**Exhibit99.1**

 

**RISK FACTORS**

 

Statements in this Form10-Q that are not historical facts are “forward-looking statements” (as definedin the Private Securities Litigation Reform Act of 1995). Forward-lookingstatements include, but by way of example only, statements regarding theCompany’s Strategic Plan, and projections regarding financial impacts ofplanned organizational re-alignment, outsourcing projects, new product roll-outand cost reductions in general. These statements, when made, are intended to reflectVIA management’s then current views with respect to future events andexpectations and are subject to a number of risks, assumptions anduncertainties, including those discussed below, which could cause our actualresults to differ materially from those projected in such statements.

 

***WE HAVE A HISTORY OFNEGATIVE CASH FLOW AND WE MAY NEVER ACHIEVE POSITIVE CASH FLOW***

 

For the three and six months endedJune 30, 2004, we experienced a net loss from continuing operations of($11.5) million and ($21.3) million respectively. We will not be ableto continue to support our operations, deliver quality customer service, andimprove our financial reporting infrastructure without material increases inrevenues. Our immediate goal is to generate recurring and positive cash flowson a consolidated basis. This goal, however, is predicated on the assumptionthat we can increase revenues and continue to reduce costs. If we are unable toincrease our revenues or otherwise reduce our costs and investmentexpenditures, we will continue to experience negative cash flow.

 

***WE ARE IMPLEMENTINGA NEW BUSINESS PLAN, WHICH MAY NOT BE SUCCESSFUL***

 

In March 2003, we adopted a new businessplan for 2003-2005. We have implemented many initiatives in 2003 and 2004 fromthe Strategic Plan and will continue to do so in 2004-2005. This Strategic Plancalls for, among other things, a shift in our business model from a focus ondial-up and leased line Internet access services to web-hosting and Internetsecurity services. It also involves a fundamental shift in our operationalapproach through outsourcing a number of administrative functions. TheStrategic Plan may not succeed, may result in increased costs, and may notprovide anticipated increased revenues.

 

***We have outsourcedcertain functions, and our providers may not deliver the anticipated level ofservice and functionality and may have substantial technological or operationalweaknesses.***

 

We have outsourced certain key network, IT,finance and administration systems and processes to third party vendors. Wecannot be assured that these third parties will be able to deliver theanticipated and desired results. These third parties may not provide theanticipated level of service and functionality and may have substantialtechnological or operational weaknesses. This may increase our costs, whichwill negatively affect our results of operations. Our use of these outsourceproviders requires us to rely on the contractual relationships we maintain withthem and we will not be able to control directly their quality of service orlevel of cooperation. As a result, we may lose a certain degree of day-to-daycontrol over the outsourced functions and we will be dependant on continuedadherence to contractual service descriptions and service level agreements. Wemay experience disputes with outsourcing providers to enforce our rights oraddress service issues. These issues may affect negatively our ability todeliver quality service to our customers and deliver accurate financialreporting on our operations.

 

***The success of ourproduct development plans depends on our ability to identify vendors and otherswho can provide quality and dependable service and to successfully negotiateagreements with these vendors and providers so that we can deliver the productsand services profitably to our customers.***

 

Our product development plans call for theintroduction of more sophisticated products and services as well as productsthat will enhance our ability to serve as a single-source provider ofcommunications solutions. When we launch new products and services, wetypically partner with technology vendors and other third party providers. Thedevelopment and success of our new products and services depends on our abilityto identify vendors and providers who can provide quality and dependableservice. In addition, we must successfully negotiate satisfactory agreementswith these vendors and providers so that we can deliver the products andservices profitably to our customers. Our success with new products and servicesand existing products and services also depends on our ability to integratesale, provisioning and billing for these products and services into our salesforce training and into our other systems and processes. Our goal of generatingrecurring and positive cash flows on a consolidated basis depends, in part, onsuccessfully introducing new products and services. Once products and servicesare launched we must aggressively build market share in order to achieve theanticipated revenue forecasted for the new products and services. If we areunsuccessful in our marketing efforts, encounter any significant delays inintroducing new products and services, or are unable to successfully sell newproducts and services once they have been introduced, our financial performancewill be negatively impacted.

 

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***Our sales forcereorganization into VIA Express and Industry Solutions requires us to upgradeour direct sales force, recruit reseller candidates and provide them withnecessary back-office solutions, and build or acquire end-to-end automatedcustomer acquisition, order entry, provisioning and billing solutions.***

 

Our new sales strategy requires that we focusour direct sales force on selling more sophisticated, higher margin,value-added services and channel our more basic products such as access andshared web-hosting to indirect and web-based sales. As a part of the newemphasis on our VIA Express channel, we may reduce our direct sales force incertain country operations. The termination of sales staff, efforts to recruitnew sales professionals and the training of our sales force may distract usfrom generating or impair our ability to generate new revenues. As a result,our operating results may suffer. As we reorganize our sales force, we mayexperience higher turnover and the loss of more key salespersons thananticipated. Our sales strategy also calls for enhancing our indirect andautomated web sales capabilities. This component of our strategy depends onsuccessfully identifying and recruiting capable reseller candidates anddelivering back-office solutions enabling them to maximize sales opportunities,as well as address customer support issues. For web-based sales, our strategydepends on building or acquiring end-to-end automated customer acquisition,order entry, provisioning and billing solutions. If we fail to successfullyimplement and execute any one or more of these components, our sales strategymay not succeed and our operating results will be negatively impacted.

 

***We may not be ableto keep up with rapid technological and other competitive changes affecting ourindustry.***

 

The markets in which we compete arecharacterized by rapid consolidation of competitors, changing technology,evolving industry standards, frequent enhancements to existing services andproducts, the introduction of new services and products and changing customerdemands. These market characteristics are heightened by the emerging nature ofthe Internet and the trend for companies from many industries to offerInternet-based products and services. In addition, the widespread adoption ofnew Internet, networking, or telecommunications technologies or othertechnological changes could require us to incur substantial expenditures tomodify or adapt our services or infrastructure. Our future success will dependon our ability to respond to changing technologies on a timely andcost-effective basis. Our operating results may be adversely affected if wecannot successfully develop, introduce, or market new services and products. Inaddition, if we fail to anticipate or respond adequately to changes intechnology and customer preferences, or any significant delays in other productdevelopment efforts, such failure could have a material adverse effect on ourbusiness, financial condition and operating results.

 

***RESTRUCTURING OF OURORGANIZATION, CONSOLIDATION OF EXISTING FUNCTIONS AND ADDITIONAL EMPLOYEERESPONSIBILITIES MAY RESULT IN OUR INABILITY TO RETAIN OR RECRUIT KEY PERSONNEL***

 

In 2004, we plan to continue our efforts toreduce costs. These efforts include, but are not limited to, continuinginitiatives to reduce customer churn through standardization of churnmeasurements, programmed communications and new customer retention salesincentives, replacing non-performing sales professionals and refocusing oursales force, and refining our web sales tool to automate and standardizeorders, pricing and other system data related to access services. Many of thesemeasures will consolidate existing functions and require employees to take onadditional responsibilities. In addition, these measures may result in greaterorganizational uncertainty, low morale and a higher than anticipated employeeturnover. Over the past two years, we have experienced significant managementturnover. Our success also depends on attracting and retaining key management,many of whom may be difficult to replace. If we are unable to find suitablereplacements for any one or more of these key employees, our ability toimplement these measures and the success of our Strategic Plan may benegatively impacted. There can be no assurances that our operations will notsuffer from unanticipated employee departures or from our inability to quicklyengage qualified replacements.

 

***OUR ACQUISITIONSTRATEGY MAY NOT ACHIEVE THE FAVORABLE RESULTS WE ARE SEEKING***

 

With significant improvements achieved inoperations, we now seek to enhance our product portfolio and sales efforts byexploring the opportunity for acquisitions. A proactive acquisition programbrings with it certain risks, including the following:

 

•                                          Whilewe have established a small team of internal resources, we expect that broaderparticipation from management will be required in the course of the duediligence, negotiation and post-closing activities as suitable targets areidentified. Senior management may be distracted from normal executiveresponsibilities and implementation of the Strategic Plan. This may slow thepace of operational improvements and other, revenue generating, activities;

 

•                                          Wemay face significant integration issues in connection with acquisitions. Thismay distract senior management, create unanticipated costs and may cause thequality of our services to suffer, resulting in the loss of customers andrevenue; and

 

•                                          Wewill seek to build legal protections into acquisition agreements. However, wemay purchase undisclosed liabilities or experience lower than projectedoperating results in newly acquired companies, which could adversely affect ourfuture operating results.

 

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***WE MAY NOT REALIZETHE ANTICIPATED FINANCIAL AND COMMERCIAL BENEFITS OF OUTSOURCING SOME OF OURFINANCIAL AND ADMINISTRATIVE FUNCTIONS AND AS A RESULT MAY SUFFER MATERIAL LOSS***

 

In the past, we have experienced operationaldifficulties with efforts to upgrade or deploy new back office systems. Ourdecision to outsource certain network, IT, finance and administration systemsto a shared service center may result in unanticipated difficulties such asloss or impairment of data integrity.

 

Our outsourcing providers provide their own personnelto manage the outsourced functions. This results in a reduction of our ownorganizational competencies and may create problems in coordinating thesefunctions with the continued implementation of our Strategic Plan. We may alsoexperience delays in response or failure to maintain software and systemupgrades. Outsourcing providers may not meet our requirements and theirpersonnel may fail to provide quality service. As a consequence, our overallcosts may rise. If we experience difficulties with a provider, we may wish tobring the outsourced services back in-house or terminate our relationship withthe provider and procure a different provider. As the number of providers islimited, it may be difficult or even impossible to transfer to another provider.Further, because our outsourcing plans call for a significant reduction instaff we may lack the ability in the short term to return the servicesin-house. Contractual difficulties may also impede our ability to terminate theoutsourcing relationship. This may lead to costly and distracting disputes andlitigation.

 

***FAILURE TO ATTRACTAND RETAIN SENIOR MANAGEMENT AND CERTAIN OTHER KEY EMPLOYEES MAY ADVERSELYAFFECT OUR ABILITY TO CONDUCT OUR BUSINESS***

 

Our future success depends on the continuedservice and performance of our senior management and certain other keyemployees. In the past, we have been dependent on certain specialized systemspersonnel to operate, maintain and upgrade our systems. In an effort to reduceour costs, we have outsourced many of these responsibilities to outsidepersonnel, who may be less experienced and less knowledgeable than our formeremployees. In the past we have made significant headcount reductions and expectto make further reductions in the future. These reductions and our reliance onoutside personnel may impair our ability to attract and retain seniormanagement and certain other key employees. Our inability to attract and retainsenior management and certain other key employees could adversely affect ourbusiness, financial condition and operating results.

 

***IF DEMAND FOR OURPRODUCTS AND SERVICES DOES NOT INCREASE AS WE EXPECT, OUR ABILITY TO INCREASEOUR REVENUES WILL BE NEGATIVELY AFFECTED***

 

If the demand for our current and plannedInternet services fails to develop, or develops more slowly than we anticipate,we may not be able to increase our revenues at the rate we have projected.Obstacles to demand for our products and services include:

 

•                                          publicconcern about the economic viability of Internet services providers and theInternet industry in general;

 

•                                          failureof regulators to take adequate steps to prevent incumbent and largertelecommunications providers from monopolizing the market;

 

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

 

•                                          limitedaccess to Internet services.

 

In particular, we depend on increasing demandfor Internet services by SMEs. Demand by SMEs is dependent on the extent towhich they and their customers and suppliers adopt the Internet as a means ofdoing business, and they utilize Internet technologies to deal with internalbusiness processes. Demand will also depend on whether there is a continuingeconomic downturn, which may result in reduced spending by SMEs on Internetproducts and services. Furthermore, as competition reduces prices for Internetaccess in many of our markets, we are increasingly dependent on our ability tosell higher profit margin services such as security services, web-hosting, andecommerce solutions. Finally, an increasing number of Internet servicesproviders are going out of business in our key markets. This results incustomer reluctance to rely on businesses such as ours for critical businessfunctions.

 

***COMPETITION FORCUSTOMERS IN OUR MARKETS MAY CAUSE US TO REDUCE OUR PRICES OR INCREASESPENDING, WHICH MAY NEGATIVELY AFFECT OUR REVENUES AND OPERATING RESULTS***

 

Some of our competitors have greater marketpresence, brand recognition and financial, technical and personnel resourcesthan we have. Although our competitors and their resources vary depending onthe market and the country, these competitors may include local and regionalInternet services providers, telecommunications companies and cable companies.Some of our competitors, in particular the telecommunications companies, havelarge existing networks and customer bases. Increasing competition may createpressure to reduce our prices while at the same time improving our products andservices. There is no assurance that the price and performance of our servicesand products will be superior relative to the services and products of ourcompetitors. As a result, we may experience a loss of competitive position thatcould result in lower prices, fewer customer orders, reduced revenues, reducedprofit margins and loss of market share.

 

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***OUR BRAND NAMES ANDTRADEMARKS ARE DIFFICULT AND COSTLY TO PROTECT AND AS A RESULT WE MAY BECOMEINVOLVED IN TRADEMARK INFRINGEMENT LITIGATION***

 

We are aware of other companies using orclaiming to have rights to use trademarks that are similar to our marks andvariations of those marks, including the VIA NET.WORKS mark. The protectivesteps we have taken may be inadequate to deter misappropriation of ourproprietary information. We may be unable to detect the unauthorized use of, ortake appropriate steps to enforce, our intellectual property rights. The usersof these or similar marks may be found to have senior rights if they were everto assert a claim against us for trademark infringement. If an infringementsuit were instituted against us, even if groundless, it could result insubstantial litigation expenses. Failure to protect our intellectual propertyadequately could harm our brand and affect our ability to compete effectively.Further, defending our intellectual property rights could result in theexpenditure of significant financial and managerial resources, which couldadversely affect our business, financial condition and operating results.

 

We are currently engaged in litigation with athird party telecommunications provider in Spain, who opposed the SpanishTrademarks and Patents Official Agency’s granting the Spanish Amen Groupcompany the trademark “Amen.” The Spanish Trademarks and Patents OfficialAgency granted and authorized the Spanish Amen Group company the use of thetrademark “Amen” within Spain. Nevertheless, the third-party telecommunicationsprovider has appealed this decision. If this appeal were to be successful, wecould be forced to cease using the Amen mark and may be required to paydamages, although we believe that any such damages would be immaterial.

 

***FLUCTUATIONS IN THEEXCHANGE RATE BETWEEN THE U.S. DOLLAR AND THE VARIOUS CURRENCIES IN WHICH WECONDUCT BUSINESS MAY AFFECT OUR OPERATING RESULTS***

 

We record the revenues and expenses of ourlocal operations in their local currencies and translate these amounts intoU.S. dollars for purposes of reporting our consolidated results. As a result,fluctuations in foreign currency exchange rates may adversely affect ourrevenues, expenses and results of operations as well as the value of our assetsand liabilities. Fluctuations in foreign currency exchange rates may alsoadversely affect the comparability of period-to-period results. For example, ifthe average value of the Euro decreases in relation to 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 local currenciesfor that period. In addition, we hold foreign currency balances that willcreate foreign exchange gains or losses, depending upon the relative values ofthe 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 ANDECONOMIC CONDITIONS IN THE COUNTRIES WHERE WE OPERATE ARE UNCERTAIN, AND MAYDECREASE DEMAND FOR OUR SERVICES, INCREASE OUR COSTS, OR OTHERWISE REDUCE OURBUSINESS PROSPECTS***

 

Our operating companies are located incountries with rapidly changing regulatory and economic conditions that mayaffect the Internet services industry. New laws or regulations pertaining tothe Internet or telecommunications, or the application or interpretation ofexisting laws and regulations, could decrease demand for our services, increaseour costs, or otherwise reduce our profitability or business prospects.Examples of the types of laws and regulations that could adversely affect usinclude laws that:

 

•                                          imposetaxes on transactions made over the Internet;

 

•                                          imposetelecommunications access fees on Internet services providers or otherincreases in access, transit or general telecommunications costs;

 

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

 

•                                          imposerequirements that Internet services providers protect users’ privacy, monitorcontent, or permit government interception of data traffic; and

 

•                                          increasethe likelihood or scope of competition from telecommunications or cable companies.

 

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For example, a number of European countrieshave enacted legislation that requires Internet services providers to establishtechnical means to permit national authorities to intercept data traffic ofidentified customers. The application of these laws to Internet servicesproviders has been subject to significant opposition from Internet servicesproviders industry groups in Germany, the United Kingdom and the Netherlands,among others, because of the substantial cost Internet services providers wouldincur in order to comply with these laws. Ultimately, these requirements mayimpose significant costs on our operations in these countries, which wouldnegatively impact our operating results. These laws could also increase ourcompetition or change our competitive environment so that customer demand forour products and services is affected adversely.

 

In addition to risks we face from new laws orregulations, we face uncertainties in connection with the application ofexisting laws to the Internet. It may take years to determine the manner inwhich existing laws governing issues like property ownership, libel, negligenceand personal privacy will be applied to communications and commerce over theInternet.

 

***WE RELY ONTELECOMMUNICATIONS PROVIDERS IN OUR MARKETS TO PROVIDE OUR CUSTOMERS WITHRELIABLE ACCESS TO OUR SERVICES, AND FAILURES OR DELAYS IN PROVIDING ACCESSCOULD LIMIT OUR ABILITY TO SERVICE OUR CUSTOMERS AND IMPACT OUR REVENUES ANDOPERATING RESULTS***

 

Our customers typically access our serviceseither through their normal telephone lines or dedicated lines provided bylocal telecommunications providers specifically for the purposes of accessingand utilizing the Internet. Our customers are usually required to maintaintheir telephone line to utilize certain of our resold voice services or musthave a preexisting voice service prior to switching to our voice service,depending on the resold voice service we offer. In some of our markets, weexperience delays in delivery of new telephone or dedicated lines that preventour customers from utilizing our services. These delays result in lostrevenues. Additionally, some local telecommunications providers that provideInternet services provide delivery of telephone or dedicated lines to their ownInternet customers on a preferential basis, which may cause us to lose currentand potential customers. We also lease network capacity and VPNs fromtelecommunications providers and rely on the quality and availability of theirservice. These companies may experience disruptions of service, which coulddisrupt our services to, or limit Internet access for, our customers. We maynot be able to replace or supplement these services on a timely basis or in acost-effective manner, which may result in customer dissatisfaction and lostrevenues. In addition, to the extent that alternative local access providersfail in any particular market, the incumbent telecommunications providers willexperience less competitive price pressure for access, which could increase ourcost structures and impair our profit margins.

 

***WE DEPEND ON THERELIABILITY OF OUR NETWORK AND SYSTEMS, AND A FAILURE OR A BREACH OF OURSECURITY MEASURES COULD RESULT IN A LOSS OF CUSTOMERS AND REDUCED REVENUES***

 

We are able to deliver services only to theextent that our network and systems are protected against damages fromtechnical, network or system failures, computer viruses, natural disasters andunauthorized access or intentional acts or omissions caused by third parties.Any failure, accident or security breach that causes interruptions in ouroperations could impair our ability to provide services to our customers andnegatively impact our revenues and results of operations. To the extent thatany disruption or security breach results in a loss or damage to our customers’data or applications, or inappropriate disclosure of confidential information,we may incur liability as a result. In addition, we may incur additional coststo remedy the damages caused by these disruptions or security breaches.Although we currently possess errors and omissions insurance and businessinterruption insurance, these policies may not provide effective coverage uponthe occurrence of a material event or a combination of events.

 

***WE MAY BE LIABLE FORINFORMATION DISSEMINATED OVER OUR NETWORK***

 

We may face liability for information carriedon or disseminated through our network. Alternatively, we may incur costsassociated with efforts to prevent access to certain information from ournetwork as required by governmental authorities. The laws governing thesematters vary from jurisdiction to jurisdiction. Some types of laws that mayresult in our liability for information disseminated 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.

 

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