performance  reviews  for  fiscal  1999  for  most  executive  officers.  The
Compensation  Committee's  philosophy  is  to  review salaries paid to executive
officers  with  comparable  responsibilities  in comparable businesses and offer
salaries to its executives which are in the lower range of those offered by such
comparable businesses.   In addition, the components of each executive officer's
compensation  is weighted to the bonus and option components.  This results in a
meaningful  portion  of  each  executive's compensation being placed at-risk and
linked  to  the  accomplishment of specific results that are expected to lead to
the  creation  of  value for the Company's stockholders from both the short-term
performance  and  long  term  success of the Company. The Compensation Committee
reviews executive officer salaries annually and exercises its judgement based on
all  the factors described above in making its decision, subject to the terms of
such officer's employment agreement. No specific formula is applied to determine
the  weight  of  each  criteria.

     Annual  Incentive Bonuses. Annual incentive bonuses for the Named Executive
Officers  are  based  upon  the  following criteria: (i) the Company's financial
performance  for  the  current fiscal year, (ii) the furthering of the Company's
strategic  position  in the marketplace, and (iii) individual merit. The Company
paid  incentive  bonuses  to  the Named Executive Officers (as defined below) as
depicted  in  the  Summary  Compensation  Table.

     Long  Term  Incentive  Compensation.  Stock  options  encourage  and reward
effective  management which results in long-term corporate financial success, as
measured  by  stock price appreciation. The Compensation Committee believes that
option  grants  afford  a  desirable  long-term compensation method because they
closely  ally the interests of management with stockholder value and that grants
of  stock  options  are  the  best way to motivate executive officers to improve
long-term  stock  market  performance. The vesting provisions of options granted
under  the  Company's  stock option plans are designed to encourage longevity of
employment  with  the  Company  and  generally  extend over a three year period.

                     Compensation of Chief Executive Officer
                     ---------------------------------------

     The  Board  believes  that  E.  Scott  Crist, the Company's Chief Executive
Officer,  provides  valuable  services  to the Company and that his compensation
should  therefore  be  competitive  with  that  paid to executives at comparable
companies.  In  addition,  the Compensation Committee believes that an important
component  of  his  compensation  should  be  based on Company performance.  Mr.
Crist's  annual  base  salary  for fiscal 1999 was $125,000.  Mr. Crist's annual
base  salary  for  fiscal  2000  is $125,000. The factors which the Compensation
Committee  considered  in  setting  his  annual  base salary were his individual
performance  and  pay  practices  of  peer  companies  relating to executives of
similar  responsibility.

                      Internal Revenue Code Section 162(m)
                      ------------------------------------

     Under  Section 162(m) of the Internal Revenue Code (the "Code"), the amount
of  compensation  paid  to certain executives that is deductible with respect to
the  Company's  corporate  taxes  is  limited to $1,000,000 annually, if certain
requirements  of  section  162(m)  are  not met. It is the current policy of the
Compensation  Committee  to  maximize,  to  the  extent reasonably possible, the
Company's  ability  to obtain a corporate tax deduction for compensation paid to
executive  officers  of  the  Company  to  the  extent  consistent with the best
interests  of  the  Company  and  its  stockholders.

                        The  Compensation  Committee:
                        Darrel  O.  Kirkland
                        Jack  M.  Fields,  Jr.


                                       67
<PAGE>
                           SUMMARY COMPENSATION TABLE

The following table sets forth the aggregate cash compensation paid for services
rendered  to  the  Company  during  the last three fiscal years by the Company's
Chief  Executive  Officer  and  the four other most highly compensated executive
officers of the Company (together, the "Named Executive Officers") who served as
such  during  the  1999  fiscal  year.

<TABLE>
<CAPTION>
                                                                                Long-Term Compensation
                                                    ---------------------------------------------------------------------------
                            Annual Compensation (1)                 Awards                              Payouts
                          -----------------------------------------------------------------------------------------------------
                                                                                        Securities
Name and                                                   Other                        Underlying
Principal                                     Bonus       Annual         Restricted      Options/       LTIP        All Other
Position (2)              Year  Salary ($)    ($)(3)  Compensation($)  Stock Awards($)   SARs (#)    Payouts(#)  Compensation($)
------------------------  ----  -----------  -------                   ---------------  -----------  ----------
<S>                       <C>   <C>          <C>      <C>              <C>              <C>          <C>         <C>
Scott Crist; Chief        1999  $   122,692      ---               --               --           --          --               --
Executive Officer         1998  $   109,548  $75,000               --               --       27,838          --               --
                          1997  $    87,308  $75,000               --               --           --          --               --

Manuel Landa;             1999  $   115,731      ---               --               --           --          --               --
Chairman,                 1998  $    80,000  $60,000               --               --       29,625          --               --
Chief Operating Officer   1997  $    80,000  $75,000               --               --           --          --               --

Oscar Garcia;             1999  $   117,000      ---               --               --           --          --               --
EVP of                    1998  $    80,000  $75,000               --               --       29,625          --               --
International             1997  $    80,000  $50,000               --               --           --          --               --
Long Distance
Operations

Ricardo Orea;             1999  $   117,000      ---               --               --           --          --               --
President of              1998  $    80,000  $75,000               --               --       29,625          --               --
Systems                   1997  $    80,000  $50,000               --               --           --          --               --
Integration and
Value AddedServices

Todd M. Binet;            1999  $   121,923      ---               --               --           --          --               --
President and             1998  $    92,684  $75,000               --               --       37,031          --               --
Secretary,                1997  $    74,346  $50,000               --               --      250,000          --               --
Treasurer and
CFO
<FN>
______________________
     (1)  Each of the Company's officers received perquisites and other personal benefits in addition to salary and bonuses.
The  aggregate  amount  of  such  perquisites  and  other personal benefits, however, does not exceed the lesser of $50,000 or 10
percent  of  the  total  of the annual salary and bonus reported for any of the Named Executive Officers for each of the reported
years.
     (2)     The  following  summarizes each executive's employment commencement dates:  Mr. Crist, August, 1996; Mr. Landa, May,
1996;  Mr. Garcia, May, 1996; Mr. Orea, May, 1996; Mr. Binet, January, 1997.  Compensation information is provided for each Named
Executive  Officer  from  such  officers  employment  commencement  date.
     (3)     Represents  annual  bonus award earned for the fiscal year noted, even though such bonus was paid in the following
fiscal  year.
</TABLE>


                                       68
<PAGE>
      OPTION/SAR GRANTS IN LAST FISCAL YEAR (1999)

There were no option or SAR grants to named executive officers during the fiscal
year  1999.

      AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
                                OPTION/SAR VALUES

     The  following table sets forth-certain information with respect to options
exercised during fiscal 1999 by the Named Executive Officers and with respect to
unexercised  options  held  by  such  persons  at  the  end  of  fiscal  1999.

<TABLE>
<CAPTION>
                                        Number of Securities      Value of Unexercised In-the-
                                      Underlying Unexercised at    Money Option/SARs at Fiscal
                                                                                        ------
                Shares                     Fiscal Year End (#)         Year End ($)(1)
               Acquired on   Value         -------------------         ---------------
NAME          Exercise (#)  Realized  EXERCISABLE  Unexercisable  EXERCISABLE   Unexercisable
              ------------  --------  -----------  -------------  ------------  --------------
<S>           <C>           <C>       <C>          <C>            <C>           <C>
Scott Crist             --        --      334,737         20,879  $  2,698,861  $      107,005
Manuel Landa            --        --      129,625            ---  $  1,014,953  $          ---
Oscar Garcia            --        --      129,625            ---  $  1,014,953  $          ---
Ricardo Orea            --        --      129,625            ---  $  1,014,953  $          ---
Todd Binet              --        --      259,258         27,773  $  2,266,197  $      142,337
<FN>

     (1)  The  calculations  of  the  value of unexercised options are based on the difference
between  the  closing price of $12.625 per share on Nasdaq of the Common Stock on December 31,
1999  and the exercise price of each option, multiplied by the number of shares covered by the
option.
</TABLE>

            LONG TERM INCENTIVE GRANTS IN THE LAST FISCAL YEAR (1999)

          There  were  no long term incentive grants to named executive officers
during  the  fiscal  year  1999.

                            COMPENSATION OF DIRECTORS

     Directors are reimbursed for their ordinary and necessary expenses incurred
in attending meetings of the Board of Directors or a committee thereof. Telscape
pays  directors  who are not also employees of Telscape $500 for each meeting of
the  Board  of  Directors  they  attend.  Directors  of Telscape are eligible to
participate  in  Telscape's  1996 Stock Option and Appreciation Rights Plan, the
1998  Stock Option and Appreciation Rights Plan, if adopted, and Telscape's 1994
Directors  Stock  Option  Plan.

     Non-employee  directors  may receive an annual grant of options to purchase
10,000 shares of Telscape's Common Stock. In February 1999, Mr. Kirkland and Mr.
Fields  each  received  grants  of  10,000  shares  of  Telscape's  common stock
exercisable  at  $8.188  a  share  with  a  one  year  vesting  period.

                              EMPLOYMENT AGREEMENTS

     In  connection  with  the  Company's  acquisition of Telereunion, Inc., the
Company entered into an employment agreement with Mr. Landa, effective as of May
14,  1996. The employment agreement provided, among other things, that Mr. Landa
will  serve  as  President  and  CEO  of  Telereunion. The original employment
agreement  terminated  May 14, 1999 and a new agreement was issued on  September
2,  1999  for  a  period  of three years.  Mr. Landa's agreement provided, among
other  things,  that  he  will  serve as Chief Operating Officer of the Company,
reporting  to the Chief Executive Officer of the Company.  Mr. Landa's agreement
will  be  terminated  upon  the consummation of the Company's merger with Pointe
Communications,  Inc.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Darrel  O.  Kirkland  and  Jack  M.  Fields,  Jr.,  comprise  the Company's
compensation  committee.  Neither  member  of  the  compensation committee is an
executive  of  the  Company  or its subsidiaries and neither serves in a similar
capacity  for  another  entity.  Additionally, no director or officer of the
Company serves in a similar capacity for an entity whose officers or directors
serve on Telscape's compensation committee.


                                       69
<PAGE>
                   STOCKHOLDER RETURN PERFORMANCE PRESENTATION

          Set  forth  below  is  a line graph comparing the yearly change in the
Company's  Common  Stock  since  the Company's initial public offering in August
1994  against  the NASDAQ Telecommunications Industry Index and the NASDAQ Stock
Market  Index.


               [Stockholder Return Performance Presentation Chart]


<TABLE>
<CAPTION>
DESCRIPTION                  1994     1995     1996     1997     1998     1999
--------------------------  -------  -------  -------  -------  -------  -------
<S>                         <C>      <C>      <C>      <C>      <C>      <C>
Telscape International ($)  $100.00  $ 73.33  $ 83.33  $211.65  $193.33  $336.66
--------------------------  -------  -------  -------  -------  -------  -------
S & P 500 ($)               $100.00  $137.58  $169.17  $225.60  $290.08  $351.12
--------------------------  -------  -------  -------  -------  -------  -------
NASDAQ US ($)               $100.00  $141.33  $173.89  $213.07  $300.24  $542.41
--------------------------  -------  -------  -------  -------  -------  -------
NASDAQ Telecom ($)          $100.00  $130.91  $133.86  $195.75  $322.30  $561.26
--------------------------  -------  -------  -------  -------  -------  -------
</TABLE>

     The  graph  assumes  that $100 was invested in August 1994 in the Company's
Common  Stock and in the S & P 500, the NASDAQ Stock Market Index and the NASDAQ
Telecommunications  Index and that all dividends were re-invested.  No dividends
have  been  declared or paid in the Company's Common Stock.  Stockholder returns
over  the  indicated  period  should  not  be  considered  indicative  of future
stockholder  returns.


                                       70
<PAGE>
ITEM  12.  Security  Ownership  Of  Certain  Beneficial  Owners  And  Management

          The  following  table  sets forth certain information, as of March 15,
2000, with respect to the beneficial ownership of Common Stock by each director,
each  Named  Executive  Officer  included in the Summary Compensation Table, the
directors  and  executive  officers  as  a  group  and each stockholder known to
management  to  own  beneficially  more  than  5%  of  the Common Stock.  Unless
otherwise  noted, the persons listed below have sole voting and investment power
with  respect  to  such  shares.

<TABLE>
<CAPTION>
Name and                              Number of Shares     Percentage
Address                               Beneficially Owned   Beneficially Owned
------------------------------------  -------------------  -------------------
<S>                                   <C>                  <C>
E. Scott Crist                               1,299,953(1)                12.0%
2700 Post Oak Boulevard, Suite 1000
Houston, Texas 77056

Manuel Landa                              1,162,950(2)(3)                10.8%
2700 Post Oak Boulevard, Suite 1000
Houston, Texas 77056

Ricardo Orea                              1,161,881(3)(4)                10.8%
Moras No. 430
Col. Del Valle, Del Benito Juarez
03100 Mexico, D.F.

Oscar Garcia                              1,155,881(3)(5)                10.7%
Moras No. 430
Col. Del Valle, Del Benito Juarez
03100 Mexico, D.F.

Todd M. Binet                                  464,936(6)                 4.3%
2700 Post Oak Boulevard, Suite 1000
Houston, Texas 77056

Darrel Kirkland                                 30,125(7)                ---*
803 Forest View
Austin, TX 78746

Jack M. Fields, Jr.                             23,571(8)                ---*
8810 Will Clayton Pkwy, Suite E
Humble, TX 77338

All directors and named executive
officers as a group (7 persons)              5,299,297(9)                49.0%
<FN>
--------------------------------------------------------------------------------
*     Less  than  1%
</TABLE>

     (1)  Includes shares of Common Stock issuable upon exercise of the Series A
Common  Stock  Warrant  which  have  vested  and are exercisable with respect to
rights  to  purchase 500 shares of Common Stock at $2.19 per share. The Series A
Common  Stock  Warrant is currently exercisable and lapses on May 16, 2003. Also
included  are  the shares of Common Stock issuable upon exercise of (i) a common
stock  warrant  representing the right to purchase 37,418 shares of Common Stock
at  $6.68  per  share  and (ii) a common stock warrant representing the right to
purchase  31,805  shares  of  Common  Stock at $6.68 per share. Includes 255,620
shares  of Common Stock owned by Delaware Charter Guaranteed Trust Co. F/B/O Mr.
Crist.  Includes options to purchase (i) 327,778 shares of Common Stock at $4.50
per share and (ii) 6,959 shares of Common Stock at $7.50 per share, all of which
are  presently exercisable. Excludes options to purchase 20,879 shares of common
stock  at $7.50 per share, as such options are not exercisable within sixty (60)
days  of  this  table.

     (2)  Includes  shares  of Common Stock issuable upon exercise of a Series A
Common  Stock  Warrant  which have vested and become exercisable with respect to
rights  to  purchase  231,442 shares of Common Stock at $2.19 per share owned by
Mr.  Landa, as well as rights to purchase 326,883 shares of Common Stock held by
Forest  International, L.L.C. (''Forest''). Mr. Landa is the beneficial owner of
Forest.  The  Series  A  Common  Stock Warrant lapses on May 16, 2003.  Excludes
options  to  purchase  77,000 shares of Common Stock at $16.00 per share as such
options  are  not  exercisable within sixty (60) days of the date of this table.


                                       71
<PAGE>
      (3)  Includes  options  to  purchase  25,000,  75,000 and 29,625 shares of
Common  Stock  at $1.35, $4.875, and $7.50 per share, respectively, all of which
options  are  presently  exercisable.

     (4)  Includes shares of Common Stock issuable upon exercise of the Series A
Common  Stock  Warrant  which have vested and become exercisable with respect to
rights  to  purchase  247,208 shares of Common Stock at $2.19 per share owned by
Mr.  Orea,  as well as rights to purchase 310,048 shares of Common Stock held by
Cloud  International,  L.L.C.  (''Cloud'').  Mr. Orea is the beneficial owner of
Cloud.  The  Series  A  Common  Stock  Warrant lapses on May 16, 2003.  Excludes
options  to  purchase 42,000 shares of Common Stock at $16.00 per share as such
options  are  not  exercisable within sixty (60) days of the date of this table.

     (5)  Includes shares of Common Stock issuable upon exercise of the Series A
Common  Stock  Warrant  which have vested and become exercisable with respect to
rights  to  purchase  241,208 shares of Common Stock at $2.19 per share owned by
Mr. Garcia, as well as rights to purchase 310,048 shares of Common Stock held by
Sky  International, L.L.C. (''Sky''). Mr. Garcia is the beneficial owner of Sky.
The  Series  A Common Stock Warrant lapses on May 16, 2003.  Excludes options to
purchase 42,000 shares  of Common Stock at $16.00 per share as such options are
not  exercisable  within  sixty  (60)  days  of  the  date  of  this  table.

     (6)  Includes shares of Common Stock issuable upon exercise of the Series A
Common  Stock Warrant representing the right to purchase 47,798 shares of Common
Stock  at  $2.19 per share. The Series A Common Stock Warrant expires on May 16,
2003.  Includes  options  to purchase 83,333 shares of Common Stock at $3.25 per
share,  options  to  purchase 166,667 shares of Common Stock at $4.00 per share,
and  options to purchase 9,258 shares of Common Stock at $7.50 per share, all of
which  are  presently exercisable. Excludes options to purchase 27,773 shares of
Common Stock at $7.50 per share as such options are not exercisable within sixty
(60)  days  of this table. Excludes 10,000 Series A Warrants and 10,000 Series B
Warrants  which  are  held  in  trust  for  the benefit of Mr. Binet's two minor
children.  Mr.  Binet  disclaims  beneficial  ownership  of  these  shares.

     (7) Includes options to purchase (i) 10,000 shares of Common Stock at $3.75
per  share,  (ii)  9,625  shares  of  Common Stock at $7.50 per share, and (iii)
10,000  shares  of  Common  Stock  at $8.188 per share, all of which options are
presently  exercisable.

     (8) Includes options to purchase 10,000 shares of Common Stock at $7.25 and
10,000  shares  at  $8.188  ,  all  of  which options are presently exercisable.

     (9)  Includes  options  and warrants to purchase 2,816,853 shares of Common
Stock,  all  of which are exercisable within sixty (60) days of the date of this
table.

ITEM  13.  Certain  Relationships  and  Related  Transactions

                     TRANSACTIONS WITH MANAGEMENT AND OTHERS

     On  October 22, 1999, we signed a loan agreement with Lennox Invest Ltd., a
BVI  Corporation,  which provided for funding of up to $10.0 million. A total of
$1.5  million  has been funded on this facility, which bears interest at 10% per
annum. Interest on each note is to be paid at maturation of the respective note,
which  occurs six months after the date of each note. Of the $1.5 million funded
under  the  facility,  $1.0  million matures on April 19, 2000, and $0.5 million
matures  on  April 26, 2000. As part of this transaction, certain members of the
board  of  directors agreed to pledge shares of Telscape stock as collateral. We
have  agreed  to  indemnify these directors for the loss of their shares for any
reason  other  than  the  non-payment  of  these  loans, and to compensate these
directors  by  immediately vesting options to acquire 22,219 shares at $7.50 per
share for each of Messrs. Landa, Orea and Garcia.  In December 1999, we informed
Lennox  that we would not be drawing any further funding under this facility due
to  a  breach  of  contract  on  the  part  of  Lennox.

          On  November  24,  1999,  we  signed  a letter of intent to merge with
Pointe.  In  connection with the letter of intent, Pointe agreed to lend us $1.5
million  that was evidenced by a short term promissory note ("Promissory Note").
As part of this transaction, certain members of the board of directors agreed to
pledge shares of Telscape stock as collateral. We have agreed to indemnify these
directors for the loss of their shares for any reason other than the non-payment
of  these  loans,  and  to  compensate  these  directors.


                                       72
<PAGE>
                           INDEBTEDNESS OF MANAGEMENT

          On  December  10,  1998,  Manual Landa issued a Promissory Note to the
Company  in the amount of $270,000, bearing simple interest at an annual rate of
9%.  The outstanding balance of the Note due to the Company at December 31, 1999
was  $220,336,  including  principal  and  accrued  interest.

          On  May  7,  1999, the Company issued $1,000,000 in senior notes to E.
Scott  Crist,  bearing  interest  at 8% until November 6, 1999.  Thereafter, the
interest  rate  increased  by  1%  for  each  month after November 6, 1999.  The
Company  repaid  $150,000  to  Mr.  Crist  on  August 27, 1999.  The outstanding
balance  of  the  Note  due  to  Mr.  Crist  at  December  31, 1999 is $850,000.

          On  August  16,  1999,  E. Scott Crist issued a Promissory Note to the
Company  in  the amount of $95,000, bearing simple interest at an annual rate of
8%.  The outstanding balance of the Note due to the Company at December 31, 1999
was  $97,873,  including  principal  and  accrued  interest.

          On  December  31,  1998  and  January  15, 1999, Marco Castilla issued
Promissory  Notes  under  the  Executive  Loan  Program  of  1998 to the Company
totaling  $76,405,  bearing  interest  at  the  Bank of America Prime Rate.  The
outstanding  balance  of  the  Notes due to the Company at December 31, 1999 was
$82,498,  including  principal  and  accrued  interest.

                               FUTURE TRANSACTIONS

          Although the Company intends that the terms of any future transactions
and  agreements  between  the  Company  and  its  directors, officers, principal
stockholders  or  other  affiliates  will  be  no  less  favorable than could be
obtained  from  unaffiliated  third  parties, no assurances can be given in this
regard.  Any  such  future transactions that are material to the Company and are
not  in  the  ordinary  course of business will be approved by a majority of the
Company's  independent  and  disinterested  directors.


                                       73
<PAGE>
PART  IV

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

     (a)     Exhibits.  See Index to Exhibits on page 77.  Each of the following
             exhibits  described  on  the  index  to  exhibits  is  a management
             contract or compensatory  plan  or arrangement:  10.1, 10.2, 10.11,
             10.12, 10.13, 10.15 and 10.16.

     (b)     Financial  Statement  Schedules:  See  Schedule  II - Valuation and
             Qualifying  Accounts  on  page  75.

     (c)     Reports  on Form 8-K:  On September  20, 1999,  the Company filed a
             report  on  Form 8-K reporting that the Company had signed a credit
             agreement with Lucent Technologies, Inc. for up to  $40  million in
             financing.


                                       74
<PAGE>
                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

ALLOWANCE  FOR  DOUBTFUL  ACCOUNTS

<TABLE>
<CAPTION>
            Balance at                                    Balance at
            Beginning of Period   Additions   Deductions  End of Period
<S>         <C>                   <C>         <C>         <C>
FY 1999     $           500,000   $1,996,000  $  386,000  $   2,110,000
FY 1998*                200,000      925,000     625,000        500,000
FY 1997                  57,000      277,000     134,000        200,000
</TABLE>

INVENTORY  RESERVES

<TABLE>
<CAPTION>
           Balance at
           Beginning of                         Balance at
           Period        Additions  Deductions  End of Period
<S>        <C>           <C>        <C>         <C>
FY 1999    $  1,047,000  $ 450,000  $  184,000  $   1,313,000
FY 1998*        352,000    946,000     251,000      1,047,000
FY 1997         299,000     53,000         ---        352,000

<FN>
*  Additions  and  deductions for 1998 include activity related to the Company's
acquisitions  during that year.  As such, the 1998 additions do not agree to the
related  entries  shown for the same items on the consolidated Statement of Cash
Flows.
</TABLE>


                                       75
<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.


                                   TELSCAPE  INTERNATIONAL,  INC.
                                   (Registrant)


March  30,  2000                   /s/  E.  SCOTT  CRIST
                                   ---------------------
                                   E.  Scott  Crist
                                   CEO  and  Principal  Executive  Officer


March  30,  2000                   /s/  TODD  M.  BINET
                                   --------------------
                                   Todd  M.  Binet
                                   President,  CFO  and
                                   Principal  Financial  Officer

March  30,  2000                   /s/  PAUL  FREUDENTHALER
                                   ------------------------
                                   Paul  Freudenthaler
                                   CAO  and  Principal  Accounting  Officer


     Pursuant  to  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  and  on  the  dates  indicated.

SIGNATURE                         TITLE          DATE
---------                         -----          ----

/s/  E.  SCOTT  CRIST             Director       March  30,  2000
---------------------
E.  Scott  Crist

/s/  MANUEL  LANDA                Director       March  30,  2000
------------------
Manuel  Landa

/s/  OSCAR  GARCIA                Director       March  30,  2000
------------------
Oscar  Garcia

/s/  RICARDO  OREA                Director       March  30,  2000
------------------
Ricardo  Orea

/s/  TODD  M.  BINET              Director       March  30,  2000
--------------------
Todd  M.  Binet

/s/  DARREL  O.  KIRKLAND         Director       March  30,  2000
-------------------------
Darrel  O.  Kirkland

/s/  JACK  M.  FIELDS             Director       March  30,  2000
---------------------
Jack  M.  Fields


                                       76
<PAGE>
<TABLE>
<CAPTION>
                                            INDEX OF EXHIBITS


Exhibit No.  Description
-----------  -------------------------------------------------------------------------------------------
<C>          <S>
        1.1  Form of Underwriting Agreement between the Company, BT Alex. Brown Incorporated
             and Lehman Brother Inc. (Incorporated herein by reference to Exhibit 1.1 to the
             Company's Registration Statement No. 333-60271)

       *2.1  Amended and Restated Agreement and Plan of Merger dated as of December 31, 1999 by
             and among Telscape International, Inc., Pointe Communications Corporation and Pointe
             Acquisition, Corp.

        3.1  Articles of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to the
             Company's Registration Statement No. 33-80542-D and incorporated herein by
             reference)

        3.2  Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to the Company's Registration
             Statement No. 33-80542-D and incorporated herein by reference)

        3.3  Articles of Incorporation of Polish Microwave, Inc. (filed as Exhibit 3.3 to the
             Company's Registration Statement No. 33-80542-D and incorporated herein by
             reference)

        3.4  Bylaws of Polish Microwave, Inc. (filed as Exhibit 3.4 to the Company's Registration
             Statement No. 33-80542-D and incorporated herein by reference)

        3.5  Contract of Limited Liability Company of DTS/ZWUT (filed as Exhibit 3.5 to the
             Company's Registration Statement No. 33-80542-D and incorporated herein by
             reference)

        4.1  Form of Certificate evidencing Common Stock (filed as Exhibit 4.1 to the
              Company'sRegistration Statement No. 33-80542-D and incorporated herein by
              reference)

        4.2  Form of Warrant Agreement between American Stock Transfer & Trust Company and
             the Company (filed as Exhibit 4.2 to the Company's Registration Statement No. 33-
             80542-D and incorporated herein by reference)

        4.3  Form of Warrant Certificate evidencing the Warrants (filed as Exhibit 4.3 to the
             Company's Registration Statement No. 33-80542-D and incorporated herein by
             reference)

        4.4  Form of Statement of the establishment of the Series B non-voting, nonparticipating
             Preferred Stock (filed as Exhibit 4.1 to the Company's Report on Form 10-QSB for the
             quarter ended March 31, 1996 and incorporated herein by reference)

       10.1  Form of Representative's Warrants (filed as Exhibit 10.8 to the Company's Registration
             Statement No. 33-80542-D and incorporated herein by reference)

       10.2  Warrant Agreement between the Company and S.P. Krishna Murthy (filed as Exhibit
             10.13 to the Company's Report on Form 10-KSB for the year ended December 31, 1995
             and incorporated herein by reference)

       10.3  Form of Series A Common Stock Warrant (filed as Exhibit 10.4 to the Company's Report
             on Form 10-QSB for the quarter ended March 31, 1996 and incorporated herein by
             reference)

       10.4  Form of Series B Common Stock Warrant (filed as Exhibit 10.5 to the Company's Report
             on Form 10-QSB for the quarter ended March 31, 1996 and incorporated herein by
             reference)

       10.5  Form of Employment Agreement for Manuel Landa, Ricardo Orea Gudino and Oscar
             Garcia Mora (filed as Exhibit 10.6 to the Company's Report on Form 10-QSB for the
             quarter ended March 31, 1996 and incorporated herein by reference)

       10.6  Form of Non-Qualified Stock Option Certificate and Agreement, as amended, for Manuel
             Landa, Ricardo Orea Gudino and Oscar Garcia Mora (filed as Exhibit 10.7 to the
             Company's Report on Form 10-QSB for the quarter ended March 31, 1996 and
             incorporated herein by reference)

       10.7  Form of Series A Common Stock Warrant dated May 17, 1996 between the Company
             and Manuel Landa, Ricardo Orea Gudino, Oscar Garcia Mora and Christopher Efird
             (filed as Exhibit 10.1 to the Company's Report on Form 8-K dated June 3, 1996 and
             incorporated herein by reference)

       10.8  Employment Agreement for E. Scott Crist (filed as Exhibit 10.1 to the Company's Report
             on Form 10-QSB for the quarter ended September 30, 1996 and incorporated herein by
             reference)

       10.9  Employment agreement for Todd Binet (filed as Exhibit 10.29 to the Company's Report
             on Form 10-KSB for the year ended December 31, 1996 and incorporated herein by
             reference)

      10.10  Form of Promissory Note dated July 1, 1997, between Telereunion and Jose Luis Apan
             Wong, Raul de la Parra Zavala and Alejandro Apan Wong (filed as Exhibit 10.4 to the
             Company's Current Report on Form 8-K dated August 5, 1997 and incorporated herein
             by reference)

      10.11  Form of Common Stock Warrant dated July 1, 1997, between the Company and Jose Luis
             Apan Wong, Raul de la Parra Zavala and Alejandro Apan Wong (filed as Exhibit 10.4 to
             the Company's Current Report on Form 8-K dated August 5, 1997 and incorporated
             herein by reference)

      10.12  Stock Purchase Agreement dated July 1, 1997, by and among the Company, Telscape
             USA, Inc., Telereunion and Jose Luis Apan Wong, Raul de la Parra Zavala and Alejandro
             Apan Wong (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated
             August 5, 1997 and incorporated herein by reference)

      10.13  Stock Purchase Agreement dated October 1, 1997, by and among Telscape USA, Inc.,
             Telereunion, Inc. and Jose Martin Pena Nunez, Carlos Joaquin De Lara Y Campos, Jorge
             Pena Nunez, Martha Teresita Martin Del Campo Gutierrez (filed as Exhibit 10.1 to the
             Company's Current Report on Form 8-K dated October 15, 1997 and incorporated herein
             by reference)

      10.14  Stock Purchase Agreement dated January 22, 1998, by and among the Company; MSN
             Communications, Inc.; Stuart Newman and Michael Newman, together with Form of
             Promissory Note dated January 23, 1998 in the principal amount of $375,000 payable to
             Stuart Newman attached as Exhibit B-1 and Form of Promissory Note dated January 23,
             1998 in the principal amount of $375,000 payable to Michael Newman attached as
             Exhibit B-2 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
             February 6, 1998 and incorporated herein by reference)

      10.15  Stock Purchase Agreement dated May 18, 1998, by and among Telscape International,
             Inc., California Microwave, Inc. and California Microwave Services Divisions, Inc.
             together with a Form of Supply Agreement between California Microwave, Inc. and
             California Microwave Services Division, Inc. as Exhibit B (Incorporated herein by
             reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated June 9,
             1998)

      10.16  Securities Purchase Agreement between Deere Park Capital Management, LLC and
             Telscape International, Inc. dated as of May 1, 1998; Registration Rights Agreement
             dated as of May 1, 1998 between Telscape International, Inc. and Deere Park Capital
             Management, LLC; Form of Convertible Debenture for $3,000,000 dated May 1, 1998;
             Form of Stock Purchase Warrant to Purchase 8,952 shares of Common Stock of Telscape
             International, Inc. dated May 12, 1998 (all filed as Exhibit 4.4 to the Company's Report
             on Form 10Q for the quarter ended March 31, 1998 and incorporated herein by reference)

      10.17  Form of Convertible Debenture in the principal amount of $1,000,000 between Deere
             Park Capital Management, LLC and Telscape International, Inc. dated as of May 28,
             1998 and a form of Stock Purchase Warrant to Purchase 2,427 shares of Common Stock
             of Telscape International, Inc. dated May 28, 1998 (Incorporated herein by reference to
             Exhibit 10.3 to the Company's Current Report on Form 8-K dated June 9, 1998)

      10.18  Securities Purchase Agreement dated May 29, 1998 by and between Telscape
             International, Inc. and Gordon Brothers Capital, LLC; together with a Form of
             Convertible Debenture in the principal amount of $5,000,000 payable to Gordon Brothers
             Capital, LLC attached as Exhibit A; a Form of Stock Purchase Warrant for Gordon
             Brothers, LLC for 12,136 shares of Common Stock of Telscape International, Inc.
             attached as Exhibit B; and a Registration Rights Agreement by and between Gordon
             Brothers Capital, LLC and Telscape International, Inc. attached as Exhibit C
             (Incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on
             Form 8-K dated June 9, 1998)

      10.19  Equity Purchase Agreement by and between INTERLINK Communications Holding Co.,
             Inc. and each of Telscape International, Inc., E. Russell Hardy, Stephen Strohman, Monty
             J. Moore, and Salvador Giblas dated as of May 19, 1998 (Incorporated herein by
             reference to Exhibit 10.5 to the Company's Current Report on Form 8-K dated June 9,
             1998)

      10.20  Form of Employment Agreement by and between California Microwave Services
             Division, Inc. and E. Russell Hardy dated as of May 18, 1998 (Incorporated herein by
             reference to Exhibit 10.6 to the Company's Current Report on Form 8-K dated June 9,
             1998)

      10.21  Form of Employment Agreement by and between California Microwave Services
             Division, Inc. and Stephen Strohman dated as of May 18, 1998 (Incorporated herein by
             reference to Exhibit 10.7 to the Company's Current Report on Form 8-K dated June 9,
             1998)

      10.22  Form of Employment Agreement by and between California Microwave Services
             Division, Inc. and Monty J. Moore dated as of May 18, 1998 (Incorporated herein by
             reference to Exhibit 10.8 to the Company's Current Report on Form 8-K dated June 9,
             1998)

      10.23  Form of Consulting Agreement by and between California Microwave Services Division,
             Inc. and Salvador Giblas dated as of May 18, 1998 (Incorporated herein by reference to
             Exhibit 10.9 to the Company's Current Report on Form 8-K dated June 9, 1998)

      10.24  Loan Agreement between Telscape USA, Inc. and MSN Communications, Inc. and
             Southwest Bank of Texas dated May 19, 1998 (Incorporated herein by reference to
             Exhibit 10.24 to the Company's Registration Statement No. 333-60271)

      10.25  Outside Directors Stock Option Plan of the Polish Telephones and Microwave
             Corporation (Incorporated herein by reference to Exhibit 10.24 to the Company's
             Registration Statement No. 333-60271)

      10.26  Form of Financing Agreement by and between the Company and Newbridge Financial
             Services Networks dated as of December 7, 1998 (Incorporated herein by reference to
             Exhibit 10.26 to the Company's Report on Form 10-K for the year ended December 31,
             1998)
      10.27  Form of Financing Agreement by and between the Company and NTFC Capital
             Corporation dated as of January 11, 1999 (Incorporated herein by reference to Exhibit
             10.27 to the Company's Report on Form 10-K for the year ended December 31, 1998)

      10.28  Form of Securities Purchase Agreement by and between the Company and Kendu
             Partners and MDNH Partners, L.P. dated as of December 18, 1998, and Exhibit B to this
             agreement representing the Form of Registration Rights Agreement (Incorporated herein
             by reference to Exhibit 10.28 to the Company's Report on Form 10-K for the year ended
             December 31, 1998)

     10.29   Form of Securities Purchase Agreement by and between Telscape International, Inc.,
             INTERLINK Communications, Inc. and Cahill, Warnock, Strategic Partners Fund, L.P.
             dated as of May 5, 1999, Exhibit A representing the form of the Increasing Rate Secured
             Promissory Note, Exhibit B representing the form of Warrant, and Exhibit C representing
             the Security Agreement. (Incorporated herein by reference to Exhibit 10.29 to the
             Company's Report on Form 10-Q for the quarter ended March 31, 1999)

     10.30   Form of Securities Purchase Agreement by and between Telscape International, Inc.,
             INTERLINK Communications, Inc. and Cahill, Warnock, Strategic Partners Fund, L.P.
             dated as of June 18, 1999, Exhibit A representing the form of the Increasing Rate Secured
             Promissory Note, Exhibit B representing the form of Warrant, and Exhibit C representing
             the Security Agreement and Amendment No. 1 to Securities Purchase Agreement.
             (Incorporated herein by reference to Exhibit 10.30 to the Company's Report on form 10-
             Q for the quarter ended June 30, 1999)

     10.31   Securities Purchase Agreement dated July 19, 1999 by and between Telscape
             International, Inc., Telscape USA, Inc., TSCP International, Inc., MSN Communications,
             Inc. and Lucent Technologies Inc., together with a Form of Demand Note in the principal
             amount of $3,000,000 payable to Lucent Technologies Inc. attached as Exhibit A; a Form
             of Stock Purchase Warrant for Lucent Technologies Inc. for 85,000 shares of Common
             Stock of Telscape International, Inc. attached as Exhibit B; and a Security Agreement by
             and between Telscape International, Inc., Telscape USA, Inc., MSN Communications,
             Inc., TSCP International, Inc. and State Street Bank and Trust Company attached as
             Exhibit C. (Incorporated herein by reference to Exhibit 10.31 to the Company's Report
             on form 10-Q for the quarter ended June 30, 1999)

     10.32   Credit Agreement dated August 27, 1999 by and between Telscape International, Inc.,
             Telereunion S.A. de C.V., Telereunion International, S.A. de C.V., Telereunion, Inc.,
             Telscape USA, Inc., MSN Communications, Inc., Interlink Communications, Inc., TSCP
             International, Inc., Vextro de Mexico S.A. de C.V., Servicios Corporativos, Telscape de
             Mexico S.A. de C.V., N.S.I. S.A de C.V., Lan and Wan S.A. de C.V., MS Noticias y
             Telecomunicaciones, S.A. de C.V., and Lucent Technologies Inc. (Incorporated herein by
             reference to Exhibit 10.1 to the Company's Report on Form 8-K dated September 20,
              1999)

     10.33   Loan Agreement dated October 22, 1999 by and between Telscape International, Inc. and
             Lennox Invest Ltd. Promissory Note dated October 22, 1999 in the principal amount of
             1,060,000 payable to Lennox Invest, Ltd., Stock Pledge Agreement dated October 22,
             1999, and Warrant Certificate issued to Lennox Invest, Ltd. To purchase 35,714 shares of
             Common Stock of Telscape International, Inc. dated October 22, 1999. (Incorporated
             herein by reference to Exhibit 10.33 to the Company's Report on form 10-Q for the
             quarter ended September 30, 1999)

     *10.34  Swap Agreement ("Contrato de Compra-Venta de Fibras") dated December 8, 1999 by
             and between Iusatel S.A. de C.V and Telereunion, S.A. de C.V.

     *10.35  Commitment Agreement dated August 16, 1999, by and between Telscape International,
             Inc. and Comercializadora Lufravic, S.A. de C.V.

     *10.36  Fiber Optic Telecommunications Services Exchange Agreement dated May 14, 1999 by
             and between Avantel, S.A. de C.V. and Telereunion S.A de C.V.

      *21.1  Subsidiaries of the registrant

      *23.1  Consent of Independent Public Accountants

      *27.1  Financial Data Schedule 1999

<FN>

________________
 *  Filed  herewith


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