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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,
2001

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 333-12977

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.

(Exact name of registrant as specified in its
charter)


|                                                  |  |                             
|------------------------------------------------- |  | ----------------------------
|Delaware                                          |  | 52-1910372                  
|Argentina                                         |  | Not Applicable              
|(state or other jurisdiction of incorporation
	or |  | (IRS employer identification
|organization)                                     |  | number)                     

Alférez Pareja 256 (1107)

Buenos Aires, Argentina


(5411) 5170-0000


(Address, including zip code, and telephone
number, including area code, of registrants 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 registrants
(1) have 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 registrants were required to file such reports), and
(2) have 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

State the aggregate market value of the voting
stock held by non-affiliates of the registrants.

The aggregate market value of voting stock held
by non-affiliates of IMPSAT Fiber Networks, Inc. based on the
closing price at which stock was sold on the Nasdaq National
Market on March 28, 2002, was approximately $7.9 million.
As of March 28, 2002, IMPSAT Fiber Networks, Inc. had
91,428,570 shares of common stock, $0.01 par value, outstanding.



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TABLE OF CONTENTS

|                       |  |                                                                                        |  |   
|---------------------- |  | -------------------------------------------------------------------------------------- |  | --
|CERTAIN CONSIDERATIONS |  | 3                                                                                     
|PART I                 |  | 13                                                                                    
|Item 1.                |  | BUSINESS                                                                               |  | 13
|Item 2.                |  | PROPERTIES                                                                             |  | 21
|Item 3.                |  | LEGAL PROCEEDINGS                                                                      |  | 22
|Item 4.                |  | SUBMISSION OF MATTERS TO A VOTE OF
	SECURITY-HOLDERS                                   |  | 23
|PART II                |  | 24                                                                                    
|Item 5.                |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
	RELATED STOCKHOLDER MATTERS                 |  | 24
|Item 6.                |  | SELECTED FINANCIAL DATA                                                                |  | 24
|Item 7.                |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 28
|Item 7A.               |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
	MARKET RISK                             |  | 47
|Item 8.                |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                            |  | 48
|Item 9.                |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
	ACCOUNTING AND FINANCIAL DISCLOSURE  |  | 48
|PART III               |  | 49                                                                                    
|Item 10.               |  | DIRECTORS AND OFFICERS                                                                 |  | 49
|Item 11.               |  | EXECUTIVE COMPENSATION                                                                 |  | 54
|Item 12.               |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
	AND MANAGEMENT                        |  | 60
|Item 13.               |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                         |  | 62
|Item 14.               |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
	REPORTS ON FORM 8-K                      |  | 64
|POWER OF ATTORNEY      |  | 66                                                                                    



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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 (the Exchange Act). 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.



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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.

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CERTAIN CONSIDERATIONS

In addition to other information in this
Form 10-K, 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
Form 10-K and the risks discussed in IMPSATs other
Securities and Exchange Commission (SEC) filings,
actual results could differ materially from those projected in
any forward-looking statements.

We have defaulted on our indebtedness and
could face liquidation

We are in default under the majority of our
long-term indebtedness. We have failed to make semi-annual
interest payments on



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our $125 million 12-1/8% Senior Guaranteed
	Notes due 2003 (Notes due 2003), which was due on
	January 15, 2002                                                 
|
| |  | our $300 million 13-3/4% senior notes due
	2005 (Notes due 2005), which was due on
	February 15, 2002, and                                                      
|
| |  | our $225 million 12-3/8% senior notes due
	2008 (the Notes due 2008 also, collectively with the
	preceding, senior notes), which was due on
	December 15, 2001

We are also in default under our vendor financing
agreements with Lucent Technologies Inc. and Nortel Networks
Limited for the development of our pan-Latin American broadband
fiber optic network (which we call our Broadband
Network). We have failed to make principal and interest
payments on these Broadband Network vendor financing agreements
(which we call our Broadband Network Vendor Financing
Agreements) in an amount totaling $48.4 million. As
of March 31, 2002, our indebtedness under the senior notes
and the Broadband Network Vendor Financing Agreements had an
aggregate outstanding principal balance of $650.0 million,
and $261.1 million, respectively. The defaults under our
senior notes and Broadband Network Vendor Financing Agreements
give holders of certain of our other indebtedness the right to
declare us in default and seek the immediate payment of such
other indebtedness. As a result of these defaults, in accordance
with U.S. GAAP, we have reclassified an aggregate of
$865.1 million of such long-term indebtedness as short-term
indebtedness.

We are currently negotiating with the holders of
our senior notes and the Broadband Network Vendor Financing
Agreements as to a proposed plan to restructure our balance
sheet. On March 18, 2002, we announced that we had reached
a non-binding agreement in principle with certain of our
creditors on this restructuring plan, which contemplates our
filing a plan of reorganization implementing the terms of a
restructuring of our equity and debt in a case filed under
chapter 11 of the U.S. Bankruptcy Code. For a description
of the proposed terms of the plan of reorganization, see
Managements Discussion And Analysis of Financial
Condition and Results of Operations 
Overview  Financial Restructuring.

Currently, we have not filed a chapter 11 plan of
reorganization under the U.S. Bankruptcy Code. There can be no
assurances that we will be able to complete this filing or, if
we do, that any plan of reorganization will be approved by the
Bankruptcy Court. If we are unable to timely file for protection
under chapter 11 of the Bankruptcy Code or obtain confirmation
of a plan of reorganization, our creditors may seek other
alternatives for our company, including accepting bids for our
company or parts thereof through an auction process or forcing
us into a liquidation proceeding.

We have substantial debt and we may lack
financial resources to meet our obligations or support our
business and operations

At December 31, 2001, we had total
consolidated indebtedness of $990.6 million. Our high level of
indebtedness has important consequences for our business,
operating results and financial condition, including:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | making it difficult for us to obtain future
	financing      
|
| |  | limiting our ability to react to changes in the
	marketplace

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| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | requiring our allocation of a substantial portion
	of our operating cash flows in making principal and interest
	payments
|
| |  | placing us at a competitive disadvantage in the
	future because we are more indebted than a number of our
	competitors   

Our significant indebtedness has a material
adverse effect on our business, results of operations and
financial condition.

As discussed below in  We have
been engaged in negotiations with representatives of the holders
of our senior notes and with vendor financing
creditors..., the proposed restructuring of our financing
obligations and balance sheet, if successfully completed, should
deleverage our operations and reduce long term debt. If we are
unable to restructure our balance sheet, obtain additional
financing and achieve and sustain profitability, we will be
unable to fund our operating requirements and meet our debt
obligations as they come due.

We have been engaged in negotiations with
representatives of holders of our senior notes and with vendor
financing creditors regarding the terms of a reorganization of
our financial obligations

As previously announced, we have been engaged in
negotiations, regarding the terms of a proposed restructuring of
our financial obligations and balance sheet, with certain
holders of our senior notes and the creditors under our
Broadband Network Vendor Financing Agreements. We have retained
an investment bank, Houlihan, Lokey, Howard, & Zukin
Capital, to assist us in connection with these negotiations.
Following the consummation of these negotiations, we anticipate
that we will file a pre-arranged plan of
reorganization under chapter 11 of the United States Bankruptcy
Code. For a description of the proposed terms of the plan of
reorganization, see Managements Discussion And
Analysis of Financial Condition and Results of
Operations  Overview  Financial
Restructuring.

There is no assurance that we will be able to
successfully restructure our balance sheet on terms acceptable
to our creditors, or at all. If we are unable to restructure our
balance sheet, we may be forced into liquidation. See
 We have defaulted on our indebtedness and
could face liquidation. In addition to the success of our
restructuring efforts, 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                                        
|
| |  | our ability to react to developments in the
	industry, including regulatory changes
|
| |  | the status of competing services                                                   
|
| |  | our results of operations                                                          

Even if we successfully restructure our
indebtedness or are able to incur additional indebtedness, we
may be subject to more restrictive financial covenants, which
could adversely affect our ability to fund future operations
following any such restructuring.

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 2000 and 2001, we
derived approximately 46.1% and 40.2% of our consolidated net
revenues from services provided by IMPSAT Argentina,
approximately 21.8% and 20.4% by IMPSAT Colombia and
approximately 11.1% and 14.1% by IMPSAT Brazil. We also have
established operations in Venezuela, Mexico, the United States
and Ecuador, and in 2000 we began operations in Chile and Peru.
Other than the United States and Mexico, 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

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have an adverse effect on many of our customers,
which could in turn adversely affect us. Volatility in regional
currencies and capital markets has also had an adverse 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 of preliminary
estimates, during 2001, Argentinas GDP fell by 4.9%, while
Brazil experienced a 2.6% growth in GDP. Colombias and
Venezuelas GDPs grew by 1.4% and 4.5%, respectively, in
2001. We do not expect fundamental improvements in macroeconomic
conditions in Latin America in the short term.

Argentina faces 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 for each of 2000 and 2001
represented approximately 46.1% and 40.2% of our total 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, and an
estimated 4.9% in 2001.

Beginning in the second half of 2001,
Argentinas recession has worsened significantly,
precipitating a severe political and economic crisis. Since
December 2001, when the Argentine government introduced a
partial freeze on bank deposits, widespread political protests
and social disturbances have continued on a near-daily basis,
and to date the International Monetary Fund and other
multilateral and official sector lenders have indicated an
unwillingness to provide financial aid until a sustainable
economic program has been presented. It is unclear whether
Argentinas current president, Eduardo Duhalde, will be
able to complete his term or, even if he is able to remain in
power, whether he will have the necessary support to implement
the reforms required to restore economic growth and public
confidence. 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 the new government or any particular set of economic
policies, have created an atmosphere of great uncertainty. As a
result, virtually all commercial and financial activities have
been paralyzed, 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 companys 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, who came into
office on New Years Day, 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 been volatile
since. As of April 10, 2002, the floating exchange rate was
2.78 pesosto the U.S. dollar. The devaluation of the
Argentine pesowill generally affect our consolidated
financial statements by generating foreign exchange transaction
gains or losses on peso-denominated monetary assets and
liabilities of IMPSAT Argentina and will generally result in a
decrease, in U.S. dollar terms, in our 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
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to an index called the coeficiente de
estabilización de referencia(CER),
to be published by the Argentine central bank, which is based on
the Argentine consumer price index. Under the
pesification decree, after the foreign
currency denominated contracts are

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converted to pesos(at the one pesoto 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 pesosbefore 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
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 our company governed by Argentine law may have
adverse, unknown and unforeseeable effects on our company.


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
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
that country could possibly have on IMPSAT Argentinas and
our companys overall cash flows, financial condition, and
results of operations.

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

We have significant operations in Brazil.
Revenues from services from our Brazilian operations for 2000
and 2001 represented approximately 11.1% and 14.1%,
respectively, of our total net revenues from services for such
periods. Accordingly, our operations in Brazil subject our
financial condition and results of operations to various
additional economic and political risks.

The Brazilian government frequently intervenes 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. Presidential elections
are currently scheduled to take place in October 2002, and a
change in the executive branch in Brazil that results in a
divergence from the economic and fiscal policies currently being
pursued by the administration of Brazils incumbent
president, Mr. Fernando Henrique Cardoso, 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 the our control, such as:



| |   |                              
| | - | -----------------------------
| |  | monetary and fiscal policies;
|
| |  | currency fluctuations;       
|
| |  | energy shortages;            

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| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | the outcome of Brazils presidential
	election scheduled for October 2002; and
|
| |  | other political, social and economic developments
	in or affecting Brazil.    

Historically, the Brazilian government has
intervened in the economy by devaluing the currency and imposing
exchange, wage and price controls. 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 to December 31, 2000. During
2001, 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. The recent worsening of the
Argentine economic crisis has so far not significantly affected
the Brazilian securities market or economy. However, due to the
size and nature of Brazils trading relationship with
Argentina, the possible expectation of corresponding risks in
Brazil by foreign investors and the developing nature of the
Argentine economic crisis, economic and market conditions for
companies with material Brazilian operations, such as our
company, could nevertheless be adversely affected by recent
events in Argentina.

IMPSAT Brazils results have been affected
by the adverse economic situation in Brazil, including the
devaluation of the Brazilian realagainst the
U.S.  dollar. 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. 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, an energy crisis and
rationing brought about by a continued period of drought that
has affected Brazils hydroelectric generating capacity, a
general aversion to emerging markets by foreign direct and
financial investors and the overall decline in worldwide
economic production. These conditions have, and can be expected
to continue to have, a material adverse effect on IMPSAT
Brazils and our companys 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 during the week of April 8, 2002 to support PdVSA
executives in protesting Mr. Chavezs policies
(particularly his appointment of a new PdVSA board of directors)
and demanding Mr. Chavezs removal from office. The general
strike was supported by the Venezuelan business association,
Fedecamaras. Mr. Chavez was 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 headed by Pedro Carmona, the president of
Fedecamaras, was installed on April 12, 2002. However, the
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. 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. 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, 2001, we generated
approximately 10.3% 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

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CER consumer price index. In Brazil, our customer
contracts cannot not be denominated in 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 net
revenues in 2001, and this can be expected to increase
significantly in future periods in connection with the
progression of our operations in Brazil and the further
development of our Broadband Network. 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, 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 2001. 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 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, 2001,
approximately 32.0% of our gross accounts receivable were past
due more than six months. We recorded a provision for doubtful
accounts of $16.8 million in 2001 compared to
$4.8 million for 2000. At December 31, 2001, our
provision for doubtful accounts covered approximately 90.4% of
our gross trade accounts receivable past due more than six
months. As our business increases with small and medium
customers, we may experience an increase in irrecoverable
accounts receivable. We anticipate that we could also experience
an increase in our uncollectible accounts receivables due to the
ongoing political and financial crisis in Argentina and its
adverse impact on the creditworthiness and solvency of our
Argentine customers and its potential adverse effects on our
customers in neighboring countries. 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 IMPSAT Argentinas
accounts receivable (in U.S. dollar terms) as a result of the
pesification decree, we have 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 is included in IMPSAT
Argentinas (and our companys consolidated) net loss
on foreign exchange for 2001. For each quarter during future
periods, we will record an additional remeasurement charge if
the peso continues to devalue against the U.S. dollar
during the quarter. Anticipated difficulties in collecting
amounts due from our Argentine customers during coming periods
could have a material adverse effect on our business, results of
operations and financial condition.

8



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##### 



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 annual revenues from
$8.2 million in 1991 to $128.4 million in 1996, and
$326.5 million in 2001. We recorded net losses of
$34.0 million in 1998, $131.5 million in 1999,
$154.1 million in 2000, and $715.3 million in 2001.
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 does not produce results capable of funding
our operations or repaying our indebtedness as it falls due. We
expect our significant net losses to continue. The capital
markets are currently not available to us. We need to raise
additional financing and/or to restructure our balance sheet. It
is unlikely that we will be able to obtain additional financing
without effecting such restructuring, and there is no assurance
that we will be able to successfully restructure our balance
sheet. If we are unable to restructure our balance sheet, obtain
additional financing and achieve and sustain profitability, we
will be unable to fund our operating requirements and meet our
debt obligations as they come due. In light of our continuing
losses, working capital deficiency, and our defaults on
indebtedness, Note 1 to our consolidated financial
statements filed as part of this report includes language
indicating that there is a substantial doubt about our ability
to continue as a going concern.

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 to:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | successfully exploit our Broadband Network and
	implement related strategies                                       
|
| |  | design and effectively market integrated private
	telecommunications services                                      
|
| |  | secure financing                                                                                                   
|
| |  | install telecommunications infrastructure                                                                          
|
| |  | obtain any required government authorizations or
	licenses as the telecommunications sector continues to deregulate
|
| |  | 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 assure you 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

Operation of the Broadband Network, which
includes the expansion into new services for our business
customers, will involve:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | regulatory risks, including obtaining the
	appropriate licenses                                                                                                       
|
| |  | interconnection difficulties                                                                                                                                          
|
| |  | capital expenditures                                                                                                                                                  
|
| |  | competition from large, well-financed
	international telecommunications carriers (such as WorldCom,
	Inc., Telecom Italia, and Spains Telefonica S.A., among
	others)

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

9



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##### 



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 outside its existing footprint
|
| |  | changes in our customers service
	requirements                                                
|
| |  | 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 Argentina, we
do not anticipate any ability to make capital expenditures
during 2002 to expand or enhance the Broadband Network to any
significant extent. 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



| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Broadband Network relies on IRU
	capacity over Global Crossings network and we are entitled
	to significant revenues under our agreements with Global
	Crossing; we may lose our rights to such IRU capacity and
	revenues

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 have 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) capacity 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, the United States and the world.

In January 2002, Global Crossing filed for
protection under chapter 11 of the U.S. Bankruptcy Code. At
March 31, 2002, Global Crossing was in default for a total
of $5.6 million that we invoiced to them during the second
half of 2001 and the first quarter of 2002. In the second week
of April 2002, Global Crossing paid us $2.6 million in
respect of these defaulted amounts. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Overview  Effects of Global
Crossing Insolvency. Although none of the Global Crossing
subsidiaries that have amounts outstanding to us are currently
included in Global Crossings chapter 11 filing, the
company believes that these payment defaults are related to the
significant cash shortfalls that Global Crossing is currently
experiencing. In April 2002, we submitted invoices for a total
of $3.0 million for services to be rendered under our
agreements with Global Crossing for the second quarter of 2002.

The difficulties being experienced by Global
Crossing, including Global Crossings chapter 11
proceeding, could have an adverse effect on our financial
condition and operations. If Global Crossings bankruptcy
proceedings were to expand to include any of the subsidiaries
that are parties to our agreements, we likely would not receive
payment on outstanding amounts due to us for previously rendered
services and sales of equipment, except to the extent of our
claims as unsecured creditors. At minimum, such an action could
cause additional delays in our receipt of amounts due to us. It
is also possible that Global Crossing could seek, in the
applicable bankruptcy proceedings, to reject some or all of the
contracts. In the latter case, any damages that we might have in
respect of the rejected contracts would be treated as general
unsecured claims in the applicable bankruptcy proceedings.



| |                                                                    
| | -------------------------------------------------------------------
| | We may need to seek alternative capacity
	for our Broadband Network

To link our Broadband Network to other parts of
Latin America, the United States and the world, we have secured
IRU capacity on Global Crossing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. Global Crossing has
filed for protection under chapter 11 of the U.S. Bankruptcy
Code. If Global Crossing is unable to successfully restructure
its balance sheet, it could be forced to liquidate its assets.
If Global Crossing were to sell or terminate its South American
operations as part of its bankruptcy proceedings, our rights to
continue to utilize the IRUs that we have purchased from Global
Crossing

10



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##### 



Bandwidth, Inc. are unclear. 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, the United States and the world. There can be no
assurance that such substitute capacity would be available to us
on acceptable terms. 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 which 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 we are dependent on third parties for
the development of and access to new technology. In addition, we
generally own the customer premises equipment we use 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 cause 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 technology 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 in our more mature markets, and we expect to
continue to face pricing pressure. We may further experience
declining operating profit margins as the monopoly public
telephony operators, or PTOs, in the countries in which we
operate become more competitive and place greater emphasis on
data telecommunications.

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. and Telefonica de Argentina S.A.,
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 private operators of
satellite data transmission networks and terrestrial
telecommunications links, and face competition from large
international telecommunications carriers, such as AT&T,
WorldCom and Sprint, and from other industry participants. While
international telecommunications carriers

11



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##### 



have focused on long distance telephony services,
they may 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 in
November 2000, these large telecommunications carriers can enter
the Argentine telephony 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. For example, in
October 1999, AT&T formed AT&T Latin America by
acquiring and merging the operations of FirstCom Corp. (which
had operations in Chile, Colombia and Peru), Brazil-based
Netstream, and Keytech LD, a local exchange carrier that is
licensed to offer wireless, high-speed internet and other
telecommunications services in Argentina. AT&T Latin America
has operations in Argentina, Brazil, Chile, Colombia and Peru.


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, newer 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 newer 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. If these
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 has had
throughout 2001, and continues to have during 2002, 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 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 in force 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.

12



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##### 



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. Our services
include dedicated Internet services to Internet service and
content providers and data center services to other carriers.

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. During 2001, we developed a terrestrial long-haul
link to integrate our Brazilian and Argentine Broadband Network
segments into a single seamless network. Our Broadband Network
allows us to enhance the services we presently provide and
significantly increase our transmission speed and capacity. At
December 31, 2001, 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 Colombia in 1991 and the establishment
of IMPSAT Venezuela in 1992. New operating subsidiaries were
created in Ecuador (IMPSAT Ecuador) and Mexico (IMPSAT Mexico)
in 1994, in the United States (IMPSAT USA) in 1995 and in Brazil
(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 and
Peru.

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,

13



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 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 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. With the
completion of our Broadband Network in Argentina and Brazil, we
can link 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 will provide
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.

14



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##### 



Telephony Services.Since the completion of our Broadband
Network in Argentina and the effectiveness of our license in
Argentina to offer telephony services, we are able to 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, with the most
significant opportunity being the deregulation of the Brazilian
telephony market in January 2002. We expect to receive a license
to provide switched voice services to or from Brazil during
2002. As components of our telephony services, we currently
offer local, national and international 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, 1999, 2000 and 2001:

|                               |           |                                  |        |         |         |             |        |         |         |             |      |       |      |   |        |         |         |  |         |       |      |  
|------------------------------ | --------- | -------------------------------- | ------ | ------- | ------- | ----------- | ------ | ------- | ------- | ----------- | ---- | ----- | ---- | - | ------ | ------- | ------- |  | ------- | ----- | ---- | -
|                               |           |                                 
|                               |           | December 31,                    
|                               |           |                                 
|                               |           | 1999                             |        | 2000    |         | % change(1) |        | 2001    |         | % change(1)
|                               |           |                                  |        |         |         |             |        |         |         |            
|                               |           |                                 
|                               |           | (dollar amounts in thousands)   
|Data and value added services: |           |                                  |        |         |         |             |        |         |         |             |      |       |      |   |        |         |         |  |         |      
|                               | Broadband |                                  | $      | 33,721  |         |             | $      | 51,260  |         |             |      | 52.0  | %    |   | $      | 85,579  |         |  |         | 67.0  | %   
|                               | Satellite |                                  |        | 160,059 |         |             |        | 159,265 |         |             |      | (0.5  | )    |   |        | 137,053 |         |  |         | (13.9 | )   
|                               | Other(2)  |                                  |        | 1,330   |         |             |        | 3,743   |         |             |      | 181.4 |      |   |        | 17,184  |         |  |         | 359.1 |     
|                               |           |                                  |        |         |         |             |        |         |         |             |      |       |      |   |        |         |         |  |         |      
|                               |           | Total                            |        |         | 195,110 |             |        |         | 214,268 |             |      |       | 9.8  |   |        |         | 239,816 |  |         |       | 11.9 |  
|Telephony                      |           |                                  |        |         |         |             | 235    |         |         |             |      |       |      |   | 11,762 |         |         |  | 4,905.1 |      
|Internet                       |           |                                  | 26,044 |         |         |             | 35,996 |         |         |             | 38.2 |       |      |   | 45,403 |         |         |  | 26.1    |      
|Services to carriers           |           |                                  |        |         |         |             | 885    |         |         |             |      |       |      |   | 7,360  |         |         |  | 731.6   |      
|                               |           |                                  |        |         |         |             |        |         |         |             |      |       |      |   |        |         |         |  |         |      
|                               |           | Total net revenues from services |        | $       | 221,154 |             |        | $       | 251,384 |             |      |       | 13.7 | % |        | $       | 304,341 |  |         |       | 21.1 | %
|                               |           |                                  |        |         |         |             |        |         |         |             |      |       |      |   |        |         |         |  |         |      



---



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|(1) | Increase compared to previous year.                                                                         
|   
|(2) | Other includes revenues from our data
	center services and our information technology solutions
	services.

The Broadband Network

We believe that continued deregulation in Latin
America will fuel demand for additional broadband capacity. To
take advantage of this demand, in the fourth quarter of 2000 we
commenced commercial operations of our Broadband Network, which
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                                                           

15



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##### 





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 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

During 2001, we completed a terrestrial long-haul
link of the Broadband Network between the cities of Curitiba and
Porto Alegre in Brazil and the city of Parana in Argentina. The
new link connects with the Broadband Network that was deployed
in Argentina, Brazil and Chile and results in the creation of 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. The Brazilian
portion of this new link was completed pursuant to 25-year IRU
capacity swap agreements with Geodex Communications do Brasil
Ltda. (formerly Convexx Communications do Brasil Ltda.),
pursuant to which we provide optical fiber cable, fiber capacity
and related services over 2,600 route kilometers on our
Broadband Network in Argentina and Brazil and, in exchange,
receive from Geodex twelve pairs of fiber capacity and related
services over 1,600 route kilometers linking Curitiba and
Uruguaiana, in Brazil. Currently, both our and Geodexs
portions of this new link are composed of dark fiber
and are not operational. This transaction was accounted for as a
non-monetary transaction under U.S. GAAP. Accordingly, our
consolidated financial statements do not reflect any revenue or
any gain or loss in connection with the transaction. For a
further explanation of the accounting treatment of this
transaction, please see Note 2 to our consolidated financial
statements, Summary of Significant Accounting
Policies  Non-Monetary Transactions.

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 2,877 corporate
customers in nine countries at December 31, 2001. 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 growth has been significant
in Brazil, where we commenced operations in 1998. Our customer
base in that country has grown from 48 as of the end of 1998 to
387 as of the end of 2001. 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, Royal Dutch Shell, Perez Companc, Siemens
and Reuters. Our ten largest customers accounted for
approximately 22.9% of our revenues in 2001 and approximately
22.0% in 2000.

Our ten largest customers as of December 31,
2001 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                           
|
| |  | Gobierno de la Provincia de Buenos Aires, the
	local government of the province of Buenos Aires                                                                                                                              
|
| |  | Confederaçaõ Nacional da Industria,
	Brazils national association of private industrial
	companies                                                                                                                          
|
| |  | subsidiaries of America Online, Inc., a Dulles,
	Virginia, USA-based provider of interactive services, Web
	brands, Internet technologies and e-commerce services, that is a
	wholly-owned subsidiary of AOL Time Warner Inc.
|
| |  | Perez Companc S.A., an Argentine energy
	conglomerate                                                                                                                                                                        
|
| |  | Corporacion Nacional de Ahorro y Vivienda, or
	Conavi, one of Colombias largest financial institutions                                                                                                                      
|
| |  | Banco de la Nación Argentina, a state-owned
	bank and the largest bank in Argentina, with over 500 branches
	throughout Argentina                                                                                            

16



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##### 





| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Empresa de Telecomunicaciones de Bogotá
	S.A., E.S.P., one of Colombias largest telecommunications
	companies                                                  
|
| |  | Banco Mercantil SAICA, one of the largest
	financial institutions in Venezuela                                                                                  
|
| |  | Repsol YPF S.A., a multinational integrated oil
	company that is one of the largest companies in Argentina and
	has operations in other Latin American countries

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   |       |                                              |     |       |  |  |      |       |   |  |       |      
|          |       |                                              |     |       |  |  |      |       |   |  |       |      
|          |       |                                              |     |       |  |  |      |       |   | 
|          |       | 1999                                         |     |       |  |  |      |       |   | 
|          |       |                                              |     |       |  |  |      |       |   | 
|          |       |                                              |     |       |  |  |      |      
|          |       |                                              |     | 2000  |  |  |      |      
|          |       |                                              |     |       |  |  |      |      
|          |       |                                             
|          |       | As of December 31,                          
|          |       |                                             
|          |       |                                              |     |      
|          |       |                                              |     | 2001 
|          |       |                                              |     |      
|          |       | )                                           
|          |       | (number of customers and percentage of total
|Argentina |       |                                              | 687 |       |  |  | 39.4 | %     |   |  | 1,146 |       |  |  | 43.1 | %     |   |  | 1,100 |       |  |  | 38.2 | %    
|Colombia  |       |                                              | 560 |       |  |  | 32.1 |       |   |  | 672   |       |  |  | 25.3 |       |   |  | 699   |       |  |  | 24.3 |      
|Brazil    |       |                                              | 90  |       |  |  | 5.2  |       |   |  | 238   |       |  |  | 9.0  |       |   |  | 387   |       |  |  | 13.5 |      
|Venezuela |       |                                              | 191 |       |  |  | 10.9 |       |   |  | 251   |       |  |  | 9.5  |       |   |  | 245   |       |  |  | 8.5  |      
|Ecuador   |       |                                              | 149 |       |  |  | 8.5  |       |   |  | 210   |       |  |  | 7.9  |       |   |  | 236   |       |  |  | 8.2  |      
|Mexico    |       |                                              | 31  |       |  |  | 1.8  |       |   |  | 51    |       |  |  | 1.9  |       |   |  | 47    |       |  |  | 1.6  |      
|USA       |       |                                              | 37  |       |  |  | 2.1  |       |   |  | 64    |       |  |  | 2.4  |       |   |  | 73    |       |  |  | 2.5  |      
|Peru      |       |                                              |    |       |  |  |     |       |   |  | 15    |       |  |  | 0.6  |       |   |  | 33    |       |  |  | 1.2  |      
|Chile     |       |                                              |    |       |  |  |     |       |   |  | 9     |       |  |  | 0.3  |       |   |  | 57    |       |  |  | 2.0  |      
|          |       |                                              |     |       |  |  |      |       |   |  |       |       |  |  |      |       |   |  |       |       |  |  |      |      
|          | Total |                                              |     | 1,745 |  |  |      | 100.0 | % |  |       | 2,656 |  |  |      | 100.0 | % |  |       | 2,877 |  |  |      | 100.0 | %
|          |       |                                              |     |       |  |  |      |       |   |  |       |       |  |  |      |       |   |  |       |       |  |  |      |      

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
recent 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, we expect that our new peso-denominated
contracts in Argentina will typically be 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. Significant customer losses during 2001 included the
following:



| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | 360networks, which accounted for
	$2.9 million of our 2001 revenues (See Legal
	Proceedings)                         
|
| |  | CTC Mundo, a customer of IMPSAT USA that
	generated $2.0 million in revenues during 2001                               
|
| |  | Fibertel, an ISP customer of IMPSAT Argentina
	that accounted for $0.9 million in 2001 revenues                        
|
| |  | Banco de la Republica, the central bank of
	Colombia, which generated $0.9 million in revenues during
	2001            
|
| |  | Intermedia Communications Corporation, an ISP
	that provided $0.6 million in 2001 revenues as a customer
	of IMPSAT USA
|
| |  | Onda Provedor Ltda., which generated
	$0.5 million in revenues during 2001 as an ISP customer of
	IMPSAT Brazil.       

17



---



##### 



Except in Brazil (and in certain instances since
the recent 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 such
currencies relative to the U.S. dollar could have a material
adverse effect on the ability of our customers to pay us for our
services. A currency devaluation 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.

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. In the future, however, they
may be expected to focus on the private telecommunications
network systems segment of the telecommunications market. 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.

18



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##### 



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 the 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 a
number of new market entrants, including:



| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Diveo Broadband Networks, which operates a
	pan-regional fiber ring network connecting its seven Internet
	data centers located in Argentina, Brazil, Colombia, Mexico and
	Florida, United States and provides broadband communications
	services over fixed wireless and fiber optic broadband networks                                                                                  
|
| |  | 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
|
| |  | OptiGlobe Communications, Inc., a data center
	service provider headquartered in Maryland in the United States
	that operates data centers in Sao Paulo, Rio de Janeiro, Buenos
	Aires, and Mexico City                                                                                                                                                                                    

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. For example, AT&T Latin America Corp.,
which is controlled by AT&T Corporation, was formed in
October 1999. AT&T Latin America has operations in
Argentina, Brazil, Chile, Colombia and Peru. Increasing
competition may significantly affect our pricing policies. We
cannot assure you that competition from this and other alliances
will not adversely affect our financial condition or results of
operations.

Furthermore, we cannot assure you that competing
technologies will not become available that will negatively
affect our position, although we believe that we have the
flexibility to act quickly to take advantage of any significant
technological development. For example, newer technologies such
as DSL can significantly enhance the speed of traditional copper
lines. These technologies enable our PTO competitors to offer
customers new 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

19



---



##### 



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 expect to
receive authorization to provide these services in Brazil in
2002. 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 initial 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 scheduled the
demonopolization of their dominant telecommunications providers.
For example, Argentina and Venezuela completed the
demonopolization of public telephone services by their PTOs
during 2000. We believe that this trend toward deregulation,
while likely to increase competition, will also 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.

Employees

As of December 31, 2001, we employed a total
of 1,370 persons, of whom 446 were employed by IMPSAT Argentina,
316 were employed by IMPSAT Brazil, and 226 were employed by
IMPSAT Colombia. 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.

20



---



##### 



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 Ocean, at Los Toninas, Argentina, and from
Buenos Aires, Argentina 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
indefeasible rights of use (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. Global Crossings South American network
is an 18,000 km undersea and terrestrial fiber optic network
that encircles that continent. 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, which
commenced service in the last quarter of 2000, connects
St. Croix, Puerto Rico, Curacao, Venezuela and Brazil. Pan
American began operations in mid-February 1999 and 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 have
established and 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.

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, which commenced operations in January 1999,
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.

21



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##### 



Satellite Capacity.Our satellite transmissions use both
C-band (4-7 GHz) and Ku-band (10-18 GHz) frequencies.
As of December 31, 2001, we had a total available leased
capacity of 967 MHz. Our lease payments for satellite
capacity totaled approximately $39.1 million in 2001. 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

We are involved in or subject to various
litigation and legal proceedings incidental to the normal
conduct of our business, including with respect to regulatory
matters. Except as described below, we were not during 2001, and
currently are not, involved in any material legal proceedings.

IPO Allocations Class Action.On November 1, 2001, a lawsuit
was filed in the United States District Court for the Southern
District of New York against our company, certain of our
companys current officers and directors, and the
underwriters to the our initial public offering (IPO). This
lawsuit alleges 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. The plaintiff has proposed a putative
class from the date of the IPO to December 6, 2000. In
August 2001, the court ordered that this suit be coordinated for
all pre-trial purposes in a proceeding styled In re Initial
Public Offering Securities Litigation, 21 MC 92,
an intra-district proceeding involving approximately 900
lawsuits concerning the initial public offerings of
approximately 310 companies and 48 underwriters. The complaint
does not seek a specified amount of damages. It is our present
understanding that the plaintiffs intend to file an amended
complaint shortly. We believe that we have meritorious defenses
to the allegations in the complaints and intend to defend the
litigation vigorously. However, because this action is in its
early stages, our company cannot make any prediction as to its
outcome. We have certain insurance policies with respect to such
claims and have filed a claim with our carriers regarding this
matter.

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 available
segments of the IRU dark fiber and capacity services 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 have 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 is in
default on payments for collocation services totaling
$0.8 million.

We have 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.
360americas and the other subsidiaries with which we had
contracted were not included in the series of bankruptcy and
insolvency filings made in the United States and Canada by their
parent, 360networks, Inc. and certain of its other affiliates.
360networks, Inc. has announced that it intends to seek a buyer
of its South American undersea fiber optic cable system. We
intend to aggressively pursue our remedies

22



---



##### 



against 360networks, including our claim for
damages due under the terminated contracts, but are unable to
predict whether we will prevail in any such proceedings and, if
so, whether 360networks would be able to pay any arbitration or
litigation award that might be entered in our favor.


During the pendency of the arbitration and
litigation proceedings, we will continue to include as Deferred
Revenues on our balance sheet the amount received from
360networks as downpayments under the terminated contracts,
after deducting amounts that were due and payable at the time of
the termination of the 360networks contracts. As of
December 31, 2001, the balance of such Deferred Revenues
was $22.6 million.

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

There were no matters submitted during the fourth
quarter of 2001 to a vote of security holders, through the
solicitation of proxies or otherwise.

23



---



##### 



PART II

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

Our common stock has been traded on the Nasdaq
National Market under the symbol IMPT since the
effective date of our initial public offering on
February 1, 2000. Prior to that time, including during
periods covered by this Report, there was no public market for
our common stock. On March 28, 2002 the last reported price
of our common stock on the Nasdaq National Market was $0.05 per
share. Based upon information supplied to us by the registrar
and transfer agent for our common stock, the number of common
stockholders of record on March 28, 2002 was 61, not
including beneficial owners in nominee or street name. We
believe that a significant number of shares of our common stock
are held in nominee name for beneficial owners.

As we have previously announced (see
Reports on Form 8-K under Item 14(b) of this
Report), we have received a notice from the Nasdaq National
Market warning that our stock may be delisted because our common
stock has failed to maintain the minimum bid price and the
market value of public float required by Nasdaqs
Marketplace Rules. In accordance with Nasdaqs Marketplace
Rules, we have 90 calendar days, or until May 15, 2002, to
regain compliance. If we are unable to demonstrate compliance on
or before May 15, 2002, Nasdaq staff will provide us with
written notification that our common stock will be delisted. In
such an event, we would seek to have our common stock traded on
the Nasdaq Over-The-Counter Bulletin Board.

The following table shows the high and low sales
price of our common stock for each fiscal quarter during the
year ended December 31, 2001, as reported on the Nasdaq
National Market System.

|        |  |      |        |     |  |   |        | 
|------- |  | ---- | ------ | --- |  | - | ------ | 
|        |  |     
|        |  | 2001
|        |  |     
|Quarter |  | High |        | Low
|        |  |      |        |    
|First   |  | $    | 4.4375 |     |  | $ | 3.6875 | 
|Second  |  |      | 2.19   |     |  |   | 2.00   | 
|Third   |  |      | .32    |     |  |   | .18    | 
|Fourth  |  |      | .22    |     |  |   | .20    | 

Our board of directors has not declared any
dividends on our common stock since our inception.

Item 6.     Selected
Financial Data

The following selected financial data are for our
company on a consolidated basis and separately for IMPSAT
Argentina, in each case in accordance with U.S. GAAP. The
following financial data have been derived from our
companys audited consolidated financial statements and
IMPSAT Argentinas audited financial statements for the
respective years. The selected financial data set forth below
should be read in

24



---



##### 



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.


OUR COMPANY

|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |          |        |         | 
|------------------------------------------------------------------ | -------------------------------------------------------------------- | ---------------------------------------- | -------------------------------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | -------- | -------- | ------ | ------- | -------- | -------- | ------ | ------- | 
|                                                                   |                                                                      |                                         
|                                                                   |                                                                      | Year Ended December 31,                 
|                                                                   |                                                                      |                                         
|                                                                   |                                                                      | 1997                                     |                                  | 1998    |        | 1999    |         | 2000    |        | 2001   
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |        
|                                                                   |                                                                      |                                         
|                                                                   |                                                                      | (in thousands, except per share amounts)
|Statement of operations data:                                      |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Net revenues from services:                                        |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|                                                                   | Data and value added services                                        |                                          | $                                | 149,338 |        |         | $       | 183,213 |        |         | $        | 195,110 |        |         | $        | 214,268  |        |         | $        | 239,816  |       
|                                                                   | Internet                                                             |                                          |                                  | 7,971   |        |         |         | 20,207  |        |         |          | 26,044  |        |         |          | 35,996   |        |         |          | 45,403   |       
|                                                                   | Telephony                                                            |                                          |                                  |        |        |         |         |        |        |         |          |        |        |         |          | 235      |        |         |          | 11,762   |       
|                                                                   | Services to carriers                                                 |                                          |                                  |        |        |         |         |        |        |         |          |        |        |         |          | 885      |        |         |          | 7,360    |       
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|                                                                   |                                                                      |                                          | Total net revenues from services |         |        | 157,309 |         |         |        | 203,420 |          |         |        | 221,154 |          |          |        | 251,384 |          |          |        | 304,341 | 
|Sales of equipment                                                 |                                                                      |                                          | 3,756                            |         |        |         | 4,669   |         |        |         | 7,297    |         |        |         | 13,083   |          |        |         | 14,952   |         
|Broadband Network development revenues                             |                                                                      |                                          |                                 |         |        |         |        |         |        |         |         |         |        |         | 57,676   |          |        |         | 7,197    |         
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|                                                                   |                                                                      |                                          | Total net revenues               |         |        | 161,065 |         |         |        | 208,089 |          |         |        | 228,451 |          |          |        | 322,143 |          |          |        | 326,490 | 
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Costs and expenses:                                                |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|                                                                   | Direct costs:                                                        |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |          |       
|                                                                   |                                                                      | Contracted services                      |                                  |         | 16,774 |         |         |         | 17,897 |         |          |         | 21,853 |         |          |          | 29,573 |         |          |          | 40,629 |        
|                                                                   |                                                                      | Other direct costs                       |                                  |         | 12,541 |         |         |         | 16,096 |         |          |         | 31,055 |         |          |          | 21,349 |         |          |          | 35,416 |        
|                                                                   |                                                                      | Leased capacity                          |                                  |         | 19,230 |         |         |         | 31,228 |         |          |         | 49,666 |         |          |          | 74,188 |         |          |          | 87,057 |        
|                                                                   |                                                                      | Broadband network cost                   |                                  |         |       |         |         |         |       |         |          |         |       |         |          |          | 34,729 |         |          |          | 3,335  |        
|                                                                   |                                                                      | Cost of equipment sold                   |                                  |         | 3,137  |         |         |         | 3,665  |         |          |         | 5,187  |         |          |          | 12,308 |         |          |          | 10,472 |        
|                                                                   | Salaries and wages                                                   |                                          |                                  | 29,109  |        |         |         | 38,198  |        |         |          | 46,174  |        |         |          | 68,922   |        |         |          | 82,095   |       
|                                                                   | Selling, general and administrative                                  |                                          |                                  | 28,237  |        |         |         | 37,189  |        |         |          | 40,631  |        |         |          | 58,471   |        |         |          | 52,964   |       
|                                                                   | Asset impairment charge                                              |                                          |                                  |        |        |         |         |        |        |         |          |        |        |         |          |         |        |         |          | 381,888  |       
|                                                                   | Depreciation and amortization                                        |                                          |                                  | 28,673  |        |         |         | 36,946  |        |         |          | 130,071 |        |         |          | 84,488   |        |         |          | 123,678  |       
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Operating income (loss)                                            |                                                                      |                                          | 23,364                           |         |        |         | 26,870  |         |        |         | (96,186  | )       |        |         | (61,885  | )        |        |         | (491,044 | )       
|Other income (expenses):                                           |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|                                                                   | Interest income and investment gains                                 |                                          |                                  | 1,336   |        |         |         | 4,686   |        |         |          | 7,418   |        |         |          | 27,394   |        |         |          | 10,687   |       
|                                                                   | Interest expense                                                     |                                          |                                  | (25,608 | )      |         |         | (49,384 | )      |         |          | (62,979 | )      |         |          | (112,894 | )      |         |          | (143,521 | )     
|                                                                   | Net gain (loss) on foreign exchange                                  |                                          |                                  | (276    | )      |         |         | 675     |        |         |          | (8,042  | )      |         |          | (10,614  | )      |         |          | (41,182  | )     
|                                                                   | Recognition of other-than-temporary decline in
	value of investments |                                          |                                  |        |        |         |         |        |        |         |          |        |        |         |          |         |        |         |          | (20,650  | )     
|                                                                   | Other (loss) income, net                                             |                                          |                                  | (151    | )      |         |         | 760     |        |         |          | 15,305  |        |         |          | 704      |        |         |          | (2,125   | )     
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Loss before income taxes, cumulative effect and
	minority interest |                                                                      |                                          | (1,335                           | )       |        |         | (16,393 | )       |        |         | (144,484 | )       |        |         | (157,295 | )        |        |         | (687,835 | )       
|(Provision for) benefit from income taxes                          |                                                                      |                                          | (5,263                           | )       |        |         | (3,805  | )       |        |         | 20,733   |         |        |         | 4,547    |          |        |         | (27,420  | )       
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Loss before cumulative effect and minority
	interest               |                                                                      |                                          | (6,598                           | )       |        |         | (20,198 | )       |        |         | (123,751 | )       |        |         | (152,748 | )        |        |         | (715,255 | )       
|Cumulative effect of a change in accounting
	principle, net of tax |                                                                      |                                          |                                 |         |        |         | (1,269  | )       |        |         |         |         |        |         |         |          |        |         |         |         
|(Income) loss attributable to minority interest                    |                                                                      |                                          | (993                             | )       |        |         | (2,502  | )       |        |         | 6,225    |         |        |         |         |          |        |         |         |         
|Dividends on redeemable preferred stock                            |                                                                      |                                          |                                 |         |        |         | (10,018 | )       |        |         | (14,017  | )       |        |         | (1,393   | )        |        |         |         |         
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Net loss attributable to common stockholders                       |                                                                      | $                                        | (7,591                           | )       |        | $       | (33,987 | )       |        | $       | (131,543 | )       |        | $       | (154,141 | )        |        | $       | (715,255 | )       
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Net loss per common share: Basic and diluted                       |                                                                      | $                                        | (0.14                            | )       |        | $       | (0.71   | )       |        | $       | (2.42    | )       |        | $       | (1.74    | )        |        | $       | (7.82    | )       
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         
|Weighted average number of common shares: Basic
	and diluted       |                                                                      |                                          | 53,594                           |         |        |         | 47,983  |         |        |         | 54,447   |         |        |         | 88,534   |          |        |         | 91,429   |         
|                                                                   |                                                                      |                                          |                                  |         |        |         |         |         |        |         |          |         |        |         |          |          |        |         |          |         

25



---



##### 



|                                                             |  |                    |         |      |  |      |          |      |  |      |         |  |  |   |           |  |  |   |           |  
|------------------------------------------------------------ |  | ------------------ | ------- | ---- |  | ---- | -------- | ---- |  | ---- | ------- |  |  | - | --------- |  |  | - | --------- | -
|                                                             |  |                   
|                                                             |  | As of December 31,
|                                                             |  |                   
|                                                             |  | 1997               |         | 1998 |  | 1999 |          | 2000 |  | 2001
|                                                             |  |                    |         |      |  |      |          |      |  |     
|                                                             |  |                   
|                                                             |  | (in thousands)    
|Balance Sheet Data:                                          |  |                    |         |      |  |      |          |      |  |      |         |  |  |   |           |  |  |   |           |  
|Cash and cash equivalents                                    |  | $                  | 10,439  |      |  | $    | 90,021   |      |  | $    | 97,507  |  |  | $ | 67,737    |  |  | $ | 35,606    |  
|Trading investments                                          |  |                    |        |      |  |      |         |      |  |      |        |  |  |   | 240,892   |  |  |   | 29,319    |  
|Total current assets                                         |  |                    | 65,015  |      |  |      | 159,099  |      |  |      | 179,026 |  |  |   | 458,873   |  |  |   | 165,768   |  
|Property, plant and equipment, net                           |  |                    | 255,422 |      |  |      | 330,726  |      |  |      | 310,330 |  |  |   | 381,674   |  |  |   | 214,459   |  
|Broadband Network, net                                       |  |                    |        |      |  |      |         |      |  |      | 71,868  |  |  |   | 364,221   |  |  |   | 310,598   |  
|Investments                                                  |  |                    | 4,178   |      |  |      | 10,708   |      |  |      | 235,925 |  |  |   | 15,091    |  |  |   | 3,307     |  
|Total assets                                                 |  |                    | 339,916 |      |  |      | 527,218  |      |  |      | 828,332 |  |  |   | 1,374,750 |  |  |   | 718,574   |  
|Total current liabilities                                    |  |                    | 103,438 |      |  |      | 97,910   |      |  |      | 196,931 |  |  |   | 220,305   |  |  |   | 1,133,635 |  
|Total short-term debt and current portion of
	long-term debt |  |                    | 60,375  |      |  |      | 40,400   |      |  |      | 38,677  |  |  |   | 52,980    |  |  |   | 967,399   |  
|Total long-term debt, net                                    |  |                    | 159,677 |      |  |      | 379,292  |      |  |      | 445,634 |  |  |   | 915,263   |  |  |   | 23,189    |  
|Minority interest                                            |  |                    | 10,398  |      |  |      | 13,071   |      |  |      |        |  |  |   |          |  |  |   |          |  
|Redeemable preferred stock                                   |  |                    |        |      |  |      | 135,018  |      |  |      | 149,035 |  |  |   |          |  |  |   |          |  
|Stockholders equity (deficiency)                            |  |                    | 63,389  |      |  |      | (101,519 | )    |  |      | 15,341  |  |  |   | 158,585   |  |  |   | (552,642  | )

|                                 |                      |                         |        |         |   |      |         |          |   |      |         |          |   |   |         |          |   |   |         |         |  
|-------------------------------- | -------------------- | ----------------------- | ------ | ------- | - | ---- | ------- | -------- | - | ---- | ------- | -------- | - | - | ------- | -------- | - | - | ------- | ------- | -
|                                 |                      |                        
|                                 |                      | Year Ended December 31,
|                                 |                      |                        
|                                 |                      | 1997                    |        | 1998    |   | 1999 |         | 2000     |   | 2001
|                                 |                      |                         |        |         |   |      |         |          |   |     
|                                 |                      |                        
|                                 |                      | (in thousands)         
|Other Financial Data:            |                      |                         |        |         |   |      |         |          |   |      |         |          |   |   |         |          |   |   |         |        
|EBITDA(1)                        |                      | $                       | 52,037 |         |   | $    | 63,816  |          |   | $    | 33,885  |          |   | $ | 22,603  |          |   | $ | 14,522  |        
|Cash flow provided by (used in): |                      |                         |        |         |   |      |         |          |   |      |         |          |   |   |         |          |   |   |         |        
|                                 | Operating activities |                         |        | 17,139  |   |      |         | 16,740   |   |      |         | 3,849    |   |   |         | (87      | ) |   |         | (71,077 | )
|                                 | Investing activities |                         |        | (58,080 | ) |      |         | (128,155 | ) |      |         | (133,975 | ) |   |         | (511,481 | ) |   |         | 51,885  |  
|                                 | Financing activities |                         |        | 22,485  |   |      |         | 191,523  |   |      |         | 139,336  |   |   |         | 485,695  |   |   |         | (5,961  | )
|Capital expenditures             |                      |                         | 56,440 |         |   |      | 109,934 |          |   |      | 155,440 |          |   |   | 447,471 |          |   |   | 226,825 |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | EBITDA is defined as operating income
	plus depreciation and amortization expense and the asset
	impairment charge. We are presenting EBITDA because some
	investors use it as a measure of a companys ability to
	service its debt and as a measure of operating performance.
	However, EBITDA is not determined using generally accepted
	accounting principles, and therefore our EBITDA is not
	necessarily comparable to EBITDA of other companies. Investors
	should not view EBITDA as an alternative to cash flows
	calculated under generally accepted accounting principles, which
	we have also presented. EBITDA is not free cash
	flow, because it will be used to pay interest expense and
	remaining amounts after we pay our interest expense will be used
	to pay taxes and make capital expenditures.

26



---



##### 



IMPSAT ARGENTINA

|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |         |        |         | 
|------------------------------------- | -------------------------------------- | ---------------------------------------- | -------------------------------- | ------------ | ------ | ----------------------- | ----- | ----- | --- | ----- | ------ | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | 
|                                      |                                        |                                          |                                  | Month        |        |                         |       |       |     |       |        |        
|                                      |                                        | Years Ended                              |                                  | Ended        |        |                        
|                                      |                                        | November 30,                             |                                  | December 31, |        | Year Ended December 31,
|                                      |                                        |                                          |                                  |              |        |                        
|                                      |                                        | 1997                                     |                                  | 1997         |        | 1998                    |       | 1999  |     | 2000  |        | 2001   
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |        
|                                      |                                        |                                         
|                                      |                                        | (in thousands, except per share amounts)
|Statement of operations data:         |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|Net revenues from services:           |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|                                      | Data and value added services          |                                          | $                                | 85,387       |        |                         | $     | 7,150 |     |       | $      | 92,677  |        |         | $       | 94,454  |        |         | $       | 102,889 |        |         | $        | 91,955  |       
|                                      | Internet                               |                                          |                                  | 4,052        |        |                         |       | 502   |     |       |        | 6,084   |        |         |         | 9,162   |        |         |         | 12,230  |        |         |          | 17,863  |       
|                                      | Telephony                              |                                          |                                  |             |        |                         |       |      |     |       |        |        |        |         |         |        |        |         |         |        |        |         |          | 8,905   |       
|                                      | Services to carriers                   |                                          |                                  |             |        |                         |       |      |     |       |        |         |        |         |         |         |        |         |         | 885     |        |         |          | 3,561   |       
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|                                      |                                        |                                          | Total net revenues from services |              |        | 89,439                  |       |       |     | 7,652 |        |         |        | 98,761  |         |         |        | 103,616 |         |         |        | 116,004 |          |         |        | 122,284 | 
|                                      | Sales of equipment                     |                                          |                                  | 2,202        |        |                         |       | 478   |     |       |        | 1,780   |        |         |         | 6,593   |        |         |         | 12,221  |        |         |          | 7,962   |       
|                                      | Broadband Network development revenues |                                          |                                  |             |        |                         |       |      |     |       |        |        |        |         |         |        |        |         |         | 32,272  |        |         |          |        |       
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|                                      |                                        |                                          | Total net revenues               |              |        | 91,641                  |       |       |     | 8,130 |        |         |        | 100,541 |         |         |        | 110,209 |         |         |        | 160,497 |          |         |        | 130,246 | 
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|Costs and expenses:                   |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|                                      | Direct costs:                          |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |         |       
|                                      |                                        | Contracted services                      |                                  |              | 7,232  |                         |       |       | 706 |       |        |         | 9,253  |         |         |         | 10,857 |         |         |         | 15,131 |         |          |         | 17,498 |        
|                                      |                                        | Other direct costs                       |                                  |              | 10,885 |                         |       |       | 760 |       |        |         | 10,241 |         |         |         | 20,017 |         |         |         | 12,001 |         |          |         | 26,243 |        
|                                      |                                        | Leased capacity                          |                                  |              | 9,614  |                         |       |       | 944 |       |        |         | 11,557 |         |         |         | 20,036 |         |         |         | 30,121 |         |          |         | 36,575 |        
|                                      |                                        | Broadband network cost                   |                                  |              |       |                         |       |       |    |       |        |         |       |         |         |         |       |         |         |         | 18,057 |         |          |         |       |        
|                                      |                                        | Cost of equipment sold                   |                                  |              | 1,674  |                         |       |       | 391 |       |        |         | 1,556  |         |         |         | 4,673  |         |         |         | 10,841 |         |          |         | 6,346  |        
|                                      | Salaries and wages                     |                                          |                                  | 15,823       |        |                         |       | 1,086 |     |       |        | 16,342  |        |         |         | 19,672  |        |         |         | 29,670  |        |         |          | 35,163  |       
|                                      | Selling, general and administrative    |                                          |                                  | 15,720       |        |                         |       | 778   |     |       |        | 16,298  |        |         |         | 16,903  |        |         |         | 26,478  |        |         |          | 18,781  |       
|                                      | Depreciation and amortization          |                                          |                                  | 18,033       |        |                         |       | 1,562 |     |       |        | 20,515  |        |         |         | 59,039  |        |         |         | 38,171  |        |         |          | 55,390  |       
|                                      | Asset impairment charge                |                                          |                                  |             |        |                         |       |      |     |       |        |        |        |         |         |        |        |         |         |        |        |         |          | 245,565 |       
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|Operating income (loss)               |                                        |                                          | 12,660                           |              |        |                         | 1,903 |       |     |       | 14,779 |         |        |         | (40,988 | )       |        |         | (19,973 | )       |        |         | (311,315 | )      
|Other income (expenses):              |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|                                      | Interest income and investment gains   |                                          |                                  |             |        |                         |       |      |     |       |        | 1,749   |        |         |         | 1,199   |        |         |         | 716     |        |         |          | 1,843   |       
|                                      | Interest expense                       |                                          |                                  | (12,617      | )      |                         |       | 976   |     |       |        | (14,571 | )      |         |         | (13,690 | )      |         |         | (12,513 | )      |         |          | (24,775 | )     
|                                      | Net gain (loss) on foreign exchange    |                                          |                                  |              |        |                         |       |       |     |       |        | 21      |        |         |         | (78     | )      |         |         | 190     |        |         |          | (17,948 | )     
|                                      | Other income, net                      |                                          |                                  | 9            |        |                         |       | 4     |     |       |        | 16      |        |         |         | 4820    |        |         |         | 5       |        |         |          | 85      |       
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|Income (loss) before income taxes     |                                        |                                          | 52                               |              |        |                         | 931   |       |     |       | 1,994  |         |        |         | (48,737 | )       |        |         | (31,575 | )       |        |         | (352,110 | )      
|(Provision) benefit from income taxes |                                        |                                          | (3,247                           | )            |        |                         | (311  | )     |     |       |       |         |        |         | 5,982   |         |        |         | 6,986   |         |        |         | (8,667   | )      
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        
|Net income (loss)                     |                                        | $                                        | (3,195                           | )            |        | $                       | 620   |       |     | $     | 1,994  |         |        | $       | (42,755 | )       |        | $       | (24,589 | )       |        | $       | (360,777 | )      
|                                      |                                        |                                          |                                  |              |        |                         |       |       |     |       |        |         |        |         |         |         |        |         |         |         |        |         |          |        

|                                                             |  |                |         |                    |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         |  
|------------------------------------------------------------ |  | -------------- | ------- | ------------------ |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | -
|                                                             |  | As of          |         |                   
|                                                             |  | November 30,   |         | As of December 31,
|                                                             |  |                |         |                   
|                                                             |  | 1997           |         | 1997               |  | 1998 |         | 1999 |  | 2000 |         | 2001
|                                                             |  |                |         |                    |  |      |         |      |  |      |         |     
|                                                             |  |               
|                                                             |  | (in thousands)
|Balance sheet data:                                          |  |                |         |                    |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         |  
|Cash and cash equivalents                                    |  | $              | 5,843   |                    |  | $    | 6,169   |      |  | $    | 13,489  |      |  | $ | 4,199   |  |  | $ | 12,051  |  |  | $ | 3,979   |  
|Total current assets                                         |  |                | 38,147  |                    |  |      | 40,475  |      |  |      | 50,810  |      |  |   | 58,805  |  |  |   | 120,297 |  |  |   | 79,503  |  
|Broadband Network, net                                       |  |                |         |                    |  |      |         |      |  |      |         |      |  |   | 28,944  |  |  |   | 176,961 |  |  |   | 105,995 |  
|Property, plant and equipment, net                           |  |                | 148,786 |                    |  |      | 147,431 |      |  |      | 167,653 |      |  |   | 155,045 |  |  |   | 163,754 |  |  |   | 40,149  |  
|Total assets                                                 |  |                | 196,850 |                    |  |      | 197,820 |      |  |      | 234,844 |      |  |   | 272,978 |  |  | $ | 494,775 |  |  |   | 235,471 |  
|Total current liabilities                                    |  |                | 71,999  |                    |  |      | 72,771  |      |  |      | 168,015 |      |  |   | 175,266 |  |  |   | 113,755 |  |  |   | 239,795 |  
|Total short-term debt and current portion of
	long-term debt |  |                | 40,570  |                    |  |      | 43,644  |      |  |      | 77,694  |      |  |   | 15,118  |  |  |   | 24,245  |  |  |   | 162,390 |  
|Long-term debt, net                                          |  |                | 63,338  |                    |  |      | 63,029  |      |  |      | 1,802   |      |  |   | 46,124  |  |  |   | 127,626 |  |  |   | 3,183   |  
|Advances from parent company                                 |  |                |        |                    |  |      |        |      |  |      |        |      |  |   |        |  |  |   | 7,523   |  |  |   | 2,448   |  
|Stockholders equity (deficiency)                            |  |                | 60,017  |                    |  |      | 60,637  |      |  |      | 63,542  |      |  |   | 76,787  |  |  |   | 220,833 |  |  |   | (60,160 | )

|                                 |                      |                |        |              |   |                         |       |        |   |      |        |         |   |   |        |         |   |   |         |          |   |   |         |         |  
|-------------------------------- | -------------------- | -------------- | ------ | ------------ | - | ----------------------- | ----- | ------ | - | ---- | ------ | ------- | - | - | ------ | ------- | - | - | ------- | -------- | - | - | ------- | ------- | -
|                                 |                      | Years Ended    |        | Year Ended   |   |                        
|                                 |                      | November 30,   |        | December 31, |   | Year Ended December 31,
|                                 |                      |                |        |              |   |                        
|                                 |                      | 1997           |        | 1997         |   | 1998                    |       | 1999   |   | 2000 |        | 2001   
|                                 |                      |                |        |              |   |                         |       |        |   |      |        |        
|                                 |                      |               
|                                 |                      | (in thousands)
|Other Financial Data:            |                      |                |        |              |   |                         |       |        |   |      |        |         |   |   |        |         |   |   |         |          |   |   |         |        
|EBITDA                           |                      | $              | 30,693 |              |   | $                       | 3,465 |        |   | $    | 35,294 |         |   | $ | 18,051 |         |   | $ | 18,198  |          |   | $ | (10,360 | )      
|Cash flow provided by (used in): |                      |                |        |              |   |                         |       |        |   |      |        |         |   |   |        |         |   |   |         |          |   |   |         |        
|                                 | Operating activities |                |        | 9,971        |   |                         |       | (2,232 | ) |      |        | 17,381  |   |   |        | 20,407  |   |   |         | 6,515    |   |   |         | 5,243   |  
|                                 | Investing activities |                |        | (19,596      | ) |                         |       | (207   | ) |      |        | (40,818 | ) |   |        | (48,332 | ) |   |         | (105,400 | ) |   |         | (76,553 | )
|                                 | Financing activities |                |        | 12,913       |   |                         |       | 2,765  |   |      |        | 31,117  |   |   |        | 18,275  |   |   |         | 106,737  |   |   |         | 62,238  |  
|Capital expenditures             |                      |                | 22,657 |              |   |                         |      |        |   |      | 40,353 |         |   |   | 75,374 |         |   |   | 194,897 |          |   |   | 106,384 |        

27



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

Overview

Financial
Restructuring.On March 11, 2002,
management, advised by investment banking firm Houlihan Lokey
Howard & Zukin Capital, concluded negotiations with an ad
hoc committee representing certain holders of debt under its
Broadband Network Vendor Financing Agreements and certain
holders of its Notes Due 2003, Notes due 2005 and Notes due
2008, of a non-binding term sheet agreement in principle
relating to the terms of a proposed restructuring of these
long-term obligations as part of a comprehensive financial
restructuring of our company. The term sheet contemplates the
following principal components of the proposed restructuring
plan:



| |   |                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | all of the shares of our existing common stock,
	options granted under our stock option plans and any other
	equity interests would be cancelled, retired and eliminated with
	no consideration paid therefor, and IMPSAT Fiber Networks, Inc.
	would issue new common stock in accordance with the
	proposed restructuring plan
|
| |  | creditors under the Broadband Network Vendor
	Financing Agreements would receive                                                                                                                                                                                                                                                  



| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $140.7 million senior secured debt issued by
	IMPSAT Argentina and IMPSAT Brazil and guaranteed by IMPSAT
	Fiber Networks                                      
|
| |  | $22.5 million of new senior convertible
	notes guaranteed by IMPSAT Argentina and convertible into 5% of
	the our new common stock on a fully-diluted basis and
|
| |  | warrants to acquire up to 15% of our new common
	stock on a fully-diluted basis.                                                                               



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | holders of the Notes due 2003 would receive
	$67.5 million of new senior convertible notes guaranteed by
	IMPSAT Argentina and convertible into 23% of our new common
	stock on a fully-diluted basis                                                                                                                                                                                                               
|
| |  | holders of the Notes due 2005 and the Notes 2008
	would exchange those securities for 98% of our new common stock,
	subject to certain dilutive events                                                                                                                                                                                                                                                              
|
| |  | our guarantees of certain indebtedness owed by
	our 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 our company
|
| |  | no distribution to existing stockholders of our
	company                                                                                                                                                                                                                                                                                                                                                            
|
| |  | management would receive 2% of our new common
	stock plus stock options representing 8% of our new common stock.                                                                                                                                                                                                                                                                                                    

The term sheet agreement in principle provides
that completion of the proposed restructuring plan would be
subject to certain conditions, including its acceptance by
affected classes of our securities holders in accordance with
the U.S. Bankruptcy Code. Further details regarding the term
sheet agreement in principle are disclosed in the section
captioned Financial Restructuring under note 1
to our consolidated financial statements.

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 recent 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, we expect that 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 recent
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

28



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##### 



 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. In
addition, as our business in a particular country matures, our
rate of growth in that country tends to slow. In particular,
this has occurred in Argentina and in Colombia. To compensate
for slower growth in maturing markets, we will seek to provide
new services through our Broadband Network.

Although we believe that our geographic
diversification provides some protection against economic
downturns in any particular country, our results of operations
and business prospects are influenced by 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 and Mexico (which account for
only a small portion of our consolidated revenues), 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, is 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.

Costs and Expenses.Our costs and expenses principally
include:



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

Our direct costs include payments for leased
satellite transponder and fiber optic capacity. Our completion
of the Broadband Network should decrease our payments for leased
capacity as a percentage of revenues as we shift 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

29



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##### 



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 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 been
volatile since. As of April 10, 2002, the floating exchange
rate was 2.78 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 peso-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.

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
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to the 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 one pesoto 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 pesosbefore 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 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 our company
governed by Argentine law may have adverse, unknown and
unforeseeable effects on our company.

Since the pesification decree,
IMPSAT Argentinas customer contracts and operating cash
inflows are now predominantly denominated in pesos.
Moreover, IMPSAT Argentinas debt service payments and a
significant portion of its costs (including capital equipment
purchases and payments for certain leased telecommunications
capacity) are denominated 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 that country
could possibly have on IMPSAT Argentinas and our
companys overall cash flows, financial condition, and
results of operations.

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 flow from IMPSAT Argentina to our
holding company in the United States; (iii) our asset
valuations; and (iv) our peso-denominated monetary
assets and liabilities.

Except in Argentina (since the
pesification decree, to the extent discussed
above) 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 2001. 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

30



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##### 



risk. 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.


Effects of 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 have
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) capacity 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, the United States and the world.

During 2001, we recognized revenues totaling
$28.9 million from Global Crossing for the services
provided under our agreements with Global Crossing. Of this
amount, $18.0 million represented services that were billed
on a quarterly basis, $8.1 million represented equipment
sales, and $2.8 million represented the revenue recognition
effect under the IRUs that we granted to Global Crossing in 2000
and for which Global Crossing paid us a total of
$67.1 million in cash during 2000 and 2001. During the same
period, Global Crossing invoiced us a total of
$1.3 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.

At March 31, 2002, Global Crossing was in
default for a total of $5.6 million that we invoiced to
them during the second half of 2001 and the first quarter of
2002. In January 2002, Global Crossing filed for protection
under chapter 11 of the U.S. Bankruptcy Code. Although
none of the Global Crossing subsidiaries that have amounts
outstanding to us are currently included in Global
Crossings chapter 11 filing, the company believes that
these payment defaults are related to the significant cash
shortfalls that Global Crossing is currently experiencing. In
the second week of April 2002, Global Crossing paid us
$2.6 million in respect of these defaulted amounts. In
April 2002, we submitted invoices for a total of
$3.0 million for services to be rendered under our
agreements with Global Crossing for the second quarter of 2002.

In light of Global Crossings payment
defaults to us, we have declined to pay to Global Crossing a
total of $1.9 million that Global Crossing has invoiced us
for services through the first quarter 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.

The difficulties being experienced by Global
Crossing, including Global Crossings chapter 11
proceeding, could have an adverse effect on our financial
condition and operations. In the event that Global
Crossings bankruptcy proceedings were to expand to include
any of the subsidiaries that are parties to our agreements, such
an action could cause additional delays in our receipt of
amounts due to us and /or Global Crossing could seek, in the
applicable bankruptcy proceedings, to reject the contracts. In
the latter case, any damages that we might have in respect of
the rejected contracts would be treated as general unsecured
claims in the applicable bankruptcy proceedings. In addition, in
the event that Global Crossing were to sell or terminate its
South American operations as part of its bankruptcy proceedings,
our rights to continue to utilize the IRUs that we have
purchased from Global Crossing Bandwidth, Inc. are unclear. If
we were required to acquire substitute capacity from a competing
undersea fiber optic system to link our operations, including
our Broadband Network, to the United States and the rest of the
World, we believe that our operations would be adversely
affected for the period in which we changed reconfigured our
telecommunications network. In addition, we

31



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##### 



would be required to incur additional costs for
such capacity which are not currently included in our operating
and capital expenditures budgets.


We will monitor the Global Crossing bankruptcy
proceedings and commercial relationship carefully. Our company
is currently evaluating its contractual rights in respect of
Global Crossings payment defaults and its alternatives
with respect to the acquisition of alternative capacity in light
of the uncertainty that Global Crossing will be able or willing
to perform its obligations under its agreements with us.

Results of Operations

The following table summarizes our results of
operations:

|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |      |      |       | 
|-------------------------------------------------------------------- | -------------------------------------- | ----------------------------------------------------------- | -------------------------------- | ------ | ------- | ------- | ----- | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ----- | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | ---- | ---- | ----- | 
|                                                                     |                                        |                                                            
|                                                                     |                                        | Year Ended December 31,                                    
|                                                                     |                                        |                                                            
|                                                                     |                                        |                                                             |                                  |        |         |        
|                                                                     |                                        | 1999                                                        |                                  | 2000   |         | 2001   
|                                                                     |                                        |                                                             |                                  |        |         |        
|                                                                     |                                        |                                                            
|                                                                     |                                        | (in thousands and as a percentage of consolidated revenues)
|Net revenues:                                                        |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|                                                                     | Net revenues from services:            |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |      |     
|                                                                     |                                        | Data and value added services                               |                                  | $      | 195,110 |         |       |      | 85.4 | %     |          | $      | 214,268 |         |       |      | 66.5 | %     |          |        | 239,816 |         |        |      | 73.5 | %    
|                                                                     |                                        | Internet                                                    |                                  |        | 26,044  |         |       |      | 11.4 |       |          |        | 35,996  |         |       |      | 11.2 |       |          |        | 45,403  |         |        |      | 13.9 |      
|                                                                     |                                        | Telephony                                                   |                                  |        |        |         |       |      |     |       |          |        | 235     |         |       |      | 0.1  |       |          |        | 11,762  |         |        |      | 3.6  |      
|                                                                     |                                        | Services to carriers                                        |                                  |        |         |         |       |      |      |       |          |        | 885     |         |       |      | 0.3  |       |          |        | 7,360   |         |        |      | 2.2  |      
|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|                                                                     |                                        |                                                             | Total net revenues from services |        |         | 221,154 |       |      |      | 96.8  |          |        |         | 251,384 |       |      |      | 78.0  |          |        |         | 304,341 |        |      |      | 93.2  | 
|                                                                     | Sale of equipment                      |                                                             |                                  | 7,297  |         |         |       | 3.2  |      |       |          | 13,083 |         |         |       | 4.1  |      |       |          | 14,952 |         |         |        | 4.6  |     
|                                                                     | Broadband network development revenues |                                                             |                                  |       |         |         |       |     |      |       |          | 57,676 |         |         |       | 17.9 |      |       |          | 7,197  |         |         |        | 2.2  |     
|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|                                                                     |                                        |                                                             | Total net revenues               |        |         | 228,451 |       |      |      | 100.0 |          |        |         | 322,143 |       |      |      | 100.0 |          |        |         | 326,490 |        |      |      | 100.0 | 
|Direct costs:                                                        |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|                                                                     | Contracted services                    |                                                             |                                  | 21,853 |         |         |       | 9.6  |      |       |          | 29,573 |         |         |       | 9.2  |      |       |          | 40,629 |         |         |        | 12.4 |     
|                                                                     | Other direct costs                     |                                                             |                                  | 31,055 |         |         |       | 13.6 |      |       |          | 21,349 |         |         |       | 6.6  |      |       |          | 35,416 |         |         |        | 10.8 |     
|                                                                     | Leased capacity                        |                                                             |                                  | 49,666 |         |         |       | 21.7 |      |       |          | 74,188 |         |         |       | 23.0 |      |       |          | 87,057 |         |         |        | 26.7 |     
|                                                                     | Broadband network cost                 |                                                             |                                  |        |         |         |       |      |      |       |          | 34,729 |         |         |       | 10.8 |      |       |          | 3,335  |         |         |        | 1.0  |     
|                                                                     | Cost of equipment sold                 |                                                             |                                  | 5,187  |         |         |       | 2.3  |      |       |          | 12,308 |         |         |       | 3.8  |      |       |          | 10,472 |         |         |        | 3.2  |     
|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|Total direct costs                                                   |                                        |                                                             | 107,761                          |        |         |         | 47.2  |      |      |       | 172,147  |        |         |         | 53.4  |      |      |       | 176,909  |        |         |         | 54.2   |     
|Salaries and wages                                                   |                                        |                                                             | 46,174                           |        |         |         | 20.2  |      |      |       | 68,922   |        |         |         | 21.4  |      |      |       | 82,095   |        |         |         | 25.1   |     
|Selling, general and administrative expenses                         |                                        |                                                             | 40,631                           |        |         |         | 17.8  |      |      |       | 58,471   |        |         |         | 18.2  |      |      |       | 52,964   |        |         |         | 16.2   |     
|Asset impairment charge                                              |                                        |                                                             |                                 |        |         |         |      |      |      |       |         |        |         |         |      |      |      |       | 381,888  |        |         |         | 117.0  |     
|Depreciation and amortization                                        |                                        |                                                             | 130,071                          |        |         |         | 56.9  |      |      |       | 84,488   |        |         |         | 26.2  |      |      |       | 123,678  |        |         |         | 37.9   |     
|Interest expense, net                                                |                                        |                                                             | 55,561                           |        |         |         | 24.3  |      |      |       | 85,500   |        |         |         | 26.5  |      |      |       | 132,834  |        |         |         | 40.7   |     
|Net loss on foreign exchange                                         |                                        |                                                             | 8,042                            |        |         |         | 3.5   |      |      |       | 10,614   |        |         |         | 3.3   |      |      |       | 41,182   |        |         |         | 12.6   |     
|Recognition of other-than-temporary decline in
	value of investments |                                        |                                                             |                                 |        |         |         |      |      |      |       |         |        |         |         |      |      |      |       | (20,650  | )      |         |         | (6.3   | )   
|Other income (loss), net                                             |                                        |                                                             | 15,305                           |        |         |         | 6.7   |      |      |       | 704      |        |         |         | 0.2   |      |      |       | (2,125   | )      |         |         | (0.7   | )   
|Benefit from (provision for) foreign income taxes                    |                                        |                                                             | 20,733                           |        |         |         | 9.1   |      |      |       | 4,547    |        |         |         | 1.4   |      |      |       | (27,420  | )      |         |         | (8.4   | )   
|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     
|Net loss attributable to common stockholders                         |                                        | $                                                           | (131,543                         | )      |         |         | (57.6 | )%   |      | $     | (154,141 | )      |         |         | (47.8 | )%   |      | $     | (715,255 | )      |         |         | (219.1 | )%  
|                                                                     |                                        |                                                             |                                  |        |         |         |       |      |      |       |          |        |         |         |       |      |      |       |          |        |         |         |        |     

32



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##### 



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 $53.0 million (or
21.1%) compared to 2000. Our net revenues from services during
2001 included net revenues from:



| |   |                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include
	satellite and broadband data transmission services, systems
	integration and other information technology services, data
	center services, and other value-added services                                                                                                                                                       
|
| |  | Internet, which is composed of our Internet
	backbone access and managed modem services to ISPs and other
	telecommunications providers, and related collocation and web
	hosting services that we provide through our advanced hosting
	facilities                                                                                                                           
|
| |  | telephony, including local, national and
	international long-distance services, and                                                                                                                                                                                                                                                                                           
|
| |  | services to carriers, which consist of our
	wholesale long-haul 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:

|                                 |                            |                               |         |         |         |             |         |         |         |             |      |       |     |   |         |         |         |  |         |       |      | 
|-------------------------------- | -------------------------- | ----------------------------- | ------- | ------- | ------- | ----------- | ------- | ------- | ------- | ----------- | ---- | ----- | --- | - | ------- | ------- | ------- |  | ------- | ----- | ---- | 
|                                 |                            |                              
|                                 |                            | December 31,                 
|                                 |                            |                              
|                                 |                            | 1999                          |         | 2000    |         | % change(1) |         | 2001    |         | % change(1)
|                                 |                            |                               |         |         |         |             |         |         |         |            
|                                 |                            |                              
|                                 |                            | (dollar amounts in thousands)
|Data and value added services:   |                            |                               |         |         |         |             |         |         |         |             |      |       |     |   |         |         |         |  |         |      
|                                 | Broadband                  |                               | $       | 33,721  |         |             | $       | 51,260  |         |             |      | 52.0  | %   |   | $       | 85,579  |         |  |         | 67.0  | %   
|                                 | Satellite                  |                               |         | 160,059 |         |             |         | 159,265 |         |             |      | (0.5  | )   |   |         | 137,053 |         |  |         | (13.9 | )   
|                                 | Other value added services |                               |         | 1,330   |         |             |         | 3,743   |         |             |      | 181.4 |     |   |         | 17,184  |         |  |         | 359.1 |     
|                                 |                            |                               |         |         |         |             |         |         |         |             |      |       |     |   |         |         |         |  |         |      
|                                 |                            | Total                         |         |         | 195,110 |             |         |         | 214,268 |             |      |       | 9.8 |   |         |         | 239,816 |  |         |       | 11.9 | 
|Internet                         |                            |                               | 26,044  |         |         |             | 35,996  |         |         |             | 38.2 |       |     |   | 45,403  |         |         |  | 26.1    |      
|Telephony                        |                            |                               |        |         |         |             | 235     |         |         |             |     |       |     |   | 11,762  |         |         |  | 4,905.1 |      
|Services to carriers             |                            |                               |        |         |         |             | 885     |         |         |             |     |       |     |   | 7,360   |         |         |  | 731.6   |      
|                                 |                            |                               |         |         |         |             |         |         |         |             |      |       |     |   |         |         |         |  |         |      
|Total net revenues from services |                            | $                             | 221,154 |         |         | $           | 251,384 |         |         |             | 13.7 |       |     | $ | 304,341 |         |         |  | 21.1    |      
|                                 |                            |                               |         |         |         |             |         |         |         |             |      |       |     |   |         |         |         |  |         |      



---



|    |                                                
|--- | -----------------------------------------------
|(1) | Increase (decrease) compared to previous
	year.

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

33



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 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.
|
| |  | 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.                                                                                                                                                                               

Global Crossing and 360networks were the
principal customers for our data center services and services to
carriers during 2001. As a result of the cancellation of our
contracts with 360networks in June 2001, Global Crossings
ongoing insolvency proceedings, and the decline in demand by
telecommunications companies for dark and
lit fiber capacity, we anticipate that we may
generate significantly lower data center services and services
to carriers revenues during 2002.

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.

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

|                 |       |                     |       |          |  |             |       |       |  |  |       |     | 
|---------------- | ----- | ------------------- | ----- | -------- |  | ----------- | ----- | ----- |  |  | ----- | --- | 
|                 |       |                     |       |         
|                 |       | Number of Customers |       |         
|                 |       |                     |       |         
|                 |       | December            |       | December |  | % Change(1)
|                 |       | 31, 2000            |       | 31, 2001 |  |            
|                 |       |                     |       |          |  |            
|IMPSAT Argentina |       |                     | 1,146 |          |  |             | 1,100 |       |  |  | (4.0  | )% 
|IMPSAT Colombia  |       |                     | 672   |          |  |             | 699   |       |  |  | 4.0   |    
|IMPSAT Brazil    |       |                     | 238   |          |  |             | 387   |       |  |  | 62.6  |    
|IMPSAT Venezuela |       |                     | 251   |          |  |             | 245   |       |  |  | (2.4  | )  
|IMPSAT Ecuador   |       |                     | 210   |          |  |             | 236   |       |  |  | 12.4  |    
|IMPSAT Mexico    |       |                     | 51    |          |  |             | 47    |       |  |  | (7.8  | )  
|IMPSAT Chile     |       |                     | 9     |          |  |             | 57    |       |  |  | 533.3 |    
|IMPSAT Peru      |       |                     | 15    |          |  |             | 33    |       |  |  | 120.0 |    
|IMPSAT USA       |       |                     | 64    |          |  |             | 73    |       |  |  | 14.1  |    
|                 |       |                     |       |          |  |             |       |       |  |  |       |    
|                 | Total |                     |       | 2,656    |  |             |       | 2,877 |  |  |       | 8.3 | 
|                 |       |                     |       |          |  |             |       |       |  |  |       |    



---



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | Increase (decrease) as of December 31,
	2001 compared to as of 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. Adverse economic
conditions experienced in Argentina and Brazil have led us to
reduce our customer expansion efforts in the small and medium
customer segments as these customers have declined to commit to
increased expenditures for their telecommunications needs
pending their own assessments of the expected length and
severity of the ongoing economic crises.

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. We
currently anticipate only minimal sales of equipment during 2002
and we do not anticipate any additional Broadband Network
development revenues during 2002.

34



---



##### 



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.
These amounts in 2001 include a total of $1.9 million
recognized upon the delivery of certain segments to 360networks
for which payment of $0.4 million has not been received to
date. In June 2001, we terminated a series of contracts that we
had signed with 360networks due to the latters payment
default of its obligations under those contracts to us. For a
description of this matter, refer to Legal
Proceedings.

The following table shows our revenues by
operating subsidiary for the periods indicated (including
intercompany transactions):

|                 |                               |                         |   |         |  |      |   |         |  |  |   |         | 
|---------------- | ----------------------------- | ----------------------- | - | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|                 |                               |                        
|                 |                               | Year Ended December 31,
|                 |                               |                        
|                 |                               | 1999                    |   | 2000    |  | 2001
|                 |                               |                         |   |         |  |     
|                 |                               |                        
|                 |                               | (in thousands)         
|IMPSAT Argentina |                               |                         |   |         |  |      |   |         |  |  |   |        
|                 | Services                      |                         | $ | 103,616 |  |      | $ | 116,004 |  |  | $ | 122,284 | 
|                 | Sale of equipment             |                         |   | 6,593   |  |      |   | 12,221  |  |  |   | 7,962   | 
|                 | Broadband network development |                         |   |        |  |      |   | 32,272  |  |  |   |        | 
|IMPSAT Colombia  |                               |                         |   |         |  |      |   |         |  |  |   |        
|                 | Services                      |                         |   | 61,047  |  |      |   | 54,819  |  |  |   | 62,087  | 
|                 | Sale of equipment             |                         |   |        |  |      |   |        |  |  |   | 493     | 
|IMPSAT Venezuela |                               |                         |   |         |  |      |   |         |  |  |   |        
|                 | Services                      |                         |   | 22,972  |  |      |   | 28,038  |  |  |   | 31,411  | 
|                 | Sale of equipment             |                         |   | 260     |  |      |   | 89      |  |  |   | 1,235   | 
|IMPSAT Brazil    |                               |                         |   |         |  |      |   |         |  |  |   |        
|                 | Services                      |                         |   | 8,503   |  |      |   | 27,947  |  |  |   | 42,816  | 
|                 | Sale of equipment             |                         |   | 65      |  |      |   | 308     |  |  |   | 2,627   | 
|                 | Broadband network development |                         |   |        |  |      |   | 9,336   |  |  |   | 2,552   | 
|Other(1)         |                               |                         |   |         |  |      |   |         |  |  |   |        
|                 | Services                      |                         |   | 50,172  |  |      |   | 56,171  |  |  |   | 85,593  | 
|                 | Sale of equipment             |                         |   | 379     |  |      |   | 465     |  |  |   | 2,635   | 
|                 | Broadband network development |                         |   |        |  |      |   | 16,068  |  |  |   | 4,645   | 



---



|    |                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other includes IMPSAT Ecuador, IMPSAT Mexico,
	IMPSAT USA, IMPSAT Chile, IMPSAT Peru and, prior to 2000, our
	former Brazilian subsidiary, Mandic S.A. On October 5,
	1999, we sold the retail dial-up Internet business of Mandic to
	El Sitio, Inc., and merged Mandics remaining operations
	into IMPSAT Brazil.

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. See Certain
Considerations  Economic and political conditions in
Latin America pose numerous risks to our operations.

Argentina, which has been mired in economic
recession for the past four years, is our largest market. 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 recessionary conditions and a lack of
access to international capital markets and has recently faced
internal disruption and social unrest. For the foreseeable

35



---



##### 



future, we do not expect the recession affecting
the Argentine economy will subside or that future economic and
political developments in Argentina will improve, and it is
possible that the Argentine economic and political environment
could deteriorate even further. The worsening political and
economic crisis 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 crisis in Argentina.


During 2001, 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. Although the introduction of the
Broadband Network in the fourth quarter of 2000 enabled us to
expand our range of services and attract additional sources of
revenue, 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 2002, we expect these negative
conditions to continue to materially and adversely impair our
business, financial condition and results of operations.
Furthermore, as a result of the pesification
of IMPSAT Argentinas customer contracts and operating cash
inflows, along with the devaluation of the pesoagainst
the U.S. dollar, we expect that IMPSAT Argentinas
revenues will decline significantly during 2002. This decrease
in revenue could exceed 50% of net revenues as compared to
IMPSAT Argentinas revenues for 2001.

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 relates
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,
also 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. This and prior devaluations have had a negative effect on
our real-denominated revenues. Although the recent
worsening of the Argentine economic crisis has so far not
significantly affected the Brazilian economy, there can be no
assurance that such adverse effects will not occur in the near
term. Due to the size and nature of Brazils trading
relationship with Argentina, the possible expectation of
corresponding risks in Brazil by foreign investors and the
developing nature of the Argentine economic crisis, economic and
market conditions for our Brazilian operations could be
adversely affected in the foreseeable future by recent events in
Argentina.

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. We currently expect net
revenues in Brazil to increase slightly in 2002 over 2001. 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. See further
discussion in  Net (Loss) Gain on Foreign
Exchange.

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. We expect that our revenues in Colombia
will stabilize at current levels during 2002.

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. Our operations in the
United States also showed improved results. IMPSAT USAs
revenues totaled $37.2 million 2001, an increase of
$9.5 million (or 34.2%) as compared to 2000. This is
primarily a result of increased network services and Internet
backbone access services to multinational corporations with
operations in Latin America.

36



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##### 



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.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 net 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 the same date in 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. The worsening of the recession in
	Argentina could adversely affect the quality of our accounts
	receivable from our customers in that country. 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. Although management
	currently believes that this allowance is appropriate, our
	company will monitor the aging of its receivables in Argentina
	in light of the severe recession and currency devaluation being
	experienced in that country.
|
| | (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. During the fourth
	quarter of 2001, our leased satellite capacity totaled
	$8.2 million, a decrease of $3.0 million (or 26.8%)
	compared to the corresponding period in 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. During the fourth quarter of 2001, our dedicated leased
	capacity on third-party fiber optic networks totaled
	$7.8 million, a decrease of $2.8 million (or 26.1%)
	compared to the corresponding period in 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                                                                                                                                                                                                                                                                                                                                                  

37



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##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | America and the U.S. Internet backbone. Although
	we are transferring increasing amounts of our telecommunications
	traffic to the Broadband Network as we migrate 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. We
	believe that our leased fiber optic capacity costs will decrease
	during 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | 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
	costs and frequency rights. These costs totaled
	$12.4 million during 2001 (composed of $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
	(composed of $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.
|
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

We anticipate that our direct costs will decline
in 2002 compared to 2001, principally because of the effect of
the devaluation of the Argentine peso against the U.S.
dollar, which will result in lower contracted services and other
direct costs at IMPSAT Argentina, and because of lower costs of
equipment sold (consistent with our expectation that sales of
equipment will decline substantially in 2002). The decline in
2002 direct costs currently anticipated by our company could be
offset by an increase in the provision for doubtful accounts if
the Argentine economy falls further into recession.

Salaries and Wages.Salaries and wages for 2001 totaled
$82.1 million, an increase of $13.2 million (or 19.1%)
compared to 2000. Salaries and wages for the last quarter of
2001 declined by $5.5 million as compared to such costs in
the last quarter of 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 include 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. Management expects that
the reduction in headcount will result in savings of
approximately $1.5 million per month during 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.

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. IMPSAT Brazils
salaries and wages for the last quarter of 2001 declined by $1.8
million (or 36.5%) as compared to such costs in the last quarter
of 2000. In addition to our reduced employee headcount in that
country, the decrease in salaries and wages at IMPSAT

38



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##### 



Brazil during the last quarter of 2001 is in part
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.


During 2002, we expect that the recent
devaluation of the Argentine peso, in addition to the
reduction in the number of our employees, will result in a
decrease in U.S. dollar terms of our consolidated salaries and
wages expense.

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
$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 real against 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.

Management intends to take efforts in the coming
periods to further control or reduce SG&A expenses. Such
efforts, along with the effects of the devaluation of the
Argentine peso, are anticipated to result in a further
decline in SG&A expenses during 2002.

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.

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 reflects the continued growth in our asset
base. Depreciation and amortization for IMPSAT Argentina for
2001 totaled $55.4 million. This represents 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
have utilized our cash and trading investments in connection
with our capital expenditures and general corporate purposes.

As discussed above under Certain
Considerations  We have defaulted on our indebtedness
and could face liquidation, we have defaulted on accrued
and unpaid amounts under our senior notes and our Broadband
Network Vendor Financing Agreements. The interest component of
such defaulted amounts,

39



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##### 



which aggregate $42.1 million and
$48.4 million, respectively, are included in our net
interest expense for 2001 discussed in the preceding paragraph.


For 2001, IMPSAT Argentinas net interest
expense totaled $22.9 million ($22.9 million after
eliminating intercompany items), compared to $11.8 million
($10.8 million after eliminating intercompany items) for
2000.

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 peso
and the Brazilian realagainst the U.S. dollar during
2001. IMPSAT Argentina recorded net losses on foreign exchange
for 2001 totaling $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
have 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 is included in
IMPSAT Argentinas (and our companys consolidated)
net loss on foreign exchange for 2001. For each quarter during
future periods, we will record an additional remeasurement
charge if the pesocontinues to devalue against the U.S.
dollar during the quarter. As of April 10, 2002, the
floating exchange rate was 2.78 pesosto the U.S. dollar.
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.We recorded a loss of
$20.6 million during 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 Standard
(SFAS) 115, the Claxson Shares had experienced an other than
temporary decline in value. 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 $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 SFAS 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.

40



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##### 



2000 Compared to 1999

Revenues.Our total
net revenues for 1999 and 2000 equaled $228.5 million and
$322.1 million. Net revenues in 2000 were composed of net
revenues from services, sales of equipment and Broadband Network
development revenues.

Our net revenues from services for 2000 totaled
$251.4 million, an increase of $30.2 million (or
13.7%) from 1999. Our net revenues from services during 2000
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 revenues from services resulted
primarily from broadband data services, Internet services and
equipment sales.

In addition to net revenues from services, our
total net revenues for 2000 included revenues from sales of
equipment and Broadband Network development revenues. Revenues
from equipment sales for 2000 totaled $13.1 million, a $5.8
million (or 79.3%) increase over 1999. Our Broadband Network
development revenues for 2000 totaled $57.7 million, which
related to our turnkey construction on behalf of Global Crossing
Development Co. of the Trans-Andean Crossing System (also called
the TAC) that we contracted to build for Global
Crossing in the third quarter of 1999 and additional backhaul
construction that we performed for Global Crossing in Brazil and
Peru. See Note 6 to our consolidated financial statements.

Our Broadband Network development revenues for
2000 were recorded upon our delivery to, and provisional
acceptance by, Global Crossing of those segments of the TAC
between Global Crossings submarine cable landing point at
Las Toninas, Argentina and Santiago, Chile and other backhaul
segments in Brazil and Peru. These revenues included a bonus
payment of $4.0 million earned under our contract with
Global Crossing for early delivery of the TAC segment. We
delivered the final segment of the TAC, between Santiago, Chile
and Global Crossings submarine landing point at
Valparaiso, Chile, in March 2001.

Despite the continued economic stagnation that we
experienced during 2000 in many of our countries of operation,
including Argentina and Colombia, we were able to achieve
services revenue growth of 13.7% for 2000 as compared to 1999.
Our services revenue growth was achieved principally because of
an overall increase in the number of customers and services we
provided, offset in part by decreasing prices. Excluding fax
store and forward customers, we had 2,656 customers at
December 31, 2000, compared to 1,745 customers at December
31, 1999. In 2000, we gained a total of 911 new customers, an
increase of 52.2% from 1999. Customer growth was most pronounced
in Argentina and Brazil, where the bulk of our marketing and
sales efforts took place in connection with the introduction of
service on our Broadband Network.

Our operations in Brazil recorded the highest
revenue growth rate for services revenues among our countries of
operation. Net revenues from services relating to our Brazilian
operations during 2000 totaled $27.9 million, an increase
of $19.4 million (or 228.7%) compared to 1999. In Brazil,
the increase in our net revenues from services resulted from
increased data and value added services to our expanding
customer base and from increased revenues for Internet access
services to the U.S. Internet backbone. During 2000, we entered
into several contracts with Brazilian telecommunications
companies for access to the U.S. Internet backbone.

Our net revenue from services in Argentina for
2000 totaled $116.0 million, an increase of $12.4 million
(or 12.0%) from 1999. While our revenue in Argentina from our
satellite-based network services declined as compared to 1999,
our broadband data and value added services revenues and
Internet services revenues increased. The decline in revenue
from satellite-based network services was due to the continuing
trend among our customers and business segment for higher
bandwidth services, increased competition and continued downward
pressure on pricing for low and medium bandwidth service
offerings. The increase in Internet

41



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##### 



services resulted from several new contracts
entered into for access to the U.S. Internet backbone. In
addition, IMPSAT Argentinas net revenues for 2000 included
$12.2 million in equipment sales.


Our improved results in Brazil and Argentina were
offset by a decrease in services revenue at IMPSAT Colombia.
During the 2000, our operations in Colombia, our second oldest
market, were adversely affected by that countrys economic
recession, which intensified pricing pressures. IMPSAT
Colombias services revenue totaled $54.8 million for
2000, a $6.2 million (or 10.2%) decrease from 1999. Due to
the recession in Colombia, a number of our customers either
cancelled their contracts with us or reduced the amount of
services contracted.

Direct Costs.Our
direct costs for 2000 totaled $172.1 million. This amount
included $34.7 million in direct costs associated with the
construction and delivery of the TAC segments and other backhaul
links delivered to Global Crossing during 2000, which amounts
related principally to cost of equipment and contracted
third-party construction services.

Excluding direct costs related to the Broadband
Network development for Global Crossing, our direct costs for
2000 totaled $137.4 million, an increase of
$29.7 million (or 27.5%) compared to 1999. Of these direct
costs for 2000, $68.1 million related to the operations of
IMPSAT Argentina. This compares to $55.6 million at IMPSAT
Argentina for 1999. Direct costs for our Brazilian operations
totaled $25.0 million for 2000, compared to
$9.0 million for 1999. Direct costs of our subsidiaries are
described prior to the elimination of intercompany transactions.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Contracted Services.During 2000,
	contracted services costs totaled $29.6 million, an
	increase of $7.7 million (or 35.3%) from 1999. Of this
	amount, maintenance costs for our telecommunications network
	infrastructure totaled $17.0 million for 2000, compared to
	$12.4 million during 1999. Our maintenance costs increased
	because we had more infrastructure. In addition, our
	installation costs totaled $12.6 million for 2000, compared to
	$9.4 million for 1999.                                                                                                                                                                                                                                                                                         
|
| | (2) Other Direct Costs.Other direct
	costs principally included licenses and other fees; sales
	commissions paid to third-party sales representatives; and our
	allowance for doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Sales commissions paid to third-party sales
	representatives for 2000 totaled $8.1 million, compared to
	$8.0 million for 1999. The majority of these commissions
	related to customers of IMPSAT Argentina.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | During 2000, we recorded a provision for doubtful
	accounts of $4.8 million compared to a provision for doubtful
	accounts of $11.2 million for 1999. During 2000, we
	obtained payment of certain past due receivables from certain
	customers in Argentina and Colombia totaling $3.9 million.
	The increase in the provision for doubtful accounts for 1999
	related principally to a change in our provisioning policy. At
	December 31, 2000, approximately 26.4% of our gross trade
	accounts receivable were past due more than six months compared
	to approximately 19% for 1999. At December 31, 2000,
	average days of gross trade accounts receivable equaled
	71 days, compared to 90 days at December 31, 1999.                                                 
|
| | (3) Leased Capacity.Our leased
	capacity costs for 2000 totaled $74.2 million, which
	represented an increase of $24.5 million (or 49.4%) from
	1999. We had approximately 1,203 MHz of leased satellite
	capacity at December 31, 2000 and 801 MHz at
	December 31, 1999. The expansion of our satellite capacity
	was primarily attributable to contractually scheduled increases
	in satellite capacity to match anticipated growth in customer
	demand.                                                                                                                                                                                                                                                                                                                   
|
| | In addition, to satisfy increasing customer
	demand for higher bandwidth telecommunications links, during
	2000 we increased our leased dedicated capacity on third-party
	fiber optic networks, spending $32.3 million for 2000, an
	increase of $19.2 million (or 147.5%) from 1999. These
	costs were incurred principally in Argentina, Brazil and the
	United States. We incurred these higher costs of leased fiber
	optic capacity in Argentina and Brazil due to the continued
	demand by some of our customers for greater bandwidth while we
	were deploying our Broadband Network and in the United States
	due to the expansion of our Internet service offerings in Latin
	America where we provide a link between Latin America and the
	U.S. Internet backbone.

42



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##### 





| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) Costs of Equipment Sold.Excluding cost of equipment related to our Broadband Network
	development costs for Global Crossing, we incurred costs of
	equipment sold in 2000 of $12.3 million, a
	$7.1 million (or 137.3%) increase from 1999.

Salaries and Wages.Salaries and wages for 2000 totaled
$68.9 million, an increase of $22.7 million (or 49.3%)
from 1999. The increase resulted primarily from:



| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in the number of employees, from
	1,107 at December 31, 1999 to 1,711 at December 31,
	2000, particularly in connection with the expansion of our
	operations in Brazil and the development of the Broadband
	Network, and
|
| |  | increases in the salaries, wages and recruiting
	costs of our personnel to match market rates for personnel with
	the expertise we require and increases in cost of living.                                                           

IMPSAT Argentina incurred salaries and wages for
2000 of $29.7 million, an increase of $10.0 million
(or 50.8%) from 1999. IMPSAT Argentina increased its number of
employees from 385 at December 31, 1999 to 587 at
December 31, 2000. IMPSAT Brazil incurred salaries and
wages for 2000 totaling $13.0 million, an increase of
$6.6 million (or 115.8%) from 1999. IMPSAT Brazil increased
its number of employees to 438 persons at December 31,
2000, compared to 60 persons at December 31, 1999. Because
many of these new personnel commenced employment only towards
the end of the third quarter, the impact of the increase in the
number of employees was not recognized in our salaries and wages
expenses until the fourth quarter of 2000.

Selling, General and Administrative Expenses.We incurred SG&A expenses of
$58.5 million for 2000. SG&A expenses increased
$17.8 million (or 43.9%) from 1999. SG&A expenses at
IMPSAT Argentina for 2000 totaled $26.5 million, an
increase of $9.6 million (or 56.6%) from SG&A expenses
incurred by IMPSAT Argentina for 1999. Compared to 1999, the
increase in SG&A expenses reflected higher publicity and
promotion expenses, travelling expenses and advisory services
related to the deployment of the Broadband Network.

Depreciation and Amortization.Our depreciation and amortization
expenses for 2000 totaled $84.5 million, a decrease of
$45.6 million (or 35.0%) compared to our depreciation and
amortization for 1999. Depreciation and amortization for IMPSAT
Argentina for 2000 totaled $38.2 million. The decrease in
our depreciation and amortization expense reflects our decision
at the end of the third quarter of 1999 to change the
depreciable life of some of our customers premises
telecommunications equipment in light of technological advances,
which resulted in a one-time depreciation and amortization
charge in that quarter. We monitor technological advances to
determine whether additional adjustments in the depreciable life
of certain of our telecommunications equipment will be
appropriate in future periods.

Interest Expense, Net.During 2000, we incurred interest
expense of $112.9 million and earned interest income of
$27.4 million. This compares to interest expense of
$63.0 million and interest income of $7.4 million
during 1999. For 2000, IMPSAT Argentinas interest expense
totaled $12.5 million ($11.1 million after eliminating
intercompany items), compared to $13.7 million
($6.1 million after eliminating intercompany items) for
1999.

Our higher levels of interest income in 2000
related to our increased holdings of cash and other trading
investments resulting from the unused proceeds of our debt and
equity offerings completed in the first quarter of 2000.

Our total indebtedness at December 31, 2000
was $968.2 million, compared to $484.3 million at
December 31, 1999. At December 31, 2000, total
outstanding indebtedness at IMPSAT Argentina totaled
$159.4 million ($151.9 million after eliminating
intercompany items), compared to $130.2 million
($61.2 million after eliminating intercompany items) as of
December 31, 1999. The increase in our interest expense
reflected higher interest bearing indebtedness in 2000 compared
to 1999, which resulted from increased levels of borrowing
associated with our development of the Broadband Network,
including the vendor financing agreements that we signed with
Nortel Networks in October 1999 and Lucent Technologies in
September 2000 for a total of up to $313.4 million to construct
the Broadband Network in Argentina and Brazil and the

43



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##### 



issuance in February 2000 of our
$300 million 13 3/4% Senior Notes due 2005. At
December 31, 2000 we had borrowed a total of
$243.4 million under our vendor financing agreements for
the Broadband Network. For 2000, the average interest rate on
our indebtedness was 12.5%, compared to an average interest rate
of 11.3% for 1999.


Net (Loss) Gain on Foreign Exchange.We recorded net losses on foreign
exchange for 2000 of $10.6 million. This compares to net
losses of $8.0 million for 1999. The increase in our net
losses on foreign exchange was principally caused by the
devaluation of the Brazilian realagainst the
U.S. dollar.

Other Income, Net.We recorded other income, net, for
2000 of $0.7 million, compared to other income, net, of
$15.3 million for 1999. During 1999, we recorded other
income, net, of $13.9 million in connection with the sale
of our retail Internet businesses in Argentina and Brazil to El
Sitio, Inc.

Benefit from (Provision for) Income Taxes.We recorded a benefit for income taxes
(all of which are for foreign taxes) of $4.5 million for
2000, compared to a benefit from income taxes of
$20.7 million for 1999. The decrease in benefit from income
taxes related to a higher net loss carry-forward recorded in
1999 as a result of the one-time increased depreciation expense
which we realized upon a change in our depreciation policy on
certain of our customer premises telecommunication equipment in
September 1999.

Net Loss Attributable to Common Stockholders.For 2000, we incurred a net loss
attributable to common stockholders of $154.1 million, an
increase of $22.6 million (or 17.2%) from 1999.

Liquidity and Capital Resources

At December 31, 2001, we had total cash,
cash equivalents and trading investments of $64.9 million
and our total indebtedness was $990.6 million, of which
$967.4 million represented short-term debt and the current
portion of our long-term debt. As a result of our default under
our senior notes and the Broadband Network Vendor Financing
Agreements, an aggregate of $865.1 million of our long-term
indebtedness has been reclassified as short-term indebtedness,
and this amount is included in the $967.4 million total
discussed in the preceding sentence. We face significant cash
flow and liquidity problems. Our capital requirements under our
business plan for fiscal year 2002 are greater than available
capital resources, and, as discussed further below, our cash
flows and liquidity are insufficient to satisfy all of our
obligations.

Our company has no material working capital or
other credit facility under which it may borrow for working
capital or other general corporate purposes. We are not
generating sufficient revenue to fund our operations and to
repay our principal and interest obligations under the Broadband
Network Vendor Financing Agreements that are due and payable. As
a result, we are in default under our senior notes. We did not
make the semi-annual interest payment on our Notes due 2003
(which was due on January 15, 2002), on our Notes due 2005
(which was due on February 15, 2002), or on our Notes due
2008 (which was due on December 15, 2001), and, in each
case, we were not able to make the required payment within the
30-day grace periods before a default. We are also in default
under our Broadband Network Vendor Financing Agreements. As of
March 31, 2002, our indebtedness under the Senior Notes and
the Broadband Network Vendor Financing Agreements had an
aggregate outstanding principal balance of $650.0 million
and $261.1 million, respectively.

We believe that, without a successful
restructuring of our financial obligations, we are unlikely to
be able to obtain future debt or equity financing on acceptable
terms, or at all. The securities markets are currently not
available to us. We therefore will be required to restructure
our balance sheet. With the assistance of the investment bank,
Houlihan Lokey Howard & Zukin Capital, we are currently
negotiating with holders of the senior notes and with the
creditors under the Broadband Network Vendor Financing
Agreements regarding a proposed plan to restructure our balance
sheet.

Currently, we have not filed a Chapter 11
plan of reorganization under the U.S. Bankruptcy Code.
There can be no assurances that we will be able to complete this
filing or, if we do, that any plan of reorganization will be
approved by the Bankruptcy Court. If we are unable to timely
file for protection under Chapter 11 or obtain confirmation
of a plan of reorganization, our creditors may seek other
alternatives for our company, including accepting bids for our
company or parts thereof through an auction process or forcing
us into a liquidation proceeding under the federal bankruptcy
laws.

44



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##### 



Due to the continued adverse macroeconomic
conditions in Argentina and Brazil and to the termination of
certain contracts with subsidiaries of of 360networks, Inc. (see
Legal Proceedings), we have reduced our capital
expenditures in 2001. Our capital expenditures budget for 2002
contemplates that we will need approximately $29.8 million
(reduced from approximately $252.0 million) during the
period from December 31, 2001 (including amounts spent to
date) through the end of 2002 for capital expenditures.

As set forth in our consolidated statement of
cash flows, our operating activities used $71.1 million for
2001, compared to $0.1 million used during 2000. The
decrease in cash flows from operating activities in 2001
compared to 2000 was primarily attributable to an increase in
our net loss. During 2001, we used $6.0 million in net cash
flows from financing activities. This compares to
$486.0 million generated from financing activities during
2000, principally our offering of our Notes due 2005, our
initial public offering and our private placement of common
stock to British Telecommunications. For 2001, investing
activities generated $51.9 million in net cash flows. This
compares to $511.5 million of net cash flow used in investing
activities during 2000, which principally represents the
purchase of high-quality short-term investments with the
proceeds of our initial public offering, private placement and
our Notes due 2005. We have financed $28.3 million related
to the development of the Broadband Network during 2001,
principally as a result of disbursements under the vendor
financing agreements with Nortel Networks.

At December 31, 2001, we had leased
satellite capacity with annual rental commitments of
approximately $27.9 million through the year 2006. In
addition, at December 31, 2001, we had commitments to
purchase telecommunications equipment amounting to approximately
$5.8 million. We also have commitments of approximately
$63.9 million with respect to purchases of IRUs for
undersea submarine fiber optic capacity with which we intend to
link our telecommunications networks in our countries of
operation with and among each other and other parts of the
World. Commitments under contracts with 360networks and Global
Crossing totaling $41.4 million and $22.5 million,
respectively, are included in this $63.9 million total.
Depending on the outcome of our dispute with 360networks (see
Legal Proceedings) and Global Crossings
ongoing insolvency proceedings, some or all of our liability
under these commitments may be canceled or fail to materialize.
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
$3.3 million per year through 2006. 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                |  | 2002           |        | 2003 |  | 2004 |         | 2005 |  | 2006 |        | Thereafter |  | Total
|                                   |  |                |        |      |  |      |         |      |  |      |        |            |  |      
|                                   |  |               
|                                   |  | (in thousands)
|Long-term debt(1)                  |  | $              | 86,734 |      |  | $    | 186,199 |      |  | $    | 60,613 |            |  | $     | 356,702 |  |  | $ | 47,888 |  |  | $ | 225,000 |  |  | $ | 963,136   | 
|Capital lease obligations          |  |                | 7,259  |      |  |      | 6,020   |      |  |      | 3,635  |            |  |       | 1,813   |  |  |   | 402    |  |  |   |        |  |  |   | 19,129    | 
|Operating leases                   |  |                | 1,570  |      |  |      | 1,533   |      |  |      | 1,016  |            |  |       |        |  |  |   |       |  |  |   |        |  |  |   | 4,119     | 
|Other long-term obligations        |  |                | 73     |      |  |      | 3,926   |      |  |      | 1,531  |            |  |       | 1,003   |  |  |   | 1,013  |  |  |   | 7,427   |  |  |   | 14,973    | 
|                                   |  |                |        |      |  |      |         |      |  |      |        |            |  |       |         |  |  |   |        |  |  |   |         |  |  |   |           | 
|Total contractual cash obligations |  | $              | 95,636 |      |  | $    | 197,678 |      |  | $    | 66,795 |            |  | $     | 359,518 |  |  | $ | 49,303 |  |  | $ | 232,427 |  |  | $ | 1,001,357 | 
|                                   |  |                |        |      |  |      |         |      |  |      |        |            |  |       |         |  |  |   |        |  |  |   |         |  |  |   |           | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed elsewhere in this Report, we are in
	default under our senior notes and the Broadband Network Vendor
	Financing Agreements. Accordingly, an aggregate of
	$865.1 million of our long-term indebtedness has been
	reclassified as short-term indebtedness. These 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.

45



---



##### 



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

|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Type of Commitments(1)          |  | 2002           |        | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter |  | Total
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |      
|                                |  |               
|                                |  | (in thousands)
|Lines of credit                 |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby letters of credit       |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Guarantees                      |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby repurchase obligations  |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Other commercial commitments(2) |  | $              | 46,904 |      |  | $    | 34,297 |      |  | $    | 31,278 |            |  | $     | 26,638 |  |  | $ | 22,994 |  |  | $ | 39,237 |  |  | $ | 201,348 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|Total commercial commitments    |  | $              | 46,904 |      |  | $    | 34,297 |      |  | $    | 31,278 |            |  | $     | 26,638 |  |  | $ | 22,994 |  |  | $ | 39,237 |  |  | $ | 201,348 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 



---



|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 completion
	dates, construction costs and subsequent maintenance and growth
	of the broadband network we are building
|
| |  | our ability to implement successfully our
	operating strategy and to sell capacity on 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:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | our significant indebtedness and the outcome and
	effects of our efforts to restructure our balance sheet
|
| |  | 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                                                                               

46



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##### 





| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | 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,
2001 and assuming that the hypothetical interest rate and
foreign exchange rate changes used in the analyses occurred
during year 2001. 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.

We are exposed to interest rate risk on our
floating rate indebtedness, which affects our cost of financing.
Our floating rate indebtedness has increased as we have drawn
down commitments under our vendor financing agreements to cover
capital expenditures, including the Broadband Network. 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.

|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 
|-------------------------------- |  | ------------------------- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ---------- |  | ----- | ------- | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                                 |  |                           |        |     
|                                 |  | Expected Maturity Date(1) |        |     
|                                 |  |                           |        | Fair
|Year Ended December 31,          |  | 2002                      |        | 2003 |  | 2004 |         | 2005 |  | 2006 |        | Thereafter |  | Total |         | Value
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |      
|Senior Notes (fixed rate)        |  |                           |       |      |  | $    | 125,000 |      |  |      |       |            |  | $     | 300,000 |       |  |   |       |   |  | $ | 225,000 |   |  | $ | 650,000 |   |  | $ | 27,250  | 
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                           |       |      |  |      | 12.13   | %    |  |      |       |            |  |       | 13.75   | %     |  |   |       |   |  |   | 12.38   | % |  |   | 12.96   | % |  |   |         | 
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 
|Term Notes (fixed rate)          |  | $                         | 20,151 |      |  | $    | 16,840  |      |  | $    | 11,927 |            |  | $     | 6,818   |       |  | $ | 1,078  |   |  |   |         |   |  | $ | 56,814  |   |  | $ | 56,814  | 
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                           | 15.1   | %    |  |      | 15.1    | %    |  |      | 15.1   | %          |  |       | 15.1    | %     |  |   | 15.1   | % |  |   |         |   |  |   | 15.1    | % |  |   |         | 
|Vendor Financing (variable rate) |  | $                         | 73,842 |      |  | $    | 50,379  |      |  | $    | 52,321 |            |  | $     | 51,697  |       |  | $ | 47,212 |   |  |   |         |   |  | $ | 275,451 |   |  | $ | 275,451 | 
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                           | 7.8    | %    |  |      | 7.8     | %    |  |      | 7.8    | %          |  |       | 7.8     | %     |  |   | 7.8    | % |  |   |         |   |  |   | 7.8     | % |  |   |         | 
|                                 |  |                           |        |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed elsewhere in this Report, we are in
	default under our senior notes and the Broadband Network Vendor
	Financing Agreements. Accordingly, an aggregate of
	$865.1 million of our long-term indebtedness has been
	reclassified as short-term indebtedness. These 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.

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 reduce 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.

47



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##### 



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
April 10, 2002 was pesos2.78 = $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 2002 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 2002
increases to our consolidated net losses that would result from
transaction gains or losses on our peso-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.

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 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. 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.

Revenues from services from our Argentine
operations for each of 2000 and 2001 represented approximately
46.1% and 40.2% of our total net revenues from services for such
periods. Revenues from services from our Brazilian operations
for each of 2000 and 2001 represented approximately 11.1% and
14.1% 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 development of
the Broadband Network. At April 10, 2001, the pesotraded at a rate of pesos2.78 = $1.00. At
December 31, 2001 and April 10, 2002, the realtraded at a rate of R$2.28 = $1.00 and R$2.44 = $1.00.

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.

48



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##### 



PART III

Item 10.     Directors
and Officers

The Bylaws of IMPSAT Fiber Networks, Inc. provide
that the number of members of its board of directors shall be
fixed and determined from time to time by resolution of its
board of directors. Our board of directors has acted to fix the
number of directors at ten. Pursuant to the terms of our
Certificate of Incorporation, our board of directors is divided
into three classes, as nearly equal in number as reasonably
possible, with terms currently expiring at our 2002 annual
meeting of stockholders, the annual meeting of stockholders in
2003, and the annual meeting of stockholders in 2004,
respectively.

IMPSAT Argentinas Estatutos, provide
for a six-member Board of Directors. The directors of IMPSAT
Argentina will hold office until the next annual meeting of
their respective stockholders and until successors of such
directors have been elected and qualified, or until their
earlier death, resignation or removal. There is currently one
vacant seat on IMPSAT Argentinas Board of Directors.

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.
The Chairman of the board of directors of IMPSAT Argentina is
elected at the regular annual meeting of the board of directors.
Officers of IMPSAT Argentina are appointed by its board of
directors.

No family relationship exists among any of our
directors or executive officers, except that Lucas Pescarmona
and Sofia Pescarmona, both directors of our company, are the
children of Enrique Pescarmona, the Chairman of our board of
directors.

Set forth below are the names, ages and positions
of directors and executive officers of our company and IMPSAT
Argentina as of March 31, 2002.

49



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|                      |  |     |    |          |  |                                                                                         
|--------------------- |  | --- | -- | -------- |  | ----------------------------------------------------------------------------------------
|Name                  |  | Age |    | Position
|                      |  |     |    |         
|Directors             |  |     |    |          |  |                                                                                         
|Enrique M. Pescarmona |  |     | 60 |          |  | Chairman of the Board; Director of IMPSAT
	Argentina                                    
|Ricardo A. Verdaguer  |  |     | 51 |          |  | Director, President and Chief Executive Officer;
	Director of IMPSAT Argentina          
|Roberto A. Vivo       |  |     | 47 |          |  | Director; Director of IMPSAT Argentina                                                  
|Alexander Rivelis     |  |     | 61 |          |  | Director and Senior Vice President, Strategic
	Alliances                                
|Lucas Pescarmona      |  |     | 32 |          |  | Director                                                                                
|Sofia Pescarmona      |  |     | 30 |          |  | Director                                                                                
|Stephen R. Munger     |  |     | 44 |          |  | Director                                                                                
|Jerónimo Bosch        |  |     | 30 |          |  | Director                                                                                
|Carlos Zamora         |  |     | 40 |          |  | Director                                                                                
|Morris Jones          |  |     | 42 |          |  | Director                                                                                
|Executive Officers    |  |     |    |          |  |                                                                                         
|Héctor Alonso         |  |     | 44 |          |  | Chief Operating Officer                                                                 
|Guillermo Jofré       |  |     | 46 |          |  | Chief Financial Officer                                                                 
|Guillermo V. Pardo    |  |     | 51 |          |  | Vice President, Planning and Secretary                                                  
|José R. Torres        |  |     | 43 |          |  | Vice President, Administration, Chief Accounting
	Officer; Director of IMPSAT Argentina 
|Marcelo Girotti       |  |     | 37 |          |  | Regional Manager, Southern Cone; Chairman of the
	Board of Directors of IMPSAT Argentina
|Jaime Alberto Peláez  |  |     | 40 |          |  | Regional Manager, Andean                                                                
|Mauricio Ceballos     |  |     | 37 |          |  | Regional Manager, North America                                                         
|Mariano Torre Gómez   |  |     | 50 |          |  | Regional Manager, Brazil                                                                

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.

Enrique Pescarmonahas been Chairman of our board of
directors since September 1994 and a member of the board of
directors of IMPSAT Argentina since March 1994.
Mr. Pescarmona is also Chairman of Corporación IMPSA
S.A. and Industrias Metalúrgicas Pescarmona S.A.I.C. y F.
(IMPSA). He is a director of Lagarde, S.A., Ingenieria y
Computacion S.A., Compañia de Seguros La Mercantil Andina
S.A. (Mercantil Andina) and TCA S.A., and is Vice President of
Henri Lagarde S.A.

Ricardo A. Verdaguerhas been President, Chief Executive
Officer and a member of our board of directors since September
1994. Mr. Verdaguer is a director of IMPSAT Argentina and
has also served as President of IMPSAT Argentina from April 1988
until February 1990. 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.

Roberto A. Vivohas
been a member of our board of directors since September 1994.
Mr. Vivo previously served as our Companys Deputy
Chief Executive Officer, Vice President, Marketing from
September 1994 until October 2000, and has been a member of the
board of directors of IMPSAT Argentina since 1988. Mr. Vivo
also serves as chairman of the board of directors and chief
executive officer of Claxson Interactive Group, Inc.

50



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Alexander Rivelishas been Senior Vice President,
Strategic Alliances, and a member of our board of directors
since December 1994. Mr. Rivelis also serves as a member of
the board of directors of IMPSAT USA. Mr. Rivelis served as
President of IMPSAT Colombia from 1991 to 1993 and President of
IMPSAT USA from 1995 to 1996.

Lucas Pescarmona,a
son of Enrique Pescarmona, has been a member of our board of
directors since February 1996. In 1995, he joined Tecnologica em
Componentes Automotivos S.A., a Brazilian manufacturer of
automotive parts that is part of the Pescarmona group, as the
senior investment analyst in Brazil. Since 1997,
Mr. Pescarmona has been principally engaged in the
insurance arm of the Pescarmona group, where he is Manager of
Business Development of Mercantil Andina.

Sofia Pescarmona,a
daughter of Enrique M. Pescarmona, has been a member of our
board of directors since February 1996. Ms. Pescarmona is
currently assistant to the Chief Executive Officer of IMPSAT
Fiber Networks, Inc. From August 1994 to December 1997,
Ms. Pescarmona held several positions in IMPSAT, including
in the Internet unit and marketing department of IMPSAT Fiber
Networks, Inc. and the sales department of IMPSAT Argentina.
Ms. Pescarmona was a member of the board of directors of El
Sitio, Inc. from October 1999 to December 2001.

Stephen R. Mungerhas been a member of our board of directors since March 1998.
Mr. Munger is a Managing Director of Morgan Stanley Dean
Witter and co-head of Morgan Stanleys worldwide mergers,
acquisitions and restructuring department, as well as
Co-Chairman of the investment committee of Princes Gate
Investors II, L.P. He joined Morgan Stanley in 1988 and became a
Managing Director in 1993.

Jerónimo Boschhas been a member of our board of directors since September
1999. Mr. Bosch is a Vice President at Morgan Stanley Dean
Witter Private Equity. Mr. Bosch joined Morgan Stanley Dean
Witter in August 1997. From 1994 to 1997, he was employed by
Salomon Brothers Inc. in its global mergers and acquisitions and
Latin American corporate finance departments.

Carlos Zamorahas
been a member of our board of directors since the end of
September 2000. Mr. Zamora is Vice President 
Corporate Development of British Telecommunications Ignite
division. Mr. Zamora joined British Telecommunications in
1998 as General Manager  Latin America Business
Development. Before joining British Telecommunications,
Mr. Zamora held a number of operations and business
development positions in the Americas and Europe, including with
Motorola and Bell Atlantic Corporation.

Morris Joneshas
been a member of our board of directors since August 2001.
Mr. Jones is Vice President  Finance and
Business Development of British Telecommunications Ignite
division. Since joining British Telecommunications in 1995,
Mr. Jones has held a number of senior finance roles in that
company, including Head of Regulatory Reporting, BT Group
Finance. Prior to joining British Telecommunications,
Mr. Jones worked as a Principal Associate within the
telecommunications consulting group of PricewaterhouseCoopers.
Mr. Jones is a chartered accountant.

Héctor Alonsohas been our Chief Operating Officer since September 1996 and
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 companies in the Pescarmona group.

Guillermo Jofréhas been our Chief Financial Officer since May 1995. Prior to
joining IMPSAT, Mr. Jofré had over ten years of
experience in management positions with companies in Argentina,
Germany and Switzerland. Mr. Jofré also serves as a member
of the board of directors of the investment fund Bemberg
Inversiones S.A.

Guillermo V. Pardojoined IMPSAT Argentina in 1988 and our Company in 1994 and has
been our Vice President, Planning since January 1995 and our
Secretary since February 2000. 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 FAICSA and the Fundacion
Torcuato Di Tella.

51



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José R. Torreshas been our Vice President, Administration and Chief Accounting
Officer since January 1995 and a Director of IMPSAT Argentina
since 1990. Mr. Torres previously worked as Assistant
Finance Manager of IMPSA and as Finance Manager of IMPSAT
Argentina until December 1994.

Marcelo Girottihas
been Regional Manager, Southern Cone since September 2000 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.

Jaime Alberto
Peláezhas been President of
IMPSAT Colombia since May 2000 and was appointed Regional
Manager, Andean in September 2000. Mr. Peláez was
Executive Vice President and Financial and Administrative Vice
President of IMPSAT Colombia before assuming his current
position. Prior to joining IMPSAT, Mr. Peláez worked
as General Manager at Corfileasing, a member of the Sindicato
Antioqueno group of companies.

Mauricio Ceballoshas been Regional Manager, North America since September 2000.
Prior to that time, he served as President of IMPSAT Venezuela
since July 1999. He also serves as Regional Manager, North
America, a position to which he was appointed in September 2000.
Mr. Ceballos was Vice President of administration and
finance of IMPSAT Venezuela from 1997 to July 1999. Before
joining IMPSAT in 1997, Mr. Ceballos served four years as
Vice President of International and Special Business at
Fiduciaria Suramericana y BIC S.A., a trust company.

Mariano Torre
Gómezhas been 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 engineering, production, planning, business
development and new markets for companies in the Pescarmona
group over a period of 17 years.

Director Compensation

Except as described below, the members of our
board of directors do not receive any compensation for their
services on our board, although we have agreed to reimburse our
directors for any expenses incurred by them in connection with
their services as directors.

Mr. Enrique Pescarmona, the Chairman of our
board of directors, receives compensation for his services to
IMPSAT in that position. See  Executive
Compensation.

Board of Directors, Committees and Attendance
at Meetings

During the year ended December 31, 2001, our
board of directors held 11 meetings, five 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.

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, 2001. The audit committee, composed
of non-employee directors, oversees the engagement of our
independent auditors and, together with our independent
auditors, review our accounting practices, internal accounting
controls and financial results. The audit committee is currently
constituted by Mr. Stephen Munger, Mr. Carlos Zamora
and Mr. Jerónimo Bosch.

During 2001, the compensation committee held two
meetings. The compensation committee, composed of a majority of
non-employee directors, establishes salaries, incentives and
other forms of compensation for

52



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our directors and officers and recommends
policies relating to our benefit plans. The compensation
committee is currently constituted by Mr. Enrique
Pescarmona, Mr. Stephen Munger and Mr. Morris Jones.


Audit Committee Report

In discharging its oversight responsibility as to
the audit process, the audit committee has reviewed and
discussed with management our companys audited financial
statements included in our companys Annual Report on Form
10-K for the year ended December 31, 2001. In addition, the
audit committee has discussed with Deloitte & Touche LLP,
our independent auditors, the matters required to be discussed
by Statements on Auditing Standards (SAS) No. 61
Communication with Audit Committees.

The audit committee has obtained from Deloitte
& Touche 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, 2001, for filing with the
SEC.



| |                        
| | -----------------------
| | By the Audit Committee:
| | Stephen Munger         
| | Carlos Zamora          
| | Jerónimo Bosch         

Auditors Fees

Aggregate fees billed to the Company for the year
ended December 31, 2001 by the Companys principal
accounting firm, Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu and their respective
affiliates 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 2001 were $800,693.                                                               
|
| |  | 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
	2001.
|
| |  | All Other Fees.All
	other fees paid to Deloitte & Touche for 2001, aggregated
	$505,040, and included internal audit services of $168,850 and
	other services of $336,190.                                                                                       

The audit committee has concluded that the
provision of services covered in the above paragraphs captioned
Financial Information Systems Design and Implementation
Fees and All Other Fees are compatible with
maintaining Deloitte & Touches independence.

Arrangements with Respect to the Board of
Directors

We are a party to a shareholders agreement with
Nevasa Holdings and Nunsgate Limited dated as of March 10,
1999, a copy of which has been filed as an exhibit to the
registration statement relating to our initial public offering
of our common stock. Pursuant to the terms of this shareholders
agreement, as long as Nunsgate Limited owns 15% of our
outstanding common stock (as determined on a fully-diluted
basis) and subject to certain conditions, Nunsgate Limited has
the right to nominate two members of our board of directors.
Nevasa Holdings has agreed to vote for the two Nunsgate Limited
nominees to our board of directors so long as Nunsgate Limited
owns 15% of our outstanding common stock, and Nunsgate Limited
has agreed to vote for all persons nominated to our board of
directors by Nevasa Holdings so long as Nevasa Holdings votes
its shares of our common stock in favor of Nunsgate
Limiteds nominees to our board of directors.

53



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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. The disclosure requirements for the Chief Executive
Officer and other executive officers include the use of tables
and a report explaining the rationale and considerations that
led to fundamental compensation decisions affecting those
individuals. In fulfillment of this requirement, the
compensation committee, at the direction of our board of
directors, has prepared the following report for inclusion in
this Report.

Report of the
Compensation Committee

General.The report
of the compensation committee of our board of directors shall
not be deemed incorporated by reference by any general statement
incorporating by reference this report into any filing under the
Securities Act, as amended, or under the Exchange Act, as
amended, except to the extent that we specifically incorporate
this information by reference, and shall not otherwise be deemed
filed under such Acts.

The compensation committee of our board of
directors (the Committee) is responsible for
determining the compensation of Mr. Ricardo A. Verdaguer,
our President and Chief Executive Officer. The Committee also
reviews and approves the cash compensation of our senior
executive officers based upon the recommendations of
Mr. Verdaguer. Mr. Enrique Pescarmona,
Mr. Stephen Munger and Mr. Morris Jones serve on the
Committee. Mr. Pescarmona is the only member of the
Committee who is an employee of our company. Mr. Pescarmona
does not participate in decisions of the Committee regarding his
own compensation. Such awards are approved solely by
Messrs. Munger and Jones.

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 high growth technology companies, and
should consist of:



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

Stock Options.Awards of options under our 1998 Stock Option Plan are based on
criteria that reflect contributions to long-term stockholder
value. We generally grant stock options to our executive
officers at levels comparable to competitive business entities,
and such grants are intended to focus the performance of

54



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these executive officers towards increasing our
stockholder value. The Committee has used, and expects to
continue to use, stock-based incentive grants, including stock
options, as a significant component of executive compensation.


Determination of Officer Compensation.The Committee has adopted the
following decision mechanisms with respect to compensation
packages of our executive officers other than our chief
executive officer. By the end of each year, the Committee makes
an initial estimate of the cash compensation package
(i.e., the combination of salary and bonus) payable to
each executive officer with respect to the upcoming year, based
upon the recommendations of our chief executive officer. After
our annual audited financial statements become available for
that year (which is typically in March), the Committee
determines the stock option package payable to each executive
officer. At that point, the Committee also adjusts the estimated
bonus component of the cash compensation package by factoring in
an evaluation of each individuals performance,
demonstrated abilities, and contribution to our companys
achieving targeted levels of profitability during the previous
year. The Chief Executive Officer has recommended to the
Committee that it postpone any consideration of adjustments to
the estimated bonus component of the cash compensation package
for 2001 until the completion of our companys proposed
restructuring of its balance sheet.

Determination of the Chief Executive
Officers Compensation.For 2001,
the Committee determined the following compensation package for
Mr. Verdaguer:



| |   |                                     
| | - | ------------------------------------
| |  | base annual salary of $500,500      
|
| |  | target annual bonus of $400,000, and
|
| |  | no stock option grants.             

Mr. Verdaguers target bonus
performance objectives for 2001 included:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | completion of the construction of the Broadband
	Networks Argentina-Brazil terrestrial long-haul link                                 
|
| |  | growth in broadband-related revenue compared to
	satellite-based revenues                                                              
|
| |  | development of data center and telephony business
	lines                                                                               
|
| |  | formulation and implementation of financial
	strategies in accordance with prevailing financial market
	conditions and industry outlook
|
| |  | achievement of revenue and EBITDA targets for the
	year.                                                                               

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).



| |                               
| | ------------------------------
| | By the Compensation Committee:
| | Enrique Pescarmona            
| | Stephen Munger                
| | Morris Jones                  

55



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| |                           
| | --------------------------
| | 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 2001. 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       |                                    |                     | 2001 |              |  | $          | 400,000 |              |  | $           | 240,000 | (1)     |     |   |        |        |     |  |       |        
|                            | Chairman of the Board of Directors |                     |      | 2000         |  |            | $       | 359,840      |  |             | $       | 240,000 | (2) |   |         |       |     |  |        | 35,000  | 
|                            |                                    |                     | 1999 |              |  | $          | 353,745 |              |  | $           | 240,000 | (3)     |     |   |        |        |     |  | 47,362 |        
|Ricardo A. Verdaguer        |                                    |                     | 2001 |              |  | $          | 500,500 |              |  | $           | 300,000 | (1)     |     |   |        |        |     |  |       |        
|                            | President and Chief Executive      |                     |      | 2000         |  |            | $       | 449,800      |  |             | $       | 300,000 | (2) |   |         |       |     |  |        | 35,000  | 
|Officer                     |                                    |                     | 1999 |              |  | $          | 449,800 |              |  | $           | 300,000 | (3)     |     |   |        |        |     |  | 47,362 |        
|Alexander Rivelis           |                                    |                     | 2001 |              |  | $          | 227,680 |              |  | $           | 200,000 | (1)     |     |   |        |        |     |  |       |        
|                            | President, Strategic Alliances     |                     |      | 2000         |  |            | $       | 191,880      |  |             | $       | 90,000  | (2) |   |         |       |     |  |        | 10,150  | 
|                            |                                    |                     | 1999 |              |  | $          | 191,880 |              |  | $           | 50,000  | (3)     |     |   |        |        |     |  | 15,156 |        
|Héctor Alonso               |                                    |                     | 2001 |              |  | $          | 303,680 |              |  | $           | 150,000 | (1)     |     |   |        |        |     |  |       |        
|                            | Chief Operating Officer            |                     |      | 2000         |  |            | $       | 260,000      |  |             | $       | 150,000 | (2) |   |         |       |     |  |        | 137,055 | 
|                            |                                    |                     | 1999 |              |  | $          | 260,000 |              |  | $           | 150,000 | (3)     |     |   |        |        |     |  | 27,470 |        
|Mariano Torre Gómez(5)      |                                    |                     | 2001 |              |  | $          | 281,692 |              |  | $           | 120,000 | (1)     |     | $ | 136,087 | (4)    |     |  |       |        
|                            | Brazil Regional Manager            |                     |      | 2000         |  |            | $       | 246,890      |  |             | $       | 85,000  | (2) |   | $       | 76,928 | (4) |  |        | 45,601  | 
|                            |                                    |                     | 1999 |              |  | $          | 183,481 |              |  | $           | 61,425  | (3)     |     | $ | 81,645  | (4)    |     |  | 15,156 |        



---



|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This amount represents bonuses we paid to the
	executive officers named in the table above in May 2001. This
	amount relates to our 2000 operating results.                     
|   
|(2) | This amount represents bonuses we paid to the
	executive officers named in the table above in June 2000. This
	amount relates to our 1999 operating results.                    
|   
|(3) | This amount represents bonuses we paid to the
	executive officers named in the table above in December 1999.
	This amount relates to our 1998 operating results.                
|   
|(4) | Annual housing allowance.                                                                                                                                                       
|   
|(5) | Mr. Torre Gómez became Regional
	Manager, Brazil in June 2000. His previous positions included
	President of IMPSAT Colombia in 1999 and President of IMPSAT
	Venezuela in 1998.



| |                    
| | -------------------
| | Stock Option Grants

No grants of options to purchase our common stock
were made by us during 2001 to any of the named executive
officers. We granted no stock appreciation rights during 2001.
No stock options were exercised by the named executive during
2001.

56



---



##### 





| |                                                                               
| | ------------------------------------------------------------------------------
| | Aggregate Option Exercises During 2001 and
	Option Values on December 31, 2001

No options were exercised during 2001. The
following table summarizes certain information regarding
outstanding options held by the named executive officers as of
December 31, 2001.

Aggregated Option Exercises in 2001
and

Option Values at December 31,
2001


|                      |                       |                                 |  |                                    |  |  |  |     | 
|--------------------- | --------------------- | ------------------------------- |  | ---------------------------------- |  |  |  | --- | 
|                      |                       | Number of Securities Underlying |  | Value of Unexercised              
|                      |                       | Unexercised Options at          |  | In-the-Money                      
|                      |                       | December 31, 2001               |  | Options at December 31, 2001($)(1)
|                      |                       |                                 |  |                                   
|Name                  |                       | Exercisable/Unexercisable       |  | Exercisable/Unexercisable         
|                      |                       |                                 |  |                                   
|Enrique M. Pescarmona |                       |                                 |  |                                    |  |  |  |    
|                      | Granted June 14, 2000 |                                 |  | /35,000                           |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                                 |  | 18,945/28,417                      |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                                 |  | 41,441/17,761                      |  |  |  | 0/0 | 
|Ricardo A. Verdaguer  |                       |                                 |  |                                    |  |  |  |    
|                      | Granted June 14, 2000 |                                 |  | /35,000                           |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                                 |  | 18,945/28,417                      |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                                 |  | 41,441/17,761                      |  |  |  | 0/0 | 
|Alexander Rivelis     |                       |                                 |  |                                    |  |  |  |    
|                      | Granted June 14, 2000 |                                 |  | /10,150                           |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                                 |  | 6,062/9,094                        |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                                 |  | 13,262/5,683                       |  |  |  | 0/0 | 
|Héctor Alonso         |                       |                                 |  |                                    |  |  |  |    
|                      | Granted June 14, 2000 |                                 |  | /18,650                           |  |  |  | /0 | 
|                      | Granted Jan. 5, 2000  |                                 |  | /118,405                          |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                                 |  | 10,988/16,482                      |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                                 |  | 24,036/10,301                      |  |  |  | 0/0 | 
|Mariano Torre Gómez   |                       |                                 |  |                                    |  |  |  |    
|                      | Granted June 14, 2000 |                                 |  | /16,000                           |  |  |  | /0 | 
|                      | Granted Jan. 5, 2000  |                                 |  | /29,601                           |  |  |  | /0 | 
|                      | Granted June 25, 1999 |                                 |  | 6,062/9,094                        |  |  |  | 0/0 | 
|                      | Granted Dec. 21, 1998 |                                 |  | 13,262/5,683                       |  |  |  | 0/0 | 



---



|    |                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Value is calculated as the difference between the
	fair market value of a share of our common stock on
	December 31, 2001 ($0.17 per share as of close of business
	on Friday, December 29, 2001) and the exercise price of the
	options.

Stock Option
Plans

1998 Stock Option Plan.On December 21, 1998,
IMPSATs board of directors and stockholders adopted the
1998 stock option plan, which provides for the grant to our
officers, key employees, consultants, advisors, directors or
affiliates of incentive stock options within the
meaning of Section 422 of the U.S. Internal Revenue Code of
1986, as amended, stock options that are non-qualified for U.S.
federal income tax purposes and stock appreciation rights.
Vesting occurs 10% on the first anniversary of the date of grant
and 30% on each anniversary thereafter. A copy of the 1998 stock
option plan is included as Exhibit 10.1 to our 1998 Annual
Report on Form 10-K filed with the SEC. The total number of
shares of our common stock for which options may be granted
pursuant to the 1998 stock option plan is 4,776,016, subject to
certain adjustments reflecting changes in our capitalization.
The 1998 stock option plan is currently administered by our
compensation committee. The compensation committee determines,
among other things, which of our

57



---



##### 



officers, employees, consultants, advisors,
affiliates and directors will receive options under the plan,
the time when options will be granted, and the type of option
(incentive stock options or non-qualified stock options, or
both) to be granted. Options granted under the 1998 stock option
plan are on such terms, including the number of shares subject
to each option, the time or times when the options will become
exercisable, and the option price and duration of the options,
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.

Payment of the option price must be made by cash
or, in the sole discretion of the compensation committee, by
promissory note, tender of shares of the common stock then owned
by the optionee or, subject to certain conditions, the surrender
to us of an exercisable option to purchase shares of common
stock under the 1998 stock option plan. Payment of the option
price may also be made by delivery to us, on a form prescribed
by the compensation committee, of a properly executed exercise
notice and irrevocable instructions to a registered securities
broker approved by the compensation committee to sell the shares
of common stock held by the optionee and promptly deliver cash
to us. Options granted pursuant to the 1998 stock option plan
are not transferable, except by will or the laws of descent and
distribution in the event of death. During an optionees
lifetime, the option is exercisable only by the optionee or, in
case of disability, by the optionees legal representative.

Pursuant to the terms of our stock options, if a
change in control of our company occurs, all outstanding stock
options become vested and fully exercisable.

Our board of directors has the right at any time
and from time to time to amend or modify the stock option plan,
without the consent of our stockholders (unless otherwise
required by law) or optionees; provided, that no such action may
adversely affect options previously granted without the
optionees consent. The expiration date of the 1998 stock
option plan, after which no option may be granted thereunder, is
October 1, 2008.

1999 Stock Option Plan.On January 5, 2000, IMPSATs
board of directors adopted the 1999 stock option plan, which
provides for the grants to our key officers and employees of
stock options that are non-qualified for U.S. federal income tax
purposes. A copy of the 1999 stock option plan is filed as an
exhibit to the registration statement relating to the initial
public offering of our common stock. The terms of the 1999 stock
option plan are otherwise identical to those of the 1998 stock
option plan except that:



| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The total number of shares of our common stock
	for which options may be and were granted pursuant to the stock
	option plan is 355,214                                                                                          
|
| |  | The exercise price is $1.69 per share of common
	stock                                                                                                                                                                           
|
| |  | Ten percent, twenty percent, thirty percent and
	forty percent of the options granted vest on the fourth, fifth,
	sixth and seventh anniversaries, respectively, of the date of
	grant or upon a change of control of our company
|
| |  | The expiration date of the 1999 stock option plan
	is January 5, 2010                                                                                                                                                            

Compensation Committee Interlocks and Insider
Participation

Mr. Stephen Munger, who is a member of our
board of directors and a member of our compensation committee
and our audit committee, is the Co-Chairman of the Investment
Committee of Princes Gate. Princes Gate is an affiliate of
Morgan Stanley & Co. Incorporated, the lead underwriter in
our initial public offering. Princes Gate and other affiliates
of Morgan Stanley own an aggregate of 14,917,915 shares of our
common stock.

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

58



---



##### 



Performance Graph

Our common stock has been traded publicly since
February 4, 2000. Prior to such date, there was no
established market for our common stock. The following
performance graph compares our companys cumulative total
stockholder return on its common stock from February 4,
2000, through December 31, 2001 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.

PERFORMANCE GRAPH

Notes:



|   |                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------
|A. | The lines represent monthly index levels derived
	from compounded daily returns that include all dividends.

|   |                                                                                                
|-- | -----------------------------------------------------------------------------------------------
|B. | The indexes are reweighted daily, using the
	market capitalization on the previous trading day.

|   |                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------
|C. | If the monthly interval, based on the fiscal
	year-end, is not a trading day, the preceding trading day is
	used.

D. The index level for all series was set to
$100.0 on 02/01/2000.


|                                     |  |                         |        |              |  |      |       |  |  |   |       | 
|------------------------------------ |  | ----------------------- | ------ | ------------ |  | ---- | ----- |  |  | - | ----- | 
|                                     |  |                        
|                                     |  | Stockholder Value as of
|                                     |  |                        
|                                     |  |                         |        |             
|                                     |  | February 4,             |        | December 31,
|                                     |  |                         |        |             
|                                     |  | 2000                    |        | 2000         |  | 2001
|                                     |  |                         |        |              |  |     
|IMPSAT common stock (NASDAQ: IMPT) |  | $                       | 100.00 |              |  | $    | 15.10 |  |  | $ | 0.60  | 
|NASDAQ Composite Index               |  | $                       | 100.00 |              |  | $    | 60.00 |  |  | $ | 48.17 | 
|NASDAQ Telecomm Index                |  | $                       | 100.00 |              |  | $    | 42.30 |  |  | $ | 28.05 | 

The foregoing graph is based on historical data
and is not necessarily indicative of future performance. This
graph shall not be deemed to be soliciting material
or to be filed with the SEC or subject to
Regulations 14A and 14C under the Exchange Act or to the
liabilities of Section 18 under the Exchange Act.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Exchange Act 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 Securities and
Exchange Commission initial reports of ownership and reports of
changes in ownership of our common stock

59



---



##### 



and other equity securities of our company.
Directors, executive officers and greater than 10% stockholders
are required by the Securities and Exchange Commission
regulations to furnish our company with copies of all
Section 16(a) forms they file.


To the our knowledge, based solely on a review of
the copies of the Section 16(a) reports furnished to the
our company and written representations that no other reports
were required, during 2001, all Section 16(a) filing
requirements applicable to its directors, executive officers and
greater than 10% beneficial owners were complied with.



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

The following table sets forth certain
information regarding the beneficial ownership of IMPSAT common
stock as of February 28, 2002, by (i) each person
known by our company to be the beneficial owner of five percent
or more of the 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 common stock listed below have sole
investment and voting power with respect to such shares. The
business address of our executive officers and directors is c/o
IMPSAT Fiber Networks, Inc., Alférez Pareja 256, 1107
Buenos Aires, Argentina.

|                                      |                               |                           |  |                     |  |              |  |         |  |  |  |            |  |  |  |      |  
|------------------------------------- | ----------------------------- | ------------------------- |  | ------------------- |  | ------------ |  | ------- |  |  |  | ---------- |  |  |  | ---- | -
|                                      |                               |                          
|                                      |                               | Shares Beneficially Owned
|                                      |                               |                          
|                                      |                               | Number of                 |  | Options Exercisable |  |             
|Name and Address of Beneficial Owner  |                               | Shares                    |  | Within 60 days      |  | Total Shares |  | Percent
|                                      |                               |                           |  |                     |  |              |  |        
|Common Stock                          |                               |                           |  |                     |  |              |  |         |  |  |  |            |  |  |  |     
|Beneficial Owners of more than 5%     |                               |                           |  |                     |  |              |  |         |  |  |  |            |  |  |  |     
|                                      | Nevasa Holdings Ltd.(1)       |                           |  | 34,969,621          |  |              |  | 0       |  |  |  | 34,969,621 |  |  |  | 38.3 | %
|                                      | Militello Limited(2)          |                           |  | 4,923,031           |  |              |  | 0       |  |  |  | 4,923,031  |  |  |  | 5.4  |  
|                                      | Morgan Stanley Dean Witter(3) |                           |  | 14,917,915          |  |              |  | 4,000   |  |  |  | 14,921,915 |  |  |  | 16.3 |  
|                                      | Nunsgate Limited(4)           |                           |  | 18,285,712          |  |              |  | 0       |  |  |  | 18,285,712 |  |  |  | 20.0 |  
|                                      | Suramericana Group(5)         |                           |  | 4,624,714           |  |              |  | 0       |  |  |  | 4,624,714  |  |  |  | 5.1  |  
|Directors and Executive Officers      |                               |                           |  |                     |  |              |  |         |  |  |  |            |  |  |  |     
|                                      | Enrique M. Pescarmona(1)(6)   |                           |  | 34,975,421          |  |              |  | 63,887  |  |  |  | 35,039,308 |  |  |  | 38.3 |  
|                                      | Ricardo A. Verdaguer(7)       |                           |  | 2,480,026           |  |              |  | 63,887  |  |  |  | 2,543,913  |  |  |  | 2.8  |  
|                                      | Roberto A. Vivo(2)            |                           |  | 4,923,031           |  |              |  |        |  |  |  | 4,928,831  |  |  |  | 5.4  |  
|                                      | Alexander Rivelis             |                           |  | 91,079              |  |              |  | 20,341  |  |  |  | 111,420    |  |  |  | *    |  
|                                      | Sofia Pescarmona              |                           |  | 700                 |  |              |  | 500     |  |  |  | 1,200      |  |  |  | *    |  
|                                      | Morris Jones(4)               |                           |  | 0                   |  |              |  | 0       |  |  |  | 0          |  |  |  | *    |  
|                                      | Carlos Zamora(4)              |                           |  | 1,500               |  |              |  | 0       |  |  |  | 1,500      |  |  |  | *    |  
|                                      | Héctor Alonso                 |                           |  | 4,100               |  |              |  | 36,889  |  |  |  | 40,989     |  |  |  | *    |  
|                                      | Guillermo Jofré               |                           |  | 6,500               |  |              |  | 25,487  |  |  |  | 31,987     |  |  |  | *    |  
|                                      | Guillermo V. Pardo            |                           |  | 1,200               |  |              |  | 20,338  |  |  |  | 21,538     |  |  |  | *    |  
|                                      | José R. Torres                |                           |  | 1,200               |  |              |  | 20,338  |  |  |  | 21,538     |  |  |  | *    |  
|                                      | Marcello Girotti              |                           |  | 3,000               |  |              |  | 20,856  |  |  |  | 23,856     |  |  |  | *    |  
|                                      | Jaime A. Peláez               |                           |  | 400                 |  |              |  | 3,744   |  |  |  | 4,144      |  |  |  | *    |  
|                                      | Mauricio Ceballos             |                           |  | 200                 |  |              |  | 3,642   |  |  |  | 3,842      |  |  |  | *    |  
|                                      | Mariano Torre Gómez           |                           |  | 2,900               |  |              |  | 20,926  |  |  |  | 23,826     |  |  |  | *    |  
|All Directors and Officers as a Group |                               |                           |  |                     |  |              |  |         |  |  |  |            |  |  |  |     
|                                      | (18 persons)                  |                           |  | 42,498,257          |  |              |  | 305,835 |  |  |  | 42,804,092 |  |  |  | 46.8 |  



---



|    |                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | Less than 1%.                                                                                                                                                                                                                                                                                           
|   
|(1) | Nevasa Holdings is owned by Corporación
	IMPSA S.A. (CORIM). The business address of Nevasa
	Holdings is Vanderpool Plaza, Wickham Cay I, Road Town, Tortola,
	British Virgin Islands. CORIM, an Argentine corporation that
	holds a 100% equity interest in Nevasa Holdings through its
	wholly owned

60



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | British Virgin Island subsidiary,
	Telecommunication Worldwide Inc., is controlled by
	Mr. Enrique Pescarmona, the Chairman of our board of
	directors, and other members of the Pescarmona family. CORIM is
	a holding company for businesses engaged in a variety of
	activities including property, casualty and other insurance,
	heavy-steel capital goods, auto parts manufacturing and

|                        | 
|----------------------- | 
|environmental services. | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Militello Ltd., a British Virgin Islands
	corporation that holds 4,923,031 shares of our common stock (or
	an 5.4% equity interest in our company), is controlled by
	Mr. Roberto Vivo, a member of our board of directors. The
	business address of Militello is c/o ATC Trustees
	(BVI) Limited, Road Town, Tortola, British Virgin Islands.                                                                                                                                                                                                                                                 
|   
|(3) | These include 11,937,532 shares of common stock
	owned by Princes Gate Investors II, L.P. (Princes
	Gate) and affiliates of Princes Gate over which Princes
	Gate has sole voting power (including 3,200 shares of our common
	stock exercisable within 60 days); and 2,984,383 shares of
	our common stock owned by Morgan Stanley Global Emerging Markets
	Private Investment Fund, L.P. (MSGEM) and Morgan
	Stanley Global Emerging Markets Private Investors, L.P.
	(Private Investors) over which MSGEM has sole voting
	power (including 800 shares of our common stock exercisable

|                 | 
|---------------- | 
|within 60 days). | 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The business address of Princes Gate is Princes
	Gate Investors II, L.P., 1585 Broadway, 36th Floor, New
	York, NY 10036. Mr. Stephen Munger, who is the
	Co-Chairman of the Investment Committee of Princes Gate and a
	member of our Board of Directors, disclaims voting or
	dispositive power over the shares of our common stock owned by
	Princes Gate and its affiliates. Princes Gate Investors II, Inc.
	(PG Inc.) is the general partner and control person
	of Princes Gate. As a result, PG Inc. may be deemed to be the
	beneficial owner of the 11,937,532 shares of our common stock
	over which Princes Gate has sole voting power. PG Inc. disclaims
	beneficial ownership of any shares of our common stock.                                                                          
|
| |  | The business address of MSGEM and Private
	Investors is c/o Morgan Stanley Global Emerging Markets Private
	Investment Fund, L.P., 1221 Avenue of the Americas, 33rd Floor,
	New York, NY 10020. Mr. Jerónimo Bosch, who is a Vice
	President at Morgan Stanley Dean Witter Private Equity and a
	member of our Board of Directors, disclaims voting or
	dispositive power over the shares of our common stock owned by
	MSGEM. Morgan Stanley Global Emerging Markets, Inc. (MSGEM
	Inc.) is the general partner and control person of MSGEM
	and Private Investors. As a result, MSGEM Inc. may be deemed to
	be the beneficial owner of the 2,984,383 shares of our
	common stock held by MSGEM and Private Investors. MSGEM, Inc.
	disclaims beneficial ownership of any shares of our common stock.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Morgan Stanley & Co. Incorporated
	(MS) is the sole shareholder of PG Inc. and MSGEM
	Inc. As their sole shareholder, MS controls the action of PG
	Inc. and MSGEM Inc. Accordingly, MS may be deemed to have
	beneficial ownership of the 11,937,532 shares of our common
	stock held by Princes Gate and the 2,984,383 shares of our
	common stock held by MSGEM and Private Investors. MS disclaims
	beneficial ownership of any shares of our common stock.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The business address of Nunsgate Limited is Queen
	Victoria Street, Queen Victoria House, Douglas Im12lS, Isle of
	Man. Mr. Carlos Zamora and Mr. Morris Jones, each of
	whom is an executive of British Telecommunications and a
	designee of Nunsgate Limited to our Board of Directors, disclaim
	voting or dispositive power over the shares of our common stock
	owned by Nunsgate Limited.                                                                                   
|   
|(5) | The Suramericana Group includes Portafolio de
	Inversiones Suramericana, Suramericana de Inversiones and
	Compañía Suramericana de Construcciones, the
	investment and construction arms of the Sindicato Antioqueno,
	which was formed in Medellin, Colombia in the mid-1970s, and is
	a group of over 100 companies related through cross-ownerships
	and interlocking directorates. The business address of the
	Suramericana Group is Carrera 64B # 49A30, Medellin,
	Colombia.
|   
|(6) | Includes 34,969,621 shares of common stock
	owned by Nevasa Holdings, of which Mr. Pescarmona may be
	deemed to be the beneficial owner.                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Includes 2,474,226 shares of our common
	stock (or a 2.7% equity interest in our company) owned by
	Rotling International Corporation, a British Virgin Islands
	corporation controlled by Mr. Verdaguer, of which
	Mr. Verdaguer may be deemed to be the beneficial owner.                                                                                                                                                                                                        

61



---



##### 



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 2001. 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. For additional information
concerning CORIM, see Security Ownership of Certain
Beneficial Owners and Management. Mr. Enrique
Pescarmona, who is the Chairman of our board of directors,
serves as the Chairman of CORIMs board of directors. Total
telecommunications services provided by us during 2001 to
companies controlled by CORIM totaled approximately
$1.2 million. During the same period, companies controlled
by CORIM provided services to IMPSAT Argentina totaling
approximately $0.3 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 are
significant stockholders of our Company. See Security
Ownership of Certain Beneficial Owners and Management.
Representatives of the Suramericana Group serve as directors of
IMPSAT Colombia and IMPSAT Venezuela, our operating subsidiaries
in Colombia and Venezuela, respectively. During 2001, the total
dollar amount of telecommunications services rendered by our
company to the Suramericana Group totaled approximately
$7.6 million. The most significant of these transactions
included services provided by IMPSAT Colombia to
Corporación Nacional de Ahorro y Vivienda totaling
$3.8 million, and to BanColombia totaling $1.3 million.

During 2001, companies within the Suramericana
Group provided us with services totaling $6.1 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, 2001, we were indebted
to companies within the Suramericana Group in the amount of
approximately $22.1 million. This includes indebtedness of
approximately $12.6 million to BanColombia and
$5.1 million to Corfinsura (with respect to which
indebtedness we paid, in the aggregate, interest of
$1.0 million during 2001); and indebtedness of
approximately $4.5 million to Suleasing (with respect to
which indebtedness we paid interest totaling $1.1 million
during 2001).

Claxson Interactive Group, Inc.

In August 2001, El Sitio, Inc., a British Virgin
Islands Internet content and Internet service provider
headquartered in Argentina in which we then held a 15.6% equity
interest, agreed with affiliates of Ibero-American Media
Partners II Ltd., a joint venture between the Cisneros Group of
Companies and Hicks, Muse, Tate & Furst Incorporated, to
combine El Sitios interactive assets with Ibero-American
Media Partners media assets in the Latin American region
to form a new company called Claxson Interactive Group, Inc.
Claxson, 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.

62



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##### 



As part of the combination, the shares in El
Sitio (including those held by our company) were converted into
an equal number (or approximately 20%, on an as-converted basis)
of the common shares in Claxson Interactive Group. As of
March 15, 2002, we held an approximately 3.3% equity
interest in Claxson. Affiliates of Mr. Roberto Vivo and
Mr. Ricardo Verdaguer, both members 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
(who is also a member of our Board of Directors) is a director
of Claxson. Prior to the merger during the last quarter of 2001,
Ms. Sofia Pescarmona, a member of our board of directors,
served as a director of El Sitio.

Claxson is the successor to El Sitios
rights and obligations under certain telecommunications services
agreements pursuant to which our subsidiaries provided El Sitio
(and now provide Claxson) with telecommunication networks to
access the Internet backbone. During 2001, the total value of
telecommunications services we rendered to Claxson (including
such services we provided to El Sitio prior to its combination
into Claxson) was approximately $2.0 million.

Morgan Stanley

During 2001, investment banking fees totaling
$0.3 million were paid by our company to representative
affiliates of Morgan Stanley Dean Witter.

British Telecommunications

We are a party to a shareholders agreement with
Nevasa Holdings and Nunsgate Limited, a wholly-owned subsidiary
of British Telecommunications plc, dated as of March 10,
1999, a copy of which has been filed as an exhibit to the
registration statement relating to the initial public offering
of our common stock. Pursuant to the terms of this shareholders
agreement, as long as Nunsgate Limited owns 15% of our
outstanding common stock (as determined on a fully-diluted
basis) and subject to certain conditions, Nunsgate Limited has
the right to nominate two members of our board of directors.
Nevasa Holdings has agreed to vote for the two Nunsgate Limited
nominees to our board of directors so long as Nunsgate Limited
owns 15% of our outstanding common stock.

As long as Nunsgate Limited owns 10% of our
outstanding common stock (as determined on a fully-diluted
basis) and subject to certain conditions, Nunsgate Limited has
the right to:



| |   |                                                  
| | - | -------------------------------------------------
| |  | consult with management on matters relating to us
|
| |  | inspect our books and records                    
|
| |  | inspect our properties and operations            

As long as Nunsgate Limited owns 5% of our
outstanding common stock (as determined on a fully-diluted
basis), Nunsgate Limited has the right to:



| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | request that we sell shares of common stock in a
	public offering registered under the Securities Act, subject to
	certain conditions                      
|
| |  | include common stock held by Nunsgate Limited in
	a public offering of our common stock registered under the
	Securities Act, subject to certain conditions
|
| |  | nominate one member to our Board of Directors and
	to have Nevasa Holdings vote for that nominee                                                           

Nunsgate Limited has agreed to vote for Nevasa
Holdings nominees to our board of directors for so long as
Nevasa Holdings is obligated to vote for Nunsgate Limiteds
nominees to our board of directors.

During 2001, the total value of
telecommunications services we rendered to British
Telecommunications was approximately $2.0 million. During
the same period, we purchased telecommunications capacity from
British Telecommunications totaling approximately
$1.4 million.

63



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##### 



Item 14.     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, 2000 and 2001                                                                   
| |  | Consolidated Statements of Operations for Each of
	the Three Years in the Period Ended December 31, 2001                        
| |  | Consolidated Statements of Comprehensive Loss for
	Each of the Three Years in the Period Ended December 31,
	2001.              
| |  | Consolidated Statements of Stockholders
	Equity (Deficiency) for Each of the Three Years in the Period
	Ended December 31, 2001
| |  | Consolidated Statements of Cash Flows for Each of
	the Three Years in the Period Ended December 31, 2001                        
| |  | Notes to the consolidated financial statements                                                                                  

Financial Statements of IMPSAT S.A.

| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Balance Sheets as of December 31, 2000 and
	2001                                                     
| |  | Statements of Operations for Each of the Three
	Years in the Period Ended December 31, 2001          
| |  | Statements of Comprehensive Loss for Each of the
	Three Years in the Period Ended December 31, 2001. 
| |  | Statements of Stockholders Equity for Each
	of the Three Years in the Period Ended December 31, 2001
| |  | Statements of Cash Flows for Each of the Three
	Years in the Period Ended December 31, 2001          
| |  | Notes to the 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
registrants filed with the Commission the following current
reports on Form 8-K:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On November 28, 2001, announcing the
	consummation of agreements with Nortel Networks Limited and
	Lucent Technologies Inc. (the Lenders) pursuant to
	which the Lenders agreed to refrain from enforcing and waived
	their respective rights to receive principal and interest
	payments owed to them by IMPSAT under our Broadband Network
	Vendor Financing Agreements until January 11, 2002. Also
	announcing our continued negotiations with representatives of
	the holders of its senior notes and the Lenders regarding the
	restructuring of those obligations.

64



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##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Exchange Act, as amended, each of the
registrants 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 12,
2002.



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



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

| |                      
| | ---------------------
| |                      
| | Ricardo A. Verdaguer,
| | President and Chief  
| | Executive Officer    
|
| | Date:  April 12, 2002

| |  | 
| |  | 
| |  | 



| |            
| | -----------
| | IMPSAT S.A.



| |     |                    
| | --- | -------------------
| | By: | /s/ Marcelo Girotti

| |                                   
| | ----------------------------------
| |                                   
| | Marcelo Girotti                   
| | Chairman of the Board of Directors



| |       |               
| | ----- | --------------
| | Date: | April 12, 2002

| | 
| | 
| | 



65



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##### 



POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below (each, a
Signatory) constitutes and appoints Guillermo
Jofré 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 and
any and all amendments thereto and to file the same, with all
exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission. 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 Exchange Act,
as amended, this Report has been signed by the following persons
in the capacities and on the dates indicated.

|                                               |  |                                                                                             |  |                |  | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                      |  | Title                                                                                       |  | Date          
|                                               |  |                                                                                             |  |               
|/s/ ENRIQUE M. PESCARMONAEnrique M. Pescarmona |  | Chairman of the Board of Directors of IMPSAT
	Fiber Networks, Inc.                          |  | April 12, 2002
|                                              
|/s/ RICARDO A. VERDAGUERRicardo A. Verdaguer   |  | Director, President and Chief Executive Officer
	of IMPSAT Fiber Networks, Inc.             |  | April 12, 2002
|                                              
|/s/ GUILLERMO JOFRÉGuillermo Jofré             |  | Chief Financial Officer of IMPSAT Fiber Networks,
	Inc.                                     |  | April 12, 2002
|                                              
|/s/ JOSE R. TORRESJose R. Torres               |  | Vice President, Administration and Chief
	Accounting Officer of IMPSAT Fiber Networks, Inc. |  | April 12, 2002
|                                              
|Roberto Vivo Chaneton                          |  | Director of IMPSAT Fiber Networks, Inc                                                      |  | April 12, 2002
|                                              
|/s/ ALEXANDER RIVELISAlexander Rivelis         |  | Director and President, Strategic Alliances of
	IMPSAT Fiber Networks, Inc.                 |  | April 12, 2002
|                                              
|Lucas Pescarmona                               |  | Director of IMPSAT Fiber Networks, Inc                                                      |  | April 12, 2002
|                                              
|/s/ SOFIA PESCARMONASofia Pescarmona           |  | Director of IMPSAT Fiber Networks, Inc                                                      |  | April 12, 2002
|                                              
|/s/ STEPHEN R. MUNGERStephen R. Munger         |  | Director of IMPSAT Fiber Networks, Inc                                                      |  | April 12, 2002
|                                              
|/s/ JERÓNIMO BOSCHJerónimo Bosch               |  | Director of IMPSAT Fiber Networks, Inc                                                      |  | April 12, 2002

66



---



##### 



|                               |  |                                        |  |                |  | 
|------------------------------ |  | -------------------------------------- |  | -------------- |  | 
|Signature                      |  | Title                                  |  | Date          
|                               |  |                                        |  |               
|/s/ CARLOS ZAMORACarlos Zamora |  | Director of IMPSAT Fiber Networks, Inc |  | April 12, 2002
|                              
|Morris Jones                   |  | Director of IMPSAT Fiber Networks, Inc |  | April 12, 2002

67



---



##### 



POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below (each, a
Signatory) constitutes and appoints Guillermo
Jofré and Jose R. Torres (each, an Agent,
and collectively, Agents) and each or any 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
and any and all amendments thereto and to file the same, with
all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission. 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 Exchange Act,
as amended, this Report has been signed by the following persons
in the capacities and on the dates indicated.

|                                               |  |                                                                                                    |  |                |  | 
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                      |  | Title                                                                                              |  | Date          
|                                               |  |                                                                                                    |  |               
|/s/ MARCELO GIROTTIMarcelo Girotti             |  | Chairman of the Board of Directors of IMPSAT
	Argentina                                            |  | April 12, 2002
|                                              
|/s/ ENRIQUE M. PESCARMONAEnrique M. Pescarmona |  | Director of IMPSAT Argentina                                                                       |  | April 12, 2002
|                                              
|/s/ RICARDO A. VERDAGUERRicardo A. Verdaguer   |  | Director of IMPSAT Argentina                                                                       |  | April 12, 2002
|                                              
|Roberto Vivo Chaneton                          |  | Director of IMPSAT Argentina                                                                       |  | April 12, 2002
|                                              
|/s/ JOSE R. TORRESJose R. Torres               |  | Director of IMPSAT Argentina                                                                       |  | April 12, 2002
|                                              
|/s/ JORGE PATERNOSTROJorge Paternostro         |  | Manager, Administration of IMPSAT Argentina
	(principal financial officer and principal accounting |  | April 12, 2002

68



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##### 



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. and its
subsidiaries (the Company) as of December 31,
2000 and 2001, 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, 2001. 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, 2000 and
2001, and the results of its operations and its cash flows for
each of the three years in the period ended December 31,
2001 in conformity with accounting principles generally accepted
in the United States of America.

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,
stockholders capital deficiency and default on
indebtedness 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
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

Certified Public Accountants


Miami, Florida

April 5, 2002


F-1



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)


|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |            |           |  
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | --------- | -------- | ------- | - | ------- | ---------- | --------- | -
|                                                   |                                                                                                                                        |                                        
|                                                   |                                                                                                                                        | December 31,                           
|                                                   |                                                                                                                                        |                                        
|                                                   |                                                                                                                                        | 2000                                    |           | 2001    
|                                                   |                                                                                                                                        |                                         |           |         
|ASSETS                                            
|CURRENT ASSETS:                                    |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   | Cash and cash equivalents                                                                                                              |                                         | $         | 67,737   |         |   | $       | 35,606     |          
|                                                   | Trading investments                                                                                                                    |                                         |           | 240,892  |         |   |         | 29,319     |          
|                                                   | Trade accounts receivable, net                                                                                                         |                                         |           | 83,351   |         |   |         | 58,411     |          
|                                                   | Other receivables                                                                                                                      |                                         |           | 63,171   |         |   |         | 39,003     |          
|                                                   | Prepaid expenses                                                                                                                       |                                         |           | 3,722    |         |   |         | 3,429      |          
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   |                                                                                                                                        | Total current assets                    |           |          | 458,873 |   |         |            | 165,768   |  
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|BROADBAND NETWORK, Net                             |                                                                                                                                        |                                         | 364,221   |          |         |   | 310,598 |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|PROPERTY, PLANT AND EQUIPMENT, Net                 |                                                                                                                                        |                                         | 381,674   |          |         |   | 214,459 |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|NON-CURRENT ASSETS:                                |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   | Investments                                                                                                                            |                                         |           | 15,091   |         |   |         | 3,307      |          
|                                                   | Intangible assets                                                                                                                      |                                         |           | 87,693   |         |   |         |            |          
|                                                   | Deferred income taxes, net                                                                                                             |                                         |           | 33,059   |         |   |         |            |          
|                                                   | Deferred financing costs, net                                                                                                          |                                         |           | 14,804   |         |   |         | 10,752     |          
|                                                   | Other non-current assets                                                                                                               |                                         |           | 19,335   |         |   |         | 13,690     |          
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   |                                                                                                                                        | Total non-current assets                |           |          | 169,982 |   |         |            | 27,749    |  
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|TOTAL                                              |                                                                                                                                        | $                                       | 1,374,750 |          |         | $ | 718,574 |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|LIABILITIES AND STOCKHOLDERS EQUITY
	(DEFICIENCY)
|CURRENT LIABILITIES:                               |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   | Accounts payable  trade                                                                                                               |                                         | $         | 113,516  |         |   | $       | 86,999     |          
|                                                   | Short-term debt                                                                                                                        |                                         |           | 14,603   |         |   |         | 8,323      |          
|                                                   | Current portion of long-term debt                                                                                                      |                                         |           | 38,377   |         |   |         | 959,076    |          
|                                                   | Accrued and other liabilities                                                                                                          |                                         |           | 53,809   |         |   |         | 79,237     |          
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   |                                                                                                                                        | Total current liabilities               |           |          | 220,305 |   |         |            | 1,133,635 |  
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|LONG-TERM DEBT, Net                                |                                                                                                                                        |                                         | 915,263   |          |         |   | 23,189  |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|OTHER LONG-TERM LIABILITIES                        |                                                                                                                                        |                                         | 28,307    |          |         |   | 14,973  |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|DEFERRED REVENUES                                  |                                                                                                                                        |                                         | 52,290    |          |         |   | 99,419  |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|COMMITMENTS AND CONTINGENCIES (NOTE 15)            |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                  
|STOCKHOLDERS EQUITY (DEFICIENCY):                 |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   | Common Stock, $0.01 par value; 300,000,000 shares
	authorized, 91,428,570 shares issued and outstanding at
	December 31, 2000 and 2001 |                                         |           | 914      |         |   |         | 914        |          
|                                                   | Additional paid in capital                                                                                                             |                                         |           | 537,356  |         |   |         | 537,924    |          
|                                                   | Accumulated deficit                                                                                                                    |                                         |           | (357,075 | )       |   |         | (1,072,330 | )        
|                                                   | Deferred stock-based compensation                                                                                                      |                                         |           | (5,438   | )       |   |         | (5,438     | )        
|                                                   | Accumulated other comprehensive loss                                                                                                   |                                         |           | (17,172  | )       |   |         | (13,712    | )        
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|                                                   |                                                                                                                                        | Total stockholders equity (deficiency) |           |          | 158,585 |   |         |            | (552,642  | )
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           
|TOTAL                                              |                                                                                                                                        | $                                       | 1,374,750 |          |         | $ | 718,574 |           
|                                                   |                                                                                                                                        |                                         |           |          |         |   |         |           

See notes to consolidated financial statements.

F-2



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

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


|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |          |        |          |  
|---------------------------------------------------- | -------------------------------------------------------------------- | ------------------------ | ---------------------------------------------- | -------- | ------ | ------- | -------- | -------- | ------ | ------- | -------- | -------- | ------ | -------- | -
|                                                     |                                                                      |                         
|                                                     |                                                                      | Years Ended December 31,
|                                                     |                                                                      |                         
|                                                     |                                                                      | 1999                     |                                                | 2000     |        | 2001   
|                                                     |                                                                      |                          |                                                |          |        |        
|NET REVENUES:                                        |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | Data and value added services                                        |                          | $                                              | 195,110  |        |         | $        | 214,268  |        |         | $        | 239,816  |       
|                                                     | Internet                                                             |                          |                                                | 26,044   |        |         |          | 35,996   |        |         |          | 45,403   |       
|                                                     | Telephony                                                            |                          |                                                |          |        |         |          | 235      |        |         |          | 11,762   |       
|                                                     | Services to carriers                                                 |                          |                                                |          |        |         |          | 885      |        |         |          | 7,360    |       
|                                                     | Sales of equipment                                                   |                          |                                                | 7,297    |        |         |          | 13,083   |        |         |          | 14,952   |       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          | Total net revenues from services and equipment |          |        | 228,451 |          |          |        | 264,467 |          |          |        | 319,293  |  
|                                                     | Broadband network development revenues                               |                          |                                                |          |        |         |          | 57,676   |        |         |          | 7,197    |       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          | Total net revenues                             |          |        | 228,451 |          |          |        | 322,143 |          |          |        | 326,490  |  
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|COSTS AND EXPENSES:                                  |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | Direct costs:                                                        |                          |                                                |          |        |         |          |          |        |         |          |          |       
|                                                     |                                                                      | Contracted services      |                                                |          | 21,853 |         |          |          | 29,573 |         |          |          | 40,629 |         
|                                                     |                                                                      | Other direct costs       |                                                |          | 31,055 |         |          |          | 21,349 |         |          |          | 35,416 |         
|                                                     |                                                                      | Leased capacity          |                                                |          | 49,666 |         |          |          | 74,188 |         |          |          | 87,057 |         
|                                                     |                                                                      | Broadband network cost   |                                                |          |        |         |          |          | 34,729 |         |          |          | 3,335  |         
|                                                     |                                                                      | Cost of equipment sold   |                                                |          | 5,187  |         |          |          | 12,308 |         |          |          | 10,472 |         
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          | Total direct costs                             |          |        | 107,761 |          |          |        | 172,147 |          |          |        | 176,909  |  
|                                                     | Salaries and wages                                                   |                          |                                                | 46,174   |        |         |          | 68,922   |        |         |          | 82,095   |       
|                                                     | Selling, general and administrative                                  |                          |                                                | 40,631   |        |         |          | 58,471   |        |         |          | 52,964   |       
|                                                     | Asset impairment charge                                              |                          |                                                |          |        |         |          |          |        |         |          | 381,888  |       
|                                                     | Depreciation and amortization                                        |                          |                                                | 130,071  |        |         |          | 84,488   |        |         |          | 123,678  |       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          | Total costs and expenses                       |          |        | 324,637 |          |          |        | 384,028 |          |          |        | 817,534  |  
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|Operating loss                                       |                                                                      |                          | (96,186                                        | )        |        |         | (61,885  | )        |        |         | (491,044 | )       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|OTHER INCOME (EXPENSES):                             |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | Interest income and investment gains                                 |                          |                                                | 7,418    |        |         |          | 27,394   |        |         |          | 10,687   |       
|                                                     | Interest expense                                                     |                          |                                                | (62,979  | )      |         |          | (112,894 | )      |         |          | (143,521 | )     
|                                                     | Net loss on foreign exchange                                         |                          |                                                | (8,042   | )      |         |          | (10,614  | )      |         |          | (41,182  | )     
|                                                     | Recognition of other-than-temporary decline in
	value of investments |                          |                                                |          |        |         |          |          |        |         |          | (20,650  | )     
|                                                     | Other income (loss), net                                             |                          |                                                | 15,305   |        |         |          | 704      |        |         |          | (2,125   | )     
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          | Total other expenses                           |          |        | (48,298 | )        |          |        | (95,410 | )        |          |        | (196,791 | )
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|LOSS BEFORE INCOME TAXES                             |                                                                      |                          | (144,484                                       | )        |        |         | (157,295 | )        |        |         | (687,835 | )       
|BENEFIT FROM (PROVISION FOR) FOREIGN INCOME TAXES    |                                                                      |                          | 20,733                                         |          |        |         | 4,547    |          |        |         | (27,420  | )       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|NET LOSS                                             |                                                                      |                          | (123,751                                       | )        |        |         | (152,748 | )        |        |         | (715,255 | )       
|LOSS ATTRIBUTABLE TO MINORITY INTEREST               |                                                                      |                          | 6,225                                          |          |        |         |          |          |        |         |          |         
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|LOSS BEFORE DIVIDENDS ON REDEEMABLE PREFERRED
	STOCK |                                                                      |                          | (117,526                                       | )        |        |         | (152,748 | )        |        |         | (715,255 | )       
|DIVIDENDS ON REDEEMABLE PREFERRED STOCK              |                                                                      |                          | (14,017                                        | )        |        |         | (1,393   | )        |        |         |          |         
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|NET LOSS ATTRIBUTABLE TO COMMON                      |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | STOCKHOLDERS                                                         |                          | $                                              | (131,543 | )      |         | $        | (154,141 | )      |         | $        | (715,255 | )     
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|NET LOSS PER COMMON SHARE:                           |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | BASIC AND DILUTED                                                    |                          | $                                              | (2.42    | )      |         | $        | (1.74    | )      |         | $        | (7.82    | )     
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:            |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         
|                                                     | BASIC AND DILUTED                                                    |                          |                                                | 54,447   |        |         |          | 88,534   |        |         |          | 91,429   |       
|                                                     |                                                                      |                          |                                                |          |        |         |          |          |        |         |          |         

See notes to consolidated financial statements.

F-3



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS

(In thousands of U.S. dollars)


|                                             |                                                                      |                          |          |         |         |      |          |          |          |   |          |         |       | 
|-------------------------------------------- | -------------------------------------------------------------------- | ------------------------ | -------- | ------- | ------- | ---- | -------- | -------- | -------- | - | -------- | ------- | ----- | 
|                                             |                                                                      |                         
|                                             |                                                                      | Years ended December 31,
|                                             |                                                                      |                         
|                                             |                                                                      | 1999                     |          | 2000    |         | 2001
|                                             |                                                                      |                          |          |         |         |     
|NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |                                                                      | $                        | (131,543 | )       |         | $    | (154,141 | )        |          | $ | (715,255 | )      
|                                             |                                                                      |                          |          |         |         |      |          |          |          |   |          |        
|OTHER COMPREHENSIVE (LOSS) INCOME:           |                                                                      |                          |          |         |         |      |          |          |          |   |          |        
|                                             | Foreign currency translation adjustment                              |                          |          | (1,724  | )       |      |          | (4,167   | )        |   |          | (6,978  | )    
|                                             | Change in unrealized loss on investments
	available for sale         |                          |          | 128,623 |         |      |          | (139,378 | )        |   |          | (10,212 | )    
|                                             | Recognition of other-than-temporary decline in
	value of investments |                          |          |         |         |      |          |          |          |   |          | 20,650  |      
|                                             |                                                                      |                          |          |         |         |      |          |          |          |   |          |        
|                                             |                                                                      | TOTAL                    |          |         | 126,899 |      |          |          | (143,545 | ) |          |         | 3,460 | 
|                                             |                                                                      |                          |          |         |         |      |          |          |          |   |          |        
|COMPREHENSIVE LOSS                           |                                                                      | $                        | (4,644   | )       |         | $    | (297,686 | )        |          | $ | (711,795 | )      
|                                             |                                                                      |                          |          |         |         |      |          |          |          |   |          |        

See notes to consolidated financial statements.

F-4



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIENCY)


Years Ended December 31, 1999, 2000 and
2001


(In thousands of U.S. dollars)


|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |          |  
|----------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ----------- | --- | ------- |  | -------------- | ------- | ------------- | - | ----------- | ---------- | -------- | - | - | -------- | ------- |  | - | ------ | ------ | - | - | ------- | -------- | - | - | -------- | -------- | -
|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         |               |   | Accumulated |            |         
|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         | Other         |   |            
|                              |                                                                                                         | Common Stock |            | Additional |  |             |     |         |  | Deferred       |         | Comprehensive |   |            
|                              |                                                                                                         |              |            | Paid In    |  | Accumulated |     |         |  | Stock-Based    |         | (Loss)        |   |            
|                              |                                                                                                         | Shares       |            | Amount     |  | Capital     |     | Deficit |  | Treasury Stock |         | Compensation  |   | Income      |            | Total   
|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         |               |   |             |            |         
|BALANCE AT DECEMBER 31, 1998. |                                                                                                         |              | 44,753,746 |            |  | $           | 597 |         |  | $              | 94,801  |               |   | $           | (71,391    | )        |   | $ | (125,000 | )       |  |   |        |        |   | $ | (526    | )        |   | $ | (101,519 | )       
|                              | Dividends on redeemable preferred stock                                                                 |              |            |            |  |             |     |         |  |                |         |               |   |             |            | (14,017  | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (14,017  | )
|                              | Common stock issuance                                                                                   |              |            | 11,934,330 |  |             |     | 119     |  |                |         | 120,817       |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 120,936  |  
|                              | Amortization of amount paid in excess of carrying
	value of net assets acquired from related party      |              |            |            |  |             |     |         |  |                |         | 568           |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          | 568      |  
|                              | Change in unrealized gain on investment available
	for sale, net of taxes                               |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         | 128,623  |   |   |          | 128,623  |  
|                              | Foreign currency translation adjustment                                                                 |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         | (1,724   | ) |   |          | (1,724   | )
|                              | Net loss for the year                                                                                   |              |            |            |  |             |     |         |  |                |         |               |   |             |            | (117,526 | ) |   |          |         |  |   |        |        |   |   |         |          |   |   |          | (117,526 | )
|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         
|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, net of taxes                               |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         | (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, net of taxes                               |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         | (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 | )       
|                              |                                                                                                         |              |            |            |  |             |     |         |  |                |         |               |   |             |            |          |   |   |          |         |  |   |        |        |   |   |         |          |   |   |          |         

See notes to consolidated financial statements.

F-5



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands of U.S. dollars)


|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |          |         |         |         |  
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | ------- | -
|                                                                      |                                                                                                                |                                                                     
|                                                                      |                                                                                                                | Years Ended December 31,                                            
|                                                                      |                                                                                                                |                                                                     
|                                                                      |                                                                                                                | 1999                                                                 |                                                                        | 2000                                                 |         | 2001   
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Net loss                                                                                                       |                                                                      | $                                                                      | (117,526                                             | )       |         | $        | (152,748 | )       |         | $        | (715,255 | )      
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by (used in) operating activities, net of acquisition: |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |          |        
|                                                                      |                                                                                                                | Amortization and depreciation                                        |                                                                        |                                                      | 130,071 |         |          |          | 84,488  |         |          |          | 123,678 |        
|                                                                      |                                                                                                                | Asset impairment charge                                              |                                                                        |                                                      |         |         |          |          |         |         |          |          | 381,888 |        
|                                                                      |                                                                                                                | Provision for doubtful accounts                                      |                                                                        |                                                      | 11,232  |         |          |          | 4,806   |         |          |          | 16,784  |        
|                                                                      |                                                                                                                | Recognition of other-than-temporary decline in
	value of investments |                                                                        |                                                      |         |         |          |          |         |         |          |          | 20,650  |        
|                                                                      |                                                                                                                | Net gain on sale of investment                                       |                                                                        |                                                      |         |         |          |          |         |         |          |          | (75     | )      
|                                                                      |                                                                                                                | Deferred income tax (benefit) provision                              |                                                                        |                                                      | (24,498 | )       |          |          | (3,036  | )       |          |          | 26,706  |        
|                                                                      |                                                                                                                | Gross profit from broadband network development                      |                                                                        |                                                      |         |         |          |          | (27,639 | )       |          |          |         |        
|                                                                      |                                                                                                                | Changes in assets and liabilities:                                   |                                                                        |                                                      |         |         |          |          |         |         |          |          |         |        
|                                                                      |                                                                                                                |                                                                      | (Increase) decrease in trade accounts receivable,
	net                 |                                                      |         | (16,434 | )        |          |         | (35,981 | )        |          |         | 8,156   |        
|                                                                      |                                                                                                                |                                                                      | Decrease (increase) in prepaid expenses                                |                                                      |         | 291     |          |          |         | (2,019  | )        |          |         | 293     |        
|                                                                      |                                                                                                                |                                                                      | (Increase) decrease in other receivables and
	other non-current assets |                                                      |         | (16,971 | )        |          |         | (33,110 | )        |          |         | 33,392  |        
|                                                                      |                                                                                                                |                                                                      | Increase (decrease) in accounts payable
	 trade                       |                                                      |         | 20,212  |          |          |         | 59,838  |          |          |         | (26,517 | )      
|                                                                      |                                                                                                                |                                                                      | Increase in accrued and other liabilities                              |                                                      |         | 4,532   |          |          |         | 24,303  |          |          |         | 25,428  |        
|                                                                      |                                                                                                                |                                                                      | Increase in deferred revenues                                          |                                                      |         | 23,200  |          |          |         | 87,757  |          |          |         | 47,129  |        
|                                                                      |                                                                                                                |                                                                      | Decrease in other long-term liabilities                                |                                                      |         | (10,260 | )        |          |         | (6,746  | )        |          |         | (13,334 | )      
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      |                                                                                                                |                                                                      |                                                                        | Net cash provided by (used in) operating
	activities |         |         | 3,849    |          |         |         | (87      | )        |         |         | (71,077 | )
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Net (increase) decrease in trading
	investments                                                                |                                                                      |                                                                        |                                                      |         |         |          | (240,892 | )       |         |          | 211,573  |        
|                                                                      | Build-out of broadband network                                                                                 |                                                                      |                                                                        | (11,833                                              | )       |         |          | (56,325  | )       |         |          | (89,240  | )      
|                                                                      | Purchases of property, plant and equipment                                                                     |                                                                      |                                                                        | (97,388                                              | )       |         |          | (213,827 | )       |         |          | (78,448  | )      
|                                                                      | Cash paid in Mandic S.A. acquisition, net                                                                      |                                                                      |                                                                        | (3,700                                               | )       |         |          |          |         |         |          |          |        
|                                                                      | Purchases of available for sale investment                                                                     |                                                                      |                                                                        | (21,527                                              | )       |         |          |          |         |         |          |          |        
|                                                                      | Proceeds from the sale of investment                                                                           |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          | 8,000    |        
|                                                                      | Decrease (increase) in other investment                                                                        |                                                                      |                                                                        | 473                                                  |         |         |          | (437     | )       |         |          |          |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      |                                                                                                                |                                                                      |                                                                        | Net cash (used in) provided by investing
	activities |         |         | (133,975 | )        |         |         | (511,481 | )        |         |         | 51,885  |  
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Net payments on short-term debt                                                                                |                                                                      |                                                                        | (3,592                                               | )       |         |          | (1,067   | )       |         |          | (6,280   | )      
|                                                                      | Proceeds from long-term debt, net of deferred
	financing costs                                                 |                                                                      |                                                                        | 46,101                                               |         |         |          | 321,453  |         |         |          | 24,567   |        
|                                                                      | Repayments of long-term debt                                                                                   |                                                                      |                                                                        | (24,109                                              | )       |         |          | (31,271  | )       |         |          | (24,248  | )      
|                                                                      | Proceeds from issuance of common stock, net                                                                    |                                                                      |                                                                        | 120,936                                              |         |         |          | 229,350  |         |         |          |          |        
|                                                                      | Cash paid in redemption of preferred stock                                                                     |                                                                      |                                                                        |                                                      |         |         |          | (32,500  | )       |         |          |          |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      |                                                                                                                |                                                                      |                                                                        | Net cash provided by (used in) financing
	activities |         |         | 139,336  |          |         |         | 485,965  |          |         |         | (5,961  | )
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH                       |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | EQUIVALENTS                                                                                                    |                                                                      |                                                                        | (1,724                                               | )       |         |          | (4,167   | )       |         |          | (6,978   | )      
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|NET INCREASE (DECREASE) IN CASH AND CASH
	EQUIVALENTS                 |                                                                                                                |                                                                      | 7,486                                                                  |                                                      |         |         | (29,770  | )        |         |         | (32,131  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                    |                                                                                                                |                                                                      | 90,021                                                                 |                                                      |         |         | 97,507   |          |         |         | 67,737   |         
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR                          |                                                                                                                | $                                                                    | 97,507                                                                 |                                                      |         | $       | 67,737   |          |         | $       | 35,606   |         
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Interest paid                                                                                                  |                                                                      | $                                                                      | 63,127                                               |         |         | $        | 93,532   |         |         | $        | 113,011  |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Foreign income taxes paid                                                                                      |                                                                      | $                                                                      | 1,751                                                |         |         | $        | 2,264    |         |         | $        | 4,590    |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Accrued dividends on redeemable preferred stock                                                                |                                                                      | $                                                                      | 14,017                                               |         |         | $        | 1,393    |         |         |          |          |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Change to unrealized gain (loss) in
	investment available for sale                                             |                                                                      | $                                                                      | 128,623                                              |         |         | $        | (139,378 | )       |         | $        | (10,212  | )      
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Rights of way agreements                                                                                       |                                                                      | $                                                                      | 15,134                                               |         |         | $        | 18,697   |         |         |          |          |        
|                                                                      |                                                                                                                |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |          |         
|                                                                      | Broadband network vendor financing                                                                             |                                                                      | $                                                                      | 46,219                                               |         |         | $        | 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

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, and subsidiaries (the Company) is a leading
integrated provider of broadband Internet, data and voice
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. In addition, the Company has built an
extensive pan-Latin American high capacity fiber optic network
(Broadband Network).

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. Finally, the Company has 500,000
gross square feet of premises housing advanced hosting
capabilities.

The 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 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 Company and its
operating subsidiaries.

Liquidity and Going Concern
Considerations The
accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company currently faces
significant near-term cash flow and liquidity problems. The
Company has no material working capital or other credit facility
under which it may borrow for working capital or other general
corporate purposes. The Company is not generating sufficient
revenue to fund its operations and to repay its principal and
interest obligations under its indebtedness, including its
vendor financing obligations with Nortel Networks Limited
(Nortel) and Lucent Technologies Inc.
(Lucent) (collectively the Broadband Network
Vendor Financing Agreements) and its 12.125% Senior
Guaranteed Notes due 2003, 13.375% Senior Notes due 2005 and
12.375% Senior Notes due 2008 (collectively the Senior
Notes). The Company did not make the semi-annual interest
payment on the Senior Notes due 2003 (which was due on
January 15, 2002), on the Senior Notes due 2005 (which was
due on February 15, 2002), or on the Senior Notes due 2008
(which was due on December 15, 2001). The Company is also
in default under the Broadband Network Vendor Financing
Agreements. The Companys capital requirements under the
business plan for fiscal year 2002 are greater than available
capital resources, and the Companys cash flows and
liquidity are insufficient to satisfy all of the Companys
obligations. These factors raise substantial doubt as to the
Companys ability to continue as a going concern for a
reasonable period of time. The consolidated financial statements
do not include any adjustments relating to the

F-7



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue
as a going concern.

The Company believes that it is unlikely it will
be able to obtain future debt or equity financing on acceptable
terms, or at all. The securities markets are currently not
available to the Company. The Company therefore will be required
to restructure its balance sheet. It is unlikely that the
Company could obtain additional financing without effecting a
restructuring. The Company with the assistance of the investment
bank, Houlihan Lokey Howard & Zukin Capital (Houlihan
Lokey), is currently negotiating with the holders of the
Senior Notes and with the creditors under the Broadband Network
Vendor Financing Agreements as to the proposed financial
restructuring plan discussed below. There is no assurance that
the Company will be able to successfully complete the proposed
financial restructuring plan. Such events could have a material
adverse effect upon the Company and could threaten its ability
to continue as a going concern.

Financial Restructuring On March 11, 2002, the
Companys management, who have been advised by Houlihan
Lokey, concluded negotiations with an ad hoc committee (the
Committee) representing certain holders of the debt
under its Broadband Network Vendor Financing Agreements and
certain holders of the $125.0 million outstanding principal
amount of the 12.125% Senior Guaranteed Notes due 2003, the
$300.0 million 13.75% Senior Notes due 2005 and the
$225.0 million 12.375% Senior Notes due 2008 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 Companys existing
	common stock, options granted under the Companys stock
	option plans, and any other equity interests would be cancelled,
	retired and eliminated with no consideration paid therefor, and
	the Company would issue new common stock in
	accordance with the proposed restructuring plan;
|
| |  | creditors under the Broadband Network Vendor
	Financing Agreements would receive                                                                                                                                                                                                                                                        



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $140.7 million senior secured debt issued by
	IMPSAT Argentina and IMPSAT Brazil and guaranteed by the Company;                                                       
|
| |  | $22.5 million of new senior convertible
	notes guaranteed by IMPSAT Argentina and convertible into 5% of
	the Companys new common stock on a fully-diluted basis; and
|
| |  | warrants to acquire up to 15% of the
	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 guaranteed by
	IMPSAT Argentina and convertible into 23% of the 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
	Companys new common stock, subject to certain dilutive
	events                                                                                                                                                                                                                                                                    
|
| |  | the Companys guarantees of certain
	indebtedness owed by the 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 Company
|
| |  | no distribution to existing stockholders of the
	Company                                                                                                                                                                                                                                                                                                                                                                                 

F-8



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | management would receive 2% of the Companys
	new common stock plus stock options representing 8% of the
	Companys new common stock.

The term sheet agreement in principle provides
that completion of the proposed restructuring plan would be
subject to certain conditions, including its acceptance by
affected classes of the Companys securities holders in
accordance with the U.S. Bankruptcy Code.

Currently, the Company has not filed a
Chapter 11 plan of reorganization under the U.S. Bankruptcy
Code. There can be no assurances that the Company will be able
to complete this filing or, if the Company does, that any plan
of reorganization will be approved by the Bankruptcy Court. If
the Company is unable to timely file for protection under
Chapter 11 or obtain confirmation of a plan of
reorganization, the creditors may seek other alternatives for
the Company, including accepting bids for the Company or parts
thereof through an auction process or forcing the Company into a
liquidation proceeding under the federal bankruptcy laws.

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.

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s
foreign exchange rate risk, other than in Brazil and in
Argentina since the devaluation discussed below, is limited
because the majority of its assets are either non-monetary in
nature or denominated in U.S. dollars, and the majority of its
debt is denominated in U.S. dollars. Additionally, a significant
portion of the Companys debt has a fixed interest rate
thereby limiting the Companys interest rate risk exposure.
Accordingly, the Company has not entered into derivative
transactions to hedge against these potential 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 peso free
market opened on January 11, 2002 and traded at 1.65
pesos to the U.S. dollar and has been volatile since. The
devaluation of the Argentine peso will generally affect
the Companys consolidated financial statements by
generating foreign exchange gains or losses on
peso-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

F-9



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 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 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,
IMPSAT Argentinas customer contracts and operating cash
inflows are now predominantly denominated in pesos.
Moreover, IMPSAT Argentinas debt service payments and a
significant 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.

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
pesos-denominated monetary assets and liabilities.

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 years ended
December 31, 1999, 2000 and 2001.

F-10



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

Broadband Network Portions of the Broadband Network are
under construction. 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 IRUs 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   

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.

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, net of tax, for
available for sale investments are included in accumulated other
comprehensive loss within stockholders equity. 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 are being amortized (and charged to interest
expense) over the term of the related notes on a method which
approximates the level yield method.

Intangible Assets Intangible assets consisted of
goodwill created from acquisitions as of December 31, 2000.
These intangible assets were being amortized on a straight-line
basis over a period ranging from 4 to 15 years. During
2001, the unamortized balance of the intangibles were
written-off through an impairment charge as discussed below.

Long-Lived Assets Long-lived assets, including goodwill,
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

F-11



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

adjusted to fair value. During the year ended
December 31, 2001, in connection with the Companys
ongoing review of its business plan, cash flows 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 interests 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.

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 which is included in
accumulated other comprehensive income (loss) in
stockholders equity. The decision of the Argentine
Government on December 20, 2001, to preclude exchanges of
pesos and U.S. dollars created a condition of
non-exchangeability, which resulted in the Company using the
first subsequent free-floating rate (1.65 pesos for $1.00 U.S.
dollar) for which transactions could be settled to remeasure
IMPSAT Argentinas financial position and results of
operations. This resulted in a remeasurement loss of
approximately $16.5 million which is reflected in net loss
on foreign exchange in the accompanying consolidated statements
of operations.

Fair Value of Financial
Instruments The
Companys financial instruments include receivables,
investments, payables, short- and long-term debt. The
Companys Senior Notes, trading and available for sale
investments, were valued at market closing prices at
December 31, 2000 and 2001. 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, 2000 and 2001.

At December 31, 2000 and 2001, the fair
values of the Companys financial instruments were as
follows:

|                                         |  |      |         |      |  |   |        | 
|---------------------------------------- |  | ---- | ------- | ---- |  | - | ------ | 
|                                         |  | 2000 |         | 2001
|                                         |  |      |         |     
|12.125% Senior Guaranteed Notes due 2003 |  | $    | 98,750  |      |  |   | 6,250  | 
|13.75% Senior Notes due 2005.            |  |      | 198,000 |      |  |   | 12,000 | 
|12.375% Senior Notes due 2008.           |  |      | 124,875 |      |  |   | 9,000  | 
|Trading Investments                      |  |      | 240,892 |      |  | $ | 29,319 | 
|Available for sale investments           |  |      | 7,166   |      |  |   | 3,307  | 

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 members of the Board compensation plans at fair
value. The Company has chosen to continue to account for
stock-based compensation to employees and non-employee members
of the Board 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 members of
the Board are measured as the excess, if any, of the fair value
of the

F-12



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Companys stock at the date of grant over
the amount an employee or non-employee member of the Board must
pay for the stock. The Company also provides the required
disclosures of SFAS No. 123.

Stock Split On January 11, 2000, the
Companys Board approved a .592 to 1 reverse common stock
split. Retroactive restatement has been made to all share
amounts to reflect the stock split.

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.

Accumulated Other Comprehensive
Loss Accumulated other
comprehensive loss is comprised as follows:

|                             |  |             |         |               |  |       |          |   |  |   |          |  
|---------------------------- |  | ----------- | ------- | ------------- |  | ----- | -------- | - |  | - | -------- | -
|                             |  |             |         | Unrealized    |  |      
|                             |  |             |         | Gain (Loss)   |  |      
|                             |  |             |         | on            |  |      
|                             |  | Foreign     |         | Investments   |  |      
|                             |  | Currency    |         | Available for |  |      
|                             |  | Translation |         | Sale          |  | Total
|                             |  |             |         |               |  |      
|Balance at December 31, 1999 |  | $           | (2,250  | )             |  | $     | 128,623  |   |  | $ | 126,373  |  
|Change during the year       |  |             | (4,167  | )             |  |       | (139,378 | ) |  |   | (143,545 | )
|                             |  |             |         |               |  |       |          |   |  |   |          |  
|Balance at December 31, 2000 |  |             | (6,417  | )             |  |       | (10,755  | ) |  |   | (17,172  | )
|Change during the year       |  |             | (6,978  | )             |  |       | 10,438   |   |  |   | 3,460    |  
|                             |  |             |         |               |  |       |          |   |  |   |          |  
|Balance at December 31, 2001 |  | $           | (13,395 | )             |  | $     | (317     | ) |  | $ | (13,712  | )
|                             |  |             |         |               |  |       |          |   |  |   |          |  

New Accounting Pronouncements The Financial Accounting Standards
Board (FASB) has issued Statement of Financial
Accounting Standards No 142 (SFAS 142),
Goodwill and Other Intangible Assets, which addresses the
accounting for goodwill and other intangible assets. SFAS 142
specifies that, among other things, intangible assets with an
indefinite useful life and goodwill will no longer be amortized.
This standard requires goodwill to be periodically tested for
impairment and written down to fair value if considered
impaired. The provisions of SFAS 142 are effective for fiscal
years beginning after December 15, 2001, and are effective
for interim periods in the initial year of adoption. As of
December 31, 2001, the Company did not have any significant
intangible assets; therefore, the adoption of SFAS 142 on
January 1, 2002, did not have a material effect on the
Companys consolidated financial statements or disclosures.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002, with early adoption encouraged. The Company
does not expect the adoption of SFAS No. 143 to have a
material effect on its consolidated financial statements or
disclosures.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years, with early adoption encouraged. The provisions of SFAS
No. 144 generally are to be applied prospectively. The
Company does not expect the adoption of SFAS No. 144 to
have a material effect on its financial statements or
disclosures.

Reclassifications Certain amounts in the 1999 and 2000
consolidated financial statements have been reclassified to
conform with the 2001 presentation.

F-13



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

3.  Investments

The Companys investments consist of the
following at December 31, 2000 and 2001:

|                                   |       |      |         |        |  |   |        |       | 
|---------------------------------- | ----- | ---- | ------- | ------ |  | - | ------ | ----- | 
|                                   |       | 2000 |         | 2001  
|                                   |       |      |         |       
|Trading investments, at fair value |       | $    | 240,892 |        |  | $ | 29,319 |      
|                                   |       |      |         |        |  |   |        |      
|Investment, at cost                |       | $    | 7,925   |        |  |   |        |      
|Investments in common stock        |       |      | 7,166   |        |  | $ | 3,307  |      
|                                   |       |      |         |        |  |   |        |      
|                                   | Total |      | $       | 15,091 |  |   | $      | 3,307 | 
|                                   |       |      |         |        |  |   |        |      

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

The Companys cost basis investment
represented a less than 1% ownership in an unaffiliated entity
established for the purchase and leasing of satellite capacity
time. During October 2001, the Company sold this investment for
$8 million.

The Companys investment in common stock
includes a 3.3% ownership interest in the outstanding common
stock of Claxson Interactive Group Inc., an integrated media
company with operations in Latin America. This investment is
subject to equity price risk. The Company has not taken any
actions to hedge this market risk exposure. During the year
ended December 31, 2001, the Company recorded a non-cash
charge of $20.7 million, which reflected an
other-than-temporary decline in the value of this investment
based upon a sustained reduction in the quoted market price of
$1.43 per share compared to the cost basis of $35.10 per
share. This charge is included in recognition of other-than
temporary decline in value of investment in the accompanying
consolidated statements of operations.

4.  Trade Accounts
Receivable

Trade accounts receivable, by operating
subsidiaries, at December 31, 2000 and 2001, are summarized
as follows:

|                                      |       |      |         |         |  |   |         |        | 
|------------------------------------- | ----- | ---- | ------- | ------- |  | - | ------- | ------ | 
|                                      |       | 2000 |         | 2001   
|                                      |       |      |         |        
|IMPSAT Argentina                      |       | $    | 75,116  |         |  | $ | 51,037  |       
|IMPSAT Brazil                         |       |      | 6,553   |         |  |   | 6,714   |       
|IMPSAT Colombia                       |       |      | 6,662   |         |  |   | 5,033   |       
|IMPSAT Venezuela                      |       |      | 6,311   |         |  |   | 6,637   |       
|All other countries                   |       |      | 11,218  |         |  |   | 12,772  |       
|                                      |       |      |         |         |  |   |         |       
|                                      | Total |      |         | 105,860 |  |   |         | 82,193 | 
|Less: allowance for doubtful accounts |       |      | (22,509 | )       |  |   | (23,782 | )     
|                                      |       |      |         |         |  |   |         |       
|Trade accounts receivable, net        |       | $    | 83,351  |         |  | $ | 58,411  |       
|                                      |       |      |         |         |  |   |         |       

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 are
susceptible to changes in the Latin American economies and
political climates. Prior to extending credit, the
customers financial history is analyzed.

F-14



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The activity for the allowance for doubtful
accounts for the year ended December 31, 1999, 2000 and
2001 is as follows:

|                                |  |      |        |      |  |      |        |   |  |   |         |  
|------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                |  | 1999 |        | 2000 |  | 2001
|                                |  |      |        |      |  |     
|Beginning balance               |  | $    | 10,109 |      |  | $    | 19,820 |   |  | $ | 22,509  |  
|Provision for doubtful accounts |  |      | 11,232 |      |  |      | 4,806  |   |  |   | 16,784  |  
|Write-offs, net of recoveries   |  |      | (1,521 | )    |  |      | (2,117 | ) |  |   | (15,511 | )
|                                |  |      |        |      |  |      |        |   |  |   |         |  
|Ending balance                  |  | $    | 19,820 |      |  | $    | 22,509 |   |  | $ | 23,782  |  
|                                |  |      |        |      |  |      |        |   |  |   |         |  

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 including its operating subsidiaries and are
as follows at December 31, 2000 and 2001:

|                    |       |      |        |        |  |   |        |        | 
|------------------- | ----- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                    |       | 2000 |        | 2001  
|                    |       |      |        |       
|IMPSAT Argentina    |       | $    | 33,678 |        |  | $ | 22,155 |       
|IMPSAT Brazil       |       |      | 12,538 |        |  |   | 3,209  |       
|IMPSAT Colombia     |       |      | 4,149  |        |  |   | 3,777  |       
|IMPSAT Venezuela    |       |      | 2,156  |        |  |   | 2,667  |       
|All other countries |       |      | 10,650 |        |  |   | 7,195  |       
|                    |       |      |        |        |  |   |        |       
|                    | Total |      | $      | 63,171 |  |   | $      | 39,003 | 
|                    |       |      |        |        |  |   |        |       

6.  Broadband Network and
Agreements

Broadband network and related equipment consists
of the following at December 31, 2000 and 2001:

|                                             |       |      |         |         |  |   |         |         | 
|-------------------------------------------- | ----- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                             |       | 2000 |         | 2001   
|                                             |       |      |         |        
|Network infrastructure                       |       | $    | 201,372 |         |  | $ | 168,301 |        
|Equipment and materials                      |       |      | 151,185 |         |  |   | 132,494 |        
|Right of ways                                |       |      | 33,266  |         |  |   | 16,056  |        
|IRU investments                              |       |      | 20,010  |         |  |   | 46,913  |        
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      |         | 405,833 |  |   |         | 363,764 | 
|Less: accumulated depreciation               |       |      | (46,433 | )       |  |   | (83,373 | )      
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      |         | 359,400 |  |   |         | 280,391 | 
|Under construction  Network
	infrastructure |       |      | 3,424   |         |  |   | 30,207  |        
|Under construction  Global Crossing
	Ducts  |       |      | 1,397   |         |  |   |         |        
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      | $       | 364,221 |  |   | $       | 310,598 | 
|                                             |       |      |         |         |  |   |         |        

F-15



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The recap of accumulated depreciation for the
year ended December 31, 1999, 2000 and 2001, is as follows:

|                          |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                          |  | 1999 |        | 2000 |  | 2001
|                          |  |      |        |      |  |     
|Beginning balance         |  | $    | 41,346 |      |  | $    | 42,368 |   |  | $ | 46,433 |  
|Depreciation expense      |  |      | 1,022  |      |  |      | 4,365  |   |  |   | 41,173 |  
|Disposals and retirements |  |      |        |      |  |      | (300   | ) |  |   | (4,233 | )
|                          |  |      |        |      |  |      |        |   |  |   |        |  
|Ending balance            |  | $    | 42,368 |      |  | $    | 46,433 |   |  | $ | 83,373 |  
|                          |  |      |        |      |  |      |        |   |  |   |        |  

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, 2001, a total of
$245.4 million was outstanding (see Note 9).

The Companys subsidiaries have obtained
additional vendor financing from Lucent Technologies, 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
$30.1 million is outstanding as of December 31, 2001,
and 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 revenues
and costs totaling $57.7 million and $34.7 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,
2000 and 2001, respectively.

IRU Agreements The Company has entered into several
agreements granting IRUs of up to 25 years to the
Companys Broadband Network, including network maintenance
services and telehousing space. The Company has received
approximately $50.4 million during the year ended
December 31, 2001 related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying consolidated balance sheets. During the year ended
December 31, 2001, the Company recognized approximately
$3.2 million from these agreements, which are reflected as
services to carriers in the accompanying consolidated statement
of operations.

F-16



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

7.  Property, Plant and
Equipment

Property, plant and equipment at
December 31, 2000 and 2001, consisted of:

|                                        |       |      |          |         |  |   |          |         | 
|--------------------------------------- | ----- | ---- | -------- | ------- |  | - | -------- | ------- | 
|                                        |       | 2000 |          | 2001   
|                                        |       |      |          |        
|Land                                    |       | $    | 10,398   |         |  | $ | 11,223   |        
|Building and improvements               |       |      | 55,792   |         |  |   | 68,350   |        
|Operating communications equipment      |       |      | 513,287  |         |  |   | 424,428  |        
|Furniture, fixtures and other equipment |       |      | 33,703   |         |  |   | 36,376   |        
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 613,180 |  |   |          | 540,377 | 
|Less: accumulated depreciation          |       |      | (265,354 | )       |  |   | (332,345 | )      
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 347,826 |  |   |          | 208,032 | 
|Equipment in transit                    |       |      | 15,285   |         |  |   | 3,413    |        
|Works in process                        |       |      | 18,563   |         |  |   | 3,014    |        
|                                        |       |      |          |         |  |   |          |        
|Property, plant and equipment, net      |       | $    | 381,674  |         |  | $ | 214,459  |        
|                                        |       |      |          |         |  |   |          |        

The recap of accumulated depreciation for the
year ended December 31, 1999, 2000 and 2001, is as follows:

|                          |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                          |  | 1999 |         | 2000 |  | 2001
|                          |  |      |         |      |  |     
|Beginning balance         |  | $    | 85,678  |      |  | $    | 201,656 |   |  | $ | 265,354 |  
|Depreciation expense      |  |      | 118,834 |      |  |      | 74,156  |   |  |   | 76,465  |  
|Disposals and retirements |  |      | (2,856  | )    |  |      | (10,458 | ) |  |   | (9,474  | )
|                          |  |      |         |      |  |      |         |   |  |   |         |  
|Ending balance            |  | $    | 201,656 |      |  | $    | 265,354 |   |  | $ | 332,345 |  
|                          |  |      |         |      |  |      |         |   |  |   |         |  

8.  Short-Term Debt

Several of the Companys subsidiaries
maintain short-term credit facilities with local banks. These
credit facilities are denominated in U.S. dollars, with interest
rates ranging from 14% to 21%. The Companys subsidiaries
have historically refinanced these short-term credit facilities
on an annual basis. As of December 31, 2000 and 2001,
amounts outstanding under these credit facilities totaled
approximately $14.6 million and $8.3 million,
respectively.

F-17



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

9.  Long-Term Debt

The Companys long-term debt at
December 31, 2000 and 2001, is detailed as follows:

|                                                                                                                                                               |                                          |                                              |                      |         |        |         |          |         |        |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------------- | -------------------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | 
|                                                                                                                                                               |                                          | 2000                                         |                      | 2001   
|                                                                                                                                                               |                                          |                                              |                      |        
|Senior Notes:                                                                                                                                                  |                                          |                                              |                      |         |        |         |          |        
|                                                                                                                                                               | 12.125% Senior Guaranteed Notes due 2003 |                                              | $                    | 125,000 |        |         | $        | 125,000 |       
|                                                                                                                                                               | 13.75% Senior Notes due 2005             |                                              |                      | 300,000 |        |         |          | 300,000 |       
|                                                                                                                                                               | 12.375% Senior Notes due 2008            |                                              |                      | 225,000 |        |         |          | 225,000 |       
|Term notes, maturing from 2001 through 2004;
	collateralized by buildings and equipment, the assignment of
	customer contracts and investment; denominated in: |                                          |                                              |                      |         |        |         |          |        
|                                                                                                                                                               |                                          | U.S. dollars (interest rates 5.89% 
	14.3%) |                      |         | 27,959 |         |          |         | 16,325 |        
|                                                                                                                                                               |                                          | Local currency (interest rates 8.88% 
	45%) |                      |         | 17,177 |         |          |         | 21,904 |        
|Eximbank notes (interest rates 3.90% 
	7.19%), maturing semiannually through 2002 and 2004.                                                                   |                                          |                                              | 11,359               |         |        |         | 18,585   |        
|Vendor financing (3.59%  12.%),
	maturing 2004 to 2008                                                                                                        |                                          |                                              | 247,145              |         |        |         | 275,451  |        
|                                                                                                                                                               |                                          |                                              |                      |         |        |         |          |        
|                                                                                                                                                               |                                          |                                              | Total long-term debt |         |        | 953,640 |          |         |        | 982,265 | 
|Less: current portion, including defaulted
	indebtedness                                                                                                       |                                          |                                              | (38,377              | )       |        |         | (959,076 | )      
|                                                                                                                                                               |                                          |                                              |                      |         |        |         |          |        
|Long-term debt, net                                                                                                                                            |                                          | $                                            | 915,263              |         |        | $       | 23,189   |        
|                                                                                                                                                               |                                          |                                              |                      |         |        |         |          |        

The scheduled maturities of long-term debt at
December 31, 2001 are as follows:

|                    |       |   |         |         | 
|------------------- | ----- | - | ------- | ------- | 
|Fiscal Year         |       |  
|                    |       |  
|2002                |       | $ | 959,076 |        
|2003                |       |   | 12,885  |        
|2004                |       |   | 6,636   |        
|2005                |       |   | 3,266   |        
|2006 and thereafter |       |   | 402     |        
|                    |       |   |         |        
|                    | Total |   | $       | 982,265 | 
|                    |       |   |         |        

The Senior Notes, the vendor financing and 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
described in Note 1 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, see Note 1. The Company is also in
default under the Senior Notes. The Company did not make the
semi-annual interest payment on the Senior Notes due 2003 (which
was due on January 15, 2002), on the Senior Notes due 2005
(which was due on February 15, 2002), or on the Senior
Notes due 2008 (which was due on December 15, 2001). As a
result of the Companys default under the Senior Notes and
the Broadband Network Vendor Financing Agreements, an aggregate
of $865.1 million of the defaulted amounts have been
reclassified to current portion of long-term debt as of
December 31, 2001.

F-18



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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, 1999, 2000 and 2001 is as follows:

|         |       |      |        |        |  |      |       |       |  |   |         |         |  
|-------- | ----- | ---- | ------ | ------ |  | ---- | ----- | ----- |  | - | ------- | ------- | -
|         |       | 1999 |        | 2000   |  | 2001
|         |       |      |        |        |  |     
|Current  |       | $    | (3,765 | )      |  | $    | 1,511 |       |  | $ | (714    | )      
|Deferred |       |      | 24,498 |        |  |      | 3,036 |       |  |   | (26,706 | )      
|         |       |      |        |        |  |      |       |       |  |   |         |        
|         | Total |      | $      | 20,733 |  |      | $     | 4,547 |  |   | $       | (27,420 | )
|         |       |      |        |        |  |      |       |       |  |   |         |        

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
the net deferred tax asset as of December 31, 2000 and 2001
is as follows:

|                                   |                                   |          |         |        |        |   |          |        |        | 
|---------------------------------- | --------------------------------- | -------- | ------- | ------ | ------ | - | -------- | ------ | ------ | 
|                                   |                                   | 2000     |         | 2001  
|                                   |                                   |          |         |       
|Deferred tax assets:               |                                   |          |         |        |        |   |          |       
|                                   | Net operating loss carryforwards: |          |         |        |        |   |          |        |       
|                                   |                                   | Domestic |         | $      | 41,364 |   |          | $      | 56,636 | 
|                                   |                                   | Foreign  |         |        | 35,850 |   |          |        | 66,005 | 
|                                   | Allowance for doubtful accounts   |          |         | 2,895  |        |   |          | 1,509  |       
|                                   | Property, plant and equipment     |          |         | 13,670 |        |   |          | 13,879 |       
|                                   | Services to carriers              |          |         | 6,549  |        |   |          | 7,612  |       
|                                   | Other                             |          |         | 2,716  |        |   |          | 2,015  |       
|                                   |                                   |          |         |        |        |   |          |       
|Gross deferred tax assets          |                                   |          | 103,044 |        |        |   | 147,656  |       
|Less: valuation allowance          |                                   |          | (76,338 | )      |        |   | (147,656 | )     
|                                   |                                   |          |         |        |        |   |          |       
|Net deferred tax asset             |                                   |          | 26,706  |        |        |   |         |       
|                                   |                                   |          |         |        |        |   |          |       
|Available for sale investments     |                                   |          | 6,353   |        |        |   | 7,103    |       
|Less: valuation allowance          |                                   |          |         |        |        |   | (7,103   | )     
|                                   |                                   |          |         |        |        |   |          |       
|Net available for sale investments |                                   |          | 6,353   |        |        |   |         |       
|                                   |                                   |          |         |        |        |   |          |       
|Net deferred tax asset             |                                   | $        | 33,059  |        |        | $ |         |       
|                                   |                                   |          |         |        |        |   |          |       

During the year ended December, 31 2001, the
Company recorded a valuation allowance of approximately
$26.7 million to offset its deferred income tax asset
because it is not clear 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.  Stock Option Plans

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 is
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

F-19



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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
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.

F-20



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of stock option transactions during
each of the three years in the period ended December 31,
2001 is presented below:

|                                             |                 |                  |           |                |   |   |       |       | 
|-------------------------------------------- | --------------- | ---------------- | --------- | -------------- | - | - | ----- | ----- | 
|                                             |                 |                  |           | Weighted      
|                                             |                 |                  |           | Average       
|                                             |                 | Number of Shares |           | Exercise Price
|                                             |                 |                  |           |               
|Granted and outstanding at December 31, 1998 |                 |                  | 441,650   |                |   | $ | 8.38  |      
|                                             | Granted         |                  |           | 393,340        |   |   |       | 10.47 | 
|                                             |                 |                  |           |                |   |   |       |      
|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  |      
|                                             |                 |                  |           |                |   |   |       |      
|                                            
|Stock Options                                |                 |                  |           |                |   |   |       |      
|                                             | Exercisable at: |                  |           |                |   |   |       |       | 
|December 31, 1999                            |                 |                  | 44,165    |                |   | $ | 8.38  |      
|                                             |                 |                  |           |                |   |   |       |      
|December 31, 2000                            |                 |                  | 170,692   |                |   | $ | 8.85  |      
|                                             |                 |                  |           |                |   |   |       |      
|December 31, 2001                            |                 |                  | 408,098   |                |   | $ | 10.07 |      
|                                             |                 |                  |           |                |   |   |       |      

The following table summarizes information
concerning outstanding stock options at December 31, 2001:

|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 
|-------------- |  | ------------------- | --------- | ----------- |  | -------------- | ------- | ------------------- |  | -------------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|               |  |                     |           |             |  |               
|               |  | Options Outstanding |           |             |  |               
|               |  |                     |           |            
|               |  |                     |           | Weighted    |  |                |         | Options Exercisable
|               |  |                     |           | Average     |  |                |         |                    
|               |  | Number of           |           | Remaining   |  | Weighted       |         | Number              |  | Weighted      
|Range of       |  | Options             |           | Contractual |  | Average        |         | of Options          |  | Average       
|Exercise Price |  | Outstanding         |           | Life        |  | Exercise Price |         | Outstanding         |  | Exercise Price
|               |  |                     |           |             |  |                |         |                     |  |               
|$1.69-$8.38    |  |                     | 692,667   |             |  |                | 8 Years |                     |  | $              | 4.95  |  |  |  | 236,230 |  |  | $ | 8.38  | 
|$10.47         |  |                     | 302,408   |             |  |                | 8 Years |                     |  |                | 10.47 |  |  |  | 120,969 |  |  |   | 10.47 | 
|$17.00         |  |                     | 373,990   |             |  |                | 8 Years |                     |  |                | 17.00 |  |  |  | 50,899  |  |  |   | 17.00 | 
|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 
|               |  |                     | 1,369,065 |             |  |                | 8 Years |                     |  | $              | 9.45  |  |  |  | 408,098 |  |  | $ | 10.07 | 
|               |  |                     |           |             |  |                |         |                     |  |                |       |  |  |  |         |  |  |   |       | 

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

F-21



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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,
1999, 2000 and 2001 would have been as follows:

|                                              |  |      |          |      |  |      |          |   |  |   |          |  
|--------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                              |  | 1999 |          | 2000 |  | 2001
|                                              |  |      |          |      |  |     
|Net loss attributable to common stockholders: |  |      |          |      |  |      |          |   |  |   |          |  
|As reported                                   |  | $    | (131,543 | )    |  | $    | (154,141 | ) |  | $ | (715,255 | )
|Pro Forma                                     |  |      | (131,892 | )    |  |      | (156,715 | ) |  |   | (717,009 | )
|Net loss per common share:                    |  |      |          |      |  |      |          |   |  |   |          |  
|As reported                                   |  | $    | (2.42    | )    |  | $    | (1.74    | ) |  | $ | (7.82    | )
|Pro Forma                                     |  |      | (2.42    | )    |  |      | (1.77    | ) |  |   | (7.84    | )

The fair value of the options granted in 1999 was
estimated using the minimum value method prescribed by SFAS
No. 123 for nonpublic entities and 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:

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 1999 |     | 2000
|                               |  |      |     |     
|Risk-free interest rate        |  |      | 7.0 | %    |  |  | 7.0 | %
|Expected option lives in years |  |      | 4   |      |  |  | 4   |  
|Volatility                     |  |      |    |      |  |  |    |  

The weighted average fair value of options
granted during 1999 and 2000 was $1.51 and $14.95, respectively.

12.  Initial Public
Offering

The Company completed an initial public offering
(IPO) of 11,500,000 shares of common stock on
February 4, 2000. On the same date, British
Telecommunications plc (BT) purchased 2,850,000
shares of the Companys common stock simultaneously with
the IPO to maintain its approximate current ownership share in
the Company. In anticipation of the IPO, on January 11,
2000, the Companys Board of Directors (the
Board) amended and restated the articles of
incorporation of the Company to change the name of the Company
to IMPSAT Fiber Networks, Inc. and authorized 300,000,000 shares
of common stock, $0.01 par value, and 5,000,000 shares of
blank check preferred stock, $0.01 par value. In
addition, the Board approved a .592 for 1 reverse common stock
split, adopted a stockholders rights plan and approved the
issuance of 5,472,579 shares of common stock to the minority
shareholders in IMPSAT Argentina, IMPSAT Venezuela and IMPSAT
Colombia in exchange for their minority interests in those
subsidiaries. The acquisition of these minority interests was
accounted for under the purchase method and resulted in
approximately $88.1 million in goodwill.

In addition, the Company redeemed approximately
$32.5 million of the redeemable preferred stock and the
holders converted their remaining preferred shares into
14,917,915 shares of common stock.

F-22



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

13.  Operating Segment
Information

The Companys operating segment information,
by subsidiary, is as follows for the years ended
December 31, 1999, 2000 and 2001:

|                                       |                      |                                                 |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |   |          |        |         |  |        |         |         |   |          |         |         | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | -------- | ------ | ------- | -------- | ------- | --------- | ------- | --------- | ----- | ------------ | ------- | ----- | ----- | ------ | ------ | - | -------- | ------ | ------- |  | ------ | ------- | ------- | - | -------- | ------- | ------- | 
|                                       |                      |                                                 |          |        |         |          |         |           |         | All other |       |              |         |      
|2001                                   |                      | Argentina                                       |          | Brazil |         | Colombia |         | Venezuela |         | countries |       | Eliminations |         | Total
|                                       |                      |                                                 |          |        |         |          |         |           |         |           |       |              |         |      
|Net Revenues                           |                      |                                                 |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |   |          |        |         |  |        |         |         |   |          |        
|Data & value added services:           |                      |                                                 |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |   |          |        |         |  |        |         |         |   |          |        
|                                       | Satellite            |                                                 | $        | 52,334 |         |          | $       | 15,460    |         |           | $     | 22,611       |         |       | $     | 24,924 |        |   | $        | 33,348 |         |  | $      | (11,624 | )       |   | $        | 137,053 |        
|                                       | Broadband            |                                                 |          | 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 | 
|                                       |                      |                                                 |          |        |         |          |         |           |         |           |       |              |         |       |       |        |        |   |          |        |         |  |        |         |         |   |          |        

F-23



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                       |                      |                                                 |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |         |           | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | ------- | ------- | ------- | -------- | ------- | --------- | ------- | --------- | ----- | ------------ | ------- | ----- | ----- | ------ | ------ | - | ------- | ------ | ------- |  | ------ | ------- | ------- | - | ------- | ------- | --------- | 
|                                       |                      |                                                 |         |         |         |          |         |           |         | All other |       |              |         |      
|2000                                   |                      | Argentina                                       |         | Brazil  |         | Colombia |         | Venezuela |         | countries |       | Eliminations |         | Total
|                                       |                      |                                                 |         |         |         |          |         |           |         |           |       |              |         |      
|Net Revenues                           |                      |                                                 |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|Data & value added services:           |                      |                                                 |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       | Satellite            |                                                 | $       | 75,666  |         |          | $       | 14,869    |         |           | $     | 29,807       |         |       | $     | 24,321 |        |   | $       | 40,635 |         |  | $      | (26,033 | )       |   | $       | 159,265 |          
|                                       | Broadband            |                                                 |         | 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 | 
|                                       |                      |                                                 |         |         |         |          |         |           |         |           |       |              |         |       |       |        |        |   |         |        |         |  |        |         |         |   |         |        

|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |         |         | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | ------- | ------ | ------- | -------- | ------- | --------- | ------ | --------- | ------- | ------------ | ------ | ----- | ------ | ------ | ------ | - | ------- | ------ | ------- |  | ------ | ------- | ------- | - | ------- | ------- | ------- | 
|                                       |                      |                                                 |         |        |         |          |         |           |        | All other |         |              |        |      
|1999                                   |                      | Argentina                                       |         | Brazil |         | Colombia |         | Venezuela |        | countries |         | Eliminations |        | Total
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |      
|Net Revenues                           |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|Data & value added services:           |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       | Satellite            |                                                 | $       | 74,293 |         |          | $       | 6,458     |        |           | $       | 46,489       |        |       | $      | 20,048 |        |   | $       | 34,205 |         |  | $      | (21,434 | )       |   | $       | 160,059 |        
|                                       | Broadband            |                                                 |         | 19,036 |         |          |         | 305       |        |           |         | 11,679       |        |       |        | 1,429  |        |   |         | 1,388  |         |  |        | (116    | )       |   |         | 33,721  |        
|                                       | Value added services |                                                 |         | 1,125  |         |          |         |           |        |           |         |              |        |       |        | 205    |        |   |         | 7      |         |  |        | (7      | )       |   |         | 1,330   |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       | Subtotal             |                                                 |         | 94,454 |         |          |         | 6,763     |        |           |         | 58,168       |        |       |        | 21,682 |        |   |         | 35,600 |         |  |        | (21,557 | )       |   |         | 195,110 |        
|Internet                               |                      |                                                 | 9,162   |        |         |          | 1,740   |           |        |           | 2,879   |              |        |       | 1,290  |        |        |   | 14,572  |        |         |  | (3,599 | )       |         |   | 26,044  |        
|Telephony                              |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|Services to carriers                   |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|Sales of equipment                     |                      |                                                 | 6,593   |        |         |          | 65      |           |        |           |         |              |        |       | 260    |        |        |   | 379     |        |         |  |        |         |         |   | 7,297   |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total net revenues from services and
	equipment |         |        | 110,209 |          |         |           | 8,568  |           |         |              | 61,047 |       |        |        | 23,232 |   |         |        | 50,551  |  |        |         | (25,156 | ) |         |         | 228,451 | 
|Broadband network development revenues |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total net revenues                              |         | $      | 110,209 |          |         | $         | 8,568  |           |         | $            | 61,047 |       |        | $      | 23,232 |   |         | $      | 50,551  |  |        | $       | (25,156 | ) |         | $       | 228,451 | 
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|Operating income (loss)                |                      | $                                               | (40,988 | )      |         | $        | (16,213 | )         |        | $         | (10,120 | )            |        | $     | (2,786 | )      |        | $ | (26,079 | )      |         |  |        |         |         | $ | (96,186 | )      
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        
|                                       |                      | Total assets                                    |         | $      | 272,978 |          |         | $         | 79,064 |           |         | $            | 83,691 |       |        | $      | 40,407 |   |         | $      | 352,192 |  |        |         |         |   |         | $       | 828.332 | 
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |         |  |        |         |         |   |         |        

F-24



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

14.  Related Party
Transactions

The Company in the normal course of its business
provides telecommunications network services to affiliates of
stockholders. During the years ended December 31, 1999,
2000 and 2001, such services totaled approximately
$11.0 million, $18.9 million and $12.2 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, 1999, 2000
and 2001, such transactions totaled approximately
$9.1 million, $10.7 million and $9.8 million,
respectively.

During the years ended December  31, 2000
and 2001, the Company made approximately $1.1 million and
$1.4 million in payments to BT for satellite capacity,
respectively. Investment banking fees amounting to
$4.1 million, $18.3 million and $0.3 million,
respectively, were paid to representative affiliates of the
former holders of the Companys redeemable preferred stock
during 1999, 2000 and 2001. These representative affiliates are
current stockholders of the Company.

15.  Commitments and
Contingencies

Commitments The Company leases satellite capacity
with average annual rental commitments of approximately
$27.9 million through the year 2006. In addition, the
Company had committed to long-term contracts for the purchase of
terrestrial links from third parties in Argentina, Colombia, and
the United States for approximately $3.3 million per year
through 2006. The Company has commitments to purchase
communications and data center equipment amounting to
approximately $5.8 million at December 31, 2001. The
Company has commitments for additional IRU investments totaling
approximately $63.9 million in the aggregate under its
various IRU agreements. These commitments are not included in
the consolidated balance sheet as of December 31, 2001.

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, 2001, the balance outstanding was
approximately $2.9 million.

360networks During June 2001, the Company
terminated a series of contracts which the Company had signed in
the first quarter of 2001 with 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, as a
result of the breach by 360networks of its payment obligations
under those contracts, including the new Argentina-Brazil link
that the Company has recently completed. Between March and May
2001, the Company made available segments of the IRU dark fiber
and capacity services 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 has 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.
360americas and the other subsidiaries with which the Company
had contracted were not included in the series of bankruptcy and
insolvency filings made in the United State and Canada by their
parent, 360networks, Inc. and certain of it other affiliates.
360networks, Inc. has announced that it intends to seek a buyer
for its South American undersea fiber optic cable system, which
is owned by 360americas. The Company intends to aggressively
pursue its remedies against 360networks, including its claim for
damages due under the terminated contracts, but is unable to
predict whether the Company will prevail in any such proceedings
and, if so, whether 360networks would be able to pay any
arbitration or litigation award that might be entered in favor
of the Company.

F-25



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the pendency of the arbitration and
litigation proceedings, the Company will continue to include as
deferred revenues on its consolidated balance sheet the amount
received from 360networks as down payments under the terminated
contracts, after deducting amounts that were due and payable at
the time of the termination of the contracts. As of
December 31, 2001, the balance of such deferred revenue was
$22.6 million.

IPO Allocations Class Action On November 1, 2001, a lawsuit
was filed in the United States District Court for the Southern
District of New York against the Company, certain of the
Companys current officers and directors, and the
underwriters to the Companys initial public offering. This
lawsuit alleges 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. The plaintiff has proposed a putative
class from the date of the IPO to December 6, 2000. In
August 2001, the court ordered that this suit be coordinated for
all pre-trial purposes in a proceeding styled In re Initial
Public Offering Securities Litigation, 21 MC 92,
an intra-district proceeding involving approximately 900
lawsuits concerning the initial public offerings of
approximately 310 companies and 48 underwriters. The complaint
does not seek a specified amount of damages. It is the
Companys present understanding that the plaintiffs intend
to file an amended complaint shortly. The Companys
management believes that the Company has meritorious defenses to
the allegations in the complaints and intends to defend the
litigation vigorously. However, due to the early stages of this
action, the Company cannot conclude as to the possible outcome.
The Company has certain insurance policies with respect to such
claims and have filed a claim with its carriers regarding this
matter.

Other Litigation The Company is involved in or subject
to various litigation and legal proceedings incidental to the
normal conduct of its business. 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
ultimate collectivity 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 2001 and 2000 is presented below:

|                                             |  |               |         |        |  |       |         |        |  |   |          |   |  |   |          |  
|-------------------------------------------- |  | ------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | -------- | - |  | - | -------- | -
|                                             |  |              
|                                             |  | 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 attributable to common stockholders |  |               | (68,251 | )      |  |       | (99,672 | )      |  |   | (344,336 | ) |  |   | (202,996 | )
|Net loss per common share basic and diluted  |  |               | (0.75   | )      |  |       | (1.09   | )      |  |   | (3.77    | ) |  |   | (2.21    | )

|                                             |  |               |         |        |  |       |         |        |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | ------- | - |  | - | ------- | -
|                                             |  |              
|                                             |  | 2000 Quarters
|                                             |  |              
|                                             |  | First         |         | Second |  | Third |         | Fourth
|                                             |  |               |         |        |  |       |         |       
|Total net revenue                            |  | $             | 58,763  |        |  | $     | 64,754  |        |  | $ | 110,676 |   |  | $ | 87,950  |  
|Operating (loss)                             |  |               | (13,463 | )      |  |       | (18,916 | )      |  |   | (1,933  | ) |  |   | (27,573 | )
|Net loss attributable to common stockholders |  |               | (29,067 | )      |  |       | (39,825 | )      |  |   | (26,660 | ) |  |   | (58,589 | )
|Net loss per common share basic and diluted  |  |               | (0.36   | )      |  |       | (0.44   | )      |  |   | (0.29   | ) |  |   | (0.65   | )

* * * * * *

F-26



---



##### 



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of
IMPSAT S.A.:

We have audited the accompanying balance sheets
of IMPSAT S.A. (the Company), a wholly-owned
subsidiary of IMPSAT Fiber Networks, Inc., as of
December 31, 2000 and 2001, and the related statements of
operations, comprehensive loss, stockholders equity
(deficiency) and cash flows for each of the three years in the
period ended December 31, 2001. 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 financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2000 and 2001, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial
statements, the Companys recurring losses from operations,
negative working capital, stockholders capital deficiency
and default on indebtedness 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

Buenos Aires, Argentina

March 15, 2002


F-27



---



##### 



IMPSAT S.A.

BALANCE SHEETS

(In thousands of U.S. dollars)


|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |          |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | ------- | ------- | - | ------- | -------- | ------- | -
|                                                   |                                                                                                                                                           |                                        
|                                                   |                                                                                                                                                           | December 31,                           
|                                                   |                                                                                                                                                           |                                        
|                                                   |                                                                                                                                                           | 2000                                    |         | 2001   
|                                                   |                                                                                                                                                           |                                         |         |        
|ASSETS                                             |                                                                                                                                                           |                                         |         |         |         |   |         |         
|CURRENT ASSETS:                                    |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   | Cash and cash equivalents                                                                                                                                 |                                         | $       | 12,051  |         |   | $       | 3,979    |        
|                                                   | Trade accounts receivable, net                                                                                                                            |                                         |         | 58,680  |         |   |         | 33,924   |        
|                                                   | Receivable from affiliated companies                                                                                                                      |                                         |         | 13,303  |         |   |         | 17,715   |        
|                                                   | Other receivables                                                                                                                                         |                                         |         | 33,679  |         |   |         | 22,155   |        
|                                                   | Prepaid expenses                                                                                                                                          |                                         |         | 2,584   |         |   |         | 1,730    |        
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   |                                                                                                                                                           | Total current assets                    |         |         | 120,297 |   |         |          | 79,503  |  
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|BROADBAND NETWORK, Net                             |                                                                                                                                                           |                                         | 176,961 |         |         |   | 105,995 |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT, Net                 |                                                                                                                                                           |                                         | 163,754 |         |         |   | 40,149  |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|NON-CURRENT ASSETS:                                |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   | Investments                                                                                                                                               |                                         |         | 11,829  |         |   |         | 2,429    |        
|                                                   | Deferred income taxes, net                                                                                                                                |                                         |         | 8,262   |         |   |         |          |        
|                                                   | Other non-current assets                                                                                                                                  |                                         |         | 13,672  |         |   |         | 7,395    |        
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   |                                                                                                                                                           | Total non-current assets                |         |         | 33,763  |   |         |          | 9,824   |  
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|TOTAL                                              |                                                                                                                                                           | $                                       | 494,775 |         |         | $ | 235,471 |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY
	(DEFICIENCY) |                                                                                                                                                           |                                         |         |         |         |   |         |         
|CURRENT LIABILITIES:                               |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   | Accounts payable  trade                                                                                                                                  |                                         | $       | 71,362  |         |   | $       | 59,535   |        
|                                                   | Short-term debt                                                                                                                                           |                                         |         | 8,860   |         |   |         |          |        
|                                                   | Advances from affiliated companies                                                                                                                        |                                         |         | 7,523   |         |   |         | 2,448    |        
|                                                   | Current portion of long-term debt                                                                                                                         |                                         |         | 15,385  |         |   |         | 162,390  |        
|                                                   | Accrued and other liabilities                                                                                                                             |                                         |         | 10,625  |         |   |         | 15,422   |        
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   |                                                                                                                                                           | Total current liabilities               |         |         | 113,755 |   |         |          | 239,795 |  
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|LONG-TERM DEBT, Net                                |                                                                                                                                                           |                                         | 127,626 |         |         |   | 3,183   |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|DEFERRED REVENUES                                  |                                                                                                                                                           |                                         | 32,561  |         |         |   | 52,653  |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (Note 11)            |                                                                                                                                                           |                                         |         |         |         |   |         |         
|STOCKHOLDERS EQUITY (DEFICIENCY):                 |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   | Common Stock, $0.01 par value 14,755 shares
	issued and outstanding at December 31, 2000, and 73,775
	shares issued and outstanding at December 31, 2001. |                                         |         | 3       |         |   |         | 4        |        
|                                                   | Paid in capital                                                                                                                                           |                                         |         | 250,326 |         |   |         | 331,179  |        
|                                                   | Accumulated deficit                                                                                                                                       |                                         |         | (30,247 | )       |   |         | (391,024 | )      
|                                                   | Accumulated other comprehensive income (loss)                                                                                                             |                                         |         | 751     |         |   |         | (319     | )      
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|                                                   |                                                                                                                                                           | Total stockholders equity (deficiency) |         |         | 220,833 |   |         |          | (60,160 | )
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         
|TOTAL                                              |                                                                                                                                                           | $                                       | 494,775 |         |         | $ | 235,471 |         
|                                                   |                                                                                                                                                           |                                         |         |         |         |   |         |         

See notes to financial statements.

F-28



---



##### 



IMPSAT S.A.

STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars)


|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |         |        |          |  
|----------------------------------------- | -------------------------------------- | ------------------------------------ | ---------------------------------------------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -------- | ------- | ------ | -------- | -
|                                          |                                        |                                     
|                                          |                                        | Years Ended December 31,            
|                                          |                                        |                                     
|                                          |                                        | 1999                                 |                                                | 2000    |        | 2001   
|                                          |                                        |                                      |                                                |         |        |        
|NET REVENUES:                             |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          | Data and value added services          |                                      | $                                              | 94,454  |        |         | $       | 102,889 |        |         | $        | 91,955  |       
|                                          | Telephony                              |                                      |                                                |         |        |         |         |         |        |         |          | 8,905   |       
|                                          | Internet                               |                                      |                                                | 9,162   |        |         |         | 12,230  |        |         |          | 17,863  |       
|                                          | Services to carriers                   |                                      |                                                |         |        |         |         | 885     |        |         |          | 3,561   |       
|                                          | Sales of equipment                     |                                      |                                                | 6,593   |        |         |         | 12,221  |        |         |          | 7,962   |       
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Total net revenues from services and equipment |         |        | 110,209 |         |         |        | 128,225 |          |         |        | 130,246  |  
|                                          | Broadband network development revenues |                                      |                                                |         |        |         |         | 32,272  |        |         |          |         |       
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Total net revenues                             |         |        | 110,209 |         |         |        | 160,497 |          |         |        | 130,246  |  
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|COSTS AND EXPENSES:                       |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|Direct costs:                             |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        | Contracted services                  |                                                |         | 10,857 |         |         |         | 15,131 |         |          |         | 17,498 |         
|                                          |                                        | Other direct costs                   |                                                |         | 20,017 |         |         |         | 12,001 |         |          |         | 26,243 |         
|                                          |                                        | Leased capacity                      |                                                |         | 20,036 |         |         |         | 30,121 |         |          |         | 36,575 |         
|                                          |                                        | Broadband network construction costs |                                                |         |        |         |         |         | 18,057 |         |          |         |        |         
|                                          |                                        | Cost of equipment sold               |                                                |         | 4,673  |         |         |         | 10,841 |         |          |         | 6,346  |         
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Total direct costs                             |         |        | 55,583  |         |         |        | 86,151  |          |         |        | 86,662   |  
|                                          | Salaries and wages                     |                                      |                                                | 19,672  |        |         |         | 29,670  |        |         |          | 35,163  |       
|                                          | Selling, general and administrative    |                                      |                                                | 16,903  |        |         |         | 26,478  |        |         |          | 18,781  |       
|                                          | Depreciation and amortization          |                                      |                                                | 59,039  |        |         |         | 38,171  |        |         |          | 55,390  |       
|                                          | Asset impairment charge                |                                      |                                                |         |        |         |         |         |        |         |          | 245,565 |       
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Total costs and expenses                       |         |        | 151,197 |         |         |        | 180,470 |          |         |        | 441,561  |  
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Operating loss                                 |         |        | (40,988 | )       |         |        | (19,973 | )        |         |        | (311,315 | )
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|OTHER INCOME (EXPENSES):                  |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          | Interest income and investment gains   |                                      |                                                | 1,199   |        |         |         | 716     |        |         |          | 1,843   |       
|                                          | Interest expense                       |                                      |                                                | (13,690 | )      |         |         | (12,513 | )      |         |          | (24,775 | )     
|                                          | Net gain (loss) on foreign exchange    |                                      |                                                | (78     | )      |         |         | 190     |        |         |          | (17,948 | )     
|                                          | Other income net                       |                                      |                                                | 4,820   |        |         |         | 5       |        |         |          | 85      |       
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|                                          |                                        |                                      | Total other income (expenses), net             |         |        | (7,749  | )       |         |        | (11,602 | )        |         |        | (40,795  | )
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|LOSS BEFORE INCOME TAXES                  |                                        |                                      | (48,737                                        | )       |        |         | (31,575 | )       |        |         | (352,110 | )      
|BENEFIT FROM (PROVISION FOR) INCOME TAXES |                                        |                                      | 5,982                                          |         |        |         | 6,986   |         |        |         | (8,667   | )      
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        
|NET LOSS                                  |                                        | $                                    | (42,755                                        | )       |        | $       | (24,589 | )       |        | $       | (360,777 | )      
|                                          |                                        |                                      |                                                |         |        |         |         |         |        |         |          |        

See notes to financial statements.

F-29



---



##### 



IMPSAT S.A.

STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. dollars)


|                          |                                                             |                          |         |      |  |      |         |     |  |   |          |        |  
|------------------------- | ----------------------------------------------------------- | ------------------------ | ------- | ---- |  | ---- | ------- | --- |  | - | -------- | ------ | -
|                          |                                                             |                         
|                          |                                                             | Years Ended December 31,
|                          |                                                             |                         
|                          |                                                             | 1999                     |         | 2000 |  | 2001
|                          |                                                             |                          |         |      |  |     
|NET LOSS                  |                                                             | $                        | (42,755 | )    |  | $    | (24,589 | )   |  | $ | (360,777 | )     
|                          |                                                             |                          |         |      |  |      |         |     |  |   |          |       
|OTHER COMPREHENSIVE LOSS: |                                                             |                          |         |      |  |      |         |     |  |   |          |       
|                          | Change in unrealized loss on investment available
	for sale |                          |         |      |  |      |         | 751 |  |   |          | (1,070 | )
|                          |                                                             |                          |         |      |  |      |         |     |  |   |          |       
|TOTAL                     |                                                             |                          |         |      |  |      | 751     |     |  |   | (1,070   | )     
|                          |                                                             |                          |         |      |  |      |         |     |  |   |          |       
|COMPREHENSIVE LOSS        |                                                             | $                        | (42,755 | )    |  | $    | (23,838 | )   |  | $ | (361,847 | )     
|                          |                                                             |                          |         |      |  |      |         |     |  |   |          |       

See notes to financial statements.

F-30



---



##### 



IMPSAT S.A.

STATEMENT OF STOCKHOLDERS EQUITY
(DEFICIENCY)

Years Ended December 31, 1999, 2000, and
2001


(In thousands of U.S. dollars)


|                                                                          |                       |        |   |         |  |             |         |               |  |       |          |          |   |   |        |   |  |   |         |          |  
|------------------------------------------------------------------------- | --------------------- | ------ | - | ------- |  | ----------- | ------- | ------------- |  | ----- | -------- | -------- | - | - | ------ | - |  | - | ------- | -------- | -
|                                                                          |                       |        |   |         |  |             |         | Accumulated   |  |      
|                                                                          |                       |        |   |         |  |             |         | Other         |  |      
|                                                                          |                       | Common |   | Paid in |  | Accumulated |         | Comprehensive |  |      
|                                                                          |                       | Stock  |   | Capital |  | Deficit(*)  |         | Income (Loss) |  | Total
|                                                                          |                       |        |   |         |  |             |         |               |  |      
|BALANCE AT DECEMBER 31, 1998                                              |                       | $      | 3 |         |  | $           | 26,442  |               |  | $     | 37,097   |          |   |   |        |   |  | $ | 63,542  |         
|Shareholders contributions                                               |                       |        |   |         |  |             | 56,000  |               |  |       |          |          |   |   |        |   |  |   | 56,000  |         
|                                                                          | Net loss for the year |        |   |         |  |             |         |               |  |       |          | (42,755  | ) |   |        |   |  |   |         | (42,755  | )
|                                                                          |                       |        |   |         |  |             |         |               |  |       |          |          |   |   |        |   |  |   |         |         
|BALANCE AT DECEMBER 31, 1999                                              |                       |        | 3 |         |  |             | 82,442  |               |  |       | (5,658   | )        |   |   |        |   |  |   | 76,787  |         
|Shareholders contributions                                               |                       |        |   |         |  |             | 167,884 |               |  |       |          |          |   |   |        |   |  |   | 167,884 |         
|Change on unrealized loss on investment available
	for sale, net of taxes |                       |        |   |         |  |             |         |               |  |       |          |          |   | $ | 751    |   |  |   | 751     |         
|                                                                          | Net loss for the year |        |   |         |  |             |         |               |  |       |          | (24,589  | ) |   |        |   |  |   |         | (24,589  | )
|                                                                          |                       |        |   |         |  |             |         |               |  |       |          |          |   |   |        |   |  |   |         |         
|BALANCE AT DECEMBER 31, 2000                                              |                       |        | 3 |         |  |             | 250,326 |               |  |       | (30,247  | )        |   |   | 751    |   |  |   | 220,833 |         
|Change on unrealized loss on investment available
	for sale, net of taxes |                       |        |   |         |  |             |         |               |  |       |          |          |   |   | (1,070 | ) |  |   | (1,070  | )       
|Shareholders contributions                                               |                       |        |   |         |  |             | 80,854  |               |  |       |          |          |   |   |        |   |  |   | 80,854  |         
|Issuance of common stock                                                  |                       |        | 1 |         |  |             | (1      | )             |  |       |          |          |   |   |        |   |  |   |         |         
|                                                                          | Net loss for the year |        |   |         |  |             |         |               |  |       |          | (360,777 | ) |   |        |   |  |   |         | (360,777 | )
|                                                                          |                       |        |   |         |  |             |         |               |  |       |          |          |   |   |        |   |  |   |         |         
|BALANCE AT DECEMBER 31, 2001                                              |                       | $      | 4 |         |  | $           | 331,179 |               |  | $     | (391,024 | )        |   | $ | (319   | ) |  | $ | (60,160 | )       
|                                                                          |                       |        |   |         |  |             |         |               |  |       |          |          |   |   |        |   |  |   |         |         




|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(*) | Includes an appropriation of retained earnings,
	amounting to $1,890 in 1999 and 2000 to comply with legal
	reserve requirements in Argentina.

See notes to financial statements.

F-31



---



##### 



IMPSAT S.A.

STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)


|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |          |        |         |         |         |  
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------- | ------ | ------- | ------- | ------ | ------ | ------- | -------- | ------ | ------- | ------- | ------- | -
|                                                                      |                                                                                                      |                                                                        
|                                                                      |                                                                                                      | Year Ended December 31,                                                
|                                                                      |                                                                                                      |                                                                        
|                                                                      |                                                                                                      | 1999                                                                    |                                         | 2000                                                                   |                                           | 2001  
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      | Net loss                                                                                             |                                                                         | $                                       | (42,755                                                                | )                                         |        | $       | (24,589 | )      |        | $       | (360,777 | )     
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by operating activities, net of acquisition: |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |          |       
|                                                                      |                                                                                                      |                                                                         | Amortization and depreciation           |                                                                        |                                           | 59,039 |         |         |        | 38,171 |         |          |        | 55,390  |        
|                                                                      |                                                                                                      |                                                                         | Asset impairment charge                 |                                                                        |                                           |        |         |         |        |        |         |          |        | 245,565 |        
|                                                                      |                                                                                                      |                                                                         | Provision for doubtful accounts         |                                                                        |                                           | 6,280  |         |         |        | 3,035  |         |          |        | 15,590  |        
|                                                                      |                                                                                                      |                                                                         | Net gain on sale of investment          |                                                                        |                                           |       |         |         |        |       |         |          |        | (75     | )      
|                                                                      |                                                                                                      |                                                                         | Deferred income tax (benefit) provision |                                                                        |                                           | (7,923 | )       |         |        | (5,045 | )       |          |        | 8,667   |        
|                                                                      |                                                                                                      |                                                                         | Changes in assets and liabilities:      |                                                                        |                                           |        |         |         |        |        |         |          |        |         |        
|                                                                      |                                                                                                      |                                                                         |                                         | (Increase) decrease in trade accounts receivable,
	net                 |                                           |        | (14,258 | )       |        |        | (25,669 | )        |        |         | 9,166   |        
|                                                                      |                                                                                                      |                                                                         |                                         | (Increase) decrease in prepaid expenses                                |                                           |        | (463    | )       |        |        | (1,759  | )        |        |         | 854     |        
|                                                                      |                                                                                                      |                                                                         |                                         | (Increase) decrease in other receivables and
	other non-current assets |                                           |        | (19,858 | )       |        |        | (26,187 | )        |        |         | 17,801  |        
|                                                                      |                                                                                                      |                                                                         |                                         | Increase (decrease) in accounts
	payable  trade                       |                                           |        | 13,629  |         |        |        | 38,630  |          |        |         | (11,827 | )      
|                                                                      |                                                                                                      |                                                                         |                                         | Increase in deferred revenues                                          |                                           |        | 23,200  |         |        |        | 9,361   |          |        |         | 20,092  |        
|                                                                      |                                                                                                      |                                                                         |                                         | Increase (decrease) in accrued and other
	liabilities                  |                                           |        | 4,491   |         |        |        | 1,077   |          |        |         | 4,797   |        
|                                                                      |                                                                                                      |                                                                         |                                         | Decrease in other long-term liabilities                                |                                           |        | (975    | )       |        |        | (510    | )        |        |         |         |        
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        | Net cash provided by operating activities |        |         | 20,407  |        |        |         | 6,515    |        |         |         | 5,243   |  
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      | Build-out of broadband network                                                                       |                                                                         |                                         | (3,235                                                                 | )                                         |        |         | (5,178  | )      |        |         | (52,139  | )     
|                                                                      | Purchases of property, plant and equipment                                                           |                                                                         |                                         | (45,570                                                                | )                                         |        |         | (99,379 | )      |        |         | (32,414  | )     
|                                                                      | Proceeds from the sale of investments                                                                |                                                                         |                                         |                                                                       |                                           |        |         |        |        |        |         | 8,000    |       
|                                                                      | Decrease (increase) in other investment                                                              |                                                                         |                                         | 473                                                                    |                                           |        |         | (843    | )      |        |         |          |       
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        | Net cash used in investing activities     |        |         | (48,332 | )      |        |         | (105,400 | )      |         |         | (76,553 | )
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      | Net repayments of short-term debt                                                                    |                                                                         |                                         | (2,293                                                                 | )                                         |        |         | (1,847  | )      |        |         | (8,860   | )     
|                                                                      | Changes in advances to from affiliates                                                               |                                                                         |                                         | 6,238                                                                  |                                           |        |         | (61,436 | )      |        |         | (9,487   | )     
|                                                                      | Repayments of proceeds from long-term debt                                                           |                                                                         |                                         | (41,670                                                                | )                                         |        |         | 2,136   |        |        |         | 731      |       
|                                                                      | Shareholders contributions                                                                          |                                                                         |                                         | 56,000                                                                 |                                           |        |         | 167,884 |        |        |         | 80,854   |       
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        | Net cash provided by financing activities |        |         | 18,275  |        |        |         | 106,737  |        |         |         | 62,238  |  
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|NET (DECREASE) INCREASE IN CASH AND CASH
	EQUIVALENTS                 |                                                                                                      |                                                                         | (9,650                                  | )                                                                      |                                           |        | 7,852   |         |        |        | (8,072  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                    |                                                                                                      |                                                                         | 13,849                                  |                                                                        |                                           |        | 4,199   |         |        |        | 12,051  |         
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR                          |                                                                                                      | $                                                                       | 4,199                                   |                                                                        |                                           | $      | 12,051  |         |        | $      | 3,979   |         
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      | Interest paid                                                                                        |                                                                         | $                                       | 12,639                                                                 |                                           |        | $       | 7,853   |        |        | $       | 14,936   |       
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      | Income taxes paid                                                                                    |                                                                         |                                         |                                                                        |                                           |        | $       | 1,900   |        |        | $       | 2,894    |       
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      |                                                                                                      | Change to unrealized loss on investment available
	for sale, net of tax |                                         |                                                                        |                                           |        |         | $       | 751    |        |         | $        | (1,070 | )      
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         
|                                                                      |                                                                                                      | Broadband network vendor financing                                      |                                         | $                                                                      | 25,709                                    |        |         | $       | 90,340 |        |         | $        | 19,677 |        
|                                                                      |                                                                                                      |                                                                         |                                         |                                                                        |                                           |        |         |         |        |        |         |         

See notes to financial statements.

F-32



---



##### 



IMPSAT S.A.

NOTES TO FINANCIAL STATEMENTS

(Tables in thousands of U.S.
dollars)


1.  General

IMPSAT S.A. (the Company) is a
leading integrated provider of broadband Internet, data and
voice services in Argentina. 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 in Argentina. It provides its services
through its advanced telecommunications networks comprised of
owned teleports, earth stations, fiber optic and microwave links
and leased satellite capacity. As of December 31, 2001, the
Company is a 100% owned subsidiary of IMPSAT Fiber Networks,
Inc. (the Parent Company)

Liquidity and Going Concern
Considerations The
accompanying financial statements have been prepared on a going
concern basic, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of
business. The Parent Company and the Company currently face
significant near-term cash flow and liquidity problems. The
Parent Company and the Company have no material working capital
or other credit facility under which they may borrow for working
capital or other general corporate purposes. The Parent Company
and the Company are not generating sufficient revenue to fund
their operations or to repay their principal and interest
obligations under their vendor financing obligations with Nortel
Networks Limited (Nortel) and Lucent Technologies
Inc. (Lucent) (collectively the Broadband
Network Vendor Financing Agreements) that are due and
payable. As a result, the Company is in default under the
Broadbank Network Vendor Financing Agreements. The Parent
Companys and the Companys capital requirements under
the business plan for fiscal year 2002 are greater than
available capital resources, and the Parent Companys and
the Companys cash flows and liquidity are insufficient to
satisfy all of the Parent Companys and the Companys
obligations. These factors among others raise substantial doubt
as to the Parent Companys and the Companys ability
to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern.

The Parent Company and the Company believe that
it is unlikely that they will be able to obtain future debt or
equity financing on acceptable terms, or at all. The Parent
Company and the Company therefore will be required to
restructure their balance sheets. It is unlikely that the Parent
Company and the Company could obtain additional financing
without effecting such restructuring. The Parent Company with
the assistance of the investment bank, Houlihan Lokey Howard
& Zukin Capital (Houlihan Lokey), is currently
negotiating with the holders of the Senior Notes and with the
creditors under the Broadbank Network Vendor Financing
Agreements as to the proposed financial restructuring plan
discussed below. There is no assurance that the Parent Company
and the Company will be able to successfully complete the
proposed financial restructuring plan. Such events could have a
material adverse effect upon the Parent Company and the Company
and could threaten its ability to continue as a going concern.

Financial Restructuring On March 11, 2002, the Parent
Companys management, who have been advised by Houlihan
Lokey, concluded negotiations with an ad hoc committee (the
Committee) representing certain holders of the debt
under its Broadband Network Vendor Financing Agreements and
certain holders of the $125.0 million outstanding principal
amount of the 12.125% Senior Guaranteed Notes due 2003, the
$300.0 million 13.75% Senior Notes due 2005 and the
$225.0 million 12.375% Senior Notes due 2008 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 Parent Company
and the Company. The Restructuring Term Sheet, contemplates the
following principal components of the proposed restructuring
plan:



| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | all of the shares of the Parent Companys
	existing common stock, options granted under the Parent
	Companys stock option plans, and any other Parent Company
	equity interests would be cancelled,

F-33



---



##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | retired and eliminated with no consideration paid
	therefor, and the Parent Company would issue new common
	stock in accordance with the proposed restructuring plan;
|
| |  | creditors under the Broadband Network Vendor
	Financing Agreements would receive                                                                                       



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $140.7 million senior secured debt issued by
	the Company and IMPSAT Brazil and guaranteed by the Parent
	Company;                                                       
|
| |  | $22.5 million of new senior convertible
	notes guaranteed by the Company and convertible into 5% of the
	Parent Companys new common stock on a fully-diluted basis;
	and
|
| |  | warrants to acquire up to 15% of the Parent
	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 guaranteed by
	the Company and convertible into 23% of the Parent
	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 Parent
	Companys new common stock, subject to certain dilutive
	events                                                                                                                                                                                                                                                                 
|
| |  | the Parent Companys guarantees of certain
	indebtedness owed by the 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
	Parent Company
|
| |  | no distribution to existing stockholders of the
	Parent Company                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | management would receive 2% of the Parent
	Companys new common stock plus stock options representing
	8% of the Parent Companys new common stock.                                                                                                                                                                                                                                                                                          

The term sheet agreement in principle provides
that completion of the proposed restructuring plan would be
subject to certain conditions in the event the Parent Company
files its plan with the Bankruptcy Court, including the
plans acceptance by affected classes of the Parent
Companys securities holders in accordance with the U.S.
Bankruptcy Code.

Currently, the Parent Company has not filed a
Chapter 11 plan of reorganization under the U.S. Bankruptcy
Code. There can be no assurances that the Parent Company will be
able to complete this filing or, if the Parent Company does,
that any plan of reorganization will be approved by the
Bankruptcy Court. If the Parent Company is unable to timely file
for protection under Chapter 11 or obtain confirmation of a
plan of reorganization, the creditors may seek other
alternatives for the Parent Company and the Company, including
accepting bids for the Company or parts thereof through an
auction process or forcing the Parent Company into a liquidation
proceeding under the federal bankruptcy laws.

2.  Summary of Significant
Accounting Policies

Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America 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 value of the Companys
telecommunications infrastructure and collectibility of
receivables. Actual results could differ from those estimates.

Market Risk 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,

F-34



---



##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

economic or other developments in or affecting
the country in which the Company operates. The Companys
foreign exchange rate risk is limited because the majority of
its assets are non-monetary in nature, and the majority of its
debt is denominated in U.S. dollars. Additionally, a significant
portion of the Companys debt has a fixed interest rate
thereby limiting the Companys interest rate risk exposure.
Accordingly, the Company has not entered into derivative
transactions to hedge against these potential 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 peso free
market opened on January 11, 2002 and traded at 1.65
pesos to the U.S. dollar and has been volatile since. The
devaluation of the Argentine peso will generally affect
the Companys financial statements by generating foreign
exchange gains or losses on peso-denominated monetary
liabilities and assets of the Company 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 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 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,
the Companys customer contracts and operating cash inflows
are now predominantly denominated in pesos. Moreover, the
Companys debt service payments and a significant 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 the Company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
the Companys and the Companys overall cash flows,
financial condition, and results of operations.

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

F-35



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

repatriations of any dividends or other cash
flows from the Company to the Parent Company, in the United
States; (iii) the Companys asset valuations; and
(iv) the Companys pesos-denominated monetary
assets and liabilities.

Cash and Cash Equivalents Cash and cash equivalents are highly
liquid investments, including short-term investments and time
deposits with 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 an 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
(IRU) 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 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 revenues from services for the year ended
December 31, 2000 and 2001.

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

Broadband Network The Broadband Network was finished
during the fourth quarter of 2000. These assets are recorded at
cost and depreciated using the straight-line method over the
following estimated useful lives. In addition, the Company
during 2000 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 | 
|IRU investment          |  |  | 15 years    | 
|Equipment and materials |  |  | 10 years    | 

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

|                                        |  |  |             | 
|--------------------------------------- |  |  | ----------- | 
|Building and improvement                |  |  | 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.

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

F-36



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

Company as available for sale and are
carried at fair value. Unrealized gains or losses, net of tax,
for available for sale investments are included in accumulated
other comprehensive income (loss) within stockholders
equity. All other investments are carried at cost.

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, in the year ended
December 31, 2001, the Company recorded a non-cash
impairment charge of $245.6 million. The Company recorded
this impairment charge based on internal estimates of fair
value, other indicators and not on independent valuations of its
telecommunication infrastructure.

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 Statements of Financial Accounting Standards
(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 Currencies Translation The translation of these financial
statements into U.S. dollars has been made following the
guidelines of SFAS No. 52, Foreign Currency Translation.Major operations of IMPSAT S.A. are stated in U.S. dollars.
Accordingly, the U.S. dollar has been designated as the
functional currency. Local currencies denominated transactions
are remeasured into the functional currency. Accordingly, fixed
assets and stockholders equity (deficiency) accounts have been
translated into U.S. dollars taking into account the exchange
rate prevailing at each transaction date. Monetary assets and
liabilities are translated using the year-end exchange rate.
Profit and loss accounts were translated using average exchange
rates for the periods in which they were accrued, except for the
consumption of non-monetary assets for which their respective
dollar translated costs were considered. The decision of the
Argentine Government on December 20, 2001, to preclude
exchanges of pesos and U.S. dollars created a condition of
non-exchangeability, which resulted in the Company using the
first subsequent free-floating rate (1.65 pesos for
$1.00 U.S. dollar) for which transactions could be settled
to remeasure the Companys financial position and results
of operations. This resulted in a remeasurement loss of
approximately $16.5 million which is reflected in net loss
on foreign exchange in the accompanying statements of operations.

Fair Value of Financial
Instruments The
Companys financial instruments include receivables,
investments, payables, short- and long-term debt. The available
for sale investments were valued at market closing prices at
December 31, 2001. The fair value of all other financial
instruments, which approximate their carrying (or contract)
values, have been determined using interest rates as of
December 31, 2001.

New Accounting Pronouncements The Financial Accounting Standards
Board (FASB) has issued Statement of Financial
Accounting Standards No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting
and reporting for legal obligations associated with the
retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 is effective for
fiscal years beginning after June 15, 2002, with early
adoption encouraged. The Company does not expect the adoption of
SFAS No. 143 to have a material effect on its financial
statements or disclosures.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.
SFAS No. 143 is effective for fiscal years beginning after
December 15, 2001 and interim years within

F-37



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

those fiscal years, with early adoption
encouraged. The provisions of SFAS No. 144 generally are to
be applied prospectively. The Company does not expect the
adoption of SFAS No. 144 to have a material effect on its
financial statements or disclosures.

Reclassifications Certain amounts in the 1999 and 2000
financial statements have been reclassified to conform with the
2001 presentation.

3.  Trade Accounts
Receivable

Trade accounts receivable at December 31,
2000 and 2001 are summarized as follows:

|                                      |  |      |         |      |  |   |         |  
|------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                      |  | 2000 |         | 2001
|                                      |  |      |         |     
|Trade accounts receivable             |  | $    | 75,116  |      |  | $ | 51,037  |  
|Less: allowance for doubtful accounts |  |      | (16,436 | )    |  |   | (17,113 | )
|                                      |  |      |         |      |  |   |         |  
|Trade accounts receivable, net        |  | $    | 58,680  |      |  | $ | 33,924  |  
|                                      |  |      |         |      |  |   |         |  

The Company provides trade credit to their
customers in the normal course of business. Prior to extending
credit, the customers financial histories are analyzed.

The activity for the allowance for doubtful
accounts for the year ended December 31, 1999, 2000 and
2001 is as follows:

|                                |  |                         |        |      |  |      |        |   |  |   |         |  
|------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                |  |                        
|                                |  | Year Ended December 31,
|                                |  |                        
|                                |  | 1999                    |        | 2000 |  | 2001
|                                |  |                         |        |      |  |     
|Beginning balance               |  | $                       | 8,310  |      |  | $    | 13,943 |   |  | $ | 16,436  |  
|Provision for doubtful accounts |  |                         | 6,280  |      |  |      | 3,035  |   |  |   | 15,590  |  
|Write-offs, net of recoveries   |  |                         | (647   | )    |  |      | (542   | ) |  |   | (14,913 | )
|                                |  |                         |        |      |  |      |        |   |  |   |         |  
|Ending balance                  |  | $                       | 13,943 |      |  | $    | 16,436 |   |  | $ | 17,113  |  
|                                |  |                         |        |      |  |      |        |   |  |   |         |  

4.  Other Receivables

Other receivables consist primarily of refunds or
credits pending from local governments for taxes other than
income, advances to suppliers other than for fixed assets, and
other miscellaneous amounts due to the Company.

5.  Broadband Network and
Agreements

Broadband network and related equipment at
December 31, 2000 and 2001 consists of:

|                                             |       |      |         |         |  |   |         |         | 
|-------------------------------------------- | ----- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                             |       | 2000 |         | 2001   
|                                             |       |      |         |        
|Network infrastructure                       |       | $    | 91,206  |         |  | $ | 76,693  |        
|Equipment and materials                      |       |      | 122,477 |         |  |   | 90,222  |        
|IRU investments                              |       |      | 4,395   |         |  |   | 2,616   |        
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      |         | 218,078 |  |   |         | 169,531 | 
|Less: accumulated depreciation               |       |      | (42,084 | )       |  |   | (63,536 | )      
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      |         | 175,994 |  |   |         | 105,995 | 
|Under construction  Network
	infrastructure |       |      | 967     |         |  |   |         |        
|                                             |       |      |         |         |  |   |         |        
|                                             | Total |      | $       | 176,961 |  |   | $       | 105,995 | 
|                                             |       |      |         |         |  |   |         |        

F-38



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

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

|                          |  |                         |        |      |  |   |        |  
|------------------------- |  | ----------------------- | ------ | ---- |  | - | ------ | -
|                          |  |                        
|                          |  | Year Ended December 31,
|                          |  |                        
|                          |  | 2000                    |        | 2001
|                          |  |                         |        |     
|Beginning balance         |  | $                       | 39,763 |      |  | $ | 42,084 |  
|Depreciation expense      |  |                         | 2,321  |      |  |   | 23,673 |  
|Disposals and retirements |  |                         |        |      |  |   | (2,221 | )
|                          |  |                         |        |      |  |   |        |  
|Ending balance            |  | $                       | 42,084 |      |  | $ | 63,536 |  
|                          |  |                         |        |      |  |   |        |  

Nortel Networks Agreements On September 6, 1999, the Company
executed a turnkey agreement with Nortel Networks Inc.
(Nortel) relating to Nortels design and
construction of segments of the Broadband Network in Argentina
for approximately $133.1 million.

On October 25, 1999, the Company signed a
definitive agreement with an affiliate of Nortel Networks to
borrow an aggregate of up to approximately $149.1 million
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 and the purchase of
additional equipment to be used by the Company in connection
with the operation of the Broadband Network. The Parent Company
has agreed to guarantee the obligations of the Company under the
Nortel financing agreement. At December 31, 2001, a total
of $120.3 million was outstanding under the Nortel
Financing Agreement (see Note 9).

Additionally, the Company has obtained additional
vendor financing from Lucent Technologies, Ericsson, Tellabs OY,
DMC and Harris Canadá, Inc. for the acquisition of fiber
optic cable and other telecommunications equipment for the
Broadband Network for an aggregate of up to approximately
$29.8 million.

Global Crossing On September of 2000 the Company
completed and delivered to Global Crossing the portion of the
Trans-Andean Crossing System connecting Las Toninas, Argentina
and Santiago, Chile. In connection with the delivery, the
Company recognized revenues and costs totaling
$32.3 million and $18.1 million, respectively.

As part of its arrangements with Global Crossing,
the Parent Company or its affiliates have 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 Parent Company to interconnect the Parent
Companys networks in Argentina and Brazil and give the
Parent Company global international access. The Parent Company
had purchased approximately $12.6 million and
$9.7 million under this agreement as of December 31,
2000 and 2001, respectively.

IRU Agreements The Company has entered into several
agreements granting IRUs of up to 25 years to the
Companys broadband network, including network maintenance
services and telehousing space. The Company has received
approximately $22.2 million during the year ended
December 31, 2001 related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying balance sheet. During the year ended
December 31, 2001, the Company recognized approximately
$2.1 million from these agreements, which are reflected as
services to carriers in the accompanying statement of operations.

F-39



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

6.  Property, Plant and
Equipment

Property, plant and equipment at
December 31, 2000 and 2001 consists of:

|                                        |       |      |          |         |  |   |          |         | 
|--------------------------------------- | ----- | ---- | -------- | ------- |  | - | -------- | ------- | 
|                                        |       | 2000 |          | 2001   
|                                        |       |      |          |        
|Land                                    |       | $    | 3,160    |         |  | $ | 3,106    |        
|Building and improvements               |       |      | 37,369   |         |  |   | 30,909   |        
|Operating communications equipment      |       |      | 224,293  |         |  |   | 142,318  |        
|Furniture, fixtures and other equipment |       |      | 16,594   |         |  |   | 17,629   |        
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 281,416 |  |   |          | 193,962 | 
|Less: accumulated depreciation          |       |      | (131,378 | )       |  |   | (158,278 | )      
|                                        |       |      |          |         |  |   |          |        
|                                        | Total |      |          | 150,038 |  |   |          | 35,684  | 
|Equipment in transit                    |       |      | 12,928   |         |  |   | 3,047    |        
|Works in process                        |       |      | 788      |         |  |   | 1,418    |        
|                                        |       |      |          |         |  |   |          |        
|Property, plant and equipment, net      |       | $    | 163,754  |         |  | $ | 40,149   |        
|                                        |       |      |          |         |  |   |          |        

The recap of accumulated depreciation for the
year ended December 31, 1999, 2000 and 2001, is as follows:

|                          |  |                         |         |      |  |      |         |   |  |   |         |  
|------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                          |  |                        
|                          |  | Year Ended December 31,
|                          |  |                        
|                          |  | 1999                    |         | 2000 |  | 2001
|                          |  |                         |         |      |  |     
|Beginning balance         |  | $                       | 47,878  |      |  | $    | 105,801 |   |  | $ | 131,378 |  
|Depreciation expense      |  |                         | 59,039  |      |  |      | 35,850  |   |  |   | 31,717  |  
|Disposals and retirements |  |                         | (1,116  | )    |  |      | (10,273 | ) |  |   | (4,817  | )
|                          |  |                         |         |      |  |      |         |   |  |   |         |  
|Ending balance            |  | $                       | 105,801 |      |  | $    | 131,378 |   |  | $ | 158,278 |  
|                          |  |                         |         |      |  |      |         |   |  |   |         |  

7.  Investments

The Companys investments at
December 31, 2000 and 2001 consist of:

|                                                                                     |       |      |       |        |  |   |       |       | 
|------------------------------------------------------------------------------------ | ----- | ---- | ----- | ------ |  | - | ----- | ----- | 
|                                                                                     |       | 2000 |       | 2001  
|                                                                                     |       |      |       |       
|Investment, at cost                                                                  |       | $    | 7,925 |        |  |   |       |      
|Investment in common stock, at fair
	value  New Skies Satellites N.V. ($2,748 cost) |       |      | 3,904 |        |  | $ | 2,429 |      
|                                                                                     |       |      |       |        |  |   |       |      
|                                                                                     | Total |      | $     | 11,829 |  |   | $     | 2,429 | 
|                                                                                     |       |      |       |        |  |   |       |      

The Companys cost basis investment
represented a less than 1% ownership in an unaffiliated entity
established for the purchase and leasing of satellite capacity
time. During October 2001, the Company sold this investment for
$8 million. The Companys investment in common stock is
subject to equity price risk. The Company has not taken any
actions to hedge this market risk exposure.

8.  Short-Term Debt

As of December 31, 2000 the Companys
short-term debt consisted of short-term credit facilities,
denominated in U.S. dollars with interest rates ranging from 11%
to 17% and the amount outstanding under these credit facilities
totaled approximately $8.9 million. As of December 31,
2001 these credit facilities were canceled.

F-40



---



##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

9.  Long-Term Debt

The Companys long-term debt at
December 31, 2000 and 2001 is detailed as follows:

|                                                                                                                      |                      |      |         |         |  |   |          |         | 
|--------------------------------------------------------------------------------------------------------------------- | -------------------- | ---- | ------- | ------- |  | - | -------- | ------- | 
|                                                                                                                      |                      | 2000 |         | 2001   
|                                                                                                                      |                      |      |         |        
|Term notes payable, maturing from 2001 through
	2004, collateralized by certain assets; denominated in U.S.
	dollars: |                      | $    | 1,861   |         |  | $ | 2,590    |        
|Eximbank notes payable (3.90%  6.09%),
	maturing semiannually through 200l and 2004.                                 |                      |      | 11,359  |         |  |   | 13,513   |        
|Vendor financing (5.21%  10,50%), due
	2006.                                                                         |                      |      | 129,791 |         |  |   | 149,470  |        
|                                                                                                                      |                      |      |         |         |  |   |          |        
|                                                                                                                      | Total long-term debt |      |         | 143,011 |  |   |          | 165,573 | 
|Less: current portion, including defaulted
	indebtedness                                                              |                      |      | (15,385 | )       |  |   | (162,390 | )      
|                                                                                                                      |                      |      |         |         |  |   |          |        
|Long-term debt, net                                                                                                   |                      | $    | 127,626 |         |  | $ | 3,183    |        
|                                                                                                                      |                      |      |         |         |  |   |          |        

The scheduled maturities of long-term debt at
December 31, 2001 are as follows:

|             |       |   |         |         | 
|------------ | ----- | - | ------- | ------- | 
|Fiscal year: |       |  
|             |       |  
|2002         |       | $ | 162,390 |        
|2003         |       |   | 2,739   |        
|2004         |       |   | 444     |        
|             |       |   |         |        
|             | Total |   | $       | 165,573 | 
|             |       |   |         |        

The vendor financing and some of the term notes
contain certain covenants requiring the maintenance of certain
financial ratios, limiting the incurrence of additional
indebtedness and capital expenditures, and restricting the
ability to pay dividends.

The Companys liquidity difficulties
described in Note 1 have led to non-compliance with certain
covenant requirements and payment provisions under the 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 $18.4 million that were
due on that date. The waiver expired on November 25, 2001
and the Broadbank Network Vendor Financing Agreements became due
and payable. The Company is in default under the Broadbank
Network Vendor Financing Agreements, and as a result of the
default, an aggregate of $118.0 million of the defaulted
amounts have been reclassified to current portion of long-term
debt as of December 31, 2001.

10.  Income Taxes

The composition of the benefit from (provision
for) income taxes, for the year ended December 31, 2000 and
2001 is as follows:

|         |       |      |        |       |  |      |       |       |  |   |        |        |  
|-------- | ----- | ---- | ------ | ----- |  | ---- | ----- | ----- |  | - | ------ | ------ | -
|         |       | 1999 |        | 2000  |  | 2001
|         |       |      |        |       |  |     
|Current  |       | $    | (1,941 | )     |  | $    | 1,941 |       |  |   |        |       
|Deferred |       |      | 7,923  |       |  |      | 5,045 |       |  | $ | (8,667 | )     
|         |       |      |        |       |  |      |       |       |  |   |        |       
|         | Total |      | $      | 5,982 |  |      | $     | 6,986 |  |   | $      | (8,667 | )
|         |       |      |        |       |  |      |       |       |  |   |        |       

The statutory tax rate in Argentina is 35%.
During the year ended December 31, 2001, the Company
recorded a valuation allowance of approximately
$7.4 million to reduce its deferred tax asset to zero,
because it is not clear that utilization of the tax benefits
from operating losses and other differences are more
likely than not to be realized, as required by
SFAS 109.

F-41



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

11.  Commitments and
Contingencies

Commitments The Company leases telecommunications
links with annual rental commitments of approximately
$8.7 million through the year 2006. In addition, the
Company has commitments to purchase communications and data
center equipment amounting to approximately $5.2 million at
December 31, 2001. These commitments are not included in
the balance sheet as of December 31, 2001.

Guarantees The Company is guarantor on the
$125 million 12 1/8% Senior Guaranteed Notes Due 2003
issued on July 30, 1996 by the Parent Company.

IMPSAT Brazil, another wholly-owned subsidiary of
IMPSAT Fiber Networks, Inc., has entered into a
$5.9 million term note with El Camino Resources, which is
guaranteed by the Company and the Parent Company. At
December 31, 2001, the balance outstanding was
approximately $2.9 million.

IPO Allocations Class Action On November 1, 2001, a lawsuit
was filed in the United States District Court for the Southern
District of New York against the Parent Company, certain of the
Parent Companys current officers and directors, and the
underwriters to the Parent Companys initial public
offering. This lawsuit alleges on behalf of a proposed class of
all shareholders that the Parent Company and its underwriters
violated various provisions of the securities laws in connection
with the IPO in February 2000. The plaintiff has proposed a
putative class from the date of the IPO to December 6,
2000. In August 2001, the court ordered that this suit be
coordinated for all pre-trial purposes in a proceeding styled
In re Initial Public Offering Securities Litigation,
21 MC 92, an intra-district proceeding involving
approximately 900 lawsuits concerning the initial public
offerings of approximately 310 companies and
48 underwriters. The complaint does not seek a specified
amount of damages. It is the Parent Companys present
understanding that the plaintiffs intend to file an amended
complaint shortly. The Parent Companys management believes
that the Parent Company has meritorious defenses to the
allegations in the complaints and intends to defend the
litigation vigorously. However, due to the early stages of this
action, the Parent Company cannot conclude as to the possible
outcome. The Company has certain insurance policies with respect
to such claims and have filed a claim with its carriers
regarding this matter.

360Networks During June 2001, the Company and
IMPSAT Brazil terminated a series of contracts which they had
signed in the first quarter of 2001 with subsidiaries of 360
americas networks (Bermuda) ltd., a subsidiary of 360 networks,
Inc., and certain other subsidiaries of 360 networks, 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, as a result of the breach by 360networks of its payment
obligation under those contracts, including the new
Argentina  Brazil link that the Companies has
recently completed. Between March and May 2001, the Company and
IMPSAT Brazil made available segments of the IRU desk fiber and
capacity services to 360networks for acceptance, but 360networks
failed to make certain payments as required by the contracts.
360networks also failed to make certain payments for collocation
space in the Companys and IMPSAT Brazils telehouses
in Sao Paulo and Rio de Janeiro, Brazil and Buenos Aires,
Argentina, and those contracts were terminated as well. The
Parent Company has also more recently terminated a contract with
360networks for collocation space in Caracas, Venezuela, also
for payment default by 360networks.

The Parent Company has 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.
360americas and the other subsidiaries with which the Parent
Company had contracted were not included in the series of
bankruptcy and insolvency filings made in the United States and
Canada by its parent, 360networks, Inc. and certain of its other
affiliates. 360networks, Inc. has announced that it intends to
seek a buyer for its South American underseas fiber optic cable
system, which is owned by 360americas. The Parent Company
intends to aggressively pursue its remedies against 360networks,
including its claim for damages due under the terminated
contracts, but is unable to predict

F-42



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##### 



IMPSAT S.A.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

whether the Parent Company will prevail in any
such proceedings and, if so, whether 360networks would be able
to pay any arbitration or litigation award that might be entered
in favor of the Parent Company.

During the pendency of the arbitration and
litigation proceedings, the Company will continue to include as
deferred revenues on its balance sheet the amount received from
360networks as down payments under the terminated contracts,
after deducting amounts that were due and payable at the time of
the termination of the contracts. As of December 31, 2001,
the balance of such deferred revenue was $8.0 million.

Other Litigation The Company is involved in or subject
to various litigation and legal proceedings incidental to the
normal conduct of its business. 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, the Company filed suit against
a former customer, ENCOTESA, for amounts due and arising under
the Companys contracts with ENCOTESA, the Argentine
national postal service, for $7.3 million. The ultimate
collectability of this matter continues to be negotiated for
settlement; however, the Company has valued this receivable at a
net realizable value of zero.

* * * * * *

F-43



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##### 



EXHIBIT INDEX

|            |      |   |  |             |  |                                                                                                                                                                                                                                                                                                                                    
|----------- | ---- | - |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |      |   |  |            
|Exhibit No. |      |   |  | Description
|            |      |   |  |            
|            | 3.1  |   |  |            |  | Amended and Restated Certificate of Incorporation
	of the Company (filed on January 14, 2000 as Exhibit No. 3.1 to
	the Companys Registration Statement on Form S-1 (No.
	333-88389) and incorporated herein by reference).                                                                                                       
|            | 3.2  |   |  |            |  | Amended and Restated Bylaws of the Company (filed
	on January 14, 2000 as Exhibit No. 3.2 to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                             
|            | 4.1  |   |  |            |  | Indenture for the Notes Due 2005, dated as of
	February 16, 2000, among the Company, The Bank of New York, as
	Trustee and Banque Internationale a Luxembourg (including form
	of Note) (filed on March 10, 2000 as an exhibit to the
	Companys 1999 Annual Report on Form 10K and incorporated
	herein by reference).            
|            | 4.2  |   |  |            |  | Indenture for the Notes due 2008, dated as of
	June 17, 1998, between the Company and The Bank of New York, as
	Trustee (including form of Note) (filed on July 21, 1998 as an
	exhibit to the Companys Registration Statement on
	Form S-4 (No. 333-59469) and incorporated herein by
	reference).                               
|            | 4.3  |   |  |            |  | Securityholders Agreement dated as of March 19,
	1998, among Nevasa Holdings, the Morgan Stanley investors and
	certain other parties (filed on April 15, 1998, as an exhibit to
	the Companys Annual Report on Form 10-K for 1997 and
	incorporated herein by reference).                                                        
|            | 4.4  |   |  |            |  | Supplemental Indenture for the Notes Due 2003
	dated as of May 13, 1997 among IMPSAT Corporation, IMPSAT S.A.
	and The Bank of New York (filed on April 15, 1998 as an exhibit
	to the Companys Annual Report on Form 10-K for 1997 and
	incorporated herein by reference).                                                       
|            | 4.5  |   |  |            |  | Indenture for the Notes Due 2003 dated as of July
	31, 1996, among the Company, IMPSAT Argentina as Guarantor and
	the Bank of New York as Trustee (including form of Note) (filed
	on November 20, 1996 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-12977) and
	incorporated herein by reference).
|            | 4.6  |   |  |            |  | Shareholders Agreement dated as of March 10, 1999
	(filed on January 14, 2000 as an exhibit to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                           
|            | 4.7  |   |  |            |  | Specimen Stock Certificate (filed on January 14,
	2000 as an exhibit to the Companys Registration Statement
	on Form S-1 (No. 333-88389) and incorporated herein by
	reference).                                                                                                                                                  
|            | 4.8  |   |  |            |  | Form of Stockholder Rights Plan Agreement between
	the Company and The Bank of New York, as Rights Agent (filed on
	June 21, 2000 as an exhibit to the Companys Registration
	Statement on Form S-4 (No. 333-34954) and incorporated herein by
	reference).                                                                       
|            | 4.9  |   |  |            |  | Certificate of Designations dated as of June 7,
	2000 (filed on June 21, 2000 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-34954) and
	incorporated herein by reference).                                                                                                                           
|            | 9.1  |   |  |            |  | 1998 Stock Option Plan (filed on March 31, 1999
	as an exhibit to the Companys 1998 Annual Report on Form
	10-K and incorporated herein by reference).                                                                                                                                                                            
|            | 9.2  |   |  |            |  | 1999 Stock Option Plan (filed on January 14, 2000
	as an exhibit to the Companys Registration Statement on
	Form S-1 (No. 333-88389) and incorporated herein by reference).                                                                                                                                                       
|            | 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).                                                                                                                                          



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##### 



|            |      |   |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- | ---- | - |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |      |   |  |            
|Exhibit No. |      |   |  | Description
|            |      |   |  |            
|            | 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 |  |  |            |  | Turnkey Project Agreement between IMPSAT
	Argentina and Nortel Networks (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 |  |  |            |  | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 10.5 |  |  |            |  | Capacity Commitment Agreement dated as of
	November 10, 2000, between South American Crossing Ltd. and
	IMPSAT Fiber Networks, Inc. (filed on March 30, 2001, as an
	exhibit to the Companys Annual Report on Form 10-K for
	2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 10.6 |  |  |            |  | Capacity Purchase Agreement dated as of
	November 10, 2000, between Global Crossing Bandwidth, Inc.
	and International Satellite Communication Holding Ltd. (filed on
	March 30, 2001, as an exhibit to the Companys Annual
	Report on Form 10-K for 2000 and incorporated herein by
	reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 10.7 |  |  |            |  | Capacity IRU Agreement dated as of
	February 15, 2001, by and between 360americas network
	(Bermuda) Ltd. and IMPSAT Fiber Networks, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 10.8 |  |  |            |  | IRU Fiber Agreement (Argentina) dated as of
	February 15, 2001, by and between IMPSAT S.A.
	(Argentina) and 360networks de Argentina S.R.L. (filed on
	March 30, 2001 as an exhibit to the Companys 2000
	Annual Report on Form 10K 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 10.9: IRU
	Fiber Agreement (Brazil) dated as of February 15, 2001, by and
	between Impsat Comunicações Ltda. and 360networks do
	Brasil Ltda. (filed on March 30, 2001 as an exhibit to the
	Companys 2000 Annual Report on Form 10K and incorporated
	herein by reference).
|            | 10.9 |  |  |            |  | Service Agreement dated as of February 15,
	2001, by and between Impsat Comunicações Ltda. and
	360networks do Brasil Ltda. (filed on March 30, 2001 as an
	exhibit to the Companys 2000 Annual Report on
	Form 10K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 10.1 | 0 |  |            |  | Master Loan Agreement dated as of June 6,
	2001 among Harris Canada, Inc. and the Company, IMPSAT
	Argentina, IMPSAT Brazil, IMPSAT Colombia, IMPSAT Ecuador, and
	IMPSAT Venezuela.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 10.1 | 1 |  |            |  | Amended and Restated Financing Agreement between
	IMPSAT Argentina and Nortel Networks. 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 10.11: Amended and Restated Financing Agreement
	between IMPSAT Brazil and Nortel Networks.                                                                                                                                                                                                                                                                                                                                                                      
|            | 21.1 |   |  |            |  | List of subsidiaries of the registrants
	(incorporated by reference to the Business 
	General section of the Companys Annual Report on
	Form 10-K for 2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 24.1 |   |  |            |  | Power of Attorney (included on the signature page
	hereto).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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