##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2002

Commission file number: 0-31010

AT&T LATIN AMERICA CORP.




(Exact name of Registrant as Specified in its
Charter)


|                                                                                |  |                                                   
|------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or Other
    Jurisdiction of Incorporation)                      |  | 22-3687745(I.R.S. Employer
    Identification No.)
|2020 K Street, N.W. Washington, D.C(Address of
    principal executive offices) |  | 20006(Zip code)                                   

Registrants telephone number including area
code: (202) 689-6300

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

As of November 14, 2002, 45,569,017 shares
of the registrants Class A common stock, par value
$0.0001 per share, and 73,081,595 shares of the
registrants Class B common stock, par value $0.0001
per share, were outstanding.



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##### 



INDEX

|                                                                                                  |                                                                                                                                    |      |    |   | 
|------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ---- | -- | - | 
|                                                                                                  |                                                                                                                                    | Page
|                                                                                                  |                                                                                                                                    |     
|Part I  Financial Information                                                                    |                                                                                                                                    |      |    |  
|Item 1. Financial Statements                                                                      |                                                                                                                                    |      |    |  
|                                                                                                  | Consolidated Balance Sheets as of
    September 30, 2002 (Unaudited) and December 31, 2001                                         |      |    | 3 | 
|                                                                                                  | Unaudited Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2002 and
    2001            |      |    | 4 | 
|                                                                                                  | Unaudited Consolidated Statement of Changes in
    Stockholders Equity (Deficit) for the Nine Months Ended
    September 30, 2002 |      |    | 5 | 
|                                                                                                  | Unaudited Consolidated Statements of Cash Flows
    for the Nine Months Ended September 30, 2002 and 2001                          |      |    | 6 | 
|                                                                                                  | Notes to Consolidated Financial Statements
    (Unaudited)                                                                         |      |    | 7 | 
|Item 2. Managements Discussion and
    Analysis of Financial Condition and Results of Operations |                                                                                                                                    |      | 23 |  
|Item 3. Quantitative and Qualitative
    Disclosure about Market Risk                             |                                                                                                                                    |      | 38 |  
|Item 4. Controls and Procedures                                                                   |                                                                                                                                    |      | 39 |  
|Part II  Other Information                                                                       |                                                                                                                                    |      | 39 |  
|Item 1. Legal Proceedings                                                                         |                                                                                                                                    |      | 39 |  
|Item 2. Changes in Securities and Use of
    Proceeds                                             |                                                                                                                                    |      | 40 |  
|Item 3. Defaults Upon Senior Securities                                                           |                                                                                                                                    |      | 40 |  
|Item 4. Submission of Matters to a Vote of
    Security Holders                                   |                                                                                                                                    |      | 40 |  
|Item 5. Other Information                                                                         |                                                                                                                                    |      | 40 |  
|Item 6. Exhibits and Reports on Form 8-K                                                          |                                                                                                                                    |      | 41 |  
|Signatures                                                                                        |                                                                                                                                    |      | 42 |  
|Certifications                                                                                    |                                                                                                                                    |      | 43 |  

2



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##### 



PART I  FINANCIAL
INFORMATION



Item 1.     Financial
Statements


AT&T LATIN AMERICA CORP.

(A majority owned subsidiary of AT&T
Corp.)




CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |          |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------- | ------------ | --------- | - | ------- | -------- | --------- | 
|                                                                                                                                                    |                                                                                                                                                                       | September 30,                                            |         | December 31,
|                                                                                                                                                    |                                                                                                                                                                       | 2002                                                     |         | 2001        
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |             
|                                                                                                                                                    |                                                                                                                                                                       | (Unaudited)                                              |         |             
|                                                                                                                                                    |                                                                                                                                                                       |                                                         
|                                                                                                                                                    |                                                                                                                                                                       | (In thousands)                                          
|ASSETS                                                                                                                                             
|Current Assets:                                                                                                                                     |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    | Cash and cash equivalents                                                                                                                                             |                                                          | $       | 47,219       |           |   | $       | 28,186   |          
|                                                                                                                                                    | Accounts receivable, net of $8,262 and $8,250 of
    allowance for bad debts at September 30, 2002 and
    December 31, 2001, respectively                            |                                                          |         | 32,744       |           |   |         | 41,973   |          
|                                                                                                                                                    | Recoverable taxes                                                                                                                                                     |                                                          |         | 15,853       |           |   |         | 15,219   |          
|                                                                                                                                                    | Prepaid expenses and other current assets                                                                                                                             |                                                          |         | 33,563       |           |   |         | 26,816   |          
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total current assets                                     |         |              | 129,379   |   |         |          | 112,194   | 
|Property and equipment, net                                                                                                                         |                                                                                                                                                                       |                                                          | 371,149 |              |           |   | 493,568 |         
|Goodwill, net of accumulated amortization of
    $66,383 at December 31, 2001                                                                       |                                                                                                                                                                       |                                                          | 35,000  |              |           |   | 759,067 |         
|Other intangible assets, net of accumulated
    amortization of $14,560 and $10,598 at September 30, 2002
    and December 31, 2001, respectively   |                                                                                                                                                                       |                                                          | 19,038  |              |           |   | 24,130  |         
|Recoverable taxes                                                                                                                                   |                                                                                                                                                                       |                                                          | 13,221  |              |           |   | 24,841  |         
|Other assets                                                                                                                                        |                                                                                                                                                                       |                                                          | 35,655  |              |           |   | 31,511  |         
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total assets                                             |         | $            | 603,442   |   |         | $        | 1,445,311 | 
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|LIABILITIES AND STOCKHOLDERS
    (DEFICIT) EQUITY                                                                                                 
|Current liabilities:                                                                                                                                |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    | Current maturities of debt                                                                                                                                            |                                                          | $       | 219,838      |           |   | $       | 87,051   |          
|                                                                                                                                                    | Accounts payable and accrued expenses (including
    $5,937 and $4,434 due to AT&T Corp. or affiliates at
    September 30, 2002 and December 31, 2001, respectively) |                                                          |         | 67,942       |           |   |         | 80,595   |          
|                                                                                                                                                    | Other current liabilities                                                                                                                                             |                                                          |         | 21,668       |           |   |         | 51,956   |          
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total current liabilities                                |         |              | 309,448   |   |         |          | 219,602   | 
|Long-term debt (including $603,937 and $475,757
    due to AT&T Corp. or affiliates at September 30, 2002
    and December 31, 2001, respectively)  |                                                                                                                                                                       |                                                          | 629,305 |              |           |   | 575,091 |         
|Deferred interest (including $27,471 and $30,172
    due to AT&T Corp. or affiliates at September 30, 2002
    and December 31, 2001, respectively) |                                                                                                                                                                       |                                                          | 27,471  |              |           |   | 31,010  |         
|Other liabilities                                                                                                                                   |                                                                                                                                                                       |                                                          | 2,544   |              |           |   | 6,289   |         
|Mandatorily Redeemable 15% Series B
    Cumulative Preferred Stock (held by a wholly-owned subsidiary of
    AT&T Corp.)                            |                                                                                                                                                                       |                                                          | 239,940 |              |           |   | 215,232 |         
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total liabilities                                        |         |              | 1,208,708 |   |         |          | 1,047,224 | 
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|Commitments and contingencies (Note 6)                                                                                                              |                                                                                                                                                                       |                                                          |        |              |           |   |        |         
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|Stockholders (deficit) equity:                                                                                                                     |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    | Common stock (including 68.3% economic interest
    owned by AT&T Corp., representing 95.2% voting power at
    September 30, 2002)                                   |                                                          |         | 11           |           |   |         | 11       |          
|                                                                                                                                                    | Additional paid in capital                                                                                                                                            |                                                          |         | 925,021      |           |   |         | 918,337  |          
|                                                                                                                                                    | Unearned restricted stock                                                                                                                                             |                                                          |         | (2,667       | )         |   |         | (2,627   | )        
|                                                                                                                                                    | Accumulated deficit                                                                                                                                                   |                                                          |         | (1,427,374   | )         |   |         | (446,429 | )        
|                                                                                                                                                    | Accumulated other comprehensive (loss) income                                                                                                                         |                                                          |         | (89,995      | )         |   |         | (61,323  | )        
|                                                                                                                                                    | Stockholder loan                                                                                                                                                      |                                                          |         | (10,262      | )         |   |         | (9,882   | )        
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total stockholders (deficit) equity                     |         |              | (605,266  | ) |         |          | 398,087   | 
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         
|                                                                                                                                                    |                                                                                                                                                                       | Total liabilities and stockholders
    (deficit) equity |         | $            | 603,442   |   |         | $        | 1,445,311 | 
|                                                                                                                                                    |                                                                                                                                                                       |                                                          |         |              |           |   |         |         

The accompanying footnotes are an integral part
of these

consolidated financial statements.


3



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##### 



AT&T LATIN AMERICA CORP.

(A majority owned subsidiary of AT&T
Corp.)




CONSOLIDATED STATEMENTS OF
OPERATIONS


(Unaudited)


|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |          |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------- | ----------------- | -------- | ---- | ------- | ------- | ------- | - | -------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                  
|                                                                                                                                                        |                                                                                                                                                                            | Three Months Ended                    |         | Nine Months Ended
|                                                                                                                                                        |                                                                                                                                                                            | September 30,                         |         | September 30,    
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                  
|                                                                                                                                                        |                                                                                                                                                                            | 2002                                  |         | 2001              |          | 2002 |         | 2001   
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |        
|                                                                                                                                                        |                                                                                                                                                                            |                                      
|                                                                                                                                                        |                                                                                                                                                                            | (In thousands, except per share data)
|Revenue:                                                                                                                                                |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        | Data-Internet services                                                                                                                                                     |                                       | $       | 24,674            |          |      | $       | 22,367  |         |   | $        | 78,314   |          |   | $       | 61,323   |         
|                                                                                                                                                        | Voice services                                                                                                                                                             |                                       |         | 15,243            |          |      |         | 16,893  |         |   |          | 47,738   |          |   |         | 43,254   |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            | Total revenue                         |         |                   | 39,917   |      |         |         | 39,260  |   |          |          | 126,052  |   |         |          | 104,577  |  
|Cost of revenue                                                                                                                                         |                                                                                                                                                                            |                                       | 24,376  |                   |          |      | 31,904  |         |         |   | 79,335   |          |          |   | 86,208  |         
|Selling, general and administrative expenses                                                                                                            |                                                                                                                                                                            |                                       | 26,323  |                   |          |      | 32,420  |         |         |   | 84,208   |          |          |   | 98,993  |         
|Depreciation and amortization                                                                                                                           |                                                                                                                                                                            |                                       | 43,607  |                   |          |      | 25,241  |         |         |   | 85,977   |          |          |   | 74,696  |         
|Impairment loss on goodwill                                                                                                                             |                                                                                                                                                                            |                                       | 413,469 |                   |          |      |        |         |         |   | 413,469  |          |          |   |        |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            | Loss from operations                  |         |                   | (467,858 | )    |         |         | (50,305 | ) |          |          | (536,937 | ) |         |          | (155,320 | )
|Interest expense                                                                                                                                        |                                                                                                                                                                            |                                       | 35,459  |                   |          |      | 21,501  |         |         |   | 89,703   |          |          |   | 56,217  |         
|Interest income                                                                                                                                         |                                                                                                                                                                            |                                       |        |                   |          |      | 109     |         |         |   | 410      |          |          |   | 872     |         
|Other (expense) income, net                                                                                                                             |                                                                                                                                                                            |                                       | (28,826 | )                 |          |      | (8,172  | )       |         |   | (82,442  | )        |          |   | (15,492 | )       
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        | Loss before provision for income taxes, minority
    interest income, extraordinary loss on debt restructuring and
    cumulative effect of change in accounting principle |                                       |         | (532,143          | )        |      |         | (79,869 | )       |   |          | (708,672 | )        |   |         | (226,157 | )       
|Provision for income taxes                                                                                                                              |                                                                                                                                                                            |                                       | 204     |                   |          |      |        |         |         |   | 204      |          |          |   |        |         
|Minority interest income                                                                                                                                |                                                                                                                                                                            |                                       | 15      |                   |          |      | 169     |         |         |   | 195      |          |          |   | 438     |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        | Loss before extraordinary loss on debt
    restructuring and cumulative effect of change in accounting
    principle                                                       |                                       |         | (532,332          | )        |      |         | (79,700 | )       |   |          | (708,681 | )        |   |         | (225,719 | )       
|Extraordinary loss on debt restructuring                                                                                                                |                                                                                                                                                                            |                                       |        |                   |          |      |        |         |         |   | (4,479   | )        |          |   |        |         
|Cumulative effect of change in accounting
    principle                                                                                                 |                                                                                                                                                                            |                                       |        |                   |          |      |        |         |         |   | (267,785 | )        |          |   |        |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            | Net loss                              |         | $                 | (532,332 | )    |         | $       | (79,700 | ) |          | $        | (980,945 | ) |         | $        | (225,719 | )
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|Basic and diluted loss per common share before
    extraordinary loss on debt restructuring and cumulative effect
    of change in accounting principle |                                                                                                                                                                            | $                                     | (4.48   | )                 |          | $    | (0.69   | )       |         | $ | (5.98    | )        |          | $ | (1.94   | )       
|Extraordinary loss per common share on debt
    restructuring                                                                                           |                                                                                                                                                                            |                                       |        |                   |          |      |        |         |         |   | (0.04    | )        |          |   |        |         
|Cumulative effect of change in accounting
    principle loss per common share                                                                           |                                                                                                                                                                            |                                       |        |                   |          |      |        |         |         |   | (2.25    | )        |          |   |        |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|Basic and diluted net loss per common share                                                                                                             |                                                                                                                                                                            | $                                     | (4.48   | )                 |          | $    | (0.69   | )       |         | $ | (8.27    | )        |          | $ | (1.94   | )       
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         
|Weighted average common shares outstanding                                                                                                              |                                                                                                                                                                            |                                       | 118,740 |                   |          |      | 116,296 |         |         |   | 118,595  |          |          |   | 116,296 |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |         |                   |          |      |         |         |         |   |          |          |          |   |         |         

The accompanying footnotes are an integral part
of these

consolidated financial statements.


4



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##### 



AT&T LATIN AMERICA CORP.

(A majority owned subsidiary of AT&T
Corp.)




CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY (DEFICIT)


(Unaudited)


|                                              |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |           |  |   |            |   |  |   |         |   |  |   |         |   |  |   |          |  
|--------------------------------------------- |  | ------------ | ------- | ---------- |  | ---------- | -- | ----------- |  | ------------- | ------- | ----------- |  | ------------- | ------ | --------- |  | - | ---------- | - |  | - | ------- | - |  | - | ------- | - |  | - | -------- | -
|                                              |  |              |         |            |  |            |    |             |  |               |         | Accumulated |  |               |        |          
|                                              |  |              |         |            |  |            |    |             |  | Other         |         |             |  | Total        
|                                              |  | Common Stock |         | Additional |  | Unearned   |    |             |  | Comprehensive |         |             |  | Stockholders
|                                              |  |              |         | Paid In    |  | Restricted |    | Accumulated |  | Income        |         | Stockholder |  | Equity       
|                                              |  | Stock        |         | Amount     |  | Capital    |    | Stock       |  | Deficit       |         | (Loss)      |  | Loan          |        | (Deficit)
|                                              |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |          
|Balance December 31, 2001                     |  |              | 118,305 |            |  | $          | 11 |             |  | $             | 918,337 |             |  | $             | (2,627 | )         |  | $ | (446,429   | ) |  | $ | (61,323 | ) |  | $ | (9,882  | ) |  | $ | 398,087  |  
|Interest accretion on stockholder loan        |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |           |  |   |           |   |  |   |        |   |  |   | (380    | ) |  |   | (380     | )
|Stock issued to employees                     |  |              | 435     |            |  |            |   |             |  |               | 420     |             |  |               | (420   | )         |  |   |           |   |  |   |        |   |  |   |        |   |  |   |         |  
|Warrants issued to parent company             |  |              |        |            |  |            |   |             |  |               | 6,264   |             |  |               |       |           |  |   |           |   |  |   |        |   |  |   |        |   |  |   | 6,264    |  
|Accretion of unearned restricted stock        |  |              |        |            |  |            |   |             |  |               |        |             |  |               | 380    |           |  |   |           |   |  |   |        |   |  |   |        |   |  |   | 380      |  
|Net loss                                      |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |           |  |   | (980,945   | ) |  |   |        |   |  |   |        |   |  |   | (980,945 | )
|Foreign currency translation adjustments      |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |           |  |   |           |   |  |   | (28,577 | ) |  |   |        |   |  |   | (28,577  | )
|Net unrealized loss on derivative instruments |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |           |  |   |           |   |  |   | (95     | ) |  |   |        |   |  |   | (95      | )
|                                              |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |           |  |   |            |   |  |   |         |   |  |   |         |   |  |   |          |  
|Balance September 30, 2002                    |  |              | 118,740 |            |  | $          | 11 |             |  | $             | 925,021 |             |  | $             | (2,667 | )         |  | $ | (1,427,374 | ) |  | $ | (89,995 | ) |  | $ | (10,262 | ) |  | $ | (605,266 | )
|                                              |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |           |  |   |            |   |  |   |         |   |  |   |         |   |  |   |          |  

The accompanying footnotes are an integral part
of these

consolidated financial statements.


5



---



##### 



AT&T LATIN AMERICA CORP.

(A majority owned subsidiary of AT&T
Corp.)




CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |          |   |        |         |  
|---------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------------------- | ------------------------------------- | - | ------- | -------- | -------- | - | ------ | ------- | -
|                                               |                                                                  |                                                                               
|                                               |                                                                  | Nine Months Ended                                                             
|                                               |                                                                  | September 30,                                                                 
|                                               |                                                                  |                                                                               
|                                               |                                                                  | 2002                                                                           |                                                                      | 2001                                 
|                                               |                                                                  |                                                                                |                                                                      |                                      
|                                               |                                                                  |                                                                               
|                                               |                                                                  | (In thousands)                                                                
|Cash flows from operating activities:          |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|                                               | Net loss                                                         |                                                                                | $                                                                    | (980,945                              | ) |         | $        | (225,719 | )
|                                               |                                                                  | Adjustment to reconcile net loss to net cash used
    in operating activities: |                                                                      |                                       |   |         |          |          |   |       
|                                               |                                                                  |                                                                                | Depreciation and amortization                                        |                                       |   | 85,977  |          |          |   | 74,696 |        
|                                               |                                                                  |                                                                                | Cumulative effect of change in accounting
    principle              |                                       |   | 267,785 |          |          |   |       |        
|                                               |                                                                  |                                                                                | Impairment loss on goodwill                                          |                                       |   | 413,469 |          |          |   |       |        
|                                               |                                                                  |                                                                                | Bad debt expense                                                     |                                       |   | 3,215   |          |          |   | 4,383  |        
|                                               |                                                                  |                                                                                | Unrealized foreign exchange loss                                     |                                       |   | 87,243  |          |          |   | 59,927 |        
|                                               |                                                                  |                                                                                | Minority interest income                                             |                                       |   | (195    | )        |          |   |       |        
|                                               |                                                                  |                                                                                | Other issuance of stock options                                      |                                       |   |        |          |          |   | 189    |        
|                                               |                                                                  |                                                                                | Preferred stock accretion                                            |                                       |   | 24,708  |          |          |   | 21,421 |        
|                                               |                                                                  |                                                                                | Loss on debt restructuring                                           |                                       |   | 4,479   |          |          |   |       |        
|                                               |                                                                  |                                                                                | Stockholder loan accretion                                           |                                       |   | (380    | )        |          |   |       |        
|                                               |                                                                  |                                                                                | Unearned restricted stock accretion                                  |                                       |   | 380     |          |          |   |       |        
|                                               |                                                                  |                                                                                | Accrued interest characterized as debt                               |                                       |   | 26,593  |          |          |   |       |        
|                                               |                                                                  |                                                                                | Changes in assets and liabilities net of effect
    of acquisitions: |                                       |   |         |          |          |   |        |        
|                                               |                                                                  |                                                                                |                                                                      | Accounts receivable                   |   |         | 6,014    |          |   |        | (26,390 | )
|                                               |                                                                  |                                                                                |                                                                      | Recoverable taxes                     |   |         | 10,986   |          |   |        | (8,127  | )
|                                               |                                                                  |                                                                                |                                                                      | Prepaid and other assets              |   |         | (6,747   | )        |   |        | (3,395  | )
|                                               |                                                                  |                                                                                |                                                                      | Other assets                          |   |         | (1,926   | )        |   |        | (26,709 | )
|                                               |                                                                  |                                                                                |                                                                      | Accounts payable and accrued expenses |   |         | (12,584  | )        |   |        | (4,076  | )
|                                               |                                                                  |                                                                                |                                                                      | Other current liabilities             |   |         | (30,289  | )        |   |        |        |  
|                                               |                                                                  |                                                                                |                                                                      | Deferred interest                     |   |         | 26,632   |          |   |        |        |  
|                                               |                                                                  |                                                                                |                                                                      | Other liabilities                     |   |         | (3,550   | )        |   |        | 9,107   |  
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Net cash used in operating activities          |                                                                  |                                                                                | (79,135                                                              | )                                     |   |         | (124,693 | )       
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Cash flows from investing activities:          |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|                                               | Purchase of property and equipment                               |                                                                                |                                                                      | (29,461                               | ) |         |          | (115,838 | )
|                                               | Cash paid for acquisitions of licenses and other
    core assets |                                                                                |                                                                      | (116                                  | ) |         |          | (8,252   | )
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Net cash used in investing activities          |                                                                  |                                                                                | (29,577                                                              | )                                     |   |         | (124,090 | )       
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Cash flows from financing activities:          |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|                                               | (Repayments) proceeds of debt, net                               |                                                                                |                                                                      | (14,241                               | ) |         |          | 25,736   |  
|                                               | Proceeds from parent company credit facilities                   |                                                                                |                                                                      | 72,244                                |   |         |          | 242,600  |  
|                                               | Proceeds from secured vendor financing                           |                                                                                |                                                                      | 162,362                               |   |         |          |         |  
|                                               | Payments of interim notes payable for equipment                  |                                                                                |                                                                      | (73,803                               | ) |         |          | (5,384   | )
|                                               | Payments of notes payable to other vendors                       |                                                                                |                                                                      | (14,609                               | ) |         |          |         |  
|                                               | Loans to stockholder                                             |                                                                                |                                                                      |                                      |   |         |          | (9,042   | )
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Net cash provided by financing activities      |                                                                  |                                                                                | 131,953                                                              |                                       |   |         | 253,910  |         
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Net increase in cash and cash equivalents      |                                                                  |                                                                                | 23,241                                                               |                                       |   |         | 5,127    |         
|Net effect of translation on cash              |                                                                  |                                                                                | (4,208                                                               | )                                     |   |         | (707     | )       
|Cash and cash equivalents, beginning of period |                                                                  |                                                                                | 28,186                                                               |                                       |   |         | 14,905   |         
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         
|Cash and cash equivalents, end of period       |                                                                  | $                                                                              | 47,219                                                               |                                       |   | $       | 19,325   |         
|                                               |                                                                  |                                                                                |                                                                      |                                       |   |         |          |         

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:

In connection with the restructuring of our
facilities with AT&T Corp., we have characterized deferred
interest at December 31, 2001 of $30.2 million plus
the amount accrued from January 1, 2002 through
June 30, 2002 of $25.8 million as part of the debt.

During the nine months ended September 30,
2002 we issued in non-cash transactions 435,000 restricted
shares of Class A common stock to employees in exchange for
future services. The issuance of stock was accounted for as
additional paid in capital with the corresponding unvested
portion as unearned restricted stock in the stockholders
equity.

During the nine months ended September 30,
2001, we acquired property and equipment amounting to
approximately $84.4 million through vendor financing
arrangements.

The accompanying footnotes are an integral part
of these

consolidated financial statements.


6



---



##### 



AT&T LATIN AMERICA CORP.

(A majority owned subsidiary of AT&T
Corp.)




NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)


NOTE 1  GENERAL, LIQUIDITY AND
GOING CONCERN CONSIDERATIONS AND CRITICAL ACCOUNTING POLICIES
AND JUDGMENTS

General

AT&T Latin America Corp. was incorporated on
October 13, 1999, under the laws of the State of Delaware,
and along with its consolidated subsidiaries is referred to
collectively in these consolidated financial statements and
elsewhere in this quarterly report on Form 10-Q as
we, our, the company,
AT&T Latin America and us. We
provide communications services under the AT&T
brand name to major metropolitan business markets in Argentina,
Brazil, Chile, Colombia and Peru. We deliver our services mainly
through our own technologically advanced networks, which
interconnect with third party networks. Our communication
services include, among others, data-Internet, local and long
distance voice, web hosting and managed network services.

AT&T Corp. holds directly or indirectly
8,000,000 shares of our Class A common stock and all
73,081,595 outstanding shares of our Class B common stock,
representing approximately 95.2% of the voting power and
approximately 68.3% of the economic interests of our common
stock as of September 30, 2002.

Liquidity and Going Concern
Considerations

As of the date of the quarterly report in which
these consolidated financial statements are included, we do not
have sufficient cash to meet our requirements in the near term
unless we defer and restructure amounts owed to our secured and
unsecured creditors, defer amounts owed to trade creditors and
successfully implement austerity measures now being undertaken,
or obtain additional financing. As we announced on
October 21, 2002, we currently anticipate a funding gap
commencing in the fourth quarter of 2002 and reaching up to
$40.0 million during 2003. This anticipated funding gap
assumes continued access to our senior secured credit facilities
with our vendors, as to which we are currently in default, and
that we will not be able to defer most of our obligations to our
in-country lenders as and when amounts under those facilities
become due. However, our senior secured lenders may not provide
additional availability to us, and if we are not able to replace
that availability with other financing, or succeed in deferring
an adequate portion of other short-term indebtedness, our
funding gap could increase. The funding gap also assumes that
neither the senior secured vendors nor in-country lenders
accelerate outstanding amounts due under our facilities with
them.

Our cash needs arise from operating losses and
other working capital requirements, capital expenditures, debt
service and loan commitment fees. We are continuing to take
steps to conserve cash on hand by reducing operating expenses
and capital expenditures. While in effect, these austerity
measures will substantially impede our growth. We believe that
it will be necessary to raise additional financing during 2003
to close our funding gap and to maintain and grow our business
and operations. Our current liquidity outlook raises substantial
risk as to our ability to maintain current operations. Following
a request from us for additional financing assistance, AT&T
Corp. advised us on October 10, 2002 that it will not
provide additional financing or credit support. If we are able
to reach agreements with our senior secured creditors, our other
financial creditors and AT&T Corp., to defer our near term
obligations under our current facilities and to restructure our
debt, to implement successfully our austerity efforts and to
transfer freely our available cash as needed among our
operations, we believe we will have sufficient cash to maintain
operations through at least mid-2003 without having to rely on
new sources of financing to meet liquidity needs. We expect,
however, that achieving each of these objectives in the
timeframe required before needing additional financing will be
difficult. If we are unable to address our liquidity needs, or
our creditors were to accelerate amounts due to them, we will
likely need to seek protection from creditors under U.S.
bankruptcy laws and, depending on remedies that may be pursued
by our creditors, under the laws of some or all of the countries
in which we operate, potentially during the fourth quarter of
2002. We can offer no assurances that any such proceedings will
lead to a

7



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


successful reorganization without additional
financing on terms acceptable to us or that such additional
financing would be available at all either before or after such
proceedings commence, if at all.

We believe that any solution to our current
liquidity situation will require us to reach an agreement to
restructure our liabilities and capital structure with our
secured vendor creditors, our other financial lenders and trade
creditors and AT&T Corp., as both an unsecured creditor and
holder of our Mandatorily Redeemable Series B 15%
Cumulative Preferred Stock. Absent a comprehensive restructuring
of our current capital structure, we do not believe it will be
possible to attract additional financing to fill our funding
needs. Moreover, even assuming a successful agreement with our
creditors to effect a comprehensive restructuring is completed,
we cannot be assured that new financing will be available on
acceptable terms, or at all, given current duress in the
communications industry in general and the difficult economic
conditions in the countries in which we operate, particularly in
Argentina and Brazil.

See Managements Discussion and
Analysis  Liquidity and Capital Resources in
the quarterly report in which these consolidated financial
statements are included for more information about the risks
associated with our current financial condition.

The unaudited consolidated financial statements
have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. Therefore, the
financial statements do not include any adjustments relating to
the companys ability to operate as a going concern. The
appropriateness of using the going concern basis in the future,
however, will be dependent upon our ability to address our
liquidity needs as described above. There is no assurance that
we will be able to address our liquidity needs through the
measures described above on acceptable terms and conditions, or
at all, and, accordingly, there is substantial doubt about our
ability to continue as a going concern.

Our cumulative comprehensive loss was
$1,517.4 million (which includes $681.3 million of
goodwill impairment including cumulative effect of change in
accounting principle) and $507.8 million as of
September 30, 2002 and December 31, 2001, respectively.
Comprehensive loss was as follows (in thousands):

|                                                             |                          |                    |          |                   |   |      |         |          |   |   |          |            |   |   |          |          |  
|------------------------------------------------------------ | ------------------------ | ------------------ | -------- | ----------------- | - | ---- | ------- | -------- | - | - | -------- | ---------- | - | - | -------- | -------- | -
|                                                             |                          |                    |          |                  
|                                                             |                          | Three Months Ended |          | Nine Months Ended
|                                                             |                          | September 30,      |          | September 30,    
|                                                             |                          |                    |          |                  
|                                                             |                          | 2002               |          | 2001              |   | 2002 |         | 2001    
|                                                             |                          |                    |          |                   |   |      |         |         
|Net loss                                                     |                          | $                  | (532,332 | )                 |   | $    | (79,700 | )        |   | $ | (980,945 | )          |   | $ | (225,719 | )       
|Foreign currency translation adjustments                     |                          |                    | (14,022  | )                 |   |      | (29,446 | )        |   |   | (28,577  | )          |   |   | (74,037  | )       
|Unrealized gains (losses) on derivative
    instruments, net |                          |                    | 8,989    |                   |   |      | (127    | )        |   |   | (95      | )          |   |   | (127     | )       
|                                                             |                          |                    |          |                   |   |      |         |          |   |   |          |            |   |   |          |         
|                                                             | Total comprehensive loss |                    | $        | (537,365          | ) |      | $       | (109,273 | ) |   | $        | (1,009,617 | ) |   | $        | (299,883 | )
|                                                             |                          |                    |          |                   |   |      |         |          |   |   |          |            |   |   |          |         

We have incurred net losses of approximately
$1,427.4 million from the period from inception
(October 13, 1999) through September 30, 2002. As of
September 30, 2002 we had a working capital deficit of
$180.1 million, which includes the reclassification of the
long-term maturities of our senior secured vendor financing and
certain notes payable to other vendors of approximately
$163.1 million.

The accompanying unaudited consolidated financial
statements included in this quarterly report have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions for
Form 10-Q and Rule 10-01 of Regulation S-X. They
do not include all information and notes required by accounting
principles generally accepted in the United States for complete
financial statements and should be read together with the
audited financial statements and notes thereto included in our
annual report on Form 10-K for the year ended
December 31, 2001. The balance sheet data as

8



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


of December 31, 2001 was derived from our
audited financial statements but does not include all
disclosures required by accounting principles generally accepted
in the United States of America. Certain reclassifications have
been made to conform to the 2002 presentation. The financial
information furnished reflects all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the quarterly
periods presented. The results of operations for the periods
presented are not necessarily indicative of our future results
of operations for the entire year.

Critical Accounting Policies and
Judgments

Our critical accounting policies are those which
we believe require our most subjective or complex judgments;
often as a result of the need to make estimates about the effect
of matters that are inherently uncertain and may ultimately
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. A discussion of our
critical accounting policies, the underlying judgments and
uncertainties are included in our Annual Report on
Form 10-K for the year ended December 31, 2001.

NOTE 2  PROPERTY AND EQUIPMENT,
NET

Property and equipment, net is comprised of the
following as of September 30, 2002 and December 31, 2001,
respectively (in thousands):

|                                                |  |               |          |              |  |           |         |   |  |  |         | 
|----------------------------------------------- |  | ------------- | -------- | ------------ |  | --------- | ------- | - |  |  | ------- | 
|                                                |  |               |          |              |  | Estimated
|                                                |  |               |          |              |  | Useful   
|                                                |  | September 30, |          | December 31, |  | Lives (In
|                                                |  | 2002          |          | 2001         |  | Years)   
|                                                |  |               |          |              |  |          
|                                                |  | (Unaudited)   |          |              |  |          
|Switching equipment                             |  | $             | 146,694  |              |  | $         | 118,542 |   |  |  | 5       | 
|Transmission equipment                          |  |               | 146,691  |              |  |           | 125,936 |   |  |  | 7       | 
|Cables                                          |  |               | 47,802   |              |  |           | 40,323  |   |  |  | 10      | 
|Underground installation                        |  |               | 146,915  |              |  |           | 108,719 |   |  |  | 25      | 
|Construction in progress                        |  |               | 24,867   |              |  |           | 87,754  |   |  |  |        | 
|Office equipment, furniture, vehicles and other |  |               | 103,903  |              |  |           | 109,149 |   |  |  | 3 to 10 | 
|Cumulative translation adjustment               |  |               | (113,792 | )            |  |           | (27,823 | ) |  |  |         | 
|                                                |  |               |          |              |  |           |         |   |  |  |         | 
|                                                |  |               | 503,080  |              |  |           | 562,600 |   |  |  |         | 
|Less: Accumulated depreciation                  |  |               | (131,931 | )            |  |           | (69,032 | ) |  |  |         | 
|                                                |  |               |          |              |  |           |         |   |  |  |         | 
|                                                |  | $             | 371,149  |              |  | $         | 493,568 |   |  |  |         | 
|                                                |  |               |          |              |  |           |         |   |  |  |         | 

Depreciation expense related to property and
equipment was $78.7 million and $37.1 million for the
nine months ended September 30, 2002 and September 30,
2001, respectively. Depreciation expense related to property and
equipment was $41.2 million and $12.5 million for the
three months ended September 30, 2002 and
September 30, 2001, respectively.

9



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


NOTE 3  DEBT

Debt is comprised of the following (in thousands):

|                                                                                       |            |               |          |              |  |   |         |         | 
|-------------------------------------------------------------------------------------- | ---------- | ------------- | -------- | ------------ |  | - | ------- | ------- | 
|                                                                                       |            | September 30, |          | December 31,
|                                                                                       |            | 2002          |          | 2001        
|                                                                                       |            |               |          |             
|                                                                                       |            | (Unaudited)   |          |             
|Senior secured vendor financing                                                        |            | $             | 162,362  |              |  | $ |        |        
|Subordinated credit facilities with parent company                                     |            |               | 603,937  |              |  |   |        |        
|Revolving credit facility, at LIBOR plus 3.75%
    (5.6% to 6.4% at December 31, 2001) |            |               |         |              |  |   | 100,000 |        
|Subordinated credit facility, at LIBOR plus 6.00%
    (8.1% at December 31, 2001)      |            |               |         |              |  |   | 200,000 |        
|Demand notes, at 15% fixed rate                                                        |            |               |         |              |  |   | 175,757 |        
|Interim notes payable to vendors, at varying rates                                     |            |               |         |              |  |   | 73,803  |        
|Notes payable to other vendors                                                         |            |               | 35,221   |              |  |   | 50,718  |        
|Other bank facilities                                                                  |            |               | 47,623   |              |  |   | 61,864  |        
|                                                                                       |            |               |          |              |  |   |         |        
|                                                                                       | Total debt |               |          | 849,143      |  |   |         | 662,142 | 
|Less current maturities                                                                |            |               | (219,838 | )            |  |   | (87,051 | )      
|                                                                                       |            |               |          |              |  |   |         |        
|Long-term debt                                                                         |            | $             | 629,305  |              |  | $ | 575,091 |        
|                                                                                       |            |               |          |              |  |   |         |        

Senior Secured Vendor Financing

In December 2001 we entered into senior secured
credit facilities, governed by common terms, with our strategic
equipment vendors, in an aggregate principal amount of
$298.5 million. These facilities became effective on
March 27, 2002.

The facilities are divided into two portions
comprised of a first tranche of up to $199.2 million to be
used to finance the purchase of equipment and related software
and services from the three vendors, and a second tranche of up
to $99.3 million to finance duties, taxes and interest on
the facility during the availability period. Draws under this
facility are available through June 2004 although we are
currently in default under this facility as described below and
the vendors are currently not permitting us to make additional
draws. See Managements Discussion and
Analysis  Liquidity and Capital Resources in
the quarterly report in which these consolidated financial
statements are included for more information. After that time
principal of the facilities amortizes on a scheduled quarterly
basis until final maturity in June 2008.

Interest on loans under the facilities accrues at
LIBOR plus 5.625% or, at our election, on a prime rate basis and
is adjusted quarterly. Since the effective date through
September 30, 2002 we have elected to accrue interest at
LIBOR plus 5.625%, or 7.435% at September 30, 2002. Accrued
interest is paid quarterly following the quarterly interest rate
adjustment. We have paid an up front facility fee and are
obligated to pay commitment fees quarterly based on the unused
portion of the facilities.

Under the terms of the facilities, a portion of
the net proceeds of any future equity and debt offerings by us
must be directed to prepay outstanding amounts under the
facilities.

The facilities are guaranteed by AT&T Latin
America Corp. and our operating subsidiaries, and are also
collateralized by a pledge of the shares of our operating
subsidiaries and of substantially all of our and our
subsidiaries material assets other than our rights to the
AT&T brand and under certain other agreements with AT&T
Corp.

10



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


The facilities contain customary covenants
restricting our ability to engage in certain activities,
including limitations on debt, liens, investments (including
acquisitions), restricted payments, transactions with
affiliates, asset dispositions and changes in corporate
existence. We are also required to meet certain financial tests
over the term of the facilities, relating to minimum revenue,
minimum EBITDA (earnings before interest, taxes, depreciation
and amortization as defined in the governing agreements),
maximum capital expenditures, minimum liquid assets and
available undrawn credit, ratios of debt to equity and to EBITDA
and minimum on-network ports.

The facilities provide for events of default in
the event of non-payment, failure to comply with covenants,
occurrence of a material adverse effect, inability, at any time
on or after June 30, 2003, to make loan repayments from
Argentina without the need to obtain further governmental
approvals or declaration of a debt moratorium in any of the
principal countries in which we operate, and other, customary
events, except that in the case of Argentina, the certain events
occurring before the effective date will not constitute a
moratorium.

The minimum revenue covenant in the facilities
requires us to have achieved revenue of $181.0 million for
the four fiscal quarters ended September 30, 2002. For that
period, we achieved revenue of $172.4 million. Accordingly
we are now in default under our senior secured credit
facilities, and our senior secured lenders are now entitled to
exercise various remedies, including denying us further access
to the undrawn amounts under those facilities, accelerating all
outstanding amounts drawn under those facilities and declaring
those amounts to be immediately due and payable, and commencing
foreclosure proceedings on our assets, including on the shares
of our operating companies. In addition, we do not expect to be
able to comply with other covenants under our senior secured
vendor financing facilities going forward at the end of the
fourth quarter of 2002, including the minimum revenue covenant
and covenants relating to minimum EBITDA and liquidity targets.
Therefore, we have reclassified amounts outstanding under these
facilities as shortterm debt in the accompanying
consolidated balance sheet as of September 30, 2002.

All of our vendors have requested reasonable
assurances from us as to our ability to re-pay the debt
outstanding. Additionally, the vendors have communicated to us
they have placed us on a temporary credit hold. We do not expect
to be able to provide the vendors reasonable assurances with
respect to our ability to re-pay the debt outstanding and to
make payments for new equipment as it is shipped or received and
thus may not be able to obtain financing under the facilities
for shipments of additional equipment from the vendors for the
foreseeable future. We are focusing on pursuing new customer
opportunities that do not require significant new investments
and using, where available, alternative means of equipment
acquisition such as value added resellers, and holders of
distressed assets.

Subordinated Credit Facilities (Related
Parties)

During the first quarter of 2002, we signed an
agreement with AT&T Corp. for the restructuring of the
financing provided under the $100.0 million and
$200.0 million credit facilities as well as
$98.0 million provided under demand notes. The
restructuring provided additional borrowings of
$150.0 million, which included the refinancing of
$87.0 million available via demand notes as of
December 31, 2001 (of which $77.8 million was
outstanding) and additional financing of up to
$63.0 million. The restructuring and additional financing
became effective concurrently with the senior secured vendor
financing on March 27, 2002. While the senior secured vendor
financing is outstanding, we are entitled to defer payment of
all accrued and future interest through the maturity date of the
loans of October 2008, and we are also entitled to defer payment
of accrued and future dividends on the Mandatorily Redeemable
15% Series B Cumulative Preferred Stock through that date.
A portion of the $100.0 million tranche, plus capitalized
interest, of the loans bore interest at LIBOR plus 3.75% until
August of 2002, and now bear interest at a fixed rate of 14.0%.
The $200.0 million and $98.0 million portions, plus
capitalized interest are fixed at a 15.0% interest rate. The

11



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


remaining $150.0 million portion pays a
fixed interest of 15.3%. The weighted average interest rate as
of September 30, 2002 was 14.9%. At September 30, 2002
we have capitalized deferred interest of $55.9 million as
part of the debt. As of September 30, 2002 we have borrowed
the full available amounts under these AT&T Corp. facilities.

As part of the restructuring, we issued to
AT&T Corp. warrants to acquire approximately
4.9 million shares of our Class A common stock. Half
of these warrants are exercisable at a price of $8.00 per share
and the other half are exercisable at a price of $0.01 per
share. The warrants have been valued using the Black-Scholes
pricing model with the following assumptions: 6 years
expected life; a volatility factor of 132.0%; and a risk-free
interest rate of 5.2%. The warrants are exercisable immediately,
and the total amount of the warrants was included as part of the
determination of the loss on debt restructuring. The debt
restructuring resulted in an extraordinary loss of $6.3 million.

The debt facilities with AT&T Corp. include
customary covenants that are based on certain of the covenant
provisions contained in our senior secured vendor financing.
Under a subordination agreement between AT&T Corp., the
vendor creditors and us, relating to the AT&T financing
facilities (including the Mandatorily Redeemable Series B
15% Cumulative Preferred Stock), interest and preferred
dividends are not payable in cash and AT&T Corp. remedies
upon any default are suppressed until October 2008, or such
earlier date as the vendor financing has been repaid in full,
subject to certain negotiated exceptions.

Notes Payable to Other Vendors

In November 1998 a subsidiary of FirstCom
Corporation (which we acquired in the FirstCom merger) entered
into a vendor financing agreement with one of its equipment
vendors. This vendor financing agreement, as amended, provided
for a maximum financing amount of $29.5 million, an
interest rate of LIBOR plus 5.5% and is repayable in 20
consecutive quarterly payments of principal and interest from
the date of the related borrowings. The financed equipment
collateralizes this vendor financing. As of September 30,
2002, there was approximately $6.3 million outstanding
under this vendor financing bearing interest at a weighted
average annual rate of 8.1%. The availability period for
drawings under this financing agreement expired on
December 31, 2000. Uncured breaches of covenants under our
senior secured vendor financing facility are also events of
default under this facility. Therefore, we have reclassified
amounts outstanding under this facility as short-term debt in
the accompanying consolidated balance sheet as of
September 30, 2002.

In July, August and September 2001, we entered
into several vendor financing agreements with an equipment
vendor maturing at various dates through April 2004 bearing
interest at LIBOR plus 7.0%, or 10.9%. In June 2002, we signed
an agreement with the vendor for the restructuring of the
financing provided under these vendor financing agreements.
Under the restructuring agreement it was agreed to reduce the
principal outstanding from $9.5 million to
$8.6 million as well as to reduce the of interest rate from
LIBOR plus 7.0% to LIBOR plus 0.0%. The restructuring also
provided for quarterly payment of interest commencing in August
2002 with a maturity of the principal in April 2004. As of
September 30, 2002 there was $7.6 million outstanding.
The debt restructuring resulted in an extraordinary gain of
$1.8 million, resulting from the reduction of principal and
accrued interest. We have no availability under these notes
payable.

We entered into several short-term vendor
financing agreements maturing in various dates through March
2003 for the development of our networks in Argentina.
Borrowings under this agreement bear interest at fixed rates
ranging from 11.9% to 17.5% per annum and variable rates based
on LIBOR plus 8.0%. At September 30, 2002, there was an
aggregate $21.4 million face amount outstanding under these
facilities. We have no availability under these notes payable.
In June 2002 the vendor initiated a legal proceeding against us
and our subsidiary in Argentina, concerning obligations under
the promissory notes due in May 2002, which we did not pay due
to a disagreement over the governing law and the effect of
changes in laws in Argentina on

12



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##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


the principal amount of such notes. In June 2002,
we also received a complaint in New York Supreme Court from an
investment fund that has informed us it received an assignment
of one of these notes, which we also did not pay when due in May
2002 due to our view of the applicable governing law and effects
of changes in law in Argentina. See additional information
regarding these proceedings in Note 6.

Other Bank Facilities

AT&T do Brasil is party to several local bank
facilities and capital leases providing for borrowings of an
aggregate amount of $33.4 million maturing through February
2004. At September 30, 2002, there was an aggregate of
$29.2 million outstanding under these facilities.
Borrowings under these facilities bear interest at fixed rates
ranging from 2.2% to 13.0% per annum and variable rates based
upon LIBOR plus a margin ranging from 1.6% to 1.9%.

AT&T Colombia is party to several local bank
facilities providing for borrowings of an aggregate amount of
$10.4 million maturing through May 2006. At
September 30, 2002, there was an aggregate of
$10.4 million outstanding under these facilities.
Borrowings under these facilities bear interest at fixed rates
ranging from 8.9% to 12.5% per annum and variable rates based
upon Deposito Tasa Fijo (DTF) plus a margin ranging from
4.5% to 7.0%. The average Colombian peso interest rate, or DTF,
for the nine months ended September 30, 2002 was 9.6%.

AT&T Peru is party to several local bank
facilities providing for borrowings of an aggregate amount of
$19.8 million, maturing on various dates through June 2011.
At September 30, 2002, there was an aggregate of $7.2
million outstanding under these facilities. Borrowings under
these facilities bear interest at fixed and variable rates
ranging from 7.5% to 12.5% per annum.

AT&T Argentina and AT&T Chile are each
party to several local bank facilities providing for borrowings
(including certain capital leases) of an aggregate amount of
$5.9 million, maturing on various dates through October
2010. At September 30, 2002 there was an aggregate of
$0.8 million outstanding under these facilities bearing
interest at fixed interest rates ranging from 9.0% to 17.5%.

As of September 30, 2002 we have
approximately $47.6 million outstanding under these bank
facilities. At September 30, 2002, we had availability
under these and unused local bank facilities of approximately
$21.8 million. As a result of our current financial
condition, we believe it will be difficult to renew or refinance
many of these facilities, and we do not expect to be able to use
undrawn availability under these facilities. See Note 1.

Our local bank facilities contain various events
of default which vary by facility, including among others,
non-payment, property seizure, a change of control affecting the
companys financial capabilities, and in the case of
certain facilities, a deterioration in the local companys
financial position or default in the payment of debt held by a
third party. We have not paid approximately $0.8 million
that was due under one of our facilities in Brazil on
November 4, 2002 and have received a notice of non-payment
from the bank. We are currently in discussions with the bank
regarding this amount.

Failure to pay outstanding amounts due under
these facilities will generally entitle the lender of that
facility to accelerate other obligations under its facility and
may entitle other local bank lenders in the applicable country,
and in some cases other countries, to accelerate payments due
under their facilities and pursue remedies available under the
local facilities and under law. In addition, if the vendors
exercise remedies available to them under the senior secured
vendor financing facility to accelerate all outstanding amounts
and/or to foreclose on our assets that secure that facility or
in certain other circumstances, we may be in default under
certain of the local bank facilities, which could result in
acceleration of those local bank facilities and other notes
payable as well as the pursuit of other remedies available under
law. In such cases, we will

13



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##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


likely need to seek protection from our creditors
under U.S. bankruptcy law and, depending on remedies that may be
pursued by these creditors, under the laws of some or all of the
countries in which we operate.

NOTE 4  REDEEMABLE PREFERRED AND
CAPITAL STOCK

On August 28, 2000, we issued to Global Card
Holdings, Inc., a wholly-owned subsidiary of AT&T Corp.,
100,000 shares of our non-voting, non-convertible and
non-participating Mandatorily Redeemable 15% Series B
Cumulative Preferred Stock having an aggregate liquidation value
as of September 30, 2002 and December 31, 2001 of
$239.9 million and $215.2 million, respectively. The
shares of Mandatorily Redeemable 15% Series B Cumulative
Preferred Stock entitle Global Card Holdings to receive
dividends at an annual rate of 15%, payable semi-annually. In
March 2002 Global Card Holdings agreed to certain amendments to
the terms of the redeemable preferred stock. The amendments
provided that the first date of redemption at the option of any
holder would be deferred until October 2008 and that dividends
would not be payable in cash unless permitted under the
Subordination Agreement related to our senior secured vendor
financing, in each case subject to certain exceptions as
permitted under the vendor financing agreements. The
accompanying statements of operations for the nine months ended
September 30, 2002 and 2001 include $24.7 million and
$21.4 million, respectively, recorded as interest expense
related to the dividend on our Mandatorily Redeemable 15%
Series B Cumulative Preferred Stock. The amount recorded as
interest expense for the three months ended September 30,
2002 and 2001 was $8.7 million and $7.5 million,
respectively.

We are authorized to issue 460,000,000 shares of
capital stock, consisting of 300,000,000 shares of Class A
common stock, par value $0.0001 per share, 150,000,000 shares of
Class B common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $.0001 per
share. At September 30, 2002 and December 31, 2001,
45,659,017 and 45,224,017 shares, respectively, of Class A
common stock were issued and outstanding. At September 30,
2002 and December 31, 2001, we had 73,081,595 shares of
Class B common stock issued and outstanding.

Holders of AT&T Latin Americas
Class A common stock have one vote per share, and holders
of Class B common stock have ten votes per share, on all
matters to be voted on by stockholders, including the election
of directors. Class B shares are convertible into
Class A shares on a share-for-share basis at the option of
the holder at any time, or automatically upon transfer to a
person or entity which is not a permitted transferee. Permitted
transferees include AT&T Corp. and any person or entity in
which it owns directly or indirectly 50% or more of the equity
securities.

NOTE 5  OPERATIONS BY GEOGRAPHIC
AREAS AND SEGMENTS

Our chief operating decision makers measure our
operating results by country and use EBITDA as an important
measure of our country operating results and performance. We
calculate EBITDA as gain or loss from operations plus
depreciation and amortization expense plus impairment loss on
goodwill. Management believes EBITDA is meaningful to investors
because it enables them to evaluate operating results using the
same measure used by our chief operating decision makers. In
addition, we believe that EBITDA allows investors a means to
evaluate the financial results of each country operation in
relation to our total operations. Our calculation of EBITDA may
or may not be consistent with the calculation of this measure by
other public companies. EBITDA should not be viewed by investors
as an alternative to generally accepted accounting principles
(GAAP) measures of income, as an indicator of performance,
or cash flows from operating activities as an indicator of
liquidity. In addition EBITDA does not take into account changes
in certain assets and liabilities as well as interest and income
taxes, which can affect cash flows.

We report revenue segmented by data-Internet and
voice services. We currently derive a substantial portion of our
revenue from data-Internet services. For the three months ended
September 30, 2002 and 2001

14



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##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


approximately 61.8% and 57.0%, respectively, were
generated from data-Internet services. For the nine months ended
September 30, 2002 and 2001 approximately 62.1% and 58.6%,
respectively, were generated from data-Internet services. No
single customer or group of customers accounted for more than
10.0% of total revenue for the periods presented.

Data-Internet Services.Our data-Internet services feature
local, national and international reach, high availability and
high security, with varying degrees of managed features, using
our common ATM/IP, or asynchronous transfer mode/ Internet
protocol multi-service network platform. These services are
accessible via single connections (one port per location) to our
broadband network. Our data services consist of basic
connectivity services, such as point-to-point dedicated private
lines, and point to multipoint network services, which include
offering and managing communications links among a number of
locations, as wide area network services, enabling intranet and
extranet connectivity. The basic infrastructure plus supporting
services allow us to implement different communications
applications to support a wide range of customers needs.
As part of our data services, we provide secured private IP
services, frame relay, ATM and clear channel services.

Our Internet services consist of dial-up and
high-speed dedicated access services offered primarily to
businesses, as well as to Internet service providers and content
providers. Our integrated package to Internet service providers
and portals allows these customers to purchase and/or lease
their entire access infrastructure and access to the Internet
from us. Our managed service offerings include managed data,
Internet and web hosting services.

Voice Services.Our
portfolio of voice services includes local telephony and long
distance services, pre-paid and calling card services and 800
and operator assistance services, depending on our competitive
situation and regulatory restrictions in each country. We
package these services differently depending on the type of
customer we are targeting. Voice services are an important
complement to our existing data-Internet product portfolio.

15



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


The following tables set forth, for the three and
nine months ended September 30, 2002 and 2001, certain
information about segment results of operations and segment
assets (in thousands):

|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |         | 
|----------------------------------- | ------------- | --------- | ------- | ------- |  | ----- | ------- | -------- |  | ---- | -------- | -------- |  | ----- | ------- | ------ |  | - | -------- | ------- |  | - | ------- | ------ | - | - | -------- | ------- | 
|Three Months Ended                  |               |           |         |         |  |       |         |          |  |      |          |          |  |      
|September 30, 2002                  |               | Argentina |         | Brazil  |  | Chile |         | Colombia |  | Peru |          | Other(1) |  | Total
|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |      
|(Unaudited)                         |               |           |         |         |  |       |         |          |  |      |          |          |  |      
|REVENUE:                            |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|Data-Internet services              |               | $         | 1,896   |         |  | $     | 9,373   |          |  | $    | 3,282    |          |  | $     | 5,757   |        |  | $ | 4,366    |         |  | $ |        |        |   | $ | 24,674   |        
|Voice services                      |               |           | 3,220   |         |  |       | 2,028   |          |  |      | 4,648    |          |  |       | 118     |        |  |   | 6,520    |         |  |   | (1,291  | )      |   |   | 15,243   |        
|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|                                    | TOTAL REVENUE |           |         | 5,116   |  |       |         | 11,401   |  |      |          | 7,930    |  |       |         | 5,875  |  |   |          | 10,886  |  |   |         | (1,291 | ) |   |          | 39,917  | 
|Cost of revenue                     |               |           | 3,848   |         |  |       | 6,536   |          |  |      | 5,764    |          |  |       | 3,004   |        |  |   | 6,515    |         |  |   | (1,291  | )      |   |   | 24,376   |        
|Selling, general and administrative |               |           | 1,551   |         |  |       | 6,043   |          |  |      | 2,689    |          |  |       | 2,272   |        |  |   | 4,149    |         |  |   | 9,619   |        |   |   | 26,323   |        
|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|EBITDA(2)                           |               |           | (283    | )       |  |       | (1,178  | )        |  |      | (523     | )        |  |       | 599     |        |  |   | 222      |         |  |   | (9,619  | )      |   |   | (10,782  | )      
|Depreciation and amortization       |               |           | 21,748  |         |  |       | 10,294  |          |  |      | 2,459    |          |  |       | 2,995   |        |  |   | 4,660    |         |  |   | 1,451   |        |   |   | 43,607   |        
|Impairment loss on goodwill         |               |           |        |         |  |       | 88,469  |          |  |      | 170,000  |          |  |       | 40,000  |        |  |   | 115,000  |         |  |   |        |        |   |   | 413,469  |        
|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|Loss from operations                |               | $         | (22,031 | )       |  | $     | (99,941 | )        |  | $    | (172,982 | )        |  | $     | (42,396 | )      |  | $ | (119,438 | )       |  | $ | (11,070 | )      |   | $ | (467,858 | )      
|                                    |               |           |         |         |  |       |         |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|                                    | Total assets  |           | $       | 155,388 |  |       | $       | 146,708  |  |      | $        | 82,870   |  |       | $       | 69,695 |  |   | $        | 115,710 |  |   | $       | 33,071 |   |   | $        | 603,442 | 
|CAPEX(3)                            |               | $         | 409     |         |  | $     | 2,879   |          |  | $    | 1,791    |          |  | $     | 1,520   |        |  | $ | 2,038    |         |  | $ | 695     |        |   | $ | 9,332    |        

|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |           | 
|----------------------------------- | ------------- | --------- | ------ | ------- |  | ----- | ------- | -------- |  | ---- | ------ | -------- |  | ----- | ------ | ------ |  | - | ------ | ------- |  | - | ------- | ------- | - | - | ------- | --------- | 
|Three Months Ended                  |               |           |        |         |  |       |         |          |  |      |        |          |  |      
|September 30, 2001                  |               | Argentina |        | Brazil  |  | Chile |         | Colombia |  | Peru |        | Other(1) |  | Total
|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |      
|(Unaudited)                         |               |           |        |         |  |       |         |          |  |      |        |          |  |      
|REVENUE:                            |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |          
|Data-Internet services              |               | $         | 2,007  |         |  | $     | 9,776   |          |  | $    | 2,904  |          |  | $     | 4,096  |        |  | $ | 3,584  |         |  | $ |        |         |   | $ | 22,367  |          
|Voice services                      |               |           | 3,942  |         |  |       | 1,577   |          |  |      | 6,066  |          |  |       | 33     |        |  |   | 5,905  |         |  |   | (630    | )       |   |   | 16,893  |          
|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |          
|                                    | TOTAL REVENUE |           |        | 5,949   |  |       |         | 11,353   |  |      |        | 8,970    |  |       |        | 4,129  |  |   |        | 9,489   |  |   |         | (630    | ) |   |         | 39,260    | 
|Cost of revenue                     |               |           | 5,893  |         |  |       | 12,166  |          |  |      | 6,897  |          |  |       | 2,232  |        |  |   | 5,174  |         |  |   | (458    | )       |   |   | 31,904  |          
|Selling, general and administrative |               |           | 7,158  |         |  |       | 7,940   |          |  |      | 3,287  |          |  |       | 3,084  |        |  |   | 4,122  |         |  |   | 6,829   |         |   |   | 32,420  |          
|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |          
|EBITDA(2)                           |               |           | (7,102 | )       |  |       | (8,753  | )        |  |      | (1,214 | )        |  |       | (1,187 | )      |  |   | 193    |         |  |   | (7,001  | )       |   |   | (25,064 | )        
|Depreciation and amortization       |               |           | 2,073  |         |  |       | 6,885   |          |  |      | 1,594  |          |  |       | 1,740  |        |  |   | 3,587  |         |  |   | 9,362   |         |   |   | 25,241  |          
|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |          
|Loss from operations                |               | $         | (9,175 | )       |  | $     | (15,638 | )        |  | $    | (2,808 | )        |  | $     | (2,927 | )      |  | $ | (3,394 | )       |  | $ | (16,363 | )       |   | $ | (50,305 | )        
|                                    |               |           |        |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |         |         |   |   |         |          
|                                    | Total assets  |           | $      | 186,701 |  |       | $       | 363,818  |  |      | $      | 56,043   |  |       | $      | 64,418 |  |   | $      | 105,260 |  |   | $       | 588,632 |   |   | $       | 1,364,872 | 
|CAPEX(3)(4)                         |               | $         | 11,634 |         |  | $     | 19,018  |          |  | $    | 1,816  |          |  | $     | 7,764  |        |  | $ | 3,139  |         |  | $ | 8,604   |         |   | $ | 51,975  |          

|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |         | 
|----------------------------------- | ------------- | --------- | ------- | ------- |  | ----- | -------- | -------- |  | ---- | -------- | -------- |  | ----- | ------- | ------ |  | - | -------- | ------- |  | - | ------- | ------ | - | - | -------- | ------- | 
|Nine Months Ended                   |               |           |         |         |  |       |          |          |  |      |          |          |  |      
|September 30, 2002                  |               | Argentina |         | Brazil  |  | Chile |          | Colombia |  | Peru |          | Other(1) |  | Total
|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |      
|(Unaudited)                         |               |           |         |         |  |       |          |          |  |      |          |          |  |      
|REVENUE:                            |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|Data-Internet services              |               | $         | 4,840   |         |  | $     | 34,135   |          |  | $    | 9,549    |          |  | $     | 17,188  |        |  | $ | 12,602   |         |  | $ |        |        |   | $ | 78,314   |        
|Voice services                      |               |           | 9,526   |         |  |       | 5,694    |          |  |      | 15,472   |          |  |       | 352     |        |  |   | 19,508   |         |  |   | (2,814  | )      |   |   | 47,738   |        
|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|                                    | TOTAL REVENUE |           |         | 14,366  |  |       |          | 39,829   |  |      |          | 25,021   |  |       |         | 17,540 |  |   |          | 32,110  |  |   |         | (2,814 | ) |   |          | 126,052 | 
|Cost of revenue                     |               |           | 12,334  |         |  |       | 25,225   |          |  |      | 17,580   |          |  |       | 9,777   |        |  |   | 17,233   |         |  |   | (2,814  | )      |   |   | 79,335   |        
|Selling, general and administrative |               |           | 6,877   |         |  |       | 23,149   |          |  |      | 8,459    |          |  |       | 7,398   |        |  |   | 12,226   |         |  |   | 26,099  |        |   |   | 84,208   |        
|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|EBITDA(2)                           |               |           | (4,845  | )       |  |       | (8,545   | )        |  |      | (1,018   | )        |  |       | 365     |        |  |   | 2,651    |         |  |   | (26,099 | )      |   |   | (37,491  | )      
|Depreciation and amortization       |               |           | 33,706  |         |  |       | 21,601   |          |  |      | 6,341    |          |  |       | 8,728   |        |  |   | 10,594   |         |  |   | 5,007   |        |   |   | 85,977   |        
|Impairment loss on goodwill         |               |           |        |         |  |       | 88,469   |          |  |      | 170,000  |          |  |       | 40,000  |        |  |   | 115,000  |         |  |   |        |        |   |   | 413,469  |        
|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|Loss from operations                |               | $         | (38,551 | )       |  | $     | (118,615 | )        |  | $    | (177,359 | )        |  | $     | (48,363 | )      |  | $ | (122,943 | )       |  | $ | (31,106 | )      |   |   | (536,937 | )      
|                                    |               |           |         |         |  |       |          |          |  |      |          |          |  |       |         |        |  |   |          |         |  |   |         |        |   |   |          |        
|                                    | Total assets  |           | $       | 155,388 |  |       | $        | 146,708  |  |      | $        | 82,870   |  |       | $       | 69,695 |  |   | $        | 115,710 |  |   | $       | 33,071 |   |   | $        | 603,442 | 
|CAPEX(3)                            |               | $         | 2,345   |         |  | $     | 9,629    |          |  | $    | 5,978    |          |  | $     | 3,461   |        |  | $ | 7,183    |         |  | $ | 865     |        |   | $ | 29,461   |        

16



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##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |           | 
|----------------------------------- | ------------- | --------- | ------- | ------- |  | ----- | ------- | -------- |  | ---- | ------ | -------- |  | ----- | ------ | ------ |  | - | ------- | ------- |  | - | ------- | ------- | - | - | -------- | --------- | 
|Nine Months Ended                   |               |           |         |         |  |       |         |          |  |      |        |          |  |      
|September 30, 2001                  |               | Argentina |         | Brazil  |  | Chile |         | Colombia |  | Peru |        | Other(1) |  | Total
|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |      
|(Unaudited)                         |               |           |         |         |  |       |         |          |  |      |        |          |  |      
|REVENUE:                            |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |          
|Data-Internet services              |               | $         | 3,685   |         |  | $     | 29,199  |          |  | $    | 8,702  |          |  | $     | 10,299 |        |  | $ | 9,438   |         |  | $ |        |         |   | $ | 61,323   |          
|Voice services                      |               |           | 5,934   |         |  |       | 4,516   |          |  |      | 18,902 |          |  |       | 64     |        |  |   | 15,142  |         |  |   | (1,304  | )       |   |   | 43,254   |          
|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |          
|                                    | TOTAL REVENUE |           |         | 9,619   |  |       |         | 33,715   |  |      |        | 27,604   |  |       |        | 10,363 |  |   |         | 24,580  |  |   |         | (1,304  | ) |   |          | 104,577   | 
|Cost of revenue                     |               |           | 11,938  |         |  |       | 36,738  |          |  |      | 21,127 |          |  |       | 4,964  |        |  |   | 12,534  |         |  |   | (1,093  | )       |   |   | 86,208   |          
|Selling, general and administrative |               |           | 20,338  |         |  |       | 25,900  |          |  |      | 10,196 |          |  |       | 8,460  |        |  |   | 12,288  |         |  |   | 21,811  |         |   |   | 98,993   |          
|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |          
|EBITDA(2)                           |               |           | (22,657 | )       |  |       | (28,923 | )        |  |      | (3,719 | )        |  |       | (3,061 | )      |  |   | (242    | )       |  |   | (22,022 | )       |   |   | (80,624  | )        
|Depreciation and amortization       |               |           | 7,306   |         |  |       | 21,728  |          |  |      | 4,573  |          |  |       | 4,257  |        |  |   | 9,857   |         |  |   | 26,975  |         |   |   | 74,696   |          
|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |          
|Loss from operations                |               | $         | (29,963 | )       |  | $     | (50,651 | )        |  | $    | (8,292 | )        |  | $     | (7,318 | )      |  | $ | (10,099 | )       |  | $ | (48,997 | )       |   | $ | (155,320 | )        
|                                    |               |           |         |         |  |       |         |          |  |      |        |          |  |       |        |        |  |   |         |         |  |   |         |         |   |   |          |          
|                                    | Total assets  |           | $       | 186,701 |  |       | $       | 363,818  |  |      | $      | 56,043   |  |       | $      | 64,418 |  |   | $       | 105,260 |  |   | $       | 588,632 |   |   | $        | 1,364,872 | 
|CAPEX(3)(4)                         |               | $         | 75,410  |         |  | $     | 62,134  |          |  | $    | 9,791  |          |  | $     | 19,391 |        |  | $ | 19,838  |         |  | $ | 13,710  |         |   | $ | 200,274  |          






|    |                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists primarily of corporate operations,
    inter-company eliminations and the results of operations and
    related assets of the deferred compensation plan. All material
    inter-company accounts and transactions have been eliminated.                                               
|(2) | EBITDA is an important measure used by our chief
    operating decision makers to measure our country operating
    results and performance.                                                                                                                                                    
|(3) | We calculate CAPEX, or capital expenditures, as
    gross property and equipment purchased, net of any cash proceeds
    from the sale of property and equipment, but excluding
    translation adjustments resulting from our countries that use
    local currencies as functional currencies.
|(4) | CAPEX includes property and equipment acquired
    through vendor financing arrangements of approximately
    $40.8 million and $84.4 million for the three and nine
    months ended September 30, 2001.                                                                                       

There are no significant transfers between
country operations. Revenue among our country operations
amounted to $0.1 million and $0.3 million in Brazil,
$0.1 million and $0.6 million in Chile,
$0.1 million and $0.1 million in Colombia,
$0.4 million and $0.9 million in Argentina, and
$0.7 million and $1.0 million in Peru for the three
and nine months ended September 30, 2002, respectively.
Revenue for the three and nine months ended September 30,
2001 among our country operations amounted to $0.4 million and
$0.8 million in Peru and $0.2 million and
$0.4 million in Chile. Revenue by country as presented in
the tables above includes revenue generated among our country
operations; but is then eliminated under the Other
column to arrive at our reported consolidated revenue.

Loss from operations consists of revenue less
operating expenses, including impairment losses on goodwill, and
does not include interest expense, interest income and other
income (expense), minority interest and income taxes. Total
assets are those assets used in our operations in each
geographic area. Corporate assets, which are included under the
Other column, include cash and cash equivalents,
property and equipment and other assets.

NOTE 6  COMMITMENTS AND
CONTINGENCIES

We have operating lease agreements for our
premises and equipment that expire on various dates through
2010. Amounts due under the operating agreements are subject to
increases in accordance with their terms.

We have been named as a nominal defendant in an
action entitled Confin International Investments, Inc., Pltf. v.
AT&T Corp., et al, filed in the Delaware Court of Chancery
in New Castle County on October 29, 2002 in which AT&T
Corp. and each of our directors have been named as defendants.
The complaint in the action contains two counts, the first
styled as a derivative claim on our behalf alleging breach of
the duty of loyalty by AT&T Corp. and the members of our
board of our directors. The second count alleges a class action
by our shareholders (other than AT&T Corp. and our
directors) for unspecified damages purportedly caused

17



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


by the actions alleged in the first count. The
complaint seeks recovery of the plaintiffs attorneys
fees and costs, and alleges plaintiff has been a shareholder of
the Company for a relevant period.

We expect that AT&T Corp. will defend this
lawsuit vigorously, and we anticipate that each of our
directors, to the extent they are not dismissed from this
action, will similarly launch a vigorous defense. While we are
unable to predict the outcome of this case, we do not believe it
will have a material impact on our consolidated financial
position, annual results of operations or consolidated cash
flows.

In June, 2002 an affiliate of Siemens AG
initiated a legal proceeding in New York Supreme Court against
us and our subsidiary in Argentina, concerning obligations under
certain promissory notes due in May 2002, having an original
face amount of approximately $12.0 million, which we did
not pay due to a disagreement over the governing law and the
effect of changes in laws in Argentina on the principal amount
of such notes. On September 5, 2002 we received an adverse
judgment in this proceeding. We are currently in discussions
with this creditor to resolve and reschedule these obligations,
and are considering an appeal of the initial judgment. In June
2002, we also received a complaint in New York Supreme Court
from IIG Capital, a investment fund that has informed us it
received an assignment of a note of $5.0 million original
face amount issued by the Company to an affiliate of Siemens,
which we also did not pay when due in May 2002 due to our view
of the applicable governing law and effects of changes in law in
Argentina. The claims at issue are similar to those raised in
the Siemens matter. We are in the process of defending this
action and are in discussions with the other party to resolve
the proceeding and reschedule the obligation.

In addition to the proceedings described above,
in the normal course of business, we are subject to proceedings,
lawsuits and other claims. These matters are subject to many
uncertainties and outcomes that are not predictable with
assurance. Consequently, we are unable to ascertain the ultimate
aggregate amount of monetary liability or financial impact with
respect to these matters. While these matters could affect
operating results of any one quarter when resolved in future
periods, it is managements opinion that after final
disposition, any monetary liability or financial impact to us
would not be material to our consolidated financial position,
annual results of operations or consolidated cash flows.

Our current and future operations and investments
in certain foreign countries are generally subject to the risks
of political, economic or social instability, including the
possibility of expropriation, confiscatory taxation,
hyper-inflation or other adverse regulatory or legislative
developments, or limitations on the repatriation of investment
income, capital and other assets. We cannot predict whether any
of such factors will occur in the future or the extent to which
such factors would have a material adverse effect on our
international operations.

See Note 10 with respect to our commitments under
our Deferred Compensation Plan.

NOTE 7  NEW ACCOUNTING
PRONOUNCEMENTS

Effective July 1, 2001, we adopted Statement
of Financial Accounting Standards (SFAS)
No. 141, Business Combinations. SFAS
No. 141 requires business combinations initiated after
June 30, 2001, to be accounted for using the purchase
method. SFAS No. 141 also further clarifies the criteria
for recognition of intangible assets separately from goodwill.
Our adoption of this standard did not have any effect on our
accounting for prior business combinations.

Effective January 1, 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 stops the amortization of our goodwill, which
is allocated through our country operations, and requires an
annual, or when events or circumstances dictate a more frequent,
impairment review of our goodwill. Accordingly, as of
January 1, 2002, we no longer amortize our goodwill. We
have recorded a transitional impairment loss of
$267.8 million as of January 1, 2002, which has been
recorded as a cumulative effect of change in accounting
principle in our country operations as follows:
Argentina  $33.2 million, Brazil 

18



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


$67.4 million, Chile 
$19.3 million, Colombia  $28.4 million and
Peru  $119.5 million. Subsequent to the
implementation of this accounting principle and in connection
with our review of our business plan, cash flow and liquidity
position, market capitalization based on the trading price of
our shares of Class A common stock as of the valuation date
and economic conditions in the countries in which we operate, we
assessed the value of our goodwill and determined additional
impairment loss in goodwill in our country operations as
follows: Brazil  $88.5 million,
Chile  $170.0 million, Colombia 
$40.0 million and Peru  $115.0 million. The
aggregate amount of impairment of $413.5 million has been
recorded as impairment loss on goodwill in the accompanying
consolidated financial statements for the three months ended
September 30, 2002. The fair value of our goodwill was
determined using discounted cash flows on the current projected
operations of our country operations and market capitalization
of our business.

Since December 31, 2001, our goodwill
carrying amount has changed as a result of an impairment of
$681.3 million (including the cumulative effect of change
in accounting principle) and the change which resulted from
using a different foreign currency translation rate at
September 30, 2002 compared to December 31, 2001. If
goodwill amortization had not been recorded in our third quarter
of 2001, our third quarter of 2001 adjusted net loss and basic
and diluted adjusted loss per share would have been
$68.7 million and $0.59 per share, respectively, instead of
$79.7 million and $0.69 per share, respectively. For the
nine months ended September 30, 2001, the adjusted net loss
and basic and diluted adjusted loss per share would have been
$193.0 million and $1.66 per share, respectively, instead
of $225.7 million and $1.94 per share, respectively.

Our intangibles subject to accumulated
amortization amount to $19.0 million and $24.1 million (net
of accumulated amortization of $14.6 million and
$10.6 million), as of September 30, 2002 and
December 31, 2001 respectively. Our intangibles do not have
residual value and the weighted average amortization period is
5.6 years. Our intangible assets are divided as follows:

|                         |                                   |               |         |              |  |         |         |        |  |  |       |  | 
|------------------------ | --------------------------------- | ------------- | ------- | ------------ |  | ------- | ------- | ------ |  |  | ----- |  | 
|                         |                                   | September 30, |         | December 31, |  | Life in
|                         |                                   | 2002          |         | 2001         |  | Years  
|                         |                                   |               |         |              |  |        
|                         |                                   | (Unaudited)   |         |              |  |        
|Customer contracts       |                                   | $             | 29,578  |              |  | $       | 30,900  |        |  |  | 3 - 5 | 
|Accumulated amortization |                                   |               | (14,022 | )            |  |         | (10,200 | )      |  |  |       | 
|                         |                                   |               |         |              |  |         |         |        |  |  |       | 
|                         | Subtotal, Net customers contracts |               |         | 15,556       |  |         |         | 20,700 |  |  |       |  | 
|                         |                                   |               |         |              |  |         |         |        |  |  |       | 
|Other intangibles        |                                   |               | 4,020   |              |  |         | 3,828   |        |  |  | 7     | 
|Accumulated amortization |                                   |               | (538    | )            |  |         | (398    | )      |  |  |       | 
|                         |                                   |               |         |              |  |         |         |        |  |  |       | 
|                         | Subtotal, Net other intangibles   |               |         | 3,482        |  |         |         | 3,430  |  |  |       |  | 
|                         |                                   |               |         |              |  |         |         |        |  |  |       | 
|                         | Total intangibles                 |               | $       | 19,038       |  |         | $       | 24,130 |  |  |       |  | 
|                         |                                   |               |         |              |  |         |         |        |  |  |       | 

The aggregate amortization expense related to
customers contracts for the three and nine months ended
September 30, 2002 amounted to $1.0 million and
$4.1 million, respectively. The aggregate amortization
expense related to other intangibles for the three and nine
months ended September 30, 2002 amounted to

19



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


$0.1 million and $0.3 million,
respectively. The estimated aggregate amortization expense of
intangibles for the next five years is estimated to be as
follows:

|                    |  |        |       | 
|------------------- |  | ------ | ----- | 
|                    |  | Amount
|                    |  |       
|2003                |  | $      | 5,641 | 
|2004                |  |        | 5,641 | 
|2005                |  |        | 3,908 | 
|2006                |  |        | 441   | 
|2007 and thereafter |  |        | 1,644 | 

Effective January 1, 2002 we also adopted
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supercedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. SFAS
No. 144 applies to all long-lived assets, including
discontinued operations and consequently amends APB Opinion
No. 30, Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Based on SFAS No. 121, SFAS
No. 144 develops one accounting model for long-lived assets
that are to be disposed of by sale, as well as addresses the
principal implementation issues. SFAS No. 144 requires that
long-lived assets that are to be disposed of by sale be measured
at the lower of book value or fair value less cost to sell.
Additionally, SFAS No. 144 expands the scope of
discontinued operations to include all components of an entity
with operations that (1) can be distinguished from the rest
of the entity and (2) will be eliminated from the ongoing
operations of the entity in a disposal transaction. The adoption
of SFAS No. 144 did not have any effect on our accounting
for long-lived assets on the adoption date.

In April 2002, the Financial Accounting Standards
Board issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13,
and Technical Corrections, which provides for the
rescission of several previously issued accounting standards,
new accounting guidance for the accounting of certain lease
modifications and various technical corrections that are not
substantive in nature to existing pronouncements. We will adopt
SFAS No. 145 on January 1, 2003. We are currently
assessing the impact of SFAS No. 145 on our financial
position and results of operations.

In June 2002, the Financial Accounting Standards
Board issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS 146 addresses the
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
Issue 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).
This statement is effective for transactions initiated after
December 31, 2002 and is to be applied prospectively.

NOTE 8  EXTRAORDINARY GAIN
(LOSS) ON DEBT RESTRUCTURING

As part of the restructuring of our financing
with AT&T Corp., we issued to AT&T Corp. warrants to
acquire approximately 4.9 million shares of our Class A
common stock. Half of these warrants are exercisable at a price
of $8.00 per share and the other half are exercisable at a price
of $0.01 per share. The warrants have been valued using the
Black-Scholes pricing model with the following assumptions:
6 years expected life; a volatility factor of 132.0%; and a
risk-free interest rate of 5.2%. The warrants are exercisable
immediately and the total amount of the warrants was included as
part of the determination of the loss on debt restructuring. The
debt restructuring resulted in an extraordinary loss of
$6.3 million for the quarter ended March 31, 2002.

In June 2002, we signed an agreement with one of
our vendors for the restructuring of the financing provided
under certain vendor financing agreements with the vendor. Under
the restructuring agreement it was

20



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


agreed to reduce the principal outstanding from
$9.5 million to $8.6 million as well as a reduction of
interest rate from LIBOR plus 7.0% to LIBOR plus 0.0%. The
restructuring also provided for quarterly payment of interest
commencing in August 2002 with a maturity of the principal in
April 2004. The debt restructuring resulted in an extraordinary
gain of $1.8 million, resulting from the reduction of
principal and accrued interest.

NOTE 9  OTHER EXPENSE (INCOME),
NET

We use derivative instruments, currently forward
contracts, to reduce our exposure to fluctuations in foreign
currency exchange rates. We do not use derivatives instruments
for speculative purposes. Our most significant contracts to buy
U.S. dollars are forward contracts entered into to fix the cost
in foreign currency or in U.S. dollars of our U.S. dollars
denominated debt obligations in Brazil.

As of September 30, 2002, we had foreign
currency forward contracts that hedge certain transactions with
notional amounts of $437.1 million, maturing in various
dates through November 2003. The total $17.5 million fair
value of forward currency contract assets, which are included as
prepaid expenses and other current assets on our
September 30, 2002 balance sheet, represents unrealized
gains on certain of our forward currency contracts selling or
buying foreign currencies as result of the strengthening of the
dollar compared to the currencies that we hedge. In addition,
the total $0.5 million of fair value of forward contract
liabilities which are included in other current liabilities on
our September 30, 2002 balance sheet represents unrealized
losses on certain of our forward currency in our various
countries in which we operate, which are mainly used to fix the
cost of certain commitments.

Derivative gains and losses included in
accumulated other comprehensive income are reclassified into
earnings at the same time the underlying hedged transaction is
recorded in earnings. At September 30, 2002, we only have
deferred in other comprehensive income approximately
$0.1 million related to anticipated cash transactions, all
of which will be executed before year-end.

During the second quarter of 2002 we discontinued
cash flows hedge accounting for certain forward contracts and
concurrently designated the respective underlying loans as a
long-term investment. The forward contracts that were accounted
for as cash flows hedges are now being accounted for as
undesignated forward contracts and the change in the fair value
of these contracts is accounted for as other expenses in the
statement of operations. With the designation of the underlying
loans as long-term investment the amount of $12.6 million
previously deferred in other comprehensive income
(loss) was reclassified to other expense in the
accompanying statement of operations during the second quarter
of 2002.

Due to our current credit capacity and higher
margin requirements needed by our counter-party financial
institutions we were not able to continue our rollover strategy
on our existing forward contracts. As a result, we discontinued
cash flow hedge accounting for all of our forward contracts that
are protecting us from the Brazilian Real fluctuations against
the U.S. dollar on loans held by AT&T do Brasil
resulting in a charge to other expense of $29.3 million
during the third quarter 2002. The remaining components of other
expense were foreign currency transaction losses, fair value
changes on our undesignated forward contracts and other
non-operating expenses.

NOTE 10  DEFERRED COMPENSATION
PLAN

In November 2000 we adopted a deferred
compensation plan for various members of management that permits
them to defer 10% to 80% all of their cash compensation until
the earlier of their termination of employment or the date on
which they designated as a distribution date at the time they
elected to make a deferral. The plan authorized the Company to
make voluntary contributions to the plan on behalf of the

21



---



##### 



AT&T LATIN AMERICA CORP.


(A majority owned subsidiary of AT&T
Corp.)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Unaudited)


participants, which amounts would have been
subject to vesting. To date the Company has made no voluntary
contributions. Deferrals made under the plan have been placed in
a rabbi trust which is primarily invested in
policies insuring the life of each participant. The investment
income or losses on the investments options made by the
participants are included in our consolidated statement of
operations. To date we have included approximately
$0.1 million of investment losses with respect to
participants investment elections.

The plan entitles the participants to receive
their entire vested amount in the plan upon termination of
employment together with an additional amount calculated as a
gross-up using the maximum corporate income tax rate (currently
35%). The amount of the gross up (assuming a 35% corporate tax
rate) would be an amount, which is approximately equal to 0.5384
multiplied by the participants account balance upon
distribution. As of September 30, 2002, we have incurred
cash expenses of approximately $0.3 million with respect to
gross-up payments paid to participants that are no longer
employed by us. As of September 30, 2002, the amount
recorded as deferred compensation in the plan is approximately
$3.7 million. In the event that any or all of the deferred
amounts are distributed from the plan, the Company will incur an
additional cash expense in an amount equal to 0.5384 multiplied
by the total amount distributed.

22



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Some of the statements under
Managements Discussion & Analysis of Financial
Condition and Results of Operations and elsewhere in this
quarterly report on Form 10-Q are forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that are based on
managements beliefs as well as on a number of assumptions
concerning future events made by, and information currently
available to, management. These statements involve known and
unknown risks, uncertainties and other factors, that may cause
our actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed in or implied by the forward-looking statements.

Forward-looking statements include but are not
limited to statements and references about the following matters:



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expectations and estimates as to the amount of
    cash required to operate as a going concern;                                                                          
|
| |  | expectations about our ability to negotiate any
    proposed solution to our current anticipated liquidity shortfall
    with our creditors and other interested parties;
|
| |  | expectations as to our ability to obtain
    additional financing;                                                                                                       
|
| |  | expectations about sources of revenues and the
    percentage breakdown of sources of revenues; and                                                                      
|
| |  | future financial performance.                                                                                                                                            

In addition to matters that are described in this
quarterly report on Form 10-Q and our Annual Report on
Form 10-K, the following factors, among others, could cause
AT&T Latin Americas actual results to differ
materially from those expressed in or implied by any
forward-looking statements contained in this quarterly report on
Form 10-Q or its exhibits:



| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether we are able to agree with our creditors
    and other interested parties on acceptable terms and conditions
    for a solution to our current liquidity problem and anticipated
    funding gap;
|
| |  | whether economic and political conditions in the
    countries in which we operate improve or deteriorate;                                                                                              
|
| |  | inaccurate forecasts of customer or market demand;                                                                                                                                                      
|
| |  | fluctuations in currency exchange rates;                                                                                                                                                                
|
| |  | changes in AT&T Corp.s approach to
    customers and to its commercial relationships with us;                                                                                                          
|
| |  | changes in communications technology and/or the
    pricing of competitive products and services;                                                                                                       
|
| |  | highly competitive market conditions;                                                                                                                                                                   
|
| |  | our ability to implement our planned
    consolidation of key functions of our operations in the manner
    we currently expect and in the time-frames we contemplate;                                  
|
| |  | our ability to retain customers, particularly in
    light of the financial condition of the company;                                                                                                   
|
| |  | changes in or developments under laws,
    regulations and licensing requirements in the countries in which
    we operate;                                                                             
|
| |  | our ability to obtain and retain rights of ways
    and permits necessary for the expansion and maintenance of our
    networks;                                                                        
|
| |  | our ability to comply with Nasdaq maintenance
    requirements for continued listing of our Class A common
    stock on Nasdaq; and                                                                     
|
| |  | our ability to retain key personnel.                                                                                                                                                                    

23



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##### 



In particular, our ability to estimate our cash
requirements will be affected by several factors, including, but
not limited to:



| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether we are able to have access to undrawn
    commitments under our senior secured vendor financing and to
    maintain access to or renew local financing facilities in the
    countries in which we operate on acceptable terms and conditions
    or at all;
|
| |  | the amount of cash expected to be used in our
    operations;                                                                                                                                                                                                       
|
| |  | our ability to increase revenue;                                                                                                                                                                                                                                    
|
| |  | our ability to collect accounts receivable as
    expected and the timing of collection;                                                                                                                                                                            
|
| |  | the level of competitive pressure on the pricing
    of our services;                                                                                                                                                                                               
|
| |  | whether interest rates fluctuate materially and
    the resulting increase in interest obligations under our
    floating rate facilities; and                                                                                                                      
|
| |  | the impact of fluctuations in currency exchange
    rates in the countries in which we operate on our operations,
    including the effect on any current or future hedging
    instruments.                                                                        

AT&T Latin America undertakes no obligation
to publicly release any updates or revisions to any
forward-looking statements, which are made as of the date of
this quarterly report on Form 10-Q, to reflect events or
circumstances after the date of this quarterly report on
Form 10-Q.

24



---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION

AND RESULTS OF OPERATIONS


The following discussion and analysis should
be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this
quarterly report on Form 10-Q and our annual report on
Form 10-K.

Critical Accounting Policies and
Judgments

Our critical accounting policies are those which
we believe require our most subjective or complex judgments;
often as a result of the need to make estimates about the effect
of matters that are inherently uncertain and may ultimately
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. A discussion of our
critical accounting policies, the underlying judgments and
uncertainties are included in our Annual Report on
Form 10-K.

Overview

We provide communications services under the
AT&T brand to major metropolitan business
centers in Argentina, Brazil, Chile, Colombia and Peru. Our
local, domestic and international communications services
include, among others, data-Internet, local and long distance
voice, web hosting and managed services. We focus primarily on
business customers with growing and diverse communications
needs. These customers include multinational corporations,
financial services companies, media and content providers,
technology companies, government entities, Internet service
providers and communications carriers, as well as small and
medium size businesses. We deliver our services mainly through
our own technologically advanced networks, which interconnect
with third party networks. In addition, we use our installed
network infrastructure to offer services to carriers, including
inbound domestic and regional voice termination services and
connectivity services. We also serve in the mass market through
various distribution channels, offering domestic and
international long distance, calling and prepaid cards and
dial-up Internet services. These opportunities remain attractive
because they provide additional revenues and margin as well as
utilization of our existing network capacity.

We were incorporated in October 1999 by AT&T
Corp. The countries in which we may operate under our
certificate of incorporation and the terms of our Regional
Vehicle Agreement with AT&T Corp., dated as of
August 28, 2000 (filed with our Annual Report on
Form 10-K dated April 2, 2001) include the countries
in South America and the Caribbean plus Panama, but excluding
Cuba and Venezuela. Our operations are conducted through
subsidiaries organized under the laws of the applicable country
in which the operations take place.

Basis of Presentation.Our unaudited financial statements
reflect operations for the three and nine months ended
September 30, 2002 and 2001 in accordance with accounting
principles generally accepted in the United States of America.
The unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. Therefore, the
financial statements do not include any adjustments relating to
our ability to operate as a going concern. The appropriateness
of using the going concern basis in the future, however, will be
dependent upon our ability to address our anticipated liquidity
needs as described below in Recent Events. There is
no assurance that we will be able to address our liquidity needs
through the measures described below on acceptable terms and
conditions, or at all, and, accordingly, there is substantial
doubt about our ability to continue as a going concern.

Recent Events

As of the date of the quarterly report in which
these consolidated financial statements are included, we do not
have sufficient cash to meet our requirements in the near term
unless we defer and restructure amounts owed to our secured and
unsecured creditors, defer amounts owed to trade creditors and
successfully implement austerity measures now being undertaken,
or obtain additional financing. As we announced on

25



---



##### 



October 21, 2002, we currently anticipate a
funding gap commencing in the fourth quarter of 2002 and
reaching up to $40.0 million during 2003. This anticipated
funding gap assumes continued access to our senior secured
credit facilities with our vendors, as to which we are currently
in default, and that we will not be able to defer most of our
obligations to our in-country lenders as and when amounts under
those facilities become due. However, our senior secured lenders
may not provide additional availability to us, and if we are not
able to replace that availability with other financing, or
succeed in deferring an adequate portion of other short-term
indebtedness, our funding gap could increase. The funding gap
also assumes that neither the senior secured vendors nor
in-country lenders accelerate outstanding amounts due under our
facilities with them. If we are unable to address our liquidity
needs, or our creditors were to accelerate amounts due to them,
we will likely need to seek protection from our creditors under
U.S. bankruptcy law and, depending on remedies that may be
pursued by these creditors, under the laws of some or all of the
countries in which we operate. Please see
Managements Discussion and Analysis 
Liquidity and Capital Resources below.


Effective January 1, 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 stops the amortization of our goodwill, which
is allocated through our country operations, and requires an
annual, or when events or circumstances dictate a more frequent,
impairment review of our goodwill. Accordingly, as of
January 1, 2002, we no longer amortize our goodwill. We
have recorded a transitional impairment loss of
$267.8 million as of January 1, 2002. We have also
recorded an additional impairment of $413.5 million in the third
quarter of 2002.

Results of Operations

The following table includes a summary of our
consolidated statements of operations for the periods indicated
below.

26



---



##### 



AT&T LATIN AMERICA CORP.

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Unaudited)


|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |          |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | -------- | ----------------- | ------ | ---- | ------- | ------- | ------ | - | -------- | -------- | ------- | - | -------- | -------- | ------- | 
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                  
|                                                                                                                                                        |                                                                                                                                                                            | Three Months Ended                    |          | Nine Months Ended
|                                                                                                                                                        |                                                                                                                                                                            | September 30,                         |          | September 30,    
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                  
|                                                                                                                                                        |                                                                                                                                                                            | 2002                                  |          | 2001              |        | 2002 |         | 2001   
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |        
|                                                                                                                                                        |                                                                                                                                                                            |                                      
|                                                                                                                                                        |                                                                                                                                                                            | (In thousands, except per share data)
|Revenue:                                                                                                                                                |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|                                                                                                                                                        | Data-Internet services                                                                                                                                                     |                                       | $        | 24,674            |        |      | $       | 22,367  |        |   | $        | 78,314   |         |   | $        | 61,323   |        
|                                                                                                                                                        | Voice services                                                                                                                                                             |                                       |          | 15,243            |        |      |         | 16,893  |        |   |          | 47,738   |         |   |          | 43,254   |        
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|                                                                                                                                                        |                                                                                                                                                                            | Total revenue                         |          |                   | 39,917 |      |         |         | 39,260 |   |          |          | 126,052 |   |          |          | 104,577 | 
|Cost of revenue                                                                                                                                         |                                                                                                                                                                            |                                       | 24,376   |                   |        |      | 31,904  |         |        |   | 79,335   |          |         |   | 86,208   |         
|Selling, general and administrative expenses                                                                                                            |                                                                                                                                                                            |                                       | 26,323   |                   |        |      | 32,420  |         |        |   | 84,208   |          |         |   | 98,993   |         
|Depreciation and amortization                                                                                                                           |                                                                                                                                                                            |                                       | 43,607   |                   |        |      | 25,241  |         |        |   | 85,977   |          |         |   | 74,696   |         
|Impairment loss on goodwill                                                                                                                             |                                                                                                                                                                            |                                       | 413,469  |                   |        |      |        |         |        |   | 413,469  |          |         |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|                                                                                                                                                        | Loss from operations                                                                                                                                                       |                                       |          | (467,858          | )      |      |         | (50,305 | )      |   |          | (536,937 | )       |   |          | (155,320 | )      
|Interest expense                                                                                                                                        |                                                                                                                                                                            |                                       | 35,459   |                   |        |      | 21,501  |         |        |   | 89,703   |          |         |   | 56,217   |         
|Interest income                                                                                                                                         |                                                                                                                                                                            |                                       |         |                   |        |      | 109     |         |        |   | 410      |          |         |   | 872      |         
|Other (expense) income, net                                                                                                                             |                                                                                                                                                                            |                                       | (28,826  | )                 |        |      | (8,172  | )       |        |   | (82,442  | )        |         |   | (15,492  | )       
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|                                                                                                                                                        | Loss before provision for income taxes, minority
    interest income, extraordinary loss on debt restructuring and
    cumulative effect of change in accounting principle |                                       |          | (532,143          | )      |      |         | (79,869 | )      |   |          | (708,672 | )       |   |          | (226,157 | )      
|Provision for income taxes                                                                                                                              |                                                                                                                                                                            |                                       | 204      |                   |        |      |        |         |        |   | 204      |          |         |   |         |         
|Minority interest income                                                                                                                                |                                                                                                                                                                            |                                       | 15       |                   |        |      | 169     |         |        |   | 195      |          |         |   | 438      |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|                                                                                                                                                        | Loss before extraordinary loss on debt
    restructuring and cumulative effect of change in accounting
    principle                                                       |                                       |          | (532,332          | )      |      |         | (79,700 | )      |   |          | (708,681 | )       |   |          | (225,719 | )      
|Extraordinary loss on debt restructuring                                                                                                                |                                                                                                                                                                            |                                       |         |                   |        |      |        |         |        |   | (4,479   | )        |         |   |         |         
|Cumulative effect of change in accounting
    principle                                                                                                 |                                                                                                                                                                            |                                       |         |                   |        |      |        |         |        |   | (267,785 | )        |         |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|Net loss                                                                                                                                                |                                                                                                                                                                            | $                                     | (532,332 | )                 |        | $    | (79,700 | )       |        | $ | (980,945 | )        |         | $ | (225,719 | )       
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|Basic and diluted loss per common share before
    extraordinary loss on debt restructuring and cumulative effect
    of change in accounting principle |                                                                                                                                                                            | $                                     | (4.48    | )                 |        | $    | (0.69   | )       |        | $ | (5.98    | )        |         | $ | (1.94    | )       
|Extraordinary loss per common share on debt
    restructuring                                                                                           |                                                                                                                                                                            |                                       |         |                   |        |      |        |         |        |   | (0.04    | )        |         |   |         |         
|Cumulative effect of change in accounting
    principle loss per common share                                                                           |                                                                                                                                                                            |                                       |         |                   |        |      |        |         |        |   | (2.25    | )        |         |   |         |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|Basic and diluted net loss per common share                                                                                                             |                                                                                                                                                                            | $                                     | (4.48    | )                 |        | $    | (0.69   | )       |        | $ | (8.27    | )        |         | $ | (1.94    | )       
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         
|Weighted average common shares outstanding                                                                                                              |                                                                                                                                                                            |                                       | 118,740  |                   |        |      | 116,296 |         |        |   | 118,595  |          |         |   | 116,296  |         
|                                                                                                                                                        |                                                                                                                                                                            |                                       |          |                   |        |      |         |         |        |   |          |          |         |   |          |         

27



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##### 



The following table includes revenue by country
and consolidated operating loss in dollars and as a percentage
of revenue for the three and nine months ended
September 30, 2002 and 2001:

|                                             |           |                      |         |        |          |      |         |      |          |    |        |        |         |   |      |      |        |   
|-------------------------------------------- | --------- | -------------------- | ------- | ------ | -------- | ---- | ------- | ---- | -------- | -- | ------ | ------ | ------- | - | ---- | ---- | ------ | --
|                                             |           |                     
|                                             |           | Three Months Ended  
|                                             |           | September 30, 2002  
|                                             |           |                     
|                                             |           | 2002                 |         | %      |          | 2001 |         | %   
|                                             |           |                      |         |        |          |      |         |     
|                                             |           |                     
|                                             |           | ($s in thousands)  
|                                             |           |                     
|                                             |           | (Unaudited)         
|Revenue:                                     |           |                      |         |        |          |      |         |      |          |    |        |        |         |   |      |     
|                                             | Argentina |                      | $       | 5,116  |          |      |         | 12.8 | %        |    | $      | 5,949  |         |   |      | 15.2 | %     
|                                             | Brazil    |                      |         | 11,401 |          |      |         | 28.6 | %        |    |        | 11,353 |         |   |      | 28.9 | %     
|                                             | Chile     |                      |         | 7,930  |          |      |         | 19.9 | %        |    |        | 8,970  |         |   |      | 22.8 | %     
|                                             | Colombia  |                      |         | 5,875  |          |      |         | 14.7 | %        |    |        | 4,129  |         |   |      | 10.5 | %     
|                                             | Peru      |                      |         | 10,886 |          |      |         | 27.3 | %        |    |        | 9,489  |         |   |      | 24.2 | %     
|                                             | Other     |                      |         | (1,291 | )        |      |         | (3.2 | %)       |    |        | (630   | )       |   |      | (1.6 | %)    
|                                             |           |                      |         |        |          |      |         |      |          |    |        |        |         |   |      |     
|                                             |           | Total revenue        |         |        | 39,917   |      |         |      | 100.0    | %  |        |        | 39,260  |   |      |      | 100.0  | % 
|Cost of revenue                              |           |                      | 24,376  |        |          |      | 61.1    | %    |          |    | 31,904 |        |         |   | 81.3 | %   
|Selling, general and administrative expenses |           |                      | 26,323  |        |          |      | 65.9    | %    |          |    | 32,420 |        |         |   | 82.6 | %   
|Depreciation and amortization                |           |                      | 43,607  |        |          |      | 109.2   | %    |          |    | 25,241 |        |         |   | 64.3 | %   
|Impairment loss on goodwill                  |           |                      | 413,469 |        |          |      | 1,035.8 | %    |          |    |       |        |         |   | 0.0  | %   
|                                             |           |                      |         |        |          |      |         |      |          |    |        |        |         |   |      |     
|                                             |           | Loss from operations |         | $      | (467,858 | )    |         |      | (1,172.1 | %) |        | $      | (50,305 | ) |      |      | (128.2 | %)
|                                             |           |                      |         |        |          |      |         |      |          |    |        |        |         |   |      |     

|                                             |           |                      |         |        |          |      |       |      |        |    |        |        |          |   |      |      |        |   
|-------------------------------------------- | --------- | -------------------- | ------- | ------ | -------- | ---- | ----- | ---- | ------ | -- | ------ | ------ | -------- | - | ---- | ---- | ------ | --
|                                             |           |                     
|                                             |           | Nine Months Ended   
|                                             |           | September 30, 2002  
|                                             |           |                     
|                                             |           | 2002                 |         | %      |          | 2001 |       | %   
|                                             |           |                      |         |        |          |      |       |     
|                                             |           |                     
|                                             |           | ($s in thousands)  
|                                             |           |                     
|                                             |           | (Unaudited)         
|Revenue:                                     |           |                      |         |        |          |      |       |      |        |    |        |        |          |   |      |     
|                                             | Argentina |                      | $       | 14,366 |          |      |       | 11.4 | %      |    | $      | 9,619  |          |   |      | 9.2  | %     
|                                             | Brazil    |                      |         | 39,829 |          |      |       | 31.6 | %      |    |        | 33,715 |          |   |      | 32.2 | %     
|                                             | Chile     |                      |         | 25,021 |          |      |       | 19.8 | %      |    |        | 27,604 |          |   |      | 26.4 | %     
|                                             | Colombia  |                      |         | 17,540 |          |      |       | 13.9 | %      |    |        | 10,363 |          |   |      | 9.9  | %     
|                                             | Peru      |                      |         | 32,110 |          |      |       | 25.5 | %      |    |        | 24,580 |          |   |      | 23.5 | %     
|                                             | Other     |                      |         | (2,814 | )        |      |       | (2.2 | %)     |    |        | (1,304 | )        |   |      | (1.2 | %)    
|                                             |           |                      |         |        |          |      |       |      |        |    |        |        |          |   |      |     
|                                             |           | Total revenue        |         |        | 126,052  |      |       |      | 100.0  | %  |        |        | 104,577  |   |      |      | 100.0  | % 
|Cost of revenue                              |           |                      | 79,335  |        |          |      | 62.9  | %    |        |    | 86,208 |        |          |   | 82.4 | %   
|Selling, general and administrative expenses |           |                      | 84,208  |        |          |      | 66.8  | %    |        |    | 98,993 |        |          |   | 94.7 | %   
|Depreciation and amortization                |           |                      | 85,977  |        |          |      | 68.2  | %    |        |    | 74,696 |        |          |   | 71.4 | %   
|Impairment loss on goodwill                  |           |                      | 413,469 |        |          |      | 328.0 | %    |        |    |       |        |          |   | 0.0  | %   
|                                             |           |                      |         |        |          |      |       |      |        |    |        |        |          |   |      |     
|                                             |           | Loss from operations |         | $      | (536,937 | )    |       |      | (425.9 | %) |        | $      | (155,320 | ) |      |      | (148.5 | %)
|                                             |           |                      |         |        |          |      |       |      |        |    |        |        |          |   |      |     

Three Months
Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001

|         |                        |                    |   |        |        |   |   |        |        |  |   |        |     |  |  |      |     |  
|-------- | ---------------------- | ------------------ | - | ------ | ------ | - | - | ------ | ------ |  | - | ------ | --- |  |  | ---- | --- | -
|         |                        |                    |   |        |        |  
|         |                        | Three Months Ended |   |       
|         |                        | September 30,      |   | Change
|         |                        |                    |   |       
|         |                        | 2002               |   | 2001   |        | $ |   | %     
|         |                        |                    |   |        |        |   |   |       
|         |                        |                   
|         |                        | ($s in thousands)
|         |                        |                   
|         |                        | (Unaudited)       
|REVENUE: |                        |                    |   |        |        |   |   |        |        |  |   |        |     |  |  |     
|         | Data-Internet services |                    | $ | 24,674 |        |   | $ | 22,367 |        |  | $ | 2,307  |     |  |  | 10.3 | %  
|         | Voice services         |                    |   | 15,243 |        |   |   | 16,893 |        |  |   | (1,650 | )   |  |  | (9.8 | %) 
|         |                        |                    |   |        |        |   |   |        |        |  |   |        |     |  |  |     
|         |                        | Total revenue      |   | $      | 39,917 |   |   | $      | 39,260 |  |   | $      | 657 |  |  |      | 1.7 | %
|         |                        |                    |   |        |        |   |   |        |        |  |   |        |     |  |  |     

28



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##### 



Revenue.Revenue for
the three months ended September 30, 2002 was $39.9
million, compared to revenue of $39.3 million for the same
period in 2001, representing an increase of $0.7 million or
1.7%. We experienced slight revenue increases in all our country
operations, except for Argentina and Chile. The increase in
revenue resulted from increases in customers and ports in
service, which reflected increased selling of services to both
existing customers and new customers. This revenue increase was
offset by a reduction of voice-wholesale revenue in Chile and
the translation effect of the weakening of the Argentine peso
and the Brazilian Real against the U.S. dollar, which devaluated
73.3% and 18.5%, respectively, when compared to the same period
in 2001.

Our data-Internet services revenue grew from
$22.4 million during the three months ended
September 30, 2001, to $24.7 million for the same
period in 2002, representing an increase of $2.3 million or
10.3%. The increase in our data-Internet services was mainly due
to increased demand for our services from our existing business
customers and to an increase in our customer base. Data-Internet
services accounted for 61.8% of our revenue during the three
months ended September 30, 2002.

Revenue from voice services decreased from
$16.9 million during the three months ended
September 30, 2001 to $15.2 million for the same
period in 2002, representing a decrease of $1.7 million or
9.8%. The decrease in our voice-related revenue was mainly due
to a reduction of voice-wholesale revenue in Chile for the
period and the translation effect of the weakening of foreign
currency exchange rates versus the U.S. dollar in Argentina.

Cost of Revenue.Cost of revenue was $24.4 million
for the three months ended September 30, 2002, compared to
$31.9 million for the same period in 2001, representing a
decrease of $7.5 million or 23.6%. Cost of revenue consists
of leased line costs, interconnection costs, maintenance costs,
and network and operating system costs, including certain labor
and other direct costs. The decrease in cost of revenue was
driven by lower leased lines in Brazil as a result of new
supplier agreements, lower labor costs from decreased network
headcount, as well as lower reported cost of revenue in U.S.
dollar terms in Argentina and Brazil due to the translation
effect of the weakening of their local currencies compared to
the U.S. dollar. We expect to continue to increase the amount of
our services that are delivered over our existing network
capacity as well as to continue to benefit from better pricing
recently obtained from third party network providers.

Selling, General and Administrative Expenses.Selling, general and administrative
expenses were $26.3 million during the three months ended
September 30, 2002, compared to $32.4 million for the
same period in 2001, representing a decrease of
$6.1 million or 18.8%. The decrease in selling, general and
administrative expenses resulted primarily from the translation
effect of the weakening of the Argentina peso and the Brazilian
real compared to the U.S. dollar in the first part of 2002, and
lower headcount when compared to the same period in 2001. We
anticipate selling, general and administrative expenses will
decrease in the near term as a result of further cost
improvement initiatives that have been implemented and
additional measures that may be undertaken. Selling, general and
administrative expenses are comprised primarily of compensation,
professional fees, travel expenses, marketing, office space and
indirect labor expenses.

Depreciation and Amortization.Depreciation and amortization was
$43.6 million during the three months ended September 30,
2002, compared to $25.2 million for the same period in 2001,
representing an increase of $18.4 million. The increase in
depreciation and amortization was attributable to incremental
depreciation expense of approximately $25.3 million on
certain non-core assets and excess property and equipment not
deployed on our countries operations, offset by the adoption of
SFAS 142, under which we no longer amortize goodwill but instead
review it annually (or more frequently if impairment indicators
arise) for impairment. If goodwill amortization would not have
been recorded in the three months ended September 30, 2001,
then our three months ended September 30, 2001 adjusted
depreciation would have been $14.3 million, compared to the
$25.2 million for the three months ended September 30,
2001.

Goodwill Impairment.During the three months ended
September 30, 2002 we recorded a goodwill impairment of
$413.5 million. In connection with the Companys
review of its business plan, cash flow and liquidity position,
market capitalization based on the trading price of our shares
of Class A common stock as of the valuation date and
economic conditions in countries in which we operate, we
assessed the value of our

29



---



##### 



goodwill and determined an impairment in our
country operations as follows: Brazil 
$88.5 million, Chile  $170.0 million,
Colombia  $40.0 million and Peru 
$115.0 million.


Interest Expense.Interest expense was $35.5 during the
three months ended September 30, 2002, compared to
$21.4 million (net of interest income of $0.1 million)
during the same period in 2001, representing an increase of
$14.1 million or 65.8%. This increase in interest expense
was due mainly to higher debt outstanding during the period and
higher interest rates on the restructured AT&T Corp. loans,
partially offset by lower interest rates on the senior secured
vendor financing. Interest expense is mainly comprised of
dividends related to our Mandatorily Redeemable 15%
Series B Cumulative Preferred Stock and interest expense
related to our subordinated credit facility with AT&T Corp.,
our senior secured vendor financing, notes payable to other
vendors and other bank facilities.

Other (Expense) Income, Net.Other (expense) income, net was
$28.8 million of expense for the three months ended
September 30, 2002, compared to $8.2 million of
expense for the same period in 2001, representing an increase of
$20.7 million. During the three months ended
September 30, 2002, we discontinued cash flow hedge
accounting for certain forward contracts resulting in a charge
to other expense of $29.3 million, offset by unrealized
gains on certain other undesignated forward contracts. The
remaining components of other expense were foreign currency
transaction losses, fair value changes on our undesignated
forward contracts, and other non-operating expenses.

Net Loss.Net loss
was $532.3 million for the three months ended
September 30, 2002, compared to net loss of
$79.7 million for the same period in 2001, representing an
increase of $452.6 million. The increase in net loss was
mainly due to the impairment loss on goodwill, incremental
depreciation on non-core assets and excess property and
equipment and losses on forward contracts, when compared to the
same period on 2001. We expect to continue to incur net losses
in the next several years.

Nine Months
Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001

|         |                        |                    |   |        |         |   |   |        |         |  |   |        |        |  |  |      |      |  
|-------- | ---------------------- | ------------------ | - | ------ | ------- | - | - | ------ | ------- |  | - | ------ | ------ |  |  | ---- | ---- | -
|         |                        |                    |   |        |         |  
|         |                        | Nine Months Ended  |   |       
|         |                        | September 30,      |   | Change
|         |                        |                    |   |       
|         |                        | 2002               |   | 2001   |         | $ |   | %     
|         |                        |                    |   |        |         |   |   |       
|         |                        |                   
|         |                        | ($s in thousands)
|         |                        |                   
|         |                        | (Unaudited)       
|REVENUE: |                        |                    |   |        |         |   |   |        |         |  |   |        |        |  |  |     
|         | Data-Internet services |                    | $ | 78,314 |         |   | $ | 61,323 |         |  | $ | 16,991 |        |  |  | 27.7 | %   
|         | Voice services         |                    |   | 47,738 |         |   |   | 43,254 |         |  |   | 4,484  |        |  |  | 10.4 | %   
|         |                        |                    |   |        |         |   |   |        |         |  |   |        |        |  |  |     
|         |                        | Total revenue      |   | $      | 126,052 |   |   | $      | 104,577 |  |   | $      | 21,475 |  |  |      | 20.5 | %
|         |                        |                    |   |        |         |   |   |        |         |  |   |        |        |  |  |     

Revenue.Revenue for
the nine months ended September 30, 2002 was $126.1
million, compared to revenue of $104.6 million for the same
period in 2001, representing an increase of $21.5 million
or 20.5%. This increase in revenue was generated in Argentina,
Brazil, Colombia and Peru, which combined accounted for
$25.6 million revenue increase, offset by a decrease in
Chiles revenue of $2.6 million. The increase in
revenue resulted from increases in customers, ports in service
and buildings connected which in turn reflected both up-selling
of services to existing customers and additions of new
customers. This revenue increase for the nine months ended
September 30, 2002 was offset by lower pricing in the
region as well as the translation effect of the weakening of the
Argentina peso and the Brazilian real when compared to the U.S.
dollar for the same period in 2001.

Our data-Internet services revenue grew from
$61.3 million during the nine months ended
September 30, 2001, to $78.3 million for the same
period in 2002, representing an increase of $17.0 million
or 27.7%. The increase in our data-Internet services mainly due
to increased demand for our services from our existing business
customers and to an increase in our customer base. Data-Internet
services accounted for 62.1% of our revenue in 2002, compared to
58.6% in 2001.

Revenue from voice services grew from
$43.3 million during the nine months ended
September 30, 2001, to $47.7 million for the same
period in 2002, representing an increase of $4.5 million or
10.4%. The increase in

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our voice-related revenue was mainly due to the
increase in our customer base, growth in local telephony
services in Peru as well as an increase in total minutes sold,
offset by a decrease in wholesale revenue in Chile.


Cost of Revenue.Cost of revenue was $79.3 million
for the nine months ended September 30, 2002, compared to
cost of revenue of $86.2 million for the same period in
2001, representing a decrease of $6.9 million or 8.0%. Cost
of revenue consists of leased line costs, interconnection costs,
maintenance costs, and network and operating system costs,
including labor and other direct costs. The decrease in cost of
revenue was driven by lower connection costs in Brazil and
Colombia as a result of newly agreed contracts with lower
interconnection costs when compared to the same period in 2001,
improved management of network traffic in Argentina, as well as
lower reported cost of revenue in U.S. dollar terms in Argentina
and Brazil due to the translation effect of the weakening of
their local currencies compared to the U.S. dollar. We expect to
continue to increase the amount of our services that are
delivered over our existing network capacity as well as to
continue to benefit from better pricing recently obtained from
third party network providers.

Selling, General and Administrative Expenses.Selling, general and administrative
expenses were $84.2 million during the nine months ended
September 30, 2002, compared to selling, general and
administrative expenses of $99.0 million for the same
period in 2001, representing an decrease of $14.8 million
or 14.9%. The decrease in selling, general and administrative
expenses resulted primarily from a decrease in headcount and
from the translation effect of the weakening of the Argentina
peso and the Brazilian real compared to the U.S. dollar in the
first part of 2002 when compared to the same period in 2001. We
anticipate selling, general and administrative expenses will
decrease in the near term as a result of further cost
improvement initiatives that have been implemented and
additional measures that may be undertaken.

Depreciation and Amortization.Depreciation and amortization was
$86.0 million during the nine months ended
September 30, 2002, compared to depreciation and
amortization of $74.7 million for the same period in 2001,
representing an increase of $11.3 million or 15.1%. The
increase in depreciation and amortization was attributable to
incremental depreciation expense of approximately
$31.3 million on certain non-core assets and excess
property and equipment not deployed on our countries operations,
offset by the adoption of SFAS 142, under which we no
longer amortize goodwill but instead review it annually (or more
frequently if impairment indicators arise) for impairment. If
goodwill amortization would not have been recorded in for our
nine months ended September 30, 2001, then our nine months
ended September 30, 2001 adjusted depreciation and
amortization would have been $42.0 million, compared to
$74.7 million for the nine months ended September 30,
2001.

Goodwill Impairment.During the nine months ended
September 30, 2002 we recorded a goodwill impairment of
$413.5 million. In connection with the Companys
review of its business plan, cash flow and liquidity position,
market capitalization based on the trading price of our shares
of Class A common stock as of the valuation date and
economic conditions in countries in which we operate, we
assessed the value of our goodwill and determined an impairment
in our country operations as follows: Brazil $88.5 million,
Chile $170.0 million, Colombia $40.0 million and Peru
$115.0 million.

Interest Expense.Interest expense, net of
$0.4 million of interest income, was $89.3 million
during the nine months ended September 30, 2002, compared
to interest expense of $55.3 million during the same period
in 2001, representing an increase of $33.9 million or
61.3%. This increase in interest expense was due mainly to the
increase in interest bearing debt over the period. Interest
expense is mainly comprised of dividends relating to our
Mandatorily Redeemable 15% Series B Cumulative Preferred
Stock and interest expense related to our credit facilities
provided by AT&T Corp., our senior secured vendor financing,
notes payable to other vendors and other bank facilities.

Other (Expense) Income, Net.Other (expense) income, net was
$82.4 million of expense for the nine months ended
September 30, 2002. During the period we discontinued cash
flows hedge accounting for certain forward contracts resulting
in a charges to other expense of approximately $42.0 million.
The remaining components of other expense were foreign currency
transaction losses, fair value changes on our undesignated
forward contracts, and other non-operating expenses. We expect
to continue to incur foreign currency transaction gains or
losses in the future depending on the volatility of the local
currencies in the countries in which we operate when compared to
the U.S. dollar.

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Extraordinary Loss on Debt Restructuring.During the nine months ended
September 30, 2002, we have recorded a net extraordinary
loss on debt restructuring of $4.5 million related to debt
restructuring with our parent company and certain vendors.

Cumulative effect of change in accounting
principle.In connection with the
adoption of SFAS No. 142 we have recorded a transitional
impairment loss of $267.8 million as of January 1,
2002 in our country operations as follows: Argentina 
$33.2 million, Brazil  $67.4 million,
Chile  $19.3 million, Colombia 
$28.4 million and Peru  $119.5 million.

Net Loss.Net loss
was $980.9 million during the nine months ended
September 30, 2002, compared to net loss of
$225.7 million for the same period in 2001. The increase in
net loss was mainly due to increases impairment losses on
goodwill, incremental depreciation on non-core assets and excess
property and equipment, losses on forward contracts and
increased in interest expense. We expect to continue to incur
net losses for the next several years.

Liquidity and Capital Resources

Current
Situation

As of the date of this quarterly report, we do
not have sufficient cash to meet our requirements in the near
term unless we defer and restructure amounts owed to our secured
and unsecured creditors, defer amounts owed to trade creditors
and successfully implement austerity measures now being
undertaken, or obtain additional financing. As we announced on
October 21, 2002, we currently anticipate a funding gap
commencing in the fourth quarter of 2002 and reaching up to
$40.0 million during 2003. This anticipated funding gap
assumes continued access to our senior secured credit facilities
with our vendors, as to which we are currently in default, and
that we will not be able to defer most of our obligations to our
in-country lenders as and when amounts under those facilities
become due. However, our senior secured lenders may not provide
additional availability to us, and if we are not able to replace
that availability with other financing, or succeed in deferring
an adequate portion of other short-term indebtedness, our
funding gap could increase. The funding gap also assumes that
neither our senior secured vendors nor in-country lenders
accelerate outstanding amounts due under our facilities with
them.

Our cash needs arise from operating losses and
other working capital requirements, capital expenditures, debt
service and loan commitment fees. We are continuing to take
steps to conserve cash on hand by reducing operating expenses
and capital expenditures. While in effect, these austerity
measures will substantially impede our growth. We believe that
it will be necessary to raise additional financing during 2003
to close our funding gap and to maintain and grow our business
and operations. If we are unable to address our liquidity needs,
or our creditors were to accelerate amounts due to them, we will
likely need to seek protection from creditors under U.S.
bankruptcy laws and, depending on remedies that may be pursued
by our creditors, under the laws of some or all of the countries
in which we operate.

We believe that any solution to our current
liquidity situation will require us to reach an agreement to
restructure our liabilities and capital structure with our
secured vendor creditors, our other financial lenders and trade
creditors and AT&T Corp., as both an unsecured creditor and
holder of our Mandatorily Redeemable Series B 15%
Cumulative Preferred Stock. Absent a comprehensive restructuring
of our current capital structure, we do not believe it will be
possible to attract additional financing to fill our funding
needs. Moreover, even assuming a successful agreement with our
creditors to effect a comprehensive restructuring is completed,
we cannot be assured that new financing will be available on
acceptable terms, or at all, given the current duress in the
communications industry in general, and the current difficult
economic conditions in the countries in which we operate,
particularly in Argentina and Brazil.

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Future Commitments and Funding
Sources

At September 30, 2002 our contractual cash
obligations were as set forth below. We have reflected the
entire outstanding balance of our senior secured vendor
financing facility as due during the fourth quarter of 2002
because we are currently in default under our minimum revenue
covenant in that facility. In addition, we do not expect to be
able to comply with other covenants under our senior secured
vendor financing facilities going forward at the end of the
fourth quarter of 2002, including the minimum revenue covenant
and covenants relating to minimum EBITDA and liquidity targets,
absent restructuring of the facility terms. In addition, our
local bank facilities contain various events of default that, if
triggered, could result in the acceleration of other outstanding
balances under those facilities. See Capital
Resources  Senior Secured Vendor Financing and
 Other Bank Facilities below for more
information.

CONTRACTUAL CASH OBLIGATIONS

(In thousands)


|                                                  |                                        |       |         |          |  |                             |         |         |  |      |        |        |  |      |        |            |  |   |       |       |  |   |       |       |  |   |       |       |  |   |         |         | 
|------------------------------------------------- | -------------------------------------- | ----- | ------- | -------- |  | --------------------------- | ------- | ------- |  | ---- | ------ | ------ |  | ---- | ------ | ---------- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ------- | ------- | 
|                                                  |                                        |       |         | Three    |  |                             |         |         |  |      |        |        |  |      |        |           
|                                                  |                                        |       |         | Months   |  |                            
|                                                  |                                        |       |         | Ending   |  | Payments Due in Year Ending
|                                                  |                                        |       |         | December |  |                            
|                                                  |                                        | Total |         | 2002     |  | 2003                        |         | 2004    |  | 2005 |        | 2006   |  | 2007 |        | Thereafter
|                                                  |                                        |       |         |          |  |                             |         |         |  |      |        |        |  |      |        |           
|Long-term debt, including current maturities (a)  |                                        | $     | 849,143 |          |  | $                           | 204,539 |         |  | $    | 16,483 |        |  | $    | 18,428 |            |  | $ | 1,389 |       |  | $ | 1,010 |       |  | $ | 781   |       |  | $ | 606,513 |        
|Operating leases                                  |                                        |       | 21,124  |          |  |                             | 1,249   |         |  |      | 4,723  |        |  |      | 3,719  |            |  |   | 3,021 |       |  |   | 2,381 |       |  |   | 2,292 |       |  |   | 3,739   |        
|Capacity agreements (IRUs)                       |                                        |       | 17,049  |          |  |                             | 313     |         |  |      | 1,215  |        |  |      | 1,177  |            |  |   | 1,212 |       |  |   | 1,249 |       |  |   | 1,286 |       |  |   | 10,597  |        
|Forward contracts (b)                             |                                        |       | 508     |          |  |                             | 508     |         |  |      |       |        |  |      |       |            |  |   |      |       |  |   |      |       |  |   |      |       |  |   |        |        
|Purchase commitments for capital expenditures (c) |                                        |       | 157     |          |  |                             |        |         |  |      | 157    |        |  |      |       |            |  |   |      |       |  |   |      |       |  |   |      |       |  |   |        |        
|                                                  |                                        |       |         |          |  |                             |         |         |  |      |        |        |  |      |        |            |  |   |       |       |  |   |       |       |  |   |       |       |  |   |         |        
|                                                  | Total Contractual Cash obligations (d) |       | $       | 887,981  |  |                             | $       | 206,609 |  |      | $      | 22,578 |  |      | $      | 23,324     |  |   | $     | 5,622 |  |   | $     | 4,640 |  |   | $     | 4,359 |  |   | $       | 620,849 | 
|                                                  |                                        |       |         |          |  |                             |         |         |  |      |        |        |  |      |        |            |  |   |       |       |  |   |       |       |  |   |       |       |  |   |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | See Note 3 to the consolidated financial
    statements for additional information regarding our debt.                                                                                                                                                                                                                                                                                                                                                              
|(b) | The fair value of our forward contracts payable
    are reflected for informational purposes only. The fair value of
    our net forward contract payables is subject market rates
    changes and the ultimate liability at settlement may materially
    differ from the amount herein presented.                                                                                                                                                                 
|(c) | Reflects only contractual commitments at
    September 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                    
|(d) | Reflects only commitments for the specific
    categories listed and does not reflect such items as trade
    payable obligations, payroll-related liabilities or
    contributions to employee-related benefit, savings or deferred
    compensation plans, employment-related contracts (including
    separate agreements), obligations in the case of redemption of
    our 15% Series B Cumulative Preferred Stock in 2008 or
    short-term lease obligations.

Capital Uses

During the nine months ended September 30,
2002, our net cash increased by $19.0 million. The increase
in cash reflected cash provided by financing activities of
$132.0 million, offset by cash used in operating and
investing activities of $108.7 million and the net effect
of currency translation on cash of $4.2 million. Our uses
of cash from operating activities were mainly as a result of our
net loss of $980.9 million during the nine months ended
September 30, 2002, excluding non-cash activities of
approximately $913.3 million (which includes
$681.3 million of goodwill impairment), a net decrease in
the changes of assets and liabilities of approximately
$11.5 million.

We plan to reduce further our capital
expenditures for the remainder of 2002, and the amount and pace
of these expenditures thereafter may vary depending upon our
ability to draw from our senior secured vendor financing or
obtain additional financing. Our 2002 capital expenditures will
be substantially lower than 2001. During the nine months ended
September 30, 2002, we invested approximately
$29.5 million in the development of our networks and
infrastructure.

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Capital Resources

Cash

As of September 30, 2002 and
October 31, 2002 we had cash and cash equivalents of
$47.2 million and $38.4 million respectively. Our
ability to transfer cash among our group companies may be
restricted by laws and regulations (including currency related)
in the countries in which we operate, particularly Argentina and
Brazil.

Senior
Secured Vendor Financing

In December 2001 we entered into senior secured
credit facilities, governed by common terms, with our strategic
equipment vendors, in an aggregate principal amount of
$298.5 million. These facilities became effective on
March 27, 2002.

The facilities are divided into two portions
comprised of a first tranche of up to $199.2 million to be
used to finance the purchase of equipment and related software
and services from the three vendors, and a second tranche of up
to $99.3 million to finance duties, taxes and interest on
the facility during the availability period. At
September 30, 2002, we had $162.4 million outstanding
under these facilities.

Interest on loans under the facilities accrues at
LIBOR plus 5.625% or, at our election, on a prime rate basis and
is payable quarterly. We have paid an up front facility fee and
are obligated to pay commitment fees quarterly based on the
unused portion of the facilities.

Under the terms of the facilities, a portion of
the net proceeds of any future equity and debt offerings by us
must be directed to prepay outstanding amounts under the
facilities.

The facilities are guaranteed by AT&T Latin
America Corp. and our operating subsidiaries, and are also
collateralized by a pledge of the shares of our operating
subsidiaries and of substantially all of our and our
subsidiaries material assets other than our rights to the
AT&T brand and under certain other agreements with AT&T
Corp.

The facilities contain customary covenants
restricting our ability to engage in certain activities,
including limitations on debt, liens, investments (including
acquisitions), restricted payments, transactions with
affiliates, asset dispositions and changes in corporate
existence. We are also required to meet certain financial tests
over the term of the facilities, relating to minimum revenue,
minimum EBITDA (earnings before interest, taxes, depreciation
and amortization as defined in the governing agreements),
maximum capital expenditures, minimum liquid assets and
available undrawn credit, ratios of debt to equity and to EBITDA
and minimum on-network ports.

The facilities provide for events of default in
the event of non-payment, failure to comply with covenants,
occurrence of a material adverse effect, inability, at any time
on or after June 30, 2003, to make loan repayments from
Argentina without the need to obtain further governmental
approvals or declaration of a debt moratorium in any of the
principal countries in which we operate, and other, customary
events, except that in the case of Argentina, the certain events
occurring before the effective date will not constitute a
moratorium.

The minimum revenue covenant in the facilities
requires us to have achieved revenue of $181.0 million for
the four fiscal quarters ended September 30, 2002. For that
period, we achieved revenue of $172.4 million. Accordingly
we are now in default under our senior secured credit
facilities, and our senior secured lenders are now entitled to
exercise various remedies, including denying us further access
to the undrawn amounts under those facilities, accelerating all
outstanding amounts drawn under those facilities and declaring
those amounts to be immediately due and payable, and commencing
foreclosure proceedings on our assets, including on the shares
of our operating companies. In addition, we do not expect to be
able to comply with other covenants under our senior secured
vendor financing facilities going forward at the end of the
fourth quarter of 2002, including the minimum revenue covenant
and covenants relating to minimum EBITDA and liquidity targets.
Therefore, we have reclassified amounts outstanding under this
facility as short-term debt in the accompanying consolidated
balance sheet as of September 30, 2002.

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All of our vendors have requested reasonable
assurances from us as to our ability to re-pay the debt
outstanding. Additionally, the vendors have communicated to us
they have placed us on a temporary credit hold, which means we
do not currently have access to undrawn commitments. We do not
expect to be able to provide the vendors reasonable assurances
with respect to our ability to re-pay the debt outstanding and
to make payments for new equipment as it is shipped or received
and thus may not be able to obtain financing under the
facilities for shipments of additional equipment from the
vendors for the foreseeable future. We are focusing on pursuing
new customer opportunities that do not require significant new
investments and using, where available, alternative means of
equipment acquisition such as value added resellers, and holders
of distressed assets.

Our senior secured vendor facility is structured
in two tranches. The first tranche is designated for the cost of
equipment plus related services and software. Our ability to
draw on the second tranche, which is used to finance taxes,
duties and interest on the facilities, is conditional upon
additional draws by us on the first tranche to finance new
purchases of equipment from the three vendors and others. If we
are unable to provide reasonable assurances to the vendors as
described above, we will not be able to draw on the second
tranche of our senior secured vendor financing facility absent
any restructuring of its terms. An inability to draw upon this
second tranche will obligate us to pay current interest in cash
(instead of financing the payment obligations) prior to June
2004 when the scheduled availability period under the facility
ends.

Other Bank
Facilities

AT&T do Brasil is party to several local bank
facilities and capital leases providing for borrowings of an
aggregate amount of $33.4 million maturing through February
2004. At September 30, 2002, there was an aggregate of
$29.2 million outstanding under these facilities.
Borrowings under these facilities bear interest at fixed rates
ranging from 2.2% to 13.0% per annum and variable rates based
upon LIBOR plus a margin ranging from 1.6% to 1.9%.

AT&T Colombia is party to several local bank
facilities providing for borrowings of an aggregate amount of
$10.4 million maturing through May 2006. At
September 30, 2002, there was an aggregate of
$10.4 million outstanding under these facilities.
Borrowings under these facilities bear interest at fixed rates
ranging from 8.9% to 12.5% per annum and variable rates based
upon Deposito Tasa Fijo (DTF) plus a margin ranging from 4.5% to
7.0%. The average rate for Colombian peso interest rate or DTF
for the nine months ended September 30, 2002 was 9.6%.

AT&T Peru is party to several local bank
facilities providing for borrowings of an aggregate amount of
$19.8 million, maturing on various dates through
June 2011. At September 30, 2002, there was an
aggregate of $7.2 million outstanding under these
facilities. Borrowings under these facilities bear interest at
fixed and variable rates ranging from 7.5% to 12.5% per annum.

AT&T Argentina and AT&T Chile are each
party to several local bank facilities providing for borrowings
(including certain capital leases) of an aggregate amount of
$5.9 million, maturing on various dates through
October 2010. At September 30, 2002 there was an
aggregate of $0.8 million outstanding under these
facilities bearing interest at fixed interest rates ranging from
9.0% to 17.5%.

As of September 30, 2002 we have
approximately $47.6 million outstanding under these bank
facilities. Of amounts outstanding under all of these
facilities, $17.5 million is due in the fourth quarter 2002
and $13.5 million in 2003.

Our local bank facilities contain various events
of default which vary by facility, including among others,
non-payment, property seizure, a change of control affecting the
companys financial capabilities, and in the case of
certain facilities, a deterioration in the local companys
financial position or default in the payment of debt held by a
third party. We have not paid approximately $0.8 million
that was due under one of these facilities on November 4,
2002 and have received a notice of non-payment with the bank. We
are currently in discussions with the bank regarding this amount.

Failure to pay outstanding amounts due under
these facilities will generally entitle the lender of that
facility to accelerate other obligations under its facility and
may entitle other local bank lenders in the

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applicable country, and in some cases other
countries, to accelerate payments due under their facilities and
pursue remedies available under the local facilities and under
law. In addition, if the vendors exercise remedies available to
them under the senior secured vendor financing facility to
accelerate all outstanding amounts and/or to foreclose on our
assets that secure that facility or in certain other
circumstances, we may be in default under certain of the local
bank facilities, which could result in acceleration of those
local bank facilities and other notes payable as well as the
pursuit of other remedies available under law. In such cases, we
will likely need to seek protection from our creditors under
U.S. bankruptcy law and, depending on remedies that may be
pursued by these creditors, under the laws of some or all of the
countries in which we operate.


Discussions with Creditors

We have initiated preliminary discussions with
our vendors concerning a possible restructuring of our senior
secured facility, and we expect these discussions to continue.
As of the date of this report, the vendors have not accelerated
the amounts outstanding under the facilities or demanded
immediate repayment of those amounts. We have also initiated
preliminary discussions with several local banks that have
provided us financing that becomes due during the fourth quarter
of 2002 and 2003, which amounts to approximately
$31.0 million in aggregate at September 30, 2002, and
we expect to continue those discussions regarding the
restructuring of our obligations. We are also currently in
discussions with an affiliate of Siemens AG to resolve and
reschedule our obligations due under certain promissory notes
due in May 2002, which has been the subject of litigation filed
by the Siemens affiliate and an investment fund that has
informed us it received an assignment of a note of
$5.0 million original face amount issued by us to the
affiliate of Siemens. See Part II,
Item 1  Legal Proceedings for more
information about these proceedings.

We can give no assurances that our discussions
will lead to a restructuring of our obligations on terms
acceptable to us, or at all, or that we will be able to continue
to draw on availability under certain of those facilities as
described above. If we are unsuccessful in our negotiations with
these parties, we will likely need to seek protection from our
creditors under U.S. bankruptcy law and, depending on remedies
that may be pursued by these creditors, under the laws of some
or all of the countries in which we operate. We can give no
assurance that the protection from creditors available under the
country laws or that the procedures followed by the courts in
those countries will be sufficient to enable us to continue
operations at our current level, or at all.

Business Outlook

We continue to believe that there is an
opportunity for growth for the company and that we have
established a strong presence in the five countries in which we
operate. As of September 30, 2002 we have over 7,957 total
route kilometers, of which 5,816 are metropolitan and 2,141 are
long haul. Our network is connected to over 7,325 buildings with
corporate customers, which in aggregate are occupied by more
than 32,000 businesses. We serve today over 5,390 of those
corporate customers with more than 20,665 ports in service in
the countries in which we operate. We have continued to improve
our EBITDA, retain existing customers and key employees and
attract new customers.

Economic uncertainties in South America,
particularly Brazil, which constitutes 31.6% of our revenue for
the nine month period ended September 30, 2002, and in
Argentina, however, have resulted in more challenging conditions
for us and other communications providers. In addition, we
understand that as AT&T Corp. is implementing its global
strategy, it intends to approach certain global multinational
clients directly on a global basis, concentrating services
through its own international facilities. We understand that, as
to these specific multinational customers with operations in
Latin America, that strategy will involve a change over time in
our relationship with some of these customers. We expect this
change will result in a reduction in the growth of our revenues
and cash flow. However, we believe that our advanced ATM/ IP
networks, our diverse base of business customers and our
experienced management team will continue to give us significant
competitive advantages if we can restructure our balance sheet
and address our funding gap.

Our current liquidity outlook raises substantial
risk as to our ability to maintain current operations. Following
a request from us for additional financing assistance, AT&T
Corp. advised us on October 10, 2002

36



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##### 



that it will not provide additional financing or
credit support. If we are able to reach agreement with our
senior secured creditors, our other financial creditors and
AT&T Corp., to defer our near term obligations under our
current facilities and to restructure our debt, to implement
successfully our austerity efforts and to transfer freely our
available cash as needed among our operations, we believe we
will have sufficient cash to maintain operations through
mid-2003 without having to rely on new sources of financing to
meet liquidity needs. We expect, however, that achieving each of
these objectives in the timeframe required before needing
additional financing will be difficult. If we are unable to
address our liquidity needs, or our creditors were to accelerate
amounts due to them, we will likely need to seek protection from
creditors under U.S. bankruptcy laws and, depending on remedies
that may be pursued by our creditors, under the laws of some or
all of the countries in which we operate, potentially during the
fourth quarter of 2002. We can offer no assurances that any such
proceedings will lead to a successful reorganization without
additional financing on terms acceptable to us or that such
additional financing would be available at all either before or
after such proceedings commence, if at all.


To conserve cash, we are implementing a number of
operational measures under an austerity plan. These measures
include the acceleration of headcount reduction planned in
connection with our regionalization project, the reduction or
elimination of discretionary spending, redirection of sales
efforts to pursue new opportunities that do not require
significant new investments and renegotiating arrangements with
certain suppliers.

We also expect to retain a financial advisor
shortly to help us with our discussions with creditors to
identify, evaluate and weigh alternatives that may be available
to us given our current financial situation and outlook. These
alternatives include continued negotiations with our creditors
in hopes of achieving adequate deferral and restructuring of our
debt and/or a sale of the company or all or a portion of our
assets. We can offer no assurances that any alternative we
pursue will be successful or if achieved would lead to a
restructuring that would satisfy all of our creditors or include
any continuing interest or proceeds for our existing
shareholders, especially for the holders of our common stock. In
addition, if AT&T does not remain our majority shareholder,
whether a result of a restructuring of our balance sheet or
following a strategic transaction involving its majority stake
in us, our right to use the AT&T brand could be limited or
terminated. If we were no longer able to use the AT&T brand
in our region, we believe our market presence and reputation
could deteriorate, which in turn could impede our ability to
attract and maintain business customers. The loss of the brand
might also make us more susceptible to pricing pressure from
competitors in our region.

Seasonality

To date we have not experienced significant
seasonality in our services offerings; however, some reduced
demand for our voice services was noted in the first quarter of
2002, or summer months, in the countries in which we operate.

Impact of Inflation and Currency
Fluctuations

Inflation in the countries in which we operate
may affect our business through increased labor costs and
increases in the cost of third-party communications capacity and
other third-party services. To date we have not experienced
significant increases in these costs due to inflation. In
addition to the effect of inflation, competition for qualified
personnel could increase labor costs for us in the future. Our
international operations may, at times in the future, expose our
business to high inflation in certain foreign countries.

We generate all of our revenue from international
operations that are susceptible to currency fluctuations. The
likelihood and extent of future currency fluctuations in the
countries in which we operate in Latin America, future
deteriorating economic conditions in those Latin American
countries and the resulting impact on our results of operations,
financial position and cash flows cannot now be determined.

Our customer contracts as well as certain direct
costs in Brazil provide for payment in local currency as
provided under law and are generally indexed to various
inflation indicators specific to Brazil. Our customer contracts
as well as certain direct costs in Argentina have been subject
to local regulatory changes due to the recent political and
economic conditions in that country.

37



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##### 



Effects of New Accounting Standards

Effective January 1, 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 stops the amortization of our goodwill, which
is allocated through our country operations, and requires an
annual, or when events or circumstances dictate a more frequent,
impairment review of our goodwill. Accordingly, as of
January 1, 2002, we no longer amortize our goodwill. We
have recorded a transitional impairment loss of
$267.8 million as of January 1, 2002, which has been
recorded as a cumulative effect of change in accounting
principle in our country operations as follows:
Argentina  $33.2 million, Brazil 
$67.4 million, Chile  $19.3 million,
Colombia  $28.4 million and Peru 
$119.5 million. Subsequent to the implementation and in
connection with the our review of our business plan, cash flow
and liquidity position, market capitalization based on the
trading price of our shares of Class A common stock as of
the valuation date and economic conditions in the countries in
which we operate, we assessed the value of our goodwill and
determined additional impairment loss in goodwill in our country
operations as follows: Brazil  $88.5 million,
Chile  $170.0 million, Colombia 
$40.0 million and Peru  $115.0 million. The
aggregate amount of impairment of $413.5 million has been
recorded as impairment loss on goodwill in the accompanying
consolidated financial statements for the three months ended
September 30, 2002. The fair value of our goodwill was
determined using discounted cash flows on the current projected
operations of our country operations and market capitalization
of our business.

Since December 31, 2001, our goodwill
carrying amount has changed as a result of an impairment of
$681.3 million (including the cumulative effect of change
in accounting principle) and the change which resulted from
using a different foreign currency translation rate at
September 30, 2002 compared to December 31, 2001. If
goodwill amortization had not been recorded in our third quarter
of 2001, our third quarter of 2001 adjusted net loss and basic
and diluted adjusted loss per share would have been
$68.7 million and $0.59 per share, respectively, instead of
$79.7 million and $0.69 per share, respectively. For the
nine months ended September 30, 2001, the adjusted net loss
and basic and diluted adjusted loss per share would have been
$193.0 million and $1.66 per share, respectively, instead
of $225.7 million and $1.94 per share, respectively.

ITEM 3. Quantitative and Qualitative
Disclosure About Market Risk

Our operations are exposed to market risks
principally from fluctuations in foreign currency exchange rates
and interest rates. We seek to minimize these risks through our
regular operating and financing activities and when appropriate,
through the use of derivative financial instruments. Our risk
management policy is a transaction oriented policy and is not
designed to use financial instruments for trading or other
speculative purposes.

Exposure to Foreign Currency Exchange Rates.Our primary foreign currency exchange
risk relates to our operations in Latin America where we conduct
business with more than one currency.

At September 30, 2002, we had foreign
currency forward contracts that hedge certain activities with
notional amounts of $437.1 million, maturing in various
dates through November 2003. Based upon a 10% strengthening or
weakening of the U.S. dollar compared to the currencies that we
currently hedge, the estimated fair value of undesignated
forward contracts would have resulted in additional unrealized
gains of $0.5 million or unrealized losses of
$4.1 million, respectively, for the nine months ended
September 30, 2002. The effect upon a 10% strengthening or
weakening of the U.S. dollar compared to the currencies that we
currently hedge on our anticipated transactions or cash flows
forward contracts, would have also resulted in a reduction of
other comprehensive losses by $0.3 million or in an
increase of unrealized other comprehensive losses by
$0.2 million, respectively.

We can offer no assurances that we will be able
to continue to enter into or maintain existing foreign currency
forward contracts to hedge our currency risks in the future
given our current financial situation.

Management considers its operations in foreign
subsidiaries and affiliates to be long-term in nature.
Accordingly, we do not hedge foreign currency exchange rate risk
related to long-term transactions.

38



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##### 



Exposure to Interest Rates.Approximately 26.0% of our debt
portfolio bears interest at variable rates. Any changes in the
market interest rate will affect the amount of our interest
expense and the ultimate cash paid to those lenders. To date we
have not used interest rate swaps to fix the interest costs on
these loans. Assuming a hypothetical 10% interest rate increase
or decrease from interest rates as of September 30, 2002,
interest expense would have increased $0.9 million or
decreased $0.9 million, respectively, for the nine months
ended September 30, 2002.

ITEM 4. Controls and
Procedures

Based on an evaluation of our disclosure controls
and procedures conducted within 90 days of the date of
filing this report on Form 10-Q, our chief executive
officer and chief financial officer have concluded that the
disclosure controls and procedures are effective.

There were no significant changes in our internal
controls or in other factors that could significantly affect
those controls subsequent to the date of this most recent
evaluation of our disclosure controls and procedures.

PART II. OTHER INFORMATION



|        |                  
|------- | -----------------
|ITEM 1. | Legal Proceedings

We have been named as a nominal defendant in an
action entitled Confin International Investments, Inc., Pltf. v.
AT&T Corp., et al, filed in the Delaware Court of Chancery
in New Castle County on October 29, 2002 in which AT&T
Corp. and each of our directors have been named as defendants.
The complaint in the action contains two counts, the first
styled as a derivative claim on our behalf alleging breach of
the duty of loyalty by AT&T Corp. and the members of our
board of our directors. The second count alleges a class action
by our shareholders (other than AT&T Corp. and our
directors) for unspecified damages purportedly caused by the
actions alleged in the first count. The complaint seeks recovery
of the plaintiffs attorneys fees and costs, and
alleges plaintiff has been a shareholder of the Company for a
relevant period.

We expect that AT&T Corp. will defend this
lawsuit vigorously, and we anticipate that each of our
directors, to the extent they are not dismissed from this
action, will similarly launch a vigorous defense. While we are
unable to predict the outcome of this case, we do not believe it
will have a material impact on our financial condition or
results of operation.

In June, 2002 an affiliate of Siemens AG
initiated a legal proceeding in New York Supreme Court against
us and our subsidiary in Argentina, concerning obligations under
certain promissory notes due in May 2002, having an original
face amount of approximately $12.0 million, which we did
not pay due to a disagreement over the governing law and the
effect of changes in laws in Argentina on the principal amount
of such notes. On September 5, 2002 we received an adverse
judgment in this proceeding. We are currently in discussions
with this creditor to resolve and reschedule these obligations,
and are considering an appeal of the initial judgment. In June
2002, we also received a complaint in New York Supreme Court
from IIG Capital, a investment fund that has informed us it
received an assignment of a note of $5.0 million original
face amount issued by the Company to an affiliate of Siemens,
which we also did not pay when due in May 2002 due to our view
of the applicable governing law and effects of changes in law in
Argentina. The claims at issue are similar to those raised in
the Siemens matter. We are in the process of defending this
action and are in discussions with the other party to resolve
the proceeding and reschedule the obligation.

In addition to the proceedings described above,
in the normal course of business, we are subject to proceedings,
lawsuits and other claims. These matters are subject to many
uncertainties and outcomes that are not predictable with
assurance. Consequently, we are unable to ascertain the ultimate
aggregate amount of monetary liability or financial impact with
respect to these matters. While these matters could affect
operating results of any one quarter when resolved in future
periods, it is managements opinion that after final
disposition, any monetary liability or financial impact to us
would not be material to our consolidated financial position or
annual results of operations.

39



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##### 





|        |                                               
|------- | ----------------------------------------------
|ITEM 2. | Changes in Securities and Use of
    Proceeds.

None.



|        |                                     
|------- | ------------------------------------
|ITEM 3. | Defaults Upon Senior
    Securities.

The minimum revenue covenant in our senior
secured credit facilities requires us to have achieved revenue
of $181.0 million for the four fiscal quarters ended
September 30, 2002. For that period, we achieved revenue of
$172.4 million. Accordingly we are now in default under our
senior secured credit facilities, and our senior secured lenders
are now entitled to exercise various remedies, including denying
us further access to the undrawn amounts under those facilities,
accelerating all outstanding amounts drawn under those
facilities and declaring those amounts to be immediately due and
payable, and commencing foreclosure proceedings on our assets,
including on the shares of our operating companies. In addition,
we do not expect to be able to comply with other covenants under
our senior secured vendor financing facilities going forward at
the end of the fourth quarter of 2002, including the minimum
revenue covenant and covenants relating to minimum EBITDA and
liquidity targets. See Managements Discussion and
AnalysisRecent Events and Liquidity and
Capital Resources for more information about our current
financial situation.



|        |                                                        
|------- | -------------------------------------------------------
|ITEM 4. | Submission of Matters to a Vote of Security
    Holders

None.



|        |                  
|------- | -----------------
|ITEM 5. | Other Information

Continued Listing Requirements of the Nasdaq
Small Cap Market.Our Class A
common stock currently trades on the Nasdaq Small Cap Market. We
are currently out of compliance with maintenance requirements
for continued listing on the Small Cap Market as of the date of
this Report. First, the current bid price for a share of our
Class A common stock is substantially less than $1. Second,
due to the impairment charges taken against our goodwill at
September 30, 2002 we now report total stockholders
equity of substantially less than $5 million, which is
required for companies that do not have at least a market
capitalization for its listed securities of at least
$35 million. In addition, the market capitalization of the
public float of our Class A common stock is less than
$1 million. With respect to the minimum bid price
requirements, we believe based on current Nasdaq policy that we
have at least until January 7, 2003 to achieve an increase
in the bid price of our Class A common stock before Nasdaq
would issue a delisting notice for the stock. With respect to
the market capitalization requirements, we expect to discuss
with Nasdaq available options, if any, and the possibility of a
grace period to address the minimum equity and minimum market
capitalization requirements. There is no assurance, however,
that Nasdaq will be willing to discuss a grace period or
additional options, and Nasdaq may issue a delisting notice if
it is unwilling to do so. If our common stock were delisted from
trading on the Nasdaq Small Cap Market, it will commence trading
on the Over-the-Counter Bulletin Board (OTC)
maintained by the National Association of Security Dealers. A
Nasdaq Small Cap delisting may make it more difficult for the
Company to attract additional financing, if at all, and our
shareholders may find it more difficult to trade our common
stock due to a lower volume of trading on the OTC market,
greater volatility in the per share price, lack of access to
information about recent trades, and the reluctance of some
brokers to trade or make markets in OTC stocks.

Director
Resignation.On November 14,
2002, we received notice of the resignation, effective
November 15, 2002, of Jorge Montoya from our board of
directors, citing time demands of other professional commitments.

40



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##### 





|        |                                     
|------- | ------------------------------------
|ITEM 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits.

| |      |  |  |                                                                                                                                                                                                                                                     
| | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 |  |  | Supplemental Agreement dated as of April 1,
    2002 among AT&T Latin America Corp., AT&T Argentina S.A.
    and Alejandro O. Rossi to the Employment Agreement dated
    June 30, 2002 between AT&T Latin America Corp. and
    Alejandro O. Rossi.
| | 10.2 |  |  | Employment Agreement, dated as of June 2002
    between AT&T Peru S.A. and Jose Gandullia.                                                                                                                                                          

(b) Reports on Form 8-K

(i) We filed a Current Report on
Form 8-K dated August 14, 2002 reporting under
Item 9Regulation FD Disclosurethat we had
provided to the Securities and Exchange Commission the
certifications of our chief executive officer and chief
financial officer as required by 18 U.S.C. ss. 1350, created by
Section 906 of the Sarbanes-Oxley Act of 2002.

(ii) We filed a Current Report on
Form 8-K dated October 21, 2002 reporting under
Item 5Other Informationthat we had issued a
press release announcing a funding gap commencing in the fourth
quarter.

41



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##### 



SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act, as amended, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized on November 14, 2002.

| |  |                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------
| |  | AT&T Latin America Corp.                                                                                             
| |  | By: /s/ NELSON A. MURPHYName: Nelson A. Murphy
    Title: Chief Financial Officer
    (Principal Financial Officer)  
|
| |  | By: /s/ LOURDES Z. MENESESName: Lourdes Z. Meneses
    Title: Corporate Controller
    (Principal Accounting Officer)

42



---



##### 



CERTIFICATION OF CHIEF EXECUTIVE
OFFICER

I, Patricio E. Northland, certify that:



| |     |                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | I have reviewed this Quarterly Report on
    Form 10-Q for AT&T Latin America Corp.;                                                                                                                                                                                                                                                              
|
| | (2) | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | (3) | Based on my knowledge, the financial statements,
    and other financial information included in the report, fairly
    present in all material respects the financial condition,
    results of operations and cash flows of the issuer as of, and
    for, the periods presented in this quarterly report;                                      
|
| | (4) | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                 



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



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



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



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

November 14, 2002

| |                                      
| | -------------------------------------
| | /s/ PATRICIO E. NORTHLAND            
| | Patricio E. Northland                
| | Chief Executive Officer and President

43



---



##### 



CERTIFICATION OF CHIEF FINANCIAL
OFFICER

I, Nelson A. Murphy, certify that:



| |     |                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | I have reviewed this Quarterly Report on
    Form 10-Q for AT&T Latin America Corp.;                                                                                                                                                                                                                                                              
|
| | (2) | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | (3) | Based on my knowledge, the financial statements,
    and other financial information included in the report, fairly
    present in all material respects the financial condition,
    results of operations and cash flows of the issuer as of, and
    for, the periods presented in this quarterly report;                                      
|
| | (4) | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                 



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



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



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



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (7) | The registrants other certifying officers
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses

November 14, 2002

| |                                           
| | ------------------------------------------
| | /s/ NELSON A. MURPHY                      
| | Nelson A. Murphy                          
| | Vice President and Chief Financial Officer

44