**Exhibit 99.1**

 

**RISK FACTORS**

 

Statements inthis Form 10-Q that are not historical facts are “forward-looking statements”(as defined in the Private Securities Litigation Reform Act of 1995).Forward-looking statements include, but by way of example only, statementsregarding the Company’s Strategic Plan, and projections regarding financialimpacts of planned organizational re-alignment, outsourcing projects, newproduct roll-out and cost reductions in general. These statements, when made,are intended to reflect VIA management’s then current views with respect tofuture events and expectations and are subject to a number of risks,assumptions and uncertainties, including those discussed below, which couldcause our actual results to differ materially from those projected in suchstatements.

 

***WE ARE IMPLEMENTING A NEW BUSINESS PLAN,WHICH MAY NOT BE SUCCESSFUL.***

 

We have begunseveral significant new business initiatives in 2003 as a part of our 2003-2005Strategic Plan to improve operational effectiveness, reduce costs and promotegrowth. This plan may not be successful and may cause the Company to incuradditional costs. Our Strategic Plan builds on the progress we made in 2002during which we focused heavily on reducing costs, rationalizing our operationsand generally stabilizing the financial condition of the Company. Hence, in2002 we significantly reduced headcount, implemented strong spending controls,sold our operations in Mexico, Argentina, Brazil, Austria and Ireland andclosed our office in Belgium. We continued these activities in 2003 by furtherreducing headcount and selling our operations in Italy.  Our Strategic Plan continues the focus of2002 to returning to a path towards profitability but now calls for organizational-widechange. The planned changes, objectives and the risks associated with thoseobjectives are noted below:

 

•                                          We are reorganizing our operationsalong functional lines away from the previous country orientation and focus. Webelieve that this functional re-alignment will in the long term enable VIA topermit the more efficient sharing of best practices and the use of commonplatforms throughout the enterprise as well as reduce our overall operatingcosts. The reorganization will also permit VIA to take better advantage ofcross–border sales and marketing opportunities in our selected markets.However, this reorganization of our operations to a functional matrixorganization may increase costs in the near term. We may incur additional costsas functional teams across all the countries may require increased travel tocoordinate their efforts and share core values. We will also incur significantone-time severance payments as we pursue our plan to streamline theorganization. We plan to engage in further significant headcount reductions in2003, which may result in employment-related litigation claims and relatedincreased costs. These additional costs may materially affect our operatingresults. In addition, the reorganization efforts may create significantdistraction for our executive team, which may negatively affect our operatingresults.

 

•                                          We entered into agreements withvendors to outsource certain network, IT, finance and administration systemsand processes. While our goals in these actions are to reduce costs, createorganizational efficiencies, enhance the standardization of processes andimprove internal controls, we may experience differing outcomes. We cannot beassured that the outsourcing providers will be able to deliver the desiredresults. Our outsourcing providers’ systems may not prove to provide the levelof service and functionality that we anticipated and may have unanticipated andsubstantial technological or operational weaknesses. Our use of outsourceproviders for certain key operational functions will require us to rely on thecontractual relationships we maintain with the third party providers and wewill not be able to control directly the quality of service or level ofcooperation we receive in connection with these functions. As a result, we maylose a certain degree of day-to-day control over these functions and we will bedependant on the continued adherence to contractual service descriptions andservice level agreements. We may experience disputes with outsourcing providersto secure our rights or address service issues. Any one or more of these issuesmay affect negatively our ability to deliver quality service to our customersor deliver accurate financial reporting on our operations and may increase ourcosts, which will negatively affect our results of operations.

 

•                                          Our productdevelopment plans call for the introduction of more sophisticated products andservices such as IP VPN service as well as products that will add to ourability of providing a single-source communications solution to our customers,such as voice service. We intend to rollout these new products and services bypartnering with technology vendors and other third party providers. Thedevelopment and rollout of these new products and services will depend on ourability to identify vendors and providers who can provide a quality anddependable service and successfully negotiate agreements with these vendors andproviders that enable VIA to deliver the products and services profitability toour customers. Our new product development plan will also depend on our abilityto integrate the sale, provisioning and billing of the new products andservices into our sales force training and into our systems and processes. Ourtarget of reaching net cash flow break-even during the course of 2004

 

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depends, in part, on successfully introducing thesenew products and services. If we are unsuccessful in these efforts or if weencounter any significant delay in introducing the new products and services,our ability to reach our goal of achieving break-even at the net cash flowlevel and profitability during the course of 2004 may be negatively impacted.

 

•                                          We arepursuing a strategy of channeling our base products such as access and sharedweb-hosting to our indirect channels, enabling our sales force to focus onselling the more sophisticated, higher margin, value-added services we offerand plan to offer. In order to address this strategy, we must upgrade ourdirect sales force through the hiring of new sales professionals, talentdevelopment and training programs and the resetting of compensation plans. Thetermination of sales staff, efforts to recruit new sales professionals and thetraining of our sales force may distract us from generating or impair ourability to generate new revenues. As a result, our operating results maysuffer. As we reorganize our sales force to meet the requirements of the newsales model, we may experience higher turnover and the loss of more keysalespersons than anticipated. If this occurs, our operating results will suffer.

 

•                                          While ourmanagement is focused on implementing our new business plan, technologicalevolution will continue. If we do not keep pace with these changes, we may failto attract and retain customers, which would reduce our revenues. The Internetservices market has been characterized by changing customer needs, frequent newservice and product introductions, evolving industry standards and rapidlychanging technology. Our success will depend, in part, on our ability torecognize and respond to these changes in a timely and cost-effective manner.

 

***WE HAVE A HISTORY OF NEGATIVE CASH FLOW ANDWE MAY NEVER ACHIEVE POSITIVE CASH FLOW.***

 

For the sixmonths ended June 30, 2003, we had a net loss from continuing operationsof $10.7 million. In order to provide continuing global support to ouroperations, enable them to deliver quality customer service, and in order todevelop an adequate financial reporting infrastructure, we will continue tomake significant ongoing expenditures for systems and staff. While we havesignificantly reduced our negative cash flow from the six months endedJune 30, 2002 to the six months ended June 30, 2003, we may reach apoint where we cannot further reduce our net use of cash from investing andoperating activities without material increases in revenues. Our strategic plancalls for us to reach positive net cash flow in 2004. The plan is predicated onthe assumption we will reach a certain level of revenue growth combined withcontinued cost-cutting measures.  If weare unable to increase our revenue or otherwise scale down our costs andinvestment expenditures, we will continue to experience negative cash flow.

 

***THE RESTRUCTURING OF OUR ORGANIZATIONMAY RESULT IN AN INABILITY TO RETAIN KEY PERSONNEL.***

 

As a part ofour Strategic Plan, we are shifting from a geographical focused organization toa functional matrix organization. The announcement of this re-orientation ofthe organization has led and may continue to lead to the departure of keyemployees. The loss of key employees may result in the loss of institutionalknowledge and experience that could be difficult to replace. We are alsoengaged in various cost-cutting actions, including headcount reductions.  These cost-cutting measures have created theneed to consolidate functions and require employees to take on additionalresponsibilities.  The implementation ofour plans may result in greater organizational uncertainty, low morale and aresulting higher than anticipated turnover of staff. If we are unable to findsuitable replacements for any one or more of these key employees, our abilityto execute our Strategic Plan may be negatively impacted.

 

***WE MAY NOT REALIZE THE ANTICIPATEDFINANCIAL OR COMMERCIAL BENEFITS AND MAY SUFFER MATERIAL LOSS AS A RESULTOF OUR DECISION TO OUTSOURCE CERTAIN SYSTEMS AND PROCESSES RELATED TO FINANCEAND ADMINISTRATION FUNCTIONS.***

 

We haveexperienced operational difficulties in the past in our efforts to upgrade ordeploy new back office systems. Our decision to outsource certain finance andadministration systems and processes may result in unanticipated difficulties.We have experienced customer and billing data integrity issues in the past; wehave developed both automated and manual additional processes and controls toaddress these issues and reduce the possibility of future data integrityproblems. However, the process of transitioning our control over thesefunctions may result in the loss of data or new data integrity issuesassociated with transferring data to third–party providers systems. Establishingproper systems and system interfaces to enable a successful transition to theshared service center may prove time consuming and require additional costs. Webelieve we have taken into consideration all costs associated with outsourcing;however, we cannot be assured that we have accounted for all hidden costs,transition costs and management costs; these may all lead to increased costs ofservices rather than a reduction in the costs of services.

 

Ouroutsourcing providers will provide their own personnel to manage our services.This will result in a reduction of our own organizational competencies,specifically certain IT expertise and finance functions. Our ability tomaintain an alignment

 

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between the outsourced IT andfinance functions with our strategy, which may change from time to time mightalso be reduced. If this occurs, we will be less able to successfully serve ourcustomers and compete effectively in our market space.

 

Unanticipateddegradation of service quality and increased overall service costs are twomajor issues relating to outsourcing. We may experience a degradation ofservice levels such as poor response time, poor turnaround time or a failure tomaintain software and system upgrades. We may discover that vendor applicationsdo not meet our requirements and vendor personnel may fail to provide qualityservice due to low compensation schemes and a lack of a direct interest in oursuccess. As a consequence of service degradation, our overall service costs mayrise. Any such degradation of service may lead to a deterioration of ourrelationship with the vendor, which could distract our senior management,increase our costs and impact our operations. In the event we experience servicedegradation we may wish to repatriate the outsourced services or terminate ourrelationship with the provider and procure a different provider. As the numberof providers is limited, it may be difficult or even impossible to transfer toanother provider. Further, because our outsourcing plans call for a significantreduction in staff we may lack the ability in the short term to repatriate theservices. This may create a situation where we are in essence locked-into anailing relationship with the outsourcing provider. Contractual difficulties mayalso impede our ability to terminate the outsourcing relationship. This maylead to disputes and litigation, which will be costly and will distract ourmanagement team.

 

***OUTSOURCING AND OTHER COST CUTTING MEASURESMAY IMPACT OUR ABILITY TO ATTRACT AND RETAIN EMPLOYEES AND CUSTOMERS.***

 

We have andwill continue to take steps to reduce our costs, including the outsourcing ofcertain network, IT and finance and administration functions. We reduced ourcombined employee headcount from 575 at December 31, 2002, excluding theItalian operation, to 480 by June 30, 2003 and will further reduce staffas a result of outsourcing and the functional re-alignment of our organization.We anticipate that by the end of 2003, we will have reduced our headcount toless than 400. These measures may impair our ability to attract and retain keyemployees. As a result of staff reduction, we may lose valuable institutionalknowledge and thereby have internal and outsourced staff that are lessexperienced and attuned to our business. As we continue these cost cuttingmeasures, we may also impair our ability to provide quality service, attractnew customers and implement integrated operating, administrative and financialcontrols.

 

***IF DEMAND FOR INTERNET SERVICES IN OURMARKETS DOES NOT GROW AS WE EXPECT, OUR ABILITY TO GROW OUR REVENUES WILL BENEGATIVELY AFFECTED.***

 

We arefocusing our sales and marketing efforts on more sophisticated value–addedservices in the Internet market. If the market opportunities for our currentand planned Internet services fail to develop, or develop more slowly thanexpected, we may not be able to increase our revenues at the rate we haveprojected. Obstacles to the development of Internet services in our marketsinclude:

 

•                  concernby customers of economic viability of service providers and the Internetindustry in general,

 

•                  failureof regulators to take adequate steps to prevent incumbent telecommunicationsproviders from abusing their economic power,

 

•                  lackof developed infrastructure to support Internet applications and access tobroadband services,

 

•                  limitedaccess to Internet services.

 

In particular,we depend on increasing demand for Internet services by small to mid-sizedbusinesses in our markets. Demand for Internet services by these businesseswill depend partly on the degree to which these businesses’ customers andsuppliers adopt the Internet as a means of doing business, and partly to theextent by which these businesses adopt Internet technologies to deal withinternal business processes, such as internal communications. Demand will alsodepend on whether there is a continuing economic downturn in these markets,which may result in a cutback of expenditures for the services we offer.Furthermore, as competitive pressures drive down customer prices for Internetaccess in many of our markets, we depend increasingly in such markets on ourability to sell to our customers higher margin, value added services such assecurity services, web hosting, and ecommerce solutions. Due to an increasingnumber of business failures in the Internet services industry in our coremarkets, an increase in customer reluctance to rely on third party serviceproviders in the Internet services industry for critical business functions mayalso reduce our revenue growth and increase our cost of sales by lengtheningsales cycles.

 

***COMPETITION FOR CUSTOMERS IN OUR MARKETSMAY CAUSE US TO REDUCE OUR PRICES OR INCREASE SPENDING, WHICHMAY NEGATIVELY AFFECT OUR REVENUES AND OPERATING RESULTS.***

 

There arecompetitors in our markets with more significant market presence and brandrecognition and greater financial,

 

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technical and personnelresources than we have. Although the competitors we face vary depending on themarket and the country, these competitors may include local and regionalInternet services providers, telecommunication companies and cable companies.Some of our competitors, especially the telecommunications companies, havelarge networks in place as well as a significant existing customer base. As aresult of this competition, we may face significant pressure to reduce ourprices, particularly with respect to Internet access services, and to improvethe products and services we offer.

 

***OUR BRAND NAMES AND TRADEMARKS ARE DIFFICULTTO PROTECT.***

 

We are awareof other companies using or claiming to have rights to use trademarks that aresimilar to our marks and variations of those marks, including the VIA NET.WORKSmark. We have received from time to time demands from third parties to ceaseand desist using one or more of our trademarks. The users of these or similarmarks may be found to have senior rights if they were ever to assert a claimagainst us for trademark infringement. If an infringement suit were institutedagainst us, even if groundless, it could result in substantial litigationexpenses in defending the suit. We are currently engaged in litigation with athird party in Portugal, who claims that the corporate name and trademark usedin Portugal infringes upon their mark and corporate name. If this suit were tobe successful, we could be forced to cease using the mark or corporate name andperhaps pay damages, although we believe that any such damages would be immaterial.Moreover, if we are forced to stop using any of our trademarks, we may have toexpend significant resources to establish new brands and our operating resultsmay be materially impacted.

 

***WE HAVE BEEN NAMED AS A DEFENDANT IN ASECURITIES CLASS ACTION LAWSUIT, WHICH COULD DISTRACT OUR MANAGEMENT AND IMPACTOUR CASH POSITION.***

 

OnNovember 5, 2001, we were named as a defendant in a class action lawsuitin the District Court for the Southern District of New York against VIANET.WORKS, Inc., certain of the underwriters who supported our initial publicoffering (“IPO”) and certain of our officers, under the title O’Leary v. ViaNet.works [sic] et al [01-CV-9720] (the “Complaint”). An amended complaint wasfiled in April 2002. The Complaint alleges that the prospectus we filedwith our registration statement in connection with our IPO was materially falseand misleading because it failed to disclose, among other things, that: (i) thenamed underwriters had solicited and received excessive and undisclosed commissionsfrom certain investors in exchange for the right to purchase large blocks ofVIA IPO shares; and (ii) the named Underwriters had entered into agreementswith certain of their customers to allocate VIA IPO shares in exchange forwhich the customers agreed to purchase additional VIA shares in the aftermarketat pre-determined prices (“Tie-in Arrangements”), thereby artificiallyinflating the Company’s stock price. The Complaint further alleges violationsof Sections 11, 12 (a)(2) and 15 of the Securities Act of 1933 and Section10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgatedthereunder arising out of the alleged failure to disclose and the allegedmaterially misleading disclosures made with respect to the commissions and theTie-in Arrangements in the prospectus. The plaintiffs in this action seekmonetary damages in an unspecified amount. Approximately 300 other issuers andtheir underwriters have had similar suits filed against them, all of which areincluded in a single coordinated proceeding in the Southern District of NewYork (the “IPO Litigation”).

 

OnJune 30, 2003, the special litigation committee of the board of directorsof the Company conditionally approved the global settlement between allplaintiffs and issuers in the IPO Litigations; the Company is in the process ofcompleting a settlement with the plaintiffs in the case.  The settlement would provide, among otherthings, a release of the Company and of the individual defendants for theconduct alleged in the action to be wrongful by the plaintiffs. Under theproposed settlement, the Company would agree to undertake otherresponsibilities under the partial settlement, including agreeing to assignaway, not assert, or release certain potential claims the Company may haveagainst its underwriters.  Any directfinancial impact of the proposed settlement is expected to be borne by theCompany’s insurers.   The speciallitigation committee agreed to approve the settlement subject to a number ofconditions, including the participation of a substantial number of otherdefendants in the proposed settlement, the consent of the Company’s insurers tothe settlement, and the completion of acceptable final settlementdocumentation.  Furthermore, thesettlement is subject to a hearing on fairness and approval by the Courtoverseeing the IPO Litigations.

 

***FLUCTUATIONS IN THE EXCHANGE RATE BETWEEN THEU.S. DOLLAR AND THE VARIOUS CURRENCIES IN WHICH WE CONDUCT BUSINESSMAY AFFECT OUR OPERATING RESULTS.***

 

We record therevenues and expenses of our local operations in their local currencies andtranslate these amounts into U.S. dollars for purposes of reporting ourconsolidated results. As a result, fluctuations in foreign currency exchangerates may adversely affect our revenues, expenses and results of operations aswell as the value of our assets and liabilities. Fluctuations may adverselyaffect the comparability of period-to-period results. For example, if theaverage value of the Euro decreases in relation to

 

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the U.S dollar during aquarterly period as compared to the prior period, each Euro will convert tofewer U.S dollars during that quarterly period than the prior period and wewill report lower revenue growth than what would have been calculated in localcurrencies for that period. In addition, we hold foreign currency balances thatwill create foreign exchange gains or losses, depending upon the relativevalues of the foreign currency at the beginning and end of the reporting period,affecting our net income and earnings per share. In projecting future operatingresults, we make certain assumptions about the fluctuation of the homecurrencies of our operations. If these assumptions turn out to be materiallyinaccurate, our actual operating results may be materially different from ourprojections.

 

***REGULATORY AND ECONOMIC CONDITIONS OF THECOUNTRIES WHERE OUR OPERATING COMPANIES ARE LOCATED ARE UNCERTAIN ANDMAY DECREASE DEMAND FOR OUR SERVICES, INCREASE OUR COST OF DOING BUSINESSOR OTHERWISE REDUCE OUR BUSINESS PROSPECTS.***

 

Our operatingcompanies are located in countries with rapidly changing regulatory andeconomic conditions that may affect the Internet services industry. Any new lawor regulation pertaining to the Internet or telecommunications, or theapplication or interpretation of existing laws, could decrease demand for ourservices, increase our costs, or otherwise reduce our profitability or businessprospects. Specific examples of the types of laws or regulations that couldadversely affect us include laws that

 

•                  imposetaxes on transactions made over the Internet,

 

•                  imposetelecommunications access fees on Internet services providers,

 

•                  directlyor indirectly affect telecommunications costs generally or the costs of Internettelecommunications specifically,

 

•                  prohibitthe transmission over the Internet of various types of information and content,

 

•                  imposerequirements on Internet services providers to protect Internet users’ privacy,monitor content, or to permit government interception of data traffic and

 

•                  increasethe likelihood or scope of competition from telecommunications or cablecompanies.

 

For example, anumber of European countries have enacted legislation that requires Internetservices providers to establish technical means to permit national authoritiesto intercept data traffic of identified customers. The application of theselaws to Internet services providers has been subject to significant oppositionfrom Internet services providers industry groups in Germany, the U.K. and theNetherlands, among others, because of the substantial cost service providerswould incur in order to comply with the law. Ultimately, these requirements mayimpose significant costs on our European operations in these countries, whichwould negatively impact our operating results. These laws could require us toincur costs to comply with them or to incur new liability. They could alsoincrease our competition or change our competitive environment so that customerdemand for our products and services is affected.

 

In addition torisks we face from new laws or regulations, we face uncertainties in connectionwith the application of existing laws to the Internet. It may take years todetermine the manner in which existing laws governing issues like propertyownership, libel, negligence and personal privacy will be applied tocommunications and commerce over the Internet.

 

***WE RELY ON TELECOMMUNICATIONS PROVIDERS INOUR MARKETS TO PROVIDE OUR CUSTOMERS WITH RELIABLE ACCESS TO OUR SERVICES, ANDFAILURES OR DELAYS IN PROVIDING ACCESS COULD LIMIT OUR ABILITY TO SERVICE OURCUSTOMERS AND IMPACT OUR REVENUES AND OPERATING RESULTS.***

 

Our customers typically accessour services either through their normal telephone lines or dedicated linesprovided by local telecommunications providers specifically for the purposes ofaccessing the Internet. In some of our markets, we experience delays indelivery of new telephone or dedicated lines that prevent our customers fromaccessing our services. These delays result in lost revenues. Additionally,some local telecommunications providers that provide Internet services providedelivery of telephone or dedicated lines to their own Internet customers on apreferential basis, which may cause VIA to lose current and potentialcustomers. We also lease network capacity from telecommunications providers andrely on the quality and availability of their service. These companies mayexperience disruptions of service, which could disrupt our services to, orlimit Internet access for, our customers. We may not be able to replace orsupplement these services on a timely basis or in a cost-effective manner,which may result in customer dissatisfaction and lost revenues. In addition, tothe extent that alternative local access providers fail in any particularmarket, the incumbent telecommunications providers will experience lesscompetitive price pressure for access, which could increase our cost structuresand impair our profit margins.

 

***WE DEPEND ON THE RELIABILITY OF OUR NETWORK,AND A SYSTEM FAILURE OR A BREACH OF OUR***

 

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***SECURITY MEASURES COULD RESULT IN A LOSS OFCUSTOMERS AND REDUCED REVENUES.***

 

We are able todeliver services only to the extent that we can protect our network systemsagainst damages from telecommunication failures, computer viruses, naturaldisasters and unauthorized access. Any system failure, accident or securitybreach that causes interruptions in our operations could impair our ability toprovide Internet services to our customers and negatively impact our revenuesand results of operations. To the extent that any disruption or security breachresults in a loss or damage to our customers’ data or applications, orinappropriate disclosure of confidential information, we may incur liability asa result. In addition, we may incur additional costs to remedy the damagescaused by these disruptions or security breaches. Although we currently possesserrors and omissions insurance and business interruption insurance thesepolicies may not provide effective coverage upon the occurrence of all events.

 

***WE MAY BE LIABLE FOR INFORMATIONDISSEMINATED OVER OUR NETWORK.***

 

We may faceliability for information carried on or disseminated through our network.Alternatively, we may incur costs associated with efforts to prevent access tocertain information from our network as required by governmental authorities.Some types of laws that may result in our liability for informationdisseminated over our network include:

 

•                  lawsdesigned to protect intellectual property, including trademark and copyrightlaws,

 

•                  lawsrelating to publicity and privacy rights and laws prohibiting defamation,

 

•                  lawsrestricting the collection, use and processing of personal data and

 

•                  lawsprohibiting the sale, dissemination or possession of offensive or pornographicmaterial.

 

The laws governing thesematters vary from jurisdiction to jurisdiction.

 

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