##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 20-F





|           |  |                                                                                                   
|---------- |  | --------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                   
|           |  |                                                                                                   
|o          |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
    OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR        
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934          
|           |  | For the fiscal year ended December 31, 2005                                                       
|OR        
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934      
|           |  | For the transition period
    from           to                                                   
|OR        
|o          |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934   
|           |  | Date of event requiring this shell company report                                                 

Commission File Number: 000-50556


VIATEL HOLDING (BERMUDA) LIMITED


(Exact Name of Registrant as Specified in its Charter)


Not applicable


(Translation of Registrants Name Into English)


Bermuda


(Jurisdiction of Incorporation or Organization)


Inbucon House


Wick Road


Egham, Surrey TW20 0HR


United Kingdom


(Address of principal executive offices)


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


None


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


Common Stock, Par Value US$0.01 Per Share


(Title of Class)


Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:


None




o þ


o þ


þ o




o o þ


o þ


12b-2 o þ


o þ










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##### 










TABLE OF CONTENTS


|                     |  |                                                                                  |     |      |    | 
|-------------------- |  | -------------------------------------------------------------------------------- | --- | ---- | -- | 
|                     |  |                                                                                  |     | Page |   
|                     |  |                                                                                  |     |      |   
|PART I               |  |                                                                                  | 4   |     
|Item 1.              |  | Identity of Directors, Senior Management
    and Advisers                        |     |      | 4  | 
|Item 2.              |  | Offer Statistics and Expected Timetable                                          |     |      | 4  | 
|Item 3.              |  | Key Information                                                                  |     |      | 4  | 
|Item 4.              |  | Information on the Company                                                       |     |      | 17 | 
|Item 4A.             |  | Unresolved Staff Comments                                                        |     |      | 38 | 
|Item 5.              |  | Operating and Financial Review and
    Prospects                                 |     |      | 39 | 
|Item 6.              |  | Directors, Senior Management and
    Employees                                   |     |      | 51 | 
|Item 7.              |  | Major Shareholders and Related Party
    Transactions                            |     |      | 57 | 
|Item 8.              |  | Financial Information                                                            |     |      | 59 | 
|Item 9.              |  | The Offer and Listing                                                            |     |      | 61 | 
|Item 10.             |  | Additional Information                                                           |     |      | 63 | 
|Item 11.             |  | Quantitative and Qualitative Disclosures
    About Market Risk                   |     |      | 74 | 
|PART II              |  |                                                                                  | 77  |     
|Item 12.             |  | Description of Securities other than Equity
    Securities                       |     |      | 77 | 
|Item 13.             |  | Defaults, Dividend Arrearages and
    Delinquencies                              |     |      | 78 | 
|Item 14.             |  | Material Modifications to the Rights of
    Security Holders and Use of Proceeds |     |      | 77 | 
|Item 15.             |  | Controls and Procedures                                                          |     |      | 77 | 
|Item 16A.            |  | Audit Committee Financial Expert                                                 |     |      | 78 | 
|Item 16B.            |  | Code of Ethics                                                                   |     |      | 78 | 
|Item 16C.            |  | Principal Accountant Fees and Services                                           |     |      | 79 | 
|Item 16D.            |  | Exemptions from the Listing Standards for
    Audit Committees                   |     |      | 80 | 
|Item 16E.            |  | Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers       |     |      | 80 | 
|PART III             |  |                                                                                  | 80  |     
|Item 17.             |  | Financial Statements                                                             |     |      | 80 | 
|Item 18.             |  | Financial Statements                                                             |     |      | 80 | 
|Item 19.             |  | Exhibits                                                                         |     |      | 80 | 
|Financial Statements |  |                                                                                  | F-1 |     
|Exhibit 4.8         
|Exhibit 4.9         
|Exhibit 4.10        
|Exhibit 4.11        
|Exhibit 4.12        
|Exhibit 4.13        
|Exhibit 4.14        
|Exhibit 4.15        
|Exhibit 4.16        
|Exhibit 4.17        
|Exhibit 4.18        
|Exhibit 8           
|Exhibit 12.1        
|Exhibit 12.2        
|Exhibit 13          



2



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##### Table of Contents



Presentation of Financial Information


20-F 20-F, 




Predecessor and Successor


20-F


20-F


Comparability of Financial Information


20-F.


Forward-Looking Statements




20-F 20-F




| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the beliefs and expectations of management;                                                                                                        
|
| |  | our business plan, its advantages and our strategy for
    implementing the business plan;                                                         
|
| |  | our expectations as to future revenues, margins, expenses and
    capital requirements;                                                            
|
| |  | our ability to raise additional cash from borrowings or other
    financings to fund operations;                                                   
|
| |  | our ability to maintain a viable cash and balance sheet position
    or to become cash flow positive in our operations with
    additional funding;
|
| |  | our ability to control costs and become profitable;                                                                                                
|
| |  | our ability to generate revenues or positive cash flows; and                                                                                       

3



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##### Table of Contents





| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the composition of revenues and cost of sales, including
    operating margins and the use of professional, consultancy
    and/or contractor services provided by third parties.











| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to obtain financing on acceptable terms and
    sufficiently to fund our working capital requirements and
    business plan;
|
| |  | our vulnerability to adverse general economic and industry
    conditions;                                                              
|
| |  | the adverse effect of a highly competitive market for our
    products and services; and                                                
|
| |  | our ability to retain the services of key management personnel.                                                                         

20-F 6-K. www.viatel.com.





PART I







|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS








|        |                                        
|------- | ---------------------------------------
|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE








|        |                
|------- | ---------------
|ITEM 3. | KEY INFORMATION

Selected financial data


20-F.


4



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##### Table of Contents





20-F.




90-7 90-7), 20-F.


20-F




|                                            |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              |  |         |   |  |  |          |  
|------------------------------------------- |  | ------------ | ------- | - | ------------ |  | ------- | ------------ |  |  | --------------- | --------------- |  |  | ----------- | - |  | ------------ |  | ------- | - |  |  | -------- | -
|                                            |  | Successor    |         |   | Successor    |  |         | Successor    |  |  | Successor       |                 |  |  | Predecessor |   |  | Predecessor  | 
|                                            |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              | 
|                                            |  |              |         |   |              |  |         | From June 7, |  |  |                 | From January 1, |  |  |            
|                                            |  | Year Ended   |         |   | Year Ended   |  |         | Year Ended   |  |  | 2002            |                 |  |  | 2002        |   |  | Year Ended   | 
|                                            |  | December 31, |         |   | December 31, |  |         | December 31, |  |  | to December 31, |                 |  |  | to June 7,  |   |  | December 31, | 
|                                            |  | 2005         |         |   | 2004         |  |         | 2003         |  |  | 2002            |                 |  |  | 2002        |   |  | 2001         | 
|                                            |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              | 
|Revenue:                                    |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              |  |         |   |  |  |          |  
|Communication services revenues             |  |              | 18,595  |   |              |  | 12,147  |              |  |  | 8,510           |                 |  |  | 2,793       |   |  |              |  | 1,216   |   |  |  | 240,092  |  
|Operations and maintenance fee revenue      |  |              | 1,964   |   |              |  | 1,828   |              |  |  | 1,707           |                 |  |  | 1,371       |   |  |              |  | 1,451   |   |  |  | 4,239    |  
|Capacity sales                              |  |              |        |   |              |  |        |              |  |  |                |                 |  |  |            |   |  |              |  |        |   |  |  | 12,298   |  
|                                            |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              | 
|Total revenue                               |  |              | 20,559  |   |              |  | 13,975  |              |  |  | 10,217          |                 |  |  | 4,164       |   |  |              |  | 2,667   |   |  |  | 256,629  |  
|Operating expenses:                         |  |              |         |   |              |  |         |              |  |  |                 |                 |  |  |             |   |  |              |  |         |   |  |  |          |  
|Cost of services and sales                  |  |              | (12,691 | ) |              |  | (7,247  | )            |  |  | (4,953          | )               |  |  | (1,506      | ) |  |              |  | (1,518  | ) |  |  | (170,463 | )
|Selling, general and administrative         |  |              | (56,346 | ) |              |  | (65,244 | )            |  |  | (47,660         | )               |  |  | (30,840     | ) |  |              |  | (26,502 | ) |  |  | (115,245 | )
|Gain on amounts due from bankruptcy estates |  |              |        |   |              |  | 3,105   |              |  |  | 358             |                 |  |  | 25,003      |   |  |              |  |        |   |  |  |         |  

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|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              |  |           |   |  |  |            |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ |  | ------- | ------------ |  |  | --------------- | - |  | ----------- | ------ | - | ------------ |  | --------- | - |  |  | ---------- | -
|                                                                                                                             |  | Successor    |         |   | Successor    |  |         | Successor    |  |  | Successor       |   |  | Predecessor |        |   | Predecessor  | 
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|                                                                                                                             |  |              |         |   |              |  |         | From June 7, |  |  | From January 1, |   |  |            
|                                                                                                                             |  | Year Ended   |         |   | Year Ended   |  |         | Year Ended   |  |  | 2002            |   |  | 2002        |        |   | Year Ended   | 
|                                                                                                                             |  | December 31, |         |   | December 31, |  |         | December 31, |  |  | to December 31, |   |  | to June 7,  |        |   | December 31, | 
|                                                                                                                             |  | 2005         |         |   | 2004         |  |         | 2003         |  |  | 2002            |   |  | 2002        |        |   | 2001         | 
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Impairment                                                                                                                   |  |              | (242    | ) |              |  |        |              |  |  |                |   |  |             |       |   |              |  | (908      | ) |  |  | (1,278,640 | )
|Depreciation and amortization                                                                                                |  |              | (6,538  | ) |              |  | (7,036  | )            |  |  | (4,464          | ) |  |             | (2,458 | ) |              |  | (1,736    | ) |  |  | (119,920   | )
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Total operating expenses (net)                                                                                               |  |              | (75,817 | ) |              |  | (76,422 | )            |  |  | (56,719         | ) |  |             | (9,801 | ) |              |  | (30,664   | ) |  |  | (1,684,268 | )
|Other operating income                                                                                                       |  |              | 362     |   |              |  | 17,780  |              |  |  |                |   |  |             |        |   |              |  |           |   |  |  |            |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Operating loss before reorganization items                                                                                   |  |              | (54,896 | ) |              |  | (44,667 | )            |  |  | (46,502         | ) |  |             | (5,637 | ) |              |  | (27,997   | ) |  |  | (1,427,639 | )
|Reorganization items                                                                                                         |  |              |        |   |              |  |        |              |  |  |                |   |  |             |       |   |              |  | 2,662,669 |   |  |  |           |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Operating (loss)/ income                                                                                                     |  |              | (54,896 | ) |              |  | (44,667 | )            |  |  | (46,502         | ) |  |             | (5,637 | ) |              |  | 2,634,672 |   |  |  | (1,427,639 | )
|Other income/ (expense):                                                                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              |  |           |   |  |  |            |  
|Interest and other income                                                                                                    |  |              | 260     |   |              |  | 774     |              |  |  | 1,555           |   |  |             | 986    |   |              |  | 1,007     |   |  |  | 8,019      |  
|Interest expense                                                                                                             |  |              | (8,199  | ) |              |  | (4,395  | )            |  |  |                |   |  |             | (11    | ) |              |  | (63       | ) |  |  | (83,965    | )
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net (loss)/ income before taxation                                                                                           |  |              | (62,835 | ) |              |  | (48,288 | )            |  |  | (44,947         | ) |  |             | (4,662 | ) |              |  | 2,635,616 |   |  |  | (1,503,585 | )
|Taxation                                                                                                                     |  |              | (666    | ) |              |  | 241     |              |  |  | 229             |   |  |             |       |   |              |  |          |   |  |  |           |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net (loss)/ income from continuing operations                                                                                |  |              | (63,501 | ) |              |  | (48,047 | )            |  |  | (44,718         | ) |  |             | (4,662 | ) |              |  | 2,635,616 |   |  |  | (1,503,585 | )
|Discontinued operations:                                                                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              |  |           |   |  |  |            |  
|Net income/ (loss) before taxation                                                                                           |  |              | 129     |   |              |  | 869     |              |  |  | (2,647          | ) |  |             |       |   |              |  |          |   |  |  |           |  
|Taxation                                                                                                                     |  |              | (6      | ) |              |  | (1      | )            |  |  | (12             | ) |  |             |       |   |              |  |          |   |  |  |           |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net income/ (loss) from discontinued operations                                                                              |  |              | 123     |   |              |  | 868     |              |  |  | (2,659          | ) |  |             |       |   |              |  |          |   |  |  |           |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net loss                                                                                                                     |  |              | (63,378 | ) |              |  | (47,179 | )            |  |  | (47,377         | ) |  |             | (4,662 | ) |              |  | 2,635,616 |   |  |  | (1,503,585 | )
|Dividends on convertible preferred securities                                                                                |  |              |        |   |              |  |        |              |  |  |                |   |  |             |       |   |              |  |          |   |  |  | (14,293    | )
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net (loss)/ income attributable to common stockholders                                                                       |  |              | (63,378 | ) |              |  | (47,179 | )            |  |  | (47,377         | ) |  |             | (4,662 | ) |              |  | 2,635,616 |   |  |  | (1,517,878 | )
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Net (loss)/ income per common share attributable to common
    shareholders, basic and diluted  continuing operations       |  |              | (5.97   | ) |              |  | (4.50   | )            |  |  | (4.18           | ) |  |             | (0.44  | ) |              |  | 51.72     |   |  |  | (29.72     | )
|Net income/ (loss) per common share attributable to common
    shareholders, basic and diluted  discontinued
    operations |  |              | 0.01    |   |              |  | 0.08    |              |  |  | (0.25           | ) |  |             |       |   |              |  |          |   |  |  |           |  
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Total                                                                                                                        |  |              | (5.96   | ) |              |  | (4.42   | )            |  |  | (4.43           | ) |  |             | (0.44  | ) |              |  | 51.72     |   |  |  | (29.72     | )
|                                                                                                                             |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |        |   |              | 
|Weighted average common shares outstanding, basic and diluted                                                                |  |              | 10,630  |   |              |  | 10,680  |              |  |  | 10,705          |   |  |             | 10,560 |   |              |  | 50,963    |   |  |  | 51,072     |  

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##### Table of Contents



|                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |         |   |              |  |        |   |  |  |          |  
|---------------------------------------------------- |  | ------------ | ------- | - | ------------ |  | ------- | ------------ |  |  | --------------- | - |  | ----------- | ------- | - | ------------ |  | ------ | - |  |  | -------- | -
|                                                     |  | Successor    |         |   | Successor    |  |         | Successor    |  |  | Successor       |   |  | Predecessor |         |   | Predecessor  | 
|                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |         |   |              | 
|                                                     |  |              |         |   |              |  |         | From June 7, |  |  | From January 1, |   |  |            
|                                                     |  | Year Ended   |         |   | Year Ended   |  |         | Year Ended   |  |  | 2002            |   |  | 2002        |         |   | Year Ended   | 
|                                                     |  | December 31, |         |   | December 31, |  |         | December 31, |  |  | to December 31, |   |  | to June 7,  |         |   | December 31, | 
|                                                     |  | 2005         |         |   | 2004         |  |         | 2003         |  |  | 2002            |   |  | 2002        |         |   | 2001         | 
|                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |         |   |              | 
|Other Consolidated Financial Data:                   |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |         |   |              |  |        |   |  |  |          |  
|Net cash used in operating activities                |  |              | (32,602 | ) |              |  | (48,338 | )            |  |  | (25,116         | ) |  |             | (13,765 | ) |              |  | (7,856 | ) |  |  | (219,854 | )
|Net cash used in investing activities                |  |              | (4,717  | ) |              |  | (4,333  | )            |  |  | (2,952          | ) |  |             | (1,667  | ) |              |  | (6,670 | ) |  |  | 65,408   |  
|Net cash provided by/ (used in) financing activities |  |              | 19,513  |   |              |  | 44,158  |              |  |  | 2               |   |  |             |        |   |              |  |       |   |  |  | (73,300  | )
|                                                     |  |              |         |   |              |  |         |              |  |  |                 |   |  |             |         |   |              | 

|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |         |  |  |  |            |  
|------------------------------------------------------------------------------------ |  | --------------------------------- | ------- | ---------- | ------------ |  | ------ | ---- |  | ----------- | ------ |  |  | ---- | ------- |  |  |  | ---------- | -
|                                                                                     |  |                                   |         |            |              |  |        |      |  | Predecessor |       
|                                                                                     |  |                                   |         | Company at |             
|                                                                                     |  | Successor Company at December 31, |         |            | December 31, | 
|                                                                                     |  |                                   |         |            |              | 
|                                                                                     |  | 2005                              |         |            | 2004         |  |        | 2003 |  |             | 2002   |  |  | 2001 |        
|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |        
|Consolidated Balance Sheet Data:                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |         |  |  |  |            |  
|Cash and cash equivalents                                                            |  |                                   |        |            |              |  | 21,939 |      |  |             | 29,510 |  |  |      | 53,408  |  |  |  | 65,933     |  
|Other current assets                                                                 |  |                                   | 12,780  |            |              |  | 25,936 |      |  |             | 19,924 |  |  |      | 22,766  |  |  |  | 43,541     |  
|Property and equipment, net                                                          |  |                                   | 30,522  |            |              |  | 37,559 |      |  |             | 39,450 |  |  |      | 37,947  |  |  |  | 30,774     |  
|Intangible assets, net                                                               |  |                                   |        |            |              |  | 210    |      |  |             | 1,056  |  |  |      |        |  |  |  | 61,865     |  
|Other assets                                                                         |  |                                   | 7,583   |            |              |  | 7,630  |      |  |             | 97     |  |  |      | 6,930   |  |  |  | 776        |  
|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |        
|Total Assets  Continuing Operations                                                 |  |                                   | 50,885  |            |              |  | 93,274 |      |  |             | 90,037 |  |  |      | 121,051 |  |  |  | 202,889    |  
|Total Assets  Discontinued Operations                                               |  |                                   | 5,524   |            |              |  | 6,406  |      |  |             | 4,845  |  |  |      |        |  |  |  |           |  
|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |        
|Total Assets                                                                         |  |                                   | 56,409  |            |              |  | 99,680 |      |  |             | 94,882 |  |  |      | 121,051 |  |  |  | 202,889    |  
|Total current liabilities                                                            |  |                                   | 28,695  |            |              |  | 21,596 |      |  |             | 29,602 |  |  |      | 12,691  |  |  |  | 2,411,059  |  
|Total long-term liabilities                                                          |  |                                   | 58,074  |            |              |  | 36,617 |      |  |             | 304    |  |  |      | 10,676  |  |  |  |           |  
|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |        
|Total Liabilities  Continuing Operations                                            |  |                                   | 86,769  |            |              |  | 58,213 |      |  |             | 29,906 |  |  |      | 23,367  |  |  |  | 2,411,059  |  
|Total Liabilities  Discontinued Operations                                          |  |                                   | 5,572   |            |              |  | 6,075  |      |  |             | 3,513  |  |  |      |        |  |  |  |           |  
|                                                                                     |  |                                   |         |            |              |  |        |      |  |             |        |  |  |      |        
|Total Liabilities                                                                    |  |                                   | 92,341  |            |              |  | 64,288 |      |  |             | 33,419 |  |  |      | 23,367  |  |  |  | 2,411,059  |  
|Series B mandatorily redeemable (in 2015) cumulative
    convertible preferred stock |  |                                   |        |            |              |  |       |      |  |             |       |  |  |      |        |  |  |  | 338,259    |  
|Stockholders (deficiency)/ equity                                                   |  |                                   | (35,932 | )          |              |  | 35,392 |      |  |             | 61,463 |  |  |      | 97,684  |  |  |  | (2,546,429 | )

Capitalization and indebtedness




7



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Reasons for the offer and use of proceeds




Risk Factors


20-F,




| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot assure you that we will be able to fund our
    operations without a refinancing of our existing debt facilities
    and/or further financing, which may not be available on
    attractive terms or at all.

6-K 6-K). 6-K 20-F.


20-F 20-F.


20-F.









8



---



##### Table of Contents









| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Our substantial level of debt may adversely affect our
    operations and financial conditions.









| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limiting our ability to obtain additional financing for our
    capital expenditures, acquisitions, working capital or other
    general requirements;                                        
|
| |  | limiting our flexibility in planning for, or reacting to,
    changes in our business, the competitive environment and the
    telecommunications industry;                                   
|
| |  | placing us at a competitive disadvantage to competitors with
    less debt;                                                                                                                   
|
| |  | making us more vulnerable to economic downturns, which could
    weaken our ability to compete effectively and could reduce our
    flexibility in responding to changing economic conditions;
|
| |  | limiting our ability to take advantage of new business
    opportunities; and                                                                                                                 
|
| |  | restricting our ability to invest further funds in order to
    finance our ongoing operations and business plan.                                                                             



| |                                                                 
| | ----------------------------------------------------------------
| | Our debt covenants limit our financing and other
    activities.





| |   |                                                         
| | - | --------------------------------------------------------
| |  | incur additional indebtedness;                          
|
| |  | make prepayments of certain indebtedness;               
|
| |  | pay dividends;                                          
|
| |  | make investments;                                       
|
| |  | engage in transactions with stockholders and affiliates;
|
| |  | issue capital stock;                                    
|
| |  | create liens;                                           

9



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| |   |                                        
| | - | ---------------------------------------
| |  | sell assets;                           
|
| |  | engage in mergers and consolidations;  
|
| |  | change the Chief Executive Officer; and
|
| |  | increase the size of the Board.        





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | The Investors are holders of the Special Share which
    provides the Investors with approval rights over material
    actions by the Company.





| |                                                                               
| | ------------------------------------------------------------------------------
| | We have a history of operating losses and expect these
    losses to continue.





| |                                                                            
| | ---------------------------------------------------------------------------
| | Our future operating results may be subject to significant
    fluctuation.





| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | our ability to raise additional financing;                                                           
|
| |  | general economic conditions;                                                                         
|
| |  | the conditions of the European telecommunications industry in
    general;                           
|
| |  | further price decreases in the European telecommunications
    industry;                             
|
| |  | our ability to introduce and support new products and services;                                      
|
| |  | our ability to attract and retain customers;                                                         
|
| |  | our ability to operate and develop in new markets, in particular
    that for Voice over IP (VoIP);
|
| |  | changes in the mix of services sold or channels through which
    services are sold;                 
|
| |  | capital expenditure requirements and costs relating to our
    network and our businesses;           

10



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| |   |                                                             
| | - | ------------------------------------------------------------
| |  | the outcome of legal proceedings; and                       
|
| |  | the effects of government regulation and regulatory changes.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot assure you that we will be able to retain or
    find qualified replacements for members of our senior management
    team and other key personnel.





| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | Our exposure to exchange rate fluctuations may have a
    material adverse effect on our ability to meet certain
    obligations.





| |                                                                             
| | ----------------------------------------------------------------------------
| | We are subject to risks associated with operating in
    multiple countries.







| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | We cannot assure you that we will be able to enter into
    sales contracts sufficient to meet our working capital
    requirements.



11



---



##### Table of Contents





| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | We cannot assure you that we will be able to retain or
    expand our existing customer base.





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | We may not have the ability to support and develop new
    services and product lines.





| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | generate customer acceptance of such new services and product
    offerings;                                         
|
| |  | integrate necessary equipment and software into our network;                                                         
|
| |  | enhance our billing, back-office and information systems
    required to accommodate these new services and products;
|
| |  | identify and sell other services and products for which we
    believe there is a significant potential demand; and  
|
| |  | support, through back office resource, the growing number of
    customers that we gain.                             





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We may not be able to generate sufficient wholesale
    revenues to meet ongoing network operating costs.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | System disruptions or failures could have a material
    adverse effect on our business.





| |   |                
| | - | ---------------
| |  | fire and flood;
|
| |  | power loss;    

12



---



##### Table of Contents





| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | natural disasters; and                                                     
|
| |  | general transmission failures caused by a number of additional
    factors.





| |                                                                               
| | ------------------------------------------------------------------------------
| | Failure of key suppliers could affect our ability to
    operate our business.





| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | delays in new products and features from suppliers, impacting
    our product development programs,                        
|
| |  | discontinuance of products or services, impacting our ability to
    deliver our products and services,                    
|
| |  | deteriorating support quality, affecting operational and
    customer service; and                                         
|
| |  | higher volatility with regard to our demands on suppliers, and
    in stock levels affected by customer returned equipment.





| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Our business strategy involves potential business
    combinations, strategic investments and acquisitions.





| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | the difficulty of integrating previously separate operations and
    personnel;                              
|
| |  | the potential disruption to our ongoing business and the
    distraction of our management;                  
|
| |  | the difficulty of incorporating acquired technology and rights
    into our products and services;           
|
| |  | unanticipated expenses related to acquired technologies and
    their integration into existing technologies;
|
| |  | potential unknown liabilities associated with acquired
    businesses; and                                   
|
| |  | higher than planned funding requirements to preserve and grow
    the value of acquired companies.           



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Electronic attack from hackers or computer viruses could
    disrupt our business.



13



---



##### Table of Contents





| |                             
| | ----------------------------
| | Rapid technological changes.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The European telecommunications industry is highly
    competitive. Our market share, net sales or net income could
    decline due to vigorous price and other competition.







| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Government regulation could adversely affect our ability
    to provide services in markets in which we operate.







14



---



##### Table of Contents







e-Communications e-Communications e-Communications




| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | limited independence and impartiality of some NRAs;                                                                                            
|
| |  | limitations on the powers of NRAs; and                                                                                                         
|
| |  | separate NRAs for telecoms and broadcasting, which increases the
    risk of regulatory uncertainty given the advent of converged
    services.

e-Communications


e-Communications




| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Changes in the regulation of VoIP could adversely affect
    our ability to meet certain obligations.

e-Communications




| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we are a Bermuda holding company and a
    foreign private issuer for purposes of
    U.S. securities laws, persons who own our common shares may
    have more difficulty in protecting their interests than persons
    who are shareholders of a U.S. corporation.



15



---



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non-U.S. non-U.S.


20-F




| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | We cannot assure you that an active trading market will
    develop or continue for our common shares.

20-F over-the




| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The conversion, or even the prospect of conversion, of our
    convertible debt securities could have a depressive effect on
    the trading activity of our common shares.







16



---



##### Table of Contents







| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | We cannot assure you that you will receive dividends on
    our common shares in the foreseeable future.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Our reputation may be adversely impacted by the
    Predecessors bankruptcy proceeding.





| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | The Company may have potential liability with respect to
    past non-compliance of the Predecessor under the Exchange
    Act.

20-F 20-F).




| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some members of our Board of Directors may have conflicts
    of interest with us, and some of these conflicts may be resolved
    in a manner adverse to us.








|        |                           
|------- | --------------------------
|ITEM 4. | INFORMATION ON THE COMPANY

Business Overview  New Viatel Organization






17



---



##### Table of Contents



















18



---



##### Table of Contents





History of the Predecessor














Chapter 11 Reorganization






| |                                                    
| | ---------------------------------------------------
| | Operations of the Predecessor as at the Filing Date



19



---



##### Table of Contents











| |                                                  
| | -------------------------------------------------
| | Asset/network disposals following the Filing Date







| |                       
| | ----------------------
| | Plan of Reorganization



8-K 8-K). 8-K 20-F.






20



---



##### Table of Contents









|                                                                                                                     |  |                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Class Description                                                                                                    |  | Treatment Under the Plan of Reorganization                                                                                                        
|                                                                                                                     |  |                                                                                                                                                   
|Class 1  Other Priority Claims                                                                                      |  | Unimpaired                                                                                                                                        
|Class 2  Convenience Claims (Unsecured Claims of
    Face Amount US$500 or less, excluding any Intercompany Claims) |  | Unimpaired                                                                                                                                        
|Class 3.01  NTFC Secured Claim                                                                                      |  | Unimpaired                                                                                                                                        
|Class 3.02  Other Secured Claims                                                                                    |  | Unimpaired                                                                                                                                        
|Class 4  General Unsecured Claims                                                                                   |  | Pro rata share of 88% of 12,000,000 new common shares of the
    Company of US$0.01 each, issued in connection with the Plan of
    Reorganization
|Class 5  Intercompany Claims                                                                                        |  | Extinguished                                                                                                                                      
|Class 6  Interests                                                                                                  |  | Cancelled                                                                                                                                         



Emergence from Chapter 11




| |                                             
| | --------------------------------------------
| | Operations of the Company as at June 7, 2002







| |   |                                      
| | - | -------------------------------------
| |  | the European Network;                
|
| |  | leased capacity to a POP in New York;

21



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##### Table of Contents





| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | several inoperative voice switches; and                         
|
| |  | certain receivables and
    cash-in-hand of the
    Predecessor.





| |                                                                       
| | ----------------------------------------------------------------------
| | Evolution of operations of Viatel from June 7, 2002
    until May 2006







6-K 6-K). 20-F. 20-F.


20-F.




22



---



##### Table of Contents



Viatel Business Plan






Sales and Marketing












| |       
| | ------
| | Retail











| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enterprise Business Broadband: an xDSL broadband service,
    with high performance and reliability, designed for the business
    user. This service is based on a
    1-to-1 contention ratio
    (contention being

23



---



##### Table of Contents



| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | defined as the number of organizations sharing the same
    bandwidth); in this way, the customer has effectively its own
    dedicated bandwidth, maximising service performance.                       
|
| |  | SoHo Business Broadband: an xDSL shared broadband service
    aimed at small offices and people working from home.                                                                                       
|
| |  | Consumer white label broadband: an xDSL
    shared broadband service, retailed under the customers or
    another third partys brand, offering email, web space and
    parental control if required.
|
| |  | Dedicated Internet Access: a high bandwidth leased line
    Internet access utilising our IP Network and worldwide peering
    agreements.                                                               





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Co-location: a managed service offering a flexible and
    cost-effective alternative to an in-house Internet facility.
    Dedicated full and half racks are available and located in a
    highly secure and monitored (on a 24 hour, 7 days a
    week basis) facility.                                                                                                                                                    
|
| |  | Managed Hosting: a service available on RedHat, Linux and
    Windows operating systems. This service is a managed, dedicated
    web and Internet applications hosting solution for business
    customers. Such applications could be a web site, an
    e-business platform or
    an SAP application. This service is again located in a highly
    secure and monitored (on a 24 hour, 7 days a week
    basis) facility.





| |   |                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Managed Firewall: a fully managed and dedicated firewall
    solution. A firewall is a set of hardware and software
    components used for the protection of a network from
    unauthorised access. Firewalls might be located in the
    customers premises for DIA and broadband connectivity or
    in Viatels data centre for managed hosting customers.
|
| |  | Managed Anti Spam & Anti Virus: an
    e-mail scanning service
    based on a three tier architecture that blocks spam and viruses
    transmitted over the Internet before reaching the customer
    network.                                                                                                                                                  





| |   |                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Site-to-Site
    IPVPN: an IPVPN service that allows customers to access
    private data, such as company information, across a public or
    shared network. The Viatel IPVPN offering takes advantage of a
    number of access technologies, such as dial, broadband and DIA.
    IPSec is currently the security protocol used by Viatel.
|
| |  | Remote IPVPN: a service that allows customers with a
    distributed workforce to access company data and systems, such
    as order entry and work-flow management. An international
    roaming service option is also available.                                                                                                           
|
| |  | Viatel Managed IPVPN: a secure, cost effective
    communication service between customer sites, remote workers and
    business partners over a shared network. If customers wish to
    manage their own site equipment, they can choose a wires
    only option.                                                                         
|
| |  | Viatel Ethernet: a high bandwidth, flexible service to
    enable customers to run data intensive or real time applications
    between their sites.                                                                                                                                                                                          





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Viatel VoIP: comparable to a traditional voice access
    line service, but routed over cost effective Internet
    connections such as broadband and leased lines. We provide the
    Internet connection and a variety of gateways to IP enabled
    existing customer equipment. Viatel hosted VoIP provides a fully
    managed, bundled telephony solution, including IP enabled
    phones, connectivity and private branch exchange PBX
    functionality such as call forwarding and voice mail.
|
| |  | Viatel VoIP VPN: a single, secure VPN network for
    integrated voice and data traffic between customer sites and
    remote workers, helping to reduce costs and improve efficiency.                                                                                                                                                                                                                                                                                                                    

24



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| |          
| | ---------
| | Wholesale

point-to






| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Leased Line: an
    end-to-end, managed,
    fully redundant and protected synchronous digital hierarchy
    (SDH) transmission technology international private
    wire service, over varying speeds, that uses the European
    Network.                                                                                                          
|
| |  | Wavelength: a service offering greater speed, flexibility
    and more bandwidth utilization allowing carriers, ISPs and large
    corporate customers, effectively, to design and operate their
    own networks.                                                                                                                                     
|
| |  | IP transit: services where, starting with our own
    networks IP backbone and then, by purchasing global IP
    transit from a number of carefully selected partners, we are
    able to offer our customers the best available connection
    routes, thus providing our customers with maximum quality,
    responsiveness and cost- effectiveness.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Dark Fiber: we offer dark fiber to customers that may
    wish to make the requisite capital investments in order to carry
    traffic over fiber; however, we do not expect that there will be
    an active market for dark fiber in the near future. We may also
    make available to our customers, in selected locations and
    facilities, certain ducts on either an outright sale or leased
    basis.
|
| |  | Co-location: services normally provided as ancillary to
    the aforementioned dark fiber services. These services allow our
    customers, who connect directly to our network, to install and
    operate their equipment in our co-location facilities. A range
    of add-on services are also offered such as dedicated                                                                                    

25



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##### Table of Contents



| |  |                                                                                                                                                 
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | racks and secure cages designed to allow increased security and
    remote monitoring of customers applications co-located at
    the facility.









| |         
| | --------
| | Cybernet



x






Segmental Revenue




26



---



##### Table of Contents





|                                      |                          |                   |        |        |                   |  |        |                   |  |  |        |       | 
|------------------------------------- | ------------------------ | ----------------- | ------ | ------ | ----------------- |  | ------ | ----------------- |  |  | ------ | ----- | 
|                                      |                          | Year Ended        |        |        | Year Ended        |  |        | Year Ended        | 
|                                      |                          | December 31, 2005 |        |        | December 31, 2004 |  |        | December 31, 2003 | 
|                                      |                          |                   |        |        |                   |  |        |                   | 
|United Kingdom                        |                          |                   | 15,361 |        |                   |  | 9,600  |                   |  |  | 4,835  |      
|                                      | Total Retail Business    |                   |        | 15,361 |                   |  |        | 9,600             |  |  |        | 4,835 | 
|United Kingdom                        |                          |                   | 1,369  |        |                   |  | 960    |                   |  |  | 3,163  |      
|Switzerland                           |                          |                   | 330    |        |                   |  | 373    |                   |  |  | 346    |      
|Western Europe                        |                          |                   | 2,290  |        |                   |  | 2,366  |                   |  |  | 397    |      
|North America                         |                          |                   | 1,209  |        |                   |  | 676    |                   |  |  | 1,476  |      
|                                      |                          |                   |        |        |                   |  |        |                   | 
|                                      | Total Wholesale Business |                   |        | 5,198  |                   |  |        | 4,375             |  |  |        | 5,382 | 
|                                      |                          |                   |        |        |                   |  |        |                   | 
|Total Revenue  Continuing Operations |                          |                   | 20,559 |        |                   |  | 13,975 |                   |  |  | 10,217 |      





The European Network












back-up


27



---



##### Table of Contents





20-F.






Global Voice Transaction


6-K 6-K). 6-K 20-F. 20-F.




| |                
| | ---------------
| | Relevant Assets





| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Netherlands, Belgium and United Kingdom: The Company
    has granted Global Voice a long-term lease (or nearest
    equivalent legal form permitted in the relevant jurisdictions)
    over one half of Viatels fiber and ducts in The
    Netherlands, Belgium and the UK for a term of 100 years (or
    such shorter

28



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | period as Viatel is able to grant or which constitutes the
    economic life of the assets). These leased assets are the
    subject of put and call options by which, after a period of five
    years from Completion, the Company and Global Voice can require
    that Global Voice acquires absolute title (or such nearest
    equivalent legal form of ownership as Viatel is able to
    transfer) to such assets for a nominal sum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | France: The Company has granted an IRU to Global Voice
    over one-half of Viatels fiber along a route extending
    from the Belgian border to Paris, and then to Strasbourg,
    constituting approximately one third of the Companys
    French network. The Company has granted (to the extent it is
    legally able to do so) Global Voice an option, for a nominal sum
    and again exercisable after a period of five years from
    Completion, to purchase title/take a long term lease of the
    fibers subject to the IRU and one-half of the related duct
    infrastructure.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Germany (PEN 3 network): Global Voice has acquired
    all of the Companys rights and interest in the assets on
    the un-lit German stretch of the Viatel network known as
    PEN 3. The PEN 3 infrastructure is currently not
    operational and accordingly customary warranties, in particular
    as to fitness for purpose and use, were excluded from the
    transaction documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Germany (PEN 2 network): The Company has granted
    Global Voice a sub-lease of one-half of the fibers currently
    located within duct space leased from Gasline on the operational
    PEN 2 network, the term of such sub-lease being for
    the remaining 23 years (approximately) of the
    principal lease with Gasline. The Company has additionally
    granted Global Voice a long-term lease and option to acquire
    title (or nearest equivalent legal form of ownership as Viatel
    is able to transfer) in one-half of the Companys ducts and
    fibers on the northern part of its Frankfurt ring. In relation
    to the southern part of the Frankfurt ring, the Company has
    granted a long-term lease of one-half of the ducts and cables
    with an option to acquire title (or such nearest equivalent
    legal form of ownership as Viatel is able to transfer) to
    one-half of the fibers. Again, the relevant options will be
    exercisable after a period of five years from Completion.








| |                                     
| | ------------------------------------
| | Consideration Payable to the Company





| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a cash payment of
    18.5 million
    (US$23.7 million approximately) net of all applicable taxes;                                                                                                                                                                         
|
| |  | title (or such nearest equivalent legal form of ownership as
    Global Voice is able to transfer) to five fiber pairs in the
    Global Voice metropolitan networks in 7 European cities
    (Amsterdam, Utrecht, Rotterdam, Frankfurt, Hamburg, Dusseldorf
    and London);
|
| |  | preferential pricing from Global Voice for up to two additional
    fibers on all of Global Voices current metropolitan
    networks  covering in total 14 European cities and,
    where available, on all future metropolitan networks constructed
    by Global Voice;  
|
| |  | preferential pricing from Global Voice for access to specified
    buildings directly connected to Global Voices metropolitan
    networks;                                                                                                                                 

29



---



##### Table of Contents





| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an indefeasible right of use for twenty years in three fiber
    pairs on each section of the PEN 3 network, as and when
    such sections are made operational by Global Voice;                              
|
| |  | access to additional buildings on the Global Voice network at
    cost plus 15 percent; and                                                                                                                   
|
| |  | from the first anniversary of Completion, a contribution of
    one-half of the operating costs with respect to those sections
    of the European Network on which Global Voice is acquiring an
    interest.



| |                   
| | ------------------
| | Operational Issues









| |                                   
| | ----------------------------------
| | Impact of Global Voice Transaction



Description of Certain Indebtedness






| |                     
| | --------------------
| | April 2004 Financing



30



---



##### Table of Contents



6-K 6-K












sub-fund






31



---



##### Table of Contents







| |                    
| | -------------------
| | July 2005 Financing







pari passu




| |                     
| | --------------------
| | March 2006 Financing



20-F




pari passu


Regulation


e-Communications


32



---



##### Table of Contents











Autorité de Régulation des
Communications électronique et des Postes Bundesnetzagentur Onafhankelijke Post
en Telecommunicatie Autoriteit


Organizational Structure




|                                |  |                               |  |                             |     |  
|------------------------------- |  | ----------------------------- |  | --------------------------- | --- | -
|                                |  |                               |  | Ownership by Viatel Holding |    
|Name of Subsidiary              |  | Jurisdiction of Incorporation |  | (Bermuda) Limited           |    
|                                |  |                               |  |                             |    
|VTL-TP (Bermuda) Limited        |  | Bermuda                       |  |                             | 100 | %
|Viatel Holding (Europe) Limited |  | England and Wales             |  |                             | 100 | %
|Viatel Operations SA(1)         |  | France                        |  |                             | 100 | %
|Viatel Belgium NV               |  | Belgium                       |  |                             | 100 | %
|VTL, Inc.(2)                    |  | US                            |  |                             | 100 | %
|Viatel Broadband Limited        |  | England and Wales             |  |                             | 100 | %

33



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##### Table of Contents



|                            |  |                               |                   |  |                        |  |     |  
|--------------------------- |  | ----------------------------- | ----------------- |  | ---------------------- |  | --- | -
|Name of Subsidiary          |  | Jurisdiction of Incorporation |                   |  | Ownership by VTL, Inc. | 
|                            |  |                               |                   |  |                        | 
|Viatel Belgium Limited      |  |                               | England and Wales |  |                        |  | 100 | %
|VTL (UK) Limited            |  |                               | England and Wales |  |                        |  | 100 | %
|Viatel Circe Assets Limited |  |                               | England and Wales |  |                        |  | 100 | %

|                                  |  |                               |  |                             |     |  
|--------------------------------- |  | ----------------------------- |  | --------------------------- | --- | -
|                                  |  |                               |  | Ownership by Viatel Holding |    
|Name of Subsidiary                |  | Jurisdiction of Incorporation |  | (Europe) Limited            |    
|                                  |  |                               |  |                             |    
|Viatel Equipment Limited          |  | England and Wales             |  |                             | 100 | %
|Viaphone AG                       |  | Switzerland                   |  |                             | 100 | %
|Viatel Global Communications B.V. |  | The Netherlands               |  |                             | 100 | %
|Viatel German Asset GmbH          |  | Germany                       |  |                             | 100 | %
|VTL Telecom GmbH                  |  | Germany                       |  |                             | 100 | %

|                        |  |                               |                   |                       |         |  |     |  
|----------------------- |  | ----------------------------- | ----------------- | --------------------- | ------- |  | --- | -
|                        |  |                               |                   | Ownership by VTL (UK) |        
|Name of Subsidiary      |  | Jurisdiction of Incorporation |                   |                       | Limited | 
|                        |  |                               |                   |                       |         | 
|Viatel Internet Limited |  |                               | England and Wales |                       |         |  | 100 | %

|                                   |  |                               |                 |                            |                     |  |     |  
|---------------------------------- |  | ----------------------------- | --------------- | -------------------------- | ------------------- |  | --- | -
|                                   |  |                               |                 | Ownership by Viatel Global |                    
|Name of Subsidiary                 |  | Jurisdiction of Incorporation |                 |                            | Communications B.V. | 
|                                   |  |                               |                 |                            |                     | 
|Viafoperations Communications B.V. |  |                               | The Netherlands |                            |                     |  | 100 | %






|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | It is a requirement of French law that there be
    7 shareholders of a corporation organized as a
    société anonyme(SA). The minority shares in
    Viatel Operations SA are held by each of 6 nominee shareholders.
|   
|(2) | As from January 6, 2003.                                                                                                                                                                                               



Property, Plant and Equipment






5-year


back-up


34



---



##### Table of Contents





|                                       |  |                                |  |                                  
|-------------------------------------- |  | ------------------------------ |  | ---------------------------------
|                                       |  |                                |  | Total Equipment or Facility Area 
|Property Name                          |  | Site Type                      |  | (Leased Total Area May be Larger)
|                                       |  |                                |  |                                  
|ESSEN (BELGIUM)                        |  | REGEN                          |  | 15 sqm                           
|LEERS-NORD                             |  | REGEN                          |  | 1 Rack                           
|LIEGE                                  |  | REGEN                          |  | 15 sqm                           
|ANTWERP WOMMELGEN                      |  | MOR                            |  | 15 sqm                           
|HASSELT                                |  | REGEN                          |  | 15 sqm                           
|ANTWERP BELIEWEG (ALASKA)              |  | MOR                            |  | 15 sqm                           
|GENT (MERELBEKE)                       |  | MOR                            |  | 15 sqm                           
|GENT (BRUGGE)                          |  | REGEN                          |  | 15 sqm                           
|LEUVEN                                 |  | STORAGE (Potential future POP) |  | 200 sqm                          
|ESTAMPUIS                              |  | MOR                            |  | 15 sqm                           
|TOURNAI                                |  | REGEN                          |  | 15 sqm                           
|MONS                                   |  | REGEN                          |  | 15 sqm                           
|CHARLEROI (CHATELET)                   |  | REGEN                          |  | 15 sqm                           
|ANTWERP VOSVELD 20                     |  | STORAGE (Potential future POP) |  | 100 sqm offices  620 sqm tech   
|BRUSSELS MIDI (RUE DE France)          |  | POP                            |  | 95 sqm                           
|ANTOING                                |  | REGEN                          |  | 15 sqm                           
|NAMUR                                  |  | REGEN                          |  | 15 sqm                           
|BRUSSELS TOLL-LAAN                     |  | POP/OFFICE                     |  | 450 sqm                          
|KORTRIJK                               |  | REGEN                          |  | 15 sqm                           
|AVIGNONET (LAURAGAIS)                  |  | MOR                            |  | 15 sqm                           
|PARIS AUBERVILLERS CEDEX (VICTOR-HUGO) |  | RACK SPACE                     |  | room 12, 1 rack                  
|AVAILLES-EN-CHATERELLAULT              |  | MINI-POP                       |  | 15 sqm                           
|LYON (RUE GEORGE MARANNE) 2            |  | POP                            |  | 16 sqm                           
|LISLE ADAM (MOURS) (A16)              |  | MOR                            |  | 15 sqm                           
|PARIS AUBERVILLIERS CEDEX (GARDINOUX)  |  | POP                            |  | 1 600 x 600 rack                 
|AZY-SUR-MARNE (NOGENT LARTAND)        |  | MOR                            |  | 15 sqm                           
|MEAUX                                  |  | MOR                            |  | 15 sqm                           
|BORDEAUX (MERIGNAC)                    |  | POP                            |  | 1267 sqm                         
|CAYEUX-SUR-MER                         |  | REGEN                          |  | 150 sqm                          
|CAZAN (VERMEGUES)                      |  | MOR                            |  | 25 sqm                           
|CHAROLLES (LP2) (VENDENESSE)           |  | MOR                            |  | 25 sqm                           
|CONDE-SUR-MARNE                        |  | REGEN                          |  | 15 sqm                           
|CORBEIL (ESSONNES) (LP7)               |  | MOR                            |  | 25 sqm                           
|COURRIERES                             |  | MOR                            |  | 15 sqm                           
|BIACHES (PERONNE) #1                   |  | REGEN                          |  | 25 sqm                           

35



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|                                                  |  |            |  |                                  
|------------------------------------------------- |  | ---------- |  | ---------------------------------
|                                                  |  |            |  | Total Equipment or Facility Area 
|Property Name                                     |  | Site Type  |  | (Leased Total Area May be Larger)
|                                                  |  |            |  |                                  
|BOURBON (LP3)                                     |  | MOR        |  | 25 sqm                           
|BELLEVILLE (LP1) (MONTMERLE)                      |  | MOR        |  | 25 sqm                           
|BON-ENCONTRE                                      |  | MOR        |  | 25 sqm                           
|FOS-SUR-MER                                       |  | MOR        |  | 25 sqm                           
|BLOIS                                             |  | MOR        |  | 25 sqm                           
|GRISOLLES                                         |  | MOR        |  | 25 sqm                           
|BLANZAY                                           |  | MOR        |  | 25 sqm                           
|MEILHAN SUR GARONNE                               |  | MOR        |  | 25 sqm                           
|LAVOURS (LG2)                                     |  | MOR        |  | 25 sqm                           
|BRIARE (LP5)                                      |  | REGEN      |  | 25 sqm                           
|ST MARTIN-DE-BRETHENCOURT                         |  | MOR        |  | 25 sqm                           
|THOUROTTE                                         |  | MOR        |  | 15 sqm                           
|SOUPPES-SUR-LOING (LP6)                           |  | MOR        |  | 25 sqm                           
|PICHEGU (ST GILES) (MARNEGA)                      |  | MOR        |  | 25 sqm                           
|PARIS LA DEFENSE (COURBEVOIE)                     |  | POP        |  | 215 sqm                          
|POILHES                                           |  | MOR        |  | 25 sqm                           
|MONTFAUCON (CADEROUSSE)                           |  | REGEN      |  | 25 sqm                           
|TOULOUSE                                          |  | POP        |  | 816 sqm                          
|ARTENAY (ORLEANS)                                 |  | POP        |  | 25 sqm                           
|REVIGNY-SUR-ORNAIN (CONTRISSON)                   |  | MOR        |  | 15 sqm                           
|SAULT BRENAZ (LG1)                                |  | MOR        |  | 25 sqm                           
|SETE (MONTPELLIER)                                |  | REGEN      |  | 25 sqm                           
|AMIENS (PARC DACTIVITIES)                        |  | POP        |  | 750 sqm warehouse + 5 car parks  
|ST CHRISTOPHE-DE-DOUBLE                           |  | MOR        |  | 25 sqm                           
|STRASBOURG                                        |  | POP        |  | 500 sqm                          
|NEVERS (LP4)                                      |  | MOR        |  | 25 sqm                           
|MONTELIMAR (SAULCE SUR RHONE)                     |  | MOR        |  | 25 sqm                           
|MARSEILLETTE                                      |  | MOR        |  | 25 sqm                           
|XOUAXANGE (HESSE)                                 |  | MOR        |  | 15 sqm                           
|NANCY RUE JAURES                                  |  | POP        |  | 500 sqm                          
|NAMBSHEIM (BS1)                                   |  | MOR        |  | 15 sqm                           
|NERSAC                                            |  | MOR        |  | 25 sqm                           
|PARIS 35 RUE DES JEUNEURS  BASEMENT (BASTILLE)   |  | POP        |  | 97 sqm                           
|ANDANCETTE                                        |  | MOR        |  | 25 sqm                           
|PARIS 35 RUE DES JEUNEURS 
    2NDFLR (BASTILLE) |  | POP/OFFICE |  | 50 sqm                           
|VERETZ (TOURS)                                    |  | MINI-POP   |  | 25 sqm                           
|PARIS 38 RUE DES JEUNEURS 
    4TH               |  | POP        |  | 3 RACKS                          

36



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##### Table of Contents



|                                                  |  |                 |  |                                      
|------------------------------------------------- |  | --------------- |  | -------------------------------------
|                                                  |  |                 |  | Total Equipment or Facility Area     
|Property Name                                     |  | Site Type       |  | (Leased Total Area May be Larger)    
|                                                  |  |                 |  |                                      
|PARIS 35 RUE DES JEUNEURS 
    3RDFLR (BASTILLE) |  | POP/OFFICE      |  | 270 sqm                              
|TROUSSEY (VILLOROY SUR MEHOLLE)                   |  | MOR             |  | 15 sqm                               
|DUSSELDORF IN DER STEELE 29                       |  | POP             |  | 1 600 x 800 Cabinet                  
|DERNBACH                                          |  | MOR             |  | 15 sqm                               
|DUSSELDORF HALLE CONNECTAPARK                     |  | POP             |  | 900 sqm equipment room plus office   
|ELTEN                                             |  | MOR             |  | 15 sqm                               
|MANNHEIM                                          |  | POP             |  | 600 sqm                              
|NAUROD                                            |  | MOR             |  | 15 sqm                               
|LINZ                                              |  | REGEN           |  | 15 sqm                               
|FRANKFURT 19 WEISSMULLERSTRASSE                   |  | POP             |  | 1 600 x 800 Cabinet                  
|BERG LANGWIESE (GASLINE)                          |  | MOR             |  | 15 sqm                               
|KAPPELLA (KAPPELLEN)                              |  | MOR             |  | 15 sqm                               
|PORZ                                              |  | MOR             |  | 15 sqm                               
|FRANKFURT 90 KLEYERSTRASSE                        |  | MINI-POP/OFFICE |  | 45 sqm                               
|AMSTERDAM SCHIPLUIDENLAAN (DELFLANDLAAN)          |  | POP/OFFICE/NOC  |  | 450 sqm, 5 car park spaces (basement)
|AMSTERDAM NIKHEF BUILDING                         |  | POP             |  | 1 rack                               
|AMSTERDAM WORLD TRADE CENTRE                      |  | POP/OFFICE      |  | 182 sqm                              
|AMSTERDAM HALFWEG                                 |  | POP             |  | 200 sqm                              
|AMSTERDAM 144 GYROKOOPWEG                         |  | POP             |  | 3 racks                              
|AMSTERDAM 58 GYROKOOPWEG (INTERXION)              |  | POP             |  | 1 rack                               
|ZANDVOORT                                         |  | REGEN           |  | 200 sqm                              
|LEERSUM                                           |  | MOR             |  | 15 sqm                               
|ROTTERDAM ALBERT PLESMANWEG (SOERWEG 5B)          |  | POP             |  | 200 sqm                              
|WORLD FASHION CENTER
    (17thfloor)              |  | ROOF SITE       |  | 100 sqm on site                      
|DOORN                                             |  | MOR             |  | 10 sqm                               
|OLTEN                                             |  | MOR             |  | 50 sqm                               
|BASEL                                             |  | POP             |  | 4 racks                              
|BERN                                              |  | POP             |  | 50 sqm                               
|EPENDES                                           |  | REGEN           |  | 100 sqm                              
|ZURICH 225 JOSEF STR                              |  | POP             |  | 2 racks                              
|ZURICH 569 BADENEERSTRASSE                        |  | POP             |  | 810 sqm                              
|ZURICH 560 SCHAFFHAUSERSTRASSE                    |  | POP/OFFICE      |  | 65 sqm                               
|GENEVA                                            |  | POP             |  | 77 sqm                               

37



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##### Table of Contents



|                                       |  |                |  |                                  
|-------------------------------------- |  | -------------- |  | ---------------------------------
|                                       |  |                |  | Total Equipment or Facility Area 
|Property Name                          |  | Site Type      |  | (Leased Total Area May be Larger)
|                                       |  |                |  |                                  
|GENEVA (Rue de la Confederation 6)     |  | POP            |  | 1 rack                           
|LONDON PARK STREET                     |  | POP            |  | 1 rack                           
|SNOW HILL                              |  | MOR            |  | 15 sqm                           
|POLEGATE                               |  | REGEN          |  | 50 sqm (equipment room)          
|PEASE POTTAGE                          |  | MOR            |  | 35 sqm                           
|PAKENHAM                               |  | MOR            |  | 15 sqm                           
|MANCHESTER WILLIAMS HOUSE              |  | POP            |  | 1 rack                           
|LONDON TELEHOUSE NORTH                 |  | POP/OFFICE     |  | 243 sqm (2600 sq ft)             
|LONDON GLOBAL SWITCH                   |  | POP            |  | 1 rack 1 duct                    
|EGHAM INBUCON HOUSE                    |  | POP/OFFICE/NOC |  | 1405 sqm                         
|LONDON 8 HARBOUR EXCHANGE (TELECITY 2) |  | POP            |  | 1 rack  ref 1 Z 18              
|LONDON TELEHOUSE NORTH (NETCOM)        |  | POP            |  | 1 racks                          
|LONDON BRICK LANE (INTERXION)          |  | POP            |  | 1 x 600 x 600 rack               
|LONDON TELEHOUSE EAST                  |  | POP            |  | 3 racks                          
|LONDON HOSTING CENTRE (PSINET)         |  | POP            |  | 3 racks                          
|LOWESTOFT                              |  | REGEN          |  | 250 sqm                          
|BRACKNELL                              |  | OFFICE/POP     |  | 2,240 sqm                        
|LONDON 7 HARBOUR EXCHANGE (REDBUS)     |  | POP            |  | 1 rack
    8thfloor              
|LONDON BONNINGTON HOUSE (TELECITY 1)   |  | POP            |  | 4 racks                          
|NEW YORK 60 HUDSON                     |  | POP            |  | 550 sqm                          
|FIBERNET BIRMINGHAM                    |  | POP            |  | rack E11 (60cm x 60 cm)          
|FIBERNET COVENTRY                      |  | POP            |  | rack A10                         
|FIBERNET LEEDS 2                       |  | POP            |  | rack D11                         
|FIBERNET LEICESTER                     |  | POP            |  | rack B10                         
|FIBERNET READING                       |  | POP            |  | rack D5                          
|FIBERNET EDINBURGH                     |  | POP            |  | 1 rack                           
|LONDON GOSWELL ROAD                    |  | POP            |  | 1 rack                           
|LONDON HEATHROW (ix Europe)            |  | POP            |  | 1 rack                           
|FIBERNET NORTHAMPTON                   |  | POP            |  | 1 rack                           
|LONDON SOVEREIGN HOUSE (REDBUS)        |  | POP            |  | 1 rack                           
|LONDON BRAHAM ST (L3)                  |  | POP            |  | 1 rack                           






ITEM 4A. UNRESOLVED STAFF COMMENTS




38



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##### Table of Contents








|        |                                             
|------- | --------------------------------------------
|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with
our financial statements and the notes thereto included
elsewhere in this
Form 20-F. The
following discussion includes certain forward-looking
statements. See Forward Looking Statements on
page 2. For a discussion of important factors, see
Item 3. Key Information  Risk
Factors.


General




20-F


Critical Accounting Policies and Estimates








| |                          
| | -------------------------
| | Revenue and Cost of Sales







39



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##### Table of Contents







| |                                
| | -------------------------------
| | Impairment of Long-lived Assets











| |   |                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | where a measurable trend has been established, cash inflows from
    existing services are forecast based upon historical performance
    along with monthly growth rates in line with those achieved over
    prior periods for which relevant data is available;                                                                                           
|
| |  | where a measurable trend has not been established, estimates of
    future inflows are based on current recurring revenues and the
    order pipeline relevant to the assets;                                                                                                                                                                              
|
| |  | cash inflows from new services or the other sales channels
    described in connection with the Viatel Business Plan are
    forecast based on good faith estimates of sales order value. In
    addition, alternative customer profiles are modeled to test the
    level of assumed revenues for reasonableness in the absence of
    historic market data;
|
| |  | estimates of cash outflows relating to costs are typically based
    on current run rates;                                                                                                                                                                                                                                                                   
|
| |  | additional staff costs are included where additional sales heads
    or other staff resources are required to meet revenue targets;                                                                                                                                                                                                                          
|
| |  | estimates of cost reductions are based on reasonable assessment
    and, where indicated, based on third party professional
    advice; and                                                                                                                                                                                                                  
|
| |  | cash flows associated with future capital expenditure that would
    increase the service potential of the relevant asset or group of
    assets are excluded.                                                                                                                                                                                               



40



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##### Table of Contents











| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Completion of the Global Voice Transaction. As noted above,
    Completion occurred on June 21, 2006. See
    Item 4. Information on the Company 
    Global Voice Transaction;                                                                                      
|
| |  | the ability of the Company to improve its competitiveness and
    generate new revenue streams in the wholesale market partly
    through its acquisition of metropolitan network assets
    under the Global Voice Transaction;                                         
|
| |  | the ability of the Company to lower its costs of sale in the
    wholesale market, and therefore increase its competitiveness,
    through using a portion of the sale proceeds received under the
    Global Voice Transaction to invest in backbone
    electronics; and
|
| |  | the range of values being attributed by third parties to
    potential further investments in the European Network and
    related wholesale business.                                                                                                                    







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company may be unable to obtain further debt financing from
    its Investors or other third parties. While management consider
    the expectations of such funding to be reasonable at this time,
    any absence of such continued financial support would likely
    prevent the Company from being able to generate the forecast
    cash flows, inevitably leading to an impairment in the carrying
    value of the European Network;                                          
|
| |  | A further deterioration in conditions within the European
    telecommunications market which could adversely impact
    assumptions used in cash flow calculations;                                                                                                                                                                                                                                                                                                                      
|
| |  | An adverse decision may be given in any of the ongoing legal
    proceedings relating to either the ROW costs or the ongoing
    proceedings regarding the termination of a French property lease
     see Item 8 Financial
    Information  Consolidated Financial Statements and
    Other Financial Information Legal Proceedings.
    Any such adverse decision could have a significant impact on
    impairment calculations dependent on the extent of the adverse
    ruling.



| |                          
| | -------------------------
| | Accounting for loan notes







41



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##### Table of Contents







| |                  
| | -----------------
| | Legal proceedings



Results of Operations


Year-on


|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              |  |         |     |   |  |      |   | 
|---------------------------------------------------------------- | -------- | ----------------- | ------- | -- | ----------------- |  | ---- | ----------------- |  |  | ------------ | -- | - | ----- | ---- | - | ------------ |  | ------- | --- | - |  | ---- | - | 
|                                                                 |          | Year Ended        |         |    | Year Ended        |  |      | Year Ended        | 
|                                                                 |          | December 31, 2005 |         |    | December 31, 2004 |  |      | December 31, 2003 | 
|                                                                 |          |                   |         |    |                   |  |      |                   | 
|                                                                 |          | $000             |         |    | % of revenue      |  |      | $000             |  |  | % of revenue |    |   | $000 |      |   | % of revenue | 
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 
|Revenue                                                          |          |                   | 20,559  |    |                   |  | 100  |                   |  |  | 13,975       |    |   |       | 100  |   |              |  | 10,217  |     |   |  | 100  |  
|Cost of service & sales                                          |          |                   | (12,691 | )  |                   |  | (62  | )                 |  |  | (7,247       | )  |   |       | (52  | ) |              |  | (4,953  | )   |   |  | (48  | )
|Selling, general & administrative                                |          |                   | (56,346 | )  |                   |  | (274 | )                 |  |  | (65,244      | )  |   |       | (467 | ) |              |  | (47,660 | )   |   |  | (466 | )
|Gains on amounts due from bankruptcy estates                     |          |                   |        |    |                   |  |     |                   |  |  | 3,105        |    |   |       | 22   |   |              |  | 358     |     |   |  | 4    |  
|Impairment                                                       |          |                   | (242    | )  |                   |  | (1   | )                 |  |  |             |    |   |       |     |   |              |  |        |     |   |  |     |  
|Depreciation and amortization                                    |          |                   | (6,538  | )  |                   |  | (32  | )                 |  |  | (7,036       | )  |   |       | (50  | ) |              |  | (4,464  | )   |   |  | (44  | )
|Other operating income                                           |          |                   | 362     |    |                   |  | 2    |                   |  |  | 17,780       |    |   |       | 127  |   |              |  |        |     |   |  |     |  
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 
|Operating loss                                                   |          |                   | (54,896 | )  |                   |  | (267 | )                 |  |  | (44,667      | )  |   |       | (320 | ) |              |  | (46,502 | )   |   |  | (455 | )
|Interest and other income                                        |          |                   | 260     |    |                   |  | 1    |                   |  |  | 774          |    |   |       | 6    |   |              |  | 1,555   |     |   |  | 15   |  
|Interest expense                                                 |          |                   | (8,199  | )  |                   |  | (40  | )                 |  |  | (4,395       | )  |   |       | (31  | ) |              |  |        |     |   |  |     |  
|Taxation                                                         |          |                   | (666    | )  |                   |  | (3   | )                 |  |  | 241          |    |   |       | 2    |   |              |  | 229     |     |   |  | 2    |  
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 
|Net loss  continuing operations                                 |          |                   | (63,501 | )  |                   |  | (309 | )                 |  |  | (48,047      | )  |   |       | (344 | ) |              |  | (44,718 | )   |   |  | (438 | )
|Discontinued Operations:                                         |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              |  |         |     |   |  |      |  
|Net income/ (loss) before taxation  discontinued
    operations |          |                   | 129     |    |                   |  | 1    |                   |  |  | 869          |    |   |       | 6    |   |              |  | (2,647  | )   |   |  | (26  | )
|                                                                 | Taxation |                   |         | (6 | )                 |  |      |                  |  |  |              | (1 | ) |       |      |  |              |  |         | (12 | ) |  |      |  | 
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 
|Net income/ (loss) from discontinued operations                  |          |                   | 123     |    |                   |  | 1    |                   |  |  | 868          |    |   |       | 6    |   |              |  | (2,659  | )   |   |  | (26  | )
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 
|Net loss  Total Business                                        |          |                   | (63,378 | )  |                   |  | (308 | )                 |  |  | (47,179      | )  |   |       | (338 | ) |              |  | (47,377 | )   |   |  | (464 | )
|                                                                 |          |                   |         |    |                   |  |      |                   |  |  |              |    |   |       |      |   |              | 

Foreign Currency




42



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##### Table of Contents







Inflation






| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Results of Operations for the year ended December 31,
    2005 as compared with the year ended December 31, 2004





| |        
| | -------
| | Revenue















| |              
| | -------------
| | Cost of Sales





43



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##### Table of Contents













| |                                             
| | --------------------------------------------
| | Selling, General and Administrative Expenses











| |                                             
| | --------------------------------------------
| | Gains on Amounts due from Bankruptcy Estates







| |           
| | ----------
| | Impairment





| |                              
| | -----------------------------
| | Depreciation and Amortization



44



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##### Table of Contents









| |                       
| | ----------------------
| | Other Operating Income





| |               
| | --------------
| | Operating Loss





| |                          
| | -------------------------
| | Interest and Other Income

week-to month-to






| |                 
| | ----------------
| | Interest Expense





| |                                    
| | -----------------------------------
| | Net Loss from Continuing Operations





| |                        
| | -----------------------
| | Discontinued Operations





| |                    
| | -------------------
| | Capital Expenditure



45



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##### Table of Contents



Results of Operations for the year ended December 31,
2004 as compared with the year ended December 31, 2003






| |        
| | -------
| | Revenue















| |              
| | -------------
| | Cost of Sales













46



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##### Table of Contents







| |                                             
| | --------------------------------------------
| | Selling, General and Administrative Expenses









| |                                             
| | --------------------------------------------
| | Gains on Amounts due from Bankruptcy Estates





| |           
| | ----------
| | Impairment





| |                              
| | -----------------------------
| | Depreciation and Amortization







| |                       
| | ----------------------
| | Other Operating Income



47



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##### Table of Contents





| |               
| | --------------
| | Operating loss





| |                          
| | -------------------------
| | Interest and Other Income





| |                 
| | ----------------
| | Interest Expense





| |                                    
| | -----------------------------------
| | Net Loss from Continuing Operations





| |                        
| | -----------------------
| | Discontinued Operations





| |                    
| | -------------------
| | Capital Expenditure





Liquidity and Capital Resources








48



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##### Table of Contents





  )






20-F.




| |            
| | -----------
| | Commitments





| |                        
| | -----------------------
| | Contractual Obligations

|                                   |  |       |         |           |        |  |        |       |  |     |        |  |           |         |        |  |  |  |        | 
|---------------------------------- |  | ----- | ------- | --------- | ------ |  | ------ | ----- |  | --- | ------ |  | --------- | ------- | ------ |  |  |  | ------ | 
|                                   |  |       |         | Less Than |        |  | 1-3    |       |  | 3-5 |        |  | More Than |        
|                                   |  | Total |         |           | 1 Year |  |        | Years |  |     | Years  |  |           | 5 Years |       
|                                   |  |       |         |           |        |  |        |       |  |     |        |  |           |         |       
|                                   |  | $000 |        
|Standby maintenance contracts      |  |       | 19,117  |           |        |  | 4,472  |       |  |     | 3,360  |  |           |         | 1,552  |  |  |  | 9,733  | 
|Operating leases                   |  |       | 34,210  |           |        |  | 4,753  |       |  |     | 7,437  |  |           |         | 6,029  |  |  |  | 15,991 | 
|Loan and future interest payments  |  |       | 112,933 |           |        |  | 5,218  |       |  |     | 31,887 |  |           |         | 4,258  |  |  |  | 71,570 | 
|                                   |  |       |         |           |        |  |        |       |  |     |        |  |           |         |       
|Total contractual cash commitments |  |       | 166,260 |           |        |  | 14,443 |       |  |     | 42,684 |  |           |         | 11,839 |  |  |  | 97,294 | 
|                                   |  |       |         |           |        |  |        |       |  |     |        |  |           |         |       



49



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##### Table of Contents











| |                                                  
| | -------------------------------------------------
| | Research and Development and Capital Expenditures



|                         |  |              |       |  |              |  |       |              |  |  |       | 
|------------------------ |  | ------------ | ----- |  | ------------ |  | ----- | ------------ |  |  | ----- | 
|                         |  | Year Ended   |       |  | Year Ended   |  |       | Year Ended   | 
|                         |  | December 31, |       |  | December 31, |  |       | December 31, | 
|                         |  | 2005         |       |  | 2004         |  |       | 2003         | 
|                         |  |              |       |  |              |  |       |              | 
|                         |  | US$000      |      
|Capital expenditure      |  |              | 4,707 |  |              |  | 3,847 |              |  |  | 2,180 | 
|Research and development |  |              | 1,321 |  |              |  | 1,093 |              |  |  |      | 



| |                                                 
| | ------------------------------------------------
| | Recent Accounting Pronouncements Not Yet Adopted



05-6). 05-6


50



---



##### Table of Contents



05-7, 05-7). 05-7 05-7 05-7


05-8). 05-8 05-8 05-8




51



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##### Table of Contents








|        |                                           
|------- | ------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management




|                    |  |     |    |  |                     |  |                    |          |  |                                                 
|------------------- |  | --- | -- |  | ------------------- |  | ------------------ | -------- |  | ------------------------------------------------
|Name                |  | Age |    |  | Date of Appointment |  |                    | Position
|                    |  |     |    |  |                     |  |                    |         
|Leslie Goodman      |  |     | 60 |  |                     |  | July 24, 2002      |          |  | Chairman of the Board(1),(2)                    
|Lucy Woods          |  |     | 47 |  |                     |  | May 9, 2003        |          |  | Chief Executive Officer and Director(1)         
|S. Dennis Belcher   |  |     | 65 |  |                     |  | August 8, 2002     |          |  | Director(1),(2),(3)                             
|Kevin Power         |  |     | 52 |  |                     |  | October 25, 2002   |          |  | Director(1),(2),(3)                             
|Edward Greenberg    |  |     | 54 |  |                     |  | March 31, 2003     |          |  | Director(3),(4)                                 
|Thomas E. Doster IV |  |     | 37 |  |                     |  | August 8, 2002     |          |  | Director(4)                                     
|Iain Burnett        |  |     | 42 |  |                     |  | December 7, 2005   |          |  | Director(4)                                     
|Didier Delepine     |  |     | 58 |  |                     |  | December 7, 2005   |          |  | Director                                        
|Steve Best          |  |     | 39 |  |                     |  | July 25, 2004      |          |  | Chief Technical Officer                         
|Stuart Blythe       |  |     | 42 |  |                     |  | September 29, 2003 |          |  | Senior Vice President and
    General Counsel(5)
|David Mitchell      |  |     | 57 |  |                     |  | October 12, 2005   |          |  | Acting Chief Financial Officer                  






|    |                                            
|--- | -------------------------------------------
|(1) | Member of the Financing Committee.         
|   
|(2) | Member of the Audit Committee.             
|   
|(3) | Member of the Remuneration Committee.      
|   
|(4) | Serves as representative of Morgan Stanley.
|   
|(5) | Member of the Disclosure Committee.        

Leslie Goodman.


Lucy Woods.


S. Dennis Belcher.


Kevin Power.


52



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##### Table of Contents





Didier Delepine.


Edward Greenberg.


Thomas E. Doster IV.


Iain Burnett.


Steve Best.


Stuart Blythe.


David Mitchell. start-ups .




53



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##### Table of Contents



Compensation


out-of






sub-fund




Board Practices




| |                   
| | ------------------
| | Board of Directors





54



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##### Table of Contents









| |                                     
| | ------------------------------------
| | Committees of the Board of Directors







20-F,


Employees




|                               |  |      |     |  |      |  |     |      |  |  |     | 
|------------------------------ |  | ---- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                               |  | 2005 |     |  | 2004 |  |     | 2003 | 
|                               |  |      |     |  |      |  |     |      | 
|Engineering and Operations     |  |      | 47  |  |      |  | 50  |      |  |  | 41  | 
|Sales, Services and Marketing  |  |      | 107 |  |      |  | 143 |      |  |  | 105 | 
|Finance                        |  |      | 12  |  |      |  | 14  |      |  |  | 15  | 
|Management Information Systems |  |      | 12  |  |      |  | 9   |      |  |  | 5   | 
|Legal and Human Resources      |  |      | 8   |  |      |  | 7   |      |  |  | 2   | 
|Other                          |  |      | 2   |  |      |  | 2   |      |  |  | 14  | 
|                               |  |      |     |  |      |  |     |      | 
|Total                          |  |      | 188 |  |      |  | 225 |      |  |  | 182 | 
|                               |  |      |     |  |      |  |     |      | 



55



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##### Table of Contents





|                               |  |       |     |  |    |  |     |         |  |  |        |  |  |         |   |  |             |  |   |  |  |  |   | 
|------------------------------ |  | ----- | --- |  | -- |  | --- | ------- |  |  | ------ |  |  | ------- | - |  | ----------- |  | - |  |  |  | - | 
|May 31, 2006                   |  | Total |     |  | UK |  |     | Belgium |  |  | France |  |  | Germany |   |  | Netherlands | 
|                               |  |       |     |  |    |  |     |         |  |  |        |  |  |         |   |  |             | 
|Engineering & Operations       |  |       | 47  |  |    |  | 40  |         |  |  | 1      |  |  |         | 3 |  |             |  | 1 |  |  |  | 2 | 
|Sales, Services and Marketing  |  |       | 72  |  |    |  | 71  |         |  |  |       |  |  |         | 1 |  |             |  |  |  |  |  |  | 
|Finance                        |  |       | 10  |  |    |  | 9   |         |  |  |       |  |  |         | 1 |  |             |  |  |  |  |  |  | 
|Management Information Systems |  |       | 6   |  |    |  | 6   |         |  |  |       |  |  |         |  |  |             |  |  |  |  |  |  | 
|Legal and Human Resources      |  |       | 6   |  |    |  | 6   |         |  |  |       |  |  |         |  |  |             |  |  |  |  |  |  | 
|Other                          |  |       | 1   |  |    |  | 1   |         |  |  |       |  |  |         |  |  |             |  |  |  |  |  |  | 
|                               |  |       |     |  |    |  |     |         |  |  |        |  |  |         |   |  |             | 
|Total                          |  |       | 142 |  |    |  | 133 |         |  |  | 1      |  |  |         | 5 |  |             |  | 1 |  |  |  | 2 | 
|                               |  |       |     |  |    |  |     |         |  |  |        |  |  |         |   |  |             | 



Share Ownership




| |                                                             
| | ------------------------------------------------------------
| | Beneficial Ownership of Executive Officers and
    Directors







Equity Incentive Plan and Employee Benefit Trust








56



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##### Table of Contents





sub-funds


20-F







|        |                                                  
|------- | -------------------------------------------------
|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Security Ownership of Certain Beneficial Owners




|                                                                                                                               |  |                         |                         |               |             |  |      |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ----------------------- | ------------- | ----------- |  | ---- | -
|                                                                                                                               |  |                         |                         | Percentage of |            
|                                                                                                                               |  | Amount and Nature of    |                         |               | Outstanding | 
|Name and Address of Beneficial Owner(1)                                                                                        |  | Beneficial Ownership(1) |                         |               | Shares(2)   | 
|                                                                                                                               |  |                         |                         |               |             | 
|Morgan Stanley & Co. Incorporated(3)
    1585 Broadway, New York, NY 10036                                                     |  |                         | 1,528,870 common shares |               |             |  | 14.4 | %
|The Värde Fund L.P.(4)
    8500 Normande Lake Blvd. #1570
    Minneapolis MN 55437                                             |  |                         | 882,531 common shares   |               |             |  | 8.3  | %
|Ramius Capital Group, LLC(5)
    666 Third Avenue,
    26thFloor
    New York, New York 10017
    Citizenship (Cayman Islands) |  |                         | 677,871 common shares   |               |             |  | 6.4  | %






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beneficial ownership is determined in accordance with the rules
    of the U.S. SEC. In computing the number of common shares
    beneficially owned by a person and the percentage ownership of
    that person, common shares subject to options and warrants held
    by that person that are currently exercisable or exercisable
    within 60 days are deemed outstanding. Such common shares,
    however, are not deemed outstanding for the purpose of computing
    the percentage ownership of any other person. Except as
    indicated in the footnotes to this table, the Shareholder named
    in the table has sole voting and investment power with respect
    to our common shares set forth opposite such Shareholders
    name.
|   
|(2) | Based on 10,630,000 common shares outstanding as of May 31,
    2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

57



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Information based on the Schedule 13D/ A, dated
    January 30, 2006, of Morgan Stanley. As a result of the
    amendment of the 2004 Notes under the terms of the Letter
    Agreement to make such 2004 Notes convertible upon the election
    of holders of a majority of the outstanding principal amount of
    the 2004 Notes (the 2004 Notes Amendment),
    Morgan Stanley will be deemed the beneficial owner of
    54,117,503 shares (or 85.6% of the Companys
    outstanding shares) comprised of: (a) the
    1,528,870 common shares directly owned by Morgan Stanley;
    (b) 47,533,333 common shares issuable upon conversion of
    $35,650,000 principal amount of 2004 Notes held by Morgan
    Stanley; and (c) 5,055,300 common shares issuable upon
    conversion of $3,791,475 of additional 2004 Notes representing
    accrued interest on the 2004 Notes held by Morgan Stanley, based
    on the lowest possible conversion price under the 2004 Notes of
    $0.75 per share. The exact number of common shares into
    which the 2004 Notes are convertible is not calculable at the
    present time because the conversion price used for such
    conversion is based upon a calculation of the total equity value
    of the Company, to be calculated at the time of conversion by
    the Board (subject to approval of the majority noteholders). See
    Item. 4 Company Information  Description of
    Certain Indebtedness).                                                                                                                                                                                                                                                                                                                               
|   
|(4) | Information based on the Schedule 13G, dated
    February 11, 2005, of The Värde Fund L.P., The
    Värde Fund V L.P., The Värde Fund VI L.P.,
    Värde Investment Partners L.P., The Värde Select
    Fund L.P., The Värde Fund (Cayman) Limited, The
    Värde Fund V GP LLC, The Värde Fund VI GP
    LLC, Värde Investment Partners GP LLC, Värde Partners
    L.P., Värde Partners Inc. and Värde Management
    International Inc., George G. Hicks, Gregory S. McMillan, Marcia
    L. Page. The address for The Värde Fund (Cayman) Limited is
    2nd Floor Harbour Centre, P.O. Box 896, George Town
    BWI. All other entities can be contacted at the address listed
    in the table. As a result of the 2004 Notes Amendment,
    Värde will be deemed the beneficial owner of
    15,008,042 shares (or 58.5% of the Companys
    outstanding shares) comprised of: (a) the 882,531 common
    shares directly owned by Värde; (b) 13,333,333 common
    shares issuable upon conversion of $10.0 million principal
    amount of 2004 Notes held by Värde; and (c) 792,178
    common shares issuable upon conversion of $594,133 of additional
    2004 Notes representing interest payment on the 2004 Notes held
    by Värde, based on the lowest possible conversion price
    under the 2004 Notes of $0.75 per share. The exact number
    of common shares into which the 2004 Notes are convertible is
    not calculable at the present time because the conversion price
    used for such conversion is based upon a calculation of the
    total equity value of the Company, to be calculated at the time
    of conversion by the Board (subject to approval of the majority
    noteholders). See Item. 4 Company Information 
    Description of Certain Indebtedness).
|   
|(5) | Information based on the Schedule 13G/ A, dated
    December 31, 2005, of Ramius Capital Group, LLC, RCG
    Carpathia Master Fund Ltd (Cayman Islands), Ramius
    Securities LLC, C4S & Co., LLC, Peter A. Cohen, Morgan
    B. Stark, Thomas W. Strauss and Jeffrey M. Solomon, as modified
    to reflect updated movements in the register of members and
    beneficial ownership of our common shares since the date of
    filing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Related Party Transactions






58



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##### Table of Contents












|        |                      
|------- | ---------------------
|ITEM 8. | FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information




| |                     
| | --------------------
| | Financial Statements

20-F




| |                  
| | -----------------
| | Legal Proceedings

    


    


59



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##### Table of Contents










  


 




60



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##### Table of Contents













| |                
| | ---------------
| | Dividend Policy



Significant Changes


20-F,


61



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##### Table of Contents








|        |                         
|------- | ------------------------
|ITEM 9. | THE OFFERING AND LISTING

Listing Details




| |                
| | ---------------
| | The Predecessor



|                       |  |          |       |  |     |  |       | 
|---------------------- |  | -------- | ----- |  | --- |  | ----- | 
|Period                 |  | High     |       |  | Low | 
|                       |  |          |       |  |     | 
|                       |  | (In USD) |      
|Fiscal 1998            |  |          | 23.50 |  |     |  | 5.00  | 
|Fiscal 1999            |  |          | 57.50 |  |     |  | 17.00 | 
|Fiscal 2000            |  |          | 75.38 |  |     |  | 1.63  | 
|First Quarter 2001     |  |          | 5.75  |  |     |  | 0.56  | 
|Second Quarter 2001(1) |  |          | 0.86  |  |     |  | 0.06  | 
|Third Quarter 2001(2)  |  |          | 0.06  |  |     |  | 0.03  | 






|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | On May 2, 2001, the Nasdaq National Market suspended
    trading of the common stock of the Predecessor.
|   
|(2) | In July 2001, the Nasdaq National Market delisted the common
    stock of the Predecessor.              

62



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| |              
| | -------------
| | The Successor

20-F over-the over-the


|                    |  |          |      |  |     |  |      | 
|------------------- |  | -------- | ---- |  | --- |  | ---- | 
|Period              |  | High     |      |  | Low | 
|                    |  |          |      |  |     | 
|                    |  | (In USD) |     
|First Quarter 2003  |  |          | 1.35 |  |     |  | 1.10 | 
|Second Quarter 2003 |  |          | 1.35 |  |     |  | 0.50 | 
|Third Quarter 2003  |  |          | 4.25 |  |     |  | 0.50 | 
|Fourth Quarter 2003 |  |          | 8.00 |  |     |  | 0.50 | 
|First Quarter 2004  |  |          | 2.75 |  |     |  | 0.75 | 
|Second Quarter 2004 |  |          | 1.90 |  |     |  | 0.90 | 
|July 2004           |  |          | 1.20 |  |     |  | 0.90 | 
|August 2004         |  |          | 0.92 |  |     |  | 0.70 | 
|September 2004      |  |          | 0.90 |  |     |  | 0.60 | 
|October 2004        |  |          | 0.95 |  |     |  | 0.60 | 
|November 2004       |  |          | 1.05 |  |     |  | 0.85 | 
|December 2004       |  |          | 1.50 |  |     |  | 0.90 | 
|January 2005        |  |          | 0.96 |  |     |  | 0.75 | 
|February 2005       |  |          | 0.95 |  |     |  | 0.75 | 
|March 2005          |  |          | 0.95 |  |     |  | 0.60 | 
|April 2005          |  |          | 0.75 |  |     |  | 0.20 | 
|May 2005            |  |          | 0.30 |  |     |  | 0.07 | 
|June 2005           |  |          | 0.10 |  |     |  | 0.07 | 
|July 2005           |  |          | 0.07 |  |     |  | 0.07 | 
|August 2005         |  |          | 0.07 |  |     |  | 0.05 | 
|September 2005      |  |          | 0.05 |  |     |  | 0.00 | 
|October 2005        |  |          | 0.01 |  |     |  | 0.00 | 
|November 2005       |  |          | 0.02 |  |     |  | 0.01 | 
|December 2005       |  |          | 0.04 |  |     |  | 0.03 | 
|January 2006        |  |          | 0.09 |  |     |  | 0.03 | 
|February 2006       |  |          | 0.08 |  |     |  | 0.03 | 
|March 2006          |  |          | 0.02 |  |     |  | 0.00 | 
|April 2006          |  |          | 0.01 |  |     |  | 0.00 | 
|May 2006            |  |          | 0.08 |  |     |  | 0.02 | 



63



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Markets


over-the







|         |                       
|-------- | ----------------------
|ITEM 10. | ADDITIONAL INFORMATION

Description of Share Capital








| |                                                                       
| | ----------------------------------------------------------------------
| | Historical Movement in the Authorized Share Capital of the
    Company











Memorandum of Association and Bye-Laws








64



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##### Table of Contents







6-K 6-K). 6-K 20-F.






| |                     
| | --------------------
| | Objects and Purposes





| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to carry on the business of constructing, establishing, owning,
    providing operating and maintaining telecommunications networks
    in all parts of the world and to provide telecommunications
    services;                                                               
|
| |  | to carry on the business as a holding company and to acquire and
    hold shares, stocks, debenture stock, bonds, mortgages,
    obligations and securities issued or guaranteed by any entity;                                                                                 
|
| |  | to acquire such shares and other securities by subscription,
    syndicate participation, tender, purchase, exchange or otherwise;                                                                                                                                              
|
| |  | to coordinate the administration, policies, management,
    supervision, control, research, planning, trading and any and
    all other activities of, and to act as financial advisers and
    consultants to, any companies which may or which may become a
    group company;
|
| |  | to provide financing and financial investment, management and
    advisory services to any group company; and                                                                                                                                                                   
|
| |  | as set forth in paragraphs (b) to (n) and
    (p) to (u) inclusive of the Second Schedule to the
    Bermuda Act.                                                                                                                                                               



| |              
| | -------------
| | Board Actions





65



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| |                   
| | ------------------
| | Board Remuneration





| |                            
| | ---------------------------
| | Directors Borrowing Powers





| |                                 
| | --------------------------------
| | Election or Removal of Directors



Bye-Laws









66



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| |              
| | -------------
| | Common Shares











| |              
| | -------------
| | Voting Rights





| |          
| | ---------
| | Dividends





| |                      
| | ---------------------
| | Rights in Liquidation



67



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| |                   
| | ------------------
| | Transfer of Shares





| |                                                    
| | ---------------------------------------------------
| | Amendment of Memorandum of Association and Bye-Laws









| |                         
| | ------------------------
| | Meetings of Shareholders

paid-up






68



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| |                                                                 
| | ----------------------------------------------------------------
| | Access to Books and Records and Dissemination of
    Information







| |             
| | ------------
| | Amalgamation





| |             
| | ------------
| | Continuation





| |                                       
| | --------------------------------------
| | Appraisal Rights and Shareholder Suits





69



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Material Contracts


6-K


20-F.


20-F.


20-F.


20-F.


20-F


20-F.


Exchange Controls and Other Limitations Affecting Security
Holders






70



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20-F.










| |   |                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the acquisition or holding of land in Bermuda, except that
    required for its business and held by way of lease or tenancy
    for terms of not more than 50 years or, with the consent of
    the Minister of Finance, that required to provide accommodation
    or recreational facilities for its employees and held by way of
    lease or tenancy for terms of not more than 21 years;
|
| |  | except as otherwise provided in the Bermuda Act, the taking of
    mortgages on land in Bermuda;                                                                                                                                                                                                                                                                                              
|
| |  | the acquisition of any bonds or debentures secured on any land
    in Bermuda except bonds or debentures issued by the Bermuda
    government or a public authority; or                                                                                                                                                                                                                       
|
| |  | the carrying on of business of any kind in Bermuda other than
    with persons outside Bermuda, except in certain limited
    circumstances such as doing business with another exempted
    company in Bermuda in furtherance of our business carried on
    outside Bermuda.                                                                                                                

Taxation






| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | for purposes of the U.S. Internal Revenue Code, a citizen
    or resident of the United States;                                                              
|
| |  | a corporation or other entity taxable as a corporation created
    or organized under the laws of the United States or any
    political subdivision thereof;
|
| |  | an estate, the income of which is subject to U.S. federal
    income taxation regardless of its source; or                                                   
|
| |  | a trust which is subject to supervision of a court within the
    United States and the control of one or more U.S. persons.                                 





71



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mark-to






| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | Bermuda law;                                                                                            
|
| |  | the U.S. Internal Revenue Code and current and proposed
    regulations under the Internal Revenue Code;
|
| |  | the administrative policies published by the U.S. Internal
    Revenue Service, or IRS; and           
|
| |  | judicial decisions;                                                                                     







| |                           
| | --------------------------
| | Bermuda Tax Considerations

20-F,






U.S. Tax Considerations




| |                                                            
| | -----------------------------------------------------------
| | Taxation of Dividends Distributed on our Common
    Shares.



72



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| |                                              
| | ---------------------------------------------
| | Taxation of Disposition of our Common Shares.





| |                                           
| | ------------------------------------------
| | Passive Foreign Investment Company Status.





| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 75% or more of its gross income is passive income,
    which includes interest, dividends and certain rents and
    royalties not earned in the active conduct of a trade or
    business (the Income Test); or
|
| |  | 50% or more of its assets, measured quarterly, generally by fair
    market value, produce, or are held for the production of,
    passive income (the Asset Test).                                              



start-up start-up




| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | the Predecessor corporation was not a PFIC; and                        
|
| |  | we were not a PFIC for any of our 2003, 2004 or 2005 taxable
    years.



73



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mark-to mark-to










| |                               
| | ------------------------------
| | Controlled Foreign Corporation



74



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| |                                             
| | --------------------------------------------
| | Information Reporting and Backup Withholding

W-9,




Documents on Display


20-F, 1-800-SEC-0330







|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK

Foreign Currency Exchange Risks








| |                  
| | -----------------
| | Transaction risks





75



---



##### Table of Contents















| |                  
| | -----------------
| | Translation risks







Hedging against foreign exchange risks






76



---



##### Table of Contents







Sensitivity analysis




Interest Rates








77



---



##### Table of Contents






PART II







|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES








|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES








|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
    AND USE OF PROCEEDS








|         |                        
|-------- | -----------------------
|ITEM 15. | CONTROLS AND PROCEDURES









| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company;                                                                                                                                                                                          
|
| |  | provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and

78



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##### Table of Contents





| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.

20-F.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have engaged an external law firm to review on an ongoing
    basis various aspects of our Exchange Act disclosure procedures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | we have established a Disclosure Committee operating under a
    written Disclosure Committee Charter approved by our Board. The
    Disclosure Committee Charter was adopted by our Chief Executive
    Officer and Chief Financial Officer and ratified by our Board.
    The Charter enumerates the Committees responsibilities,
    including designing disclosure controls, monitoring their
    effectiveness and supervising the preparation of our disclosure
    documents. The current members of the Disclosure Committee are
    General Counsel Stuart Blythe, Legal Director Laura King and
    Financial Controller Toni Flore. However, following the
    departures from the Company of previous members of the
    Committee, Laura King and Toni Flore were only appointed after
    the fiscal year-end. Members of the Disclosure Committee oversee
    the gathering of information in connection with the preparation
    of the reports that we file under the Exchange Act, including
    this Form 20-F,
    and work to ensure the accuracy and completeness of our
    disclosures in such reports;
|
| |  | the members of our Disclosure Committee have been directly
    involved in the preparation and review of this
    Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | further, our Board has approved and adopted a written Code of
    Ethics. See Item 16B. Code of Ethics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



20-F,









|          |                                 
|--------- | --------------------------------
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT








|          |               
|--------- | --------------
|ITEM 16B. | CODE OF ETHICS



79



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20-F 20-F.











|          |                                       
|--------- | --------------------------------------
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES





|                                   |  |              |     |  |      |  |     |      |  |  |     | 
|---------------------------------- |  | ------------ | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                   |  | Year Ended   |    
|                                   |  | December 31, |    
|                                   |  |              |    
|                                   |  | 2005         |     |  | 2004 |  |     | 2003 | 
|                                   |  |              |     |  |      |  |     |      | 
|                                   |  | US$000(1)   |    
|Audit Fees(2)                      |  |              | 418 |  |      |  | 380 |      |  |  | 425 | 
|Audit-Related Fees(3)              |  |              |    |  |      |  | 75  |      |  |  | 16  | 
|                                   |  |              |     |  |      |  |     |      | 
|Total audit and audit-related fees |  |              | 418 |  |      |  | 455 |      |  |  | 441 | 
|Tax Fees(4)                        |  |              | 78  |  |      |  | 27  |      |  |  | 20  | 
|                                   |  |              |     |  |      |  |     |      | 
|Total Fees                         |  |              | 496 |  |      |  | 483 |      |  |  | 461 | 
|                                   |  |              |     |  |      |  |     |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Predominantly all fees are billed in Pounds Sterling. The
    exchange rates used in preparing this table are GBP:US$1:1.73
    for 2005, 1:1833 for 2004 and 1:1.633 for 2003.                                                                                                                                                                                                                                                                           
|   
|(2) | Consists of fees rendered for professional services for the
    audit of our annual financial statements and services that are
    normally provided by the accountant in connection with statutory
    and regulatory filings or engagements for those fiscal years.
    The 2003 figure excludes £45,000 (approximately US$73,000)
    of fees in respect of the audit of an acquired entity for the
    period prior to the acquisition by the Company.
|   
|(3) | Consists of fees for financial due diligence.                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(4) | Consists of fees for UK tax compliance services.                                                                                                                                                                                                                                                                                                                                                                                                          



| |                                                           
| | ----------------------------------------------------------
| | Audit Committees pre-approval policies and
    procedures





80



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|          |                                                               
|--------- | --------------------------------------------------------------
|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES








|          |                                                                           
|--------- | --------------------------------------------------------------------------
|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS






PART III







|         |                     
|-------- | --------------------
|ITEM 17. | FINANCIAL STATEMENTS








|         |                     
|-------- | --------------------
|ITEM 18. | FINANCIAL STATEMENTS

20-F.







|         |         
|-------- | --------
|ITEM 19. | EXHIBITS

|        |   |    |  |                        |  |                                                                                                                                                                                                                                                                                        
|------- | - | -- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |  |                       
|Number  |   |    |  | Description of Exhibit
|        |   |    |  |                       
|        | 1 | .1 |  |                       |  | Certificate of Incorporation of Viatel Holding (Bermuda)
    Limited. (Previously filed as Exhibit 1.1 to the
    Companys Form 20-F for the year ended
    December 31, 2002 dated March 22, 2004 and
    incorporated by reference herein).                                         
|        | 1 | .2 |  |                       |  | Memorandum of Association of Viatel Holding (Bermuda) Limited.
    (Previously filed as Exhibit 1.2 to the Companys
    Form 20-F for the year ended December 31, 2002 dated
    March 22, 2004 and incorporated by reference herein).                                                
|        | 1 | .3 |  |                       |  | Amendment to Memorandum of Association of Viatel Holding
    (Bermuda) Limited. (Previously filed as Exhibit 1.3 to the
    Companys Form 20-F for the year ended
    December 31, 2002 dated March 22, 2004 and
    incorporated by reference herein).                               
|        | 1 | .4 |  |                       |  | Bye-laws of Viatel Holding (Bermuda) Limited effective from
    April 21, 2004. (Amending and reinstating those Bye-Laws
    previously filed as Exhibit 99.2 to the Companys
    Form 6-K dated February 5, 2004).                                                                   
|        | 2 | .1 |  |                       |  | Form of Registration Rights Agreement, among Viatel Holding
    (Bermuda) Limited and the other parties thereto. (Previously
    filed as Exhibit 2 to the Companys Form 20-F for
    the year ended December 31, 2002 dated March 22, 2004
    and incorporated by reference herein).
|        | 2 | .2 |  |                       |  | Registration Rights Agreement, among Viatel Holding (Bermuda)
    Limited and the other parties thereto. (Previously filed as
    Exhibit 2 to the Companys Form 6-K dated
    April 28, 2004 and incorporated by reference herein).                                                  
|        | 4 | .1 |  |                       |  | Investment and Note Purchase Agreement, among Viatel
    Holding (Bermuda) Limited and the other parties thereto.
    (Previously filed as Exhibit 1 to the Companys
    Form 6-K dated April 28, 2004 and incorporated by
    reference herein).                                     
|        | 4 | .2 |  |                       |  | Shareholders Agreement, among Viatel Holding (Bermuda)
    Limited and the other parties thereto. (Previously filed as
    Exhibit 3 to the Companys Form 6-K dated
    April 28, 2004 and incorporated by reference herein).                                                        

81



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|        |    |     |  |                        |  |                                                                                                                                                                                                                                                                                                
|------- | -- | --- |  | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |                       
|Number  |    |     |  | Description of Exhibit
|        |    |     |  |                       
|        | 4  | .3  |  |                       |  | Form of Note, due 2014. (Previously filed as Exhibit 4 to
    the Companys Form 6-K dated April 28, 2004 and
    incorporated by reference herein).                                                                                                                                           
|        | 4  | .4  |  |                       |  | Investment and Note Purchase Agreement among Viatel Holding
    (Bermuda) Limited and the other parties thereto dated
    June 23, 2005. (Previously filed as Exhibit 4.4 to the
    Companys Form 20-F for the year ended
    December 31, 2005 and incorporated by reference herein).       
|        | 4  | .5  |  |                       |  | Letter Agreement among Viatel Holding (Bermuda) Limited and the
    other parties thereto dated June 23, 2005. (Previously
    filed as Exhibit 4.5 to the Companys Form 20-F
    for the year ended December 31, 2005 and incorporated by
    reference herein).                             
|        | 4  | .6  |  |                       |  | Form of Note, due 2007. (Previously filed as Exhibit 4.6 to
    the Companys Form 20-F for the year ended
    December 31, 2005 and incorporated by reference herein).                                                                                                                        
|        | 4  | .7  |  |                       |  | Employment Agreement between Viatel Holding (Bermuda) Limited
    and the Chief Executive Officer, dated April 21, 2004.
    (Previously filed as Exhibit 4.7 to the Companys
    Form 20-F for the year ended December 31, 2005 and
    incorporated by reference herein).                   
|        | 4  | .8  |  |                       |  | Amendment No. 3, waiver and consent relating to the
    Investment and Note Purchase Agreement dated 23 June 2005
    among Viatel Holding (Bermuda) Limited and the other parties
    thereto dated March 14, 2006.                                                                           
|        | 4  | .9  |  |                       |  | Form of Note, due 2007 in relation to the 2006 Notes.                                                                                                                                                                                                                                          
|        | 4  | .10 |  |                       |  | Share Purchase Agreement among Viatel Holding (Bermuda) Limited
    and the other parties thereto dated October 20, 2005.                                                                                                                                                                      
|        | 4  | .11 |  |                       |  | Facility Letter between VTL (UK) Limited and Lloyds TSB
    Bank plc dated October 21, 2005.                                                                                                                                                                                                   
|        | 4  | .12 |  |                       |  | Guarantee Agreement among Viatel Holding (Bermuda) Limited and
    the other parties thereto dated October 21, 2005.                                                                                                                                                                           
|        | 4  | .13 |  |                       |  | Amendment Letter between VTK (UK) Limited and Lloyds Bank
    TSB plc dated January 20, 2006.                                                                                                                                                                                                  
|        | 4  | .14 |  |                       |  | Master Network Sale and Lease Agreement among Viatel Holding
    (Bermuda) Limited and the other parties thereto dated
    June 15, 2006.                                                                                                                                                      
|        | 4  | .15 |  |                       |  | Network Operational Agreement among Viatel Holding (Bermuda)
    Limited and the other party thereto dated June 15, 2006.                                                                                                                                                                      
|        | 4  | .16 |  |                       |  | Instrument of Settlement in relation to the EBT among Viatel
    Holding (Bermuda) Limited and the other party thereto dated
    July 18, 2005.                                                                                                                                                
|        | 4  | .17 |  |                       |  | EBT Contribution Covenant in relation to the Lucy Woods
    Dependent Trust dated July 19, 2005.                                                                                                                                                                                               
|        | 4  | .18 |  |                       |  | Form of EBT Contribution Covenant in relation to the Stuart
    Blythe and Steve Best Dependent Trusts.                                                                                                                                                                                        
|        | 8  |     |  |                       |  | List of subsidiaries of Viatel Holding (Bermuda) Limited.                                                                                                                                                                                                                                      
|        | 11 |     |  |                       |  | Code of Ethics. (Previously filed as Exhibit 11 to the
    Companys Form 20-F for the year ended
    December 31, 2002 dated March 22, 2004 and
    incorporated by reference herein).                                                                                                        
|        | 12 | .1  |  |                       |  | Certification of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                    
|        | 12 | .2  |  |                       |  | Certification of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                    
|        | 13 |     |  |                       |  | Certification of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                
|        | 15 | .1  |  |                       |  | Amended Disclosure Statement with Respect to the First Amended
    Joint Chapter 11 Plan of Reorganization of Viatel, Inc. and
    Certain of its Subsidiaries (Previously filed as
    Exhibit 2.1 to the Companys Form 8-K dated
    January 22, 2002 and incorporated by reference herein).

82



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SIGNATURES


20-F




| |                                 
| | --------------------------------
| | Viatel Holding (Bermuda) Limited



| |     |               
| | --- | --------------
| | By: | /s/ Lucy Woods

| |                        
| | -----------------------
| |                        
| | Lucy Woods             
| | Chief Executive Officer



83



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INDEX TO FINANCIAL STATEMENTS


|                                                                                                                            |  |      |     | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                            |  | Page |    
|                                                                                                                            |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                                 |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and December 31, 2004                                               |  |      | F-3 | 
|Consolidated Statements of Operations and
    Comprehensive Income for the years ended December 31, 2005,
    2004 and 2003 |  |      | F-4 | 
|Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2005, 2004 and 2003                |  |      | F-5 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2005, 2004 and 2003                              |  |      | F-6 | 
|Notes to the Consolidated Financial
    Statements                                                                          |  |      | F-7 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
























F-2



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


(United States dollars, in thousands, unless specifically
stated)


|                                       |                                                                                                                                                                                                           |              |         |          |              |  |         |         |  
|-------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------- | -------- | ------------ |  | ------- | ------- | -
|                                       |                                                                                                                                                                                                           | December 31, |         |          | December 31, | 
|                                       |                                                                                                                                                                                                           | 2005         |         |          | 2004         | 
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|ASSETS                                
|Current assets:                        |                                                                                                                                                                                                           |              |         |          |              |  |         |        
|                                       | Cash and cash equivalents                                                                                                                                                                                 |              |         |         |              |  |         | 21,939  |  
|                                       | Amounts receivable from exchange contracts, related party                                                                                                                                                 |              |         |         |              |  |         | 10,552  |  
|                                       | Accounts receivable (net of allowance for doubtful debts of
    $644, 2004  $1,567)                                                                                                                      |              |         | 1,905    |              |  |         | 1,651   |  
|                                       | Amounts receivable from bankruptcy estates within one year                                                                                                                                                |              |         | 1,565    |              |  |         | 5,320   |  
|                                       | VAT receivable                                                                                                                                                                                            |              |         | 2,775    |              |  |         | 3,424   |  
|                                       | Prepaid expenses and other current assets                                                                                                                                                                 |              |         | 6,535    |              |  |         | 4,989   |  
|                                       | Assets held for sale                                                                                                                                                                                      |              |         | 5,524    |              |  |         | 6,406   |  
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|Total current assets                   |                                                                                                                                                                                                           |              | 18,304  |          |              |  | 54,281  |        
|                                       | Property and equipment, net                                                                                                                                                                               |              |         | 30,522   |              |  |         | 37,559  |  
|                                       | Intangible assets, net                                                                                                                                                                                    |              |         |         |              |  |         | 210     |  
|                                       | Deferred financing costs                                                                                                                                                                                  |              |         | 7,583    |              |  |         | 7,630   |  
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|Total assets                           |                                                                                                                                                                                                           |              | 56,409  |          |              |  | 99,680  |        
|                                      
|LIABILITIES AND SHAREHOLDERS EQUITY  
|Current liabilities:                   |                                                                                                                                                                                                           |              |         |          |              |  |         |        
|                                       | Overdraft                                                                                                                                                                                                 |              |         | 4,436    |              |  |         |        |  
|                                       | Accounts payable                                                                                                                                                                                          |              |         | 13,201   |              |  |         | 8,373   |  
|                                       | Accrued expenses                                                                                                                                                                                          |              |         | 4,384    |              |  |         | 7,292   |  
|                                       | Accrued interest                                                                                                                                                                                          |              |         | 3,109    |              |  |         | 1,955   |  
|                                       | Deferred revenue                                                                                                                                                                                          |              |         | 1,062    |              |  |         | 1,684   |  
|                                       | Deferred income tax liability                                                                                                                                                                             |              |         |         |              |  |         | 47      |  
|                                       | Other current liabilities                                                                                                                                                                                 |              |         | 2,503    |              |  |         | 2,245   |  
|                                       | Liabilities held for sale                                                                                                                                                                                 |              |         | 5,572    |              |  |         | 6,075   |  
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|Total current liabilities              |                                                                                                                                                                                                           |              | 34,267  |          |              |  | 27,671  |        
|Long  term liabilities:               |                                                                                                                                                                                                           |              |         |          |              |  |         |        
|                                       | Loan notes (related parties  2005: $52,961; 2004:
    $32,167)                                                                                                                                           |              |         | 58,074   |              |  |         | 36,617  |  
|Total long  term liabilities          |                                                                                                                                                                                                           |              | 58,074  |          |              |  | 36,617  |        
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|Total liabilities                      |                                                                                                                                                                                                           |              | 92,341  |          |              |  | 64,288  |        
|                                       | Commitments and contingencies (Note 13)                                                                                                                                                                   |              |         |          |              |  |         |         |  
|Shareholders equity:                  |                                                                                                                                                                                                           |              |         |          |              |  |         |        
|                                       | Common stock, $0.01 par value: 2005 
    250,000,000 shares authorized; 10,630,000 shares
    issued and outstanding, 2004  250,000,000 shares
    authorized; 10,630,000 shares issued and outstanding |              |         | 106      |              |  |         | 106     |  
|Additional paid-in capital             |                                                                                                                                                                                                           |              | 117,625 |          |              |  | 116,045 |        
|Accumulated other comprehensive income |                                                                                                                                                                                                           |              | 8,933   |          |              |  | 18,459  |        
|                                       | Accumulated deficit                                                                                                                                                                                       |              |         | (162,596 | )            |  |         | (99,218 | )
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|                                       | Total shareholders (deficit)/equity                                                                                                                                                                      |              |         | (35,932  | )            |  |         | 35,392  |  
|                                       |                                                                                                                                                                                                           |              |         |          |              | 
|                                       | Total liabilities and shareholders equity                                                                                                                                                                |              |         | 56,409   |              |  |         | 99,680  |  



F-3



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS


(United States dollars, in thousands, unless specifically
stated)


|                                                                                                                            |                                             |                                |         |         |              |   |         |              |         |   |         |         |         |  
|--------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------ | ------- | ------- | ------------ | - | ------- | ------------ | ------- | - | ------- | ------- | ------- | -
|                                                                                                                            |                                             | Year Ended                     |         |         | Year Ended   |   |         | Year Ended   |        
|                                                                                                                            |                                             | December 31,                   |         |         | December 31, |   |         | December 31, |        
|                                                                                                                            |                                             | 2005                           |         |         | 2004         |   |         | 2003         |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Revenue:                                                                                                                    |                                             |                                |         |         |              |   |         |              |         |   |         |        
|                                                                                                                            | Communication services revenues             |                                |         | 18,595  |              |   |         | 12,147       |         |   |         | 8,510   |        
|                                                                                                                            | Operations and maintenance fee revenue      |                                |         | 1,964   |              |   |         | 1,828        |         |   |         | 1,707   |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|                                                                                                                            |                                             | Total revenue                  |         |         | 20,559       |   |         |              | 13,975  |   |         |         | 10,217  |  
|Operating expenses:                                                                                                         |                                             |                                |         |         |              |   |         |              |         |   |         |        
|                                                                                                                            | Cost of sales                               |                                |         | (12,691 | )            |   |         | (7,247       | )       |   |         | (4,953  | )      
|                                                                                                                            | Selling, general and administrative         |                                |         | (56,346 | )            |   |         | (65,244      | )       |   |         | (47,660 | )      
|                                                                                                                            | Gain on amounts due from bankruptcy estates |                                |         |        |              |   |         | 3,105        |         |   |         | 358     |        
|                                                                                                                            | Impairment                                  |                                |         | (242    | )            |   |         |             |         |   |         |        |        
|                                                                                                                            | Depreciation and amortization               |                                |         | (6,538  | )            |   |         | (7,036       | )       |   |         | (4,464  | )      
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|                                                                                                                            |                                             | Total operating expenses (net) |         |         | (75,817      | ) |         |              | (76,422 | ) |         |         | (56,719 | )
|Other operating income                                                                                                      |                                             |                                | 362     |         |              |   | 17,780  |              |         |   |        |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Operating loss                                                                                                              |                                             |                                | (54,896 | )       |              |   | (44,667 | )            |         |   | (46,502 | )      
|Other income/(expense):                                                                                                     |                                             |                                |         |         |              |   |         |              |         |   |         |        
|                                                                                                                            | Interest and other income                   |                                |         | 260     |              |   |         | 774          |         |   |         | 1,555   |        
|                                                                                                                            | Interest expense                            |                                |         | (8,199  | )            |   |         | (4,395       | )       |   |         |        |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Net loss before taxation                                                                                                    |                                             |                                | (62,835 | )       |              |   | (48,288 | )            |         |   | (44,947 | )      
|                                                                                                                            | Taxation                                    |                                |         | (666    | )            |   |         | 241          |         |   |         | 229     |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Net loss from continuing operations                                                                                         |                                             |                                | (63,501 | )       |              |   | (48,047 | )            |         |   | (44,718 | )      
|Discontinued operations:                                                                                                    |                                             |                                |         |         |              |   |         |              |         |   |         |        
|Net income/ (loss) before taxation                                                                                          |                                             |                                | 129     |         |              |   | 869     |              |         |   | (2,647  | )      
|                                                                                                                            | Taxation                                    |                                |         | (6      | )            |   |         | (1           | )       |   |         | (12     | )      
|Net income/ (loss) from discontinued operations                                                                             |                                             |                                | 123     |         |              |   | 868     |              |         |   | (2,659  | )      
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Net loss                                                                                                                    |                                             |                                | (63,378 | )       |              |   | (47,179 | )            |         |   | (47,377 | )      
|Foreign currency translation adjustment                                                                                     |                                             |                                | (9,526  | )       |              |   | 3,545   |              |         |   | 11,279  |        
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Comprehensive loss                                                                                                          |                                             |                                | (72,904 | )       |              |   | (43,634 | )            |         |   | (36,098 | )      
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Weighted average common shares outstanding, basic and diluted                                                               |                                             |                                | 10,630  |         |              |   | 10,680  |              |         |   | 10,705  |        
|Net loss per common share attributable to common shareholders,
    basic and diluted  continuing operations                |                                             |                                | (5.97   | )       |              |   | (4.50   | )            |         |   | (4.18   | )      
|Net income/(loss) per common share attributable to common
    shareholders, basic and diluted  discontinued
    operations |                                             |                                | 0.01    |         |              |   | 0.08    |              |         |   | (0.25   | )      
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        
|Total                                                                                                                       |                                             |                                | (5.96   | )       |              |   | (4.42   | )            |         |   | (4.43   | )      
|                                                                                                                            |                                             |                                |         |         |              |   |         |              |        



F-4



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(United States dollars, in thousands, unless specifically
stated)


|                                        |  |           |            |   |        |  |            |         |  |          |              |   |          |             |      |   |             |  |        |       |  |  |          |   |  |  |         |  
|--------------------------------------- |  | --------- | ---------- | - | ------ |  | ---------- | ------- |  | -------- | ------------ | - | -------- | ----------- | ---- | - | ----------- |  | ------ | ----- |  |  | -------- | - |  |  | ------- | -
|                                        |  | Number of |            |   |        |  |            |         |  |          | Foreign      |   |          |             |      |  
|                                        |  | Shares of |            |   |        |  | Additional |         |  | Deferred |              |   | Currency |             |      |   |             | 
|                                        |  | Common    |            |   | Common |  |            | Paid-In |  |          | Stock        |   |          | Translation |      |   | Accumulated |  |        |      
|                                        |  | Stock     |            |   | Stock  |  |            | Capital |  |          | Compensation |   |          | Adjustments |      |   | Deficit     |  |        | Total | 
|                                        |  |           |            |   |        |  |            |         |  |          |              |   |          |             |      |   |             |  |        |       | 
|Balance at January 1, 2003              |  |           | 10,560,000 |   |        |  | 106        |         |  |          | 98,788       |   |          |             | (183 | ) |             |  | 3,635  |       |  |  | (4,662   | ) |  |  | 97,684  |  
|Earned compensation                     |  |           |           |   |        |  |           |         |  |          |             |   |          |             | 68   |   |             |  |       |       |  |  |         |   |  |  | 68      |  
|Stock options exercised                 |  |           | 170,000    |   |        |  | 2          |         |  |          |             |   |          |             |     |   |             |  |       |       |  |  |         |   |  |  | 2       |  
|Shares exchanged for One World          |  |           |           |   |        |  | (1         | )       |  |          | (97          | ) |          |             |     |   |             |  |       |       |  |  |         |   |  |  | (98     | )
|Stock options forfeited                 |  |           |           |   |        |  |           |         |  |          | (197         | ) |          |             | 102  |   |             |  |       |       |  |  |         |   |  |  | (95     | )
|Foreign Currency translation adjustment |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  | 11,279 |       |  |  |         |   |  |  | 11,279  |  
|Net loss                                |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  |       |       |  |  | (47,377  | ) |  |  | (47,377 | )
|                                        |  |           |            |   |        |  |            |         |  |          |              |   |          |             |      |   |             |  |        |       | 
|Balance at December 31, 2003            |  |           | 10,730,000 |   |        |  | 107        |         |  |          | 98,494       |   |          |             | (13  | ) |             |  | 14,914 |       |  |  | (52,039  | ) |  |  | 61,463  |  
|Shares cancelled                        |  |           | (100,000   | ) |        |  | (1         | )       |  |          |             |   |          |             |     |   |             |  |       |       |  |  |         |   |  |  | (1      | )
|Stock options forfeited                 |  |           |           |   |        |  |           |         |  |          | (61          | ) |          |             | 13   |   |             |  |       |       |  |  |         |   |  |  | (48     | )
|Beneficial conversion feature           |  |           |           |   |        |  |           |         |  |          | 17,612       |   |          |             |     |   |             |  |       |       |  |  |         |   |  |  | 17,612  |  
|Foreign Currency translation adjustment |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  | 3,545  |       |  |  |         |   |  |  | 3,545   |  
|Net loss                                |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  |       |       |  |  | (47,179  | ) |  |  | (47,179 | )
|                                        |  |           |            |   |        |  |            |         |  |          |              |   |          |             |      |   |             |  |        |       | 
|Balance at December 31, 2004            |  |           | 10,630,000 |   |        |  | 106        |         |  |          | 116,045      |   |          |             |     |   |             |  | 18,459 |       |  |  | (99,218  | ) |  |  | 35,392  |  
|Beneficial conversion feature           |  |           |           |   |        |  |           |         |  |          | 1,580        |   |          |             |     |   |             |  |       |       |  |  |         |   |  |  | 1,580   |  
|Foreign Currency translation adjustment |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  | (9,526 | )     |  |  |         |   |  |  | (9,526  | )
|Net loss                                |  |           |           |   |        |  |           |         |  |          |             |   |          |             |     |   |             |  |       |       |  |  | (63,378  | ) |  |  | (63,378 | )
|                                        |  |           |            |   |        |  |            |         |  |          |              |   |          |             |      |   |             |  |        |       | 
|Balance at December 31, 2005            |  |           | 10,630,000 |   |        |  | 106        |         |  |          | 117,625      |   |          |             |     |   |             |  | 8,933  |       |  |  | (162,596 | ) |  |  | (35,932 | )



F-5



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


(United States dollars, in thousands, unless specifically
stated)


|                                                                                |                                                                                                            |              |         |         |              |  |         |              |   |  |         |         |  
|------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------ | ------- | ------- | ------------ |  | ------- | ------------ | - |  | ------- | ------- | -
|                                                                                |                                                                                                            | Year Ended   |         |         | Year Ended   |  |         | Year Ended   |  
|                                                                                |                                                                                                            | December 31, |         |         | December 31, |  |         | December 31, |  
|                                                                                |                                                                                                            | 2005         |         |         | 2004         |  |         | 2003         |  
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Cash flows from operating activities:                                           |                                                                                                            |              |         |         |              |  |         |              |   |  |         |        
|Net loss                                                                        |                                                                                                            |              | (63,378 | )       |              |  | (47,179 | )            |   |  | (47,377 | )      
|Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                                                                            |              |         |         |              |  |         |              |   |  |         |        
|                                                                                | Depreciation and amortization                                                                              |              |         | 7,989   |              |  |         | 9,140        |   |  |         | 7,181   |  
|                                                                                | Loss on disposal of property and equipment                                                                 |              |         | 79      |              |  |         | 344          |   |  |         | 256     |  
|                                                                                | Accreted interest expense on long-term debt                                                                |              |         | 5,603   |              |  |         | 2,930        |   |  |         |        |  
|                                                                                | Amortization of deferred financing costs                                                                   |              |         | 969     |              |  |         | 461          |   |  |         |        |  
|                                                                                | Amortization of loan note discount                                                                         |              |         | 1,540   |              |  |         | 1,003        |   |  |         |        |  
|                                                                                | Deferred income tax liability                                                                              |              |         | 55      |              |  |         | (257         | ) |  |         | (217    | )
|                                                                                | Stock-based compensation                                                                                   |              |         |        |              |  |         | (48          | ) |  |         | (27     | )
|                                                                                | Non-cash exchange of common shares                                                                         |              |         |        |              |  |         |             |   |  |         | (97     | )
|                                                                                | Changes in operating assets and liabilities, net of effect of
    acquisitions                             |              |         | (718    | )            |  |         | 859          |   |  |         | 1,869   |  
|                                                                                | Decrease/ (increase) in amounts receivable from exchange
    contracts                                     |              |         | 10,552  |              |  |         | (10,552      | ) |  |         |        |  
|                                                                                | Decrease/ (increase) in prepaid expenses and other receivables                                             |              |         | 98      |              |  |         | 374          |   |  |         | (6,074  | )
|                                                                                | Decrease in amounts receivable from bankruptcy estates                                                     |              |         | 3,755   |              |  |         | 1,937        |   |  |         | 13,628  |  
|                                                                                | Decrease in other assets                                                                                   |              |         |        |              |  |         | 96           |   |  |         | 859     |  
|                                                                                | Increase/ (decrease) in accrued telecommunications costs,
    accounts payable, and other accrued expenses |              |         | 854     |              |  |         | (7,446       | ) |  |         | 4,883   |  
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|                                                                                | Net cash used in operating activities                                                                      |              |         | (32,602 | )            |  |         | (48,338      | ) |  |         | (25,116 | )
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Cash flows from investing activities:                                           |                                                                                                            |              |         |         |              |  |         |              |   |  |         |        
|                                                                                | Capital expenditures                                                                                       |              |         | (4,707  | )            |  |         | (3,847       | ) |  |         | (2,180  | )
|                                                                                | Proceeds from disposal of property and equipment                                                           |              |         |        |              |  |         |             |   |  |         | 2,697   |  
|                                                                                | Increase in restricted cash                                                                                |              |         | (10     | )            |  |         | (486         | ) |  |         |        |  
|                                                                                | Cash paid for acquisitions, net of cash acquired                                                           |              |         |        |              |  |         |             |   |  |         | (3,469  | )
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|                                                                                | Net cash used in investing activities                                                                      |              |         | (4,717  | )            |  |         | (4,333       | ) |  |         | (2,952  | )
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Cash flows from financing activities:                                           |                                                                                                            |              |         |         |              |  |         |              |   |  |         |        
|                                                                                | Proceeds from exercise of stock options                                                                    |              |         |        |              |  |         |             |   |  |         | 2       |  
|                                                                                | Proceeds from loan notes                                                                                   |              |         | 16,000  |              |  |         | 52,250       |   |  |         |        |  
|                                                                                | Deferred financing costs associated with loan notes                                                        |              |         | (923    | )            |  |         | (8,092       | ) |  |         |        |  
|                                                                                | Proceeds from overdraft facility                                                                           |              |         | 4,436   |              |  |         |             |   |  |         |        |  
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|                                                                                | Net cash provided by financing activities                                                                  |              |         | 19,513  |              |  |         | 44,158       |   |  |         | 2       |  
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Effects of exchange rate changes on cash                                        |                                                                                                            |              | (3,605  | )       |              |  | 955     |              |   |  | 5,036   |        
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Net decrease in cash and cash equivalents                                       |                                                                                                            |              | (21,411 | )       |              |  | (7,558  | )            |   |  | (23,030 | )      
|Cash and cash equivalents at beginning of period                                |                                                                                                            |              | 22,820  |         |              |  | 30,378  |              |   |  | 53,408  |        
|                                                                                |                                                                                                            |              |         |         |              |  |         |              |  
|Cash and cash equivalents at end of period                                      |                                                                                                            |              |        |         |              |  | 21,939  |              |   |  | 29,510  |        
|Cash and cash equivalents included in assets held for sale                      |                                                                                                            |              | 1,409   |         |              |  | 881     |              |   |  | 868     |        
|Supplemental disclosure of cash flow activity                                   |                                                                                                            |              |         |         |              |  |         |              |   |  |         |        
|Interest paid                                                                   |                                                                                                            |              | 13      |         |              |  | (2      | )            |   |  |        |        
|Interest received                                                               |                                                                                                            |              | 254     |         |              |  | 775     |              |   |  | 848     |        
|Taxes paid                                                                      |                                                                                                            |              | 128     |         |              |  |        |              |   |  |        |        
|Receipts from bankruptcy estates                                                |                                                                                                            |              | 3,081   |         |              |  | 5,612   |              |   |  | 13,628  |        



F-6



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(United States Dollars, in thousands, unless specifically
stated)




|    |                                             
|--- | --------------------------------------------
|(1) | Nature of Business and Basis of Presentation

co-location














pari passu




F-7



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)














|    |                                
|--- | -------------------------------
|(2) | Significant Accounting Policies





|    |                       
|--- | ----------------------
|(a) | Basis of Consolidation





|    |                 
|--- | ----------------
|(b) | Use of Estimates



F-8



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(c) | AICPA Practice Bulletin, Confirmation Contingencies
    in Fresh Start Reporting





|    |                          
|--- | -------------------------
|(d) | Revenue and Cost of Sales











|    |                  
|--- | -----------------
|(e) | Advertising Costs





|    |             
|--- | ------------
|(f) | Income Taxes



F-9



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)






|    |                          
|--- | -------------------------
|(g) | Net Loss per Common Share





|    |                       
|--- | ----------------------
|(h) | Property and Equipment





|                                                  |  |  |                 | 
|------------------------------------------------- |  |  | --------------- | 
|Communications systems and network infrastructure |  |  | 5 to 18 years   | 
|Furniture, office and computer equipment          |  |  | 2 to 5 years    | 
|Land                                              |  |  | Not depreciated | 



|    |                  
|--- | -----------------
|(i) | Intangible Assets









|    |                                
|--- | -------------------------------
|(j) | Impairment of Long-lived Assets



F-10



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)


long-lived


long-lived




|    |                          
|--- | -------------------------
|(k) | Cash and Cash Equivalents





|    |                
|--- | ---------------
|(l) | Restricted Cash







|    |                                           
|--- | ------------------------------------------
|(m) | Amounts Receivable from Exchange Contracts





|    |           
|--- | ----------
|(n) | Loan Notes









F-11



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|    |                             
|--- | ----------------------------
|(o) | Foreign Currency Translation









|    |                                                                        
|--- | -----------------------------------------------------------------------
|(p) | Financial Instruments, Derivatives and Concentration of
    Credit Risk











F-12



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)










|    |                  
|--- | -----------------
|(q) | Stock Option Plan



non-employees




|                                                         |  |             |         |   |             |  |         |             |  |  |         |  
|-------------------------------------------------------- |  | ----------- | ------- | - | ----------- |  | ------- | ----------- |  |  | ------- | -
|                                                         |  | Year Ended  |         |   | Year Ended  |  |         | Year Ended  | 
|                                                         |  | December 31 |         |   | December 31 |  |         | December 31 | 
|                                                         |  | 2005        |         |   | 2004        |  |         | 2003        | 
|                                                         |  |             |         |   |             |  |         |             | 
|Net loss as reported                                     |  |             | (63,378 | ) |             |  | (47,179 | )           |  |  | (47,377 | )
|Add: non-cash stock-based compensation                   |  |             |        |   |             |  | (48     | )           |  |  | (27     | )
|Less: SFAS 123 stock-based compensation                  |  |             |        |   |             |  | 69      |             |  |  | 38      |  
|Pro forma net loss                                       |  |             | (63,378 | ) |             |  | (47,158 | )           |  |  | (47,366 | )
|Pro-forma basic and diluted loss per share               |  |             | (5.96   | ) |             |  | (4.42   | )           |  |  | (4.42   | )
|Basic and diluted net loss per common share, as reported |  |             | (5.96   | ) |             |  | (4.42   | )           |  |  | (4.43   | )



|    |                    
|--- | -------------------
|(r) | Segment Information



F-13



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|    |                   
|--- | ------------------
|(s) | Comprehensive Loss





|    |                                                 
|--- | ------------------------------------------------
|(t) | Recent Accounting Pronouncements Not Yet Adopted



05-6). 05-6


05-7, 05-7). 05-7 05-7 05-7


05-8). 05-8 05-8


F-14



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)


05-8






|    |                  
|--- | -----------------
|(u) | Reclassifications





|    |                                           
|--- | ------------------------------------------
|(3) | Amounts receivable from exchange contracts





|    |                       
|--- | ----------------------
|(4) | Property and Equipment



|                                                  |  |      |         |   |      |  |         |  
|------------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | -
|                                                  |  | 2005 |         |   | 2004 | 
|                                                  |  |      |         |   |      | 
|Land and buildings                                |  |      | 482     |   |      |  | 500     |  
|Communications systems and network infrastructure |  |      | 49,792  |   |      |  | 52,517  |  
|Furniture, office and computer equipment          |  |      | 1,857   |   |      |  | 2,314   |  
|                                                  |  |      |         |   |      | 
|                                                  |  |      | 52,131  |   |      |  | 55,331  |  
|Less accumulated depreciation                     |  |      | (21,609 | ) |      |  | (17,772 | )
|                                                  |  |      |         |   |      | 
|Net book value                                    |  |      | 30,522  |   |      |  | 37,559  |  
|                                                  |  |      |         |   |      | 

F-15



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)








|    |                  
|--- | -----------------
|(5) | Intangible Assets



|                                     |  |      |        |   |      |  |        |  
|------------------------------------ |  | ---- | ------ | - | ---- |  | ------ | -
|                                     |  | 2005 |        |   | 2004 | 
|                                     |  |      |        |   |      | 
|Customer relationships (see Note 10) |  |      | 1,927  |   |      |  | 2,087  |  
|Less accumulated amortization        |  |      | (1,927 | ) |      |  | (1,877 | )
|                                     |  |      |        |   |      | 
|Net book value                       |  |      |       |   |      |  | 210    |  
|                                     |  |      |        |   |      | 





|    |                         
|--- | ------------------------
|(6) | Deferred financing costs



|                              |  |      |        |   |      |  |       |  
|----------------------------- |  | ---- | ------ | - | ---- |  | ----- | -
|                              |  | 2005 |        |   | 2004 | 
|                              |  |      |        |   |      | 
|Financing costs               |  |      | 9,015  |   |      |  | 8,092 |  
|Less accumulated amortization |  |      | (1,432 | ) |      |  | (462  | )
|                              |  |      |        |   |      | 
|Net book value                |  |      | 7,583  |   |      |  | 7,630 |  
|                              |  |      |        |   |      | 



|    |           
|--- | ----------
|(7) | Loan notes





F-16



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




00-27


















F-17



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|    |                      
|--- | ---------------------
|(8) | Stock Incentive Plans









|                                          |  |                  |      |                |                  |           |                        |                  |  |  |     | 
|----------------------------------------- |  | ---------------- | ---- | -------------- | ---------------- | --------- | ---------------------- | ---------------- |  |  | --- | 
|                                          |  |                  |      |                |                  | Number of |                       
|                                          |  | Weighted Average |      |                |                  |           | Exercisable Options at |                 
|                                          |  | Exercise Price   |      |                | Number of Shares |           |                        | End of Each Year | 
|                                          |  |                  |      |                |                  |           |                        |                  | 
|                                          |  |                  |      | (In thousands) |                  |           |                       
|Outstanding at December 31, 2002          |  |                  | 5.65 |                |                  |           | 744                    |                  |  |  | 408 | 
|Forfeited                                 |  |                  | 8.33 |                |                  |           | (384                   | )                |  |  |    | 
|Exercised                                 |  |                  | 0.01 |                |                  |           | (170                   | )                |  |  |    | 
|Outstanding at December 31, 2003          |  |                  | 5.26 |                |                  |           | 190                    |                  |  |  | 150 | 
|Forfeited                                 |  |                  | 8.33 |                |                  |           | (120                   | )                |  |  |    | 
|Exercised                                 |  |                  | 0.01 |                |                  |           | (70                    | )                |  |  |    | 
|Outstanding at December 31, 2004 and 2005 |  |                  |     |                |                  |           |                       |                  |  |  |    | 



F-18



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)






|    |                       
|--- | ----------------------
|(9) | Other Operating Income





|     |             
|---- | ------------
|(10) | Acquisitions





| |       
| | ------
| | Netcom



|                              |  |  |        |  
|----------------------------- |  |  | ------ | -
|Current Assets                |  |  | 1,063  |  
|Property and Equipment        |  |  | 775    |  
|Intangible Assets             |  |  | 1,737  |  
|Deferred Income Tax Liability |  |  | (521   | )
|Current Liabilities           |  |  | (2,168 | )
|                              |  |  |       
|Net assets                    |  |  | 886    |  
|                              |  |  |       
|Consideration                 |  |  |        |  
|Cash                          |  |  | 722    |  
|Expenses                      |  |  | 164    |  
|                              |  |  |       
|Total Consideration           |  |  | 886    |  
|                              |  |  |       



F-19



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##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)






| |         
| | --------
| | Cybernet



|                       |  |  |        |  
|---------------------- |  |  | ------ | -
|Cash                   |  |  | 331    |  
|Current Assets         |  |  | 843    |  
|Property and Equipment |  |  | 942    |  
|Intangible Assets      |  |  | 3,539  |  
|Current Liabilities    |  |  | (2,697 | )
|                       |  |  |       
|Net Assets             |  |  | 2,958  |  
|                       |  |  |       
|Consideration          |  |  |        |  
|Cash                   |  |  | 2,908  |  
|Expenses               |  |  | 50     |  
|                       |  |  |       
|Total Consideration    |  |  | 2,958  |  
|                       |  |  |       





|                                     |  |              |         |  
|------------------------------------ |  | ------------ | ------- | -
|                                     |  | Year Ended   |        
|                                     |  | December 31, |        
|                                     |  | 2003         |        
|                                     |  |              |        
|Revenue                              |  |              | 21,006  |  
|Net loss                             |  |              | (47,520 | )
|Basic and diluted net loss per share |  |              | (4.44   | )



|     |                        
|---- | -----------------------
|(11) | Discontinued Operations



F-20



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|                                     |                                           |              |  |       |              |  |  |       | 
|------------------------------------ | ----------------------------------------- | ------------ |  | ----- | ------------ |  |  | ----- | 
|                                     |                                           | December 31, |  |       | December 31, | 
|                                     |                                           | 2005         |  |       | 2004         | 
|                                     |                                           |              |  |       |              | 
|Assets                              
|Current assets:                      |                                           |              |  |       |              |  |  |      
|                                     | Cash and cash equivalents                 |              |  | 1,409 |              |  |  | 881   | 
|                                     | Restricted cash                           |              |  | 496   |              |  |  | 486   | 
|                                     | Accounts receivable                       |              |  | 1,981 |              |  |  | 1,516 | 
|                                     | VAT receivable                            |              |  | (68   | )            |  |  | 252   | 
|                                     | Prepaid expenses and other current assets |              |  | 170   |              |  |  | 856   | 
|                                     |                                           |              |  |       |              | 
|                                     | Total current assets                      |              |  | 3,988 |              |  |  | 3,991 | 
|                                     | Property and equipment, net               |              |  | 336   |              |  |  | 427   | 
|                                     | Intangible assets, net                    |              |  | 1,200 |              |  |  | 1,988 | 
|                                     |                                           |              |  |       |              | 
|                                     | Total assets                              |              |  | 5,524 |              |  |  | 6,406 | 
|                                     |                                           |              |  |       |              | 
|                                    
|Liabilities and shareholders equity
|Current liabilities:                 |                                           |              |  |       |              |  |  |      
|                                     | Accounts payable                          |              |  | 1,231 |              |  |  | 949   | 
|                                     | Accrued expenses                          |              |  | 1,477 |              |  |  | 645   | 
|                                     | Deferred revenue                          |              |  | 2,854 |              |  |  | 2,942 | 
|                                     | Other current liabilities                 |              |  | 10    |              |  |  | 1,539 | 
|                                     |                                           |              |  |       |              | 
|                                     | Total current liabilities                 |              |  | 5,572 |              |  |  | 6,075 | 
|                                     |                                           |              |  |       |              | 



|                                  |                                     |                                |        |         |              |   |        |              |         |   |        |        |         |  
|--------------------------------- | ----------------------------------- | ------------------------------ | ------ | ------- | ------------ | - | ------ | ------------ | ------- | - | ------ | ------ | ------- | -
|                                  |                                     | Year Ended                     |        |         | Year Ended   |   |        | Year Ended   |        
|                                  |                                     | December 31,                   |        |         | December 31, |   |        | December 31, |        
|                                  |                                     | 2005                           |        |         | 2004         |   |        | 2003         |        
|                                  |                                     |                                |        |         |              |   |        |              |        
|Total revenue                     |                                     |                                | 18,266 |         |              |   | 14,815 |              |         |   | 8,695  |       
|Operating expenses:               |                                     |                                |        |         |              |   |        |              |         |   |        |       
|                                  | Cost of sales                       |                                |        | (12,674 | )            |   |        | (9,291       | )       |   |        | (5,062 | )      
|                                  | Selling, general and administrative |                                |        | (5,057  | )            |   |        | (2,552       | )       |   |        | (3,565 | )      
|                                  | Depreciation and amortization       |                                |        | (1,210  | )            |   |        | (2,104       | )       |   |        | (2,717 | )      
|                                  |                                     |                                |        |         |              |   |        |              |        
|                                  |                                     | Total operating expenses (net) |        |         | (18,941      | ) |        |              | (13,947 | ) |        |        | (11,344 | )
|Other operating income            |                                     |                                | 802    |         |              |   |       |              |         |   |       |       
|Operating income/(loss)           |                                     |                                | 127    |         |              |   | 868    |              |         |   | (2,649 | )     
|Other income                      |                                     |                                |        |         |              |   |        |              |         |   |        |       
|                                  | Interest and other income           |                                |        | 2       |              |   |        | 1            |         |   |        | 2      |        
|                                  |                                     |                                |        |         |              |   |        |              |        
|Net income/(loss) before taxation |                                     |                                | 129    |         |              |   | 869    |              |         |   | (2,647 | )     
|                                  | Taxation                            |                                |        | (6      | )            |   |        |             |         |   |        | (12    | )      
|                                  |                                     |                                |        |         |              |   |        |              |        
|Net income/(loss)                 |                                     |                                | 123    |         |              |   | 869    |              |         |   | (2,659 | )     
|                                  |                                     |                                |        |         |              |   |        |              |        

F-21



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|     |             
|---- | ------------
|(12) | Income Taxes







|                             |  |            |         |   |              |  |     |  
|---------------------------- |  | ---------- | ------- | - | ------------ |  | --- | -
|                             |  | December   |         |   | December     | 
|                             |  | 31, 2005   |         |   | 31, 2005     | 
|                             |  | Continuing |         |   | Discontinued | 
|                             |  |            |         |   |              | 
|(Loss)/profit before tax     |  |            | (62,835 | ) |              |  | 129 |  
|@30%                         |  |            | (18,851 | ) |              |  | 39  |  
|Permanent differences        |  |            | 689     |   |              |  |    |  
|Effect of Overseas Tax Rates |  |            | (25,970 | ) |              |  |    |  
|Effect of Double Taxation    |  |            | 125     |   |              |  |    |  
|Prior Year Adjustment        |  |            | 40      |   |              |  |    |  
|Valuation allowance movement |  |            | 44,633  |   |              |  | (33 | )
|Total tax provision          |  |            | 666     |   |              |  | 6   |  









|                                                     |  |              |          |   |              |  |         |  
|---------------------------------------------------- |  | ------------ | -------- | - | ------------ |  | ------- | -
|                                                     |  | December, 31 |          |   | December 31, | 
|                                                     |  | 2005         |          |   | 2004         | 
|                                                     |  |              |          |   |              | 
|US net operating losses carryforward                 |  |              | 1,208    |   |              |  |        |  
|Foreign net operating loss carryforward              |  |              | 109,337  |   |              |  | 43,756  |  
|Foreign property and equipment temporary differences |  |              | 167,960  |   |              |  | 7,914   |  
|                                                     |  |              |          |   |              | 
|Total gross deferred tax assets                      |  |              | 280,505  |   |              |  | 51,670  |  
|Less valuation allowance                             |  |              | (280,505 | ) |              |  | (51,670 | )
|                                                     |  |              |          |   |              | 
|Net deferred tax assets                              |  |              |         |   |              |  |        |  
|                                                     |  |              |          |   |              | 

F-22



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)
















|     |                              
|---- | -----------------------------
|(13) | Commitments and Contingencies



|    |                               
|--- | ------------------------------
|(a) | Leases and long-term contracts



F-23



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|                       |  |           |        |  |             |  |        |        |  |  |          |  |  |       |    |  |  |  |        | 
|---------------------- |  | --------- | ------ |  | ----------- |  | ------ | ------ |  |  | -------- |  |  | ----- | -- |  |  |  | ------ | 
|                       |  | Network   |        |  | Standby     |  |        | Office |  |  | Motor    |  |  |      
|                       |  | Locations |        |  | Maintenance |  |        | Space  |  |  | Vehicles |  |  | Total |   
|                       |  |           |        |  |             |  |        |        |  |  |          |  |  |       |   
|2006                   |  |           | 3,883  |  |             |  | 4,472  |        |  |  | 845      |  |  |       | 25 |  |  |  | 9,225  | 
|2007                   |  |           | 3,176  |  |             |  | 2,229  |        |  |  | 845      |  |  |       | 3  |  |  |  | 6,253  | 
|2008                   |  |           | 2,695  |  |             |  | 1,131  |        |  |  | 718      |  |  |       |   |  |  |  | 4,544  | 
|2009                   |  |           | 2,453  |  |             |  | 776    |        |  |  | 714      |  |  |       |   |  |  |  | 3,943  | 
|2010                   |  |           | 2,148  |  |             |  | 776    |        |  |  | 714      |  |  |       |   |  |  |  | 3,638  | 
|Thereafter             |  |           | 14,920 |  |             |  | 9,733  |        |  |  | 1,071    |  |  |       |   |  |  |  | 25,724 | 
|                       |  |           |        |  |             |  |        |        |  |  |          |  |  |       |   
|Total minimum payments |  |           | 29,275 |  |             |  | 19,117 |        |  |  | 4,907    |  |  |       | 28 |  |  |  | 53,327 | 
|                       |  |           |        |  |             |  |        |        |  |  |          |  |  |       |   





|    |           
|--- | ----------
|(b) | Litigation

    


     


F-24



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)








  


 




F-25



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)












|    |                                                   
|--- | --------------------------------------------------
|(c) | Amounts due from Liquidators of bankruptcy estates





|    |                                   
|--- | ----------------------------------
|(d) | The Employee Benefit Trust (EBT)

sub-funds


F-26



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)












|     |                            
|---- | ---------------------------
|(14) | Segment and Geographic Data





|                                      |                          |              |        |        |              |  |        |              |  |  |        |       | 
|------------------------------------- | ------------------------ | ------------ | ------ | ------ | ------------ |  | ------ | ------------ |  |  | ------ | ----- | 
|                                      |                          | Year Ended   |        |        | Year Ended   |  |        | Year Ended   | 
|                                      |                          | December 31, |        |        | December 31, |  |        | December 31, | 
|                                      |                          | 2005         |        |        | 2004         |  |        | 2003         | 
|                                      |                          |              |        |        |              |  |        |              | 
|United Kingdom                        |                          |              | 15,361 |        |              |  | 9,600  |              |  |  | 4,835  |      
|                                      | Total Retail Business    |              |        | 15,361 |              |  |        | 9,600        |  |  |        | 4,835 | 
|United Kingdom                        |                          |              | 1,369  |        |              |  | 960    |              |  |  | 3,163  |      
|Switzerland                           |                          |              | 330    |        |              |  | 373    |              |  |  | 346    |      
|Western Europe                        |                          |              | 2,290  |        |              |  | 2,366  |              |  |  | 397    |      
|North America                         |                          |              | 1,209  |        |              |  | 676    |              |  |  | 1,476  |      
|                                      |                          |              |        |        |              |  |        |              | 
|                                      | Total Wholesale Business |              |        | 5,198  |              |  |        | 4,375        |  |  |        | 5,382 | 
|                                      |                          |              |        |        |              |  |        |              | 
|Total Revenue  Continuing Operations |                          |              | 20,559 |        |              |  | 13,975 |              |  |  | 10,217 |      







F-27



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)




|     |                                  
|---- | ---------------------------------
|(15) | Valuation and Qualifying Accounts



|                                        |  |              |        |   |              |  |        |              |  |  |        |  
|--------------------------------------- |  | ------------ | ------ | - | ------------ |  | ------ | ------------ |  |  | ------ | -
|                                        |  | Year Ended   |        |   | Year Ended   |  |        | Year Ended   | 
|                                        |  | December 31, |        |   | December 31, |  |        | December 31, | 
|                                        |  | 2005         |        |   | 2004         |  |        | 2003         | 
|                                        |  |              |        |   |              |  |        |              | 
|Allowances for doubtful debts           |  |              |        |   |              |  |        |              |  |  |        |  
|Balance at beginning of period          |  |              | (1,567 | ) |              |  | (1,648 | )            |  |  | (790   | )
|Additions charged to costs and expenses |  |              | (3,219 | ) |              |  | (883   | )            |  |  | (1,034 | )
|Utilizations                            |  |              | 4,142  |   |              |  | 964    |              |  |  | 176    |  
|                                        |  |              |        |   |              |  |        |              | 
|Balance at end of period                |  |              | (644   | ) |              |  | (1,567 | )            |  |  | (1,648 | )
|                                        |  |              |        |   |              |  |        |              | 



|     |                         
|---- | ------------------------
|(16) | Authorized Share Capital





|     |                           
|---- | --------------------------
|(17) | Related Party Transactions











F-28



---



##### Table of Contents



VIATEL HOLDING (BERMUDA) LIMITED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(United States Dollars, in thousands, unless specifically
stated)












|     |                  
|---- | -----------------
|(18) | Subsequent events







F-29