##### 









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, DC 20549


FORM 10-K



|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
|x | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,
2002

OR



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

For the transition period
from                                      to

Commission File Number 000-29085

IMPSAT Fiber Networks, Inc.

(Exact name of registrant as specified in its
charter)


|                                                     |  |                             
|---------------------------------------------------- |  | ----------------------------
|Delaware                                             |  | 52-1910372                  
|(state or other jurisdiction of incorporation
    or |  | (IRS employer identification
|organization)                                        |  | number)                     

Elvira Rawson de Dellepiane 150

Piso 8, C1107BCA


Buenos Aires, Argentina


(5411) 5170-0000


(Address, including zip code, and telephone
number, including area code, of registrants principal
executive offices)


Securities registered pursuant to
Section 12(b) of the Act: None

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of Each Exchange
|Title of Each Class |  | on Which Registered  
|                    |  |                      
|                   
|                    |  |                      
|                   
|                    |  |                      

Securities registered pursuant to
Section 12(g) of the Act:common
stock, par value $0.01 per share

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

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Securities Exchange Act
Rule 12b-2). Yes o     No x

Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Section 12, 13, or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a
court. Yes x     No o

The aggregate market value of our common stock
held by non-affiliates was approximately $0.3 million as of
June 28, 2002, the last business day of our most recently
completed second fiscal quarter (based upon the closing price
for the common stock as reported on such date by the Nasdaq
Over-The-Counter Bulletin Board).

There were 10,000,000 shares of common stock
outstanding on March 31, 2003.



---






---



##### 



TABLE OF CONTENTS

|                       |  |                                                                                                    |  |   
|---------------------- |  | -------------------------------------------------------------------------------------------------- |  | --
|CERTAIN CONSIDERATIONS |  | 4                                                                                                 
|PART I                 |  | 15                                                                                                
|Item 1.                |  | BUSINESS                                                                                           |  | 15
|Item 2.                |  | PROPERTIES                                                                                         |  | 24
|Item 3.                |  | LEGAL PROCEEDINGS                                                                                  |  | 25
|Item 4.                |  | SUBMISSION OF MATTERS TO A VOTE OF
    SECURITY-HOLDERS                                            |  | 27
|PART II                |  | 28                                                                                                
|Item 5.                |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS                          |  | 28
|Item 6.                |  | SELECTED FINANCIAL DATA                                                                            |  | 28
|Item 7.                |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |  | 30
|Item 7A.               |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
    MARKET RISK                                      |  | 52
|Item 8.                |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                        |  | 54
|Item 9.                |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 54
|PART III               |  | 55                                                                                                
|Item 10.               |  | DIRECTORS AND OFFICERS                                                                             |  | 55
|Item 11.               |  | EXECUTIVE COMPENSATION                                                                             |  | 58
|Item 12.               |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 65
|Item 13.               |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     |  | 68
|Item 14.               |  | CONTROLS AND PROCEDURES                                                                            |  | 69
|PART IV                |  | 70                                                                                                
|Item 15.               |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
    REPORTS ON FORM 8-K                               |  | 70
|SIGNATURES             |  | 71                                                                                                
|CERTIFICATIONS         |  | 73                                                                                                



---

Outlook and Uncertainties

Certain information in this Report contains
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact
are forward-looking statements for purposes of these
provisions, including any projections of earnings, revenues or
other financial items, any statements of the plans and
objectives of management for future operations, any statements
concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. In
some cases, forward-looking statements can be identified by the
use of terminology such as may, will,
expects, plans, anticipates,
estimates, potential, or
continue, or the negative thereof or other
comparable terminology. Although IMPSAT Fiber Networks, Inc.
believes that the expectations reflected in its forward-looking
statements are reasonable, it can give no assurance that such
expectations or any of its forward-looking statements will prove
to be correct, and actual results could differ materially from
those projected or assumed in these forward-looking statements.



---

Our Internet address is www.IMPSAT.com. We
make available free of charge, on or through the investor
relations section of our web site, annual reports on
Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the U.S. Securities and Exchange Commission
(SEC).

2



---



##### 





---

The terms VSAT®,
Dataplus®, Teledatos®, Regional
Teleport®, Difusat®,
Interplus®, Global Fax®,
Minidat®, ConeXia® and
Telecampus® are service marks or trademarks of
IMPSAT Fiber Networks, Inc. or its subsidiaries that are
registered or otherwise protected under the laws of various
jurisdictions. In this Report, company,
IMPSAT, we, us and
our refer to IMPSAT Fiber Networks, Inc. and its
subsidiaries.

3



---



##### 



CERTAIN CONSIDERATIONS

In addition to other information in this Report,
the following risk factors should be carefully considered in
evaluating IMPSAT and its business because such factors
currently may have a significant impact on IMPSATs
business, operating results and financial condition. As a result
of the risk factors set forth below and elsewhere in this Report
and the risks discussed in IMPSATs other SEC filings,
actual results could differ materially from those projected in
any forward-looking statements.

We have emerged from Chapter 11
bankruptcy and will potentially need additional financing for
working capital purposes

On June 11, 2002, we filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of New York (the Bankruptcy
Court). On October 23, 2002, we also filed with the
Bankruptcy Court our plan of reorganization (as amended, the
Plan). By order dated December 16, 2002, the
Bankruptcy Court confirmed the Plan. In accordance to the terms
of the Plan, we formally emerged from bankruptcy on
March 25, 2003 (the Effective Date). Our recent
emergence from Chapter 11 bankruptcy may adversely affect
our ability to negotiate favorable trade terms with lenders,
suppliers and vendors.

Our projections contained in the Plan contemplate
a $20 million financing in 2005 for working capital
purposes, regarding which there also can be no assurances that
such financing will be achieved. In addition, the new guaranteed
senior notes issued under the Plan (the New Guaranteed
Senior Notes) must be repaid, or refinanced, upon the
maturity date of such notes eight years after the Effective
Date. We may be required to refinance all or a portion of such
indebtedness at such time in order to repay the New Guaranteed
Senior Notes because we may not have sufficient
internally-generated funds to do so. In such event, we
anticipate that we would be able to arrange refinancing by means
of the issuance of debt or the infusion of equity at such time.
However, there can be no assurances that any such refinancing
will be achieved. In such event, the holders of the New
Guaranteed Senior Notes will be entitled to enforce their rights
and remedies under the New Guaranteed Senior Notes.

We are in default under certain of our
operating subsidiary indebtedness

Although we have emerged from bankruptcy, we
remain in default under indebtedness owed to certain creditors
who voted against the Plan. Under the Plan, the claims of these
creditors were contingent obligations arising under guarantees
by our parent holding company of certain primary indebtedness of
our operating subsidiaries. In accordance with the Plan, these
holders will receive, in full satisfaction of their contingent
guarantee claims (Post-Effective Date
Contingencies), a pro ratashare of the
9.8 million shares of our new common stock (New
Common Stock) issuable to our creditors under the Plan.
See Business  Chapter 11 Filing and
Emergence. Notwithstanding our settlement of the
Post-Effective Date Contingencies, as a consequence of the
occurrence of our Chapter 11 bankruptcy, an event of
default has occurred and is continuing with respect to certain
of the related primary underlying indebtedness of our operating
subsidiaries. These defaults, which relate to indebtedness
totaling approximately $18.6 million in outstanding
principal amount, give the respective creditors the right to
accelerate such indebtedness and seek the immediate repayment of
all outstanding amounts and accrued interest thereon. We may
lack the financial resources to meet our obligations under some
or all of such defaulted indebtedness. We are currently
conducting negotiations at the level of our operating
subsidiaries with these creditors with a view to rescheduling or
otherwise restructuring these defaulted debt obligations. There
is no assurance, however, that we will be successful in these
negotiations or that we will reach a definitive agreement with
these creditors to reschedule or restructure such obligations.
Under those circumstances, certain of our operating subsidiaries
could be forced to seek protection or liquidate under the
bankruptcy laws of their respective jurisdictions. Any such
event would have a material adverse effect upon our entire
company and could threaten our ability to continue as a going
concern.

We have a history of incurring losses that may
make it difficult to fund our future operations

We commenced commercial operations in 1990 and
have experienced rapid growth, increasing our annual revenues
from $8.2 million in 1991 to $128.4 million in 1996 and
$230.2 million in 2002. We recorded

4



---



##### 



net losses of $34.0 million in 1998,
$131.5 million in 1999, $154.1 million in 2000,
$715.3 million in 2001, and $204.5 million in 2002.
Increased competition, adverse economic conditions in our
countries of operation and other factors have negatively
affected our rates of revenue growth and expansion. As a result,
our revenue growth has not produced results capable of funding
our operations and repaying its indebtedness when due. We expect
our net losses to continue. We will need to raise additional
financing to achieve and sustain profitability, and to fund our
operating requirements.


As a result of the implementation of our plan
of reorganization we now have a significant concentration of
holders of our shares of New Common Stock

On the Effective Date, certain holders of claims
have received or will receive distributions of a significant
number of shares of New Common Stock or of securities
convertible into or exercisable for such New Common Stock. If
such holders of significant numbers of shares of the New Common
Stock were to act as a group, such holders may be in a position
to control the outcome of actions requiring stockholder
approval, including the election of directors. The concentration
of ownership could also facilitate or hinder a negotiated change
of control of the company and, consequently, affect the value of
the New Common Stock.

Further, the possibility that one or more of the
holders of significant numbers of shares of the New Common Stock
may determine to sell all or a large portion of their shares of
New Common Stock in a short period of time may adversely affect
the market price of the New Common Stock.

There is a lack of an established market for
our New Common Stock

There is currently no trading market for the New
Common Stock, nor is it known whether or when one would develop.
There can be no assurance that an active market will develop
therefor. Further, there can be no assurance as to the degree of
price volatility in a such market. No assurance can be given as
to the market prices that will prevail for the New Common Stock
following the Effective Date.

There is a lack of an established market for
our New Guaranteed Senior Notes

On the Effective Date, in accordance with the
Plan, the company issued the New Guaranteed Senior Notes to
certain impaired classes of creditors, some of whom may prefer
to liquidate their investment rather than to hold it on a
long-term basis. There is currently no trading market for the
New Guaranteed Senior Notes, nor is it known whether or when one
would develop. There can be no assurance that an active market
will develop therefor. Further, there can be no assurance to the
degree of price volatility in any such market.

We are restricted in our ability to issue
dividends

We do not anticipate paying any dividends on the
New Common Stock in the foreseeable future. In addition, the
covenants under the indentures governing our New Guaranteed
Senior Notes limit (and any future financing facility to which
we are a party will likely also limit) the ability of our
company to pay dividends. Certain institutional investors may
only invest in dividend-paying equity securities or may operate
under other restrictions that may prohibit or limit their
ability to invest in our New Common Stock.

Economic and political conditions in Latin
America pose numerous risks to our operations

Substantially all of our revenues are derived
from operations in Latin America. During 2001 and 2002, we
derived approximately 40.2% and 24.6% of our consolidated net
revenues from services provided by IMPSAT Argentina,
approximately 20.4% and 25.3% by IMPSAT Colombia and
approximately 14.7% and 15.6% by IMPSAT Brazil. Our company also
has operations in Venezuela, Mexico, the United States, Ecuador,
Chile and Peru. Other than the United States, each country where
we have significant operations has experienced political and
economic instability in recent years. Moreover, as events in the
Latin American region have demonstrated, negative economic or
political developments in one country in the region can lead to
or exacerbate economic or political crises elsewhere in the
region. Furthermore, events in recent years in other developing
markets have placed pressures on the stability of the currencies
of a number of countries in Latin America, including Argentina,
Brazil, Colombia and Venezuela. Continued pressures on the local
currencies in the countries in which we operate are likely to
have an adverse effect on many of our customers, which, in turn,
could adversely affect us. Volatility in regional currencies and
capital markets has also had an adverse

5



---



##### 



effect on our ability and that of our customers
to gain access to international capital markets for necessary
financing and refinancing. A lack of international capital
sources for emerging market borrowers could have a material
adverse effect on us and many of our customers.


According to published reports, during 2002,
Argentinas gross domestic product (GDP) contracted by
10.9%, while Brazil experienced 1.5% growth in GDP. During 2002,
Colombias GDP grew by 1.8% and Venezuelas GDP
contracted by 8.9%. Published reports have forecasted 2003 GDP
growth of 1.1% for Argentina, 1.8% for Brazil and 2.0% for
Colombia, and a 7.6% contraction for Venezuela. We do not expect
fundamental improvements in macroeconomic conditions in Latin
America in the short term.

Argentina faces a severe political and
financial crisis

A significant portion of our operations,
properties and customers are located in Argentina. Revenues from
services from our Argentine operations, acting through IMPSAT
Argentina, for each of 2001 and 2002 represented approximately
40.2% and 24.6% of our consolidated net revenues from services
during those years. Accordingly, our financial condition and
results of operations depend to a significant extent on
macroeconomic and political conditions prevailing from time to
time in Argentina. The Argentine economy has experienced
significant volatility in recent decades, characterized by
periods of low or negative growth and high and variable levels
of inflation.

In the fourth quarter of 1998, the Argentine
economy entered into a recession that caused the gross domestic
product to decrease by 3% in 1999, 0.5% in 2000, 4.5% in 2001,
and 10.9% in 2002. Beginning in the second half of 2001,
Argentinas recession worsened significantly, precipitating
a severe political and economic crisis. In December 2001, the
Argentine government introduced a partial freeze on bank
deposits, which resulted in widespread political protests and
social disturbances and the resignation of Argentinas then
president, Fernando de la Rua. Such protests and disturbances
have persisted as the Argentine economy has continued to
deteriorate.

Argentina is currently trying to negotiate a
multibillion-dollar financial aid package from the International
Monetary Fund (the IMF) to help overcome that
countrys debilitating economic crisis. To date, the IMF
and other multilateral and official sector lenders have
indicated an unwillingness to provide financial aid until a
sustainable economic program has been presented. Although in
January 2003 the IMF refinanced $7 billion of
Argentinas indebtedness to the IMF that had fallen due,
there has since been little progress on critical reforms or on
the timing of any new agreement with the IMF. It is unclear
whether Argentinas current president, Eduardo Duhalde, has
the necessary support to implement the reforms required to
restore economic growth and public confidence. In addition,
presidential elections are scheduled in Argentina during April
2003, and a change in governmental policies in Argentina, along
with investor reactions to any such changes, could have further
adverse effects on the Argentine economy. The rapid and radical
nature of the recent changes in the Argentine social, political,
economic and legal environment and the absence of a clear
political consensus in favor of any particular set of economic
policies, have created an atmosphere of great uncertainty. As a
result, commercial and financial activities have been disrupted,
further aggravating the economic recession that precipitated the
current crisis. These conditions have had, and can be expected
to continue to have, a material adverse effect on IMPSAT
Argentinas and our overall financial condition and results
of operations.

The political and financial crisis has
resulted in the devaluation of the Argentine peso

In late December 2001, Argentinas ongoing
political and financial crisis deepened and the country
defaulted on its massive foreign debt. In early January 2002,
the government of President Eduardo Duhalde abandoned the
decade-old fixed peso-dollar exchange rate and permitted
the pesoto float freely against the U.S. dollar. The
pesofree market opened on January 11, 2002 and
traded at 1.65 pesosto the U.S. dollar and has traded as
low as 3.87 pesosto the U.S. dollar on June 26,
2002. At March 31, 2003, the exchange rate was 2.88
pesosto the U.S. dollar. The devaluation of the
Argentine pesoaffects our consolidated financial
statements by generating foreign exchange transaction gains or
losses on dollar-denominated monetary assets and liabilities of
IMPSAT Argentina and generally results in a decrease, in U.S.
dollar terms, in our revenues, costs and expenses in Argentina.

6



---



##### 



In February 2002, the Argentine government
instituted the pesificationdecree. Generally,
this decree mandates that all monetary obligations arising from
agreements subject to Argentine law denominated in foreign
currency and existing as of January 6, 2002 are mandatorily
converted into monetary obligations denominated in pesosat an exchange rate of one U.S. dollar to one peso.
Such obligations generally may be adjusted pursuant to an index
published by the Argentine central bank called the
coeficiente de estabilización de referencia(CER), which is based on the Argentine consumer
price index. Contracts denominated in pesosbefore the
decree continue to be denominated in pesos, unaffected by
the decree. The devaluation and the
pesification of agreements of our company
governed by Argentine law may have adverse, unknown and
unforeseeable effects on us.

Since the pesification decree,
a significant number of IMPSAT Argentinas customer
contracts and a large percentage of its operating cash inflows
are now denominated in pesos. However, IMPSAT
Argentinas debt service payments and a significant portion
of its costs (including capital equipment purchases and payments
for certain leased satellite and terrestrial capacity) remain
denominated and payable in U.S. dollars. Accordingly, our
financial condition and results of operations in Argentina are
dependent upon IMPSAT Argentinas ability to generate
sufficient pesos(in U.S. dollar terms) to pay its costs,
expenses and to satisfy its debt service requirements. Because
of the recent nature of these events and the significant
uncertainties regarding the extent and duration of the
devaluation and the direction of the fiscal policies in
Argentina, management cannot presently determine or reasonably
estimate the impact a continued economic crisis in Argentina
could possibly have on IMPSAT Argentinas and our
consolidated cash flows, financial condition, and results of
operations.

On March 5, 2003, Argentinas Supreme
Court declared the pesificationdecree
unconstitutional to the extent that it required the mandatory
redenomination of U.S. dollar bank deposits to pesos.
Although the ruling applies only to amounts held by the
petitioner in that case on deposit at a state-owned bank, the
decision will likely strengthen existing (and create a profusion
of similar) claims by other depositors seeking to
redollarize their deposits. This could force the
Argentine government to issue long-term bonds in satisfaction of
such claims, which, in turn, could increase Argentinas
public debt burden and cause a further deterioration of its
national economy. The future judicial implementation of the
Argentine Supreme Courts decision as well as any
legislative or executive response could take an unknown variety
of forms. Accordingly, its potential impact on the Argentine
economy and on our operations in that country presently cannot
be estimated.

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability, and actual results could differ from those
estimates and assumptions utilized. The Argentine economic and
political situation continues to evolve and the Argentine
government may enact future regulations or policies that, when
finalized and adopted, may adversely and materially impact,
among other items: (i) the realized revenues we receive for
services offered in Argentina; (ii) the timing of
repatriations of any dividends or other cash flows from IMPSAT
Argentina to our holding company in the United States;
(iii) our asset valuations; and (iv) our
peso-denominated monetary assets and liabilities.

Brazilian economic and political conditions
may have a direct impact on our operations

Our operations in Brazil, which commenced in
1998, are less developed than in several of our other main
countries of operation. However, Brazil, as the largest country
and economy in Latin America, represents a significant existing
and potential market for us. Our company, acting through IMPSAT
Brazil, has expanded its operations in Brazil since that
subsidiarys inception. Revenues from services from our
Brazilian operations for 2001 and 2002 represented approximately
14.7% and 15.6%, respectively, of our consolidated net revenues
from services for such periods. For 2002, our operations in
Brazil represented the third largest source of revenues among
the nine countries in which we operate. Accordingly, our
operations in Brazil subject our financial condition and results
of operations to various additional economic and political risks.

The Brazilian government has frequently
intervened in the Brazilian economy and occasionally makes
drastic changes in policy. The Brazilian governments
actions to control inflation and effect other policies have
often involved wage and price controls, currency devaluations,
capital controls and limits on imports, among other things. Luiz
Inacio Lula da Silva, the left-wing candidate, was elected
president of Brazil on October 27,

7



---



##### 



2002. The economic and fiscal policies of
Mr. Lula da Silva could have an adverse effect on the
Brazilian economy and our companys financial condition and
results of operation.


Our business, financial condition and result of
operations in Brazil may be adversely affected by changes in
policy involving factors outside of our control, such as:



| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | monetary and fiscal policies;                                                
|
| |  | currency fluctuations;                                                       
|
| |  | energy shortages; and                                                        
|
| |  | other political, social and economic developments
    in or affecting Brazil.

In early 1999, the Brazilian government allowed
the realto float freely, resulting in a 38% devaluation
against the U.S. dollar from January 14, 1999 through
December 31, 2000. During 2002, Brazils currency
experienced further significant devaluations against the U.S.
dollar. These and prior devaluations have had a negative effect
on our real-denominated revenues. In addition, currency
devaluations can also create inflationary pressures. Inflation
itself, as well as some governmental measures to combat
inflation, have had significant negative effects on the
Brazilian economy in the past.

IMPSAT Brazils results have been affected
by the devaluation of the Brazilian realagainst the U.S.
dollar. At December 31, 2001, the realtraded at a
rate of R$2.41 = $1.00. The realdepreciated
during 2002, reaching a low of R$4.03 = $ 1.00 during
the third and fourth quarters of that year, and closing at
R$3.53  = $1.00 at December 31, 2002. This
volatility eroded IMPSAT Brazils revenues by approximately
$16.0 million during 2002. At March 31, 2003, the
realtraded at a rate of R$3.46 = $1.00. The
devaluation of the realand the decline in growth in the
Brazilian economy have been caused in part by the continued
recession in the region, a general aversion to emerging markets
by foreign direct and financial investors and the overall
decline in worldwide economic production. In addition, Brazil
experienced economic uncertainty in the months leading up to the
election of Mr. Lula da Silva as President of Brazil on
October 27, 2002, as investors feared that the leftist Lula
administration would fail to maintain fiscal discipline and that
the nation would default on its debt obligations. In the
aftermath of the election however, policy promises and cabinet
appointments by the Lula administration have generally appeased
the investor community and caused Brazilian markets to react
positively. The political and economic volatility in Brazil have
had, and can be expected to continue to have, a material adverse
effect on IMPSAT Brazils and our overall financial
condition and results of operations.

Recent civil and political unrest in
Venezuela may have an adverse impact on our
operations

In the first weeks of April 2002, political
instability and civil unrest plagued Venezuela after the
policies of that countrys head of state, President Hugo
Chavez, brought him into conflict with managers at Petroleos de
Venezuela SA (or, PDVSA), the state oil monopoly. The
million-member Venezuelan Workers Confederation called a general
strike to support PDVSA executives in protesting
Mr. Chavezs policies and demanding
Mr. Chavezs removal from office. The general strike
was supported by the Venezuelan business association,
Fedecamaras. Mr. Chavez was temporarily deposed and
detained by military forces on April 12, 2002, after a
massive opposition demonstration ended with gunmen reportedly
killing at least a dozen opposition protesters and wounding
hundreds others. An interim administration held office for less
than two days after tens of thousands of pro-Chavez
demonstrators took to the streets of Caracas to demand
Mr. Chavezs reinstatement. Mr. Chavez was
restored to power on April 15, 2002.

In December 2002, opposition groups launched a
nationwide labor strike. The strike, which lasted for two
months, brought the Venezuelan economy to an almost standstill
and severely curtailed the production and export of oil, the
major source of Venezuelas foreign exchange.
Venezuelas recent political instability has caused the
many private businesses throughout the country to close
temporarily and has disrupted Venezuelas petroleum
industry, which provides the government with more than half its
revenue. In response, the government imposed foreign exchange
and price controls, which make it difficult for our customers in
Venezuela to obtain the U.S. dollars needed to make payments due
to us in U.S. dollars on a timely basis. These foreign exchange
controls could also limit our ability to convert local currency
into U.S. dollars and

8



---



##### 



transfer funds out of Venezuela. At
December 31, 2001, the bolivartraded at a rate of
Bs.769.00 = $1.00, at December 31, 2002, it
traded at a rate of Bs.1,392.00 = $1.00, and at
February 5, 2003, it traded at the rate of
Bs.1,924 = $1.00. On February 6, 2003, the
Venezuelan government set a single fixed exchange rate for the
bolivaragainst the U.S. dollar of approximately
Bs.1,600 = $1.00 as part of the new currency controls.
There is a risk that a continuation or worsening of these
conditions could materially and adversely impact our future
business, operations, financial condition and results of
operations. Of our total consolidated net revenue from services
for the year ended December 31, 2002, we generated
approximately 13.7% from our operations in Venezuela.


We are vulnerable to currency fluctuations,
devaluations and restrictions that may increase our losses and
cause fluctuations in our operating results

A significant portion of our costs, including
lease payments for certain satellite and fiber optic capacity,
purchases of capital equipment, and payments of interest and
principal on our indebtedness is payable in U.S. dollars. Our
results of operations and financial conditions are therefore
vulnerable to currency devaluations. Following the
pesification decree, our contracts that were
governed by Argentine law, denominated in foreign currency and
existing as of January 6, 2002 were mandatorily converted
into monetary obligations denominated in pesosat an
exchange rate of one U.S. dollar to one peso, subject to
adjustment pursuant to the Argentine CER consumer price index.
In Brazil, our customer contracts cannot be denominated in U.S.
dollars or linked to the exchange rate between the Brazilian
realand the U.S. dollar, although we are permitted to
amend the pricing of our services for our long-term
telecommunications service contracts with our customers annually
based on changes in the consumer price index in Brazil for the
prior year. The inflation adjustment provisions in these laws do
not eliminate completely the currency exchange risk facing our
operations in Argentina and Brazil. For example, contracts
entered into between Argentine parties after the
pesification decrees enactment that are
initially denominated in pesosmay not thereafter be
adjusted according to the CER or any other consumer price index.
Also, changes in the consumer price indices in Argentina and
Brazil may lag or be lower than changes in the exchange rate
between the Argentine and Brazil local currency and the U.S.
dollar and therefore may not fully allow us to address the
impact of a devaluation of those currencies against the U.S.
dollar. Our operations in Argentina and Brazil represented a
significant proportion of our consolidated net revenues in 2002,
and this can be expected to increase in future periods in
connection with the progression of our operations in Brazil.
Accordingly, our operations in Argentina and Brazil have exposed
us, and will increase our exposure, to exchange rate risks.

Except in Argentina (since the
pesification decree, to the extent discussed
above) and Brazil, the contracts of the company and its
subsidiaries with customers generally provide for payment in
U.S. dollars or for payment in local currency linked to the
exchange rate between the local currency and the U.S. dollar at
the time of invoicing. Accordingly, inflationary pressures on
local economies in the other countries in which we operate did
not have a material effect on our revenues during 2002. However,
given that the exchange rate is generally set at the date of
invoicing and that we in some cases experience substantial
delays in collecting receivables, our operations in those other
countries are also exposed to exchange rate risk.

Substantial or continued devaluations in local
currencies relative to the U.S. dollar could have a material
adverse effect on the ability of our customers to absorb the
costs of a devaluation. This could result in our customers
seeking to renegotiate their contracts with us or, failing
satisfactory renegotiation, defaulting on or canceling their
contracts. Our competitors and potential future competitors,
including the monopoly public telephony operators
(PTOs) and large, multinational telecommunications
companies, may be less exposed to currency risk or may be better
able to hedge their currency risk and could thereby gain a
relative competitive advantage in the event of a currency
devaluation. In addition, Latin American economies have
experienced shortages in foreign currency reserves and
restrictions on the ability to expatriate local earnings and
convert local currencies into U.S. dollars. Currency
devaluations in one country may have adverse effects in another
country.

Our earnings will deteriorate if we cannot
collect on our customer accounts

We provide trade credit to our customers in the
normal course of business. As of December 31, 2002,
approximately 32.0% of our gross accounts receivable were past
due more than six months. We recorded a

9



---



##### 



provision for doubtful accounts of
$13.1 million in 2002 compared to $16.8 million for
2001. At December 31, 2002, our provision for doubtful
accounts covered approximately 116% of our gross trade accounts
receivable past due more than six months. As our business
increases with small and medium customers and as economic
contractions continue in our principal countries of operation,
we may experience an increase in uncollectable accounts
receivable. We anticipate that we could also experience an
increase in our uncollectable accounts receivables due to the
ongoing political and financial crises in Argentina and
Venezuela (See  Economic and political
conditions in Latin America pose numerous risks to our
operations) and their adverse impact on the
creditworthiness and solvency of our customers and its potential
adverse effects on our customers in neighboring countries.
Anticipated difficulties in collecting amounts due from our
Argentine and Venezuelan customers during coming periods could
have a material adverse effect on our business, results of
operations and financial condition.


Our future success depends upon our ability to
implement and manage our resources effectively

Our future success will require us to continue to
implement and improve our operating, financial and accounting
systems and to hire, train and manage new employees. Among other
things, the continued development of our business will also
depend upon our ability, directly, or through our subsidiaries,
to:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | successfully exploit our Broadband Network and
    implement related strategies;                                               
|
| |  | design and effectively market integrated private
    telecommunications services;                                              
|
| |  | secure financing;                                                                                                              
|
| |  | install telecommunications infrastructure as our
    operations require;                                                       
|
| |  | obtain any required government authorizations or
    licenses as the telecommunications sector continues to
    deregulate; and
|
| |  | attract and retain qualified employees.                                                                                        

In addition, we must perform these tasks in a
timely manner, at reasonable costs and on satisfactory terms and
conditions. Failure to effectively manage our resources could
have a material adverse effect on our business, results of
operations and financial condition.

We cannot provide any assurance that we will be
successful or timely in developing and marketing service
enhancements or new services that respond to technological
change, changes in customer requirements and emerging industry
standards.

We face numerous risks that could adversely
affect our Broadband Network strategy

Operating the Broadband Network may have a
negative impact on our results of operations

Our operation of the Broadband Network, which may
include the expansion into new services for our business
customers, could involve any one or more of the following:



| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | regulatory risks, including obtaining the
    appropriate licenses;                 
|
| |  | interconnection difficulties;                                                       
|
| |  | capital expenditures; and                                                           
|
| |  | competition from large, well-financed
    international telecommunications carriers.

Our operation of the Broadband Network may have a
negative impact on our results of operations, at least over the
short term.

10



---



##### 



Our ability to obtain new capital that we
might require in the future may be negatively affected by many
factors beyond our control

Our future capital requirements will depend upon
many factors, including:



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | the cost, timing and extent of upgrading or
    maintaining our networks and services; 
|
| |  | our enhancement and development of services,
    directly or through our subsidiaries; 
|
| |  | our ability to react to developments in the
    industry, including regulatory changes;
|
| |  | the status of competing services; and                                                  
|
| |  | our results of operations.                                                             

Further development of the Broadband
Network will require additional resources that we may not
have

We may need to adapt the Broadband Network to
respond to:



| |   |                                                                                                   
| | - | --------------------------------------------------------------------------------------------------
| |  | requests by our customers for coverage of our
    Broadband Network beyond its existing footprint;
|
| |  | changes in our customers service
    requirements; and                                           
|
| |  | technological advances by our competitors.                                                        

We may require additional financial, operational
and managerial resources to expand or adapt the Broadband
Network. If we are unable to expand or adapt the Broadband
Network to respond to these developments on a timely basis and
at a commercially reasonable cost, then our business will be
materially adversely affected. In light of our current financial
condition and the political and economic crises in Latin
America, we do not anticipate having the ability to make capital
expenditures during 2003 to expand or enhance significantly the
Broadband Network. Our inability to make such expenditures could
have an adverse effect on our customer retention and expansion.

We are negatively impacted by Global
Crossings insolvency

We are party to a series of agreements with
several subsidiaries of Global Crossing Ltd. for the provision
of telecommunications services. Pursuant to those agreements,
which were initially signed in 1999, we constructed a
terrestrial portion of Global Crossings South American
network between landing points on the Atlantic Ocean in
Argentina and the Pacific Ocean in Chile, granted Global
Crossing a series of indefeasible rights of use (IRU) over
ducts and dark fiber on our Broadband Network in Argentina,
Brazil and Peru, provided Global Crossing with collocation space
and related services in our data centers in Argentina, Brazil,
Chile, Venezuela and Peru, and provided Global Crossing with
maintenance services for their telecommunications assets in
Latin America. In addition, we acquired IRU and leased capacity
on Global Crossings South American undersea fiber optic
cable system in order to connect our Broadband Network with
other parts of Latin America and the world.

In January 2002, Global Crossing Ltd. filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
Although the Global Crossing subsidiaries to whom we provide
services and infrastructure were not originally included in
Global Crossing Ltd.s Chapter 11 filing, during
August 2002, Global Crossing Ltd. amended its Chapter 11
proceeding to include its subsidiaries that are counterparties
to the agreements with us. At March 7, 2003, Global
Crossing was in default for a total of $4.8 million that we
invoiced to them during 2002 and for the first quarter of 2003.
We have recorded a provision for doubtful accounts of
$2.8 million against these receivables.

Although Global Crossings reorganization
plan was approved in December 2002, Global Crossing is awaiting
receipt of certain regulatory approvals and satisfaction of
other conditions to the effectiveness of its plan of
reorganization, and there is no guaranty as to when or whether
it will emerge from bankruptcy. The difficulties being
experienced by Global Crossing, including Global Crossings
Chapter 11 proceeding, have had an adverse effect on our
financial condition and operations. At a minimum, Global
Crossings bankruptcy proceedings have caused delays in our
efforts to enforce our contracts with Global Crossing. In the
event of a rejection of any of the contracts by Global Crossing,
any pre-petition damages that we might have in respect of

11



---



##### 



such rejected contracts would be treated as
claims in the applicable Global Crossing bankruptcy proceedings,
which claims may not realize any meaningful recovery to us. In
this regard, in connection with Global Crossings filing at
the end of August 2002 to include certain of its subsidiaries in
its Chapter 11 proceedings, Global Crossing rejected one of
its agreements with us, pursuant to which agreement IMPSAT
Colombia had agreed to lease space in its telehouse in Bogota,
Colombia to Global Crossing, and Global Crossing has indicated
in other filings made in its Chapter 11 proceedings that it
might reject some or all of the other agreements that it has
with us.


We have filed motions in Global Crossings
bankruptcy proceeding seeking an order that Global Crossing make
payment to us of the amounts claimed by us and that Global
Crossing either accept or reject its contracts with us. Global
Crossing has disputed that it owes us any amounts under the
contracts at issue and has filed a proceeding seeking that the
bankruptcy court grant Global Crossing a property right in the
IRUs that it acquired from us.

To link our Broadband Network to other parts of
Latin America and the world, we have secured IRU and leased
capacity on Global Crossings undersea fiber optic cable
systems (and associated terrestrial capacity) between the United
States and Latin America, including Global Crossings South
American network. Global Crossing has not yet affirmed or
rejected these agreements. If Global Crossing rejects these
contracts or is unable to successfully reorganize and were to
sell or terminate its South American operations as part of its
bankruptcy proceedings, it is unclear what rights we would have
to continue to utilize the IRUs that we have purchased from
Global Crossing. It is possible that our agreements with Global
Crossing would be terminated, and we would need to seek
substitute sources of IRU or other capacity from competing
undersea fiber optic systems to link our operations, including
our Broadband Network, to other parts of Latin America and the
world. There can be no assurance that such substitute capacity
would be available to us on acceptable terms or at all. If we
were required to acquire such substitute capacity, we believe
that our operations would be adversely affected for the period
in which we reconfigured our telecommunications network. In
addition, we would be required to incur additional costs for
such capacity that are not currently included in our operating
and capital expenditures budgets. The occurrence of these
circumstances would have a material adverse effect on our
business, results of operations and financial condition.

Our failure to acquire, integrate and operate
new technologies could harm our competitive position

The telecommunications industry is characterized
by rapid and significant technological advancements and the
introduction of new products and services. We do not possess
significant intellectual property rights with respect to the
technologies we use and are dependent on third parties for the
development of and access to new technology. In addition, we
generally own the customer premises equipment used to provide
our services and we own the fiber optic networks, including
switching equipment, that constitute the Broadband Network.
Therefore, technological changes that render our equipment and
the Broadband Network out of date, less efficient or more
expensive to operate than newer equipment could require us to
incur substantial increases in capital expenditures to upgrade
or replace such equipment.

We cannot predict the effect on our business of
technological changes, such as changes relating to emerging
wireline and wireless transmission technologies and the use of
the Internet for traditional voice, data or other broadband
services. In addition, it is impossible for us to predict with
any certainty which emergent technology relevant to our business
will prove to be the most economic, efficient or capable of
attracting new customers. A reduction in the demand for data
transmission services or a failure by us to obtain and adapt to
new technology in our markets could have a material adverse
effect on our ability to compete successfully.

We face significant competition in Latin
America

The telecommunications industry in Latin America
is highly competitive and is generally characterized by low
barriers to entry. We expect that competition in the industry
will maintain its intensity. We compete on the basis of our
experience, quality, customer service, range of services offered
and price.

We have experienced pricing pressure for some of
our services, and we expect to continue to face pricing
pressure. We may further experience declining operating profit
margins as the PTOs in the countries in which we operate become
more competitive and place greater emphasis on data
telecommunications.

12



---



##### 



PTOs have competitive advantages in the
marketplace

In most of our markets, our principal competitor
is the local PTO or an affiliate of the local PTO. The PTOs
generally have significant competitive advantages. These
advantages generally include:



| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | close ties with national regulatory authorities                                                                                    
|
| |  | control over connections to local telephone lines                                                                                  
|
| |  | ability to subsidize competitive services with
    revenues generated from services they provide on a monopoly or
    duopoly basis
|
| |  | reluctance of regulators to adopt policies and
    grant regulatory approvals that will result in increased
    competition        

For example, our principal competitors in
Argentina are Telecom Soluciones S.A. and Advance
Telecomunicaciones S.A., which are data transmission companies
controlled by Telecom Argentina STET-France Telecom S.A.
(Telecom Argentina) and Telefonica de Argentina S.A.
(Telefonica), respectively. Telecom Argentina and
Telefonica are the PTOs in Argentina. In Brazil, our principal
competitors are Embratel and Telemar.

In the future, the PTOs may devote substantially
more resources to the sale, marketing and provision of services
that compete with us, which could have a material adverse effect
on our business, results of operations and financial condition.

International telecommunications carriers
have greater resources than we do

We also compete with operators of satellite data
transmission networks and terrestrial telecommunications links,
and face actual or potential competition from large
international telecommunications carriers and from other
industry participants. International telecommunications
carriers, whose principal focus has traditionally been long
distance telephony services, may increasingly focus on the
private telecommunications network systems segment of the
telecommunications market as deregulation continues. For
example, since the introduction of full competition in
Argentinas long distance telephony market in November
2000, these large international telecommunications carriers can
enter that market and provide data transmission services. Many
of these potential competitors have substantially greater
financial and other resources than we do. In addition,
consolidation of telecommunications companies and the formation
of strategic alliances within the telecommunications industry
could give rise to significant new competitors.

Our competitors could take advantage of new
or competing technologies to our detriment

Although we believe we have the flexibility to
act quickly to take advantage of any significant technological
development, new competing technologies may negatively affect
our business. For example, technologies such as digital
subscriber line, or DSL, significantly enhances the speed of
traditional copper lines. DSL or other technologies enable our
PTO competitors to offer high-speed services without undergoing
the expense of replacing their existing copper networks.
Widespread use of DSL in our markets could have a material
adverse effect on our last mile advantage. Our
telecommunications network services also may face competition
from entities that use new or emerging voice and data
transmission services or technologies that currently are not
widely available in Latin America. Furthermore, competing
technologies may gain market and commercial acceptance. We are
limited by our existing cash resources and our anticipated
constraints on availability of financing from making any
significant capital expenditures to acquire any new
technologies. If these developing or new technologies are
successful, they may provide significant long-term competition
that could have a material adverse effect on our business,
results of operations and financial condition.

The downturn in the telecommunications
industry negatively affects us

The regional economic recession, which has
persisted since 2001, has had a materially negative impact on
the telecommunications market in Latin America. The rate at
which the industry improves is critical to our ability to
improve overall financial performance. The financial
difficulties currently experienced by other participants in the
telecommunications industry may result in some of our
competitors being able to purchase

13



---



##### 



the assets of these troubled companies at
depressed prices. This consolidation could result in multiple
smaller competitors being absorbed into relatively few large
entities (with significantly greater financial and other
resources than we have, including greater access to financing),
thereby increasing the operating profit margin pressures that we
face. As a result of our financial difficulties, potential
customers and suppliers may be unwilling to do business with us
and may prefer to do business with competitors that have greater
financial and other resources.


We face regulatory risks and uncertainty with
respect to local laws and regulations

Our business is dependent upon the procurement
and maintenance of licenses to provide various
telecommunications network services in the countries in which we
operate. We believe that we have all licenses required for the
conduct of our current operations. We expect that those licenses
that are subject to expiration will be renewed in due course
upon our application to the appropriate authorities. Due to the
political and economic risks associated with the countries in
which we operate, we cannot assure you that we will be able to
maintain our licenses or that they will be renewed upon their
expiration. The loss, or substantial limitation upon the terms,
of our licenses could have a material adverse effect on our
results of operations. We cannot assure you that we will succeed
in obtaining all requisite regulatory approvals to operate in
those countries in which we may desire to do business.

Local laws and regulations differ significantly
among the jurisdictions in which we operate and in which we may
operate in the future. The interpretation and enforcement of
these laws and regulations vary and are often based on the
informal views of the local ministries which, in some cases,
might be subject to influence by the PTOs. The conditions
governing our service offerings may be altered by future
legislation or regulation. In some of our principal existing and
target markets, laws and regulations prohibit or limit our
provision of certain telecommunications services.

14



---



##### 



PART I

Item 1.     Business

General

We are a leading provider of private
telecommunications network and Internet services in Latin
America. We offer integrated data, voice, and Internet
solutions, with an emphasis on broadband transmission, for
national and multinational companies, financial institutions,
governmental agencies and other business customers. We have
operations in Argentina, Colombia, Brazil, Venezuela, Ecuador,
Mexico, Chile, Peru and the United States and also provide our
services in other countries in Latin America. We provide
telecommunications and Internet services through our networks,
which consist of owned fiber optic and wireless links,
teleports, earth stations and leased fiber optic and satellite
links. We own and operate 15 metropolitan area networks in some
of the largest cities in Latin America, including Buenos Aires,
Bogotá, Caracas and São Paulo.

In the fourth quarter of 2000, we completed the
construction of an extensive pan-Latin American broadband fiber
optic network (which we call our Broadband Network) connecting
major cities across Argentina and Brazil, and the commencement
of commercial operation of the full Broadband Network in those
locations. Our Broadband Network allows us to enhance the
services we presently provide and significantly increase our
transmission speed and capacity. At December 31, 2002, the
Broadband Network comprised twelve metropolitan area fiber optic
networks and wireless links, extending over 1,000 route
kilometers in the largest cities in Argentina, Brazil, Colombia
and Peru, and long-haul fiber optic backbones in Brazil,
Argentina, Chile and Colombia extending over 8,880 route
kilometers. Our Broadband Network uses advanced transmission
technologies, including dense wave division multiplexing, or
DWDM, asynchronous transfer mode, or ATM, and Internet protocol,
or IP.

IMPSAT Fiber Networks, Inc. was organized in 1994
as a Delaware holding company to combine the IMPSAT businesses
in Argentina, Colombia and Venezuela. Our operations started in
Argentina in 1990 under the name IMPSAT S.A. (IMPSAT Argentina).
We began operations outside of Argentina with the establishment
of IMPSAT S.A. (IMPSAT Colombia) in 1991 and the establishment
of Telecomunicaciones Impsat S.A. (IMPSAT Venezuela) in 1992.
New operating subsidiaries were created in Ecuador (Impsatel del
Ecuador S.A., which we call IMPSAT Ecuador) and Mexico (Impsat
S.A. de C.V., which we call IMPSAT Mexico) in 1994, in the
United States (IMPSAT USA, Inc.) in 1995 and in Brazil (Impsat
Comunicacoes Ltda., which we call IMPSAT Brazil) in 1998. In
January 2000, we changed our companys name from IMPSAT
Corporation to IMPSAT Fiber Networks, Inc. During 2001, we
commenced operations in Chile (Impsat Chile S.A., or IMPSAT
Chile) and Peru (Impsat S.A., or IMPSAT Peru).

Chapter 11 Filing and Emergence

On June 11, 2002, we filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code with the Bankruptcy Court. On September 4,
2002, we filed the Plan with the Bankruptcy Court. During our
bankruptcy proceedings, we operated our business and managed our
assets in the ordinary course as a debtor-in-possession.

By order dated December 16, 2002, the
Bankruptcy Court confirmed the Plan. In accordance with the
terms of the Plan, we formally emerged from bankruptcy on the
Effective Date, March 25, 2003.

Under the Plan, we issued shares of New Common
Stock to holders of our 13 3/4% Senior Notes due 2005 and
12 3/8% Senior Notes due 2008 (the 2005/2008
Holders) in full satisfaction of their claims thereunder,
including the outstanding principal and all accrued and unpaid
interest. The 2005/2008 Holders received their ratable portion
of 9.8 million shares of New Common Stock, as may be
decreased to allow for the allocation of a ratable number of
such shares of New Common Stock to the holders of the
Post-Effective Date Contingencies and certain other claims of
unsecured creditors of our parent holding company. (See
Certain Considerations  We are in default under
certain of our operating subsidiary indebtedness.) Under
the Plan, the dollar value of the Post-Effective Date
Contingencies and other unsecured claims is to be determined
after

15



---



##### 



the Effective Date based on factors at the level
of our operating subsidiaries. Accordingly, the Plan required us
to establish on the Effective Date a reserve (the Common
Stock Reserve Pool) consisting of an estimated sufficient
portion of such 9.8 million shares of New Common Stock to
enable us to make any distributions after the Effective Date on
account of Post-Effective Date Contingencies and other unsecured
claims. To this end, based on the estimated maximum value of the
Post-Effective Date Contingencies and other unsecured claims, we
and the creditors committee under the Plan determined that the
Common Stock Reserve Pool shall be composed of 686,000 shares of
New Common Stock. Accordingly, the 2005/2008 holders have
initially received on the Effective Date 9.1 million shares
of New Common Stock, net of the Common Stock Reserve Pool.
Pursuant to the Plan, any settlements or distributions from the
Common Stock Reserve Pool with the holders of the Post-Effective
Date Contingencies and other unsecured claims shall be made in
accordance with the disputed claims resolution process contained
therein. Following the resolution of these claims, we will
distribute any shares of New Common Stock remaining in the
Common Stock Reserve Pool ratably among the 2005/2008 Holders in
accordance with the terms of the Plan. Holders of our
pre-Chapter 11 common stock (the Old Common
Stock) and holders of any other equity interest received
no distribution under the Plan. All Old Common Stock and all
other equity interests were cancelled on the Effective Date.


In addition, on or shortly after the Effective
Date of the Plan, we consummated several transactions pursuant
to the Plan. We:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | filed with the Delaware Secretary of State a
    Restated Certificate of Incorporation (the Certificate of
    Incorporation);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | amended and restated our Bylaws (the
    Bylaws)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | cancelled all Old Common Stock, and all other
    existing securities and agreements to issue or purchase any
    equity interests;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | issued $67,531,000 in aggregate principal amount
    of Series A 6% Senior Guaranteed Convertible Notes due 2011
    (initially convertible, in the aggregate, into 22.8% of the New
    Common Stock on a fully diluted basis) (the Series A
    Notes) to holders of our former 12 1/8% Senior
    Guaranteed Notes due 2003 (the 2003 Noteholders), in
    full satisfaction of the claims of the 2003 Noteholders,
    including the outstanding principal and all accrued and unpaid
    interest thereon;                                                                                                                                                                                                                                                
|
| |  | issued to (i) holders of debt under our
    pre-Effective Date Broadband Network vendor financing agreements
    (the Original Vendor Financing Agreements) and
    (ii) other creditors of our operating subsidiaries holding
    guarantees by our parent holding company of such indebtedness
    who voted to accept the Plan, a combination of new senior
    secured indebtedness totaling $143.8 million,
    $23.9 million in the aggregate of new Series B 6%
    Senior Guaranteed Notes due 2011 (Series B
    Notes) (initially convertible in the aggregate into 5.3%
    of the New Common Stock on a fully diluted basis), and
    eight-year warrants to acquire 15.3% in the aggregate of the New
    Common Stock (on a fully diluted basis);
|
| |  | issued 200,000 shares of New Common Stock to
    certain officers of the Company in accordance with our 2003
    Stock Incentive Plan (the 2003 Stock Incentive
    Plan); and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | agreed, subject to our compensation
    committees approval, to issue options for 1,646,332 shares
    of New Common Stock to senior officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Under our Certificate of Incorporation, our
authorized capital stock as of the Effective Date consists of
(i) 50,000,000 shares of the New Common Stock, with a par
value of $0.01 per share and (ii) 5,000,000 shares of
Preferred Stock, with a par value of $0.01 per share (the
Preferred Stock). No Preferred Stock has been
issued. Pursuant to the Certificate of Incorporation, Preferred
Stock may be issued in one or more series as determined from
time to time by our board of directors (the Board)
without further approval of our stockholders. Upon issuance of
any series of Preferred Stock, the Board will fix the voting
powers, designations, preferences, and relative, participating,
optional, redemption, conversion, exchange or other special
rights, qualifications, limitations or restrictions of such
Preferred Stock, to the extent permitted by law. Pursuant to the
Certificate of Incorporation, we may not create, designate,
authorize or cause to be issued any

16



---



##### 



class or series of nonvoting stock to the extent
prohibited by Section 1123 of the United States Bankruptcy
Code.


In connection with the reorganization our Board
was reconstituted and is composed of seven directors. In
accordance with the Plan and the Certificate of Incorporation,
the directors (the Directors) consist of
(1) our Chief Executive Officer; (2) two individuals
(the Category 2 Directors) elected by the initial
holders of Series A Notes issued under the Plan (the
Initial Series A Noteholders) for so long as
the sum of (x) the aggregate number of shares of New Common
Stock issuable upon conversion of Series A Notes issued to
and held by the Initial Series A Noteholders or any of
their respective affiliates, and (y) the aggregate number
of shares of New Common Stock issued to and held by the Initial
Series A Noteholders or such affiliates upon conversion of
such Series A Notes continues to represent in the aggregate
7.5% or more of the New Common Stock on a fully diluted basis
(but excluding for purposes of this calculation shares of New
Common Stock issued or issuable pursuant to our 2003 Stock
Incentive Plan or subsequent stock plan adopted by the Board, or
any modification, renewal or extension thereof) (a Fully
Diluted Basis); (3) one individual elected by Nortel
Networks Limited (Nortel), as an initial holder of
Series B Notes and warrants to purchase New Common Stock
(the Warrants) issued to Nortel under the Plan, for
so long as the sum of (x) the aggregate number of shares of New
Common Stock issuable upon conversion of Series B Notes and
Warrants issued to and held by Nortel or any of its affiliates,
and (y) the aggregate number of shares of New Common Stock
issued to and held by Nortel or such affiliate upon conversion
of such Series B Notes and Warrants, continues to represent
in the aggregate 4.5% or more of the New Common Stock on a Fully
Diluted Basis; and (4) three individuals (the
Category 4 Directors) elected by the initial
2005/2008 Holders who received New Common Stock under the Plan
(the Initial 2005/2008 Common Stock), for so long as
the holders of the Initial 2005/2008 Common Stock or any of
their respective affiliates continue to beneficially own Initial
2005/2008 Common Stock equal, in the aggregate, to 15% or more
of the New Common Stock on a Fully Diluted Basis; provided that,
for so long as the Initial Series A Noteholders have the
right to elect the Category 2 Directors, no more than two of the
Category 4 Directors may be persons who are affiliates of Morgan
Stanley & Co. Incorporated. The initial term of the Category
2 Directors and the Category 4 Directors will end on the date of
the annual meeting to be held in 2004. Thereafter, the Category
2 and Category 4 Directors will be elected each year for a term
ending on the date of the annual meeting of stockholders in the
following year. Subject to the rights of certain parties, a
director may be removed with or without cause in accordance with
the procedures set forth in the Certificate of Incorporation.

Our Services

Our comprehensive telecommunications solutions
consist of any combination of our service offerings, including
the enhanced and additional services that we are able to offer
using our Broadband Network in Argentina and Brazil. We
currently classify these service offerings into four categories:
data and value added services, Internet services, services to
carriers, and telephony services.

Data Transmission and Value Added Services.We offer our customers a broad range
of end-to-end network service combinations for their
point-to-point and point-to-multipoint telecommunications needs,
ranging from simple connections to customized private network
solutions. We offer our network services over our proprietary
and leased networks, which are comprised of metropolitan area
fiber optic rings and wireless networks, fiber optic and
satellite links. We also offer value-added services, including
secure web and applications hosting services through our
advanced data center facilities.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Connection Services.Our customers can purchase clear
    channels, frame relay services, ATM services and Internet
    protocol digital connection services to support their specific
    transmission requirements. Clear channels are typically
    purchased by customers that constantly transmit large amounts of
    voice, data and video traffic. Frame relay and ATM services are
    typically purchased by customers requiring reliable and rapid
    transmission of variable amounts of voice, data and video
    traffic. We typically offer our clear channel connection
    services from 64 Kbps to 2 Mbps, and we intend to expand this
    offering to 155 Mbps of capacity. Our frame relay services are
    typically offered from 64 Kbps to 2 Mbps and we intend to offer
    our ATM services from 2 Mbps to 155 Mbps. In addition, we offer
    digital connections

17



---



##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | using Internet protocol with interfaces of 10
    Mbps to 100 Mbps as one of our options for local data network
    solutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Private Network Services.For customers that require significant
    bandwidth and reliable data transmission between a number of
    sites, we offer customized private networks that combine fiber
    optic, fixed wireless and satellite technology. We also provide
    them with a variety of other services including network
    management services, trouble shooting reports, quality control
    and value-added services. Our consultative sales process ensures
    that each private network is designed to meet the evolving
    specific business and systems requirements of each customer. We
    also offer services such as video conferencing and remote
    learning as part of our private network services.
|
| |  | Other Value-Added Services.We offer information technology
    solutions and data center services designed to facilitate our
    customers e-business and e-commerce needs and optimize our
    customers business processes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Data Center Services.We have established 14 data center
    facilities that offer hosting services by integrating our
    broadband services with advanced value-added solutions in the
    region. We offer our clients a complete set of data center
    services ranging from housing, shared and dedicated hosting to
    more complex managed hosting solutions, including disaster
    recovery and applications management and outsourcing services.
    We also offer co-location services to carriers, including the
    rental of secure space, equipment provisioning and operation and
    maintenance services.                       
|
| |  | Information Technology Solutions.As part of our end-to-end solutions,
    we also offer a variety of information technology services,
    including the design, installation and integration of intranets,
    extranets and virtual private data networks, through which our
    customers can conduct business in a secure environment as well
    as integrate these new systems with their legacy
    telecommunications systems. In addition, we offer an outsourcing
    solution for customers that do not have the technical personnel
    or choose not to operate, manage and maintain their
    telecommunications systems and networks.

Internet Services.We have offered Internet access
services to corporate and ISP customers since 1996. Our
Broadband Network in Argentina and Brazil links our Latin
American Internet backbone, as part of the Broadband Network, to
the U.S. Internet through our U.S.-based point of presence using
our fiber optic links in addition to our leased satellite links.
With the objective of positioning ourselves as the Latin America
Internet Backbone, we have deployed a series of data centers
within the region.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Corporate Internet Services.As part of providing our customers
    with a total telecommunications solution, we currently offer our
    corporate customers Internet access services including line
    provisioning, equipment provisioning and installation, primary
    and secondary domain registration and maintenance and technical
    support.                                                        
|
| |  | Wholesale Internet Services.We provide a complete Internet service
    for ISPs, including managed line provisioning for domestic and
    international backbone connections between points of presence,
    access to our co-location sites and server services (e-mail and
    hosting services), managed modem and roaming services, as well
    as the use of our network operation and help desk services.

Services to
Carriers.We offer dark fiber
capacity, lit fiber services and duct capacity to
ISPs and telecommunications carriers. Our network provides
customers with reliable broadband connections between and among
our metropolitan area networks at high speeds. Customers that
choose to purchase lit capacity are able to purchase
an initial amount of capacity (typically 45 Mbps) and increase
that capacity on demand.

Telephony Services.We provide switched-voice domestic and
international long distance telephony services to corporate
customers and resellers in Argentina, international long
distance service in the United States, where we have our
international hub, and international long distance service in
Peru. We plan to further expand these offerings to other
countries in the region, of which Brazil is expected to provide
the most significant market opportunities. In
November 2002, we received a license to provide switched
voice services to or from Brazil. As components of our telephony
services, we currently offer local, national and international

18



---



##### 



long-distance services, Private Branch Exchange
(PBX), toll free services and local numbering to our corporate
customers as well as wholesale voice services to other carriers
and resellers.


The following table shows our companys net
revenues breakdown by service for the years ended
December 31, 2000, 2001 and 2002:

|                                 |                         |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |       |       |  
|-------------------------------- | ----------------------- | ----------------------------- | ------- | ------- | ------- | ----------- | ------- | ------- | ------- | ----------- | ------- | ----- | ---- | - | ------- | ------ | ------- |  | ----- | ----- | ----- | -
|                                 |                         |                              
|                                 |                         | December 31,                 
|                                 |                         |                              
|                                 |                         | 2000                          |         | 2001    |         | % change(1) |         | 2002    |         | % change(1)
|                                 |                         |                               |         |         |         |             |         |         |         |            
|                                 |                         |                              
|                                 |                         | (dollar amounts in thousands)
|Data and value added services:   |                         |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|                                 | Broadband               |                               | $       | 51,260  |         |             | $       | 85,579  |         |             |         | 67.0  | %    |   | $       | 77,733 |         |  |       | (9.2  | )%   
|                                 | Satellite               |                               |         | 159,265 |         |             |         | 137,053 |         |             |         | (13.9 | )    |   |         | 88,547 |         |  |       | (35.4 | )    
|                                 | Value added services(2) |                               |         | 3,743   |         |             |         | 17,184  |         |             |         | 359.1 |      |   |         | 14,191 |         |  |       | (17.4 | )    
|                                 |                         |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|                                 |                         | Total                         |         |         | 214,268 |             |         |         | 239,816 |             |         |       | 11.9 |   |         |        | 180,471 |  |       |       | (24.7 | )
|Telephony                        |                         |                               | 235     |         |         |             | 11,762  |         |         |             | 4,905.1 |       |      |   | 14,327  |        |         |  | 21.8  |      
|Internet                         |                         |                               | 35,996  |         |         |             | 45,403  |         |         |             | 26.1    |       |      |   | 27,243  |        |         |  | (40.0 | )    
|Services to carriers             |                         |                               | 885     |         |         |             | 7,360   |         |         |             | 731.6   |       |      |   | 6,985   |        |         |  | (5.1  | )    
|                                 |                         |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|Total net revenues from services |                         | $                             | 251,384 |         |         | $           | 304,341 |         |         |             | 21.1    | %     |      | $ | 229,026 |        |         |  | (24.7 | )%   
|                                 |                         |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      



---

|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Increase (decrease) compared to previous
    year.                                                                                                      
|   
|(2) | Value added services includes
    revenues from our data center services, systems integration and
    other information technology solutions services.

The Broadband Network

Our Broadband Network, enables us to provide high
capacity, high speed telecommunications services across Latin
America. Our Broadband Network consists of:



| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fiber optic local rings and wireless access
    points within major cities in Latin America, including Buenos
    Aires, São Paulo and Rio de Janeiro                                   
|
| |  | long-haul, high capacity fiber optic backbones
    linking major cities in Latin America                                                                                                
|
| |  | capacity on undersea cable systems to provide
    connections between and among major Latin American countries, as
    well as global telecommunications connections and Internet access
|
| |  | data center facilities in major cities in Latin
    America                                                                                                                             

We believe that our Broadband Network enables us
to:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | cost-effectively offer more bandwidth-intensive
    services, including intranet and extranet services                        
|
| |  | reduce our costs for leased satellite capacity
    and leased telecommunications links as a percentage of our net
    revenues
|
| |  | create a high capacity, pan-Latin American
    Internet backbone                                                              
|
| |  | offer Latin American companies more efficient
    access to the U.S. Internet backbone                                        
|
| |  | continue to provide consistent, high quality
    service by keeping our customer traffic on our network                       

Our Broadband Network is a fully integrated
terrestrial fiber optic network connecting Santiago, Chile;
Buenos Aires, Argentina; and São Paulo and Rio de Janeiro,
Brazil with points in between.

19



---



##### 



Customers

Overview.We have
grown rapidly since the commencement of our operations in 1990.
Our customer base has increased from 125 corporate customers in
two countries at December 31, 1992 to 2,649 corporate
customers in nine countries at December 31, 2002. Larger
entities, which often have significant needs for reliable,
cost-effective data transmissions and other telecommunications
services, were the first to use our customized
telecommunications services. As a result, a significant portion
of our revenues has been derived from our largest customers. A
significant number of our customers, including our largest
customers, are in Argentina and Colombia, which, having
commenced in 1990 and 1992, respectively, are the locations of
our longest-standing operations. Our customer base in Brazil has
grown from 48 at the end of 1998 to 366 at the end of 2002. As
our business further matures and as we extend the operation of
the Broadband Network, we expect that the average size of our
customers will decline.

Our customers consist of financial institutions,
major governmental agencies, and leading national and
multinational corporations and private sector companies,
including Repsol YPF, Petroleo Brasileiro S.A. 
Petrobras, Siemens and Reuters. Our ten largest customers
accounted for approximately 20.8% of our revenues in 2002 and
approximately 22.9% in 2001.

Our ten largest customers as of December 31,
2002 were:



| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | subsidiaries of Global Crossing Ltd., a
    Bermuda-headquartered corporation that constructs, and offers
    carriers carrier services over, worldwide terrestrial and
    submarine fiber optic networks
|
| |  | Instituto Nacional de Hipodromos (INH), a
    Venezuelan horse racing track                                                                                                                                
|
| |  | Confederaçaõ Nacional da Industria,
    Brazils national association of private industrial
    companies                                                                                                  
|
| |  | Corporacion Nacional de Ahorro y Vivienda, or
    Conavi, one of Colombias largest financial institutions                                                                                                 
|
| |  | Citicorp Global Technology, Inc.                                                                                                                                                                           
|
| |  | OpenTech S.A., a communications equipment and
    software distributor based in Venezuela.                                                                                                                 
|
| |  | Empresa de Telecomunicaciones de Bogotá
    S.A., E.S.P., one of Colombias largest telecommunications
    companies                                                                                       
|
| |  | HSBC Bank Brasil S.A., the third-largest
    privately-owned bank in Brazil                                                                                                                                
|
| |  | Perez Companc S.A., an Argentine energy
    conglomerate                                                                                                                                                   
|
| |  | Gobierno de la Provincia de Buenos Aires, the
    local government of the province of Buenos Aires                                                                                                         

The following table shows our customer
concentration by country as of the dates indicated. Totals
presented do not include customers from our fax, store and
forward service.

|          |       |                                               |       |       |  |      |      |       |   |  |       |       |  |      |      |       |   |  |     |       |  |      |      |       |  
|--------- | ----- | --------------------------------------------- | ----- | ----- |  | ---- | ---- | ----- | - |  | ----- | ----- |  | ---- | ---- | ----- | - |  | --- | ----- |  | ---- | ---- | ----- | -
|          |       |                                              
|Country   |       | As of December 31,                           
|          |       |                                              
|          |       |                                               |       |      
|          |       |                                               |       |       |  | 2000 |      |       |   |  |       |       |  | 2001 |      |       |   |  |     |       |  | 2002 |      |       |  
|          |       |                                               |       |       |  |      |     
|          |       |                                               |       |      
|          |       | (number
of customers and percentage of total)
|Argentina |       |                                               | 1,146 |       |  |      | 43.1 | %     |   |  | 1,100 |       |  |      | 38.2 | %     |   |  | 953 |       |  |      | 36.0 | %    
|Colombia  |       |                                               | 672   |       |  |      | 25.3 |       |   |  | 699   |       |  |      | 24.3 |       |   |  | 678 |       |  |      | 25.6 |      
|Brazil    |       |                                               | 238   |       |  |      | 9.0  |       |   |  | 387   |       |  |      | 13.5 |       |   |  | 366 |       |  |      | 13.8 |      
|Venezuela |       |                                               | 251   |       |  |      | 9.5  |       |   |  | 245   |       |  |      | 8.5  |       |   |  | 215 |       |  |      | 8.1  |      
|Ecuador   |       |                                               | 210   |       |  |      | 7.9  |       |   |  | 236   |       |  |      | 8.2  |       |   |  | 216 |       |  |      | 8.2  |      
|Mexico    |       |                                               | 51    |       |  |      | 1.9  |       |   |  | 47    |       |  |      | 1.6  |       |   |  | 24  |       |  |      | 0.9  |      
|USA       |       |                                               | 64    |       |  |      | 2.4  |       |   |  | 73    |       |  |      | 2.5  |       |   |  | 67  |       |  |      | 2.5  |      
|Peru      |       |                                               | 15    |       |  |      | 0.6  |       |   |  | 33    |       |  |      | 1.2  |       |   |  | 70  |       |  |      | 2.6  |      
|Chile     |       |                                               | 9     |       |  |      | 0.3  |       |   |  | 57    |       |  |      | 2.0  |       |   |  | 60  |       |  |      | 2.3  |      
|          |       |                                               |       |       |  |      |      |       |   |  |       |       |  |      |      |       |   |  |     |       |  |      |      |      
|          | Total |                                               |       | 2,656 |  |      |      | 100.0 | % |  |       | 2,877 |  |      |      | 100.0 | % |  |     | 2,649 |  |      |      | 100.0 | %
|          |       |                                               |       |       |  |      |      |       |   |  |       |       |  |      |      |       |   |  |     |       |  |      |      |      

20



---



##### 



Customer Contracts.Our contracts with our customers have
in the past typically ranged in duration from six months to five
years and contracts with our private telecommunications network
customers have generally been three-year contracts. Under the
Argentine pesification decree, if a contract
denominated in pesosis entered into after the
decrees enactment, payments under that contract are not
entitled to be adjusted according to the CER or any other
consumer price index. Accordingly, in order to mitigate our
inflation risk, our new peso-denominated contracts in
Argentina are typically for shorter terms ranging from three to
six months. Contracts generally may be terminated by the
customer without penalty. The private telecommunications network
customers generally pay a one-time installation fee and a fixed,
monthly fee. We believe that as we further commercialize our
Broadband Network, we may develop a more flexible pricing
structure, using both a usage-based billing and fixed fee-based
billing model.

The ongoing severe economic downturn in Argentina
and recessionary economic conditions in Latin America as a
whole, has adversely affected many of our customers and caused a
number of them to terminate their contracts with us, fail to
renew their contracts, or reduce the amount of services
contracted.

Except in Brazil (and in certain instances since
the pesification decree, in Argentina), our
contracts generally provide for payment in U.S. dollars or for
payment in local currency linked to the exchange rate at the
time of invoicing between the local currency and the U.S.
dollar. The revenues of our customers are generally denominated
in local currencies. Although our customers include some of the
largest and most financially sound companies and financial
institutions in their markets, devaluation of local currencies
relative to the U.S. dollar and foreign exchange controls
restricting the exchange or convertibility of such currencies
could have a material adverse effect on the ability of our
customers to pay us for our services. Such currency devaluations
and foreign exchange controls could also result in our customers
seeking to renegotiate their contracts with us or,
alternatively, defaulting on their contracts.

Sales, Marketing and Customer
Services

We view our relationship with our customers as a
long-term partnership in which customer satisfaction is of
paramount importance. For this reason, we apply an integrated
approach to our sales, marketing and customer service functions.
We emphasize the highest quality in our sales, marketing and
customer services and an enduring commitment to providing fast
and flexible responses to customer demands. In order to
efficiently meet these challenges, we adapt and tailor our
customer service function to match the scale and complexity of
the solutions we provide.

Customers who require or are better-suited to
standardized or bundled solutions are serviced by dedicated
sales teams with shared centralized support, along with
available assistance from our 24 hours a day, 365 days a
year call centers. Customers that utilize complex, customized
solutions composed of a variety of different services are
assigned to designated multi-task customer service teams that
develop and maintain long-term, cooperative relationships with
these customers. These relationships provide us with an in-depth
understanding of the customers evolving telecommunications
service requirements and levels of service satisfaction. The
customer service team oversees all phases of initial customer
contact, service planning, installation and ongoing service.
After we establish initial contact with a potential customer,
the customer service team conducts a thorough evaluation of the
customers telecommunications needs. As a result of this
team-oriented approach, we believe that we have achieved high
levels of customer satisfaction while being able to identify new
revenue generating opportunities, customer telecommunications
solution enhancements and product or service improvements
previously overlooked or not adequately addressed by the client.

To market our new and enhanced services, such as
telephony and data centers, we have developed several sales and
marketing teams, each focusing on a particular type of service.
In addition to salaried sales and marketing personnel, we often
use the services of third-party sales representatives to assist
in generating sales and managing the contract process between us
and our potential customers. We typically pay these third
parties a commission and royalties equal to a percentage of the
revenues we collect from any contract with those customers
obtained as a result of the efforts of the third-party sales
representative.

21



---



##### 



Competition

We compete on the basis of our experience,
network quality, customer service, range of services offered and
price. Our competitors fall into three broad categories:



| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PTOs in each country where we operate                                                                                                                                                                      
|
| |  | other companies that operate competing satellite
    and terrestrial data transmission businesses, including newer
    entrants from more developed telecommunications markets outside
    of Latin America
|
| |  | large international telecommunications carriers                                                                                                                                                            

In the past, the PTOs and international
telecommunications carriers have focused on local and
long-distance telephony services. More recently, however, they
have focused a degree of attention and resources towards the
private telecommunications network systems segment of the
telecommunications market, and may be expected to increasingly
do so in the future. Several of these entities have
significantly greater financial and other resources than we do,
including greater access to financing. These competitors may
also be able to subsidize their private telecommunications
network businesses with revenues from their other business lines.

With the first group of competitors, our further
expansion into the telecommunications services market along with
continued deregulation of the telecommunications industry in
Latin America, has brought us into more direct competition with
the PTOs. Many of the PTOs in the countries where we operate
have established and marketed large customer or
grand user business teams in an attempt to provide
dedicated services to the type of customer that represents our
most important target market.

We believe that by maintaining our position as a
reliable, high quality provider of telecommunications services,
while strengthening the quality of our network and the breadth
of service offerings through our Broadband Network, we will be
able to maintain our current customers and successfully attract
new customers. We might consider strategic alliances and other
cooperative ventures with the PTOs to take advantage of each
partners relative strengths.

In the second category, our competitors include
data transmission providers. We believe that we are able to
compete successfully in data transmission services because we
offer a broad array of services, provide high quality,
custom-designed services that are tailored to meet the specific
needs of each customer and have a greater geographical footprint
for our Broadband Network than our current competitors among
these providers. Among our competitors in this category are:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | MetroRED Telecomunicaciones, owned by Fidelity
    Investments, a data transmission service operator in Argentina,
    Brazil and Mexico that offers local network services in the
    cities of Buenos Aires in Argentina, São Paulo and Rio de
    Janeiro in Brazil, and Mexico City in Mexico                                                                                                            
|
| |  | Pegasus Telecom S.A., a provider of broadband
    data transmission services throughout 25 cities in Brazil and an
    affiliate of Brazilian fixed line and wireless operator, Telemar
    Participacoes S.A.                                                                                                                                                                                               
|
| |  | Engenharia de Redes S.A., a Brazilian
    infrastructure and data services provider that uses both fiber
    optic and wireless links                                                                                                                                                                                                                                                                        
|
| |  | NetUno, a local exchange carrier and provider of
    broadband local access, Internet and private network services in
    Venezuela                                                                                                                                                                                                                                                                          
|
| |  | TechTel (an Argentine telecommunications company
    jointly owned by Grupo Techint SA, one of Argentinas
    largest industrial groups, and Telmex (Telefonos de Mexico S.A.
    de C.V.), Mexicos dominant telecommunications carrier),
    which offers long distance, data transmission and basic
    telephony services in Argentina and has announced plans to
    expand its operations into Uruguay

In the third category, major telecommunications
carriers have entered or indicated their intention to enter the
market as deregulation in Latin America and elsewhere opens new
market opportunities. Increasing competition may significantly
affect our pricing policies. We cannot assure you that any
future competition arising from major telecommunications
carriers will not adversely affect our financial condition or
results of operations.

22



---



##### 



Furthermore, we cannot assure you that competing
technologies will not become available that will negatively
affect our position. For example, technologies such as DSL can
significantly enhance the speed of traditional copper lines.
These technologies enable our PTO competitors to offer customers
high-speed services without undergoing the expense of replacing
their existing twisted-pair copper networks. This, in turn,
could negate our last mile advantage. Our private
telecommunications services could also face future competition
from entities using or proposing to use new or emerging voice
and data transmission services or technologies that are not
widely available in Latin America, such as space based systems
dedicated to data distribution services.

Rates are not regulated in our countries of
operation, and the prices for our services are strongly
influenced by market forces. We believe that increasing
competition will result in increased pricing pressures. We have
faced and expect to continue to face declining prices and may
experience margin pressure as the PTOs in the countries where we
have operations modernize their facilities, adapt to a
competitive marketplace and place greater emphasis on data
telecommunications and as other companies enter the Latin
American telecommunications market. These price and margin
declines have also accelerated, and will likely continue to do
so, as new competitors enter our markets.

The principal barriers to entry for prospective
providers of private telecommunications network services such as
ours are the development of the requisite understanding of
customer needs and the technological and commercial experience
and know-how, infrastructure to provide quality services to meet
those needs and working capital.

Regulation

Domestic Service.We
are subject to regulation by the national telecommunications
authorities of the countries where we operate, and our
operations require us to procure permits and licenses from these
authorities. While we believe that we have received all required
authorizations from regulatory authorities for us to offer our
services in the countries in which we operate, the conditions
governing our service offerings may be altered by future
legislation or regulation that could affect our business and
operations.

Cross-Border Service.We provide integrated data, voice and
video transmission under the Interplus name between and among
nineteen Latin American and Caribbean countries and the United
States. In November 2000, we were granted a license to provide
switched voice services to or from Argentina, and in November
2002 we received authorization to provide these services in
Brazil. International private line services such as Interplus
are traditionally provided by local carriers in each country
acting as correspondents and establishing dedicated
telecommunications links between their facilities. Due to our
pan-Latin American presence, we are often able to offer our
Interplus service using our own facilities and personnel at both
ends of the private line circuit. As a result of this end-to-end
control, we maintain customer service and quality assurance at
both ends of an Interplus link and realize better margins than
when we use a correspondent carrier.

In countries where we do not maintain customer
premises equipment or where we are not authorized to operate in
that fashion, our Interplus service uses our facilities in the
originating country to connect with a correspondent local
carrier in the destination country or vice-versa. To date, we
have signed Interplus correspondent agreements with carriers in
several Latin American and Caribbean countries. We charge
customers a monthly fee for Interplus that is based on the
capacity of the circuit provided.

Deregulation.Various countries in Latin America
have taken steps towards deregulation in the telecommunications
market during the last few years. Several Latin American
countries have completely or partially privatized their national
carriers, including Argentina, Brazil, Mexico and Venezuela.
Furthermore, some countries have demonopolized their dominant
telecommunications providers. For example, Argentina and
Venezuela completed the demonopolization of public telephone
services by their PTOs during 2000. We believe that these events
of deregulation, while serving to increase competition, have
presented and will continue to present significant opportunities
for us to expand our private telecommunications network services
to, from and within the region, as well as to present
opportunities for us in areas of telecommunications currently
permitted to be conducted only by the PTOs.

23



---



##### 



Employees

As of December 31, 2002, we employed a total
of 1,271 persons, of whom 453 were employed by IMPSAT Argentina,
225 by IMPSAT Brazil, and 229 by IMPSAT Colombia. Except with
respect to our Chief Executive Officer and our Chief Financial
Officer, we do not have any long-term employment contracts with
any of our employees, including management, and none of our
employees are members of any union. We believe that our
relations with our employees are good.

Item 2.     Properties

Metropolitan Area
Networks.We operate 15 metropolitan
area networks, composed of a combination of owned and leased
fiber optic and microwave links covering a total of 1,000 route
kilometers. Our first metropolitan area network was established
in Buenos Aires, Argentina in 1990. In addition, we currently
provide services over our metropolitan area networks in
Córdoba, Mendoza and Rosario, in Argentina; Bogotá,
Medellín and Cali, Colombia; Rio de Janeiro, Curitiba,
São Paulo and Belo Horizonte in Brazil; Caracas, Venezuela;
Quito and Guayaquil, Ecuador; and Lima, Peru. We also manage and
operate data transmission services offered over a fiber optic
network covering 352 route kilometers in Bogotá, Colombia,
pursuant to a joint venture with Empresa de Telecomunicaciones
de Santafe de Bogotá, the Colombian PTO that provides local
telephone service in the Bogotá region. In addition, we own
and control several microwave links in smaller cities in Latin
America.

Fiber Optic Long-Haul
Capacity.The long-haul segment of our
Broadband Network, which comprises a seamless long-haul, high
capacity fiber optic backbone extending over 8,880 route
kilometers, stretches from the Pacific Ocean at Valparaiso,
Chile to the Atlantic coast in Buenos Aires, Argentina, and from
there into Curitiba, Rio de Janeiro and São Paulo, Brazil.
We also own and operate a long haul fiber optic network
connecting the cities of Cali, Medellín and Bogotá in
Colombia. To link the Broadband Network to other parts of Latin
America and the world, we have purchased IRU capacity on Global
Crossing Ltd.s undersea digital fiber optic cable systems
(and associated terrestrial capacity) between the United States
and Latin America, including Global Crossings South
American network, as well as leased capacity from other undersea
fiber optic cable operations, including on the submarine system
between Latin America and the United States of Latin American
Nautilus S.A., an affiliate of the Telecom Italia Group. This
capacity enables our company to transmit telecommunications
traffic seamlessly from the United States to major countries in
South America using the latest fiber optic technology. For a
discussion of certain risks that could adversely affect our
rights to IRU capacity on Global Crossings network, see
Certain Considerations  We are negatively
impacted by Global Crossings insolvency.

In addition to our IRU capacity on Global
Crossings undersea fiber optic networks, we are a member
of the Americas-1 and Columbus-II undersea fiber optic cable
consortia, and have purchased an initial total capacity of 2
Mbps on each system. Americas-1, which commenced commercial
operation in December 1994, is a 4,960 mile fiber optic cable
system connecting Vero Beach, Florida with the U.S. Virgin
Islands, Trinidad, Brazil and Venezuela. Columbus-II links
Mexico, the United States, the U.S. Virgin Islands, Spain,
Portugal and Italy with about 7,440 miles of fiber optic cable.
We also have reserved up to 18 Mbps, 4 Mbps and 24 Mbps of
capacity on the Americas-II, Pan American and Arcos I undersea
fiber optic cable networks, respectively. The 8,300 km
Americas-II fiber optic submarine cable connects St. Croix,
Puerto Rico, Curacao, Venezuela and Brazil. Pan American runs
between the U.S. Virgin Islands, Aruba, Venezuela, Colombia,
Panama, Ecuador, Peru and Chile. Arcos I, an 8,600 km fiber
optic cable system, connects the United States with 14 Caribbean
and Latin American nations.

Data Centers.To
complement our Broadband Network infrastructure, we operate in
major cities in Latin America 14 advanced data center hosting
facilities with an aggregate of approximately 500,000 gross
square feet. These state-of-the-art facilities, which are
capable of supporting the most advanced application hosting
services, are located in Buenos Aires, Mendoza, Córdoba and
Rosario in Argentina; São Paulo, Rio de Janeiro and
Curitiba in Brazil; Santiago, Chile; Fort Lauderdale, United
States; Mexico City, Mexico; Bogotá, Colombia; Caracas,
Venezuela; Quito, Ecuador; and Lima, Peru.

24



---



##### 



Teleports.We own
and operate teleports in Buenos Aires, Argentina; São
Paulo, Brazil; Bogotá, Colombia; Caracas, Venezuela; Quito,
Ecuador; Mexico City, Mexico; Lima, Peru; and Fort Lauderdale,
Florida, United States. In addition to the teleport in Fort
Lauderdale, Florida, IMPSAT USA operates leased teleport
facilities in New Jersey. We also own and operate regional
teleports in Mendoza, Córdoba, Rosario, Tucumán, Mar
del Plata, La Plata and Neuquén in Argentina;
Medellín, Cali and Barranquilla in Colombia; Guayaquil,
Ecuador; and Rio de Janeiro and Curitiba, Brazil.

Satellite Capacity.Our satellite transmissions use both
C-band (4-7 GHz) and Ku-band (10-18 GHz) frequencies. As of
December 31, 2002, we had a total available leased capacity
of 143.0 MHz. Our lease payments for satellite capacity totaled
approximately $32.1 million in 2002. We will contract for
additional leased satellite capacity if business requires. A
portion of our satellite capacity is leased by our wholly-owned
subsidiary, International Satellite Capacity Holding, Ltd. This
subsidiarys principal function is to lease private
telecommunications capacity from telecommunications carriers and
then sublease this capacity at market rates to our operating
subsidiaries. We believe that this method of centralizing our
leasing of telecommunications capacity provides us with better
terms.

Item 3.     Legal
Proceedings

As more fully described in
Item 1  Business and
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations
we sought protection under Chapter 11 of the United States
Bankruptcy Code on June 11, 2002. We developed a Plan that
was approved by the Bankruptcy Court on December 16, 2002.
On March 25, 2003, the Plan became effective and we emerged
from the proceedings under Chapter 11 of the United States
Bankruptcy Code pursuant to the terms of the Plan.

We are also involved in or subject to various
litigation and legal proceedings incidental to the normal
conduct of our business, including with respect to regulatory
matters.

IPO Allocations Class Action.As previously reported, on
November 1, 2001, a lawsuit (the IPO
Class Action) was filed in the United States District
Court for the Southern District of New York against our company,
certain individuals who were then officers and directors of our
company, and the underwriters to our initial public offering
(IPO). This lawsuit alleged on behalf of a proposed class of all
shareholders that our company and its underwriters violated
various provisions of the securities laws in connection with the
IPO in February 2000. Pursuant to the Plan, the plaintiffs in
the IPO Class Action received in connection with their
claims the assignment of any insurance proceeds that we receive
in connection with the litigation, but otherwise the claims of
the plaintiffs against us or any of our other assets have been
discharged as part of our Chapter 11 proceedings.

360networks, Inc.During June 2001, we terminated a
series of contracts that we had signed in the first quarter of
2001 with 360americas network (Bermuda) Ltd., a subsidiary of
360networks, Inc., and certain other subsidiaries of
360networks, Inc. (collectively, 360networks), to
construct and provide IRU dark fiber, capacity services and
conduit to 360networks over the Broadband Network in Argentina
and Brazil, including the new Argentina-Brazil link, as a result
of the breach by 360networks of its payment obligations under
those contracts. Between March and May 2001, we made segments of
the IRU dark fiber and capacity services available to
360networks for acceptance, but 360networks failed to make
certain payments as required by our contracts with them.
360networks also failed to make certain payments for collocation
space in our telehouses in Sao Paulo and Rio de Janeiro, Brazil
and Buenos Aires, Argentina, and we terminated those contracts
as well. We also terminated a contract with 360networks for
collocation space in Caracas, Venezuela, also for payment
default by 360networks.

Our IRU dark fiber, capacity services and
construction contracts with 360networks contemplated total
payments of approximately $98.8 million in advance upon
delivery of the IRU dark fiber, capacity services and conduit
construction to 360networks and additional recurring payments,
totaling approximately $45.0 million over the term of the
contracts, for maintenance services. As of the termination of
the contracts, 360networks had paid us a total of
$25.8 million and was in default on additional payments
totaling $32.0 million. In addition, 360networks was in default
on payments for collocation services totaling $0.8 million.

25



---



##### 



We commenced arbitration and litigation
proceedings against 360networks for damages under the terminated
contracts for the provision of IRU dark fiber and capacity
services, as contemplated by the relevant agreements. During
November 2002, we reached an agreement (the Settlement
Agreement) with 360networks pursuant to which we agreed to
dismiss our arbitration and litigation proceedings against
360networks and, in return, we became entitled to certain funds
totaling $22.6 million that 360networks had advanced to us
in connection with the contracts between us and 360networks.
These funds had been recorded by us as deferred revenues during
the pendency of the litigation and arbitration proceedings. In
addition, under the Settlement Agreement, we received from
360networks assets with a fair value of approximately $1.6
million. The Settlement Agreement became effective on
December 20, 2002.

Global Crossing Ltd.Global Crossing Ltd. filed for
protection under Chapter 11 of the Bankruptcy Code in
January 2002, and the Global Crossing subsidiaries to whom our
company provides services and infrastructure, as described
below, were included in Global Crossings Chapter 11
proceedings during August 2002. We are party to a series of
agreements with Global Crossing for the provision of
telecommunications services. Pursuant to those agreements, our
company constructed a terrestrial portion of Global
Crossings South American network between landing points on
the Atlantic Ocean in Argentina and the Pacific Ocean in Chile,
granted Global Crossing a series of indefeasible rights of use
(IRU) over ducts and dark fiber on its broadband
telecommunication network in Argentina, Brazil and Peru,
provided Global Crossing with collocation space and related
services in its telehouses in Argentina, Brazil, Chile,
Venezuela and Peru and provided Global Crossing with maintenance
services for their telecommunications assets in Latin America.
In addition, we acquired IRU and leased capacity on Global
Crossings South American undersea fiber optic cable system
in order to connect our Broadband Network with other parts of
Latin America and the world.

Commencing in the first quarter of 2002 and
subsequent to the filing of Global Crossings petition
under Chapter 11, Global Crossing has disputed a number of
invoices that we have delivered to it in connection with the
services which we are rendering to Global Crossing and has
failed to make full payment in accordance with the terms of our
invoices. The principal disputed matters include the following:

Beginning in the first quarter of 2002, Global
Crossing disputed certain of our invoices sent to its Argentine
and Brazilian subsidiaries for collocation and related services
in our telehouses in those countries. On January 15, 2003,
we filed a motion in the Global Crossing Chapter 11
proceeding seeking an order that Global Crossing either
irrevocably reject or assume the telehouse agreements and that
Global Crossing make payment of all shortfalls under the
telehouse agreements after the respective petition dates of the
Global Crossing debtors through December 31, 2002, in the
aggregate amount of $1,069,051.57, plus interest on the past due
amounts, as administrative expense claims. On February 19,
2003, Global Crossing responded to our motion. In its response,
Global Crossing stated its intention to assume the Brazil and
Argentina telehouse agreements, along with three other telehouse
agreements covering collocation space in Santiago, Chile, Lima,
Peru and Caracas, Venezuela, although it also stated its right
under its plan of reorganization to reconsider its assumption of
such agreements at any time prior to the effective date of the
Global Crossing plan of reorganization. Global Crossing denied
that it owed any unpaid amounts with respect to the Argentine or
Brazilian telehouse agreements. We and Global Crossing are
currently seeking to agree to a schedule for evidence, briefing
and adjudication of the disputes regarding the Argentine and
Brazilian telehouse agreements.

In October 2002, Global Crossing failed to make
payment of the full amount of recurring service charges for
operation and maintenance of the IRUs that Global Crossing
acquired under the TAC Turnkey Construction and IRU Agreement
dated September 22, 1999 (the TAC Agreement).
During the first quarter of 2003, Global Crossing also paid
recurring service charges under the TAC Agreement and the other
backhaul agreements in amounts less than we assert to be
contractually required. As part of our January 15, 2003
motion in Global Crossings bankruptcy proceeding, we
requested that the bankruptcy court find that Global Crossing
has failed to make the full recurring service charges required
by the TAC Agreement and order Global Crossing to make payment
of such amounts as administrative expenses through
December 31, 2002, in the amount of $614,470.50, plus
interest on the past due amounts as set forth in the TAC
Agreement. In its response to our motion, Global Crossing
requested that the bankruptcy court defer determination of our

26



---



##### 



entitlement to the recurring service charges
until such time as Global Crossing has decided to assume or
reject the TAC Agreement and other backhaul agreements.


On March 26, 2003, Global Crossing filed an
adversary proceeding with the bankruptcy court overseeing its
Chapter 11 case asserting a proprietary interest in the
IRUs granted to them under the TAC Agreement and other backhaul
agreements entered into between the two companies. Our response
to Global Crossings complaint is due on April 25,
2003. Our company and Global Crossing are currently seeking to
agree to a schedule for evidence, briefing and adjudication of
Global Crossings asserted proprietary interest in the IRUs
arising under the TAC Agreement and other backhaul agreements.

On March 26, 2003, Global Crossing
Bandwidth, Inc., one of the debtors in Global Crossings
Chapter 11 proceeding, filed an adversary proceeding in the
Global Crossing Chapter 11 case claiming IMPSAT USA had
failed to pay Global Crossing Bandwidth, Inc. a total of
$466,820 for IP transit services pursuant to a Carrier Service
Agreement dated January 19, 2001 between IMPSAT USA and
Global Crossing Bandwidth, Inc. We intend to dispute Global
Crossing Bandwidths complaint on the basis that IMPSAT USA
has paid in full all amounts owed by it under the Carrier
Services Agreement. Our answer to the complaint in this matter
is due on April 25, 2003.

See Certain Considerations  We
are negatively impacted by Global Crossings
insolvency for more information concerning our commercial
relationships and current disputes with Global Crossing.

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

On or around November 1, 2002, ballots
respecting the Plan and the related disclosure statement dated
as of October 23, 2002 were circulated to our security
holders and other persons entitled to vote on the Plan. Notice
of the Plan was also mailed to our equity holders. The majority
of holders of the Class 2 and Class 3 claims voted in
favor of the restructuring set forth in the Plan, which was
confirmed by the Bankruptcy Court on December 16, 2002. No
vote was taken of the equity holders as they were not entitled
to vote in accordance with the United States Bankruptcy Code.

27



---



##### 



PART II

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

Our Old Common Stock had been traded on the
Nasdaq National Market under the symbol IMPT since
the effective date of our initial public offering on
February 4, 2000. On May 15, 2002, the Old Common
Stock was delisted from the Nasdaq National Market because the
Old Common Stock failed to maintain a minimum market value of $3
over 30 consecutive trading days and failed to maintain a
minimum market value of public float of $15,000,000. Since
May 15, 2002, the Old Common Stock was traded on the Nasdaq
Over-The-Counter Bulletin Board under the symbol
IMPTQ.

The following tables shows the high and low sales
price of the Old Common Stock for each fiscal quarter between
January 1, 2001 through May 15, 2002 as reported on
Nasdaq National Market System and, after May 15, 2002
through December 31, 2002, on the Nasdaq Over-The-Counter
Bulletin Board.

|        |  |      |      |     |  |   |      | 
|------- |  | ---- | ---- | --- |  | - | ---- | 
|        |  |     
|        |  | 2002
|        |  |     
|Quarter |  | High |      | Low
|        |  |      |      |    
|First   |  | $    | 0.20 |     |  | $ | 0.05 | 
|Second  |  |      | 0.15 |     |  |   | 0.01 | 
|Third   |  |      | 0.04 |     |  |   | 0.01 | 
|Fourth  |  |      | 0.02 |     |  |   | 0.01 | 

|        |  |      |      |     |  |   |      | 
|------- |  | ---- | ---- | --- |  | - | ---- | 
|        |  |     
|        |  | 2001
|        |  |     
|Quarter |  | High |      | Low
|        |  |      |      |    
|First   |  | $    | 4.44 |     |  | $ | 3.70 | 
|Second  |  |      | 2.19 |     |  |   | 2.00 | 
|Third   |  |      | 0.32 |     |  |   | 0.18 | 
|Fourth  |  |      | 0.22 |     |  |   | 0.20 | 

In accordance with the Plan, all pre-existing
equity interests of IMPSAT Fiber Networks, Inc. were cancelled
on the Effective Date. We anticipate the New Common Stock to
trade on the Nasdaq Over-The-Counter Bulletin Board some time
during the second quarter of 2003. As of March 31, 2003
there was no market for our New Common Stock and there were
approximately nine holders of record of our New Common Stock,
not including beneficial owners in nominee or street name. Our
board of directors has not declared any dividends on our Old
Common Stock in past, and we do not anticipate paying any cash
dividends on the New Common Stock in the foreseeable future. In
addition, the terms of our Series A Notes and Series B
Notes restrict our ability to pay dividends on the New Common
Stock.

The information required concerning compensation
plans under which equity securities of our company are
authorized for issuance is set forth in Item 12 of this
Report under the caption Equity Compensation Plan
Information.

Item 6.     Selected
Financial Data

The following selected financial data are for our
company on a consolidated basis in accordance with U.S. GAAP.
The following financial data have been derived from our
companys audited consolidated financial statements for the
respective years. The selected financial data set forth below
should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our financial statements and notes included
at the back of this Report.

28



---



##### 



|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |         |         |         |          |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------- | ------------------ | ------------------------ | ------- | ------- | -------- | ------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | ------- | ------- | ------- | -------- | -
|                                                                      |                                                                         |                                         
|                                                                      |                                                                         | Year Ended December 31,                 
|                                                                      |                                                                         |                                         
|                                                                      |                                                                         | 1998                                     |                    | 1999                     |         | 2000    |          | 2001    |         | 2002   
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |        
|                                                                      |                                                                         |                                         
|                                                                      |                                                                         | (in thousands, except per share amounts)
|Statement of operations data:                                         |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Net revenues from services:                                           |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      | Data and value added services                                           |                                          | $                  | 183,213                  |         |         | $        | 195,110 |         |         | $        | 214,268  |         |         | $        | 239,816  |         |         | $        | 180,471 |        
|                                                                      | Internet                                                                |                                          |                    | 20,207                   |         |         |          | 26,044  |         |         |          | 35,996   |         |         |          | 45,403   |         |         |          | 27,243  |        
|                                                                      | Telephony                                                               |                                          |                    |                         |         |         |          |        |         |         |          | 235      |         |         |          | 11,762   |         |         |          | 14,327  |        
|                                                                      | Services to carriers                                                    |                                          |                    |                         |         |         |          |        |         |         |          | 885      |         |         |          | 7,360    |         |         |          | 6,985   |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      |                                                                         | Total net revenues from services         |                    |                          | 203,420 |         |          |         | 221,154 |         |          |          | 251,384 |         |          |          | 304,341 |         |          |         | 229,026 |        
|Sales of equipment                                                    |                                                                         |                                          | 4,669              |                          |         |         | 7,297    |         |         |         | 13,083   |          |         |         | 14,952   |          |         |         | 1,168    |        
|Broadband Network development revenues                                |                                                                         |                                          |                   |                          |         |         |         |         |         |         | 57,676   |          |         |         | 7,197    |          |         |         |         |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      |                                                                         |                                          | Total net revenues |                          |         | 208,089 |          |         |         | 228,451 |          |          |         | 322,143 |          |          |         | 326,490 |          |         |         | 230,194 |         
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Costs and expenses:                                                   |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      | Direct costs:                                                           |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |         |        
|                                                                      |                                                                         | Contracted services                      |                    |                          | 17,897  |         |          |         | 21,853  |         |          |          | 29,573  |         |          |          | 40,629  |         |          |         | 19,199  |        
|                                                                      |                                                                         | Other direct costs                       |                    |                          | 16,096  |         |          |         | 31,055  |         |          |          | 21,349  |         |          |          | 35,416  |         |          |         | 25,935  |        
|                                                                      |                                                                         | Leased capacity                          |                    |                          | 31,228  |         |          |         | 49,666  |         |          |          | 74,188  |         |          |          | 87,057  |         |          |         | 74,679  |        
|                                                                      |                                                                         | Broadband network cost                   |                    |                          |        |         |          |         |        |         |          |          | 34,729  |         |          |          | 3,335   |         |          |         |        |        
|                                                                      |                                                                         | Cost of equipment sold                   |                    |                          | 3,665   |         |          |         | 5,187   |         |          |          | 12,308  |         |          |          | 10,472  |         |          |         | 576     |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      |                                                                         |                                          |                    | Total Direct Costs       |         |         | 68,886   |         |         |         | 107,761  |          |         |         | 172,147  |          |         |         | 176,909  |         |         |         | 120,389  |  
|                                                                      | Salaries and wages                                                      |                                          |                    | 38,198                   |         |         |          | 46,174  |         |         |          | 68,922   |         |         |          | 82,095   |         |         |          | 47,894  |        
|                                                                      | Selling, general and administrative                                     |                                          |                    | 37,189                   |         |         |          | 40,631  |         |         |          | 58,471   |         |         |          | 52,964   |         |         |          | 28,204  |        
|                                                                      | Asset impairment charge                                                 |                                          |                    |                         |         |         |          |        |         |         |          |         |         |         |          | 381,888  |         |         |          |        |        
|                                                                      | Gain on early extinguishment of debt                                    |                                          |                    |                         |         |         |          |        |         |         |          |         |         |         |          |         |         |         |          | (16,367 | )      
|                                                                      | Depreciation and amortization                                           |                                          |                    | 36,946                   |         |         |          | 130,071 |         |         |          | 84,488   |         |         |          | 123,678  |         |         |          | 82,766  |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      |                                                                         |                                          |                    | Total costs and expenses |         |         | 181,219  |         |         |         | 324,637  |          |         |         | 384,028  |          |         |         | 817,534  |         |         |         | 262,886  |  
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Operating income (loss)                                               |                                                                         |                                          | 26,870             |                          |         |         | (96,186  | )       |         |         | (61,885  | )        |         |         | (491,044 | )        |         |         | (32,692  | )      
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Other income (expenses):                                              |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      | Interest income and investment gains                                    |                                          |                    | 4,686                    |         |         |          | 7,418   |         |         |          | 27,394   |         |         |          | 10,687   |         |         |          | 1,907   |        
|                                                                      | Interest expense                                                        |                                          |                    | (49,384                  | )       |         |          | (62,979 | )       |         |          | (112,894 | )       |         |          | (143,521 | )       |         |          | (75,815 | )      
|                                                                      | Net gain (loss) on foreign exchange                                     |                                          |                    | 675                      |         |         |          | (8,042  | )       |         |          | (10,614  | )       |         |          | (41,182  | )       |         |          | (91,884 | )      
|                                                                      | Recognition of other-than-temporary decline in
    value of investments |                                          |                    |                         |         |         |          |        |         |         |          |         |         |         |          | (20,650  | )       |         |          | (794    | )      
|                                                                      | Reorganization items                                                    |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          | (23,297 | )      
|                                                                      | Legal Settlement                                                        |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          | 26,229  |        
|                                                                      | Other (loss) income, net                                                |                                          |                    | 760                      |         |         |          | 15,305  |         |         |          | 704      |         |         |          | (2,125   | )       |         |          | (5,896  | )      
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|                                                                      |                                                                         |                                          |                    | Total other expenses     |         |         | (43,263  | )       |         |         | (48,298  | )        |         |         | (95,410  | )        |         |         | (196,791 | )       |         |         | (169,550 | )
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Loss before income taxes                                              |                                                                         |                                          | (16,393            | )                        |         |         | (144,484 | )       |         |         | (157,295 | )        |         |         | (687,835 | )        |         |         | (202,242 | )      
|Benefit from (provision for) foreign income taxes                     |                                                                         |                                          | (3,805             | )                        |         |         | 20,733   |         |         |         | 4,547    |          |         |         | (27,420  | )        |         |         | (2,273   | )      
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Loss before dividends on redeemable preferred
    stock               |                                                                         |                                          | (20,198            | )                        |         |         | (123,751 | )       |         |         | (152,748 | )        |         |         | (715,255 | )        |         |         | (204,515 | )      
|Cumulative effect of a change in accounting
    principle, net of tax |                                                                         |                                          | (1,269             | )                        |         |         |         |         |         |         |         |          |         |         |         |          |         |         |         |        
|(Income) loss attributable to minority interest                       |                                                                         |                                          | (2,502             | )                        |         |         | 6,225    |         |         |         |         |          |         |         |         |          |         |         |         |        
|Dividends on redeemable preferred stock                               |                                                                         |                                          | (10,018            | )                        |         |         | (14,017  | )       |         |         | (1,393   | )        |         |         |         |          |         |         |         |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Net loss                                                              |                                                                         | $                                        | (33,987            | )                        |         | $       | (131,543 | )       |         | $       | (154,141 | )        |         | $       | (715,255 | )        |         |         | (204,515 | )      
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Net loss per common share: Basic and diluted                          |                                                                         | $                                        | (0.71              | )                        |         | $       | (2.42    | )       |         | $       | (1.74    | )        |         | $       | (7.82    | )        |         | $       | (2.24    | )      
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        
|Weighted average number of common shares: Basic
    and diluted       |                                                                         |                                          | 47,983             |                          |         |         | 54,447   |         |         |         | 88,534   |          |         |         | 91,429   |          |         |         | 91,429   |        
|                                                                      |                                                                         |                                          |                    |                          |         |         |          |         |         |         |          |          |         |         |          |          |         |         |          |        

29



---



##### 



|                                                                |  |                    |          |      |  |      |         |      |  |      |           |  |  |   |           |   |  |   |          |  
|--------------------------------------------------------------- |  | ------------------ | -------- | ---- |  | ---- | ------- | ---- |  | ---- | --------- |  |  | - | --------- | - |  | - | -------- | -
|                                                                |  |                   
|                                                                |  | As of December 31,
|                                                                |  |                   
|                                                                |  | 1998               |          | 1999 |  | 2000 |         | 2001 |  | 2002
|                                                                |  |                    |          |      |  |      |         |      |  |     
|                                                                |  |                   
|                                                                |  | (in thousands)    
|Balance Sheet Data:                                             |  |                    |          |      |  |      |         |      |  |      |           |  |  |   |           |   |  |   |          |  
|Cash and cash equivalents                                       |  | $                  | 90,021   |      |  | $    | 97,507  |      |  | $    | 67,737    |  |  | $ | 35,606    |   |  | $ | 32,563   |  
|Trading investments                                             |  |                    |         |      |  |      |        |      |  |      | 240,892   |  |  |   | 29,319    |   |  |   | 23,021   |  
|Total current assets                                            |  |                    | 159,099  |      |  |      | 179,026 |      |  |      | 458,873   |  |  |   | 165,768   |   |  |   | 106,016  |  
|Broadband Network, net                                          |  |                    |         |      |  |      | 71,868  |      |  |      | 364,221   |  |  |   | 310,598   |   |  |   | 228,471  |  
|Property, plant and equipment, net                              |  |                    | 330,726  |      |  |      | 310,330 |      |  |      | 381,674   |  |  |   | 214,459   |   |  |   | 175,477  |  
|Investments in common stock                                     |  |                    | 10,708   |      |  |      | 235,925 |      |  |      | 15,091    |  |  |   | 3,307     |   |  |   | 86       |  
|Total assets                                                    |  |                    | 527,218  |      |  |      | 828,332 |      |  |      | 1,374,750 |  |  |   | 718,574   |   |  |   | 520,683  |  
|Total current liabilities                                       |  |                    | 97,910   |      |  |      | 196,931 |      |  |      | 220,305   |  |  |   | 1,133,635 |   |  |   | 402,986  |  
|Total short-term debt and current portion of
    long-term debt |  |                    | 40,400   |      |  |      | 38,677  |      |  |      | 52,980    |  |  |   | 967,399   |   |  |   | 281,680  |  
|Total long-term debt, net                                       |  |                    | 379,292  |      |  |      | 445,634 |      |  |      | 915,263   |  |  |   | 23,189    |   |  |   | 27,592   |  
|Liabilities subject to compromise                               |  |                    |         |      |  |      |        |      |  |      |          |  |  |   |          |   |  |   | 727,522  |  
|Minority interest                                               |  |                    | 13,071   |      |  |      |        |      |  |      |          |  |  |   |          |   |  |   |         |  
|Redeemable preferred stock                                      |  |                    | 135,018  |      |  |      | 149,035 |      |  |      |          |  |  |   |          |   |  |   |         |  
|Stockholders (deficiency) equity                               |  |                    | (101,519 | )    |  |      | 15,341  |      |  |      | 158,585   |  |  |   | (552,642  | ) |  |   | (722,615 | )

|                                 |                      |                         |         |          |   |      |         |          |   |      |         |          |   |  |         |         |   |  |        |         |  
|-------------------------------- | -------------------- | ----------------------- | ------- | -------- | - | ---- | ------- | -------- | - | ---- | ------- | -------- | - |  | ------- | ------- | - |  | ------ | ------- | -
|                                 |                      |                        
|                                 |                      | Year Ended December 31,
|                                 |                      |                        
|                                 |                      | 1998                    |         | 1999     |   | 2000 |         | 2001     |   | 2002
|                                 |                      |                         |         |          |   |      |         |          |   |     
|                                 |                      |                        
|                                 |                      | (in thousands)         
|Other Financial Data:            |                      |                         |         |          |   |      |         |          |   |      |         |          |   |  |         |         |   |  |        |        
|Cash flow provided by (used in): |                      |                         |         |          |   |      |         |          |   |      |         |          |   |  |         |         |   |  |        |        
|                                 | Operating activities |                         |         | 16,740   |   |      |         | 3,849    |   |      |         | (87      | ) |  |         | (71,077 | ) |  |        | 26,392  |  
|                                 | Investing activities |                         |         | (128,155 | ) |      |         | (133,975 | ) |      |         | (511,481 | ) |  |         | 51,885  |   |  |        | (11,635 | )
|                                 | Financing activities |                         |         | 191,523  |   |      |         | 139,336  |   |      |         | 485,695  |   |  |         | (5,961  | ) |  |        | (17,246 | )
|Capital expenditures             |                      |                         | 109,934 |          |   |      | 155,440 |          |   |      | 447,471 |          |   |  | 226,825 |         |   |  | 20,483 |        

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

Overview

Reorganization.As
discussed above under Business  Chapter 11
Filing and Emergence, the Bankruptcy Court confirmed the
Plan on December 16, 2002. In accordance to the terms of
the Plan, we formally emerged from bankruptcy on the Effective
Date, March 25, 2003. Pursuant to the Plan, on the
Effective Date, all of the shares of our Old Common Stock,
options granted under our stock option plans and any other
equity interests were cancelled, retired and eliminated with no
consideration paid thereon. We also adopted a new 2003 Stock
Incentive Plan and terminated our 1998 Stock Option Plan and our
1999 Stock Option Plan. Also under the Plan, we restructured our
obligations with certain holders of our Original Vendor
Financing Agreements and the holders of our former Senior Notes.
On the Effective Date, in full satisfaction of the claims of the
2005/2008 Holders, we issued 9.8 million shares of New
Common Stock (as decreased by the number of shares necessary to
allow for the allocation of the Common Stock Reserve Pool to
Post-Effective Date Contingencies and other general unsecured
claims (see Business  Chapter 11 Filing
and Emergence)) in accordance with the Plan. Each holder
of our Notes Due 2003 has received, in full satisfaction of its
claims, including the outstanding principal and all accrued and
unpaid interest thereon, its ratable portion of our $67,531,000
aggregate principal amount of Series A Notes. In full
satisfaction of their claims, the holders of the Original Vendor
Financing Agreements and other creditors of our operating
subsidiaries holding guarantees by our parent holding company of
such indebtedness who voted to accept the Plan have received,
inter alia, $23.9 million in aggregate principal
amount of our new Series B Notes and restructured senior
debt of one or more of our operating subsidiaries in the amounts
provided for in the Plan, and an aggregate of 3,155,244 New
Warrants. We also issued, pursuant to the Plan 200,000 shares of
New Common Stock to certain of our officers in accordance with
our 2003 Stock Incentive Plan.

Pursuant to our reorganization, we have
substantially reduced our outstanding debt and annual interest
expense and increased our liquidity. At December 31, 2002,
prior to the reorganization, our long-term debt,

30



---



##### 



including current maturities and estimated
liabilities subject to Chapter 11 proceedings, aggregated
approximately $1.09 billion. Such liabilities at
December 31, 2002, adjusted to give pro formaeffect
to the consummation of the reorganization, aggregate
approximately $267.0 million. Also at December 31,
2002, our total indebtedness aggregated $1.04 billion and
our cash and cash equivalents totaled $32.6 million. As of
the Effective Date, our total indebtedness was approximately
$264.9 million and our cash and cash equivalents totaled
approximately $61.1 million. Our reported net interest
expense for 2002 totaled $73.9 million (not including
$52.2 million of contractually accrued interest on our
unsecured, pre-petition obligations, which, pursuant to the
provisions of the Bankruptcy Code, ceased to accrue at and after
June 11, 2002, the date of our Chapter 11 filing). As
a consequence of our Chapter 11 reorganization, we estimate
that our net cash interest expense will be reduced to
approximately $18.7 million during 2003.


Upon our emergence from bankruptcy on
March 25, 2003, we have adopted fresh start
reporting as required by American Institute of Certified
Public Accountants Statement of Position 90-7, Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code (SOP 90-7). Under SOP 90-7 fresh start
reporting, a new reporting entity is considered to be created
and the recorded amounts of assets and liabilities are adjusted
to reflect their estimated fair values at the date fresh start
reporting is applied. Among other things, this requires us to
allocate the reorganization value of our reorganized company to
its specific tangible and identifiable assets and liabilities.
The effect of the reorganization and the implementation of SOP
90-7 fresh start reporting on our consolidated financial
statements as if we had formally emerged from bankruptcy on
December 31, 2002 is discussed in detail in Note 17
(unaudited) to our audited consolidated financial
statements included elsewhere in this Report. As a result of the
implementation of SOP 90-7 fresh start reporting, the
consolidated financial statements of our company from and after
its emergence from bankruptcy will not be comparable to the
consolidated financial statements of prior periods.

Revenues.Our
contracts with our customers have in the past typically ranged
in duration from six months to five years and contracts with our
private telecommunications network customers have generally been
three-year contracts. Under the Argentine
pesification decree, if a contract
denominated in pesosis entered into after the
decrees enactment, payments under that contract are not
entitled to be adjusted according to the CER or any other
consumer price index. Accordingly, in order to mitigate our
inflation risk, our new peso-denominated contracts in
Argentina will typically be for shorter terms ranging from three
to six months. The customer generally pays an installation
charge at the beginning of the contract and a monthly fee based
on the quantity and type of equipment installed. Except in
Brazil and, since the pesification decree, in
Argentina, the fees stipulated in the contracts are generally
denominated in U.S. dollar equivalents. See Certain
Considerations  We are vulnerable to currency
fluctuations . . . and
 Currency Risks. Services (other than
installation fees) are billed on a monthly, predetermined basis,
which coincide with the rendering of the services. We report our
revenues net of deductions for sales taxes.

We have experienced, and anticipate that we will
continue to experience, downward pressure on our prices as we
expand our customer base, confront growing competition for
private telecommunications network services, and endure the
effects of economic downturns in our countries of operation.
When we have renewed and/or expanded our contracts with existing
customers, the prices we charge have generally declined.

Although we believe that our geographic
diversification provides some protection against economic
downturns in any particular country, our results of operations
and business prospects depend upon the overall financial and
economic conditions in Latin America. Most of the countries in
which we operate are undergoing, or have experienced in recent
years, political and economic volatility. With the exception of
the United States, each of the countries in which we operate
have suffered in recent years and, in some cases, continue to
experience, economic recession. In particular, Argentina (our
largest market in terms of revenues generated) and Venezuela are
experiencing severe economic and political crises. See
Certain Considerations  Economic and political
conditions in Latin America pose numerous risks to our
operations. These conditions may have material adverse
effects on our business, results of operation and financial
condition.

31



---



##### 



Costs and Expenses.Our costs and expenses principally
include:



| |   |                                             
| | - | --------------------------------------------
| |  | direct costs                                
|
| |  | salaries and wages                          
|
| |  | selling, general and administrative expenses
|
| |  | depreciation and amortization               

Our direct costs include payments for leased
satellite transponder and fiber optic capacity. The completion
of the Broadband Network has decreased our payments for leased
capacity as we have shifted transmission from leased satellite
facilities to our Broadband Network after satellite contracts
expire. The other principal items composing direct costs are
contracted services costs, and other direct costs. Contracted
services costs include costs of maintenance and installation
(and de-installation) services provided by outside contractors.
Installation and de-installation costs are the costs we incur
when we install or remove earth stations, microstations and
other equipment from customer premises. Other direct costs
include:



| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | licenses and other fees                                        
|
| |  | sales commissions paid to third-party sales
    representatives
|
| |  | allowance for doubtful accounts                                

Our selling, general and administrative expenses
consist principally of:



| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | publicity and promotion costs                                                    
|
| |  | fees and other remuneration                                                      
|
| |  | travel and entertainment                                                         
|
| |  | rent                                                                             
|
| |  | plant services, insurance and corporate
    telecommunication and energy expenses

Currency Risks.Except in Argentina (since the pesification
decree, to the extent discussed below) and Brazil, our contracts
with customers generally provide for payment in U.S. dollars or
for payment in local currency linked to the exchange rate
between the local currency and the U.S. dollar at the time of
invoicing. Accordingly, inflationary pressures on local
economies in the other countries in which we operate did not
have a material effect on our revenues during 2002.
Nevertheless, given that the exchange rate is generally set at
the date of invoicing and that we in some cases experience
substantial delays in collecting receivables, we are exposed to
exchange rate risk, even in countries other than Argentina and
Brazil. Furthermore, under Brazilian law and to the extent
discussed above, under Argentinas
pesification decree, our contracts with
customers in Brazil cannot and, under certain circumstances, our
contracts with customers in Argentina may not, be linked to the
exchange rate between the local currency and the U.S. dollar.
Accordingly, operations in Argentina and Brazil increase our
exposure to exchange rate risks. In addition, the foreign
currency exchange and transfer controls established by the
Venezuelan government in February 2003 are likely to adversely
affect the collectibility of our dollar-denominated contracts in
Venezuela.

In early January 2002, the government of
President Eduardo Duhalde, who abandoned the decade-old fixed
peso-dollar exchange rate and permitted the pesoto
float freely against the U.S. dollar. The pesofree
market opened on January 11, 2002 and traded at 1.65 pesos to
the U.S. dollar and has traded as low as 3.87 pesosto
the U.S. dollar on June 26, 2002. As of March 31,
2003, the floating exchange rate was 2.88 pesosto the
U.S. dollar. The devaluation of the Argentine pesowill
generally affect our consolidated financial statements by
generating foreign exchange gains or losses on
dollar-denominated monetary liabilities and assets of IMPSAT
Argentina and will generally result in a decrease, in U.S.
dollar terms, in our revenues, costs and expenses in Argentina.

Since the pesification decree,
IMPSAT Argentinas customer contracts and operating cash
inflows are now predominantly denominated in pesos.
However, IMPSAT Argentinas debt service payments and a

32



---



##### 



significant portion of its costs (including
capital equipment purchases and payments for certain leased
telecommunications capacity) remain denominated and payable in
U.S. dollars. Accordingly, our financial condition and results
of operations in Argentina are dependent upon IMPSAT
Argentinas ability to generate sufficient pesos(in
U.S. dollar terms) to pay its costs and expenses and to satisfy
its debt service requirements. Because of the recent nature of
these events and the significant uncertainties regarding the
extent and duration of the devaluation and the direction of the
fiscal policies in Argentina, management cannot presently
determine or reasonably estimate the impact a continued economic
crisis in that country could possibly have on IMPSAT
Argentinas and our consolidated cash flows, financial
condition, and results of operations.


Our operations in Brazil have also been affected
by currency devaluation during 2002. Investors became
increasingly uneasy about Brazil due to, among other factors, an
increasingly uncertain political environment leading up to the
election at the end of October 2002 of Luiz Inacio Lula da
Silva. The markets are awaiting further clarification as to the
policies that will be implemented by his administration and the
effect of these policies, although there has been a positive
market reaction to Mr. da Silvas actions and appointments
thus far. The election was preceded by the rapid decline in the
value of Brazils currency compared to the U.S. dollar and
speculation about the ability of Brazil to service its
approximately $239 billion of public debt, much of which
must be refinanced in the next several years. At
December 31, 2001, the realtraded at a rate of
R$2.41 = $1.00. The realdepreciated during 2002,
reaching a low of R$4.03 = $ 1.00 during the third and fourth
quarters of that year, and closing at R$3.53 = $1.00 at
December 31, 2002. At March 31, 2003, the realtraded at a rate of R$3.46 = $1.00.

Widespread discontent with the policies of the
current Venezuelan government produced a country-wide strike in
the beginning of December 2002 that lasted two months and
seriously disrupted economic activity in Venezuela and severely
curtailed the production and export of oil, the major source of
Venezuelas foreign exchange. In response, on
February 5, 2003, the Venezuelan government imposed foreign
exchange and price controls, making it difficult for our
customers in that country to obtain the U.S. dollars needed to
make payments due to us in U.S. dollars on a timely basis. These
foreign exchange controls could also limit our ability to
convert local currency into U.S. dollars and transfer funds out
of Venezuela. At December 31, 2001, the
bolivartraded at a rate of Bs.769.00 = $1.00, at
December 31, 2002, it traded at a rate of Bs.1,392.00 =
$1.00, and at February 5, 2003, it traded at the rate of
Bs.1,924 = $1.00. On February 6, 2003, the Venezuelan
government set a single fixed exchange rate for the bolivaragainst the U.S. dollar of approximately Bs.1,600 = $1.00 as
part of the new currency controls.

Global Crossing Insolvency.We are party to a series of agreements
with several subsidiaries of Global Crossing Ltd. for the
provision of telecommunications services. Pursuant to those
agreements, which were initially signed in 1999, we constructed
a terrestrial portion of Global Crossings South American
network between landing points on the Atlantic Ocean in
Argentina and the Pacific Ocean in Chile, granted Global
Crossing a series of indefeasible rights of use (IRU) over
ducts and dark fiber on our Broadband Network in Argentina,
Brazil and Peru, provided Global Crossing with collocation space
and related services in our data centers in Argentina, Brazil,
Chile, Venezuela and Peru and provided Global Crossing with
maintenance services for their telecommunications assets in
Latin America. In addition, we acquired IRU and leased capacity
on Global Crossings South American undersea fiber optic
cable system in order to connect our Broadband Network with
other parts of Latin America and the world.

During 2002, we recognized revenues totaling
$14.8 million from Global Crossing for the services
provided under our agreements with Global Crossing. Of this
amount, $10.6 million represented services that were billed
on a quarterly basis, and $4.2 million represented the
recognition of revenue that had been deferred under the IRUs
that we granted to Global Crossing. In 2002, Global Crossing
invoiced us a total of $2.0 million, principally for
maintenance services on the IRUs that we have acquired from
Global Crossing. In general, invoices under our agreements with
Global Crossing are submitted quarterly in advance and are
payable 30 days after receipt.

In January 2002, Global Crossing Ltd. filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
Although the Global Crossing subsidiaries to whom we provide
services and infrastructure were not originally included in
Global Crossing Ltd.s Chapter 11 filing, during
August 2002 Global Crossing Ltd.

33



---



##### 



amended its Chapter 11 proceeding to include
its subsidiaries that are counterparties to the agreements with
us.


As of December 31, 2002, Global Crossing
owed us $3.3 million that we invoiced to them during 2002.
We have recorded a provision for doubtful accounts of
$2.1 million against these receivables. As of March 7,
2003, Global Crossing owed us $4.8 million that we invoiced
them during 2002 and the first quarter of 2003. We have recorded
a provision for doubtful accounts of $2.8 million against
these receivables.

We have disputed a total of $[0.1] million that
Global Crossing has invoiced us for services through the end of
2002. The amounts that we owe Global Crossing are principally
owed to Global Crossing Bandwidth, Inc., a subsidiary of Global
Crossing that is among the Global Crossing parties that have
filed for relief under Chapter 11.

Global Crossings reorganization plan was
approved in December 2002. Global Crossing is awaiting receipt
of certain regulatory approvals and satisfaction of other
conditions to the effectiveness of its plan of reorganization,
and there is no guaranty as to when or whether it will emerge
from bankruptcy. The difficulties being experienced by Global
Crossing, including Global Crossings Chapter 11
proceeding, have had an adverse effect on our financial
condition and operations. At a minimum, Global Crossings
bankruptcy proceedings have caused delays in our efforts to
enforce our contracts with Global Crossing. In the event of a
rejection of any of the contracts by Global Crossing, any
pre-petition damages that we might have in respect of such
rejected contracts would be treated as claims in the applicable
Global Crossing bankruptcy proceedings, which claims may not
realize any meaningful recovery to us. In this regard, in
connection with Global Crossings filing at the end of
August 2002 to include certain of its subsidiaries in its
Chapter 11 proceedings, Global Crossing rejected one of its
agreements with us, pursuant to which agreement IMPSAT Colombia
had agreed to lease space in its telehouse in Bogota, Colombia
to Global Crossing. More recently, Global Crossing has indicated
in its filings related to its Chapter 11 proceeding that it
might reject some or all of the other agreements that it has
with us.

We are monitoring the Global Crossing commercial
relationship and the outcome of its bankruptcy proceedings
carefully. We have filed motions in Global Crossings
bankruptcy proceeding seeking an order that Global Crossing make
payment to us of the amounts claimed by us and that Global
Crossing either accept or reject its contracts with us. Global
Crossing has disputed that it owes us any amounts under the
contracts at issue and has filed a proceeding seeking that the
bankruptcy court grant Global Crossing a property right in the
IRUs that it acquired from us. See Certain
Considerations  We are negatively impacted by Global
Crossings insolvency and Legal
Proceedings  Global Crossing.

Critical Accounting Policies

In the ordinary course of business, our company
has made a number of estimates and assumptions relating to the
reporting of results of operations and financial position in the
preparation of its financial statements in conformity with U.S.
generally accepted accounting principles (GAAP). We
use our best judgment based on our knowledge of existing facts
and circumstances and actions that we may undertake in the
future, as well as the advice of external experts in determining
the estimates that affect our consolidated financial statements.
Actual results could differ significantly from those estimates
under different assumptions and conditions. Our most critical
accounting policies are:

Revenue Recognition.We record revenues from data,
value-added telephony, IT solutions and Internet services
monthly as the services are provided. Equipment sales are
recorded upon delivery to and acceptance by the customer.

We have entered into agreements with carriers
granting indefeasible rights of use (IRUs) and
access to portions of our Broadband Network capacity and
infrastructure. Pursuant to these agreements, we receive fixed
advance payments for the IRUs and recognize the revenue from the
IRUs ratably over the life of the IRUs. Amounts received in
advance are recorded as deferred revenue.

34



---



##### 



Non-Monetary Transactions.We may exchange capacity on our
Broadband Network for capacity from other carriers through the
exchange of IRUs. We account for these transactions as an
exchange of similar IRUs at historical carryover basis with no
revenue, gain or loss recognized.

Broadband Network and Property, Plant and
Equipment.Our business is capital
intensive. We record at cost our telecommunications network
assets and other improvements that, in managements
opinion, extend the useful lives of the underlying assets, and
depreciate such assets and improvements over their estimated
useful lives. Our telecommunications network is highly complex
and, due to innovation and enhancements, certain components of
the network may lose their utility faster than anticipated. We
periodically reassess the economic lives of these components and
make adjustments to their expected lives after considering
historical experience and capacity requirements, consulting with
the vendors, and assessing new product and market demands and
other factors. When these factors indicate that network
components may not be useful for as long as anticipated, we
depreciate their remaining book values over their residual
useful lives. The timing and deployment of new technologies
could affect the estimated remaining useful lives of our
telecommunications network assets, which could have a
significant impact on our results of operations in the future.

Impairment of Long-Lived Assets.We periodically review the carrying
amounts of our Broadband Network and property, plant, and
equipment to determine whether current events or circumstances
warrant adjustments to the carrying amounts. As part of this
review, we analyze the projected undiscounted cash flows
associated with our Broadband Network and property, plant, and
equipment. Considerable management judgment is required in
establishing the assumptions necessary to complete this
analysis. Although we believe these estimates to be reasonable,
they could vary significantly from actual results and our
estimates could change based on market conditions. Variances in
results or estimates could cause changes to the carrying value
of our assets including, but not limited to, recording
additional impairment charges for some of these assets in future
periods. During the year ended December 31, 2001, we
recorded a $381.9 million impairment charge primarily
related to our telecommunications network.

Basis for Translation.IMPSAT maintains its accounts in U.S.
dollars. The accounts of our subsidiaries are maintained in the
currencies of the respective countries. In accordance with
Statement of Financial Accounting Standards No. 52,
Foreign Currency Translation, the accounts of our
subsidiaries are translated from local currency amounts to U.S.
dollars. The method of translation is determined by the
functional currency of our subsidiaries. A subsidiarys
functional currency is defined as the currency of the primary
environment in which a subsidiary operates and is determined
based on managements judgment. When a subsidiarys
accounts are not maintained in the functional currency, the
financial statements must be remeasured into the functional
currency. This involves remeasuring monetary assets and
liabilities using current exchange rates and non-monetary assets
and liabilities using historical exchange rates. The adjustments
generated by remeasurement are included in our consolidated
statement of operations.

When the local currency of a subsidiary is
determined to be the functional currency, the statements are
translated into U.S. dollars using the current rate method. The
adjustments generated by translation using the current rate
method are accumulated in an equity account entitled
Accumulated other comprehensive loss within our
consolidated balance sheets.

Financial Reporting by Entities in
Reorganization under the Bankruptcy Code.Our consolidated financial statements
have been prepared in accordance with AICPA Statement of
Position (SOP) 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code.
Pursuant to SOP 90-7, an objective of financial statements
issued by an entity in Chapter 11 is to reflect its
financial evolution during the proceeding. For that purpose, the
consolidated financial statements for periods including and
subsequent to filing of our Chapter 11 petition should
distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of our
business. Expenses and other items not directly related to
ongoing operations are reflected separately in the consolidated
statement of operations as reorganization items.

Upon consummation of the Plan, we will apply
Fresh-Start reporting in accordance with GAAP and
the requirements of SOP 90-7. Under Fresh Start reporting, the
reorganization value of our company, which generally represents
its going concern value, is ultimately determined pursuant to
the approval of the Plan by its creditors and confirmation of
the Plan by the Bankruptcy Court. Upon the Effective Date, a new
capital

35



---



##### 



structure will be established and assets and
liabilities, other than deferred taxes, will be stated at their
relative fair values. Deferred taxes are determined in
conformity with the Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards
No. 109.


These policies, which are those that are most
important to the portrayal of our financial condition and
results of operations and require managements most
difficult, subjective and complex judgments, often are a result
of the need to make estimates about the effect of matters that
are inherently uncertain. We have not made any changes in any of
these critical accounting policies during 2002, nor have we made
any material changes in any of the critical accounting estimates
underlying these accounting policies during 2002.

Results of Operations

The following table summarizes our results of
operations:

|               |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |      |      |       | 
|-------------- | -------------------------------------- | -------------------------------------------------- | -------------------------------- | ------ | ------- | ------- |  | ---- | ---- | ----- | ---- | ------ | ------- | ------- |  | ---- | ---- | ----- |  | ------ | ------- | ------- |  | ---- | ---- | ----- | 
|               |                                        |                                                    |                                  |        |         |         |  |      |      |      
|               |                                        | Year Ended December 31,                           
|               |                                        |                                                   
|               |                                        |                                                    |                                  |       
|               |                                        |                                                    |                                  |        |         | 2000    |  |      |      |       | 2001 |        |         |         |  | 2002 |      |      
|               |                                        |                                                    |                                  |        |         |         |  |      |     
|               |                                        | (in
thousands and as a percentage of consolidated)
|               |                                        | revenues                                          
|Net revenues : |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|               | Net revenues from services :           |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |      |     
|               |                                        | Data and value added services                      |                                  | $      | 214,268 |         |  |      | 66.5 | %     |      | $      | 239,816 |         |  |      | 73.5 | %     |  | $      | 180,471 |         |  |      | 78.4 | %    
|               |                                        | Internet                                           |                                  |        | 35,996  |         |  |      | 11.2 |       |      |        | 45,403  |         |  |      | 13.9 |       |  |        | 27,243  |         |  |      | 11.8 |      
|               |                                        | Telephony                                          |                                  |        | 235     |         |  |      | 0.1  |       |      |        | 11,762  |         |  |      | 3.6  |       |  |        | 14,327  |         |  |      | 6.2  |      
|               |                                        | Services to carriers                               |                                  |        | 885     |         |  |      | 0.3  |       |      |        | 7,360   |         |  |      | 2.2  |       |  |        | 6,985   |         |  |      | 3.0  |      
|               |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|               |                                        |                                                    | Total net revenues from services |        |         | 251,384 |  |      |      | 78.0  |      |        |         | 304,341 |  |      |      | 93.2  |  |        |         | 229,026 |  |      |      | 99.5  | 
|               | Sale of equipment                      |                                                    |                                  | 13,083 |         |         |  | 4.1  |      |       |      | 14,952 |         |         |  | 4.6  |      |       |  | 1,168  |         |         |  | 0.5  |     
|               | Broadband network development revenues |                                                    |                                  | 57,676 |         |         |  | 17.9 |      |       |      | 7,197  |         |         |  | 2.2  |      |       |  |       |         |         |  |     |     
|               |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|               |                                        |                                                    | Total net revenues               |        |         | 322,143 |  |      |      | 100.0 |      |        |         | 326,490 |  |      |      | 100.0 |  |        |         | 230,194 |  |      |      | 100.0 | 
|               |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|Direct costs : |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|               | Contracted services                    |                                                    |                                  | 29,573 |         |         |  | 9.2  |      |       |      | 40,629 |         |         |  | 12.4 |      |       |  | 19,199 |         |         |  | 8.3  |     
|               | Other direct costs                     |                                                    |                                  | 21,349 |         |         |  | 6.6  |      |       |      | 35,416 |         |         |  | 10.8 |      |       |  | 25,935 |         |         |  | 11.3 |     
|               | Leased capacity                        |                                                    |                                  | 74,188 |         |         |  | 23.0 |      |       |      | 87,057 |         |         |  | 26.7 |      |       |  | 74,679 |         |         |  | 32.4 |     
|               | Broadband network cost                 |                                                    |                                  | 34,729 |         |         |  | 10.8 |      |       |      | 3,335  |         |         |  | 1.0  |      |       |  |       |         |         |  |     |     
|               | Cost of equipment sold                 |                                                    |                                  | 12,308 |         |         |  | 3.8  |      |       |      | 10,472 |         |         |  | 3.2  |      |       |  | 576    |         |         |  | 0.3  |     
|               |                                        |                                                    |                                  |        |         |         |  |      |      |       |      |        |         |         |  |      |      |       |  |        |         |         |  |     
|               |                                        |                                                    | Total direct costs               |        |         | 172,147 |  |      |      | 53.4  |      |        |         | 176,909 |  |      |      | 54.2  |  |        |         | 120,389 |  |      |      | 52.3  | 

36



---



##### 



|                                                                        |  |                                                    |         |   |      |  |      |   |  |   |         |  |      |  |       |   |  |   |         |   |      |  |       |  
|----------------------------------------------------------------------- |  | -------------------------------------------------- | ------- | - | ---- |  | ---- | - |  | - | ------- |  | ---- |  | ----- | - |  | - | ------- | - | ---- |  | ----- | -
|                                                                        |  |                                                    |         |   |      |  |      |   |  |  
|                                                                        |  | Year Ended December 31,                           
|                                                                        |  |                                                   
|                                                                        |  |                                                    |         |  
|                                                                        |  |                                                    |         |   | 2000 |  |      |   |  |   |         |  | 2001 |  |       |   |  |   |         |   | 2002 |  |       |  
|                                                                        |  |                                                    |         |   |      | 
|                                                                        |  | (in
thousands and as a percentage of consolidated)
|                                                                        |  | revenues                                          
|Salaries and wages                                                      |  |                                                    | 68,922  |   |      |  | 21.4 |   |  |   | 82,095  |  |      |  | 25.1  |   |  |   | 47,894  |   |      |  | 20.8  |  
|Selling, general and administrative expenses                            |  |                                                    | 58,471  |   |      |  | 18.2 |   |  |   | 52,964  |  |      |  | 16.2  |   |  |   | 28,204  |   |      |  | 12.3  |  
|Asset impairment charge                                                 |  |                                                    |        |   |      |  |     |   |  |   | 381,888 |  |      |  | 117.0 |   |  |   |        |   |      |  |      |  
|Gain on early extinguishment of debt                                    |  |                                                    |        |   |      |  |     |   |  |   |        |  |      |  |      |   |  |   | (16,367 | ) |      |  | (7.1  | )
|Depreciation and amortization                                           |  |                                                    | 84,488  |   |      |  | 26.2 |   |  |   | 123,678 |  |      |  | 37.9  |   |  |   | 82,766  |   |      |  | 36.0  |  
|Interest expense, net                                                   |  |                                                    | 85,500  |   |      |  | 26.5 |   |  |   | 132,834 |  |      |  | 40.7  |   |  |   | 73,908  |   |      |  | 32.1  |  
|Net loss on foreign exchange                                            |  |                                                    | 10,614  |   |      |  | 3.3  |   |  |   | 41,182  |  |      |  | 12.6  |   |  |   | 91,884  |   |      |  | 39.9  |  
|Recognition of other-than-temporary decline in
    value of investments |  |                                                    |        |   |      |  |     |   |  |   | 20,650  |  |      |  | 6.3   |   |  |   | 794     |   |      |  | 0.3   |  
|Reorganization items                                                    |  |                                                    |        |   |      |  |     |   |  |   |        |  |      |  |      |   |  |   | 23,297  |   |      |  | 10.1  |  
|Legal settlement                                                        |  |                                                    |        |   |      |  |     |   |  |   |        |  |      |  |      |   |  |   | (26,229 | ) |      |  | (11.4 | )
|Other (income) loss, net                                                |  |                                                    | (704    | ) |      |  | (0.2 | ) |  |   | 2,125   |  |      |  | 0.7   |   |  |   | 5,896   |   |      |  | 2.5   |  
|(Benefit from) provision for foreign income taxes                       |  |                                                    | (4,547  | ) |      |  | (1.4 | ) |  |   | 27,420  |  |      |  | 8.4   |   |  |   | 2,273   |   |      |  | 1.0   |  
|Net loss                                                                |  | $                                                  | 154,141 |   |      |  | 47.8 | % |  | $ | 715,255 |  |      |  | 219.1 | % |  | $ | 204,515 |   |      |  | 88.7  | %
|                                                                        |  |                                                    |         |   |      |  |      |   |  |   |         |  |      |  |       |   |  |   |         |   |      |  |       |  

2002 Compared to 2001

Revenues.Our total
net revenues for 2001 and 2002 equaled $326.5 million and
$230.2 million. Net revenues were composed of net revenues
from services, sales of equipment and Broadband Network
development revenues. The decrease in our net revenues was
principally due to the continuing adverse economic conditions
being experienced throughout Latin America, including the
significant devaluations of the Argentine pesoand the
Brazilian realduring 2002.

Our net revenues from services for 2002 totaled
$229.0 million, a decrease of $75.3 million (or 24.7%)
compared to 2001. Our net revenues from services during 2002
included net revenues from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include
    satellite and broadband data transmission services, data center
    services, and other value-added services                                                                                                                                                                                                                     
|
| |  | Internet, which is composed of our Internet
    backbone access and managed modem services                                                                                                                                                                                                                                                                                        
|
| |  | telephony, including local, national and
    international long-distance services, and                                                                                                                                                                                                                                                                                            
|
| |  | services to carriers, which consist of our
    wholesale services to other telecommunications carriers
    (including revenue recognition from the sale of IRU capacity on
    our Broadband Network to, and our provision of switching and
    transportation of telecommunications traffic services for, such
    carriers), and related maintenance services to those carriers.

The following table shows our revenues from
services by business lines (after elimination of intercompany
transactions) for the periods indicated:

37



---



##### 



|                                 |                               |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |       |       |  
|-------------------------------- | ----------------------------- | ----------------------------- | ------- | ------- | ------- | ----------- | ------- | ------- | ------- | ----------- | ------- | ----- | ---- | - | ------- | ------ | ------- |  | ----- | ----- | ----- | -
|                                 |                               |                              
|                                 |                               | December 31,                 
|                                 |                               |                              
|                                 |                               | 2000                          |         | 2001    |         | % change(1) |         | 2002    |         | % change(1)
|                                 |                               |                               |         |         |         |             |         |         |         |            
|                                 |                               |                              
|                                 |                               | (dollar amounts in thousands)
|Data and value added services:   |                               |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|                                 | Satellite                     |                               | $       | 159,265 |         |             | $       | 137,053 |         |             |         | (13.9 | )%   |   | $       | 88,547 |         |  |       | (35.4 | )%   
|                                 | Broadband                     |                               |         | 51,260  |         |             |         | 85,579  |         |             |         | 67.0  |      |   |         | 77,733 |         |  |       | (9.2  | )    
|                                 | Other value added services(2) |                               |         | 3,743   |         |             |         | 17,184  |         |             |         | 359.1 |      |   |         | 14,191 |         |  |       | (17.4 | )    
|                                 |                               |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|                                 |                               | Total                         |         |         | 214,268 |             |         |         | 239,816 |             |         |       | 11.9 |   |         |        | 180,471 |  |       |       | (24.7 | )
|Internet                         |                               |                               | 35,996  |         |         |             | 45,403  |         |         |             | 26.1    |       |      |   | 27,243  |        |         |  | (40.0 | )    
|Telephony                        |                               |                               | 235     |         |         |             | 11,762  |         |         |             | 4,905.1 |       |      |   | 14,327  |        |         |  | 21.8  |      
|Services to carriers             |                               |                               | 885     |         |         |             | 7,360   |         |         |             | 731.6   |       |      |   | 6,985   |        |         |  | (5.1  | )    
|                                 |                               |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      
|Total net revenues from services |                               | $                             | 251,384 |         |         | $           | 304,341 |         |         |             | 21.1    |       |      | $ | 229,026 |        |         |  | (24.8 | )    
|                                 |                               |                               |         |         |         |             |         |         |         |             |         |       |      |   |         |        |         |  |       |      



---



|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Increase (decrease) compared to previous
    year.                                                             
|   
|(2) | Includes our data center services, systems
    integration and other information technology solutions services.

The decrease in our net revenues from services
during 2002 as compared to 2001 primarily resulted from lower
revenues from data and value added services and Internet
services (offset in part by an increase in our revenues from
telephony services during 2002). Changes in our revenues during
2002 as compared to 2001 include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our revenues from satellite services during 2002
    declined in comparison to 2001 due to (i) the effect of
    devaluations of the Argentine pesoand the Brazilian
    real, (ii) lower satellite-based services volume (as
    we transferred telecommunications services to our Broadband
    Network), (iii) downward pressure on our prices because of
    competition and adverse economic conditions, and (iv) a
    number of customer cancellations or non-renewals.                                                                    
|
| |  | Our revenues from broadband services decreased
    during 2002 as compared to 2001 due to the negative effect on
    these revenues (in U.S. dollar terms) primarily attributable to
    the devaluation of the Argentine pesoand the Brazilian
    real.                                                                                                                                                                                                                                                                                         
|
| |  | The decline in our revenues from Internet
    services during 2002 over the prior year is attributable to
    (i) pricing pressure (because of competition and adverse
    economic conditions), (ii) the effect of devaluations of
    the Argentine pesoand the Brazilian real, and
    (iii) our sale during 2002 of our retail Internet service
    provider business in Ecuador.                                                                                                                                                             
|
| |  | Our telephony services revenues increased during
    2002 as compared to 2001. Our telephony services in Argentina,
    which we introduced as a new service in 2001, are utilized by
    third-party resellers. The overall increase in our telephony
    services revenues for 2002 over 2001 was generated in connection
    with our increased delivery during that period of switched voice
    services to corporate customers in Argentina and international
    call terminations to end-user customers in Peru and the United
    States.
|
| |  | Our revenues from services to carriers decreased
    during 2002 compared to 2001. Our revenues from services to
    carriers during 2002 have been impacted by the cancellation of
    our contracts with 360networks in June 2001 and a general
    decline in demand by telecommunications companies for
    dark and lit fiber capacity.                                                                                                                                                                                                  

We had 2,649 customers at December 31, 2002,
compared to 2,877 customers at December 31, 2001.

38



---



##### 



The following table shows the evolution of our
customer base for the periods indicated:

|                 |       |                     |       |             |  |  |     |       |  |  |       |      |  
|---------------- | ----- | ------------------- | ----- | ----------- |  |  | --- | ----- |  |  | ----- | ---- | -
|                 |       |                     |       |            
|                 |       | December            |       | December    |  | 
|                 |       | 31, 2001            |       | 31, 2002    |  | 
|                 |       |                     |       |             |  | 
|                 |       | Number of Customers |       | % Change(1)
|                 |       |                     |       |            
|IMPSAT Argentina |       |                     | 1,100 |             |  |  | 953 |       |  |  | (13.4 | )   
|IMPSAT Colombia  |       |                     | 699   |             |  |  | 678 |       |  |  | (3.0  | )   
|IMPSAT Brazil    |       |                     | 387   |             |  |  | 366 |       |  |  | (5.4  | )   
|IMPSAT Venezuela |       |                     | 245   |             |  |  | 215 |       |  |  | (12.2 | )   
|IMPSAT Ecuador   |       |                     | 236   |             |  |  | 216 |       |  |  | (8.5  | )   
|IMPSAT Mexico    |       |                     | 47    |             |  |  | 24  |       |  |  | (48.9 | )   
|IMPSAT Chile     |       |                     | 57    |             |  |  | 60  |       |  |  | 5.3   |     
|IMPSAT Peru      |       |                     | 33    |             |  |  | 70  |       |  |  | 112.1 |     
|IMPSAT USA       |       |                     | 73    |             |  |  | 67  |       |  |  | (8.2  | )   
|                 |       |                     |       |             |  |  |     |       |  |  |       |     
|                 | Total |                     |       | 2,877       |  |  |     | 2,649 |  |  |       | (7.9 | )
|                 |       |                     |       |             |  |  |     |       |  |  |       |     






|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | Increase (decrease) as of December 31,
    2002 compared to as of December 31, 2001.

During 2002, we lost a net total of 228
customers, a decrease of 7.9% compared to the prior year. Due to
adverse economic conditions in Argentina, we lost a net total of
147 customers in that country during 2002. In addition to poor
economic conditions in Argentina and Brazil, negative or
sluggish economic growth persisted throughout most of the Latin
American region during 2002. During 2002, we have not
experienced any significant customer losses to our competitors.

In addition to net revenues from services, our
total net revenues for 2002 included revenues from sales of
equipment. Revenues from equipment sales for 2002 totaled
$1.2 million, a $13.8 million (or 92.2%) decrease over
2001. We did not record any Broadband Network development
revenues during 2002. Our Broadband Network development revenues
for 2001 totaled $7.2 million. Because equipment sales are
ancillary to our core business and are generally engaged in by
our company only on an opportunistic basis, we are currently
unable to predict more than minimal sales of equipment during
2003. We do not anticipate any Broadband Network development
revenues during 2003.

The following table shows by operating subsidiary
our revenues from services and total revenues (in each case,
including intercompany transactions) for the periods indicated:

|                 |                               |                         |   |         |  |      |   |         |  |  |   |        | 
|---------------- | ----------------------------- | ----------------------- | - | ------- |  | ---- | - | ------- |  |  | - | ------ | 
|                 |                               |                        
|                 |                               | Year Ended December 31,
|                 |                               |                        
|                 |                               | 2000                    |   | 2001    |  | 2002
|                 |                               |                         |   |         |  |     
|                 |                               |                        
|                 |                               | (in thousands)         
|IMPSAT Argentina |                               |                         |   |         |  |      |   |         |  |  |   |       
|                 | Services                      |                         | $ | 116,004 |  |      | $ | 122,284 |  |  | $ | 56,009 | 
|                 | Sale of equipment             |                         |   | 12,221  |  |      |   | 7,962   |  |  |   | 538    | 
|                 | Broadband network development |                         |   | 32,272  |  |      |   |        |  |  |   |       | 
|                 |                               |                         |   |         |  |      |   |         |  |  |   |       
|                 | Total                         |                         |   | 160,497 |  |      |   | 130,246 |  |  |   | 56,547 | 
|                 |                               |                         |   |         |  |      |   |         |  |  |   |       
|IMPSAT Colombia  |                               |                         |   |         |  |      |   |         |  |  |   |       
|                 | Services                      |                         |   | 54,819  |  |      |   | 62,087  |  |  |   | 58,300 | 
|                 | Sale of equipment             |                         |   |        |  |      |   | 493     |  |  |   | 14     | 
|                 |                               |                         |   |         |  |      |   |         |  |  |   |       
|                 | Total                         |                         |   | 54,819  |  |      |   | 62,580  |  |  |   | 58,314 | 
|                 |                               |                         |   |         |  |      |   |         |  |  |   |       

39



---



##### 



|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |        | 
|------------------------------------------------- | ----------------------------- | ----------------------- |  | ------ |  | ---- |  | ------ |  |  |  | ------ | 
|                                                  |                               |                        
|                                                  |                               | Year Ended December 31,
|                                                  |                               |                        
|                                                  |                               | 2000                    |  | 2001   |  | 2002
|                                                  |                               |                         |  |        |  |     
|                                                  |                               |                        
|                                                  |                               | (in thousands)         
|IMPSAT Brazil                                     |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 27,947 |  |      |  | 42,816 |  |  |  | 35,804 | 
|                                                  | Sale of equipment             |                         |  | 308    |  |      |  | 2,627  |  |  |  | 9      | 
|                                                  | Broadband network development |                         |  | 9,336  |  |      |  | 2,552  |  |  |  |       | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 37,591 |  |      |  | 47,995 |  |  |  | 35,813 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|IMPSAT Venezuela                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 28,038 |  |      |  | 31,411 |  |  |  | 31,285 | 
|                                                  | Sale of equipment             |                         |  | 89     |  |      |  | 1,235  |  |  |  | 349    | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 28,127 |  |      |  | 32,646 |  |  |  | 31,364 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|IMPSAT Ecuador                                    |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 14,263 |  |      |  | 15,756 |  |  |  | 16,633 | 
|                                                  | Sale of equipment             |                         |  | 379    |  |      |  | 79     |  |  |  | 87     | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 14,642 |  |      |  | 15,835 |  |  |  | 16,720 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|IMPSAT Chile                                      |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 278    |  |      |  | 7,431  |  |  |  | 9,494  | 
|                                                  | Sale of equipment             |                         |  |       |  |      |  | 1,415  |  |  |  |       | 
|                                                  | Broadband network development |                         |  | 16,068 |  |      |  | 4,645  |  |  |  |       | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 16,346 |  |      |  | 13,491 |  |  |  | 9,494  | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|IMPSAT Peru                                       |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 568    |  |      |  | 6,020  |  |  |  | 11,015 | 
|                                                  | Sale of equipment             |                         |  | 904    |  |      |  | 1,021  |  |  |  | 152    | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 1,472  |  |      |  | 7,041  |  |  |  | 11,167 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|IMPSAT USA                                        |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 27,653 |  |      |  | 37,051 |  |  |  | 33,315 | 
|                                                  | Sale of equipment             |                         |  | 47     |  |      |  | 118    |  |  |  | 14     | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 27,700 |  |      |  | 37,169 |  |  |  | 33,329 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|International Satellite Capacity Holding, Ltd.(1) |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 8,992  |  |      |  | 14,941 |  |  |  | 16,616 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 8,992  |  |      |  | 14,941 |  |  |  | 16,616 | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|Other                                             |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Services                      |                         |  | 3,525  |  |      |  | 4,394  |  |  |  | 3,599  | 
|                                                  | Sale of equipment             |                         |  | 27     |  |      |  | 2      |  |  |  | 5      | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       
|                                                  | Total                         |                         |  | 3,552  |  |      |  | 4,396  |  |  |  | 3,604  | 
|                                                  |                               |                         |  |        |  |      |  |        |  |  |  |       



---



|    |                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This subsidiarys principal function is to
    lease private telecommunications capacity from
    telecommunications carriers and then sublease this capacity at
    market rates to our operating subsidiaries.

The growth in our net revenues from services has
been adversely impacted during the past three years by the
continued adverse economic conditions in our most important
markets in Argentina, Brazil and Colombia, as well as in
Venezuela. See Certain Considerations  Economic
and political conditions in Latin America pose numerous risks to
our operations.

40



---



##### 



Argentina, which has been mired in economic
recession for the past four years, is our largest market in
terms of number of customers and, until the devaluation of the
pesoin 2002, in revenues. In the first weeks of January
2002, Argentina defaulted on its external debt payments and
devalued its currency, exacerbating declining commercial
confidence and activity and further inflating exorbitant costs
of financing for Argentine companies. Argentina continues to
experience adverse economic conditions and a lack of access to
international capital markets and has faced during 2002 internal
disruption and social unrest. For 2003, we do not expect that
the conditions affecting the Argentine economy will subside or
that future economic developments in Argentina will improve in
any significant respect, and it is possible that the Argentine
economic and political environment could deteriorate even
further. The political and economic crises in Argentina, our
largest country of operation, will continue to have a materially
adverse impact on our financial condition and results of
operations. See Certain Considerations 
Economic and political conditions in Latin America pose numerous
risks to our operations for a description of the economic
and political crises in Argentina.

During 2002, IMPSAT Argentinas financial
condition and results of operations were severely and negatively
affected by currency fluctuations, inflation, interest rates,
taxation and other political, social and economic developments
in and affecting Argentina. The ongoing severe economic downturn
in Argentina has adversely affected many of our customers in
that country and caused a number of them to terminate their
contracts with us, fail to renew their contracts, or reduce the
amount of services contracted. See Business 
Customers. During the remainder of 2003, we expect these
negative conditions to continue to adversely impair our
business, financial condition and results of operations.

Our total net revenues at IMPSAT Argentina for
2002 totaled $56.6 million, a decrease of
$73.7 million (or 56.6%) compared to 2001. This decrease
was primarily caused by the devaluation of the Argentine pesofollowing the implementation of the
pesification decree and general recessionary
conditions in that country.

Our results in Brazil also were adversely
affected during 2002 as compared to 2001 by the devaluation of
the Brazilian realagainst the U.S. dollar. At
December 31, 2001, the realtraded at a rate of
R$2.41 = $1.00, and at December 31, 2002 it had depreciated
46.5% to R$3.53 = $1.00. As of March 31, 2003, the realtraded at a rate of R$3.46 = $1.00. These and prior
devaluations have had a negative effect on our
real-denominated revenues. The devaluation of the realand the decline in growth in the Brazilian economy have been
caused in part by the continued recession in the region, a
general aversion to emerging markets by foreign direct and
financial investors and the overall decline in worldwide
economic production. In addition, there remains some concern
among the international investor community that Mr. da Silva,
who was elected president of Brazil on October 27, 2002,
will cause Brazil to alter its policies in a manner that would
adversely affect its economy. These conditions have had, and can
be expected to continue to have, an adverse effect on IMPSAT
Brazils and our companys overall financial condition
and results of operations.

IMPSAT Brazils revenues from services for
2002 totaled $35.8 million, a decrease of $7.0 million
(or 16.4%) compared to the same periods in 2001. This decrease
in revenues relates primarily to the effect of the devaluation
of the real. In local currency terms, IMPSAT
Brazils revenues for 2002 decreased by 3.8% as compared to
2001.

IMPSAT Colombia recorded revenues from services
of $58.3 million during 2002, compared to
$62.1 million for 2001. Our net revenues from services in
Colombia have been negatively impacted by sustained adverse
economic conditions in that country and increased competition.
Colombias economy continues to suffer as a result of
devaluations of the Colombian pesoand an enduring civil
war.

Revenues from services at IMPSAT Venezuela
equaled $31.3 million for 2002, compared to
$31.4 million for 2001. On February 12, 2002,
Venezuelas government floated its currency, ending a
five-year-old regime that permitted the bolivarto trade
only within a fixed-band against the U.S. dollar. As a result,
devaluation of the bolivaroccurred. Venezuela has
experienced and continues to experience political and economic
uncertainty following the attempted military coup staged against
that countrys President Hugo Chavez during the first weeks
of April 2002 and the labor strikes that commenced in December
2002 and ended two months later. In response to this political
and economic turmoil affecting Venezuela, that countrys
government imposed foreign exchange and price controls during
February 2003, making it difficult for our

41



---



##### 



customers in that country to obtain the U.S.
dollars needed to make payments due to us in U.S. dollars on a
timely basis. These foreign exchange controls could also limit
our ability to convert local currency into U.S. dollars and
transfer funds out of Venezuela. See Certain
Considerations  Economic and political conditions in
Latin America pose numerous risks to our operations. The
continuation or worsening of this crisis in Venezuela could have
a material adverse effect on IMPSAT Venezuelas results of
operations and financial condition. See Certain
Considerations  Economic and political conditions in
Latin America pose numerous risks to our operations.


Direct Costs.Our
direct costs for 2002 totaled $120.4 million, a decrease of
$56.5 million (or 31.9%), compared to 2001. As compared to
2001, this reduction during 2002 was caused principally by
(i) the devaluation of local currencies in Argentina,
Brazil, Colombia and Venezuela during 2002, which had the effect
of decreasing our direct costs in those countries in U.S. dollar
terms, and (ii) our incurring significantly lower total
costs of equipment sold and no Broadband Network development
costs during 2002. Of our total direct costs for 2002,
$42.8 million related to the operations of IMPSAT
Argentina, compared to $86.7 million at IMPSAT Argentina
for 2001. Direct costs for IMPSAT Brazil totaled
$21.9 million for 2002, compared to $32.3 million for 2001.
Direct costs of our subsidiaries are described prior to the
elimination of intercompany transactions.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Contracted Services.Contracted
    services costs include costs of maintenance and installation
    (and de-installation) services provided by outside contractors.
    During 2002, our contracted services costs totaled
    $19.2 million, a decrease of $21.4 million (or 52.7%)
    compared to 2001. Of this amount, maintenance costs for our
    telecommunications network infrastructure, including the
    Broadband Network, totaled $14.4 million for 2002 compared
    to $27.4 million during 2001. The decrease in our
    maintenance costs and installation costs is partially
    attributable to the effect of the devaluation of the pesoon such costs in Argentina and the favorable renegotiation
    of certain of our agreements for maintenance services with
    third-party contractors in that country. Also, our installation
    costs decreased because we had fewer new customers during 2002
    compared to during 2001. Of our total contracted services costs
    for 2002, $5.9 million related to the operations of IMPSAT
    Argentina, compared to $17.5 million at IMPSAT Argentina
    for 2001.                  
|
| | (2) Other Direct Costs.Other direct
    costs principally include licenses and other fees; sales
    commissions paid to third-party sales representatives; and our
    provision for doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Sales commissions paid to third-party sales
    representatives for 2002 totaled $5.2 million compared to
    $8.2 million in 2001. The year over year decline in these
    commissions is primarily attributable to the effect of the
    devaluation of the pesoon such costs in Argentina, which
    resulted in lower amounts of such commissions in U.S. dollar
    terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | We recorded a provision for doubtful accounts of
    $13.1 million for 2002, compared to a provision of
    16.8 million for the previous year. At December 31,
    2002, approximately 37.0% of our gross trade accounts receivable
    were past due more than six months compared to 32.0% at the end
    of 2001. At the same date in 2002, our allowance for doubtful
    accounts covered approximately 116.0% of our gross trade
    accounts receivable past due more than six months. The average
    days in quarterly gross trade accounts receivable decreased from
    89 days at December 31, 2001 to 83 days at
    December 31, 2002. The recession in Argentina has adversely
    affected the quality of our accounts receivable from our
    customers in that country. IMPSAT Argentinas allowance for
    doubtful accounts at year-end 2002 covered approximately 102.0%
    of its gross trade accounts receivable past due more than six
    months. In addition, as a consequence of the economic and
    political turmoil in Venezuela, we increased our allowance for
    doubtful accounts in that country by $1.2 million for 2002.
|
| | (3) Leased Capacity.Our leased
    capacity costs for 2002 totaled $74.7 million, which
    represented a decrease of $12.4 million (or 14.2%) compared
    to 2001. This decrease occurred notwithstanding an increase in
    costs for interconnection and telephony termination costs (which
    are components of our leased capacity costs), as described
    below. The decrease in our leased capacity costs is attributable
    to our favorable renegotiation of the terms of certain of the
    underlying capacity leases and, to a lesser extent, the effects
    of currency devaluations in our countries of operation during
    2002. As a percentage of our total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

42



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | revenues, our leased capacity costs increased,
    principally because such costs are incurred in U.S. dollars,
    while our revenues in Argentina and Brazil are principally
    denominated and generated in local currency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Our leased capacity costs for satellite capacity
    for 2002 totaled $32.1 million, a decrease of
    $7.0 million (or 17.8%) compared to 2001. In Argentina, our
    leased satellite capacity costs totaled $8.1 million for
    2002, as compared to $10.5 million for 2001. Our leased
    satellite capacity costs for IMPSAT Brazil totaled
    $4.1 million for 2002, as compared to $5.9 million for
    2001. Our satellite capacity costs decreased in Argentina and
    Brazil, in part because of (i) our favorable renegotiation
    of certain of our agreements satellite capacity providers,
    (ii) our transitioning customers from satellite-based
    solutions onto the Broadband Network, and (iii) the effect
    on such costs of the devaluations of the pesoand the
    real. We had approximately 873 MHz of leased satellite
    capacity at December 31, 2002 and 967 MHz at
    December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Our costs for dedicated leased capacity on
    third-party fiber optic networks totaled $25.7 million for
    2002, a decrease of $9.9 million (or 27.8%) compared to
    2001. These costs were incurred principally in Argentina,
    Brazil, Colombia and the United States. Prior to the
    implementation of our Broadband Network, we had incurred these
    higher costs of leased fiber optic capacity in Argentina and
    Brazil due to the continued demand by our customers in those
    countries for greater bandwidth and, in the United States, due
    to the expansion of our Internet service offerings where we
    provide a link between Latin America and the U.S. Internet
    backbone. Although we have transferred substantial amounts of
    our telecommunications traffic to the Broadband Network as we
    migrated our customers to our Broadband Network, we will
    continue to require leased capacity to provide
    telecommunications services to clients with facilities outside
    of the footprint of our Broadband Network in order to provide
    end-to-end telecommunications services. The decrease in these
    costs was also due, in part, to the effect on such costs of the
    currency devaluations experienced during 2002 in certain of our
    countries of operation.
|
| | In connection with certain new services that we
    are offering as a result of the implementation of our Broadband
    Network and the effectiveness of our license in Argentina to
    provide domestic and international long distance services, we
    also incur costs for interconnection and telephony termination
    (I&T) and frequency rights. Our I&T and
    frequency rights costs totaled $14.9 million during 2002
    (which includes $11.7 million of I&T costs). This
    compares to $12.4 million of I&T and frequency rights costs
    for 2001 (which includes $8.0 million of I&T costs). Our
    I&T costs, which are principally denominated in local
    currencies, have increased in connection with the growth of our
    telephony revenues (as discussed above under
     Revenues), notwithstanding the effects
    of currency devaluations in our countries of operation during
    2002.                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Our I&T and frequency rights costs in
    Argentina totaled $7.7 million during 2002 (which includes
    $7.0 million of I&T costs). This compares to
    $6.7 million of I&T and frequency rights costs for 2001
    (which includes $4.3 million of I&T costs).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (4) Costs of Equipment Sold and Broadband
    Network Development.In 2002, we incurred costs of equipment
    sold of $0.6 million, compared to costs of equipment sold
    of $10.5 million for 2001. During 2002, we incurred no
    Broadband Network development costs, compared to
    $3.3 million of such costs in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Salaries and Wages.Salaries and wages for 2002 totaled
$47.9 million, a decrease of $34.2 million (or 41.7%)
compared to 2001. As a result of the adverse economic conditions
experienced in Argentina, Brazil and elsewhere in Latin America
and as part of cost-control measures implemented by management
commencing at the end of the first quarter of 2001, our
aggregate number of employees fell from 1,711 at
December 31, 2000 to 1,271 at December 31, 2002.
Management expects to continue to monitor the size of its total
workforce and to make appropriate adjustments as required by
financial and competitive circumstances. The decrease in these
costs was also due, in part, to the effect on such costs of the
currency devaluations experienced during 2002 in certain of our
countries of operation.

IMPSAT Argentina incurred salaries and wages for
2002 totaling $9.2 million, a decrease of $26.0 million (or
73.9%) over 2001. This decrease was due to the devaluation of
the peso, which decreased the dollar

43



---



##### 



value of our salaries and wages expenses incurred
in Argentina during 2002. IMPSAT Argentina had 453 employees as
of December 31, 2002 as compared to 446 employees as of
December 31, 2001.


IMPSAT Brazil incurred salaries and wages for
2002 of $11.2 million, a decrease of $4.8 million (or
30.1%) compared to 2001. IMPSAT Brazil decreased its number of
employees to 225 persons at December 31, 2002, compared to
316 persons at December 31, 2001. In addition to our
reduced employee headcount in that country, the decrease in
salaries and wages at IMPSAT Brazil during 2002 is related to
the devaluation of the realagainst the U.S. dollar,
which resulted in a decrease in U.S. dollar terms of our
salaries and wages expense in Brazil.

Selling, General and Administrative Expenses.Our SG&A expenses consist
principally of:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | publicity and promotion costs                               
|
| |  | professional fees and other remuneration                    
|
| |  | travel and entertainment                                    
|
| |  | rent                                                        
|
| |  | plant services, insurance, telephone and energy
    expenses

We incurred SG&A expenses of
$28.2 million for 2002, representing a decrease of
$24.8 million (or 46.7%) compared to 2001. Our SG&A
expenses for 2002 declined due principally to a decrease in our
publicity and promotion costs, the effects of currency
devaluations in our countries of operation during 2002 (which
decreased the dollar value of our SG&A expenses in those
countries), and overall cost control measures undertaken by
management. SG&A expenses at IMPSAT Argentina for 2002
totaled $7.6 million, a decrease of $11.2 million (or
59.8%) compared to 2001. Management intends to take efforts in
the coming periods to further control or reduce SG&A
expenses.

Asset Impairment Charge.During 2001, in connection with our
ongoing review of our business plan, cash flow and liquidity
position, and the economic environment in Latin America, we
determined that our long-lived assets primarily related to our
telecommunication infrastructure were likely impaired. We
calculated the present value of expected cash flows of our
operating subsidiaries to determine the fair value of our
telecommunication infrastructure. Accordingly, our company
recorded a non-cash impairment charge of $381.9 million for
2001. This total charge included approximately $245.6 million
for IMPSAT Argentina, $24.7 million for IMPSAT Brazil and
$28.9 million for all other countries. In addition, the
total charge also included approximately $82.7 million for
a write-down of the value of goodwill generated by the
acquisition of certain minority interests in the operating
subsidiaries. Our company recorded this impairment charge based
on internal estimates of fair value and other indicators, and
not independent valuations of its telecommunication
infrastructure. We did not record any similar charges in 2002.

Gain on Early Extinguishment of
Debt.We recorded a gain of
$16.4 million during 2002, which was attributable to the
repurchase at a discount of indebtedness, plus accrued interest,
owed to an unrelated third party by IMPSAT Argentina through our
subsidiary International Satellite Communication Holding Ltd. (a
wholly-owned Liechtenstein non-operating subsidiary of our
company, whose principal function is to lease telecommunications
capacity from carriers and then sublease this capacity at market
rates to our operating subsidiaries).

Depreciation and Amortization.Our depreciation and amortization
expenses for 2002 totaled $82.8 million, a decrease of
$40.9 million (or 33.1%) compared to depreciation and
amortization for 2001. Depreciation and amortization expenses
for IMPSAT Argentina for 2002, totaled $24.9 million. This
represents a decrease of $30.5 million (or 55.0%) compared
to IMPSAT Argentinas depreciation and amortization
expenses for 2001. The decrease in depreciation and amortization
primarily is the result of the asset impairment charge of
$381.9 million recorded in 2001, which reduced the dollar
value of our depreciable fixed asset base.

Interest Expense, Net.Our net interest expense for 2002
totaled $73.9 million, consisting of interest expense (including
financing costs and taxes) of $97.9 million, a gain for a
waiver of interest of $22.1 million and interest income of
$1.9 million. The waived interest was due and payable to
one of IMPSAT Brazils

44



---



##### 



vendors. Our net interest expense for 2002
decreased $58.9 million (or 44.4%) compared to net interest
expense for 2001.


Pursuant to the provisions of the Bankruptcy
Code, as of June 11, 2002, the date of our Chapter 11
filing, contractual interest on our unsecured, pre-petition
obligations, which were entirely constituted by our former
12 1/8% Senior Guaranteed Notes due 2003, 13 3/4%
Senior Notes due 2005, and 12 3/8% Senior Notes due 2008
(collectively, the Senior Notes) ceased to accrue at
and after such date. Such post-petition contractual interest,
which is excluded in our reported interest expense for 2002,
totaled $52.2 million.

Prior to our emergence from bankruptcy, we were
also in default on certain amounts of accrued and unpaid
interest under our Original Vendor Financing Agreements and
certain other subsidiary indebtedness. Such defaulted interest
components, which aggregated $49.7 million for 2002, are
included in our net interest expense for 2002 as discussed in
the preceding paragraph.

In accordance with GAAP, the filing of our
Chapter 11 petition on June 11, 2002 resulted in the
classification as of such date of our primary obligations under
the Senior Notes and certain other accounts payables (which,
including accrued interest, totaled $727.5 million) as
liabilities subject to compromise on our
consolidated balance sheet. (See Notes 1 and 11 to our
consolidated financial statements, included elsewhere in this
Report.) Also in accordance with GAAP, our contingent
liabilities as guarantor under the Original Vendor Financing
Agreements and certain other indebtedness of our subsidiaries,
which aggregated $281.7 million as of December 31,
2002, have been classified as current portion of long-term
indebtedness.

Net Loss on Foreign Exchange.We recorded net losses on foreign
exchange for 2002 of $91.9 million, compared to net losses
of $41.2 million for 2001. As discussed in greater detail
below, the increase in our losses on foreign exchange was
primarily due to the devaluation of the Argentine pesoand the Brazilian realagainst the U.S. dollar during
2002.

IMPSAT Brazil recorded net losses on foreign
exchange for 2002 totaling $79.5 million, compared to net
losses of $25.1 million for 2001. This net loss on foreign
exchange reflects the effect of the devaluation of the realagainst the U.S. dollar in 2002 on the book value of the
dollar-denominated debt of IMPSAT Brazil under the Original
Vendor Financing Agreements. At December 31, 2002, the
realtraded at a rate of R$3.53 = $1.00. At
December 31, 2001, the realtraded at a rate of
R$2.41 = $1.00.

Decreases in U.S. dollar terms of IMPSAT
Argentinas peso-denominated assets during 2002
caused by the devaluation were partially offset by the effects
of decreases in U.S. dollar terms of peso-denominated
liabilities during the same period. IMPSAT Argentina recorded
net losses on foreign exchange for 2002 totaling
$13.9 million. In comparison, IMPSAT Argentina recorded net
losses on foreign exchange of $17.9 million during 2001.

IMPSAT Colombia recorded net income on foreign
exchange for 2002 totaling $3.8 million. This compares to
net income on foreign exchange of $1.2 million for 2001.

Recognition of Other-Than-Temporary Decline in
Value.We recorded non-cash charges of
$0.8 million and $20.7 million during 2002 and 2001
relating to the decline in value of our shares of common stock
of Claxson Interactive Group Inc., an integrated media company
with operations in Latin America (the Claxson
Shares). This loss relating to our write down of our
investment in the Claxson Shares was recorded because we had
determined that, in accordance with the requirements under
Statement of Financial Accounting Standards No. 115, the
Claxson Shares had experienced an other than temporary decline
in value.

Reorganization
Items.We recorded reorganization
items for 2002 of $23.3 million. The majority of these costs
represent professional service fees that were incurred in
connection with the negotiation and formation of our Plan and
Chapter 11 filing. These amounts also include the remaining
deferred financing costs on our Senior Notes and other
subsidiary indebtedness that were expensed during 2002.

Legal Settlement.During 2002, we recorded a legal settlement gain of
$26.2 million. During November 2002, we entered into the
Settlement Agreement with 360networks pursuant to which we
agreed to dismiss our arbitration and litigation proceedings
against 360networks and, in return, we became entitled to
certain funds totaling $22.6 million that 360networks had
advanced to us in connection with the contracts between us

45



---



##### 



and 360networks (described above under
Legal Proceedings  360networks, inc.).
These funds had been recorded by us as deferred revenues during
the pendency of the litigation and arbitration proceedings. In
addition, under the Settlement Agreement, we received from
360networks assets with a fair vale of approximately
$1.6 million.


Other Losses, Net.We recorded other losses, net, for
2002 of $5.9 million, as compared to other losses, net, of
$2.1 million for 2001.

Benefit From (Provision for) Foreign Income
Taxes.For 2002, we recorded a
provision for foreign income taxes of $2.3 million,
compared to a provision for foreign income taxes of
$27.4 million for 2001. The smaller provision for foreign
income taxes in 2002 compared to 2001 was principally caused by
a one-time valuation allowance made in the second quarter of
2001 totaling approximately $25.5 million, which was
required to be recorded because we could not conclude that
utilization of tax benefits resulting from operating losses and
other temporary differences was more likely than not
to be realized under GAAP.

Net Loss.For 2002,
we incurred a net loss of $204.5 million, a decrease of
$510.7 million (or 71.4%) compared to 2001.

2001 Compared to 2000

Revenues.Our total
net revenues for 2000 and 2001 equaled $322.1 million and
$326.5 million. Net revenues were composed of net revenues
from services, sales of equipment and Broadband Network
development revenues.

Our net revenues from services for 2001 totaled
$304.3 million, an increase of $53 million (or 21.1%)
from 2000. Our net revenues from services during 2001 included
net revenues from:



| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | data and value added services                                                         
|
| |  | Internet                                                                              
|
| |  | telephony, including local, national and
    international long-distance services, and
|
| |  | services to carriers                                                                  

Growth in our net revenues from services resulted
primarily from data and other value added services, Internet and
telephony services and from services to carriers.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | With respect to revenues from data and other
    value added services, revenues from our broadband services
    increased compared to 2000 in concert with the migration during
    2001 of new and existing customer traffic to the Broadband
    Network, the construction of which was completed in the last
    quarter of 2000. Data service center services also contributed
    to our revenues in this category. Our revenues from satellite
    services during 2001 declined in comparison to 2000 due to:
    (i) lower satellite-based services volume (as we
    transferred telecommunications services to our Broadband
    Network), (ii) downward pressure on our prices (because of
    competition and adverse economic conditions), and (iii) a
    number of customer cancellations or non-renewals.
|
| |  | The increase in Internet services resulted in
    part from the expansion during 2001 of our Internet access
    services in Argentina to AOL Argentina S.R.L., an affiliate of
    America Online, Inc., which services commenced upon AOL
    Argentinas launch in August 2000. The total increase in
    our Internet revenues was partially offset by lower revenues
    caused by renegotiated or terminated contracts with Internet
    service providers in Argentina and Brazil.                                                                                                                                                                                                                                                                                                                                
|
| |  | Our telephony services revenues grew during 2001
    following the introduction of switched voice service in
    Argentina during the fourth quarter of 2000. In particular,
    during the second half of 2001, switched voice services to
    corporate customers in Argentina and international call
    terminations provided to end-users in Peru and the United States
    were principal sources of this revenue growth.                                                                                                                                                                                                                                                                                                                                                                                          

46



---



##### 





| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our revenues from services to carriers increased
    in 2001 compared to 2000 as a result of our completion of the
    Broadband Network in the fourth quarter of 2000, which enabled
    us to more fully implement this service line.

Overall, growth in our revenues from services for
2001 as compared to the prior year reflected a net increase in
the number of customers and scope of services we provided,
offset in part by decreasing prices. We had 2,877 customers at
December 31, 2001, compared to 2,656 customers at
December 31, 2000.

During 2001, we gained a net total of 221
customers, an increase of 8.3% compared to the prior year. Due
to adverse economic conditions in Argentina, we lost a net total
of 46 customers in that country during 2001.

In addition to net revenues from services, our
total net revenues for 2001 included revenues from sales of
equipment and Broadband Network development revenues. Revenues
from equipment sales for 2001 totaled $15.0 million, a $1.9
million (or 14.3%) increase over 2000. Broadband Network
development revenues for 2001 totaled $7.2 million compared
to $57.7 million of such revenues for 2000.

Our Broadband Network development revenues for
2000 related to our construction, on behalf of affiliates of
Global Crossing Ltd., of certain terrestrial segments connecting
that companys fiber optic cable system between South
America with North America. Our Broadband Network development
revenues for 2001 related to our construction of additional
backhaul segments for Global Crossings fiber optic cable
system and for a similar fiber optic cable system that was being
developed by 360networks, Inc. These revenues were predominantly
recorded during the first quarter of 2001 upon our delivery of
the constructed segments to Global Crossing and 360networks.

Our total net revenues at IMPSAT Argentina for
2001 totaled $130.2 million, a decrease of $30.3 million
(or 18.8%) compared to 2000. This decrease in revenues related
principally to our recognition in the third quarter of 2000 of
$32.3 million in Broadband Network development revenues
upon delivery of telecommunications infrastructure to Global
Crossing. Excluding Broadband Network development revenues and
other equipment sales revenues, IMPSAT Argentinas net
revenues from services for 2001 totaled $122.3 million, an
increase of $6.3 million (or 5.4%) compared to 2000.

Brazil, where we commenced operations in 1998,
experienced a significant devaluation of its currency against
the U.S. dollar during 2001. As of December 31, 2001, the
realhad devalued against the U.S. dollar by 18.7%
compared to the exchange rate as of December 31, 2000.
Despite the devaluation of the Brazilian realagainst the
U.S. dollar, IMPSAT Brazils revenues for 2001 totaled
$48.0 million, an increase of $10.4 million over 2000.
Revenues from services for 2001 were $42.8 million, a 53.4%
increase from 2000. In local currency terms, IMPSAT
Brazils 2001 revenues from services increased by 95.3% as
compared to 2000. At December 31, 2000, the realtraded at a rate of R$1.95 = $1.00. The realdepreciated during 2001, reaching a low of R$2.78 = $1.00
during the fourth quarter of that year, and closing at R$2.32 =
$1.00 at December 31, 2001.

In Colombia, after a period of declining revenues
throughout 2000 due to the general deterioration in the
Colombian economy, we recorded an increase in revenues during
2001 of 14.2% over 2000.

Revenues at IMPSAT Venezuela equaled
$32.6 million for 2001, an increase of $4.5 million
(or 16.1%) over 2000. IMPSAT Ecuadors revenues grew during
2001 to a total of $15.8 million, an increase of
$1.2 million (or 8.2%) over 2000. In 2001, our operations
in the United States also showed improved results. IMPSAT
USAs revenues totaled $37.2 million in 2001, an
increase of $9.5 million (or 34.2%) as compared to 2000.
This was primarily the result of increased network services and
Internet backbone access services to multinational corporations
with operations in Latin America.

Direct Costs.Our
direct costs for 2001 totaled $176.9 million, an increase
of $4.8 million (or 2.8%), compared to 2000.

Of our total direct costs for 2001,
$86.7 million related to the operations of IMPSAT
Argentina, compared to $86.2 million at IMPSAT Argentina
for 2000. Direct costs for IMPSAT Brazil totaled
$32.3 million for 2001, compared to $30.7 million for
2000. Direct costs of our subsidiaries are described prior to
the elimination of intercompany transactions.

47



---



##### 





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Contracted Services.Contracted
    services costs include costs of maintenance and installation
    (and de-installation) services provided by outside contractors.
    During 2001, our contracted services costs totaled
    $40.6 million, an increase of $11.1 million (or 37.4%)
    compared to 2000. Of this amount, maintenance costs for our
    telecommunications network infrastructure, including the
    Broadband Network, totaled $27.4 million for 2001 compared
    to $17.0 million during 2000. Our maintenance costs
    increased because we had more infrastructure, including the
    Broadband Network. Installation costs totaled $13.2 million
    for 2001 compared to $12.6 million during 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (2) Other Direct Costs.Other direct
    costs principally include licenses and other fees; sales
    commissions paid to third-party sales representatives; and our
    provision for doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Sales commissions paid to third-party sales
    representatives for 2001 totaled $8.2 million compared to
    $8.1 million in 2000. The majority of these commissions
    related to customers of IMPSAT Argentina.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | We recorded a provision for doubtful accounts of
    $16.8 million for 2001, compared to a provision of
    $4.8 million for the previous year. At December 31,
    2001, approximately 32.0% of our gross trade accounts receivable
    were past due more than six months compared to 26.4% at the end
    of 2000. At December 31, 2001, our allowance for doubtful
    accounts covered approximately 90.4% of our gross trade accounts
    receivable past due more than six months. The average days in
    quarterly gross trade accounts receivable increased from
    71 days at December 31, 2000 to 89 days at
    December 31, 2001. IMPSAT Argentinas allowance for
    doubtful accounts at year-end 2001 covered approximately 86.4%
    of its gross trade accounts receivable past due more than six
    months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (3) Leased Capacity.Our leased
    capacity costs for 2001 totaled $87.1 million, which
    represented an increase of $12.9 million (or 17.4%)
    compared to 2000. This increase was primarily due to an increase
    in costs for interconnection and telephony termination costs and
    frequency rights, as further discussed below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Our leased capacity costs for satellite capacity
    for 2001 totaled $39.1 million, a decrease of
    $0.2 million (or 0.5%) compared to 2000. Leased satellite
    capacity costs declined in Argentina during 2001 as compared to
    2000, in part due to our transitioning customers from
    satellite-based solutions onto the Broadband Network. Our
    satellite capacity costs increased principally in Venezuela and
    the United States, where we increased our satellite capacity to
    satisfy customer needs. We had approximately 967 MHz of leased
    satellite capacity at December 31, 2001 and 1,203 MHz at
    December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Our costs for dedicated leased capacity on
    third-party fiber optic networks totaled $35.6 million for
    2001, an increase of $3.3 million (or 10.3%) compared to
    2000. These costs were incurred principally in Argentina, Brazil
    and the United States. Prior to the implementation of our
    Broadband Network, we had incurred these higher costs of leased
    fiber optic capacity in Argentina and Brazil due to the
    continued demand by our customers in those countries for greater
    bandwidth and, in the United States, due to the expansion of our
    Internet service offerings where we provide a link between Latin
    America and the U.S. Internet backbone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | In connection with certain services that we
    offered during 2001 as a result of the implementation of our
    Broadband Network and the effectiveness of our license in
    Argentina to provide domestic and international long distance
    services, we incurred costs for interconnection and telephony
    termination costs and frequency rights. These costs totaled
    $12.4 million during 2001 (which includes $8.0 million for
    interconnection and telephony termination costs and $4.4 million
    for frequency rights) as compared to $2.7 million for 2000
    (entirely composed of costs for frequency rights). Our
    interconnection and telephony termination costs in Argentina
    totaled $6.7 million during 2001 (which includes
    $4.3 million for interconnection and telephony termination
    costs and $2.4 million for frequency rights) as compared to
    $1.2 million for 2000 (entirely composed of costs for
    frequency rights). Our interconnection and telephony termination
    costs increased during 2001 primarily as a result of the
    completion of our Broadband Network in Argentina and the
    effectiveness of our license in Argentina to offer telephony
    services. These events enabled us to provide the switched-voice
    domestic and international long distance telephony services that
    generated these costs in Argentina during 2001.

48



---



##### 





| |                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) Costs of Equipment Sold and Broadband
    Network Development.In 2001, we incurred costs of equipment
    sold of $10.5 million compared to costs of equipment sold
    of $12.3 million for 2000. During 2001, we incurred
    Broadband Network development costs of $3.3 million,
    compared to $34.7 million in 2000.

Salaries and Wages.Salaries and wages for 2001 totaled
$82.1 million, an increase of $13.2 million (or 19.1%)
compared to 2000.

As a result of the adverse economic conditions
experienced in Argentina, Brazil and elsewhere in Latin America
and as part of cost-control measures implemented by management
following the end of the first quarter of 2001, our aggregate
number of employees fell from 1,711 at December 31, 2000 to
1,370 at December 31, 2001. In connection with this
reduction, our salaries and wages for 2001 included one-time
severance payments totaling approximately $4.4 million, of which
severance payments totaled $2.5 million at IMPSAT Argentina
and $0.4 million at IMPSAT Brazil.

IMPSAT Argentina incurred salaries and wages for
2001 totaling $35.2 million, an increase of $5.5 million
(or 18.5%) over 2000. IMPSAT Argentina had 446 employees as of
December 31, 2001 as compared to 587 employees as of
December 31, 2000.

IMPSAT Brazil incurred salaries and wages for
2001 of $16.0 million, an increase of $3.0 million (or
23.1%) compared to 2000. IMPSAT Brazil decreased its number of
employees to 316 persons at December 31, 2001, compared to
438 persons at December 31, 2000.

Selling, General and Administrative Expenses.We incurred SG&A expenses of
$53.0 million for 2001. These SG&A expenses represented
a decrease of $5.5 million (or 9.4%) compared to 2000. Our
SG&A expenses for 2001 declined due, in part, to a decrease
in our publicity and promotion costs and to the positive effects
of the devaluation of the realagainst the U.S. dollar,
which decreased the dollar value of our SG&A expenses
incurred in Brazil. SG&A expenses at IMPSAT Argentina for
2001 totaled $18.8 million, a decrease of $7.7 million
(or 29.1%) compared to 2000.

Asset Impairment Charge.As discussed above under 
2002 Compared to 2001  Asset Impairment Charge,
during 2001 we recorded an asset impairment charge based on
internal estimates of fair value and other indicators, and not
independent valuations of our telecommunication infrastructure.

Depreciation and Amortization.Our depreciation and amortization
expenses for 2001 totaled $123.7 million, an increase of
$39.2 million (or 46.4%) compared to our depreciation and
amortization for 2000. The increase in our depreciation and
amortization expense reflected the continued growth in our asset
base. Depreciation and amortization for IMPSAT Argentina for
2001 totaled $55.4 million. This represented an increase of
$17.2 million (or 45.1%) compared to IMPSAT
Argentinas depreciation and amortization for 2000.

Interest Expense, Net.Our net interest expense for 2001
totaled $132.8 million, consisting of interest expense
(including financing costs and taxes) of $143.5 million and
interest income of $10.7 million. Our net interest expense
for 2001 increased $47.3 million (or 55.4%) over net
interest expense for 2000. At December 31, 2001, we had
cash, cash equivalents and other short-term trading investments
of $64.9 million compared to $308.6 million at
December 31, 2000. Our interest income has declined as we
utilized our cash and trading investments in connection with
capital expenditures and general corporate purposes.

Our total indebtedness as of December 31,
2001 was $990.6 million as compared to $968.2 million
as of December 31, 2000. As of December 31, 2001,
total outstanding indebtedness at IMPSAT Argentina totaled
$168.0 million ($165.6 million after eliminating
intercompany items), compared to $159.4 million
($151.9 million after eliminating intercompany items) as of
December 31, 2000. For 2001, the average interest rate on our
indebtedness was 12.0%, compared to an average interest rate of
12.5% for 2000.

Net Loss on Foreign Exchange.We recorded net losses on foreign
exchange for 2001 of $41.2 million, compared to net losses
of $10.6 million for 2000. As discussed in greater detail
below, the increase in our losses on foreign exchange was
primarily due to the devaluation of the Argentine pesoand the Brazilian realagainst the U.S. dollar.
IMPSAT Argentina recorded net losses on foreign exchange for
2001 totaling

49



---



##### 



$17.9 million, compared to a net gain of
$0.2 million for 2000. The explanation for this increase in
IMPSAT Argentinas net losses from foreign exchange is as
follows. In response to the devaluation of the pesofollowing the Argentine governments adoption of the
floating exchange rate system in January 2002, and the
depreciation of our accounts receivable (in U.S. dollar terms)
as a result of the pesification decree, we
remeasured IMPSAT Argentinas financial position and
results of operations for 2001 using the first subsequent
free-floating rate for the settlement of transactions (which was
1.65 pesos= $1.00). This resulted in a remeasurement
loss of approximately $16.5 million, which was included in
IMPSAT Argentinas (and our companys consolidated)
net loss on foreign exchange for 2001. IMPSAT Brazil recorded
net losses on foreign exchange for 2001 totaling
$25.1 million, compared to a net losses of
$10.6 million for 2000. The net losses on foreign exchange
reflect the effect of the devaluation of the realagainst
the U.S. dollar on the book value of our monetary assets and
liabilities in Brazil, including the primarily
dollar-denominated debt of IMPSAT Brazil under the Nortel
Networks vendor financing agreement. At December 31, 2000,
the realtraded at a rate of R$1.95 = $1.00. At
December 31, 2001, the realtraded at a rate of
R$2.32 = $1.00.


Recognition of Other-Than-Temporary Decline in
Value.As discussed above under
 2002 Compared to 2001  Recognition of
Other-Than-Temporary Decline in Value, we recorded a loss
of $20.6 million during 2001 relating to the decline in
value of our Claxson Shares. Our Claxson Shares, which had a
market value of $0.9 million at December 31, 2001,
were initially acquired in the fourth quarter of 1999 for a cost
of $21.5 million.

Benefit From (Provision for) Foreign Income
Taxes.For 2001, we recorded a
provision for foreign income taxes of $27.4 million,
compared to a benefit for foreign income taxes of
$4.5 million for 2000. The provision for foreign income
taxes in 2001 was principally caused by a valuation allowance
made in the second quarter of 2001 totaling approximately
$25.5 million. This valuation allowance was required to be
recorded because it was not clear that utilization of tax
benefits resulting from operating losses and other temporary
differences are more likely than not to be realized,
as stipulated by Statement of Financial Accounting Standards 109.

Net Loss Attributable to Common Stockholders.For 2001, we incurred a net loss
attributable to common stockholders of $715.3 million, an
increase of $561.1 million (or 364.0%) compared to 2000.
The increase in our net loss attributable to common stockholders
was principally due to our recording in the third and fourth
quarters of 2001 of the non-cash impairment charges discussed
above.

Liquidity and Capital Resources

At December 31, 2002, we had total cash,
cash equivalents and trading investments of $55.6 million
(as compared to $64.9 million as of December 31,
2001). At December 31, 2002, our total indebtedness was
$1.04 billion (as compared to $990.6 million as of
December 31, 2001), of which $281.7 million
represented current portion of long-term debt,
$27.6 million represented long-term debt, and
$727.5 million represented principal and accrued interest
of indebtedness subject to compromise. Following our emergence
from bankruptcy and before the end of the second quarter of
2003, in accordance with the Plan, we expect to pay
approximately $6.1 million (including amounts paid to date)
in satisfaction of all allowed general unsecured convenience
class claims as well as certain fees and expenses relating to
our Chapter 11 proceedings and reorganization. As a result
of the financial reorganization of our Senior Notes and the
Original Vendor Financing Agreements that accompanied our
emergence from Chapter 11 protection, our capital
requirements for 2003 are projected to be less than our
available capital resources. Our capital expenditures budget for
2003 contemplates that we will need approximately $21.0 million
(including amounts spent to date) through the end of 2003 for
capital expenditures.

As set forth in our consolidated statement of
cash flows, our operating activities provided $26.4 million
in net cash flow for 2002, compared to $71.1 million used by
operating activities during 2001. In addition to the decrease in
our operating losses discussed above, the increase in cash flow
from operating activities in 2002 was primarily due to an
increase in accrued and other liabilities of $67.9 million
(as compared to an increase of $25.4 million in 2001).
Also, during 2002, a decrease in our trade accounts receivable
of $30.7 million (compared to a decrease of
$8.2 million for 2001) and an increase in trade accounts
payable of $9.2 million

50



---



##### 



(as compared to a decrease of $26.5 million in
2001), contributed to the increase in net cash flow from
operating activities during the period. These changes to our
accounts receivable and payable during 2002 reflect actual
operating cash flows, as well as changes in the value of those
accounts (in U.S. dollar terms) caused by the devaluation of the
Brazilian realand the Argentine pesoduring that
period.


For 2002, we used $11.6 million in net cash
flow from investing activities, compared to $51.9 million
of net cash flow generated by investing activities during 2002.
The decreased net cash flow from investing activities was
principally due to a decrease in our trading investments of
$6.3 million during 2002, compared to decrease in our
trading investments of $211.6 million during 2001. During
2002, we used $17.2 million in net cash flows from
financing activities. This compares to $6.0 million in net
cash flows used in financing activities during 2001.

At December 31, 2002, we had leased
satellite capacity with annual rental commitments of
approximately $21.9 million through the year 2007. In
addition, at December 31, 2002, we had commitments to
purchase telecommunications equipment amounting to approximately
$1.8 million. Our commitments in respect of IRU purchases
under contracts with 360networks and Global Crossing have been
terminated under the Settlement Agreement (in the case of
360networks) and in connection with the Plan (in the case of
Global Crossing). Furthermore, we had leased from third parties
a series of terrestrial links for the provision of data,
Internet and telephony services to our clients in the different
countries in which we operate. We have committed to long term
contracts for the purchase of terrestrial links from third
parties in Argentina, Colombia, and the United States for
approximately $2.5 million per year through 2007. The
remainder of the leases are typically under one-year contracts,
the early cancellation of which is subject to a fee.

The following table sets forth due dates of our
contractual obligations:

|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |       |  |  |   |       |  |  |   |           | 
|------------------------------------ |  | -------------- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ----- |  |  | - | ----- |  |  | - | --------- | 
|Type of Obligations                  |  | 2003           |         | 2004 |  | 2005 |        | 2006 |  | 2007 |        | Thereafter |  | Total
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |      
|                                     |  |               
|                                     |  | (in thousands)
|Long-term debt(1)                    |  | $              | 129,246 |      |  | $    | 57,250 |      |  | $    | 57,361 |            |  | $     | 53,024 |  |  | $ | 926   |  |  |   |       |  |  | $ | 297,807   | 
|Liabilities subject to compromise(2) |  |                | 727,522 |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |       |  |  |   |       |  |  |   | 727,522   | 
|Capital lease obligations            |  |                | 1,751   |      |  |      | 2,124  |      |  |      | 2,799  |            |  |       | 4,791  |  |  |   |       |  |  |   |       |  |  |   | 11,465    | 
|Operating leases                     |  |                | 266     |      |  |      | 22     |      |  |      |        |            |  |       |        |  |  |   |       |  |  |   |       |  |  |   | 288       | 
|Other long-term obligations          |  |                | 3,772   |      |  |      | 1,132  |      |  |      | 1,665  |            |  |       | 606    |  |  |   | 5,364 |  |  | $ | 2,741 |  |  |   | 15,280    | 
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |       |  |  |   |       |  |  |   |           | 
|Total contractual cash obligations   |  | $              | 862,557 |      |  | $    | 60,528 |      |  | $    | 61,825 |            |  | $     | 58,421 |  |  | $ | 6,290 |  |  | $ | 2,741 |  |  | $ | 1,052,362 | 
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |       |  |  |   |       |  |  |   |           | 






|    |                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed above, our contingent liability as
    guarantor under the Original Vendor Financing Agreements is
    included in our current portion of long-term indebtedness, which
    reclassified amounts are not included in this line item as being
    due in 2002, but instead are set forth based on their originally
    scheduled contractual due dates.
|   
|(2) | As discussed elsewhere in this Report, as a
    result of our default under our Senior Notes and the
    Chapter 11 filing, our liabilities subject to
    compromise are constituted by IMPSAT Fiber Network
    Inc.s primary obligations under the Senior Notes and
    certain other accounts payables.                                                     

The following table illustrates expirations of
our commercial commitments as provided in corresponding
contracts:

|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Type of Commitments(1)          |  | 2003           |        | 2004 |  | 2005 |        | 2006 |  | 2007 |        | Thereafter |  | Total
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |      
|                                |  |               
|                                |  | (in thousands)
|Lines of credit                 |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby letters of credit       |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Guarantees                      |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby repurchase obligations  |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Other commercial commitments(2) |  | $              | 33,952 |      |  | $    | 29,761 |      |  | $    | 24,158 |            |  | $     | 20,485 |  |  | $ | 15,129 |  |  | $ | 19,334 |  |  | $ | 142,819 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|Total commercial commitments    |  | $              | 33,952 |      |  | $    | 29,761 |      |  | $    | 24,158 |            |  | $     | 20,485 |  |  | $ | 15,129 |  |  | $ | 19,334 |  |  | $ | 142,819 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 

51



---



##### 








|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Commitments are contractual obligations (other
    than indebtedness) that could potentially require our
    performance in the event of demands by third-parties or
    contingent events.
|   
|(2) | This includes commitments to purchase
    communications and data center equipment and long-term contracts
    for the purchase of satellite capacity and terrestrial links.               

Forward Looking Statements

Forward Looking
Statements.Some of the statements in
this Managements Discussion and Analysis of Financial
Condition and Results of Operations are forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed
or implied by the forward-looking statements. Forward-looking
statements include but are not limited to:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | our expectations and estimates as to maintenance
    and growth of our Broadband Network, and
|
| |  | future financial performance, including growth in
    sales and income.                      

Factors that could cause our actual results to
differ materially from those expressed in any forward-looking
statements we make include those in the Certain
Considerations section of this Report, and the following
factors, among others:



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | factors affecting our performance and financial
    conditions                         
|
| |  | the availability and terms of additional capital
    to fund our continuing efforts    
|
| |  | adequacy of cash from operations for our future
    liquidity and working capital needs
|
| |  | inaccuracies in our forecasts of customer or
    market demand                         
|
| |  | loss of a customer that provides us with
    significant revenues                      
|
| |  | highly competitive market conditions                                                   
|
| |  | changes in or developments under laws,
    regulations and licensing requirements      
|
| |  | changes in telecommunications technology                                               
|
| |  | currency fluctuations, and                                                             
|
| |  | changes in economic conditions in the Latin
    American countries where we operate.   

These factors should not be construed as
exhaustive. We will not update or revise any forward-looking
statements.

Item 7A.     Quantitative
and Qualitative Disclosure About Market Risk

The sections below highlight our exposure to
interest rate and foreign exchange rate risks and changes in the
market values of our investment in equity securities. The
analyses presented below are illustrative and should not be
viewed as predictive of our future financial performance.
Additionally, we cannot assure you that our actual results in
any particular year will not differ from the amounts indicated
below. However, we believe that these results are reasonable
based on our financial instrument portfolio at December 31, 2002
and assuming that the hypothetical interest rate and foreign
exchange rate changes used in the analyses occurred during year
2002. We do not hold or issue any market risk sensitive
instruments for trading purposes.

Interest Rate Risk.Our cash, cash equivalents and trading
investments consist of highly liquid investments with a maturity
of less than 360 days. As a result of the short-term nature
of these instruments, we do not believe that a hypothetical 10%
change in interest rates would have a material impact on our
future earnings and cash flows related to these instruments. A
hypothetical 10% change in interest rates would also have an
immaterial impact on the fair values of these instruments.

52



---



##### 



We are exposed to interest rate risk on our
floating rate indebtedness, which affects our cost of financing.
Prior to our Chapter 11 filing, our floating rate
indebtedness had increased as we drew down commitments under our
vendor financing agreements to cover capital expenditures,
including the Broadband Network. Following our emergence from
bankruptcy, our floating rate debt and, therefore, our exposure
to interest rate risk, has decreased. At December 31, 2002,
our total floating rate indebtedness aggregated
$284.5 million. As of the Effective Date, our total
floating rate indebtedness was approximately $27.9 million. Our
actual interest rate is not quantifiable or predictable because
of the variability of future interest rates and business
requirements. We do not believe such risk is material and we do
not customarily use derivative instruments to adjust interest
rate risk. As of December 31, 2002 and as of the Effective
Date, a hypothetical 100 basis point increase in the London
Interbank Offered Rate (LIBOR) would adversely affect our
annual interest cost related to our floating rate indebtedness
by approximately $2.8 million and $0.2 million,
respectively.

|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|-------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ------ | ----- |  | - | ----- | - |  |  |  |  |  | - | ------- | - |  | - | ------- | 
|                                 |  |                        |         |     
|                                 |  | Expected Maturity Date |         |     
|                                 |  |                        |         | Fair
|Year Ended December 31,          |  | 2003                   |         | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total |        | Value
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |      
|Senior Notes (fixed rate)        |  | $                      | 650,000 |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  | $ | 650,000 |   |  |   |        | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 12.96   | %    |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   | 12.96   | % |  |   |         | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|Term Notes (fixed rate)          |  | $                      | 21,783  |      |  | $    | 5,287 |      |  | $    | 8,691 |            |  | $     | 12,688 |       |  | $ | 926   |   |  |  |  |  |  | $ | 49,375  |   |  | $ | 49,375  | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 14.31   | %    |  |      | 14.31 | %    |  |      | 14.31 | %          |  |       | 14.31  | %     |  |   | 14.31 | % |  |  |  |  |  |   | 14.31   | % |  |   |         | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|Vendor Financing (variable rate) |  | $                      | 259,897 |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  | $ | 259,897 |   |  |   | 259,897 | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 14.14   | %    |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   | 14.14   | % |  |   |         | 
|                                 |  |                        |         |      |  |      |       |      |  |      |       |            |  |       |        |       |  |   |       |   |  |  |  |  |  |   |         |   |  |   |         | 

Foreign Currency Risk.A substantial portion of our costs,
including lease payments for certain satellite transponder and
fiber optic capacity, purchases of capital equipment, and
payments of interest and principal on our indebtedness, is
payable in U.S. dollars. To date, we have not entered into
hedging or swap contracts to address currency risks because our
contracts with our customers generally have provided for payment
in U.S. dollars or for payment in local currency linked to the
exchange rate between the local currency and the U.S. dollar at
the time of invoicing. These contractual provisions are
structured to mitigate our risk if currency exchange rates
fluctuate. However, given that the exchange rate is generally
set at the date of invoicing and that in some cases we
experience substantial delays in collecting receivables, we are
exposed to some exchange rate risk.

As previously discussed in this Report, during
January 2002 Argentina abandoned the fixed dollar-to-pesoexchange rate and devalued the Argentine pesoand, on
February 3, 2002, pursuant to the
pesification decree, the Argentine government
announced the mandatory conversion of all foreign currency
denominated contractual obligations governed by Argentine law
into Argentine pesosat a rate of one Argentine pesoto one U.S. dollar. The floating exchange rate at
March 31, 2003 was pesos2.88 = $1.00. These and any
further devaluations of the pesohave and will adversely
affect IMPSAT Argentinas results of operations and, in
turn, our companys consolidated results of operations and
financial condition. Management is currently unable to predict
the most likely average or end-of-period peso/dollar
exchange rates for 2003 or provide estimates of the impacts that
the changes in Argentine laws, the potential impacts of the
currency devaluation and other recent events in Argentina could
have on our companys consolidated results of operation and
financial condition. There is likely to occur during 2003
increases to our consolidated net losses that would result from
transaction gains or losses on our dollar-denominated monetary
assets and liabilities. Also, operating income reductions are
likely to result from the potential impacts on our consolidated
revenues from services of the conversion to pesosof
contract obligations that were previously tied to the dollar.
Balance sheet exposures include the reduction to our
consolidated stockholders equity due to the effects of
lower net income on retained earnings. Our management is
continuing to assess the impacts that the events in Argentina
could have on our consolidated results of operations and
financial condition.

53



---



##### 



As discussed under Certain
Considerations  Economic and political conditions in
Latin America pose numerous risks to our operations, in
Brazil, the realhas devalued significantly during 2002,
mostly related to uncertainty surrounding the presidential
elections. At December 31, 2001, the realtraded at
a rate of R$2.41 = $1.00, and at December 31, 2002 it had
depreciated to R$3.53 = $1.00. These and prior devaluations have
had a negative effect on our real-denominated revenues.

Pursuant to laws in Brazil, our contracts with
customers in Brazil cannot be denominated in dollars or linked
to the exchange rate between the Brazilian realand the
U.S. dollar. In Brazil, we are permitted to amend the pricing of
our services for our long-term telecommunication services
contracts with our customers annually based on changes in the
consumer price index in Brazil for the prior year. In Argentina,
obligations that are mandatorily converted to pesosunder
the pesification decree may be adjusted
pursuant to the CER, an index rate based on variations in the
Argentine consumer price index. These aspects of the laws in
Brazil and Argentina do not eliminate completely the currency
exchange risk facing our operations in those countries. Changes
in the consumer price indices in Brazil and Argentina may lag or
be lower than changes in the exchange rate between the Brazil
and Argentine local currencies and the U.S. dollar and therefore
may not fully allow us to address the impact of a devaluation of
those currencies against the U.S. dollar. Also, contracts
entered into after the pesification
decrees enactment that are initially denominated in
pesosare not entitled to be adjusted according to the
CER or any other consumer price index. Accordingly, our
operations in Brazil and Argentina have exposed us, and will
increase our exposure, to exchange rate risks.

As discussed above, in response to political and
economic turmoil currently affecting Venezuela, that
countrys government imposed foreign exchange and price
controls during February 2003, making it difficult for our
customers in Venezuela to obtain the U.S. dollars needed to make
payments due to us in U.S. dollars on a timely basis. These
foreign exchange controls could also limit our ability to
convert local currency into U.S. dollars and transfer funds out
of Venezuela. At December 31, 2001, the bolivartraded at a rate of Bs.769.00 = $1.00, at December 31,
2002, it traded at a rate of Bs.1,392.00 = $1.00, and at
February 5, 2003, it traded at the rate of Bs.1,924 =
$1.00. On February 6, 2003, the Venezuelan government set a
single fixed exchange rate for the bolivaragainst the
U.S. dollar of approximately Bs.1,600 = $1.00 as part of the new
currency controls.

Revenues from services from our Argentine
operations for each of 2001 and 2002 represented approximately
40.2% and 24.5% of our total net revenues from services for such
years. Revenues from services from our Brazilian operations for
each of 2001 and 2002 represented approximately 14.1% and 15.6%
of our total net revenues from services for such periods.
However, this proportion can be expected to increase
significantly in future periods in connection with the
progression of our operations in Brazil and the further
development of the Broadband Network. At December 31, 2002
and March 31, 2003, the pesotraded at a rate of
pesos3.40 = $1.00 and pesos2.88 = $1.00,
respectively. At December 31, 2002 and March 31, 2003, the
realtraded at a rate of R$3.53 = $1.00 and R$3.46 =
$1.00. Our revenues from services in Venezuela accounted for
10.3% and 13.7% of our total revenues from services in 2001 and
2002.

Item 8.     Financial
Statements and Supplementary Data

Information required by this Item is included
herein beginning on page F-1.

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

None.

54



---



##### 



PART III

Item 10.     Directors
and Officers

The Bylaws of our company provide that the number
of members of its board of directors shall initially be seven.
(See Item 1  Business 
Chapter 11 Filing and Emergence for further details and
description of the Board.)

The officers of IMPSAT Fiber Networks, Inc. are
appointed by its board of directors. All officers hold office
until their successors are elected and qualified, or until their
earlier death, resignation or removal. Executive officers of
IMPSAT Fiber Networks, Inc. are employees of IMPSAT Argentina
and IMPSAT Brazil.

No family relationship exists among any of our
directors or executive officers.

Set forth below are the names, ages and positions
of directors and executive officers of our company as of
March 31, 2003.

|                     |  |     |    |          |  |                                                          
|-------------------- |  | --- | -- | -------- |  | ---------------------------------------------------------
|Name                 |  | Age |    | Position
|                     |  |     |    |         
|Directors            |  |     |    |          |  |                                                          
|Ricardo A. Verdaguer |  |     | 52 |          |  | Chairman, President and Chief Executive Officer          
|William Connors      |  |     | 32 |          |  | Director                                                 
|Thomas Doster IV     |  |     | 33 |          |  | Director                                                 
|Elias Makris         |  |     | 40 |          |  | Director                                                 
|Raul Ramirez         |  |     | 33 |          |  | Director                                                 
|Joseph R. Thornton   |  |     | 41 |          |  | Director                                                 
|Ignacio Troncoso     |  |     | 47 |          |  | Director                                                 
|Executive Officers   |  |     |    |          |  |                                                          
|Héctor Alonso        |  |     | 45 |          |  | Executive Vice President and Chief Financial
    Officer 
|Guillermo V. Pardo   |  |     | 52 |          |  | Senior Vice President, Corporate Finance and
    Treasury
|José R. Torres       |  |     | 44 |          |  | Senior Vice President, Accounting                        
|Marcelo Girotti      |  |     | 38 |          |  | Executive Vice President, Products and Marketing         
|Mariano Torre Gómez  |  |     | 51 |          |  | Executive Vice President, Sales and Services             
|Matias Heinrich      |  |     | 37 |          |  | Executive Vice President, Network                        

Biographies
of Directors and Executive Officers

Information with respect to the business
experience and the affiliations of the current directors and
executive officers of our company is set forth below.

Ricardo A. Verdaguerhas been President, Chief Executive
Officer and a member of our board of directors since September
1994. Mr. Verdaguer has been director of IMPSAT Argentina
since 1988 and served as President of IMPSAT Argentina from
April 1988 until February 1994. Mr. Verdaguer is also a
director of Claxson Interactive Group, Inc., a multimedia
company headquartered in Argentina that provides branded
entertainment content targeted to Spanish and Portuguese
speakers around the world.

William Connorsis a
Portfolio Manager for W.R. Huff Asset Management Co., LLC and
Chief Investment Officer of WRH Partners Global Securities, LP.
He has worked with the Huff group since 1992. Mr. Connors
serves on the board of directors at ICG Communications, Inc. He
is a chartered financial analyst.

55



---



##### 



Thomas Doster IVis
an Executive Director at Morgan Stanley & Co. Incorporated,
where he has worked since 1996. Prior to joining Morgan Stanley,
Mr. Doster worked in the bank debt group at Goldman, Sachs
& Co.

Elias Makrisis Head
of Customer Finance Americas of Nortel Networks Limited since
November 2002. Previously, he held various other positions
within Nortel since joining that company in 1999, including
Director, Customer Finance North America and Director, Global
Credit. Prior to joining Nortel, Mr. Makris was Director,
Structured Finance at Bank of Montreal since 1996 and held
financing and team leadership positions at Export Development
Corporation since 1988.

Raul Ramirezis an
Executive Director at Morgan Stanley & Co. Incorporated, and
head of Morgan Stanleys European Special Situations
Research. Previously, he has held various positions with Morgan
Stanley, where he has worked since 1996, including within Latin
American Corporate Bonds under the High Yield Group.

Joseph R. Thorntonis counsel to W.R. Huff Asset Management Co., LLC, where he has
worked for more than ten years. Mr. Thornton serves on the
board of directors of ICG Communications, Inc., and has served
on the on the boards of directors of e.spire Communications,
Inc. and Uniflex, Inc., and as an observer to the board of
directors of Price Communications. Mr. Thornton is a
chartered financial analyst.

Ignacio Troncosois
the founder and chief executive officer of each of planOK, a
company that provides document management services through the
world wide web, and AIMSA, a company focused on data integration
in the telecommunications and electrical engineering markets. He
previously served as country manager for Chile for Raychem
Corporation from July 1988 to November 1999.

Héctor Alonsois our Executive Vice President and
Chief Financial Officer since June 2002, and was our Chief
Operating Officer from September 1996 until May 2002.
Mr. Alonso was President of IMPSAT Colombia from September
1993 to August 1996. Prior to joining IMPSAT Colombia,
Mr. Alonso had 14 years of experience in a variety of
management positions with Industrias Metalúrgicas
Pescarmona S.A.I.C. y F. (IMPSA).

Guillermo V. Pardohas served as our Senior Vice
President, Corporate Finance and Treasury since June 2002 and as
our Secretary since February 2000. Previously, Mr. Pardo
served as our Vice President, Planning from January 1995 to May
2002. Mr. Pardo was previously Managing Director of the
Guido Di Tella companies and has had over 20 years of
experience in finance positions in a number of companies in
Argentina and Spain. Mr. Pardo is a member of the board of
directors of FAIC S.A. and the Fundacion Torcuato Di Tella.

José R. Torreshas served as our Senior Vice
President, Accounting since March 25, 2003, and as a
Director of IMPSAT Argentina since 1990. Previously, he was our
Vice President, Administration and Chief Accounting Officer from
January 1995 until March 25, 2003. Mr. Torres
previously worked as Assistant Finance Manager of IMPSA and as
Finance Manager of IMPSAT Argentina for five years until
December 1994.

Marcelo Girottiis
our Executive Vice President, Products and Marketing since
March 25, 2003. He was Regional Manager, Southern Cone from
September 2000 until March 25, 2003 and has served as
chairman of the board of directors of IMPSAT Argentina since
March 2000. He is also President of IMPSAT Argentina, a position
he has held since August 1998. Mr. Girotti joined IMPSAT
Argentina in 1992 where he has held several managerial
positions, including Manager of Special Accounts from 1996 to
1997 and Business Manager of the value-added unit from 1997 to
1998.

Mariano Torre Gómezis our Executive Vice President, Sales
and Services since March 25, 2003 and, before that, was
President of IMPSAT Brazil and Regional Manager, Brazil since
September 2000. Mr. Torre Gómez was President of
IMPSAT Colombia from July 1999 to June 2000 and of IMPSAT
Venezuela from April 1997 to July 1999. Mr. Torre
Gómez was President of IMPSAT Ecuador for two years prior
to his transfer to IMPSAT Venezuela. Before that, Mr. Torre
Gómez served four years at IMPSAT Argentina in the
commercial and new licenses departments. Mr. Torre
Gómez has served in a variety of positions involving

56



---



##### 



engineering, production, planning, business
development and new markets with IMPSA over a period of
17 years.


Matias Heinrichis
our Executive Vice President, Networks since March 25,
2003. Before that, he was our Regional Manager, Network
Operations from June 1999 and Vice President of Operations and
Director of IMPSAT Venezuela from 1997 until 1999.
Mr. Heinrich joined IMPSAT Argentina in 1990 and has held
several managerial positions there, including Teleport Manager
from 1995 to 1996 and Terrestrial Network (Teledatos) Manager
from 1996 to 1997.

Section 16(a)  Beneficial
Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act
of 1934 requires that our companys directors, executive
officers and persons who own more than 10% of a registered class
of our companys equity securities file with the SEC
initial reports of ownership and reports of changes in ownership
of our Old Common Stock and other equity securities of our
company. Directors, executive officers and greater than 10%
stockholders are required by the SEC regulations to furnish our
company with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the
copies of the Section 16(a) reports furnished to our
company and written representations that no other reports were
required, during 2002, all Section 16(a) filing
requirements applicable to our directors, executive officers and
greater than 10% beneficial owners were complied with.

Director Compensation

During 2002, the members of our board of
directors did not receive any compensation for their services on
our board.

Board of Directors, Committees and Attendance
at Meetings

During 2002, our board of directors held six
meetings, three of which were by telephone conference. During
their term, all of the then incumbent directors were present for
at least 75 percent of the meetings of our board of
directors and the committees of our board of directors on which
they serve. In accordance with the Plan, the directors of our
company immediately before the Effective Date resigned as of the
Effective Date and were thereupon replaced by the current
members of our board of directors.

Our board of directors has two standing
committees: the audit committee and the compensation committee.

The audit committee held four meetings during the
year ended December 31, 2002. The audit committee, composed
of non-employee directors, oversees the engagement of our
independent auditors and, together with our independent
auditors, reviews our accounting practices, internal accounting
controls and financial results. Our audit committee was
dissolved on the Effective Date upon the reconstitution of our
board of directors in accordance with the Plan. The new audit
committee, which was established by our board of directors on
April 9, 2003, is currently constituted by
Messrs. Joseph Thornton, Ignacio Troncoso and Raul Ramirez,
each of whom has served as a non-employee director since our
emergence from bankruptcy.

During 2002, the compensation committee held one
meeting. Our compensation committee traditionally establishes
salaries, incentives and other forms of compensation for our
directors and officers and recommends policies relating to our
benefit plans. During our debt restructuring negotiations during
the first half of 2002, our compensation committee did not make
any decisions regarding executive compensation. For the duration
of our Chapter 11 bankruptcy proceedings (beginning with
the filing of our Plan on June 11, 2002 through our
emergence from bankruptcy on March 25, 2003), the
compensation committee did not take any actions in respect of
salaries, incentives and other benefits for our officers and
directors because of the limitations regarding approval of such
matters under the United States Bankruptcy Code. Our
compensation committee was dissolved on the Effective Date upon
the reconstitution of our board of directors in accordance with
the Plan. Our current compensation committee, which was
established by our board of directors on April 9, 2003, is
currently constituted by Messrs. William Connors and Raul
Ramirez, each of whom has served as a director

57



---



##### 



since our emergence from bankruptcy. Our current
compensation committee has not taken any actions in respect of
salaries, incentives and other benefits for our officers and
directors following our emergence from bankruptcy.


2002 Audit Committee Report

Our board of directors has adopted a written
audit committee charter. All members of the audit committee are
independent as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers Listing Standards.

In discharging its oversight responsibility as to
the audit process, the audit committee has reviewed and
discussed with management and Deloitte & Touche LLP,
our companys independent auditors, our companys
audited financial statements included in our companys
Annual Report on Form 10-K for the year ended
December 31, 2002. In addition, the audit committee has
discussed with Deloitte & Touche LLP, the matters
required to be discussed by Statement on Auditing Standards
(SAS) No. 61 Communication with Audit
Committees.

The audit committee has obtained from Deloitte
& Touche LLP a formal written statement describing all
relationships between the auditors and our company that might
bear on the auditors independence consistent with the
Independence Standards Board Standard No. 1, discussed with
the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors
independence.

Based on the review and discussions referred to
above in this report, the audit committee has recommended to the
board of directors that the audited financial statements be
included in our companys Annual Report on Form 10-K
for the year ended December 31, 2002, for filing with the
SEC.



| |                        
| | -----------------------
| | By the Audit Committee:
| | Joseph Thornton        
| | Ignacio Troncoso       
| | Raul Ramirez           

Auditors Fees

Aggregate fees billed to the Company for the year
ended December 31, 2002 by the Companys principal
accounting firm, Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu and their respective affiliates
(Deloitte & Touche) were:



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Audit Fees.The
    aggregate fees billed for professional services rendered for the
    audit of our consolidated financial statements and local
    statutory financial statements for 2002 were $586,532.                                                                     
|
| |  | Financial Information Systems Design and
    Implementation Fees.There were no
    fees billed for the professional services described in Paragraph
    (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR
    210.2-01(c)(4)(ii)) rendered by Deloitte & Touche during
    2002.
|
| |  | All Other Fees.All
    other fees paid to Deloitte & Touche for 2002, aggregated
    $486,626, and included internal audit services of $36,992,
    bankruptcy and reorganization services of $223,849 and other
    services of $225,785.                                      

The audit committee has concluded that the
provision of services covered in the above paragraph captioned
All Other Fees are compatible with maintaining
Deloitte & Touches independence.

Item 11.     Executive
Compensation

Executive Compensation

Under rules established by the SEC, we are
required to provide certain data and information with respect to
the compensation and benefits provided to our companys
Chief Executive Officer and other executive officers of our
company.

58



---



##### 



Employment
Agreements

Employment Agreements With
Messrs. Verdaguer and Alonso.On
the Effective Date, pursuant to the Plan, Messrs. Ricardo
Verdaguer and Héctor Alonso, entered into employment
contracts with our company as of such date.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Each employment agreement with
    Messrs. Verdaguer and Alonso is for a three-year term,
    subject to recurrent automatic one-year renewals (unless the
    agreement is first terminated as provided therein).
    Mr. Verdaguer will continue to serve as our President and
    Chief Executive Officer, and Mr. Alonso will serve as our
    Chief Financial Officer and Executive Vice President 
    Corporate Services.                              
|
| |  | Pursuant to the employment agreements, the terms
    of which were negotiated between management and the creditors
    committee during our Chapter 11 proceedings,
    Mr. Verdaguer and Mr. Alonso (each, an
    executive) were on the Effective Date granted
    bonuses of $200,000 and $75,000, respectively, in respect of
    their performances for 2002. Following below is a summary of the
    additional key terms of the employment agreements.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Base Salary.During
    the initial three-year term, Mr. Verdaguers annual
    base salary will be $510,000 and Mr. Alonsos annual base
    salary will be $310,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Bonus.For each
    year, the executives will be eligible to participate in our
    Executive Incentive Bonus Plan (the Incentive Bonus
    Plan). Under the Incentive Bonus Plan, if our company and
    the respective executive meet certain targets for the year, as
    set by our compensation committee, the executive will receive an
    annual bonus equal to 100% of the executives annual base
    salary, subject to the right of the compensation committee, in
    its sole discretion, to pay a lesser such percentage (or to pay
    no annual bonus whatsoever). The targets for each year will be
    determined by our compensation committee by no later than
    March 31 of such year and paid no later than thirty days
    following receipt by our board of directors of our audited
    financial statements for such year.                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Stock Options.Subject to the approval of our compensation committee,
    Messrs. Verdaguer and Alonso were granted under our 2003
    Stock Incentive Plan and their employment agreements eight-year
    stock options for 617,400 and 154,350 shares of our New Common
    Stock, respectively, at an exercise price of $15 per share (or,
    if greater, the fair market value of the stock) and vesting in
    one-quarter increments on the date of grant and on each of the
    successive first three anniversaries of the date of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Restricted Stock.On
    the Effective Date, we granted Mr. Verdaguer and
    Mr. Alonso under our 2003 Stock Incentive Plan and their
    employment agreements 100,000 and 25,000 shares of our New
    Common Stock, respectively, vesting in one-quarter increments on
    the date of grant and on each of the successive first three
    anniversaries of the date of grant (but, in each case, only if
    the executive is still employed with us on such respective date).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Termination.Under
    the employment agreements, subject to certain narrow exceptions
    contained therein, if an executives employment is
    terminated due to death or disability, by our company without
    cause, or by the executive for good reason, then (A) the
    executive is entitled to receive a lump sum payment equal to
    (1) if the termination occurs during the initial three-year
    term, the sum of (x) the amount to which the executive
    would be entitled in respect of his annual base salary for the
    remainder of the such initial term plus a bonus equal to 50% of
    such amount and (y) 100% of his then current annual base
    salary, or (2) if the termination occurs after the initial
    three-year term, 100% of the executives then current
    annual base salary; and (B) any unvested portion of the
    stock option and the restricted stock grants discussed above
    will automatically and fully vest. If the executives
    employment is terminated by our company for cause or by the
    executive without good reason, the executive will only be
    entitled to receive accrued annual base salary and benefits
    through the date of such termination.

59



---



##### 



Offer Letters With Messrs. Giroti, and
Torre Gómez.On the Effective
Date, Messrs. Marcelo Girotti and Mariano Torre Gómez
received offer letters for at will employment with
our company.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Base Salary.During
    their respective at will employment terms, the
    annual base salary of each of Messrs. Girotti and Torre
    Gómez (an each, an additional executive) will
    be $310,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Stock Options.Subject to the approval of our compensation committee, each
    additional executive was granted under our 2003 Stock Incentive
    Plan and their offer letters eight-year stock options for
    154,350 shares of our New Common Stock, at an exercise price of
    $15 per share (or, if greater, the fair market value of the
    stock) and vesting in one-quarter increments on the date of
    grant and on each of the successive first three anniversaries of
    the date of grant, but, in each case, only if the additional
    executive is still employed with us on such date.                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Restricted Stock.On
    the Effective Date, we granted each additional executive under
    our 2003 Stock Incentive Plan and their respective offer letter,
    25,000 shares of our New Common Stock, vesting in one-quarter
    increments on the date of grant and on each of the successive
    first three anniversaries of the date of grant (but, in each
    case, only if the additional executive is still employed with us
    on such date).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Termination.The
    additional executives employment with us is at
    will and is terminable by us upon 30 days prior
    written notice. Under the offer letters, subject to certain
    narrow exceptions contained therein, if an additional
    executives employment is terminated by our company without
    cause or by the additional executive for good reason, then
    (A) the additional executive is entitled to receive a lump
    sum payment equal to 100% of his then current annual base
    salary; and (B) any unvested portion of the stock option
    and the restricted stock grants discussed above will
    automatically and fully vest. If the additional executives
    employment is terminated by our company for cause or by the
    additional executive without good reason, the additional
    executive will only be entitled to receive accrued annual base
    salary and benefits through the date of such termination.

2002 Report
of the Compensation Committee

During 2002, our executive officers, including
our Chief Executive Officer, were paid the same base salaries
they received during 2001. Except as discussed above under
Employment Agreements, we awarded no stock
options, bonuses or other cash compensation to our executive
officers during 2002. As discussed above due to the exigencies
related to our bankruptcy negotiations and Chapter 11
proceedings, neither our compensation committee (or any other
board committee performing equivalent functions) nor our board
of directors engaged in any deliberation or decision making
regarding executive officer compensation for 2002. Our current
compensation committee, which was constituted on April 9,
2003, has not taken any actions in respect of salaries,
incentives and other benefits for our officers and directors
following our emergence from bankruptcy.

The following is a discussion of our overall
executive compensation philosophy.

General.IMPSATs overall compensation philosophy is to link
executives total compensation to the short-term and
long-term performance of our company so as to maximize long-term
stockholder value. The policy is designed to provide a
competitive compensation program that will enable our company to
attract, motivate, reward and retain executives and other
employees who have the skills, experience and talents required
to promote IMPSATs short and long-term financial
performance and growth. IMPSAT believes that the compensation
levels of its executive officers, who provide leadership and
strategic direction, should be targeted to provide opportunities
that are comparable to other similarly situated
telecommunications and technology companies, and should consist
of:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | fair base salaries                                                                            
|
| |  | cash bonuses based on achievement of performance
    objectives established by our company and

60



---



##### 





| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | stock option and restricted stock grants, which
    align management compensation with long-term value gains
    realized by the stockholders.

Base Salary.Generally, our companys salaries policy is designed to
provide executive officers and other management personnel with a
base salary that is competitive both for the industry and the
specific countries where IMPSAT has its operations.

Bonus.As a further
component of the total cash compensation payable to its
executive officers, IMPSAT has established a program of target
annual bonuses. This program rewards our executive officers for
their contributions to our company and motivates them to perform
to the full extent of their abilities. Target bonuses for
executive officers are determined on the basis of specific goals
to be achieved by each covered executive officer, including ,
among others, revenue growth, EBITDA evolution, and attainment
of network development milestones. Except as discussed above
under  Employment Agreements, no target
bonuses were set, earned or paid during 2002.

Stock Options and Restricted
Stock.Awards of options or restricted
under our stock incentive plans are based on criteria that
reflect contributions to long-term stockholder value. We will
generally grant stock options and/or restricted stock to our
executive officers at levels comparable to competitive business
entities, and such grants are intended to focus the performance
of these executive officers towards increasing our stockholder
value. We expect to use stock-based incentive grants, including
stock options and restricted stock, as a significant component
of executive compensation. During 2002, no stock options or
restricted stock were earned by or awarded to our executive
officers.

Section 162(m) of the Internal Revenue
Code.Section 162(m) of the
Internal Revenue Code generally denies a deduction to any
publicly-held corporation for compensation paid to its chief
executive officer and its four other highest-paid executive
officers to the extent that any such individuals
compensation exceeds $1 million, subject to certain
exceptions. Certain forms of compensation meeting a tax law
definition of performance-based is generally exempt
from this deduction limit. Our company does not currently intend
to qualify cash compensation paid to executive officers for
deductibility under Section 162(m). Further, in general,
our company does not currently have a policy that requires or
encourages the Committee to qualify other types of compensation
awarded to executive officers for deductibility under
Section 162(m).

The foregoing information is provided by the
compensation committee of our company:



| |                               
| | ------------------------------
| | By the compensation committee:
| | William Connors               
| | Raul Ramirez                  

61



---



##### 



Summary Compensation
Table

The following tables set forth the compensation
paid or accrued to our chief executive officer and each of our
four other most highly compensated executive officers (whom we
refer to as the named executive officers) receiving
compensation in excess of $100,000 per year during 2002. We do
not maintain any long-term incentive plans and have not granted
stock appreciation rights or restricted stock awards.

|                            |                                    |                     |      |              |  |            |         |              |  |             |           |           |   |   |         |         |     |  |         |        | 
|--------------------------- | ---------------------------------- | ------------------- | ---- | ------------ |  | ---------- | ------- | ------------ |  | ----------- | --------- | --------- | - | - | ------- | ------- | --- |  | ------- | ------ | 
|                            |                                    |                     |      | Long Term   
|                            |                                    | Annual Compensation |      | Compensation
|                            |                                    |                     |      |             
|                            |                                    |                     |      | Securities  
|                            |                                    |                     |      | Other Annual |  | Underlying
|Name and Principal Position |                                    | Year                |      | Salary       |  | Bonus      |         | Compensation |  | Options (#)
|                            |                                    |                     |      |              |  |            |         |              |  |            
|Enrique M. Pescarmona (1)   |                                    |                     | 2002 |              |  | $          | 400,000 |              |  | $           | (2       | )         |   |   |        |         |     |  |        |       
|                            | Chairman of the Board of Directors |                     |      | 2001         |  |            | $       | 400,000      |  |             | $         | 240,000(3 | ) |   |         |        |     |  |         |       | 
|                            |                                    |                     | 2000 |              |  | $          | 359,840 |              |  | $           | 240,000(4 | )         |   |   |        |         |     |  | 35,000  |       
|Ricardo A. Verdaguer        |                                    |                     | 2002 |              |  | $          | 500,500 |              |  | $           | 200,000(2 | )         |   |   |        |         |     |  |        |       
|                            | President and Chief                |                     |      | 2001         |  |            | $       | 500,500      |  |             | $         | 300,000(3 | ) |   |         |        |     |  |         |       | 
|                            | Executive Officer                  |                     |      | 2000         |  |            | $       | 359,840      |  |             | $         | 300,000(4 | ) |   |         |        |     |  |         | 35,000 | 
|Marcelo Girotti             |                                    |                     | 2002 |              |  | $          | 305,500 |              |  | $           | (2       | )         |   |   |        |         |     |  |        |       
|                            | Executive Vice President,          |                     |      | 2001         |  |            | $       | 305,500      |  |             | $         | 95,000(3  | ) |   |         |        |     |  |         |       | 
|                            | Product and Marketing              |                     |      | 2000         |  |            | $       | 266,500      |  |             | $         | 83,000(4  | ) |   |         |        |     |  |         |       | 
|Héctor Alonso               |                                    |                     | 2002 |              |  | $          | 303,680 |              |  | $           | 75,000(2  | )         |   |   |        |         |     |  |        |       
|                            | Chief Financial Officer            |                     |      | 2001         |  |            | $       | 303,680      |  |             | $         | 150,000(3 | ) |   |         |        |     |  |         |       | 
|                            |                                    |                     | 2000 |              |  | $          | 260,000 |              |  | $           | 150,000(4 | )         |   |   |        |         |     |  | 137,055 |       
|Mariano Torre Gómez         |                                    |                     | 2002 |              |  | $          | 281,692 |              |  | $           | (2       | )         |   | $ | 174,623 | (5)     |     |  |        |       
|                            | Executive Vice President, Sales    |                     |      | 2001         |  |            | $       | 281,692      |  |             | $         | 120,000(3 | ) |   | $       | 136,087 | (5) |  |         |       | 
|                            | and Services                       |                     |      | 2000         |  |            | $       | 246,890      |  |             | $         | 85,000(4  | ) |   | $       | 76,928  | (5) |  |         | 45,601 | 






|    |                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Enrique M. Pescarmona ceased to be a
    Chairman and a member of our board of directors as of the
    Effective Date.                                                                                                                                                        
|   
|(2) | This amount represents bonuses awarded in 2003
    pursuant to the executive employment agreements discussed above
    under Employment Agreements. This amount
    relates to our 2002 operating results. No bonuses were paid with
    respect to our 2001 operating results.
|   
|(3) | This amount represents bonuses we paid to the
    executive officers named in the table above in June 2001. This
    amount relates to our 2000 operating results.                                                                                                                
|   
|(4) | This amount represents bonuses we paid to the
    executive officers named in the table above in December 2000.
    This amount relates to our 1999 operating results.                                                                                                            
|   
|(5) | Annual housing allowance.                                                                                                                                                                                                                                                         

Stock Option
Grants

No grants of options to purchase our Old Common
Stock were made by us during 2002 to any of the named executive
officers. We granted no stock appreciation rights during 2002.
No stock options were exercised by the named executives during
2002.

62



---



##### 



Aggregate Option Exercise During 2002 and
Option Values on December 31, 2002

|                      |                       |                              |  |                           |  |  |  |     | 
|--------------------- | --------------------- | ---------------------------- |  | ------------------------- |  |  |  | --- | 
|                      |                       |                              |  | Value of Unexercised     
|                      |                       | Number of Securities         |  | In-the-Money             
|                      |                       | Underlying Unexercised       |  | Options at December 31,  
|                      |                       | Options at December 31, 2002 |  | 2002($)(1)               
|                      |                       |                              |  |                          
|Name                  |                       | Exercisable/Unexercisable    |  | Exercisable/Unexercisable
|                      |                       |                              |  |                          
|Enrique M. Pescarmona |                       |                              |  |                           |  |  |  |    
|                      | Granted June 14, 2000 |                              |  | 14,000/21,000             |  |  |  | 0/0 | 
|                      | Granted June 25, 1999 |                              |  | 33,154/14,208             |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                              |  | 59,202/                  |  |  |  | 0/ | 
|Ricardo A. Verdaguer  |                       |                              |  |                           |  |  |  |    
|                      | Granted June 14, 2000 |                              |  | 14,000/21,000             |  |  |  | 0/0 | 
|                      | Granted June 25, 1999 |                              |  | 33,154/14,208             |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                              |  | 59,202/                  |  |  |  | 0/ | 
|Marcelo Girotti       |                       |                              |  |                           |  |  |  |    
|                      | Granted June 14, 2000 |                              |  | 6,120/9,180               |  |  |  | 0/0 | 
|                      | Granted Jan. 5, 2000  |                              |  | /29,601                  |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                              |  | 10,610/4,546              |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                              |  | 18,945/                  |  |  |  | 0/ | 
|Héctor Alonso         |                       |                              |  |                           |  |  |  |    
|                      | Granted June 14, 2000 |                              |  | 7,640/11,190              |  |  |  | 0/0 | 
|                      | Granted Jan. 5, 2000  |                              |  | /118,405                 |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                              |  | 19,229/8,241              |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                              |  | 34,337/                  |  |  |  | 0/ | 
|Mariano Torre Gómez   |                       |                              |  |                           |  |  |  |    
|                      | Granted June 14, 2000 |                              |  | 6,400/9,600               |  |  |  | 0/0 | 
|                      | Granted Jan. 5, 2000  |                              |  | /29,601                  |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                              |  | 10,610/4,546              |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                              |  | 18,945/                  |  |  |  | 0/ | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed previously in this Report, on the
    Effective Date, we adopted a new 2003 Stock Incentive Plan and
    terminated our 1998 Stock Option Plan and our 1999 Stock Option
    Plan, and all of the shares of our Old Common Stock, options
    granted under such plans were cancelled, stock option plans were
    cancelled, retired and eliminated with no consideration paid
    thereon. See Business  Chapter 11 Filing and
    Emergence.
|   
|(2) | Value is calculated as the difference between the
    fair market value of a share of our Old Common Stock on
    December 31, 2002 ($0.01 per share as of close of business
    on December 31, 2002 by the Nasdaq Over-The-Counter
    Bulletin Board) and the exercise price of the options.                                                                                                                                                                

Stock Option
Plans

2003 Stock Incentive Plan.On the Effective Date, in accordance
with the Plan, we adopted the 2003 Stock Incentive Plan, which
provides for the grant to our officers, key employees,
consultants, advisors, directors or affiliates of (i)
incentive stock options within the meaning of
Section 422 of the U.S. Internal Revenue Code of 1986, as
amended, (ii) stock options that are non-qualified for U.S.
federal income tax purposes, (iii) restricted stock grants
and (iv) stock appreciation rights (collectively the
Awards). A copy of the 2003 Stock Incentive Plan is
included as Exhibit 9.1 to this Report. The total number of
shares of New Common Stock for which Awards may be granted
pursuant to the 2003 Stock Incentive Plan is 3,087,044, subject
to certain adjustments reflecting changes in our capitalization
(provided that no more than 200,000 shares of New Common Stock
may be issued pursuant to Awards that are not stock options or
stock

63



---



##### 



appreciation rights). The 2003 Stock Incentive
Plan is administered by our compensation committee (or, if we do
not have a compensation committee, by our full board of
directors). The compensation committee determines, among other
things, which of our officers, employees, consultants, advisors,
affiliates and directors will receive Awards under the plan, the
time when Awards will be granted, and the type of Awards to be
granted. Awards granted under the 2003 Stock Incentive Plan are
on such terms, including the number of shares subject to each
Award, the time or times when the Awards will become
exercisable, and the price and duration of the Award, as
determined by the compensation committee.


The exercise price of incentive and non-qualified
stock options is determined by the compensation committee, but
may not be less than the fair market value of the common stock
on the date of grant and the term of any such option may not
exceed ten years from the date of grant (or five years in the
case of an incentive stock option granted to an employee owning
10% or more of our voting stock).

Payment of the exercise price of a stock option
or stock appreciation right must be made by cash or, in the sole
discretion of the compensation committee, by promissory note,
tender of shares of the New Common Stock then owned by the
optionee or, subject to certain conditions, the surrender to us
of an exercisable option to purchase shares of New Common Stock
under the 2003 Stock Incentive Plan. Stock options and stock
appreciation rights granted pursuant to the 2003 Stock Incentive
Plan are generally not transferable, other than by will or the
laws of descent and distribution in the event of death.

Our board of directors has the right at any time
and from time to time to amend or modify the 2003 Stock
Incentive Plan, without the consent of our stockholders (unless
otherwise required by law) or grantees of Awards; provided, that
no such action may adversely affect Awards previously granted
without the grantees consent.

Compensation Committee Interlocks and Insider
Participation

Mr. Roberto Vivo, who was a member of our
board of directors prior to the Effective Date, is a member of
the compensation committee of the board of directors of Claxson
Interactive Group, Inc. (formerly, El Sitio, Inc.).

Performance Graph

Our Old Common Stock first traded publicly on
February 4, 2000. Prior to such date, there was no
established market for our Old Common Stock. Our Old Common
Stock was delisted from the NASDAQ National Market effective on
May 15, 2002. Thereafter, until the Effective Date, our Old
Common Stock was traded on the NASDAQ Over-The-Counter Bulletin
Board. The following performance graph compares our
companys cumulative total stockholder return on the Old
Common Stock from February 4, 2000, through May 15,
2002 with the cumulative total return of an overall stock market
index (NASDAQ National Market) and a published industry group
index the (NASDAQ Telecomm Index) over the same period. The
graph assumes that the value of the investment in the Old Common
Stock and each index was $100 at February 4, 2000, and all
dividends were reinvested.

64



---



##### 






The foregoing graph is based on historical data
and is not necessarily indicative of future performance.



|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

Equity Compensation Plan Information

The following table provides information as of
December 31, 2002 about our Old Common Stock that was then
issuable upon the exercise of options, warrants, and rights
under all of our then existing equity

65



---



##### 



compensation plans, including the 1998 Stock
Option Plan and the 1999 Stock Option Plan. As discussed
previously in this Report, on the Effective Date, we adopted a
new 2003 Stock Incentive Plan and terminated our 1998 Stock
Option Plan and our 1999 Stock Option Plan, and all of the
shares of our Old Common Stock, options granted under such plans
were cancelled, stock option plans were cancelled, retired and
eliminated with no consideration paid thereon. See Business
 Chapter 11 Filing and Emergence.


|                                                                  |       |                         |         |                      |  |                         |       |      |  |  |           |           | 
|----------------------------------------------------------------- | ----- | ----------------------- | ------- | -------------------- |  | ----------------------- | ----- | ---- |  |  | --------- | --------- | 
|                                                                  |       | (a)                     |         | (b)                  |  | (c)                    
|                                                                  |       |                         |         |                      |  | Number of securities   
|                                                                  |       |                         |         |                      |  | remaining available for
|                                                                  |       |                         |         |                      |  | future issuance under  
|                                                                  |       | Number of securities to |         | Weighted-average     |  | equity compensation    
|                                                                  |       | be issued upon exercise |         | exercise price of    |  | plans (excluding       
|                                                                  |       | of outstanding options, |         | outstanding options, |  | securities reflected in
|Plan category                                                     |       | warrants and rights     |         | warrants and rights  |  | column (a))            
|                                                                  |       |                         |         |                      |  |                        
|Equity compensation plans approved by security
    holders(1)     |       |                         | 950,105 |                      |  |                         | 12.21 |      |  |  | 3,825,911 |          
|Equity compensation plans not approved by
    security holders(2) |       |                         | 296,012 |                      |  |                         | 1.69  |      |  |  | 59,202    |          
|                                                                  |       |                         |         |                      |  |                         |       |      |  |  |           |          
|                                                                  | Total |                         |         | 1,246,117            |  |                         | $     | 9.70 |  |  |           | 3,885,113 | 
|                                                                  |       |                         |         |                      |  |                         |       |      |  |  |           |          



---



|    |                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our sole stockholder approved equity compensation
    plan as of December 31, 2002 was our 1998 Stock Option Plan.                                                                                                                                                                                                     
|   
|(2) | Our sole non-stockholder approved equity
    compensation plan as of December 31, 2002 was our 1999 Stock
    Option Plan. A description of the material features of the 1999
    Stock Option Plan is set forth in Note 12 to our audited
    consolidated financial statements included elsewhere in this
    Report.

Beneficial Ownership

The following table sets forth certain
information, to the best of our information and knowledge,
regarding the beneficial ownership of our New Common Stock as of
March 26, 2003, by (i) each person known by our
company to be the beneficial owner of five percent or more of
the New Common Stock, (ii) each director of our company,
(iii) each executive officer of our company named in the
summary compensation table below (see Further
Information  Executive Compensation), and
(iv) all current directors and executive officers of our
company as a group. Except as otherwise indicated below, the
beneficial owners of the New Common Stock listed below have sole
investment and voting power with respect to such

66



---



##### 



shares. The business address of our executive
officers and directors is c/o IMPSAT Fiber Networks, Inc.,
Elvira Rawson de Dellepiane 150, 8th Floor, C1107BCA Buenos
Aires, Argentina.


|                                                  |                                      |                           |         |                |  |              |   |            |     |  |         |           |  |  |     |      |  
|------------------------------------------------- | ------------------------------------ | ------------------------- | ------- | -------------- |  | ------------ | - | ---------- | --- |  | ------- | --------- |  |  | --- | ---- | -
|                                                  |                                      |                          
|                                                  |                                      | Shares Beneficially Owned
|                                                  |                                      |                          
|                                                  |                                      |                           |         | Options        |  |             
|                                                  |                                      | Number of                 |         | Exercisable    |  |             
|Name and Address of Beneficial Owner              |                                      | Shares                    |         | Within 60 days |  | Total Shares |   | Percent(1)
|                                                  |                                      |                           |         |                |  |              |   |           
|Common Stock                                      |                                      |                           |         |                |  |              |   |            |     |  |         |           |  |  |     |     
|Beneficial Owners of more than 5%                 |                                      |                           |         |                |  |              |   |            |     |  |         |           |  |  |     |     
|                                                  | Nortel Networks Ltd.(2)              |                           |         | 3,395,658      |  |              |   |           |     |  |         | 3,395,658 |  |  |     | 17.9 | %
|                                                  | William R. Huff(3)                   |                           |         | 2,593,866      |  |              |   |           |     |  |         | 2,593,866 |  |  |     | 13.7 |  
|                                                  | Morgan Stanley & Co. Incorporated(4) |                           |         | 2,884,659      |  |              |   |           |     |  |         | 2,884,659 |  |  |     | 15.2 |  
|Directors and Executive Officers                  |                                      |                           |         |                |  |              |   |            |     |  |         |           |  |  |     |     
|                                                  | Ricardo A. Verdaguer                 |                           |         | 108,680        |  |              |   |           | (5) |  |         | 108,680   |  |  |     | *    |  
|                                                  | Joseph R. Thornton(3)                |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | William Connors(3)                   |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Elias Makris(2)                      |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Thomas Doster IV(4)                  |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Raul Ramirez(4)                      |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Ignacio Troncoso                     |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Héctor Alonso                        |                           |         | 25,000         |  |              |   |           | (5) |  |         | 25,000    |  |  |     | *    |  
|                                                  | Guillermo V. Pardo                   |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | José R. Torres                       |                           |         |               |  |              |   |           |     |  |         |          |  |  |     |      |  
|                                                  | Marcello Girotti                     |                           |         | 25,000         |  |              |   |           | (5) |  |         | 25,000    |  |  |     | *    |  
|                                                  | Mariano Torre Gómez                  |                           |         | 25,000         |  |              |   |           | (5) |  |         | 25,000    |  |  |     | *    |  
|                                                  | Matias Heinrich                      |                           |         | 25,000         |  |              |   |           | (5) |  |         | 25,000    |  |  |     | *    |  
|All Directors and Officers as a Group(13 persons) |                                      |                           | 208,689 |                |  |              |  | (5)        |     |  | 208,689 |           |  |  | 1.1 |     




(*) Less than 1%.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For purposes of this table, beneficial
    ownership is determined in accordance with Rule 13d-3
    under the U.S. Securities Exchange Act of 1934, pursuant to
    which a person or group of persons is deemed to have
    beneficial ownership of any shares of Common Stock
    that such person has the right to acquire within 60 days.
    The percentage of total outstanding for each stockholder is
    calculated by dividing (i) the number of shares of New
    Common Stock deemed to be beneficially owned by such stockholder
    as of March 26, 2003 by (ii) the sum of (A) the
    number of shares of New Common Stock outstanding as of
    March 26, 2003 plus (B) the number of shares of New
    Common Stock issuable upon the exercise of options or warrants
    or conversion of convertible securities held by such stockholder
    that were exercisable or convertible as of March 26, 2003
    or will become exercisable or convertible within 60 days
    thereafter.
|   
|(2) | Includes Series B Notes currently
    convertible into 722,484 shares of New Common Stock and
    currently exercisable warrants to purchase 2,667,975 shares of
    New Common Stock. Mr. Elias Makris was nominated to our
    board of directors by Nortel Networks. Mr. Makris disclaims
    any beneficial interest in these shares. The address of Nortel
    Networks Inc. is 8200 Dixie Road Suite 100, Brampton,
    Ontario, L6T 5P6 Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | Represents Series A Notes currently
    convertible into 2,593,866 shares of New Common Stock, which are
    held by Mr. William R. Huff through two controlled
    entities: W.R.H. Partners Global Securities, L.P. and W.R. Huff
    Asset Management Co., L.L.C. Messrs. Thornton and Connors
    are employees of W.R. Huff Asset Management Co., L.L.C.
    Messrs. Thornton and Connors disclaim any beneficial
    interest in these shares. The address for Mr. William R.
    Huff is c/o W.R. Huff Asset Management Co., L.L.C, 1776 On the
    Green, 67 Park Place, Morristown, New Jersey 07960.                                                                                                                                                                                                                                                                                                                                                                                              

67



---



##### 





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Messrs. Ramirez and Doster are employed in
    various capacities by Morgan Stanley. They disclaim any
    beneficial interest in these shares owned by Morgan Stanley. The
    address for Morgan Stanley is 1585 Broadway New York, NY 10036.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(5) | On the Effective Date, we agreed, subject to the
    approval of our compensation committee, to grant to certain of
    our executive officers eight-year stock options with an exercise
    price of $15 per share (or, if greater, the fair market value of
    the stock) and vesting in one-quarter increments on the date of
    grant and on each of the successive first three anniversaries of
    the date of grant for the purchase of the number of shares of
    our New Common Stock as follows: Mr. Verdaguer 
    617,400 shares; Mr. Alonso  154,350 shares;
    Mr. Girotti  154,350 shares; Mr. Torre
    Gomez  154,350 shares; and
    Mr. Heinrich  154,350 shares. As discussed
    previously, our compensation committee has not taken any actions
    in respect of salaries, incentives and other benefits for our
    officers and directors since the Effective Date and, therefore,
    these stock options have not yet been granted.

Item 13.     Certain
Relationships and Related Transactions

Overview

In the normal course of business, we engage in
transactions with companies in which direct or indirect material
interests are held by our directors, executive officers,
five-percent stockholders, or immediate family members of any of
the preceding persons. The following is a description of the
most significant of these transactions during 2002. Although we
believe that these transactions are generally conducted on an
arms length basis, conflicts of interest are inherent in
these transactions.

CORIM

Our company provides telecommunications services
to companies controlled by Corporación IMPSA S.A. (CORIM).
CORIM is an Argentine holding company for businesses engaged in
a variety of activities including property, casualty and other
insurance, heavy-steel capital goods, manufacturing auto parts
and environmental services. Mr. Enrique Pescarmona, who was
the Chairman of our board of directors during 2002, is an
affiliate of CORIM and serves as the Chairman of CORIMs
board of directors. Total telecommunications services provided
by us during 2002 to companies controlled by CORIM totaled
approximately $0.5 million. During the same period,
companies controlled by CORIM provided services to IMPSAT
Argentina totaling approximately $0.1 million.

Suramericana Group

The Suramericana Group, which was formed in
Medellin, Colombia in the mid-1970s, is a group of over 100
companies related through cross-ownership and interlocking
directorates. Companies within the Suramericana Group were
significant stockholders of our Company during 2002, and during
2002, representatives of the Suramericana Group served as
directors of IMPSAT Colombia and IMPSAT Venezuela, our operating
subsidiaries in Colombia and Venezuela, respectively. During
2002, the total dollar amount of telecommunications services
rendered by our company to the Suramericana Group totaled
approximately $9.8 million. The most significant of these
transactions included services provided by IMPSAT Colombia to
Corporación Nacional de Ahorro y Vivienda totaling
$4.3 million, and to BanColombia totaling $1.4 million.

During 2002, companies within the Suramericana
Group provided us with services totaling $3.3 million. This
total comprises amounts in respect of insurance premiums,
accrued interest on indebtedness, pension fund services, health
benefit services, and employee luncheon services. Certain
companies within the Suramericana Group are creditors of IMPSAT
Colombia, including Corporación Financiera Nacional y
Suramericana S.A. (Corfinsura) and BanColombia, which are
financial institutions, and Suleasing, which is a financial
leasing company. As of December 31, 2002, we were indebted
to companies within the Suramericana Group in the amount of
approximately $15.0 million. This includes indebtedness of
approximately $7.1 million to BanColombia and
$2.8 million to Corfinsura (with respect to which
indebtedness we paid, in the aggregate, interest of
$1.5 million during 2002); and indebtedness of
approximately $2.8 million to Suleasing (with respect to
which indebtedness we paid interest totaling $0.5 million
during 2002).

68



---



##### 



Claxson Interactive Group, Inc.

Claxson Interactive Group, Inc, a British Virgin
Islands multimedia company providing branded entertainment
content targeted to Spanish and Portuguese speakers around the
world, is headquartered in Argentina and has operations in
Brazil, Mexico, Colombia, Venezuelan, Chile, Uruguay and the
United States. As of March 31, 2003, we held an
approximately 3.3% equity interest in Claxson. Affiliates of
Mr. Roberto Vivo (a member of our board of directors during
2002) and Mr. Ricardo Verdaguer (the chairman of our board
of directors), also have equity interests in Claxson.
Mr. Roberto Vivo is Claxsons chief executive officer,
the chairman of its board of directors and a member of its
compensation committee. In addition, Mr. Ricardo Verdaguer
is a director of Claxson.

Claxson is a party to certain telecommunications
services agreements pursuant to which our subsidiaries provide
Claxson with telecommunication networks to access the Internet
backbone. During 2002, the total value of telecommunications
services we rendered to Claxson was approximately $0.1 million.

Morgan Stanley

During 2002 (prior to the Effective Date of our
Chapter 11 restructuring), affiliates of Morgan Stanley
& Co. Incorporated (Morgan Stanley) beneficially
owned 16.3% of our Old Common Stock. For information concerning
Morgan Stanleys current ownership of our New Common Stock,
see Security Ownership of Certain Beneficial Owners and
Management. During 2002, we paid fees totaling
$1.0 million to Morgan Stanley in connection with the
structuring and negotiation of the terms of the Plan.

Nortel Networks Ltd.

During 2002, we paid fees totaling
$1.0 million to Nortel Networks Ltd. (Nortel)
in connection with the structuring and negotiation of the terms
of the Plan. For information concerning Nortels current
ownership of our New Common Stock, see Security Ownership
of Certain Beneficial Owners and Management.

W.R.H. Partners Global Securities,
L.P.

During 2002, we paid fees totaling
$1.0 million to W.R.H. Partners Global Securities, L.P. in
connection with the structuring and negotiation of the terms of
the Plan. For information concerning current ownership of our
New Common Stock by W.R.H. Partners Global Securities, L.P.
and/or its affiliates, see Security Ownership of Certain
Beneficial Owners and Management.

British Telecommunications

Prior to the Effective Date, Nunsgate Limited, a
wholly-owned subsidiary of British Telecommunications,
beneficially owned 20% of our Old Common Stock.

During 2002, the total value of
telecommunications services we rendered to British
Telecommunications was approximately $0.7 million. During
the same period, we purchased telecommunications capacity from
British Telecommunications totaling approximately
$1.4 million.

Item 14.     Controls
and Procedures

Under the supervision and with the participation
of our Chief Executive Officer and our Executive Vice President
and Chief Financial Officer (our companys principal
executive officer and principal financial officer,
respectively), management has evaluated the effectiveness of the
design and operation of our companys disclosure controls
and procedures within 90 days of the filing date of this
quarterly report. Based on that evaluation, our Chief Executive
Officer and our Executive Vice President and Chief Financial
Officer have concluded that these disclosure controls and
procedures are effective. There were no significant changes in
our internal controls or in other factors that could
significantly affect these controls subsequent to the date of
the evaluation.

69



---



##### 



PART IV

Item 15.     Exhibits,
Financial Statement Schedules, and Reports on Form
8-K

(a)(1) List of Financial Statements

Consolidated Financial Statements of IMPSAT
Fiber Networks, Inc. and Subsidiaries



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidated Balance Sheets as of
    December 31, 2001 and 2002                                                                      
|
| |  | Consolidated Statements of Operations for Each of
    the Three Years in the Period Ended December 31, 2002                           
|
| |  | Consolidated Statements of Comprehensive Loss for
    Each of the Three Years in the Period Ended December 31,
    2002.              
|
| |  | Consolidated Statements of Stockholders
    Equity (Deficiency) for Each of the Three Years in the Period
    Ended December 31, 2002
|
| |  | Consolidated Statements of Cash Flows for Each of
    the Three Years in the Period Ended December 31, 2002                           
|
| |  | Notes to the consolidated financial statements                                                                                        

(a)(2) List of Schedules.

All schedules for which provision is made in the
applicable accounting regulations of the Commission are omitted
because they are not applicable, or the information is included
in the financial statements included herein.

(a)(3) Exhibits

The exhibits listed in the accompanying
Exhibit Index and required by Item 601 of
Regulation S-K (numbered in accordance with Item 601
of Regulation S-K) are filed or incorporated by reference
as part of this Report.

(b) Reports on Form 8-K.

During the period covered by this Report, the
registrant filed with the Commission the following current
reports on Form 8-K:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On February 15, 2002, announcing our failure
    to make a $20.6 million interest payment due on
    February 15, 2002 on our $300 million principal amount of
    13 3/4% Senior Notes due 2005. Also announcing that we
    received a notice from the Nasdaq National Market warning that
    our stock would be delisted for failure to maintain a minimum
    bid price of $3 over the preceding 30 consecutive trading days
    and failed to maintain a minimum market value of public float of
    $15,000,000.
|
| |  | On June 11, 2002, announcing our
    companys voluntary petition for reorganization under
    Chapter 11 of the United States Bankruptcy Code.                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | On December 19, 2002, announcing the
    confirmation of the Plan by the Bankruptcy Court.                                                                                                                                                                                                                                                                                                                                                                                                                             

70



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in the City
of Buenos Aires in the Republic of Argentina, on April 15,
2003.



| |                            
| | ---------------------------
| | IMPSAT Fiber Networks, Inc.



| |     |                         
| | --- | ------------------------
| | By: | /s/ Ricardo A. Verdaguer

| |                      
| | ---------------------
| |                      
| | Ricardo A. Verdaguer,
| | President and Chief  
| | Executive Officer    



| |       |               
| | ----- | --------------
| | Date: | April 15, 2003

| | 
| | 
| | 

71



---



##### 



POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below (each, a
Signatory) constitutes and appoints Héctor
Alonso and José R. Torres (each, an Agent, and
collectively, Agents) or either of them, his true
and lawful attorney-in-fact and agent, each with full power of
substitution and resubstitution, for and in his name, place and
stead, in any and all capacities, to sign this Report of
Form 10-K (this Report) and any and all
amendments thereto and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with
the SEC. Each Signatory further grants to the Agents, and each
of them, full power and authority to do and perform each and
every act and thing requisite and necessary, in the judgment of
such Agent, to be done in connection with any such signing and
filing, as full to all intents and purposes as he might or could
do in person, and hereby ratifies and confirms all that said
Agents, or any of them, or their or his other substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, this Report has been signed by
the following persons in the capacities and on the dates
indicated.

|                                             |  |                                                                                                                                                   |  |                |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                    |  | Title                                                                                                                                             |  | Date          
|                                             |  |                                                                                                                                                   |  |               
|/s/ RICARDO A. VERDAGUERRicardo A. Verdaguer |  | Chairman of the Board of Directors and President
    and Chief Executive Officer of IMPSAT Fiber Networks, Inc.
    (principal executive officer) |  | April 15, 2003
|                                            
|/s/ WILLIAM CONNORSWilliam Connors           |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ THOMAS DOSTER IVThomas Doster IV         |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ ELIAS MAKRISElias Makris                 |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ RAUL RAMIREZRaul Ramirez                 |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ JOSEPH THORNTONJoseph Thornton           |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ IGNACIO TRONCOSOIgnacio Troncoso         |  | Director of IMPSAT Fiber Networks, Inc.                                                                                                           |  | April 15, 2003
|                                            
|/s/ HÉCTOR ALONSOHéctor Alonso               |  | Executive Vice President and Chief Financial
    Officer of IMPSAT Fiber Networks, Inc. (principal financial
    officer)                         |  | April 15, 2003
|                                            
|/s/ JOSE R. TORRESJose R. Torres             |  | Executive Vice PresidentAccounting and
    Chief Accounting Officer of IMPSAT Fiber Networks, Inc.
    (principal accounting officer)            |  | April 15, 2003

72



---



##### 



CERTIFICATIONS

Chief Executive Officer Certification pursuant
to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Ricardo A. Verdaguer, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of IMPSAT Fiber Networks, Inc. (the
    Registrant);                                                                                                                                                                                                                                
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the Registrant as of,
    and for, the periods presented in this annual report;                     
|
| | 4. | The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in the Securities
    and Exchange Act of 1934 Rules 13a-14 and 15d-14) for the
    Registrant and we have:                                                                       



| |     |                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | designed such disclosure controls and procedures
    to ensure that material information relating to the Registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | (b) | evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of the
    Registrants board of directors (or persons performing the
    equivalent function):



| |     |                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    Registrants ability to record, process, summarize and
    report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    Registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The Registrants other certifying officer
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                      
| | -------------------------------------
| | /s/RICARDO A. VERDAGUER              
| |                                      
| | Ricardo A. Verdaguer                 
| | President and Chief Executive Officer

April 15, 2003

73



---



##### 



Chief Financial Officer Certification pursuant
to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Héctor Alonso, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of IMPSAT Fiber Networks, Inc. (the
    Registrant);                                                                                                                                                                                                                                
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the Registrant as of,
    and for, the periods presented in this annual report;                     
|
| | 4. | The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in the Securities
    and Exchange Act of 1934 Rules 13a-14 and 15d-14) for the
    Registrant and we have:                                                                       



| |     |                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | designed such disclosure controls and procedures
    to ensure that material information relating to the Registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | (b) | evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of the
    Registrants board of directors (or persons performing the
    equivalent function):



| |     |                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    Registrants ability to record, process, summarize and
    report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    Registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The Registrants other certifying officer
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                        
| | -----------------------
| | /s/HÉCTOR ALONSO       
| |                        
| | Héctor Alonso          
| | Chief Financial Officer

April 15, 2003

74



---



##### 



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of
IMPSAT Fiber Networks, Inc.:

We have audited the accompanying consolidated
balance sheets of IMPSAT Fiber Networks, Inc.
(Debtor-in-Possession) and its subsidiaries (the
Company) as of December 31, 2001 and 2002, and
the related consolidated statements of operations, comprehensive
loss, stockholders equity (deficiency) and cash flows
for each of the three years in the period ended
December 31, 2002. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, such consolidated financial
statements present fairly, in all material respect, the
financial position of the Company at December 31, 2001 and
2002, and the results of its operations and its cash flows for
each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 1 to the consolidated
financial statements, the Company has filed for reorganization
under Chapter 11 of the Federal Bankruptcy Code. The
accompanying consolidated financial statements do not purport to
reflect or provide for the consequences of the bankruptcy
proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on
a liquidation basis or their availability to satisfy
liabilities; (b) as to prepetition liabilities, the amounts
that may be allowed for claims or contingencies, or the status
and priority thereof; (c) as to stockholder accounts, the
effect of any changes that may be made in the capitalization of
the Company; or (d) as to operations, the effect of any
changes that may be made in its business. The Company emerged
from bankruptcy on March 25, 2003.

The accompanying consolidated financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Companys recurring
losses from operations, negative working capital, and
stockholders capital deficiency raise substantial doubt
about its ability to continue as a going concern.
Managements plans concerning these matters are also
discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.

DELOITTE & TOUCHE LLP

Certified Public Accountants


Miami, Florida

March 28, 2003


F-1



---



##### 



PART I

FINANCIAL INFORMATION


IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. Dollars, except share
amounts)


|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |            |           |          |  
|-------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------------------------------------- | ---------- | --------- | --------- | ------- | ---------- | --------- | -------- | -
|                                             |                                                                                                                                              |                  
|                                             |                                                                                                                                              | December 31,     
|                                             |                                                                                                                                              |                  
|                                             |                                                                                                                                              | 2001              |                                             | 2002      
|                                             |                                                                                                                                              |                   |                                             |           
|ASSETS                                      
|CURRENT ASSETS:                              |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             | Cash and cash equivalents                                                                                                                    |                   | $                                           | 35,606     |           |           | $       | 32,563     |          
|                                             | Trading investments                                                                                                                          |                   |                                             | 29,319     |           |           |         | 23,021     |          
|                                             | Trade accounts receivable, net                                                                                                               |                   |                                             | 58,411     |           |           |         | 31,012     |          
|                                             | Other receivables                                                                                                                            |                   |                                             | 39,003     |           |           |         | 16,674     |          
|                                             | Prepaid expenses                                                                                                                             |                   |                                             | 3,429      |           |           |         | 2,746      |          
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              |                   | Total current assets                        |            |           | 165,768   |         |            |           | 106,016  |  
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|BROADBAND NETWORK, Net                       |                                                                                                                                              |                   | 310,598                                     |            |           |           | 228,471 |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|PROPERTY, PLANT AND EQUIPMENT, Net           |                                                                                                                                              |                   | 214,459                                     |            |           |           | 175,477 |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|NON-CURRENT ASSETS:                          |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             | Investments in common stock                                                                                                                  |                   |                                             | 3,307      |           |           |         | 86         |          
|                                             | Deferred financing costs, net                                                                                                                |                   |                                             | 10,752     |           |           |         |            |          
|                                             | Other non-current assets                                                                                                                     |                   |                                             | 13,690     |           |           |         | 10,633     |          
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              |                   | Total non-current assets                    |            |           | 27,749    |         |            |           | 10,719   |  
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|TOTAL                                        |                                                                                                                                              | $                 | 718,574                                     |            |           | $         | 520,683 |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY
|LIABILITIES NOT SUBJECT TO COMPROMISE:       |                                                                                                                                              |                   |                                             |            |           |           |         |           
|CURRENT LIABILITIES:                         |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             | Accounts payable  trade                                                                                                                     |                   | $                                           | 86,999     |           |           | $       | 72,860     |          
|                                             | Short-term debt                                                                                                                              |                   |                                             | 8,323      |           |           |         |            |          
|                                             | Current portion of long-term debt                                                                                                            |                   |                                             | 959,076    |           |           |         | 281,680    |          
|                                             | Accrued and other liabilities                                                                                                                |                   |                                             | 79,237     |           |           |         | 48,446     |          
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              |                   | Total current liabilities                   |            |           | 1,133,635 |         |            |           | 402,986  |  
|LONG-TERM DEBT, Net                          |                                                                                                                                              |                   | 23,189                                      |            |           |           | 27,592  |           
|OTHER LONG-TERM LIABILITIES                  |                                                                                                                                              |                   | 16,877                                      |            |           |           | 15,280  |           
|DEFERRED REVENUES                            |                                                                                                                                              |                   | 97,515                                      |            |           |           | 69,918  |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              |                   | Total liabilities not subject to compromise |            |           | 1,271,216 |         |            |           | 515,776  |  
|LIABILITIES SUBJECT TO COMPROMISE            |                                                                                                                                              |                   |                                             |            |           |           | 727,522 |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              | Total liabilities |                                             |            | 1,271,216 |           |         |            | 1,243,298 |         
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|COMMITMENTS AND CONTINGENCIES (NOTE 15)      |                                                                                                                                              |                   |                                             |            |           |           |         |           
|STOCKHOLDERS DEFICIENCY:                    |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             | Common Stock, $0.01 par value; 300,000,000 shares
    authorized, 91,428,570 shares issued and outstanding at
    December 31, 2001 and 2002 |                   |                                             | 914        |           |           |         | 914        |          
|                                             | Additional paid in capital                                                                                                                   |                   |                                             | 537,924    |           |           |         | 537,583    |          
|                                             | Accumulated deficit                                                                                                                          |                   |                                             | (1,072,330 | )         |           |         | (1,276,845 | )        
|                                             | Deferred stock-based compensation                                                                                                            |                   |                                             | (5,438     | )         |           |         | (4,530     | )        
|                                             | Accumulated other comprehensive (loss) income                                                                                                |                   |                                             | (13,712    | )         |           |         | 20,263     |          
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|                                             |                                                                                                                                              |                   | Total stockholders deficiency              |            |           | (552,642  | )       |            |           | (722,615 | )
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           
|TOTAL                                        |                                                                                                                                              | $                 | 718,574                                     |            |           | $         | 520,683 |           
|                                             |                                                                                                                                              |                   |                                             |            |           |           |         |           

See notes to consolidated financial statements.

F-2



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONSOLIDATED STATEMENTS OF
OPERATIONS

(In thousands of U.S. dollars, except per
share amounts)


|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |         |        |         |          |  
|------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------ | ---------------------------------------------- | ------------------------ | ------ | ------- | -------- | -------- | ------ | ------- | -------- | ------- | ------ | ------- | -------- | -
|                                                        |                                                                         |                         
|                                                        |                                                                         | Years Ended December 31,
|                                                        |                                                                         |                         
|                                                        |                                                                         | 2000                     |                                                | 2001                     |        | 2002   
|                                                        |                                                                         |                          |                                                |                          |        |        
|NET REVENUES:                                           |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        | Data and value added services                                           |                          | $                                              | 214,268                  |        |         | $        | 239,816  |        |         | $        | 180,471 |       
|                                                        | Internet                                                                |                          |                                                | 35,996                   |        |         |          | 45,403   |        |         |          | 27,243  |       
|                                                        | Telephony                                                               |                          |                                                | 235                      |        |         |          | 11,762   |        |         |          | 14,327  |       
|                                                        | Services to carriers                                                    |                          |                                                | 885                      |        |         |          | 7,360    |        |         |          | 6,985   |       
|                                                        | Sales of equipment                                                      |                          |                                                | 13,083                   |        |         |          | 14,952   |        |         |          | 1,168   |       
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          | Total net revenues from services and equipment |                          |        | 264,467 |          |          |        | 319,293 |          |         |        | 230,194 |         
|                                                        | Broadband network development revenues                                  |                          |                                                | 57,676                   |        |         |          | 7,197    |        |         |          |         |       
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          | Total net revenues                             |                          |        | 322,143 |          |          |        | 326,490 |          |         |        | 230,194 |         
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|COSTS AND EXPENSES:                                     |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        | Direct costs:                                                           |                          |                                                |                          |        |         |          |          |        |         |          |         |       
|                                                        |                                                                         | Contracted services      |                                                |                          | 29,573 |         |          |          | 40,629 |         |          |         | 19,199 |        
|                                                        |                                                                         | Other direct costs       |                                                |                          | 21,349 |         |          |          | 35,416 |         |          |         | 25,935 |        
|                                                        |                                                                         | Leased capacity          |                                                |                          | 74,188 |         |          |          | 87,057 |         |          |         | 74,679 |        
|                                                        |                                                                         | Broadband network cost   |                                                |                          | 34,729 |         |          |          | 3,335  |         |          |         |        |        
|                                                        |                                                                         | Cost of equipment sold   |                                                |                          | 12,308 |         |          |          | 10,472 |         |          |         | 576    |        
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          |                                                | Total direct costs       |        |         | 172,147  |          |        |         | 176,909  |         |        |         | 120,389  |  
|                                                        | Salaries and wages                                                      |                          |                                                | 68,922                   |        |         |          | 82,095   |        |         |          | 47,894  |       
|                                                        | Selling, general and administrative                                     |                          |                                                | 58,471                   |        |         |          | 52,964   |        |         |          | 28,204  |       
|                                                        | Asset impairment charge                                                 |                          |                                                |                          |        |         |          | 381,888  |        |         |          |         |       
|                                                        | Gain on early extinguishment of debt                                    |                          |                                                |                          |        |         |          |          |        |         |          | (16,367 | )     
|                                                        | Depreciation and amortization                                           |                          |                                                | 84,488                   |        |         |          | 123,678  |        |         |          | 82,766  |       
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          |                                                | Total costs and expenses |        |         | 384,028  |          |        |         | 817,534  |         |        |         | 262,886  |  
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|Operating loss                                          |                                                                         |                          | (61,885                                        | )                        |        |         | (491,044 | )        |        |         | (32,692  | )      
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|OTHER INCOME (EXPENSES):                                |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        | Interest income                                                         |                          |                                                | 27,394                   |        |         |          | 10,687   |        |         |          | 1,907   |       
|                                                        | Interest expense (contractual interest of
    $128,023 in 2002)         |                          |                                                | (112,894                 | )      |         |          | (143,521 | )      |         |          | (75,815 | )     
|                                                        | Net loss on foreign exchange                                            |                          |                                                | (10,614                  | )      |         |          | (41,182  | )      |         |          | (91,884 | )     
|                                                        | Recognition of other-than-temporary decline in
    value of investments |                          |                                                |                          |        |         |          | (20,650  | )      |         |          | (794    | )     
|                                                        | Reorganization items                                                    |                          |                                                |                          |        |         |          |          |        |         |          | (23,297 | )     
|                                                        | Legal settlement                                                        |                          |                                                |                          |        |         |          |          |        |         |          | 26,229  |       
|                                                        | Other income (loss), net                                                |                          |                                                | 704                      |        |         |          | (2,125   | )      |         |          | (5,896  | )     
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          |                                                | Total other expenses     |        |         | (95,410  | )        |        |         | (196,791 | )       |        |         | (169,550 | )
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|LOSS BEFORE INCOME TAXES                                |                                                                         |                          | (157,295                                       | )                        |        |         | (687,835 | )        |        |         | (202,242 | )      
|BENEFIT FROM (PROVISION FOR) FOREIGN INCOME TAXES       |                                                                         |                          | 4,547                                          |                          |        |         | (27,420  | )        |        |         | (2,273   | )      
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|LOSS BEFORE DIVIDENDS ON REDEEMABLE PREFERRED
    STOCK |                                                                         |                          | (152,748                                       | )                        |        |         | (715,255 | )        |        |         | (204,515 | )      
|DIVIDENDS ON REDEEMABLE PREFERRED STOCK                 |                                                                         |                          | (1,393                                         | )                        |        |         |          |          |        |         |          |        
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|NET LOSS                                                |                                                                         | $                        | (154,141                                       | )                        |        | $       | (715,255 | )        |        | $       | (204,515 | )      
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|NET LOSS PER COMMON SHARE:                              |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        | BASIC AND DILUTED                                                       |                          | $                                              | (1.74                    | )      |         | $        | (7.82    | )      |         | $        | (2.24   | )     
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:               |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        
|                                                        | BASIC AND DILUTED                                                       |                          |                                                | 88,534                   |        |         |          | 91,429   |        |         |          | 91,429  |       
|                                                        |                                                                         |                          |                                                |                          |        |         |          |          |        |         |          |        

See notes to consolidated financial statements.

F-3



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS

(In thousands of U.S. dollars)


|                                   |                                                                        |                          |          |          |          |      |          |         |       |   |          |        |        | 
|---------------------------------- | ---------------------------------------------------------------------- | ------------------------ | -------- | -------- | -------- | ---- | -------- | ------- | ----- | - | -------- | ------ | ------ | 
|                                   |                                                                        |                         
|                                   |                                                                        | Years ended December 31,
|                                   |                                                                        |                         
|                                   |                                                                        | 2000                     |          | 2001     |          | 2002
|                                   |                                                                        |                          |          |          |          |     
|NET LOSS                           |                                                                        | $                        | (154,141 | )        |          | $    | (715,255 | )       |       | $ | (204,515 | )     
|                                   |                                                                        |                          |          |          |          |      |          |         |       |   |          |       
|OTHER COMPREHENSIVE (LOSS) INCOME: |                                                                        |                          |          |          |          |      |          |         |       |   |          |       
|                                   | Foreign currency translation adjustment                                |                          |          | (4,167   | )        |      |          | (6,978  | )     |   |          | 33,656 |       
|                                   | Change in unrealized loss on investments
    available for sale        |                          |          | (139,378 | )        |      |          | (10,212 | )     |   |          | (475   | )     
|                                   | Recognition of other-than-temporary decline in
    value of investment |                          |          |          |          |      |          | 20,650  |       |   |          | 794    |       
|                                   |                                                                        |                          |          |          |          |      |          |         |       |   |          |       
|                                   |                                                                        | TOTAL                    |          |          | (143,545 | )    |          |         | 3,460 |   |          |        | 33,975 | 
|                                   |                                                                        |                          |          |          |          |      |          |         |       |   |          |       
|COMPREHENSIVE LOSS                 |                                                                        | $                        | (297,686 | )        |          | $    | (711,795 | )       |       | $ | (170,540 | )     
|                                   |                                                                        |                          |          |          |          |      |          |         |       |   |          |       

See notes to consolidated financial statements.

F-4



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 2000, 2001 AND
2002


(In thousands of U.S. Dollars)


|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |          |  
|---------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | --------------- | --- | -------- |  | ----------- | ------- | ------------- | - | ------------- | ---------- | -------- | - | - | -------- | ------- |  | - | ------ | ------ | - | - | ------- | -------- | - | - | -------- | -------- | -
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         | Accumulated   |   |              
|                             |                                                                                                            | Common Stock |            |            |  |                 |     |          |  | Deferred    |         | Other         |   |              
|                             |                                                                                                            |              |            | Additional |  | Accumulated     |     | Treasury |  | Stock-Based |         | Comprehensive |   |              
|                             |                                                                                                            | Shares       |            | Amount     |  | Paid In Capital |     | Deficit  |  | Stock       |         | Compensation  |   | Income (Loss) |            | Total   
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |         
|BALANCE AT DECEMBER 31, 1999 |                                                                                                            |              | 56,688,076 |            |  | $               | 716 |          |  | $           | 216,186 |               |   | $             | (202,934   | )        |   | $ | (125,000 | )       |  |   |        |        |   | $ | 126,373 |          |   | $ | 15,341   |         
|                             | Dividends on redeemable preferred stock                                                                    |              |            |            |  |                 |     |          |  |             |         |               |   |               |            | (1,393   | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (1,393   | )
|                             | Issuance of common shares in Initial Public
    Offering, net of offering expenses                         |              |            | 14,350,000 |  |                 |     | 144      |  |             |         | 229,206       |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 229,350  |  
|                             | Issuance of common stock in exchange for minority
    interest in IMPSAT Argentina, Colombia and Venezuela |              |            | 5,472,579  |  |                 |     | 54       |  |             |         | 92,980        |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 93,034   |  
|                             | Issuance of common stock upon conversion of
    Series A preferred shares                                  |              |            | 14,917,915 |  |                 |     |          |  |             |         | (7,022        | ) |               |            |          |   |   |          | 125,000 |  |   |        |        |   |   |         |          |   |   |          | 117,978  |  
|                             | Deferred stock-based compensation                                                                          |              |            |            |  |                 |     |          |  |             |         | 5,438         |   |               |            |          |   |   |          |         |  |   | $      | (5,438 | ) |   |         |          |   |   |          |          |  
|                             | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party      |              |            |            |  |                 |     |          |  |             |         | 568           |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 568      |  
|                             | Change in unrealized loss on investment available
    for sale                                             |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | (139,378 | ) |   |          | (139,378 | )
|                             | Foreign currency translation adjustment                                                                    |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | (4,167   | ) |   |          | (4,167   | )
|                             | Net loss for the year                                                                                      |              |            |            |  |                 |     |          |  |             |         |               |   |               |            | (152,748 | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (152,748 | )
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         
|BALANCE AT DECEMBER 31, 2000 |                                                                                                            |              | 91,428,570 |            |  |                 | 914 |          |  |             | 537,356 |               |   |               | (357,075   | )        |   |   |         |         |  |   | (5,438 | )      |   |   | (17,172 | )        |   |   | 158,585  |         
|                             | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party      |              |            |            |  |                 |     |          |  |             |         | 568           |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 568      |  
|                             | Change in unrealized loss on investment available
    for sale                                             |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | (10,212  | ) |   |          | (10,212  | )
|                             | Recognition of other-than-temporary decline in
    value of investments                                    |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | 20,650   |   |   |          | 20,650   |  
|                             | Foreign currency translation adjustment                                                                    |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | (6,978   | ) |   |          | (6,978   | )
|                             | Net loss for the year                                                                                      |              |            |            |  |                 |     |          |  |             |         |               |   |               |            | (715,255 | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (715,255 | )
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         
|BALANCE AT DECEMBER 31, 2001 |                                                                                                            |              | 91,428,570 |            |  |                 | 914 |          |  |             | 537,924 |               |   |               | (1,072,330 | )        |   |   |         |         |  |   | (5,438 | )      |   |   | (13,712 | )        |   |   | (552,642 | )       
|                             | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party      |              |            |            |  |                 |     |          |  |             |         | 567           |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 567      |  
|                             | Change in unrealized loss on Investment available
    for sale                                             |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | (475     | ) |   |          | (475     | )
|                             | Recognition of other-than-temporary decline in
    value of investment                                     |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | 794      |   |   |          | 794      |  
|                             | Foreign currency translation adjustment                                                                    |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         | 33,656   |   |   |          | 33,656   |  
|                             | Adjustment for stock options not vested                                                                    |              |            |            |  |                 |     |          |  |             |         | (908          | ) |               |            |          |   |   |          |         |  |   |        | 908    |   |   |         |          |   |   |          |         |  
|                             | Net loss for the year                                                                                      |              |            |            |  |                 |     |          |  |             |         |               |   |               |            | (204,515 | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (204,515 | )
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         
|BALANCE AT DECEMBER 31, 2002 |                                                                                                            |              | 91,428,570 |            |  | $               | 914 |          |  | $           | 537,583 |               |   | $             | (1,276,845 | )        |   |   |         |         |  | $ | (4,530 | )      |   | $ | 20,263  |          |   | $ | (722,615 | )       
|                             |                                                                                                            |              |            |            |  |                 |     |          |  |             |         |               |   |               |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         

See notes to consolidated financial statements.

F-5



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands of U.S. dollars)


|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |          |         |        |         |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ------- | ------- | -------- | -------- | ------- | ------- | ------- | -------- | ------- | ------ | ------- | -
|                                                                         |                                                                                                             |                                                                        
|                                                                         |                                                                                                             | Years Ended December 31,                                               
|                                                                         |                                                                                                             |                                                                        
|                                                                         |                                                                                                             | 2000                                                                    |                                                                           | 2001                                                    |         | 2002   
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Net loss                                                                                                    |                                                                         | $                                                                         | (152,748                                                | )       |         | $        | (715,255 | )       |         | $       | (204,515 | )      
|                                                                         | Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:               |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             | Amortization and depreciation                                           |                                                                           |                                                         | 84,488  |         |          |          | 123,678 |         |         |          | 82,766  |       
|                                                                         |                                                                                                             | Asset impairment charge                                                 |                                                                           |                                                         |         |         |          |          | 381,888 |         |         |          |         |       
|                                                                         |                                                                                                             | Provision for doubtful accounts                                         |                                                                           |                                                         | 4,806   |         |          |          | 16,784  |         |         |          | 13,053  |       
|                                                                         |                                                                                                             | Recognition of other-than-temporary decline in
    value of investments |                                                                           |                                                         |         |         |          |          | 20,650  |         |         |          | 794     |       
|                                                                         |                                                                                                             | Net (gain) loss on sale of investment                                   |                                                                           |                                                         |         |         |          |          | (75     | )       |         |          | 1,368   |       
|                                                                         |                                                                                                             | Gain on early extinguishment of debt                                    |                                                                           |                                                         |         |         |          |          |         |         |         |          | (16,367 | )     
|                                                                         |                                                                                                             | Deferred income tax (benefit) provision                                 |                                                                           |                                                         | (3,036  | )       |          |          | 26,706  |         |         |          | 319     |       
|                                                                         |                                                                                                             | Gross profit from broadband network development                         |                                                                           |                                                         | (27,639 | )       |          |          |         |         |         |          |         |       
|                                                                         |                                                                                                             | Changes in assets and liabilities:                                      |                                                                           |                                                         |         |         |          |          |         |         |         |          |         |       
|                                                                         |                                                                                                             |                                                                         | (Increase) decrease in trade accounts receivable,
    net                 |                                                         |         | (35,981 | )        |          |         | 8,156   |         |          |         | 30,661 |        
|                                                                         |                                                                                                             |                                                                         | (Increase) decrease in prepaid expenses                                   |                                                         |         | (2,019  | )        |          |         | 293     |         |          |         | 683    |        
|                                                                         |                                                                                                             |                                                                         | (Increase) decrease in other receivables and
    other non-current assets |                                                         |         | (33,110 | )        |          |         | 33,392  |         |          |         | 51,421 |        
|                                                                         |                                                                                                             |                                                                         | Increase (decrease) in accounts payable
     trade                       |                                                         |         | 59,838  |          |          |         | (26,517 | )       |          |         | 9,173  |        
|                                                                         |                                                                                                             |                                                                         | Increase in accrued and other liabilities                                 |                                                         |         | 24,303  |          |          |         | 25,428  |         |          |         | 67,898 |        
|                                                                         |                                                                                                             |                                                                         | Increase (decrease) in deferred revenues                                  |                                                         |         | 87,757  |          |          |         | 47,129  |         |          |         | (9,265 | )      
|                                                                         |                                                                                                             |                                                                         | Decrease in other long-term liabilities                                   |                                                         |         | (6,746  | )        |          |         | (13,334 | )       |          |         | (1,597 | )      
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         |                                                                                                             |                                                                         |                                                                           | Net cash (used in) provided by operating
    activities |         |         | (87      | )        |         |         | (71,077 | )        |         |        | 26,392  |  
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Net (increase) decrease in trading
    investments                                                          |                                                                         |                                                                           | (240,892                                                | )       |         |          | 211,573  |         |         |         | 6,298    |        
|                                                                         | Purchases of broadband network, net of disposals                                                            |                                                                         |                                                                           | (56,325                                                 | )       |         |          | (89,240  | )       |         |         | (6,112   | )      
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                            |                                                                         |                                                                           | (213,827                                                | )       |         |          | (78,448  | )       |         |         | (13,201  | )      
|                                                                         | Proceeds from the sale of investment                                                                        |                                                                         |                                                                           |                                                         |         |         |          | 8,000    |         |         |         | 1,380    |        
|                                                                         | Increase in other investment                                                                                |                                                                         |                                                                           | (437                                                    | )       |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         |                                                                                                             |                                                                         |                                                                           | Net cash (used in) provided by investing
    activities |         |         | (511,481 | )        |         |         | 51,885  |          |         |        | (11,635 | )
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Net payments on short-term debt                                                                             |                                                                         |                                                                           | (1,067                                                  | )       |         |          | (6,280   | )       |         |         | (8,323   | )      
|                                                                         | Proceeds from long-term debt, net of deferred
    financing costs                                           |                                                                         |                                                                           | 321,453                                                 |         |         |          | 24,567   |         |         |         | 1,609    |        
|                                                                         | Repayments of long-term debt                                                                                |                                                                         |                                                                           | (31,271                                                 | )       |         |          | (24,248  | )       |         |         | (10,532  | )      
|                                                                         | Proceeds from issuance of common stock, net                                                                 |                                                                         |                                                                           | 229,350                                                 |         |         |          |          |         |         |         |          |        
|                                                                         | Cash paid in redemption of preferred stock                                                                  |                                                                         |                                                                           | (32,500                                                 | )       |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         |                                                                                                             |                                                                         |                                                                           | Net cash provided by (used in) financing
    activities |         |         | 485,965  |          |         |         | (5,961  | )        |         |        | (17,246 | )
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS          |                                                                                                             |                                                                         | (4,167                                                                    | )                                                       |         |         | (6,978   | )        |         |         | (554    | )       
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                |                                                                                                             |                                                                         | (29,770                                                                   | )                                                       |         |         | (32,131  | )        |         |         | (3,043  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                       |                                                                                                             |                                                                         | 97,507                                                                    |                                                         |         |         | 67,737   |          |         |         | 35,606  |         
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR                             |                                                                                                             | $                                                                       | 67,737                                                                    |                                                         |         | $       | 35,606   |          |         | $       | 32,563  |         
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Interest paid                                                                                               |                                                                         | $                                                                         | 93,532                                                  |         |         | $        | 113,011  |         |         | $       | 5,774    |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Foreign income taxes paid                                                                                   |                                                                         | $                                                                         | 2,264                                                   |         |         | $        | 4,590    |         |         | $       | 2,328    |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|CASH PAID DURING THE YEAR FOR REORGANIZATION
    ITEMS:                  |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Professional fees                                                                                           |                                                                         |                                                                           |                                                         |         |         |          |          |         |         | $       | 6,767    |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Accrued dividends on redeemable preferred stock                                                             |                                                                         | $                                                                         | 1,393                                                   |         |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Change to unrealized gain (loss) in
    investment available for sale, net of tax                           |                                                                         | $                                                                         | (139,378                                                | )       |         | $        | (10,212  | )       |         | $       | (475     | )      
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Rights of way agreements                                                                                    |                                                                         | $                                                                         | 18,697                                                  |         |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Broadband network vendor financing                                                                          |                                                                         | $                                                                         | 184,397                                                 |         |         | $        | 28,306   |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Issuance of treasury stock upon conversion of
    preferred stock                                           |                                                                         | $                                                                         | 117,978                                                 |         |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         
|                                                                         | Issuance of common stock in exchange for minority
    interests of IMPSAT Argentina, Colombia and Venezuela |                                                                         | $                                                                         | 93,034                                                  |         |         |          |          |         |         |         |          |        
|                                                                         |                                                                                                             |                                                                         |                                                                           |                                                         |         |         |          |          |         |         |         |         

See notes to consolidated financial statements.

F-6



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Tables in Thousands of U.S. Dollars, Except
for per Share Amounts)


1.  General

IMPSAT Fiber Networks, Inc., a Delaware holding
company (the Holding Company), and subsidiaries
(collectively the Company) is a leading provider of
integrated broadband, data, Internet, voice and data center
services in Latin America. The Company offers integrated
telecommunications solutions, with an emphasis on end-to-end
broadband data transmission, for national and multinational
companies, financial institutions, governmental agencies and
other business customers.

The Company currently provides telecommunications
services to its customers using its local access and long haul
fiber optic and satellite networks. The deployed facilities
include 15 metropolitan area networks in the largest cities of
the region, long haul networks across Argentina, Brazil, Chile
and Colombia, and leased submarine capacity to link South
America to the United States. In addition, the Company has
500,000 gross square feet of premises housing advanced hosting
capabilities.

The Holding Companys operating subsidiaries
are wholly owned (except for a small number of shares issued to
other persons to comply with local corporate law requirements).
A listing of the Holding Companys operating subsidiaries
is as follows:

|          |  |  |                                | 
|--------- |  |  | ------------------------------ | 
|Argentina |  |  | Impsat S.A.                    | 
|Brazil    |  |  | Impsat Comunicacoes Ltda.      | 
|Chile     |  |  | Impsat Chile S.A.              | 
|Colombia  |  |  | Impsat S.A.                    | 
|Ecuador   |  |  | Impsatel del Ecuador S.A.      | 
|Mexico    |  |  | Impsat S.A. de C.V.            | 
|Peru      |  |  | Impsat S.A.                    | 
|USA       |  |  | Impsat USA, Inc.               | 
|Venezuela |  |  | Telecomunicaciones Impsat S.A. | 

In addition, the Company owns other subsidiaries,
which serve intermediary functions to the Holding Company and
its operating subsidiaries.

Financial Restructuring On March 11, 2002, the Holding
Company, which was advised by Houlihan Lokey Howard & Zukin
Capital, concluded negotiations with an ad hoc committee
representing certain creditors under the Holding Companys
Broadband Network Vendor Financing Agreements, and certain
holders of its $125.0 million 12.125% Senior Guaranteed
Notes due 2003, $300.0 million 13.75% Senior Notes due 2005
and $225.0 million 12.375% Senior Notes due 2008
(collectively, the Senior Notes) of a non-binding
term sheet agreement in principle (the Restructuring Term
Sheet) relating to the terms of a proposed restructuring
of these long-term obligations, as part of a comprehensive
financial restructuring of the Company. The Restructuring Term
Sheet contemplates the following principal components of the
proposed restructuring plan:



| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | all of the shares of the Holding Companys
    existing common stock, options granted under the Holding
    Companys stock option plans, and any other equity
    interests would be cancelled, retired and eliminated with no
    consideration paid therefore, and the Holding Company would
    issue new common stock in accordance with the
    proposed restructuring plan;
|
| |  | creditors under the Broadband Network Vendor
    Financing Agreements would receive                                                                                                                                                                                                                                                                                                 



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | $143.8 million senior secured debt issued by
    IMPSAT Argentina and IMPSAT Brazil and guaranteed by the Holding
    Company;

F-7



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $23.9 million of new senior convertible
    notes guaranteed by IMPSAT Argentina and initially convertible
    into 5% of the Holding Companys new common stock on a
    fully-diluted basis; and
|
| |  | warrants to acquire up to 15% of the Holding
    Companys new common stock on a fully-diluted basis.                                                                                             



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | holders of the Notes due 2003 would receive
    $67.5 million of new senior convertible notes of the
    Holding Company guaranteed by IMPSAT Argentina and initially
    convertible into 23% of the Holding Companys new common
    stock on a fully-diluted basis                                                                                                                                                                                                                 
|
| |  | holders of the Notes due 2005 and the Notes due
    2008 would exchange those securities for 98% of the Holding
    Companys new common stock, subject to certain dilutive
    events                                                                                                                                                                                                                                                                                                
|
| |  | the Holding Companys guarantees of certain
    indebtedness owed by the Holding Companys operating
    subsidiaries to certain of their respective creditors will
    either be restructured in exchange for new senior convertible
    notes and warrants consistent with and proportionate to the
    restructuring treatment of analogous indebtedness under the
    Broadband Network Vendor Financing Agreements, or canceled in
    exchange for equity in the Holding Company
|
| |  | no distribution to the existing stockholders of
    the Holding Company                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | management would receive 2% of the Holding
    Companys new common stock plus stock options representing
    8% of the Holding Companys new common stock.                                                                                                                                                                                                                                                                                                                           

The Restructuring Term Sheet provided that
completion of the proposed restructuring plan would be subject
to certain conditions, including the plans acceptance by
affected classes of the Holding Companys securities
holders in accordance with the United States Bankruptcy Code
(Bankruptcy Code).

Petition for Relief Under Chapter 11 and
Emergence On June 11,
2002 (the Petition Date), the Holding Company filed
a voluntary petition for relief under Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court
for the Southern District of New York (the Bankruptcy
Court). Under Chapter 11, certain claims against the
Holding Company in existence prior to the filing of the petition
for relief under the federal bankruptcy laws are stayed while
the Holding Company continues business operations as
Debtor-in-Possession. These claims are reflected in the
December 31, 2002 consolidated balance sheet as
liabilities subject to compromise. Additional claims
(liabilities subject to compromise) may arise subsequent to the
filing date resulting from rejection of executory contracts,
including leases, and from the determination of the Bankruptcy
Court (or agreed to by parties in interest) of allowed claims
for contingencies and other disputed amounts.

On September 4, 2002, the Holding Company
filed a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the
Plan) with the Bankruptcy Court. The Plan reflects
the terms of the pre-arranged plan of reorganization that
holders of the indebtedness under the Companys Vendor
Financing Agreements and Senior Notes agreed to support. The
Plan provided for the restructuring of the Companys
indebtedness in the manner described above in the caption
Financial Restructuring. The Disclosure
Statement summarized the Plan and contained information
concerning among other matters the history, business, results of
operations, management, properties, liabilities and the assets
available for distribution under the Plan as well as the
anticipated organization and operation of a reorganized Holding
Company. The Disclosure Statement also described certain effects
of Plan confirmation, certain risk factors associated with the
Plan, the manner in which distributions will be made to the
Companys creditors under the Plan for all amounts that
were owed to such parties on the Petition Date and the
confirmation process and voting procedures that holders of
claims in impaired classes must follow for their votes to be
counted.

F-8



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Plan received the affirmative vote of the
Holding Companys creditors in accordance with the
Bankruptcy Code in December 2002 and was confirmed by order of
the Bankruptcy Court on December 16, 2002. In accordance
with the Plan, the Holding Company emerged from bankruptcy on
March 25, 2003 (the Effective Date). Pursuant
to the Plan, on the Effective Date, all of the shares of the
Companys old common stock, options granted under the
Companys stock option plans and all other equity interests
were cancelled, retired and eliminated with no consideration
paid thereon. The Company also adopted a new 2003 Stock
Incentive Plan and terminated all stock options plans described
in Note 12. In addition, the Company restructured its
obligations as contemplated under the Financial
Restructuring section described above. See Note 17.

Although the Company has emerged from bankruptcy,
the Company remains in default under indebtedness owed to
certain creditors who voted against the Plan. Under the Plan,
the claims of these creditors were contingent obligations
arising under guarantees by the Holding Company of certain
primary indebtedness of its operating subsidiaries. In
accordance with the Plan, these holders will receive, in full
satisfaction of their contingent guarantee claim
(Post-Effective Date Contingencies), a pro ratashare of the shares of the Companys new common stock
issuable to the Holding Companys creditors under the Plan,
see Note 17. Notwithstanding the Companys settlement
of the Post-Effective Date Contingencies, as a consequence of
the Companys Chapter 11 bankruptcy, an event of
default has occurred and is continuing with respect to certain
of the related primary underlying indebtedness of the
Companys operating subsidiaries. These defaults, which
relate to indebtedness totaling approximately $18.6 million
in outstanding principal amount, give the respective creditors
the right to accelerate such indebtedness and seek immediate
repayment of all outstanding amounts and accrued interest
thereon.

The Holding Companys unconsolidated balance
sheet as of December 31, 2002 consists primarily of cash
and trading investments of approximately $28.3 million, other
assets of approximately $0.1 million and the net investment
in each of its consolidated subsidiaries. The Holding
Companys liabilities consist primarily of accounts payable
of approximately $6.6 million (not including payables to
subsidiaries of approximately $2.8 million) and the
liabilities subject to compromise described in Note
11.

The Holding Companys statement of
operations for the year ended December 31, 2002 consists of the
equity in the earnings of its consolidated subsidiaries,
interest income earned on its trading investment, offset by the
interest expense on the Senior Notes, certain general and
administrative expenses and the reorganization items described
in Note 11.

The accompanying consolidated financial
statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such
financial statements do not purport to show (a) as to
assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition
liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as
to stockholder accounts, the effect of any changes that may be
made in the capitalization of the Holding Company; or
(d) as to operations, the effect of any changes that may be
made in the business of the Holding Company and its subsidiaries.

Going Concern Matters The Companys history of losses,
negative working capital and stockholders deficiency raise
substantial doubt about the Companys ability to continue
as a going concern. The consolidated financial statements do not
include any adjustments relating to recoverability and
classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The ability of
the Holding Company to continue as a going concern and to
appropriately use the going concern basis is dependent upon,
among other things, (i) the Companys ability to
revise and implement its business plan, (ii) the
Companys ability to achieve profitable operations after
emergence from bankruptcy, and (iii) the Companys
ability to generate sufficient cash from operations to meet its
obligations. The consolidated financial statements do not give
effect to any adjustment

F-9



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

to the carrying value of assets or amounts and
classifications of liabilities that might result from the
uncertainties described above.

2.  Summary of Significant
Accounting Policies

Basis of Presentation The financial statements are presented
on a consolidated basis and include the accounts of IMPSAT Fiber
Networks, Inc and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. AICPA Statement
of Position (SOP) 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code, was
followed in the preparation of these consolidated financial
statements.

Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America (generally
accepted accounting principles) requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant assumptions and estimates were used in
determining the carrying values of the Companys
telecommunication infrastructure and collectibility of
receivables. Actual results could differ from those estimates.

Market Risk The Company currently operates in
countries throughout Latin America. The Companys financial
performance may be affected by inflation, exchange rates and
controls, price controls, interest rates, changes in
governmental economic policy, taxation and political, economic
or other developments in or affecting the Latin America
countries in which the Company operates. The Company has not
entered into derivative transactions to hedge against potential
foreign exchange or interest rate risks.

Currency Risks In early January 2002, as
Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted the peso to float
freely against the U.S. dollar. The pesofree market
opened on January 11, 2002 at 1.65 pesos to the U.S. dollar
and has been volatile since. At December 31, 2002, the
Argentine pesotraded at 3.40 pesos to the U.S.
dollar. The devaluation of the Argentine peso will generally
affect the Companys consolidated financial statements by
generating foreign exchange gains or losses on
dollar-denominated monetary liabilities and assets of
IMPSAT Argentina and will generally result in a decrease, in
U.S. dollar terms, in the Companys revenues, costs and
expenses in Argentina.

During December 2001, the Argentine government
instituted a system for the freezing of the deposits in its
financial system. In February 2002, these measures led to, among
other things, the pesification decree.
Generally, this decree mandates that all monetary obligations
arising from agreements subject to Argentine law denominated in
foreign currency and existing as of January 6, 2002 are
mandatorily converted into monetary obligations denominated in
pesos at an exchange rate of one U.S. dollar to one peso.
Such obligations generally may be adjusted pursuant to the
coeficiente de estabilizacion de referencia
(CER), as published by the Argentine central bank
based on the Argentine consumer price index. Under the
pesificationdecree, after the foreign
currency denominated contracts are converted to pesos (at the
rate of one peso to one U.S. dollar rate), the contracts may be
privately renegotiated by the parties back into foreign currency
denominated terms. Under the pesification
decree, if a contract governed by Argentine law is entered into
after the decrees enactment, that contract may be
denominated in either U.S. dollars or pesos. However, if the
parties choose to denominate the new contract in pesos, payments
under that contract are not entitled to be adjusted according to
the CER or any other consumer price index. Contracts denominated
in pesos before the decree continue to be denominated in pesos,
unaffected by the decree. Finally, the decree provides that if
the value of the goods sold or services rendered is higher or
lesser than the price payable after the mandatory
pesification,either party may request an
equitable adjustment of such price. If the parties

F-10



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

do not agree on the equitable
adjustment, the dispute is to be settled by the courts,
which will attempt to preserve the contractual agreement between
the parties. The devaluation and the pesificationof agreements of the Company governed by Argentine law may
have adverse, unknown and unforeseeable effects on the Company.

Since the pesification decree, an
increasing portion of IMPSAT Argentinas customer contracts
and operating cash inflows are denominated in pesos while its
debt service payments and a portion of its costs (including
capital equipment purchases and payments for certain leased
telecommunication capacity) are denominated in U.S. dollars.
Accordingly, the Companys financial condition and results
of operations in Argentina are dependent upon IMPSAT
Argentinas ability to generate sufficient pesos(in
U.S. dollar terms) to pay its costs, expenses and to satisfy its
debt service requirements. Because of the recent nature of these
events and the significant uncertainties regarding the extent
and duration of the devaluation and the direction of the fiscal
policies in Argentina, management cannot presently determine or
reasonably estimate the impact a continued economic crisis in
that country could possibly have on IMPSAT Argentinas and
the Companys overall cash flows, financial condition, and
results of operations.

On March 5, 2003, Argentinas Supreme
Court declared the pesification decree
unconstitutional to the extent that it required the mandatory
redenomination of U.S. dollar bank deposits to pesos.
Although the ruling applies only to amounts held by the
petitioner in that case on deposit at a state-owned bank, the
decision will likely strengthen existing (and create a profusion
of similar) claims by other depositors seeking to
redollarize their deposits. This could force the
Argentine government to issue long-term bonds in satisfaction of
such claims, which, in turn, could increase Argentinas
public debt burden and cause a further deterioration of its
national economy. The future judicial implementation of the
Argentine Supreme Courts decision as well as any
legislative or executive response could take an unknown variety
of forms. Accordingly, its potential impact on the Argentine
economy and on the Companys operations in that country
presently cannot be estimated.

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability and actual results could differ from those estimates
and assumptions utilized. The Argentine economic and political
situation continues to evolve and the Argentine government may
enact future regulations or policies that, when finalized and
adopted, may adversely and materially impact, among other items,
(i) the realized revenues the Company receives for services
offered in Argentina; (ii) the timing of repatriations of
any dividends or other cash flows from IMPSAT Argentina to the
Company in the United States; (iii) the Companys
asset valuations; and (iv) the Companys
peso-denominated monetary assets and liabilities.

The Companys results in Brazil also were
adversely affected during the period by the devaluation of the
Brazilian realagainst the U.S. dollar. At
December 31, 2001, the realtraded at a rate of
R$2.41 = $1.00, and at December 31, 2002 it had
depreciated to R$3.53 = $1.00. These and prior
devaluations have had a negative effect on the Companys
real-denominated revenues. The devaluation of the realand the decline in growth in the Brazilian economy have been
caused in part by the continued recession in the region, a
general aversion to emerging markets by foreign direct and
financial investors and the overall decline in worldwide
economic production. On October 27, 2002, Luiz Inacio Lula
da Silva of the left-wing Workers Party was elected
president of Brazil. Although, as a candidate, Mr. da Silva
expressed support for tightening of Brazils fiscal policy
as a condition of an IMF loan and promised to honor and
stabilize government debt, anxiety has persisted within the
investor community regarding whether Mr. da Silva can restore
financial confidence and quickly establish trust in his
administration and its ability to govern. A protraction or
worsening of the economic difficulties in Brazil, including
further currency devaluations, could have a material adverse
effect on IMPSAT Brazils and the Companys overall
financial condition and results of operations.

F-11



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In addition, in 2002, the Venezuelan government
removed controls over the trading range of the bolivar, allowing
the exchange rate to be determined by market conditions. As a
result, during 2002, the bolivar decreased in value in relation
to the U.S. dollar by approximately 85%. During February 2003,
the Venezuelan government imposed exchange rate controls, fixing
the bolivars value to the U.S. dollar at approximately
1,600 bolivars to the U.S. dollar.

Cash and Cash Equivalents Cash and cash equivalents are time
deposits with original maturities of three months or less at the
time of purchase. Cash equivalents and short-term investments
are stated at cost, which approximates fair value.

Revenue Recognition Revenues from data, value-added
telephony, IT solutions and Internet services are recognized
monthly as the services are provided. Equipment sales are
recorded upon delivery to and acceptance by the customer. In
addition, the Company has entered into, and may enter into in
the future, agreements with carriers granting indefeasible
rights of use (IRUs) and access to portions of the
Companys broadband network capacity and infrastructure.
Pursuant to these agreements, the Company will receive fixed
advance payments for the IRU and will recognize the revenue from
the IRU ratably over the life of the IRU. Amounts received in
advance are recorded as deferred revenue in the accompanying
consolidated balance sheets. The Securities and Exchange
Commission (the SEC) issued Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition
in Financial Statements. SAB No. 101 summarizes the
SECs views on the application of generally accepted
accounting principles to revenue recognition. The Company has
reviewed SAB No. 101 and believes that it is in compliance
with the SECs interpretation of revenue recognition.

No single customer accounted for greater than 10%
of total net revenues from services for the year ended
December 31, 2000, 2001 and 2002.

Non-Monetary Transactions The Company may exchange capacity on
its Broadband Network for capacity from other carriers through
the exchange of IRUs. These transactions are accounted for in
accordance with Accounting Principles Board Opinion No. 29,
Accounting for Nonmonetary Transactions, where an
exchange of similar IRUs is recorded at a historical carryover
basis with no revenue or any gain or loss being recorded.

Broadband Network Costs in connection with the
construction, installation and expansion of the Broadband
Network are capitalized. Rights of way agreements represent the
fees paid and the net present value of fees to be paid per
signed agreements entered into for obtaining rights of way and
other permits for the Broadband Network. These capitalized
agreements are being amortized over the term of the rights of
way, which range from 10 to 20 years.

In addition, the Company has acquired IRUs from
other entities for its own purposes. Such IRU investments are
capitalized and amortized over their estimated useful lives, not
to exceed 15 years. The acquired IRUs have a 25-year term.
In those cases where the right of use has been acquired for a
longer period of time (25 years) management believes that,
due to anticipated advances in technology, the Companys
IRUs are not likely to be productive assets beyond 15 years.

|                        |  |            
|----------------------- |  | -----------
|Network infrastructure  |  | 10-15 years
|Equipment and materials |  | 10 years   
|Right of way            |  | 10-20 years
|IRU investments         |  | 15 years   

F-12



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Property, Plant and Equipment Property, plant and equipment are
recorded at cost and depreciated using the straight-line method
over the following estimated useful lives:

|                                        |  |            
|--------------------------------------- |  | -----------
|Buildings and improvements              |  | 10-25 years
|Operating communications equipment      |  | 5-10 years 
|Furniture, fixtures and other equipment |  | 2-10 years 

The operating communications equipment owned by
the Company is subject to rapid technological obsolescence;
therefore, it is reasonably possible that the equipments
estimated useful lives could change in the near future.

Long-Lived Assets Long-lived assets are reviewed on an
ongoing basis for impairment based on a comparison of carrying
values to the related undiscounted future cash flows. If the
carrying amounts exceed such cash flows, identifying a possible
impairment, the assets carrying amount is adjusted to fair value.

During the year ended December 31, 2001, in
connection with the Companys ongoing review of its
business plan, cash flow and liquidity position, and the
economic environment in Latin America, the Company determined
that its long-lived assets primarily related to its
telecommunication infrastructure were likely impaired. The
Company calculated the present value of its expected cash flows
of its operating subsidiaries to determine the fair value of its
telecommunication infrastructure. Accordingly, the Company
recorded a noncash impairment charge of $381.9 million.
This charge included approximately $245.6 million for
IMPSAT Argentina, $24.7 million for IMPSAT Brazil and
$28.9 million for all other countries. In addition, the
charge also included approximately $82.7 million for a
write-down of the value of goodwill generated by the acquisition
of certain minority interest in the operating subsidiaries. The
Company recorded this impairment charge based on internal
estimates of fair value, other indicators and not on an
independent valuation of its telecommunication infrastructure.
During the years ended December 31, 2000 and 2002, no
impairments were recorded.

Investments Investments covered under the scope of
Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and
Equity Securities,are classified by the Company as either
trading for short term investments or
available for sale for long term investments and are
carried at fair value. Unrealized gains and losses for trading
investments are included in the Companys results of
operations. Unrealized gains or losses for available for sale
investments are included in accumulated other comprehensive loss
within stockholders equity (deficiency). All other
investments are carried at cost.

Deferred Financing Costs Debt issuance costs and transaction
fees, which are associated with the issuance of the Senior
Guaranteed Notes were being amortized (and charged to interest
expense) over the term of the related notes on a method which
approximates the level yield method. During the year ended
December 31, 2002, the unamortized balances of the deferred
financing costs were written-off. See Note 11.

Income Taxes Deferred income taxes result from
temporary differences in the recognition of expenses for tax and
financial reporting purposes and are accounted for in accordance
with SFAS No. 109, Accounting for Income Taxes,
which requires the liability method of computing deferred income
taxes. Under the liability method, deferred taxes are adjusted
for tax rate changes as they occur.

Foreign Currency Translation The Companys subsidiaries
generally use the U.S. dollar as the functional currency.
Accordingly, the financial statements of the subsidiaries were
remeasured. The effects of foreign currency transactions and of
remeasuring the financial position and results of operations
into the functional currency are included as net gain or loss on
foreign exchange, except for IMPSAT Brazil, which uses the local
currency as the functional currency, and are included in
accumulated other comprehensive income (loss) in
stockholders equity.

F-13



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Stock-Based Compensation SFAS No. 123, Accounting for
Stock-Based Compensation, encourages, but does not require,
companies to record compensation cost for stock-based employee
and non-employee director compensation plans at fair value. The
Company has chosen to continue to account for stock-based
compensation to employees and non-employee directors using the
intrinsic value method as prescribed by Accounting Principles
Board Opinion (APB) No. 25, Accounting for
Stock Issued to Employees, and related interpretations.
Accordingly, compensation cost for stock options issued to
employees and non-employee directors are measured as the excess,
if any, of the fair value of the Companys stock at the
date of grant over the amount an employee or non-employee
director must pay for the stock. The Company also provides the
required disclosures of SFAS No. 123.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. This
Statement, which is effective for fiscal years ending after
December 15, 2002, amends SFAS No. 123, and provides
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based
compensation. In addition, Statement No. 148 amends the
disclosure requirements of SFAS No. 123 regardless of the
accounting method used to account for stock-based compensation.
The Company has chosen to continue to account for stock-based
compensation of employees using the intrinsic value method
prescribed in APB No. 25, and related interpretations.
However, the Company will adopt the enhanced disclosure
provisions as defined by SFAS No. 148.

The Company has adopted the disclosure-only
provisions of SFAS No. 123. Had compensation costs been
recognized based on the fair value at the date of grant for
options awarded under the 1998 and 1999 Plans, the pro forma
amounts of the Companys net loss attributable to common
stockholders and net loss per common share for the years ended
December 31, 2000, 2001 and 2002 would have been as follows:

|                                              |             |      |   |          |   |      |   |          |   |  |   |          |  
|--------------------------------------------- | ----------- | ---- | - | -------- | - | ---- | - | -------- | - |  | - | -------- | -
|                                              |             | 2000 |   | 2001     |   | 2002
|                                              |             |      |   |          |   |     
|Net loss attributable to common stockholders: |             |      |   |          |   |      |   |          |   |  |   |         
|                                              | As reported |      | $ | (154,141 | ) |      | $ | (715,255 | ) |  | $ | (204,515 | )
|                                              | Pro Forma   |      |   | (156,715 | ) |      |   | (717,009 | ) |  |   | (206,269 | )
|Net loss per common share:                    |             |      |   |          |   |      |   |          |   |  |   |         
|                                              | As reported |      | $ | (1.74    | ) |      | $ | (7.82    | ) |  | $ | (2.24    | )
|                                              | Pro Forma   |      |   | (1.77    | ) |      |   | (7.84    | ) |  |   | (2.26    | )

The fair value of the options granted in 2000 was
estimated using the Black-Scholes option-pricing model assuming
no dividend yield and the following weighted average assumptions:

|                               |  |  |      |  
|------------------------------ |  |  | ---- | -
|Risk-free interest rate        |  |  | 10.8 | %
|Expected option lives in years |  |  | 4    |  
|Volatility                     |  |  | 155  | %

Fair Value of Financial
Instruments The
Companys financial instruments include trading
investments, receivables, investments in common stock, payables,
short- and long-term debt. The Companys trading and common
stock investments were valued at market closing prices at
December 31, 2001 and 2002. The fair value of these
instruments are presented in Note 3. The fair value of the
Companys Senior Notes is not presented as such is not
considered meaningful by management based on the pending
financial restructuring and the Companys petition for
relief under Chapter 11. The fair value of all other
financial instruments, which approximate their carrying value,
have been determined using available market information and
interest rates as of December 31, 2001 and 2002.

Net Loss Per Common Share Basic earnings (loss) per share
is computed based on the average number of common shares
outstanding and diluted earnings (loss) per share is
computed based on the average number of common and potential
common shares outstanding under the treasury stock method.

F-14



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Accumulated Other Comprehensive Income
(Loss) Accumulated other
comprehensive income (loss) is comprised as follows:

|                             |  |             |         |               |  |       |         |   |  |   |         |  
|---------------------------- |  | ----------- | ------- | ------------- |  | ----- | ------- | - |  | - | ------- | -
|                             |  |             |         | Unrealized    |  |      
|                             |  |             |         | Loss on       |  |      
|                             |  | Foreign     |         | Investments   |  |      
|                             |  | Currency    |         | Available for |  |      
|                             |  | Translation |         | SALE          |  | Total
|                             |  |             |         |               |  |      
|Balance at December 31, 2000 |  | $           | (6,415  | )             |  | $     | (10,757 | ) |  | $ | (17,172 | )
|Change during the year       |  |             | (6,978  | )             |  |       | 10,438  |   |  |   | 3,460   |  
|                             |  |             |         |               |  |       |         |   |  |   |         |  
|Balance at December 31, 2001 |  |             | (13,393 | )             |  |       | (319    | ) |  |   | (13,712 | )
|Change during the year       |  |             | 33,656  |               |  |       | 319     |   |  |   | 33,975  |  
|                             |  |             |         |               |  |       |         |   |  |   |         |  
|Balance at December 31, 2002 |  | $           | 20,263  |               |  |       |        |   |  | $ | 20,263  |  
|                             |  |             |         |               |  |       |         |   |  |   |         |  

New Accounting Pronouncements In April 2002, the Financial
Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of the FASB Statements No. 44
and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates the requirement to
classify gains and losses from the extinguishment of
indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback
transaction, and makes other non-substantive technical
corrections to existing pronouncements. SFAS No. 145 is
effective for fiscal years beginning after May 15, 2002,
with earlier adoption encouraged. The Company does not expect
the adoption of SFAS 145 to have a material effect on its
consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard
include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued
operations, plant closing, or other exit or disposal activities.
SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with
earlier adoption encouraged. As the provisions of SFAS
No. 146 are required to be applied prospectively after the
adoption date, the Company cannot determine the potential
effects that adoption of SFAS No. 146 will have on its
consolidated financial statements.

In November 2002, the FASB issued FASB
Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of FASB Statements No. 5, 57, and
107 and Rescission of FASB Interpretation No. 34.
FIN 45 clarifies the requirements of SFAS No. 5,
relating to the guarantors accounting for, and disclosure
of, the issuance of certain types of guarantees. This
Interpretation clarifies that a guarantor is required to
recognize, at the inception of certain types of guarantees, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial
measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantors
fiscal year-end. The disclosure requirements in this
Interpretation are effective for financial statements of interim
or annual periods ending after December 15, 2002. The
Company is currently evaluating the impact of adopting
FIN 45.

In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an
Interpretation of APB No. 51. FIN 46 requires
certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46
is effective for all

F-15



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

new variable interest entities created or
acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company
is currently evaluating the effect that the adoption of
FIN 46 will have on its results of operations and financial
condition.

Reclassifications
Certain amounts in the 2000 and 2001 consolidated financial
statements have been reclassified to conform with the 2002
presentation.

3.     Investments

The Companys investments consist of the
following at December 31, 2001 and 2002:

|                                   |  |      |        |      |  |   |        | 
|---------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                   |  | 2001 |        | 2002
|                                   |  |      |        |     
|Trading investments, at fair value |  | $    | 29,319 |      |  | $ | 23,021 | 
|                                   |  |      |        |      |  |   |        | 
|Investments in common stock        |  | $    | 3,307  |      |  | $ | 86     | 
|                                   |  |      |        |      |  |   |        | 

The Companys trading investments consist of
high-quality, short-term investments with maturities of less
than 360 days.

The Companys investments in common stock at
December 31, 2001 included a 3.3% ownership interest in the
outstanding common stock of Claxson Interactive Group Inc.
(Claxon), an integrated media company with
operations in Latin America, and a less than 1% ownership
interest in New Skies Satellites, Inc. (New Skies),
a provider of satellite capacity. During the years ended
December 31, 2001 and 2002, the Company recorded a non-cash
charge of $20.7 million and $0.8 million,
respectively, which reflected an other-than-temporary decline in
value of the Claxon investment based upon a sustained reduction
in the quoted market price. During 2002, the Company sold its
investment in New Skies for approximately $1.4 million and
recorded a loss of approximately $1.0 million on the sale.
This loss is included in other income (expense) in the
accompanying consolidated financial statements.

4.     Trade Accounts
Receivable

Trade accounts receivable, by operating
subsidiaries, at December 31, 2001 and 2002, are summarized
as follows:

|                                      |       |      |         |        |  |   |         |        | 
|------------------------------------- | ----- | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                      |       | 2001 |         | 2002  
|                                      |       |      |         |       
|IMPSAT Argentina                      |       | $    | 51,037  |        |  | $ | 27,739  |       
|IMPSAT Brasil                         |       |      | 6,714   |        |  |   | 4,577   |       
|IMPSAT Colombia                       |       |      | 5,033   |        |  |   | 3,542   |       
|IMPSAT Venezuela                      |       |      | 6,637   |        |  |   | 8,154   |       
|All other countries                   |       |      | 12,772  |        |  |   | 10,384  |       
|                                      |       |      |         |        |  |   |         |       
|                                      | Total |      |         | 82,193 |  |   |         | 54,396 | 
|Less: allowance for doubtful accounts |       |      | (23,782 | )      |  |   | (23,384 | )     
|                                      |       |      |         |        |  |   |         |       
|Trade accounts receivable, net        |       | $    | 58,411  |        |  | $ | 31,012  |       
|                                      |       |      |         |        |  |   |         |       

The Companys subsidiaries provide trade
credit to their customers in the normal course of business. The
collection of a substantial portion of the trade receivables is
susceptible to changes in the Latin American economies and
political climates. Prior to extending credit, the
customers financial history is analyzed.

F-16



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The activity for the allowance for doubtful
accounts for the years ended December 31, 2000, 2001 and
2002 is as follows:

|                                |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                |  | 2000 |        | 2001 |  | 2002
|                                |  |      |        |      |  |     
|Beginning balance               |  | $    | 19,820 |      |  | $    | 22,509 |   |  | $ | 23,782 |  
|Provision for doubtful accounts |  |      | 4,806  |      |  |      | 16,784 |   |  |   | 13,053 |  
|Write-offs, net of recoveries   |  |      | (2,077 | )    |  |      | (7,697 | ) |  |   | (4,741 | )
|Effect of exchange rate change  |  |      | (40    | )    |  |      | (7,814 | ) |  |   | (8,710 | )
|                                |  |      |        |      |  |      |        |   |  |   |        |  
|Ending balance                  |  | $    | 22,509 |      |  | $    | 23,782 |   |  | $ | 23,384 |  
|                                |  |      |        |      |  |      |        |   |  |   |        |  

5.     Other
Receivables

Other receivables consist primarily of refunds or
credits pending from local governments for taxes other than
income, advances to suppliers, and other miscellaneous amounts
due to the Company and its operating subsidiaries and are as
follows at December 31, 2001 and 2002:

|                    |       |      |        |        |  |   |       |        | 
|------------------- | ----- | ---- | ------ | ------ |  | - | ----- | ------ | 
|                    |       | 2001 |        | 2002  
|                    |       |      |        |       
|IMPSAT Argentina    |       | $    | 22,155 |        |  | $ | 3,576 |       
|IMPSAT Brazil       |       |      | 3,209  |        |  |   | 2,150 |       
|IMPSAT Colombia     |       |      | 3,777  |        |  |   | 3,498 |       
|IMPSAT Venezuela    |       |      | 2,667  |        |  |   | 2,024 |       
|All other countries |       |      | 7,195  |        |  |   | 5,426 |       
|                    |       |      |        |        |  |   |       |       
|                    | Total |      | $      | 39,003 |  |   | $     | 16,674 | 
|                    |       |      |        |        |  |   |       |       

6.     Broadband
Network and Agreements

Broadband network and related equipment consists
of the following at December 31, 2001 and 2002:

|                                                |       |      |         |         |  |   |          |         | 
|----------------------------------------------- | ----- | ---- | ------- | ------- |  | - | -------- | ------- | 
|                                                |       | 2001 |         | 2002   
|                                                |       |      |         |        
|Network infrastructure                          |       | $    | 168,301 |         |  | $ | 157,480  |        
|Equipment and materials                         |       |      | 132,494 |         |  |   | 121,552  |        
|IRU investments                                 |       |      | 46,913  |         |  |   | 42,618   |        
|Right of ways                                   |       |      | 16,056  |         |  |   | 10,427   |        
|                                                |       |      |         |         |  |   |          |        
|                                                | Total |      |         | 363,764 |  |   |          | 332,077 | 
|Less: accumulated depreciation                  |       |      | (83,373 | )       |  |   | (103,606 | )      
|                                                |       |      |         |         |  |   |          |        
|                                                | Total |      |         | 280,391 |  |   |          | 228,471 | 
|Under construction  Network
    infrastructure |       |      | 30,207  |         |  |   |          |        
|                                                |       |      |         |         |  |   |          |        
|                                                | Total |      | $       | 310,598 |  |   | $        | 228,471 | 
|                                                |       |      |         |         |  |   |          |        

F-17



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The recap of accumulated depreciation for the
years ended December 31, 2000, 2001 and 2002 is as follows:

|                          |  |      |        |      |  |      |        |   |  |   |         |  
|------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                          |  | 2000 |        | 2001 |  | 2002
|                          |  |      |        |      |  |     
|Beginning balance         |  | $    | 42,368 |      |  | $    | 46,433 |   |  | $ | 83,373  |  
|Depreciation expense      |  |      | 4,365  |      |  |      | 41,173 |   |  |   | 30,016  |  
|Disposals and retirements |  |      | (300   | )    |  |      | (4,233 | ) |  |   | (9,783  | )
|                          |  |      |        |      |  |      |        |   |  |   |         |  
|Ending balance            |  | $    | 46,433 |      |  | $    | 83,373 |   |  | $ | 103,606 |  
|                          |  |      |        |      |  |      |        |   |  |   |         |  

Nortel Networks
Agreements On
September 6, 1999, the Company executed two turnkey
agreements with Nortel Networks Limited (Nortel)
relating to Nortels design and construction of segments of
the Broadband Network in Argentina and Brazil for approximately
$265 million.

On October 25, 1999, each of IMPSAT
Argentina and IMPSAT Brazil signed definitive agreements with
Nortel to borrow an aggregate of up to approximately
$149.1 million and $148.3 million, respectively, of
long-term vendor financing. The financing, which has a final
maturity in 2006, was used to finance Nortels construction
of the segments of the Broadband Network in Argentina and Brazil
as well as additional purchases of telecommunications equipment.
The Company has guaranteed the obligations of each of IMPSAT
Argentina and IMPSAT Brazil under the Nortel financing
agreements. At December 31, 2002, a total of
$245.4 million was outstanding. See Notes 1 and 17 for
a description of the restructuring of these amounts under the
Holding Companys proposed restructuring plan.

The Companys subsidiaries have obtained
additional vendor financing from Ericsson, Tellabs OY, DMC and
Harris Canada, Inc. for the acquisition of fiber optic cable and
other telecommunications equipment for the Broadband Network,
with respect to which an aggregate of $14.5 million was
outstanding as of December 31, 2002, which is guaranteed by
the Company.

Global
Crossing During the year
ended December 31, 2000, the Company completed and
delivered to Global Crossing the portion of the Trans-Andean
Crossing System connecting Las Toninas, Argentina and Santiago,
Chile. As part of the Broadband Network and the South American
Crossing, the Company also constructed turnkey backhaul segments
and granted IRUs to Global Crossing in Peru and Brazil between
Global Crossings landing points in those countries and its
metropolitan points of presence located at the Companys
telehouses in Lima, Peru and Sao Paulo and Rio de Janeiro,
Brazil. In connection with the delivery of such infrastructure
to Global Crossing during 2000, the Company recognized during
the years ended December 31, 2000 and 2001, revenues
totaling $57.7 million and $7.2 million, respectively,
and costs totaling $34.7 million and $3.3 million,
respectively.

As part of its arrangements with Global Crossing,
the Company has agreed to purchase from Global Crossing
indefeasible rights of use of capacity valued at not less than
$46 million on any of Global Crossings fiber optic
cable networks worldwide. These rights enable the Company to
interconnect the Companys networks in Argentina and Brazil
and give the Company global international access. The Company
had purchased approximately $12.6 million and
$9.7 million under this agreement as of December 31,
2002 and 2001, respectively, and did not purchase any amount
during the year ended December 31, 2002. As part of the
Holding Companys emergence from bankruptcy, the Company
rejected its obligation to purchase the outstanding balance of
$23.7 million in IRUs from Global Crossing as permitted by
the Bankruptcy Code.

In January 2002, Global Crossing filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
Although the Global Crossing subsidiaries to which the Company
provides services and infrastructure were not originally
included in the Global Crossings Chapter 11 filing,
during August 2002, Global Crossing amended its Chapter 11
proceeding to include its subsidiaries that are counter parties
to the agreements with

F-18



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Company. As of December 31, 2002, Global
Crossing was in default for a total of approximately
$3.3 million for services provided under such agreements.
The Company has recorded provisions for doubtful accounts of
approximately $2.1 million against these receivables.

The Company has filed motions in Global
Crossings bankruptcy proceeding seeking an order that
Global Crossing make payment to the Company of the amounts
claimed by the Company and that Global Crossing either accept or
reject its agreements with the Company. Global Crossing has
disputed that it owes the Company any amounts under the
agreements at issue and has filed a proceeding seeking that the
bankruptcy court grant Global Crossing a property right in
certain of the IRUs that it acquired from the Company. See
Note 15 for a further description of the commercial
disputes between the Company and Global Crossing.

To link the Companys Broadband Network to
other parts of Latin America and the world, the Company has
secured IRU and leased capacity on Global Crossings
undersea fiber optic cable systems (and associated terrestrial
capacity) between the United States and Latin America, including
Global Crossings South American network. Global Crossing
has not yet affirmed or rejected these agreements. If Global
Crossing rejects these agreements or is unable to successfully
reorganize and were to sell or terminate its South American
operations as part of its bankruptcy proceedings, it is unclear
what rights the Company would have to continue to utilize the
IRUs that the Company purchased from Global Crossing. It
is possible that the Companys agreements with Global
Crossing would be terminated, and the Company would need to seek
substitute sources of IRU or other capacity from competing
undersea fiber optic systems to link its operations, including
the Companys Broadband Network, to other parts of Latin
America and the world. As of December 31, 2002, the
unamortized balance of IRU investments acquired from Global
Crossing approximated $ 32.5 million.

IRU
Agreements The Company has
entered into several framework agreements granting IRUs of up to
25 years on the Companys Broadband Network, including
network maintenance services and telehousing space. The Company
has received advance payments related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying consolidated balance sheets. During the years ended
December 31, 2001 and 2002, the Company recognized
approximately $3.2 million and $5.0 million,
respectively, from these agreements, which are reflected as
services to carriers in the accompanying consolidated statement
of operations.

7.     Property,
Plant and Equipment

Property, plant and equipment at
December 31, 2001 and 2002, consisted of:

|                                        |       |      |          |         |  |   |          |         | 
|--------------------------------------- | ----- | ---- | -------- | ------- |  | - | -------- | ------- | 
|                                        |       | 2001 |          | 2002   
|                                        |       |      |          |        
|Land                                    |       | $    | 11,223   |         |  | $ | 11,238   |        
|Building and improvements               |       |      | 68,350   |         |  |   | 70,070   |        
|Operating communications equipment      |       |      | 424,428  |         |  |   | 413,842  |        
|Furniture, fixtures and other equipment |       |      | 36,376   |         |  |   | 38,824   |        
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 540,377 |  |   |          | 533,974 | 
|Less: accumulated depreciation          |       |      | (332,345 | )       |  |   | (361,536 | )      
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 208,032 |  |   |          | 172,438 | 
|Equipment in transit                    |       |      | 3,413    |         |  |   | 2,705    |        
|Works in process                        |       |      | 3,014    |         |  |   | 334      |        
|                                        |       |      |          |         |  |   |          |        
|Property, plant and equipment, net      |       | $    | 214,459  |         |  | $ | 175,477  |        
|                                        |       |      |          |         |  |   |          |        

F-19



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The recap of accumulated depreciation for the
year ended December 31, 2000, 2001 and 2002, is as follows:

|                          |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                          |  | 2000 |         | 2001 |  | 2002
|                          |  |      |         |      |  |     
|Beginning balance         |  | $    | 201,656 |      |  | $    | 265,354 |   |  | $ | 332,345 |  
|Depreciation expense      |  |      | 74,156  |      |  |      | 76,465  |   |  |   | 52,183  |  
|Disposals and retirements |  |      | (10,458 | )    |  |      | (9,474  | ) |  |   | (22,992 | )
|                          |  |      |         |      |  |      |         |   |  |   |         |  
|Ending balance            |  | $    | 265,354 |      |  | $    | 332,345 |   |  | $ | 361,536 |  
|                          |  |      |         |      |  |      |         |   |  |   |         |  

8.     Short-Term
Debt

As of December 31, 2001, several of the
Companys subsidiaries maintain short-term credit
facilities with local banks, denominated in U.S. dollars with
interest rates ranging from 14% to 21% and the amount
outstanding under these credit facilities totaled approximately
$8.3 million. During 2002 these credit facilities were
repaid and not renewed.

9.     Long-Term
Debt

The Companys long-term debt at
December 31, 2001 and 2002 is detailed as follows:

|                                                                                                                                                           |                                           |                                                     |                      |         |        |         |          |   |        |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | -------------------- | ------- | ------ | ------- | -------- | - | ------ | ------- | 
|                                                                                                                                                           |                                           | 2001                                                |                      | 2002   
|                                                                                                                                                           |                                           |                                                     |                      |        
|Senior Notes (see Note 11):                                                                                                                                |                                           |                                                     |                      |         |        |         |          |  
|                                                                                                                                                           | 12.125% Senior Guaranteed Notes due 2003. |                                                     | $                    | 125,000 |        |         |          |   |       
|                                                                                                                                                           | 13.75% Senior Notes due 2005.             |                                                     |                      | 300,000 |        |         |          |   |       
|                                                                                                                                                           | 12.375% Senior Notes due 2008.            |                                                     |                      | 225,000 |        |         |          |   |       
|Term notes, maturing through 2005; collateralized
    by buildings and equipment, the assignment of customer contracts
    and investment; denominated in: |                                           |                                                     |                      |         |        |         |          |  
|                                                                                                                                                           |                                           | U.S. dollars (interest rates 5.47% 
    13%)       |                      |         | 16,325 |         |          | $ | 11,821 |        
|                                                                                                                                                           |                                           | Local currency (interest rates 10.37% 
    38.37%) |                      |         | 21,904 |         |          |   | 19,279 |        
|Eximbank notes (interest rates 3.88% 
    10.09%), maturing semiannually through 2004.                                                                    |                                           |                                                     | 18,585               |         |        |         | 18,275   |  
|Vendor financing (3,59%  24.68%),
    maturing 2004 to 2008.                                                                                              |                                           |                                                     | 275,451              |         |        |         | 259,897  |  
|                                                                                                                                                           |                                           |                                                     |                      |         |        |         |          |  
|                                                                                                                                                           |                                           |                                                     | Total long-term debt |         |        | 982,265 |          |   |        | 309,272 | 
|Less: current portion including defaulted
    indebtedness                                                                                                 |                                           |                                                     | (959,076             | )       |        |         | (281,680 | )
|                                                                                                                                                           |                                           |                                                     |                      |         |        |         |          |  
|Long-term debt, net                                                                                                                                        |                                           | $                                                   | 23,189               |         |        | $       | 27,592   |  
|                                                                                                                                                           |                                           |                                                     |                      |         |        |         |          |  

The scheduled maturities of long-term debt at
December 31, 2002 are as follows:

|                    |       |   |         |         | 
|------------------- | ----- | - | ------- | ------- | 
|Fiscal Year         |       |  
|                    |       |  
|2003                |       | $ | 281,680 |        
|2004                |       |   | 5,287   |        
|2005                |       |   | 8,691   |        
|2006                |       |   | 12,688  |        
|2007 and thereafter |       |   | 926     |        
|                    |       |   |         |        
|                    | Total |   | $       | 309,272 | 
|                    |       |   |         |        

F-20



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company is in default on its senior notes
since it did not make the semi-annual interest payments on the
Senior Notes due 2003 (which were due on January 15, 2002),
on the Senior Notes due 2005 (which were due on
February 15, 2002), or on the Senior Notes due 2008 (which
were due on December 15, 2001). As of June 11, 2002,
the Company reclassified the senior notes, which were
outstanding prior to the bankruptcy filing, to liabilities
subject to compromise (see Note 11).

Some of the term notes contain certain covenants
requiring the Company to maintain certain financial ratios,
limiting the incurrence of additional indebtedness and capital
expenditures, and restricting the ability to pay dividends.

The Companys liquidity difficulties have
led to non-compliance with certain covenant requirements and
payment provisions under the Companys Broadband Network
Vendor Financing Agreements. On October 25, 2001, the
Company obtained a waiver of covenant defaults and an extension
from these lenders for scheduled principal and interest payments
under the Broadband Network Vendor Financing Agreements totaling
approximately $36.3 million that were due on that date. The
waiver expired on November 25, 2001 and the Broadband
Network Vendor Financing Agreements became due and payable, and
the Company is in default. On June 11, 2002, the Holding
Company filed a voluntary petition for reorganization under
Chapter 11 of the Bankruptcy Code and, effective as of such
date pursuant to the provisions of the Bankruptcy Code,
contractually accrued interest on the Companys unsecured,
pre-petition obligations ceased to accrue. As a result of the
Companys default under the Broadband Network Vendor
Financing Agreements, the defaulted amounts have been
reclassified to current portion of long-term debts as of
December 31, 2001 and 2002, respectively.

During the year ended December 31, 2002, the
Company extinguished certain of its vendor financing obligations
prior to maturity and recorded a gain on early extinguishment of
approximately $16.4 million, which is included in operating
loss of the 2002 consolidated statements of operations. In
addition, during 2002, the Company negotiated a forgiveness of
interest, which was due and payable to one of IMPSAT
Brazils vendors. At the consummation of these
negotiations, the Company recorded the total amount of forgiven
interest of approximately $22.1 million as a reduction of
interest expense.

10.     Income
Taxes

The composition of the benefit from (provision
for) income taxes, all of which is for foreign taxes, for the
years ended December 31, 2000, 2001 and 2002 is as follows:

|         |       |      |       |       |  |      |         |         |   |   |        |        |  
|-------- | ----- | ---- | ----- | ----- |  | ---- | ------- | ------- | - | - | ------ | ------ | -
|         |       | 2000 |       | 2001  |  | 2002
|         |       |      |       |       |  |     
|Current  |       | $    | 1,511 |       |  | $    | (714    | )       |   | $ | (1,954 | )     
|Deferred |       |      | 3,036 |       |  |      | (26,706 | )       |   |   | (319   | )     
|         |       |      |       |       |  |      |         |         |   |   |        |       
|         | Total |      | $     | 4,547 |  |      | $       | (27,420 | ) |   | $      | (2,273 | )
|         |       |      |       |       |  |      |         |         |   |   |        |       

F-21



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The foreign statutory tax rates range from 15% to
35% depending on the particular country. Deferred taxes result
from temporary differences in revenue recognition, depreciation
methods and net operating loss carryforwards. The composition of
net deferred tax asset at December 31, 2000 and 2001 is as
follows:

|                                   |                                   |          |          |        |        |   |          |       |        | 
|---------------------------------- | --------------------------------- | -------- | -------- | ------ | ------ | - | -------- | ----- | ------ | 
|                                   |                                   | 2001     |          | 2002  
|                                   |                                   |          |          |       
|Deferred tax assets:               |                                   |          |          |        |        |   |          |      
|                                   | Net operating loss carryforwards: |          |          |        |        |   |          |       |       
|                                   |                                   | Domestic |          | $      | 56,636 |   |          | $     | 76,609 | 
|                                   |                                   | Foreign  |          |        | 66,005 |   |          |       | 64,413 | 
|                                   | Allowance for doubtful accounts   |          |          | 1,509  |        |   |          | 1,624 |       
|                                   | Property, plant and equipment     |          |          | 13,879 |        |   |          | 1,140 |       
|                                   | Services to carriers              |          |          | 7,612  |        |   |          | 6,068 |       
|                                   | Other                             |          |          | 2,015  |        |   |          | 5,602 |       
|                                   |                                   |          |          |        |        |   |          |      
|Gross deferred tax assets          |                                   |          | 147,656  |        |        |   | 155,456  |      
|Less: valuation allowance          |                                   |          | (147,656 | )      |        |   | (155,456 | )    
|                                   |                                   |          |          |        |        |   |          |      
|Net deferred tax asset             |                                   |          |         |        |        |   |         |      
|                                   |                                   |          |          |        |        |   |          |      
|Available for sale investments     |                                   |          | 7,103    |        |        |   |         |      
|Less: valuation allowance          |                                   |          | (7,103   | )      |        |   |         |      
|                                   |                                   |          |          |        |        |   |          |      
|Net available for sale investments |                                   |          |         |        |        |   |         |      
|                                   |                                   |          |          |        |        |   |          |      
|Net deferred tax asset             |                                   | $        |         |        |        | $ |         |      
|                                   |                                   |          |          |        |        |   |          |      

The Company recorded a valuation allowance to
offset its deferred income tax asset because management cannot
conclude that utilization of the tax benefits resulting from
operating losses and the other temporary differences are
more likely than not to be realized, as required by
SFAS 109.

11.     Liabilities
Subject To Compromise and Reorganization Items

Liabilities subject to
compromise This refers to
liabilities incurred prior to the commencement of the
Chapter 11 case. These liabilities consist primarily of
amounts outstanding under the Companys Senior Notes and
also include accounts payable, accrued interest and other
accrued expenses. These amounts represent the Companys
estimate of known or potential claims to be resolved in
connection with the Chapter 11 case. Such claims remain
subject to future adjustments. Adjustments may result from
(i) negotiations, (ii) actions of the Bankruptcy
Court, (iii) further developments with respect to disputed
claims, (iv) future rejection of additional executory
contracts or unexpired leases, (v) the determination as to
the value of any collateral securing claims, (vi) proof of
claims or (vii) other events. Payment terms for these
amounts, which are considered long-term liabilities at this
time, will be established in connection with a plan of
reorganization.

F-22



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The principal categories of claims classified as
liabilities subject to compromise under reorganization
proceedings are identified below:

|                 |                                          |   |         |         | 
|---------------- | ---------------------------------------- | - | ------- | ------- | 
|Senior Notes:    |                                          |   |         |        
|                 | 12.125% Senior Guaranteed Notes due 2003 |   | $       | 125,000 | 
|                 | 13.75% Senior Notes due 2005.            |   |         | 300,000 | 
|                 | 12.375% Senior Notes due 2008.           |   |         | 225,000 | 
|Accrued Interest |                                          |   | 77,317  |        
|Accounts payable |                                          |   | 205     |        
|                 |                                          |   |         |        
|Total            |                                          | $ | 727,522 |        
|                 |                                          |   |         |        

Contractual interest expense not accrued on
prepetition debt totaled $52.2 million for the period that
began as of June 11, 2002, the date of the Companys
petition for relief under chapter 11 of the Bankruptcy
Code, and ended December 31, 2002.

Reorganization
items Reorganization items
during the year ended December 31, 2002 are comprised of
the following:

|                                      |       |   |        |        | 
|------------------------------------- | ----- | - | ------ | ------ | 
|Write-off of deferred financing costs |       | $ | 9,683  |       
|Professional fees                     |       |   | 13,614 |       
|                                      |       |   |        |       
|                                      | Total |   | $      | 23,297 | 
|                                      |       |   |        |       

12.     Stock Option
Plans

Pursuant to the Plan, on the Effective Date as
described in Note 1, the Companys stock option plans
described below were terminated, and all of the options and any
other equity interests granted thereunder were cancelled,
retired and eliminated with no consideration paid thereon.

1998
Plan In December 1998, the
Company adopted the 1998 Stock Option Plan (the
1998 Plan), pursuant to which 4,776,016 shares
of Companys common stock were reserved for issuance upon
exercise of options. The 1998 Plan was designed as a means to
retain and motivate key employees and directors. The
Companys compensation committee, or in the absence
thereof, the Board, administers and interprets the 1998 Plan and
is authorized to grant options thereunder to all eligible
employees of the Company, including executive officers and
directors (whether or not they are employees) of the Company or
affiliated companies. Options granted under the 1998 Plan are on
such terms and at such prices as determined by the compensation
committee, except that the per share exercise price of incentive
stock options cannot be less than the fair market value of the
common stock on the date of grant. The 1998 Plan will terminate
on December 1, 2008, unless sooner terminated by the
Companys Board.

Under the 1998 Plan, the Company granted options
for 441,650 shares at an exercise price of $8.38 during the year
ended December 31, 1998 and options for 393,340 shares at
an exercise price of $10.47 during the year ended
December 31, 1999 and options for 507,100 shares at an
exercise price of $17.00 during the year ended December 31,
2000. These options vest on each of the first, second and third
anniversaries of the date of grant, as to 10%, 30%, and 30%,
respectively, of the granted shares. On the fourth anniversary
of the date of grant, the option vests as to the remainder of
the granted shares. The options vest fully upon a change of
control of the Company.

1999
Plan On January 5,
2000, the Companys Board adopted the 1999 Stock Option
Plan (the 1999 Plan), which provides for the grants
to its key officers and employees of stock options that are
non-qualified

F-23



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

for U.S. federal income tax purposes. The terms
of the 1999 Plan are otherwise identical to those of the 1998
Plan except that:



| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The total number of shares of our common stock
    for which options may be and were granted pursuant to the 1999
    Plan is 355,214;                                                                                                             
|
| |  | The exercise price is $1.69 per share of common
    stock; and                                                                                                                                                                                     
|
| |  | Ten percent, twenty percent, thirty percent and
    forty percent of the options granted vest on each of the fourth,
    fifth, sixth and seventh anniversaries, respectively, of the
    date of grant or upon a change of control of the Company.

The expiration date of the 1999 Plan is
January 5, 2010.

In connection with the stock options granted
under the 1999 Plan, the Company recorded $5.4 million in
stockholders equity as deferred compensation during
January 2000. The deferred compensation will be amortized to
expense over the vesting period, which commences four years
after the date of grant.

A summary of stock option transactions during
each of the three years in the period ended December 31,
2002 is presented below:

|                                 |           |                  |           |                  |   |   |       |       | 
|-------------------------------- | --------- | ---------------- | --------- | ---------------- | - | - | ----- | ----- | 
|                                 |           |                  |           | Weighted Average
|                                 |           | Number of Shares |           | Exercise Price  
|                                 |           |                  |           |                 
|Outstanding at December 31, 1999 |           |                  | 834,990   |                  |   | $ | 9.36  |      
|                                 | Granted   |                  |           | 862,314          |   |   |       | 10.70 | 
|                                 | Cancelled |                  |           | (29,427          | ) |   |       | 14.48 | 
|                                 |           |                  |           |                  |   |   |       |      
|Outstanding at December 31, 2000 |           |                  | 1,667,877 |                  |   |   | 9.96  |      
|                                 | Granted   |                  |           |                 |   |   |       |      | 
|                                 |           |                  |           |                  |   |   |       |      
|                                 | Cancelled |                  |           | (298,812         | ) |   |       | 12.26 | 
|                                 |           |                  |           |                  |   |   |       |      
|Outstanding at December 31, 2001 |           |                  | 1,369,065 |                  |   |   | 9.45  |      
|                                 | Granted   |                  |           |                 |   |   |       |      | 
|                                 | Cancelled |                  |           | (122,948         | ) |   |       | 6.62  | 
|                                 |           |                  |           |                  |   |   |       |      
|Outstanding at December 31, 2002 |           |                  | 1,246,117 |                  |   | $ | 9.70  |      
|                                 |           |                  |           |                  |   |   |       |      
|Stock Options exercisable at:    |           |                  |           |                  |   |   |       |      
|December 31, 2000.               |           |                  | 170,692   |                  |   | $ | 8.85  |      
|                                 |           |                  |           |                  |   |   |       |      
|December 31, 2001.               |           |                  | 408,098   |                  |   | $ | 10.07 |      
|                                 |           |                  |           |                  |   |   |       |      
|December 31, 2002.               |           |                  | 653,344   |                  |   | $ | 10.87 |      
|                                 |           |                  |           |                  |   |   |       |      

F-24



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information
concerning outstanding stock options at December 31, 2002:

|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 
|-------------- |  | ------------------- | --------- | ----------- |  | -------------- | ------- | ------------------- |  | -------------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|               |  |                     |           |             |  |               
|               |  | Options Outstanding |           |             |  |               
|               |  |                     |           |            
|               |  |                     |           | Weighted    |  |                |         | Options Exercisable
|               |  |                     |           | Average     |  |                |         |                    
|               |  | Number              |           | Remaining   |  | Weighted       |         | Number              |  | Weighted      
|Range of       |  | of Options          |           | Contractual |  | Average        |         | of Options          |  | Average       
|Exercise Price |  | Outstanding         |           | Life        |  | Exercise Price |         | Outstanding         |  | Exercise Price
|               |  |                     |           |             |  |                |         |                     |  |               
|$1.69-$8.38    |  |                     | 609,784   |             |  |                | 7 Years |                     |  | $              | 5.13  |  |  |  | 313,772 |  |  | $ | 8.38  | 
|$10.47         |  |                     | 283,463   |             |  |                | 7 Years |                     |  |                | 10.47 |  |  |  | 198,424 |  |  |   | 10.47 | 
|$17.00         |  |                     | 352,870   |             |  |                | 7 Years |                     |  |                | 17.00 |  |  |  | 141,148 |  |  |   | 17.00 | 
|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 
|               |  |                     | 1,246,117 |             |  |                | 7 Years |                     |  | $              | 9.70  |  |  |  | 653,344 |  |  | $ | 10.87 | 
|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 

The weighted average fair value of options
granted during 2000 was $14.95.

13.     Operating
Segment Information

The Companys operating segment information,
by subsidiary, is as follows for the years ended
December 31, 2000, 2001 and 2002:

|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |         |         | 
|------------------------------ | -------------------- | ------------------ | ------- | ------ | ------- | -------- | ------- | --------- | ------- | --------- | ----- | ------------ | ------ | ----- | ----- | ------ | ------ | - | ------ | ------ | ------- |  | ------ | ------- | ------- | - | ------- | ------- | ------- | 
|                               |                      |                    |         |        |         |          |         |           |         | All other |       |              |        |      
|2002                           |                      | Argentina          |         | Brazil |         | Colombia |         | Venezuela |         | countries |       | Eliminations |        | Total
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |      
|Net Revenues                   |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|Data and value added services: |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|                               | Satellite            |                    | $       | 16,556 |         |          | $       | 11,431    |         |           | $     | 17,088       |        |       | $     | 22,718 |        |   | $      | 29,453 |         |  | $      | (8,699  | )       |   | $       | 88,547  |        
|                               | Broad Band           |                    |         | 15,140 |         |          |         | 14,577    |         |           |       | 35,624       |        |       |       | 4,659  |        |   |        | 22,008 |         |  |        | (14,275 | )       |   |         | 77,733  |        
|                               | Value added services |                    |         | 4,919  |         |          |         | 3,223     |         |           |       | 817          |        |       |       | 1,413  |        |   |        | 15,291 |         |  |        | (11,472 | )       |   |         | 14,191  |        
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|                               | Subtotal             |                    |         | 36,615 |         |          |         | 29,231    |         |           |       | 53,529       |        |       |       | 28,790 |        |   |        | 66,752 |         |  |        | (34,446 | )       |   |         | 180,471 |        
|Internet                       |                      |                    | 6,588   |        |         |          | 4,022   |           |         |           | 4,508 |              |        |       | 2,495 |        |        |   | 12,871 |        |         |  | (3,241 | )       |         |   | 27,243  |        
|Telephony                      |                      |                    | 9,451   |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   | 10,143 |        |         |  | (5,267 | )       |         |   | 14,327  |        
|Services to carriers           |                      |                    | 3,355   |        |         |          | 2,551   |           |         |           | 263   |              |        |       |       |        |        |   | 906    |        |         |  | (90    | )       |         |   | 6,985   |        
|Sales of equipment             |                      |                    | 538     |        |         |          | 9       |           |         |           | 14    |              |        |       | 349   |        |        |   | 258    |        |         |  |        |         |         |   | 1,168   |        
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|                               |                      | Total net revenues |         | $      | 56,547  |          |         | $         | 35,813  |           |       | $            | 58,314 |       |       | $      | 31,634 |   |        | $      | 90,930  |  |        | $       | (43,044 | ) |         | $       | 230,194 | 
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|Operating income (loss)        |                      | $                  | (11,558 | )      |         | $        | (19,865 | )         |         | $         | 1,485 |              |        | $     | 3,198 |        |        | $ | (5,952 | )      |         |  |        |         |         | $ | (32,692 | )      
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        
|                               |                      | Total assets       |         | $      | 167,804 |          |         | $         | 115,386 |           |       | $            | 85,573 |       |       | $      | 47,254 |   |        | $      | 104,666 |  |        |         |         |   |         | $       | 520,683 | 
|                               |                      |                    |         |        |         |          |         |           |         |           |       |              |        |       |       |        |        |   |        |        |         |  |        |         |         |   |         |        

F-25



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |         |         | 
|-------------------------------------- | -------------------- | -------------------------------------------------- | -------- | ------ | ------- | -------- | ------- | --------- | ------- | --------- | ----- | ------------ | ------- | ----- | ----- | ------ | ------ |  | -------- | ------ | ------- |  | ------ | ------- | ------- | - | -------- | ------- | ------- | 
|                                       |                      |                                                    |          |        |         |          |         |           |         | All other |       |              |         |      
|2001                                   |                      | Argentina                                          |          | Brazil |         | Colombia |         | Venezuela |         | countries |       | Eliminations |         | Total
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |      
|Net Revenues                           |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|Data and value added services:         |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|                                       | Satellite            |                                                    | $        | 52,334 |         |          | $       | 15,460    |         |           | $     | 22,611       |         |       | $     | 24,924 |        |  | $        | 33,348 |         |  | $      | (11,624 | )       |   | $        | 137,053 |        
|                                       | Broad Band           |                                                    |          | 32,539 |         |          |         | 10,077    |         |           |       | 34,487       |         |       |       | 3,334  |        |  |          | 12,426 |         |  |        | (7,284  | )       |   |          | 85,579  |        
|                                       | Value added services |                                                    |          | 7,082  |         |          |         | 4,042     |         |           |       | 533          |         |       |       | 1,106  |        |  |          | 15,683 |         |  |        | (11,262 | )       |   |          | 17,184  |        
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|                                       | Subtotal             |                                                    |          | 91,955 |         |          |         | 29,579    |         |           |       | 57,631       |         |       |       | 29,364 |        |  |          | 61,457 |         |  |        | (30,170 | )       |   |          | 239,816 |        
|Internet                               |                      |                                                    | 17,863   |        |         |          | 11,826  |           |         |           | 4,298 |              |         |       | 2,047 |        |        |  | 15,705   |        |         |  | (6,336 | )       |         |   | 45,403   |        
|Telephony                              |                      |                                                    | 8,905    |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  | 5,199    |        |         |  | (2,342 | )       |         |   | 11,762   |        
|Services to carriers                   |                      |                                                    | 3,561    |        |         |          | 1,411   |           |         |           | 158   |              |         |       |       |        |        |  | 3,232    |        |         |  | (1,002 | )       |         |   | 7,360    |        
|Sales of equipment                     |                      |                                                    | 7,962    |        |         |          | 2,627   |           |         |           | 493   |              |         |       | 1,235 |        |        |  | 2,635    |        |         |  |        |         |         |   | 14,952   |        
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|                                       |                      | Total net revenues from services and
    equipment |          |        | 130,246 |          |         |           | 45,443  |           |       |              | 62,580  |       |       |        | 32,646 |  |          |        | 88,228  |  |        |         | (39,850 | ) |          |         | 319,293 | 
|Broadband network development revenues |                      |                                                    |          |        |         |          | 2,552   |           |         |           |       |              |         |       |       |        |        |  | 4,645    |        |         |  |        |         |         |   | 7,197    |        
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|                                       |                      | Total net revenues                                 |          | $      | 130,246 |          |         | $         | 47,995  |           |       | $            | 62,580  |       |       | $      | 32,646 |  |          |        | 92,873  |  |        | $       | (39,850 | ) |          | $       | 326,490 | 
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|Operating income (loss)                |                      | $                                                  | (311,315 | )      |         | $        | (58,952 | )         |         | $         | (190  | )            |         | $     | 781   |        |        |  | (121,368 | )      |         |  |        |         |         | $ | (491,044 | )      
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        
|                                       |                      | Total assets                                       |          | $      | 235,471 |          |         | $         | 188,005 |           |       | $            | 101,583 |       |       | $      | 55,618 |  |          | $      | 137,897 |  |        |         |         |   |          | $       | 718,574 | 
|                                       |                      |                                                    |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |  |          |        |         |  |        |         |         |   |          |        

|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |         |           | 
|-------------------------------------- | -------------------- | -------------------------------------------------- | ------- | ------- | ------- | -------- | ------- | --------- | ------- | --------- | ----- | ------------ | ------- | ----- | ----- | ------ | ------ | - | ------- | ------ | ------- |  | ------ | ------- | ------- | - | ------- | ------- | --------- | 
|                                       |                      |                                                    |         |         |         |          |         |           |         | All other |       |              |         |      
|2000                                   |                      | Argentina                                          |         | Brazil  |         | Colombia |         | Venezuela |         | countries |       | Eliminations |         | Total
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |      
|Net Revenues                           |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|Data and value added services:         |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       | Satellite            |                                                    | $       | 75,666  |         |          | $       | 14,869    |         |           | $     | 29,807       |         |       | $     | 24,321 |        |   | $       | 40,635 |         |  | $      | (26,033 | )       |   | $       | 159,265 |          
|                                       | Broad Band           |                                                    |         | 24,640  |         |          |         | 2,324     |         |           |       | 21,219       |         |       |       | 1,896  |        |   |         | 1,350  |         |  |        | (169    | )       |   |         | 51,260  |          
|                                       | Value added services |                                                    |         | 2,583   |         |          |         | 615       |         |           |       | 200          |         |       |       | 429    |        |   |         | 23     |         |  |        | (107    | )       |   |         | 3,743   |          
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       | Subtotal             |                                                    |         | 102,889 |         |          |         | 17,808    |         |           |       | 51,226       |         |       |       | 26,646 |        |   |         | 42,008 |         |  |        | (26,309 | )       |   |         | 214,268 |          
|Internet                               |                      |                                                    | 12,230  |         |         |          | 10,139  |           |         |           | 3,589 |              |         |       | 1,392 |        |        |   | 13,902  |        |         |  | (5,256 | )       |         |   | 35,996  |        
|Telephony                              |                      |                                                    |         |         |         |          |         |           |         |           | 4     |              |         |       |       |        |        |   | 261     |        |         |  | (30    | )       |         |   | 235     |        
|Services to carriers                   |                      |                                                    | 885     |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   | 885     |        
|Sales of equipment                     |                      |                                                    | 12,221  |         |         |          | 308     |           |         |           |       |              |         |       | 89    |        |        |   | 465     |        |         |  |        |         |         |   | 13,083  |        
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total net revenues from services and
    equipment |         |         | 128,225 |          |         |           | 28,255  |           |       |              | 54,819  |       |       |        | 28,127 |   |         |        | 56,636  |  |        |         | (31,595 | ) |         |         | 264,467   | 
|Broadband network development revenues |                      |                                                    | 32,272  |         |         |          | 9,336   |           |         |           |       |              |         |       |       |        |        |   | 16,068  |        |         |  |        |         |         |   | 57,676  |        
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total net revenues                                 |         | $       | 160,497 |          |         | $         | 37,591  |           |       | $            | 54,819  |       |       | $      | 28,127 |   |         | $      | 72,704  |  |        | $       | (31,595 | ) |         | $       | 322,143   | 
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|Operating income (loss)                |                      | $                                                  | (19,973 | )       |         | $        | (26,867 | )         |         | $         | 4,765 |              |         | $     | 92    |        |        | $ | (19,902 | )      |         |  |        |         |         | $ | (61,885 | )      
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total assets                                       |         | $       | 494,775 |          |         | $         | 223,766 |           |       | $            | 115,584 |       |       | $      | 55,760 |   |         | $      | 484,865 |  |        |         |         |   |         | $       | 1,374,750 | 
|                                       |                      |                                                    |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        

F-26



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

14.     Related Party
Transactions

The Company provides telecommunications network
services to affiliates of stockholders. During the years ended
December 31, 2000, 2001 and 2002, such services totaled
approximately $18.9 million, $12.2 million and
$10.4 million, respectively. In addition, the Company also
enters into transactions with such affiliates, which primarily
include financial borrowings, insurance, and employee benefits
services. During the years ended December 31, 2000, 2001
and 2002, such transactions totaled approximately
$10.7 million, $9.8 million and $3.3 million,
respectively.

The Company also has obtained certain financing
from these affiliates, which are included in Term Notes in Note
9. Amounts outstanding totaled approximately $22.1 million
and $15.0 million at December 31, 2001 and 2002,
respectively.

During the years ended December 31, 2000,
2001 and 2002, the Company made approximately $1.1 million,
$1.4 million and $1.4 million, respectively, in
payments to British Telecommunications plc for satellite
capacity. Investment banking fees amounting to
$18.3 million, $0.3 million and $1.0 million were
paid to representative affiliates of the former holders of the
Companys redeemable preferred stock during 2000, 2001 and
2002, respectively. These representative affiliates are current
stockholders of the Company.

During 2002, the Company paid approximately
$2.0 million in fees to affiliates of certain of the
Companys creditors for structuring and negotiation of the
terms of the Plan.

15.     Commitments
and Contingencies

Commitments
The Company leases satellite capacity with average annual rental
commitments of approximately $21.9 million through the year
2007. In addition, the Company had committed to long-term
contracts for the purchase of terrestrial links from third
parties for approximately $2.5 million per year through
2007. The Company has commitments to purchase communications and
data center equipment amounting to approximately
$1.8 million at December 31, 2002.

IMPSAT Brazil has entered into a
$5.9 million term note with El Camino Resources, which is
guaranteed by the Company and IMPSAT Argentina. At
December 31, 2002, the balance outstanding was
approximately $2.3 million.

360networks
During June 2001, the Company terminated a series of contracts
which the Company had signed in the first quarter of 2001 with
subsidiaries of 360americas networks (Bermuda) ltd., a
subsidiary of 360networks, Inc., and certain other subsidiaries
of 360networks, Inc. (collectively 360networks), to
construct and provide IRU dark fiber, capacity services and
conduit to 360networks over the Companys Broadband Network
in Argentina and Brazil, including the Companys new
Argentina-Brazil link, as a result of the breach by 360americas
of its payment obligations under those contracts. Between March
and May 2001, the Company made segments of the IRU dark fiber
and capacity services available to 360networks for acceptance,
but 360networks failed to make certain payments as required by
the Companys contract with them. 360networks also failed
to make certain payments for collocation space in the
Companys telehouses in Sao Paulo and Rio de Janeiro,
Brazil and Buenos Aires, Argentina, and the Company terminated
those contracts as well. The Company has also terminated a
contract with 360networks for collocation space in Caracas,
Venezuela, also for payment default by 360networks.

The Companys IRU dark fiber, capacity
services and construction contracts with 360networks
contemplated total payments of approximately $98.8 million
in advance upon delivery of the IRU dark fiber, capacity
services and conduit construction to 360networks and additional
recurring payments, totaling approximately $45.0 million
over the term of the contracts, for maintenance services. As of
the termination of the contracts,

F-27



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

360networks had paid as a total of
$25.8 million and was in default on additional payments
totaling $32.0 million. In addition, 360networks is in
default on payments to collocation services totaling
$0.8 million.

The Company commenced arbitration and litigation
proceedings against 360networks for damages under the terminated
contracts for the provision of IRU dark fiber and capacity
services, as contemplated by the relevant agreements. During
November 2002, the Company reached a agreement (the
Settlement Agreement) with 360networks in which the
Company agreed to dismiss its arbitration and litigation
proceedings against 360networks and in return, the Company would
be entitled to the funds that 360networks had advanced the
Company in the amount of $22.6 in relation to the contracts
described above between the Company and 360networks. These funds
had been recorded as deferred revenues by the Company. In
addition, the Company received from 360networks, assets, with a
fair value of approximately $1.6 million. In connection
with the Settlement Agreement, the Company recorded a gain in
the amount of $26.2 million. The gain was calculated as
follows:

|                              |  |   |        | 
|----------------------------- |  | - | ------ | 
|Reversal of deferred revenues |  | $ | 22,557 | 
|Recovery of VAT taxes         |  |   | 2,078  | 
|Fair Value of Assets Acquired |  |   | 1,594  | 
|                              |  |   |        | 
|Legal Settlement              |  | $ | 26,229 | 
|                              |  |   |        | 

IPO Allocations
Class Action On
November 1, 2001, a lawsuit (the IPO
Class Action) was filed in the United States District
Court for the Southern District of New York against the Company,
certain individuals who were then officers and directors of the
Company, and the underwriters to the Companys initial
public offering (IPO). This lawsuit alleged on behalf of a
proposed class of all shareholders that the Company and its
underwriters violated various provisions of the securities laws
in connection with the IPO in February 2000. Pursuant to the
Plan, the plaintiffs in the IPO Class Action received in
connection with their claims the assignment of any insurance
proceeds that the Company receives in connection with the
litigation, but otherwise the claims of the plaintiffs against
the Company or any of its other assets have been discharged as
part of the Chapter 11 proceedings.

Global
Crossing Global Crossing
Ltd. filed for protection under Chapter 11 of the
Bankruptcy Code in January 2002, and the Global Crossing
subsidiaries to whom the Company provides services and
infrastructure, as described below, were included in Global
Crossings Chapter 11 proceedings during August 2002.
The Company is party to a series of agreements with Global
Crossing for the provision of telecommunications services.
Pursuant to those agreements, the Company constructed a
terrestrial portion of Global Crossings South American
network between landing points on the Atlantic Ocean in
Argentina and the Pacific Ocean in Chile, granted Global
Crossing a series of indefeasible rights of use (IRU) over
ducts and dark fiber on its broadband telecommunication network
in Argentina, Brazil and Peru, provided Global Crossing with
collocation space and related services in its telehouses in
Argentina, Brazil, Chile, Venezuela and Peru and provided Global
Crossing with maintenance services for their telecommunications
assets in Latin America. In addition, the Company acquired IRU
and leased capacity on Global Crossings South American
undersea fiber optic cable system in order to connect the
Broadband Network with other parts of Latin America and the
world, See Note 6.

Commencing in the first quarter of 2002 and
subsequent to the filing of Global Crossings petition
under Chapter 11, Global Crossing has disputed a number of
invoices that the Company delivered to it in connection with the
services the Company is rendering to Global Crossing and has
failed to make full payment in accordance with the terms of such
invoices. The principal disputed matters include the following:

Beginning in the first quarter of 2002, Global
Crossing disputed certain of the invoices sent by the Company to
its Argentine and Brazilian subsidiaries for collocation and
related services in the Companys

F-28



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

telehouses in those countries. On
January 15, 2003, the Company filed a motion in the Global
Crossing Chapter 11 proceeding seeking an order that Global
Crossing either irrevocably reject or assume the telehouse
agreements and that Global Crossing make payment of all
shortfalls under the telehouse agreements after the respective
petition dates of the Global Crossing debtors, through
December 31, 2002, in the aggregate amount of approximately
$1.1 million, plus interest on the past due amounts, as
administrative expense claims. On February 19, 2003, Global
Crossing responded to the Companys motion. In its
response, Global Crossing stated its intention to assume the
Brazil and Argentina telehouse agreements, along with three
other telehouse agreements covering collocation space in
Santiago, Chile, Lima, Peru and Caracas, Venezuela, although it
also stated its right under its plan of reorganization to
reconsider its assumption of such agreements at any time prior
to the effective date of the Global Crossing plan of
reorganization. Global Crossing denied that it owed any unpaid
amounts with respect to the Argentine or Brazilian telehouse
agreements. The Company and Global Crossing are currently
seeking to agree to a schedule for evidence, briefing and
adjudication of the disputes regarding the Argentine and
Brazilian telehouse agreements.

In October 2002, Global Crossing failed to make
payment of the full amount of recurring service charges for
operation and maintenance of the IRUs that Global Crossing
acquired under the TAC Turnkey Construction and IRU Agreement
dated September 22, 1999 (the TAC Agreement).
During the first quarter of 2003, Global Crossing also paid
recurring service charges under the TAC Agreement and the other
backhaul agreements in amounts less than the Company asserts to
be contractually required. As part of the Companys
January 15, 2003 motion in Global Crossings
bankruptcy proceeding, the Company requested that the bankruptcy
court find that Global Crossing has failed to make the full
recurring service charges required by the TAC Agreement and
order Global Crossing to make payment of such amounts as
administrative expenses through December 31, 2002, in the
amount of approximately $0.6 million, plus interest on the
past due amounts as set forth in the TAC Agreement. In its
response to the Companys motion, Global Crossing requested
that the bankruptcy court defer determination of the
Companys entitlement to the recurring service charges
until such time as Global Crossing has decided to assume or
reject the TAC Agreement and other backhaul agreements.

On March 26, 2003, Global Crossing filed an
adversary proceeding with the bankruptcy court overseeing its
Chapter 11 case asserting a proprietary interest in the
IRUs granted to them under the TAC Agreement and other backhaul
agreements entered into between the two companies. The
Companys response to Global Crossings complaint is
due on April 25, 2003. The Company and Global Crossing are
currently seeking to agree to a schedule for evidence, briefing
and adjudication of Global Crossings asserted proprietary
interest in the IRUs arising under the TAC Agreement and other
backhaul agreements.

On March 26, 2003, Global Crossing
Bandwidth, Inc., one of the debtors in Global Crossings
Chapter 11 proceeding, filed an adversary proceeding in the
Global Crossing Chapter 11 case claiming IMPSAT USA had
failed to pay Global Crossing Bandwidth, Inc. a total of
approximately $0.5 million for IP transit services pursuant
to a Carrier Service Agreement dated January 19, 2001
between IMPSAT USA and Global Crossing Bandwidth, Inc. The
Company intends to dispute Global Crossing Bandwidths
complaint on the basis that IMPSAT USA has paid in full all
amounts owed by it under the Carrier Services Agreement. The
Companys answer to the complaint in this matter is due on
April 25, 2003.

Other
Litigation The Company is
involved in or subject to various litigation and legal
proceedings incidental to the normal conduct of its business,
including with respect to regulatory matters. Whenever
justified, the Company expects to vigorously prosecute or defend
such claims, although there can be no assurance that the Company
will ultimately prevail with respect to any such matters. In
November 1996, IMPSAT Argentina filed suit against a former
customer, ENCOTESA, for amounts due and arising under IMPSAT
Argentinas contracts with ENCOTESA, the Argentine national
postal service for $7.3 million. The

F-29



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

ultimate collectibility of this matter continues
to be negotiated for settlement; however, the Company has valued
this receivable at a net realizable value of zero.

16.  Selected Quarterly Financial
Information (Unaudited)

Selected financial information for the quarterly
periods in 2002 and 2001 is presented below:

|                                                         |  |               |         |        |  |       |         |        |  |   |         |   |  |   |        | 
|-------------------------------------------------------- |  | ------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | ------- | - |  | - | ------ | 
|                                                         |  |              
|                                                         |  | 2002 Quarters
|                                                         |  |              
|                                                         |  | First         |         | Second |  | Third |         | Fourth
|                                                         |  |               |         |        |  |       |         |       
|Total net revenue                                        |  | $             | 62,413  |        |  | $     | 59,341  |        |  | $ | 55,308  |   |  | $ | 53,132 | 
|Operating loss                                           |  |               | (15,158 | )      |  |       | (13,186 | )      |  |   | (5,287  | ) |  |   | 939    | 
|Net (loss) income                                        |  |               | (58,477 | )      |  |       | (85,630 | )      |  |   | (92,719 | ) |  |   | 32,311 | 
|Net (loss) income per common share basic and
    diluted |  |               | (0.64   | )      |  |       | (0.94   | )      |  |   | (1.01   | ) |  |   | 0.35   | 

|                                            |  |               |         |        |  |       |         |        |  |   |          |   |  |   |          |  
|------------------------------------------- |  | ------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | -------- | - |  | - | -------- | -
|                                            |  |              
|                                            |  | 2001 Quarters
|                                            |  |              
|                                            |  | First         |         | Second |  | Third |         | Fourth
|                                            |  |               |         |        |  |       |         |       
|Total net revenue                           |  | $             | 88,745  |        |  | $     | 78,527  |        |  | $ | 76,570   |   |  | $ | 82,648   |  
|Operating loss                              |  |               | (25,109 | )      |  |       | (30,187 | )      |  |   | (264,405 | ) |  |   | (171,343 | )
|Net loss                                    |  |               | (68,251 | )      |  |       | (99,672 | )      |  |   | (344,336 | ) |  |   | (202,996 | )
|Net loss per common share basic and diluted |  |               | (0.75   | )      |  |       | (1.09   | )      |  |   | (3.77    | ) |  |   | (2.21    | )

The Companys 2002 fourth quarter results
were positively impacted as a result of the forgiveness of
interest totaling approximately $22.1 million and the legal
settlement totaling approximately $26.2 million recorded by
the Company as discussed in Notes 9 and 15, respectively.

17.  Subsequent Events
(Unaudited)

Emergence from
Chapter 11 As
discussed in Note 1, the Holding Company emerged from bankruptcy
on March 25, 2003 as contemplated under the Plan and
restructured its indebtedness in the manner described in the
Financial Restructuring caption in Note 1, specifically:

The Company consummated the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Issued shares of New Common Stock to holders of
    the Companys 13 3/4% Senior Notes due 2005 and
    12 3/8% Senior Notes due 2008, (the 2005/2008
    Holders) in full satisfaction of their claims thereunder,
    including the outstanding principal and all accrued and unpaid
    interest. The 2005/2008 Holders received their ratable portion
    of 9.8 million shares of New Common Stock, as may be
    decreased to allow for the allocation of a ratable number of
    such shares of New Common Stock to the holders of the
    Post-Effective Date Contingencies and certain other claims of
    unsecured creditors of the Holding Company. Under the Plan, the
    dollar value of the Post-Effective Date Contingencies and other
    unsecured claims is to be determined after the Effective Date
    based on factors at the level of the Companys operating
    subsidiaries. Accordingly, the Plan required the Company to
    establish on the Effective Date a reserve (the Common
    Stock Reserve Pool) consisting of an estimated sufficient
    portion of such 9.8 million shares of New Common Stock to
    enable the Company to make any distributions after the Effective
    Date on account of Post-Effective Date Contingencies and other
    unsecured claims. To this end, based on the estimated maximum
    value of the Post-Effective Date Contingencies and other
    unsecured claims, the Company and the creditors committee under
    the Plan have determined that the Common Stock Reserve Pool
    shall be composed of 686,000 shares of New Common Stock. The
    2005/2008 holders have initially received on the Effective Date
    9.1 million shares

F-30



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | of New Common Stock, net of the Common Stock
    Reserve Pool. Pursuant to the Plan, any settlements or
    distributions from the Common Stock Reserve Pool with the
    holders of the Post-Effective Date Contingencies and other
    unsecured claims shall be made in accordance with the disputed
    claims resolution process contained therein. Following the
    resolution of these claims, the Company will distribute any
    shares of New Common Stock remaining in the Common Stock Reserve
    Pool ratably among the 2005/2008 Holders in accordance with the
    terms of the Plan. Holders of the Companys
    pre-Chapter 11 common stock (the Old Common
    Stock) and holders of any other equity interest received
    no distribution under the Plan. All Old Common Stock and all
    other equity interests were cancelled on the Effective Date;
|
| |  | filed with the Delaware Secretary of State a
    Restated Certificate of Incorporation (Certificate of
    Incorporation);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | amended and restated the Companys Bylaws
    (Bylaws);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | cancelled all Old Common Stock, and all other
    existing securities and agreements to issue or purchase any
    equity interest;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | issued $67.5 million in aggregate principal
    amount of Series A 6% Senior Guaranteed Notes due 2011 (the
    Series A Notes) (initially convertible, in the
    aggregate, into 22.8% of the New Common Stock on a fully diluted
    basis) to holders of the Companys former 12 1/8%
    Senior Guaranteed Notes due 2003 (the 2003
    Noteholders), in full satisfaction of the claims of the
    2003 Noteholders, including the outstanding principal and all
    accrued and unpaid interest thereon;                                                                                                                                                                                                                                                                                                                                                             
|
| |  | issued to (i) holders of debt under the
    Companys pre-Effective Date Broadband Network vendor
    financing agreements (the Original Vendor Financing
    Agreements) and (ii) other creditors of the
    Companys operating subsidiaries holding guarantees by the
    Holding Company of such indebtedness who voted to accept the
    Plan, a combination of new senior indebtedness totaling
    $143.8 million, $23.9 million in the aggregate of new
    Series B 6% Senior Guaranteed Notes due 2011
    (Series B Notes) (initially convertible in the
    aggregate into 5.3% of the New Common Stock on a fully diluted
    basis), and eight-year warrants to acquire 15.3% in the
    aggregate of the New Common Stock (on a fully diluted basis);                                                                                                        
|
| |  | issued 200,000 shares of New Common Stock to
    certain officers of the Company in accordance with the
    Companys 2003 Stock Incentive Plan (the 2003 Stock
    Incentive Plan); and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | issued options for 1,646,332 shares of New Common
    Stock to senior officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Under the Companys Certificate of
Incorporation, the authorized capital stock as of the Effective
Date consists of (i) 50,000,000 shares of the New Common
Stock, with a par value of $0.01 per share and
(ii) 5,000,000 shares of Preferred Stock, with a par value
of $0.01 per share (the Preferred Stock). No
Preferred Stock has been issued. Pursuant to the Certificate of
Incorporation, Preferred Stock may be issued in one or more
series as determined from time to time by the Companys
Board of Directors (the Board) without further
approval of the Companys stockholders. Upon issuance of
any series of Preferred Stock, the Board will fix the voting
powers, designations, preferences, and relative, participating,
optional, redemption, conversion, exchange or other special
rights, qualifications, limitations or restrictions of such
Preferred Stock, to the extent permitted by law. Pursuant to the
Certificate of Incorporation, the Company may not create,
designate, authorize or cause to be issued any class or series
of nonvoting stock to the extent prohibited by Section 1123
of the United States Bankruptcy Code.

Fresh Start
Accounting The Company
will record the reorganization and related transactions using
fresh start accounting as required by SOP 90-7. In
accordance with SOP 90-7, the reorganization value
(approximately $370.0 million) will be allocated to specific
tangible and identifiable assets and liabilities. The

F-31



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

following Selected Consolidated Pro Forma Balance
Sheet Data (Unaudited) reflects the Plan and fresh start
accounting as if the Plan had been consummated on
December 31, 2002. The fresh start adjustments reflected
below are based on preliminary indications of fair values of the
Companys assets and liabilities as of December 31,
2002. Actual amounts are subject to change based on the actual
carrying values of the Companys assets and liabilities and
completion of the fair value determinations as of March 25,
2003 (emergence date).

SELECTED CONSOLIDATED PRO FORMA BALANCE SHEET
DATA

(Unaudited)


|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |         | 
|---------------------------------- | ------------------------------------------- | ----------------- | -------- | --------------- |  | -------------- | -------- | ----------------- | - | - | ------ | ------ | - | - | ------- | ------- | 
|                                   |                                             |                   |          |                 |  |                |          | Pro-Forma        
|                                   |                                             | Pre-Fresh Start   |          |                 |  |                |          | Fresh Start      
|                                   |                                             | Balance Sheet     |          | Adjustments to  |  | Fresh Start    |          | Balance Sheet    
|                                   |                                             | December 31, 2002 |          | record the Plan |  | Adjustments(5) |          | December 31, 2002
|                                   |                                             |                   |          |                 |  |                |          |                  
|Current assets                     |                                             | $                 | 106,016  |                 |  | $              |         |                   |   | $ |       |        |   | $ | 106,016 |        
|Broadband Network, net             |                                             |                   | 228,471  |                 |  |                |          |                   |   |   | (2,119 | )      |   |   | 226,352 |        
|Property, plant and equipment, net |                                             |                   | 175,477  |                 |  |                |          |                   |   |   | (1,627 | )      |   |   | 173,850 |        
|Non-current assets                 |                                             |                   | 10,719   |                 |  |                |          |                   |   |   |        |        |   |   | 10,719  |        
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|                                   | TOTAL                                       |                   | $        | 520,683         |  |                | $        |                  |   |   | $      | (3,746 | ) |   | $       | 516,937 | 
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|Current liabilities                |                                             | $                 | 402,986  |                 |  | $              | (295,698 | )(1)              |   |   |        |        |   | $ | 107,288 |        
|Long term debt, net                |                                             |                   | 27,592   |                 |  |                | 208,959  | (2)               |   |   |        |        |   |   | 236,551 |        
|Other long term liabilities        |                                             |                   | 15,280   |                 |  |                |          |                   |   |   |        |        |   |   | 15,280  |        
|Deferred revenues                  |                                             |                   | 69,918   |                 |  |                |          |                   |   |   |        |        |   |   | 69,918  |        
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|                                   | Total liabilities not subject to compromise |                   |          | 515,776         |  |                |          | (86,739           | ) |   |        |        |   |   |         | 429,037 | 
|Liabilities subject to compromise  |                                             |                   | 727,522  |                 |  |                | (727,522 | )(3)              |   |   |        |        |   |   |        |        
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|                                   | Total liabilities                           |                   |          | 1,243,298       |  |                |          | (814,261          | ) |   |        |        |   |   |         | 429,037 | 
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|Stockholders (deficiency) equity  |                                             |                   | (722,615 | )               |  |                | 814,261  | (4)               |   |   | (3,746 | )      |   |   | 87,900  |        
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        
|                                   | TOTAL                                       |                   | $        | 520,683         |  |                | $        |                  |   |   | $      | (3,746 | ) |   | $       | 516,937 | 
|                                   |                                             |                   |          |                 |  |                |          |                   |   |   |        |        |   |   |         |        

Adjustments:



|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | To record the extinguishment of the
    Companys broadband network vendor financing agreements and
    related balances for those creditors who voted to accept the
    Plan. Such amount is comprised as follows:

|                         |       |                   |         |         | 
|------------------------ | ----- | ----------------- | ------- | ------- | 
|                         |       | Amounts as of    
|                         |       | December 31, 2002
|                         |       |                  
|Outstanding principal    |       | $                 | 258,832 |        
|Accrued interest         |       |                   | 25,137  |        
|Accounts payable  trade |       |                   | 11,729  |        
|                         |       |                   |         |        
|                         | Total |                   | $       | 295,698 | 
|                         |       |                   |         |        

F-32



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|(2) | To record the issuance of the new debt
    instruments (described above) pursuant to the Plan. Such amount
    is comprised as follows:

|                                             |  |           |         |              |  |     |        |  |  |   |         | 
|-------------------------------------------- |  | --------- | ------- | ------------ |  | --- | ------ |  |  | - | ------- | 
|                                             |  | Principal |         | PIK Interest |  | Net
|                                             |  |           |         |              |  |    
|New Senior Indebtedness                      |  | $         | 143,754 |              |  | $   | 16,030 |  |  | $ | 127,724 | 
|Series A 6% Senior Guaranteed Notes due 2011 |  |           | 67,531  |              |  |     | 7,531  |  |  |   | 60,000  | 
|Series B 6% Senior Guaranteed Notes due 2011 |  |           | 23,900  |              |  |     | 2,665  |  |  |   | 21,235  | 
|                                             |  |           |         |              |  |     |        |  |  |   |         | 
|Total                                        |  | $         | 235,185 |              |  | $   | 26,226 |  |  | $ | 208,959 | 
|                                             |  |           |         |              |  |     |        |  |  |   |         | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | To record the extinguishment of liabilities
    subject to compromise per the Plan, see detail of amounts in
    Note 11.                                                                                                                                                                                                                                                                                                                
|   
|(4) | To record the adjustments to stockholders
    equity upon emergence. Such amount is comprised of the gain on
    early extinguishment of debt of approximately $814 million, the
    adjustment to common stock to reflect the new amount of
    outstanding shares upon emergence and the eliminations of the
    balances in deferred stock-based compensation and accumulated
    other comprehensive income as of December 31, 2002.
|   
|(5) | To record the effect of applying fresh start
    accounting upon emergence based on the approved reorganization
    value pursuant to the Plan. The approved equity value
    approximated $87.9 million.                                                                                                                                                                                                                                

* * * * * *

F-33



---



##### 



EXHIBIT INDEX

|            |      |   |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------- | ---- | - |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |      |   |  |            
|Exhibit No. |      |   |  | Description
|            |      |   |  |            
|            | 3.1  |   |  |            |  | Restated Certificate of Incorporation of the
    Company (filed on March 26, 2003 as
    Exhibit No. 2.1 to the Companys Amendment
    No. 1 to Registration Statement on Form 8-A and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 3.2  |   |  |            |  | Restated Bylaws of the Company (filed on
    March 26, 2003 as Exhibit No. 2.2 to the
    Companys Amendment No. 1 to Registration Statement on
    Form 8-A and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 4.1  |   |  |            |  | Indenture for the Companys 6% Senior
    Guaranteed Convertible Notes due 2011  Series A,
    dated as of March 25, 2003, among the Company, The Bank of
    New York, as trustee and IMPSAT Argentina, as guarantor
    (including form of Note) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 4.2  |   |  |            |  | Indenture for the Companys 6% Senior
    Guaranteed Convertible Notes due 2011  Series B,
    dated as of March 25, 2003, among the Company, The Bank of
    New York, as trustee and IMPSAT Argentina, as guarantor
    (including form of Note) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 4.3  |   |  |            |  | Disclosure Statement Under Chapter 11 of the
    Bankruptcy Code (filed on December 19, 2002 as
    Exhibit No. 99.2 to the Companys Current Report
    on Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 4.4  |   |  |            |  | Plan of Reorganization of the Company Under
    Chapter 11 of the Bankruptcy Code (filed on
    December 19, 2002 as Exhibit No. 99.3 to the
    Companys Current Report on Form 8-K, and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 4.5  |   |  |            |  | Order Confirming the Companys Plan of
    Reorganization Under Chapter 11 of the Bankruptcy Code
    dated December 16, 2002 (filed on December 19, 2002 as
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 4.6  |   |  |            |  | Registration Rights Agreement among the Company,
    IMPSAT Argentina and the securityholders party thereto, dated as
    of March 25, 2003 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 4.7  |   |  |            |  | Specimen Common Stock Certificate (filed on
    March 26, 2003 as Exhibit No. 2.6 to the
    Companys Amendment No. 1 to Registration Statement on
    Form 8-A and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 4.8  |   |  |            |  | Warrant Agreement between the Company and The
    Bank of New York, as warrant agent, dated as of March 25,
    2003 (including form of Warrant) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 9.1  |   |  |            |  | 2003 Stock Incentive Plan (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 10.1 |  |  |            |  | Global Crossing Framework Agreement (filed on
    October 4, 1999 as an exhibit to the Companys
    Registration Statement on Form S-1 (No. 333-88389) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 10.2 |  |  |            |  | Turnkey Backhaul Construction and IRU Agreement
    between IMPSAT Brazil and South American Crossing, Ltd. (Rio de
    Janeiro), dated as of February 17, 2000 (filed on
    April 17, 2000 as an exhibit to the Companys
    Registration Statement on Form S-4 (No. 333-34954) and
    incorporated herein by reference). In accordance with
    Instruction 2 to Item 601 of Regulation S-K, the
    following agreement was not filed as an exhibit because it is
    substantially identical in all material respects to Exhibit
    10.2: Turnkey Backhaul Construction and IRU Agreement between
    IMPSAT Brazil and South American Crossing, Ltd. (São
    Paolo), dated as of February 17, 2000.
|            | 10.3 |  |  |            |  | TAC Turnkey Construction and IRU Agreement among
    IMPSAT Argentina, IMPSAT Chile and South American Crossing Ltd.
    (filed on October 4, 1999 as an exhibit to the
    Companys Registration Statement on Form S-1
    (No. 333-88389) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 10.4 |   |  |            |  | Amended and Restated Financing Agreement among
    IMPSAT Argentina, Nortel Networks Limited, and Deutsche Bank
    Trust Company Americas and the Lenders party thereto, dated as
    of March 25, 2003 (filed herewith). In accordance with
    Instruction 2 to Item 601 of Regulation S-K, the
    following agreements were not filed as exhibits because they are
    substantially identical in all material respects to Exhibit
    10.5: Amended and Restated Financing Agreement between IMPSAT
    Brazil and Nortel Networks Limited, dated as of March 25, 2003.                                                                                                                                



---



##### 



|            |      |  |  |             |  |                                                                                                                                                                                                           
|----------- | ---- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |      |  |  |            
|Exhibit No. |      |  |  | Description
|            |      |  |  |            
|            | 21.1 |  |  |            |  | List of subsidiaries of the registrants
    (incorporated by reference to the Business 
    General section of the Companys 2002 Annual Report
    on Form 10-K and incorporated herein by reference).
|            | 99.1 |  |  |            |  | Certification by the Companys Chief
    Executive Officer pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed herewith).             
|            | 99.2 |  |  |            |  | Certification by the Companys Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed herewith).             



---



|  |                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------
| | Confidential treatment requested as to certain
    portions, which portions were omitted and filed separately with
    the Commission.