##### 









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 March 31, 2003

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

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

As of May 14, 2003, 45,544,017 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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TABLE OF CONTENTS

|                                   |  |                                                                                                                        |    |      |    | 
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                   |  |                                                                                                                        |    | Page
|                                   |  |                                                                                                                        |    |     
|Part I  Financial
    Information
|Item 1.                            |  | Financial Statements                                                                                                   |    |      |    | 
|                                   |  | Consolidated Balance Sheets as of March 31,
    2003 (Unaudited) and December 31, 2002                                 |    |      | 3  | 
|                                   |  | Unaudited Consolidated Statements of Operations
    for the Three Months Ended March 31, 2003 and 2002                 |    |      | 4  | 
|                                   |  | Unaudited Consolidated Statement of Changes in
    Stockholders Deficit for the Three Months Ended
    March 31, 2003 |    |      | 5  | 
|                                   |  | Unaudited Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2003 and 2002                 |    |      | 6  | 
|                                   |  | Notes to Consolidated Financial Statements
    (Unaudited)                                                             |    |      | 7  | 
|Item 2.                            |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                              |    |      | 26 | 
|Item 3.                            |  | Quantitative and Qualitative Disclosure about
    Market Risk                                                          |    |      | 37 | 
|Item 4.                            |  | Controls and Procedures                                                                                                |    |      | 37 | 
|Part II  Other
    Information   
|Item 1.                            |  | Legal Proceedings                                                                                                      |    |      | 38 | 
|Item 2.                            |  | Changes in Securities and Use of Proceeds                                                                              |    |      | 39 | 
|Item 3.                            |  | Defaults Upon Senior Securities                                                                                        |    |      | 39 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                |    |      | 39 | 
|Item 5.                            |  | Other Information                                                                                                      |    |      | 39 | 
|Item 6.                            |  | Exhibits and Reports on Form 8-K                                                                                       |    |      | 40 | 
|Signatures                         |  |                                                                                                                        | 41 |     
|Certifications                     |  |                                                                                                                        | 42 |     

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

|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |            |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ------------ | --------- | - | ------- | ---------- | --------- | -
|                                                                                                                                              |                                                                                                                                                     | March 31,                                   |         | December 31,
|                                                                                                                                              |                                                                                                                                                     | 2003                                        |         | 2002        
|                                                                                                                                              |                                                                                                                                                     |                                             |         |             
|                                                                                                                                              |                                                                                                                                                     | (Unaudited)                                 |         |             
|                                                                                                                                              |                                                                                                                                                     |                                            
|                                                                                                                                              |                                                                                                                                                     | (In thousands)                             
|ASSETS                                                                                                                                       
|Current assets:                                                                                                                               |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              | Cash and cash equivalents                                                                                                                           |                                             | $       | 26,916       |           |   | $       | 33,481     |          
|                                                                                                                                              | Accounts receivable, net of $7,568 and $7,318 of
    allowance for bad debts at March 31, 2003 and
    December 31, 2002, respectively              |                                             |         | 33,583       |           |   |         | 34,980     |          
|                                                                                                                                              | Recoverable taxes                                                                                                                                   |                                             |         | 15,623       |           |   |         | 15,126     |          
|                                                                                                                                              | Prepaid expenses and other current assets                                                                                                           |                                             |         | 36,025       |           |   |         | 31,222     |          
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total current assets                        |         |              | 112,147   |   |         |            | 114,809   |  
|Property and equipment, net                                                                                                                   |                                                                                                                                                     |                                             | 358,121 |              |           |   | 365,422 |           
|Other intangible assets, net of accumulated
    amortization of $21,424 and $20,029 at March 31, 2003 and
    December 31, 2002, respectively |                                                                                                                                                     |                                             | 13,136  |              |           |   | 14,445  |           
|Recoverable taxes                                                                                                                             |                                                                                                                                                     |                                             | 17,178  |              |           |   | 16,812  |           
|Other assets                                                                                                                                  |                                                                                                                                                     |                                             | 22,985  |              |           |   | 22,967  |           
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total assets                                |         | $            | 523,567   |   |         | $          | 534,455   |  
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|LIABILITIES AND STOCKHOLDERS
    DEFICIT                                                                                                    
|Current liabilities:                                                                                                                          |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              | Current maturities of debt                                                                                                                          |                                             | $       | 219,406      |           |   | $       | 228,491    |          
|                                                                                                                                              | Accounts payable and accrued expenses (including
    $8,239 and $6,578 due to AT&T Corp. at March 31,
    2003 and December 31, 2002, respectively) |                                             |         | 75,686       |           |   |         | 71,264     |          
|                                                                                                                                              | Other current liabilities                                                                                                                           |                                             |         | 22,022       |           |   |         | 24,546     |          
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total current liabilities                   |         |              | 317,114   |   |         |            | 324,301   |  
|Long-term debt (including $647,233 due to
    AT&T Corp. at March 31, 2003 and December 31,
    2002)                                         |                                                                                                                                                     |                                             | 673,795 |              |           |   | 664,298 |           
|Deferred interest due to parent                                                                                                               |                                                                                                                                                     |                                             | 31,877  |              |           |   | 7,768   |           
|Other liabilities                                                                                                                             |                                                                                                                                                     |                                             | 2,585   |              |           |   | 2,881   |           
|Mandatorily Redeemable 15% Series B
    Preferred Stock (held by a wholly-owned subsidiary of
    AT&T Corp.)                                 |                                                                                                                                                     |                                             | 257,877 |              |           |   | 248,734 |           
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total liabilities                           |         |              | 1,283,248 |   |         |            | 1,247,982 |  
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|Commitments and contingencies (Note 6)                                                                                                        |                                                                                                                                                     |                                             |        |              |           |   |        |           
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|Stockholders deficit:                                                                                                                        |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              | Common stock (including 68.4% economic interest
    owned by AT&T Corp., representing 95.2% voting power)                                           |                                             |         | 11           |           |   |         | 11         |          
|                                                                                                                                              | Additional paid in capital                                                                                                                          |                                             |         | 924,844      |           |   |         | 924,906    |          
|                                                                                                                                              | Unearned restricted stock                                                                                                                           |                                             |         | (2,220       | )         |   |         | (2,423     | )        
|                                                                                                                                              | Accumulated deficit                                                                                                                                 |                                             |         | (1,597,111   | )         |   |         | (1,548,939 | )        
|                                                                                                                                              | Accumulated other comprehensive (loss) income                                                                                                       |                                             |         | (85,205      | )         |   |         | (87,082    | )        
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total stockholders deficit                 |         |              | (759,681  | ) |         |            | (713,527  | )
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           
|                                                                                                                                              |                                                                                                                                                     | Total liabilities and stockholders deficit |         | $            | 523,567   |   |         | $          | 534,455   |  
|                                                                                                                                              |                                                                                                                                                     |                                             |         |              |           |   |         |           

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  
|                                                                                                |                        | March 31,           
|                                                                                                |                        |                     
|                                                                                                |                        | 2003                 |                                                                                                                                   | 2002  
|                                                                                                |                        |                      |                                                                                                                                   |       
|Revenue:                                                                                        |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                | Data-Internet services |                      | $                                                                                                                                 | 25,475 |         |         | $        | 26,488 |        
|                                                                                                | Voice services         |                      |                                                                                                                                   | 13,614 |         |         |          | 17,673 |        
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                |                        |                      | Total revenue                                                                                                                     |        |         | 39,089  |          |        |         | 44,161   |  
|Cost of revenue                                                                                 |                        |                      | 20,083                                                                                                                            |        |         |         | 28,486   |       
|Selling, general and administrative expenses                                                    |                        |                      | 19,272                                                                                                                            |        |         |         | 29,171   |       
|Depreciation and amortization                                                                   |                        |                      | 16,988                                                                                                                            |        |         |         | 17,192   |       
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                |                        | Loss from operations |                                                                                                                                   |        | (17,254 | )       |          |        | (30,688 | )       
|Interest expense                                                                                |                        |                      | 39,033                                                                                                                            |        |         |         | 21,803   |       
|Interest income                                                                                 |                        |                      | 359                                                                                                                               |        |         |         | 198      |       
|Other (expense) income, net                                                                     |                        |                      | 7,897                                                                                                                             |        |         |         | (25,337  | )     
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                |                        |                      | Loss before provision for income taxes, minority
    interest income, and cumulative effect of change in accounting
    principle |        |         | (48,031 | )        |        |         | (77,630  | )
|Provision for income taxes                                                                      |                        |                      | 141                                                                                                                               |        |         |         |         |       
|Minority interest income                                                                        |                        |                      |                                                                                                                                  |        |         |         | 94       |       
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                |                        |                      | Loss before cumulative effect of change in
    accounting principle                                                               |        |         | (48,172 | )        |        |         | (77,536  | )
|Cumulative effect of change in accounting
    principle                                         |                        |                      |                                                                                                                                  |        |         |         | (267,785 | )     
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|                                                                                                |                        |                      | Net loss                                                                                                                          |        | $       | (48,172 | )        |        | $       | (345,321 | )
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|Basic and diluted loss per common share
    cumulative effect of change in accounting principle |                        | $                    | (0.41                                                                                                                             | )      |         | $       | (0.66    | )     
|Cumulative effect of change in accounting
    principle loss per common share                   |                        |                      |                                                                                                                                  |        |         |         | (2.26    | )     
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|Basic and diluted net loss per common share                                                     |                        | $                    | (0.41                                                                                                                             | )      |         | $       | (2.92    | )     
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       
|Weighted average common shares outstanding                                                      |                        |                      | 118,672                                                                                                                           |        |         |         | 118,399  |       
|                                                                                                |                        |                      |                                                                                                                                   |        |         |         |          |       

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 DEFICIT

(Unaudited)


|                                         |  |              |         |            |  |            |    |             |  |               |         |               |  |         |        |   |  |   |            |   |  |   |         |   |  |   |          |  
|---------------------------------------- |  | ------------ | ------- | ---------- |  | ---------- | -- | ----------- |  | ------------- | ------- | ------------- |  | ------- | ------ | - |  | - | ---------- | - |  | - | ------- | - |  | - | -------- | -
|                                         |  |              |         |            |  |            |    |             |  |               |         | Accumulated   |  |        
|                                         |  |              |         |            |  |            |    |             |  | Other         |         |              
|                                         |  | Common Stock |         | Additional |  | Unearned   |    |             |  | Comprehensive |         | Total        
|                                         |  |              |         | Paid In    |  | Restricted |    | Accumulated |  | Income        |         | Stockholders
|                                         |  | Stock        |         | Amount     |  | Capital    |    | Stock       |  | Deficit       |         | (Loss)        |  | Deficit
|                                         |  |              |         |            |  |            |    |             |  |               |         |               |  |        
|Balance December 31, 2002                |  |              | 118,710 |            |  | $          | 11 |             |  | $             | 924,906 |               |  | $       | (2,423 | ) |  | $ | (1,548,939 | ) |  | $ | (87,082 | ) |  | $ | (713,527 | )
|Cancellation of restricted stock         |  |              | (85     | )          |  |            |   |             |  |               | (62     | )             |  |         | 62     |   |  |   |           |   |  |   |        |   |  |   |         |  
|Accretion of unearned restricted stock   |  |              |        |            |  |            |   |             |  |               |        |               |  |         | 141    |   |  |   |           |   |  |   |        |   |  |   | 141      |  
|Net loss                                 |  |              |        |            |  |            |   |             |  |               |        |               |  |         |       |   |  |   | (48,172    | ) |  |   |        |   |  |   | (48,172  | )
|Foreign currency translation adjustments |  |              |        |            |  |            |   |             |  |               |        |               |  |         |       |   |  |   |           |   |  |   | 1,877   |   |  |   | 1,877    |  
|                                         |  |              |         |            |  |            |    |             |  |               |         |               |  |         |        |   |  |   |            |   |  |   |         |   |  |   |          |  
|Balance March 31, 2003                   |  |              | 118,625 |            |  | $          | 11 |             |  | $             | 924,844 |               |  | $       | (2,220 | ) |  | $ | (1,597,111 | ) |  | $ | (85,205 | ) |  | $ | (759,681 | )
|                                         |  |              |         |            |  |            |    |             |  |               |         |               |  |         |        |   |  |   |            |   |  |   |         |   |  |   |          |  

The accompanying footnotes are an integral part
of these

consolidated financial statements.


5



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##### 



AT&T LATIN AMERICA CORP.

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


CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Unaudited)


|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |          |   |         |         |  
|-------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------- | ------------------------------------- | - | ------ | ------- | -------- | - | ------- | ------- | -
|                                                         |                                                                  |                                                                               
|                                                         |                                                                  | Three Months Ended                                                            
|                                                         |                                                                  | March 31,                                                                     
|                                                         |                                                                  |                                                                               
|                                                         |                                                                  | 2003                                                                           |                                                         | 2002                                 
|                                                         |                                                                  |                                                                                |                                                         |                                      
|                                                         |                                                                  |                                                                               
|                                                         |                                                                  | (In thousands)                                                                
|Cash flows from operating activities:                    |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|                                                         | Net loss                                                         |                                                                                | $                                                       | (48,172                               | ) |        | $       | (345,321 | )
|                                                         |                                                                  | Adjustment to reconcile net loss to net cash used
    in operating activities: |                                                         |                                       |   |        |         |          |   |        
|                                                         |                                                                  |                                                                                | Depreciation and amortization                           |                                       |   | 16,988 |         |          |   | 17,192  |        
|                                                         |                                                                  |                                                                                | Cumulative effect of change in accounting
    principle |                                       |   |       |         |          |   | 267,785 |        
|                                                         |                                                                  |                                                                                | Bad debt expense                                        |                                       |   | 176    |         |          |   | 1,360   |        
|                                                         |                                                                  |                                                                                | Unrealized foreign exchange loss                        |                                       |   | (4,449 | )       |          |   | (10,481 | )      
|                                                         |                                                                  |                                                                                | Minority interest income                                |                                       |   |       |         |          |   | (94     | )      
|                                                         |                                                                  |                                                                                | Preferred stock accretion                               |                                       |   | 9,143  |         |          |   | 7,915   |        
|                                                         |                                                                  |                                                                                | Loss on debt restructuring                              |                                       |   |       |         |          |   | 6,264   |        
|                                                         |                                                                  |                                                                                | Stockholder loan accretion                              |                                       |   |       |         |          |   | (125    | )      
|                                                         |                                                                  |                                                                                | Unearned restricted stock accretion                     |                                       |   | 141    |         |          |   | 102     |        
|                                                         |                                                                  |                                                                                | Accrued interest characterized as debt                  |                                       |   |       |         |          |   | 12,426  |        
|                                                         |                                                                  |                                                                                | Changes in assets and liabilities:                      |                                       |   |        |         |          |   |         |        
|                                                         |                                                                  |                                                                                |                                                         | Accounts receivable                   |   |        | 1,221   |          |   |         | (3,653  | )
|                                                         |                                                                  |                                                                                |                                                         | Recoverable taxes                     |   |        | (863    | )        |   |         | 8,300   |  
|                                                         |                                                                  |                                                                                |                                                         | Prepaid and other assets              |   |        | (4,803  | )        |   |         | 10,538  |  
|                                                         |                                                                  |                                                                                |                                                         | Other assets                          |   |        | (399    | )        |   |         | (7,100  | )
|                                                         |                                                                  |                                                                                |                                                         | Accounts payable and accrued expenses |   |        | 4,422   |          |   |         | (15,145 | )
|                                                         |                                                                  |                                                                                |                                                         | Other current liabilities             |   |        | (2,524  | )        |   |         | 11,869  |  
|                                                         |                                                                  |                                                                                |                                                         | Deferred interest                     |   |        | 24,109  |          |   |         |        |  
|                                                         |                                                                  |                                                                                |                                                         | Other liabilities                     |   |        | (296    | )        |   |         | 400     |  
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Net cash used in operating activities                    |                                                                  |                                                                                | (5,306                                                  | )                                     |   |        | (37,767 | )       
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Cash flows from investing activities:                    |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|                                                         | Purchase of property and equipment                               |                                                                                |                                                         | (2,008                                | ) |        |         | (7,334   | )
|                                                         | Cash paid for acquisitions of licenses and other
    core assets |                                                                                |                                                         |                                      |   |        |         | (146     | )
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Net cash used in investing activities                    |                                                                  |                                                                                | (2,008                                                  | )                                     |   |        | (7,480  | )       
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Cash flows from financing activities:                    |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|                                                         | (Repayments) proceeds of other bank facilities,
    net          |                                                                                |                                                         | 412                                   |   |        |         | (2,679   | )
|                                                         | Proceeds from parent company credit facilities                   |                                                                                |                                                         |                                      |   |        |         | 47,243   |  
|                                                         | Proceeds from secured vendor financing                           |                                                                                |                                                         |                                      |   |        |         | 143,323  |  
|                                                         | Payments of interim notes payable for equipment                  |                                                                                |                                                         |                                      |   |        |         | (73,803  | )
|                                                         | Payments of notes payable to other vendors                       |                                                                                |                                                         |                                      |   |        |         | (4,690   | )
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Net cash provided by financing activities                |                                                                  |                                                                                | 412                                                     |                                       |   |        | 109,394 |         
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Net (decrease) increase in cash and cash
    equivalents |                                                                  |                                                                                | (6,902                                                  | )                                     |   |        | 64,147  |         
|Net effect of translation on cash                        |                                                                  |                                                                                | 337                                                     |                                       |   |        | (94     | )       
|Cash and cash equivalents, beginning of period           |                                                                  |                                                                                | 33,481                                                  |                                       |   |        | 28,186  |         
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         
|Cash and cash equivalents, end of period                 |                                                                  | $                                                                              | 26,916                                                  |                                       |   | $      | 92,239  |         
|                                                         |                                                                  |                                                                                |                                                         |                                       |   |        |         |         

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 accrued from January 1, 2002 through March 1,
2002 of $12.4 million as part of the debt.

During the three months ended March 31, 2002
we issued in non-cash transactions 285,000 restricted shares of
Class A common stock to employees in exchange for 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
three months ended March 31, 2003, 85,000 restricted shares
of Class A common stock with a fair value of $62,000 were
cancelled.

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

March 31, 2003 and December 31,
2002


(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 by AT&T Corp., 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 68.4% of the economic interests of our common
stock and held approximately $937.0 million of our long-term
debt, deferred interest and the mandatorily redeemable preferred
stock as of March 31, 2003.

In January 2003 AT&T Corp. announced that it
had reached a non-binding letter of intent to sell its majority
equity interest in us for a nominal price to Southern Cross
Group, LLC, a telecommunications holding company. According to
the terms of the letter of intent, AT&T Corp. is obligated
to pay to Southern Cross a fee of $750,000 if the transaction
were not to close by or before April 15, 2003. To our
knowledge, as of May 16, 2003, no such closing has
occurred. We also have received expressions of interest from a
number of other qualified strategic and financial investors and
are pursuing discussions with a selected sub-group of such
investors. We will continue to pursue all strategic options for
the Company that serve our objective of maximizing value for our
constituents.

We expect that, in connection with any sale or
investment transaction that may be concluded as part of our
restructuring process (including a transfer or other disposition
of AT&T Corp.s equity interest as well as a sale of
all or substantially all assets of the Company, merger or other
similar transaction), certain brand, commercial and other
contractual arrangements we have with AT&T Corp. will likely
expire, be terminated or be phased out over time. These
arrangements include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our regional vehicle agreement with AT&T
    Corp., which agreement establishes the territory in South
    America and the Caribbean in which we operate , the types of
    services we are permitted to provide or are restricted from
    providing, certain restrictions on AT&T Corp.s ability
    to compete with us in our designated region and certain rights
    we have to acquire similar businesses in our region from
    AT&T Corp., in the event it acquires such businesses;
|
| |  | our non-exclusive service mark license, which
    allows us to use the AT&T brand and logo in our operations
    and for our services, subject to certain qualifications as to
    service quality and requirements as to brand monitoring and
    management; and                                                                                                                                                                                                                           
|
| |  | our joint sales initiative, which along with
    related arrangements provides for the compensation of the
    AT&T Corp. sales force for sales of our services to AT&T
    Corp. customers and for joint account planning with respect to
    such customers. The joint sales initiative expired in accordance
    with its terms on April 15, 2003.                                                                                                                                        

7



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


We expect that the termination or expiry of these
commercial arrangements will generally reduce the volume of
customer referrals through AT&T Corp., and, at least in the
short term, the number of direct relationships we have with
AT&T Corp.s global customers that we service in South
America and internationally using our infrastructure. In
addition, AT&T Corp. is deploying a global data network,
known as the AGN, including in several South American cities,
and we expect that some of these customers may choose to
transition to the AT&T Corp. global network for a
substantial portion of the international data services we
currently provide. We are currently discussing with AT&T
Corp. the terms of commercial transition arrangements and our
future commercial relationship. Given our advanced regional
network covering key South American business centers, our
integrated regional platform, our high-quality services and our
strong relationships with numerous customers that are also
customers of AT&T Corp., we are working to maintain a
collaborative and productive commercial relationship with
AT&T Corp. At the same time, we believe that a disengagement
by AT&T Corp. from its investment in us may open potential
opportunities for us to strengthen relationships with other
major international carriers and their customers, which
opportunities are not fully available to us under our current
business model and contractual restrictions with AT&T Corp.

Liquidity and Going Concern
Considerations

As of the date of this quarterly report, we do
not have sufficient cash to meet our requirements in the near
term unless we continue to defer and restructure amounts owed to
our secured and unsecured creditors, and continue to execute
successfully the austerity measures undertaken late last year,
or obtain additional financing. Our restructuring efforts, and
the suspension of certain debt service and principal payment
obligations pending the resolution of negotiations with
creditors, have allowed us to preserve adequate cash to sustain
operations and substantially reduce our net use of cash in the
near term.

Our cash needs arise from operating losses and
other working capital requirements, capital expenditures, debt
service and loan commitment fees. We are continuing to conserve
cash on hand by not servicing material indebtedness and by
continuing to reduce operating expenses and capital
expenditures. While in effect, these austerity measures will
substantially impede our growth, and may result in decreased
revenue over the short and long term.

As of March 31, 2003, we had foreign
currency forward contracts that hedge certain transactions with
notional amounts of $147.8 million, maturing in various
dates through November 2003. The total $22.6 million fair
value of forward currency contract assets, which are included as
prepaid expenses and other current assets on our March 31,
2003 balance sheet, represents unrealized gains on our forward
currency contracts selling or buying foreign currencies as a
result of the strengthening or weakening of the dollar compared
to the currencies that we hedge. In April 2003 all of our
forward contracts were settled in advance of their respective
maturity dates with our counter party financial institutions
resulting in net cash proceeds of approximately
$21.3 million.

On April 11, 2003 involuntary petitions
under chapter 11 of the United States Bankruptcy Code were
filed by MatlinPatterson Global Opportunities Partners, LP, one
of the Companys secured creditors, against AT&T Latin
America Corp., AT&T Argentina, S.A. and a special-purpose
entity related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of the
Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11
case. On the same day, April 17, 2003, certain other
subsidiaries of AT&T Latin America Corp. such as Frantis,
Inc., Nantis, Inc., Jamtis, Inc. and Jamtis, LLC each filed
voluntary petitions for relief under chapter 11. On

8



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


April 30, 2003, AT&T Argentina, S.A.
also consented to an order for relief. The foregoing cases are
being jointly administered.

The Company conducts its operations through
direct and indirect subsidiaries of AT&T Latin America Corp.
While AT&T Latin America Corp., its U.S. affiliates and
AT&T Argentina, S.A., are in the reorganization process, we
expect our other country operating subsidiaries (which include
AT&T do Brasil Ltda., AT&T Chile Holding S.A. and its
subsidiaries, AT&T Colombia S.A. and AT&T Peru S.A.)
will continue to operate in the ordinary course of business, as
they are not directly involved with the chapter 11
proceedings. We believe that most of our trade suppliers,
unsecured general creditors, employees and customers will not be
adversely affected while we are involved in the chapter 11
bankruptcy proceedings. During this reorganization process, we
have attempted to maintain normal and regular trade terms with
our suppliers and customers. However, there can be no assurance
that our suppliers will continue to provide normal trade credit
or credit on terms acceptable to us, if at all, or that
customers will continue to do business or enter into new
business with us.

As a consequence of the bankruptcy petition,
pending claims and litigation against AT&T Latin America
Corp. and the other entities involved in the chapter 11
proceeding are stayed automatically by Section 362 of the
Bankruptcy Code, and absent further order of the Bankruptcy
Court, no party may take any action to recover any pre-petition
claims, enforce any lien against or obtain possession of any
property from the Company. In addition, pursuant to Section 365
of the Bankruptcy Code, the Company may reject or assume
pre-petition executory contracts and unexpired leases, and
parties affected by rejections of these contracts or leases may
file claims with the Bankruptcy Court in accordance with the
chapter 11 reorganization process.

As a result of the chapter 11 proceedings, a
significant amount of the Companys liabilities will be
subject to compromise. We estimate that the liabilities subject
to compromise as of March 31, 2003 are as follows:

|                                                        |  |   |           | 
|------------------------------------------------------- |  | - | --------- | 
|Debt                                                    |  | $ | 758,171   | 
|Accounts payable and accrued expenses                   |  |   | 38,596    | 
|Other current liabilities                               |  |   | 1,402     | 
|Deferred interest due to parent                         |  |   | 31,877    | 
|Mandatorily Redeemable 15% Series B
    Preferred Stock |  |   | 257,877   | 
|                                                        |  |   |           | 
|                                                        |  | $ | 1,087,923 | 
|                                                        |  |   |           | 

We also remain actively engaged in discussions
with our various creditor constituencies and their advisors
regarding the restructuring of our debt. There can be no
assurance that current negotiations with the various creditors
will lead to a comprehensive debt restructuring agreement on
terms acceptable to all of our creditors, or that any
alternative transaction or reorganization as a part of the
chapter 11 proceeding will lead to a viable
recapitalization plan.

If the process for implementing a plan of
reorganization or other disposition of the Company is delayed or
abandoned, we may encounter increased difficulty in retaining
customers and key employees which could, in turn, result in
significant declines in revenue, or increases in restructuring
and other costs that would adversely impact our liquidity and
reduce the time period for which our existing cash and cash
equivalents would fund our operations. If a plan of
reorganization or other disposition, or a comprehensive
restructuring is not completed, we may be forced to liquidate
under applicable provisions of the Bankruptcy Code. There can be
no assurance of the level of recovery our secured and unsecured
creditors would receive in such a liquidation. In the event that
such a plan of reorganization, other disposition or
restructuring of the Company and its affiliates (including
affiliates not included currently in the chapter 11
proceedings) is completed, all equity

9



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


interests in the Company, including shares of our
Class A and B common stock, likely will be cancelled and
discharged and the holders of such equity securities likely will
not receive any distribution.

Absent a plan of reorganization, other
disposition or restructuring of the Company in the
chapter 11 proceedings we do not believe it will be
possible to attract additional financing to fund operations in
the longer term, support increased growth or fill our funding
needs. Moreover, even assuming a successful plan of
reorganization, 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.

On a consolidated basis, as of March 31,
2003 we had cash and cash equivalents of $26.9 million. As
of May 15, 2003, we had approximately $42.3 million in
cash, on a consolidated basis. The increase in cash compared to
March 31, 2003 was due primarily to the receipt of proceeds
from the early settlement of foreign currency forward contracts
in April 2003. We actively manage liquidity not only in terms of
preserving cash but also with a view toward projected cash needs
in each of our country operations. Our ability to maintain
adequate liquidity for our business as a whole may depend on our
ability to move cash between our country operations. However,
due to exchange control regulations and local fiduciary
considerations, we may not be able to transfer cash freely
within our corporate group, and restrictions on such
transactions could have an adverse effect on the liquidity of
one or more of our country operations. We presently do not have
available unused commitments under any credit facilities.

Implementation of our restructuring program will
require cash outlays during 2003, including for the
renegotiation of financing facilities and other contractual
commitments and for the engagement of professional advisors. The
amount of professional expenses, which we estimate between
$8.0 million and $15.0 million, will be payable in
part upon completion of a successful restructuring and will be
affected by factors such as the length of time required to
complete the restructuring and the amount of consideration that
may be received in any sale or investment transaction. We
believe it will be critical to the business to retain
effectively a number of key employees and officers, including
the chief executive officer during the restructuring process,
and accordingly we are pursuing Bankruptcy court approval to
implement a retention program under which retention payments
will be payable following completion of key milestones in the
restructuring process. We estimate the aggregate amounts payable
under the retention program will range from $2.2 million to
$3.6 million during 2003. The actual payments made under
this program may vary depending upon the amount of consideration
to be received by the Company in a sale transaction or upon
emerging from chapter 11 as well as upon the timing of
either the sale transaction or the confirmation of a
restructuring plan by the Bankruptcy court.

The 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. The
appropriateness of using the going concern basis in the future,
however, will be dependent upon our ability to successfully
implement a plan of reorganization or other disposition or
restructuring of the Company that is approved by the U.S.
Bankruptcy Court. There is no assurance that we will be able to
successfully implement such a plan of reorganization,
disposition or restructuring 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 through
March 31, 2003 was $1,682.5 million and
$1,636.0 million through December 31, 2002 (which
includes $716.3 million of goodwill impairment including
cumulative

10



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


effect of change in accounting principle).
Comprehensive loss for the periods presented was as follows (in
thousands):

|                                                 |                          |                    |         |         |   |   |         |         |  
|------------------------------------------------ | ------------------------ | ------------------ | ------- | ------- | - | - | ------- | ------- | -
|                                                 |                          |                   
|                                                 |                          | Three Months Ended
|                                                 |                          | March 31,         
|                                                 |                          |                   
|                                                 |                          | 2003               |         | 2002   
|                                                 |                          |                    |         |        
|Net loss                                         |                          | $                  | (48,172 | )       |   | $ | (77,536 | )      
|Foreign currency translation adjustments         |                          |                    | 1,877   |         |   |   | 9,744   |        
|Unrealized losses on derivative instruments, net |                          |                    |        |         |   |   | (20,205 | )      
|                                                 |                          |                    |         |         |   |   |         |        
|                                                 | Total comprehensive loss |                    | $       | (46,295 | ) |   | $       | (87,997 | )
|                                                 |                          |                    |         |         |   |   |         |        

We have incurred net losses of approximately
$1,597.1 million from the period from inception
(October 13, 1999) through March 31, 2003. As of March
31, 2003 we had a working capital deficit of $205.0 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, as amended, for the year ended
December 31, 2002. The balance sheet data as of
December 31, 2002 included in this quarterly report on
Form 10-Q was derived from our audited financial statements
included on our Annual Report on Form 10-K, as amended. 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 is included in our Annual Report on
Form 10-K, as amended, for the year ended December 31,
2002.

11



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)




|          |                            
|--------- | ---------------------------
|NOTE  2  | PROPERTY AND EQUIPMENT, NET

Property and equipment, net is comprised of the
following (in thousands):

|                                                |  |             |          |              |  |            |          |   |  |  |         | 
|----------------------------------------------- |  | ----------- | -------- | ------------ |  | ---------- | -------- | - |  |  | ------- | 
|                                                |  |             |          |              |  | Estimated 
|                                                |  |             |          |              |  | Useful    
|                                                |  | March 31,   |          | December 31, |  | Lives     
|                                                |  | 2003        |          | 2002         |  | (In Years)
|                                                |  |             |          |              |  |           
|                                                |  | (Unaudited) |          |              |  |           
|Switching equipment                             |  | $           | 163,645  |              |  | $          | 162,459  |   |  |  | 5       | 
|Transmission equipment                          |  |             | 141,814  |              |  |            | 147,390  |   |  |  | 7       | 
|Cables                                          |  |             | 50,913   |              |  |            | 50,718   |   |  |  | 10      | 
|Underground installation                        |  |             | 151,411  |              |  |            | 147,441  |   |  |  | 25      | 
|Construction in progress                        |  |             | 11,965   |              |  |            | 12,278   |   |  |  |        | 
|Office equipment, furniture, vehicles and other |  |             | 99,479   |              |  |            | 97,139   |   |  |  | 3 to 10 | 
|Cumulative translation adjustment               |  |             | (93,284  | )            |  |            | (101,146 | ) |  |  |         | 
|                                                |  |             |          |              |  |            |          |   |  |  |         | 
|                                                |  |             | 525,943  |              |  |            | 516,279  |   |  |  |         | 
|Less: Accumulated depreciation                  |  |             | (167,822 | )            |  |            | (150,857 | ) |  |  |         | 
|                                                |  |             |          |              |  |            |          |   |  |  |         | 
|                                                |  | $           | 358,121  |              |  | $          | 365,422  |   |  |  |         | 
|                                                |  |             |          |              |  |            |          |   |  |  |         | 

Depreciation expense related to property and
equipment was $15.0 million and $14.8 million for the
three months ended March 31, 2003 and 2002, respectively.



|          |     
|--------- | ----
|NOTE  3  | DEBT

Debt is comprised of the following (in thousands):

|                                                   |            |             |          |              |  |   |          |         | 
|-------------------------------------------------- | ---------- | ----------- | -------- | ------------ |  | - | -------- | ------- | 
|                                                   |            | March 31,   |          | December 31,
|                                                   |            | 2003        |          | 2002        
|                                                   |            |             |          |             
|                                                   |            | (Unaudited) |          |             
|Senior secured vendor financing                    |            | $           | 166,743  |              |  | $ | 166,755  |        
|Subordinated credit facilities with parent company |            |             | 647,233  |              |  |   | 647,233  |        
|Notes payable to other vendors                     |            |             | 35,221   |              |  |   | 35,221   |        
|Other bank facilities                              |            |             | 44,004   |              |  |   | 43,581   |        
|                                                   |            |             |          |              |  |   |          |        
|                                                   | Total debt |             |          | 893,201      |  |   |          | 892,789 | 
|Less current maturities                            |            |             | (219,406 | )            |  |   | (228,491 | )      
|                                                   |            |             |          |              |  |   |          |        
|Long-term debt                                     |            | $           | 673,795  |              |  | $ | 664,298  |        
|                                                   |            |             |          |              |  |   |          |        

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 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 certain of our and our subsidiaries
material assets which pledged assets do not include 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

12



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


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.

Draws under this facility were originally
available through June 2004. On November 15, 2002 we
received a communication from the vendors indicating the
termination of their open commitments under the secured vendor
financing.

Current interest is based on the default rate as
defined in the agreements of LIBOR rate plus a margin of 5.625%
plus a default rate of 2.0%. We have paid interest through
September 30, 2002.

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.

For the cumulative four quarters ended on
September 30, 2002, we did not meet certain financial
covenants with respect to minimum revenue and EBITDA, as defined
in the facilities. Accordingly we have been in default under the
facilities, and our senior secured lenders have exercised their
right of denying us further access to the undrawn amounts under
those facilities. The lenders under the senior secured vendor
financing also are entitled to exercise other remedies,
including 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 these and perhaps
other financial covenants under our senior secured vendor
financing facilities going forward in 2003. All of our vendors
have requested adequate assurances from us as to our ability to
re-pay the debt outstanding. At the present time we are not able
to provide the vendors adequate assurances with respect to our
ability to re-pay the debt outstanding and thus we expect not to
be able to obtain financing under the facilities for the
foreseeable future. Therefore, we have reclassified amounts
outstanding under this facility as shortterm debt in the
accompanying consolidated balance sheets.

Subordinated Credit Facilities (Related
Parties)

During the first quarter of 2002, we signed an
agreement with AT&T Corp. for the restructuring of an
aggregate $548.0 million of financing provided under prior
arrangements with AT&T Corp. The restructuring provided
additional borrowings of $150.0 million and 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.
The weighted average interest rate as of March 31, 2003 was
14.9%. At March 31, 2003 we have capitalized deferred
interest of $100.0 million as part of debt and have accrued
deferred interest of $31.9 million. We currently have no
availability under these credit facilities.

13



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


As part of the restructuring, we also 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 is exercisable at a price of $0.01 per share.
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 a
loss of $6.3 million in 2002.

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 creditor 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 March 31, 2003,
there was approximately $6.2 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 sheets as of March 31, 2003 and December 31,
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 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 March 31, 2003 there was
$7.6 million outstanding and 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 March 31, 2003, there was an
aggregate $21.4 million original 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
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.

14



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


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 $26.3 million maturing through February
2004. At March 31, 2003, there was an aggregate of
$26.3 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
March 31, 2003 we had no availability under these
facilities. As of April 2003, certain of these facilities were
restructured including by deferral of approximately
$6.4 million. We also have litigation pending in Brazil
with one of our local bank lenders, although we expect to
continue discussions with that lender concerning a restructuring
of the debt. See Note 6.

AT&T Colombia is party to several local bank
facilities providing for borrowings of an aggregate amount of
$9.1 million maturing through May 2006. At March 31,
2003, there was an aggregate of $9.1 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 Depósito Término Fijo
(DTF) plus a margin ranging from 4.5% to 7.0%. The average
Colombian peso interest rate, or DTF, for the three months ended
March 31, 2003 was approximately 7.4%. On April 11,
2003, approximately $7.1 million of these facilities or
approximately 80% of AT&T Colombias bank debt in
Colombia was restructured. In connection with the restructuring
AT&T Colombia made an initial down payment of approximately
12.0% of this outstanding amount in consideration for a six year
facility including a two year grace period on payment of
principal. The restructured debt has an interest rate based upon
DTF (a floating rate in the local market which as of
March 31, 2003 was approximately 7.4%) plus a margin of
5.5%, amounting to approximately 12.9% on an all-in basis.

AT&T Peru is party to several local bank
facilities providing for borrowings of an aggregate amount of
$7.9 million, maturing on various dates through June 2011.
At March 31, 2003, there was an aggregate of
$7.9 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
$0.7 million, maturing on various dates through October
2010. At March 31, 2003 there was an aggregate of
$0.7 million outstanding under these facilities bearing
interest at fixed interest rates ranging from 9.0% to 17.5%.

As of March 31, 2003 we have approximately
$44.0 million outstanding under these bank facilities. At
March 31, 2003, we had no availability under these local
bank facilities. As a result of our current financial condition,
we believe it will be difficult to renew or refinance many of
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 received notice of non-payment from one the
Brazilian banks and we are currently in discussions with the
banks regarding these amounts.

On April 17, 2003, the Company successfully
restructured $8.4 million of its bank debt with a Brazilian
lender. In consideration for a six year rollover with a two year
grace period on principal payments, the company made an upfront
payment of $2.0 million plus accrued interest. The balance
of the debt will carry an interest rate of LIBOR plus 1.625% and
will be converted into Brazilian Reais on January 16, 2004.
At that point, the company will pay CDI (a floating rate in the
local market which as of March 31, 2003 was approximately
26%) plus a margin of 5.0%, amounting to approximately 31% on an
all-in basis.

15



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


Failure to pay outstanding amounts due under
these facilities may 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.



|          |                                           
|--------- | ------------------------------------------
|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 March 31, 2003 and December 31, 2002 of
$257.9 million and $248.7 million, respectively. The
shares of Mandatorily Redeemable 15% Series B Cumulative
Preferred Stock entitle Global Card Holdings to accrue dividends
at an annual rate of 15%. 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
three months ended March 31, 2003 and 2002 include
$9.1 million and $7.9 million, respectively, recorded
as interest expense related to the dividend on our Mandatorily
Redeemable 15% Series B Cumulative Preferred Stock.

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 March 31, 2003 and December 31, 2002,
45,544,017 and 45,629,017 shares, respectively, of
Class A common stock were issued and outstanding. At
March 31, 2003 and December 31, 2002, 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.

AT&T Corp. holds 8,000,000 shares of our
Class A common stock and all 73,081,595 outstanding shares of
our Class B common stock as of March 31, 2003.



|          |                                                
|--------- | -----------------------------------------------
|NOTE  5  | OPERATIONS BY GEOGRAPHIC AREAS AND
    SEGMENTS

Our operations are segregated and measured by
country and 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
March 31, 2003 and 2002, approximately 65.2% and 60.0%,
respectively, were generated from data-internet services. No
single customer or group of related customers accounted for more
that 10.0% of total revenue.

16



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


Our chief operating decision makers measure our
operating results by country and use EBITDA, EBITDAR and CAPEX
as important measures to our country operating results and
performance. Management believes EBITDA, EBITDAR and CAPEX are
meaningful because they provide analyses of operating results
using the same measure used by our chief operating decision
makers.

EBITDA.EBITDA is an
important measure used by our chief operating decision makers to
measure our country operating results and performance. We
calculate EBITDA as loss from operations plus depreciation and
amortization expenses. Management believes EBITDA is meaningful
because they provide analyses of operating results using the
same measure used by our chief operating decision makers. Our
calculations of EBITDA may or may not be consistent with the
calculation of this measure by other public companies. EBITDA
should not be viewed as an alternative to generally accepted
accounting principles (GAAP) measure of income as a measure
of performance or to cash flows from operating, investing and
financing activities as a measure 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.

EBITDAR.EBITDAR is
an important measure implemented during this first quarter of
2003 by our chief operating decision makers to measure our
country operating results and performance by excluding all
restructuring expenses incurred in connection with our
preparation and on-going restructuring process. We calculate
EBITDAR as EBITDA plus restructuring expenses. EBITDAR should
not be viewed as an alternative to generally accepted accounting
principles (GAAP) measure of income as a measure of performance
or to cash flows from operating, investing and financing
activities as a measure of liquidity.

The following table shows our calculation of
EBITDA and EBITDAR as of March 31, 2003 and 2002,
respectively.

|                                                                                          |       |                    |         |      |  |   |         |   | 
|----------------------------------------------------------------------------------------- | ----- | ------------------ | ------- | ---- |  | - | ------- | - | 
|                                                                                          |       |                   
|                                                                                          |       | Three Months Ended
|                                                                                          |       | March 31,         
|                                                                                          |       |                   
|                                                                                          |       | 2003               |         | 2002
|                                                                                          |       |                    |         |     
|                                                                                          |       |                   
|                                                                                          |       | (Unaudited)       
|Loss from operations                                                                      |       | $                  | (17,254 | )    |  | $ | (30,688 | )
|                                                                                          | plus: |                    |         |      |  |   |         |   | 
|Depreciation and amortization                                                             |       |                    | 16,988  |      |  |   | 17,192  |  
|                                                                                          |       |                    |         |      |  |   |         |  
|EBITDA                                                                                    |       |                    | (266    | )    |  |   | (13,496 | )
|                                                                                          | plus: |                    |         |      |  |   |         |   | 
|Restructuring expenses (included within Selling,
    general and administrative expenses) |       |                    | 4,965   |      |  |   |        |  
|                                                                                          |       |                    |         |      |  |   |         |  
|EBITDAR                                                                                   |       | $                  | 4,699   |      |  | $ | (13,496 | )
|                                                                                          |       |                    |         |      |  |   |         |  

CAPEX.Management
believes that CAPEX or capital expenditures is a meaningful
measure used by our chief operating decision makers to measure
our countries operational performance. We calculate CAPEX, or
capital expenditures, as gross property and equipment purchased,
net of dispositions, but excluding translation adjustments
resulting from our countries that use local currencies as
functional currencies. CAPEX should not be viewed as an
alternative to generally accepted accounting principles
(GAAP) measure of income as a measure of performance or to
cash flows from operating, investing and financing activities as
a measure of liquidity.

Data-Internet Services.Our data-Internet services feature
local, national and international reach, high availability and
high security featuring our common ATM/ IP, or asynchronous
transfer mode/ Internet

17



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


protocol multi-service network platform and are
accessible via single connections (one port per location) to our
broadband network:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Data Services.Our
    data services consist of basic connection services, such as
    point-to-point dedicated private lines, and private 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 (available or
    being deployed) 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.
|
| |  | Internet 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 from us.                                                                                                                                                                                                                                                                                               
|
| |  | Managed Services.Our managed service offers include
    managed data, Internet and web hosting services. Managed
    services refer to our ability to offer customized performance
    reporting, customer network performance monitoring and customer
    premise equipment management.                                                                                                                                                                                                                                                                                                                                                                                            

Voice Services.Voice services are an important
component of our service portfolio. Our portfolio of voice
services includes local telephony and long distance services,
pre-paid and calling card services, 1-800 services 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
target. We offer to business customers all available voice
services through a combination of different offers. To the
consumer mass-market, we offer a more selective set of services,
which require little or no customization, and minimum employee
resources, which enables us to use available network capacity,
particularly during non-business hours. Voice services are also
an important point of entry for other services, particularly
with small and medium sized enterprises.

18



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


The following unaudited tables set forth, for
March 31, 2003 and 2002, certain information about segment
results of operations and segment assets (in thousands):

|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |         | 
|---------------------------------------------- | ------------- | --------- | ------ | ------- |  | ----- | ----- | -------- |  | ---- | ------ | -------- |  | ----- | ----- | ------ |  | - | ------ | ------- |  | - | ------ | ------ | - | - | ------- | ------- | 
|Three Months Ended                             |               |           |        |         |  |       |       |          |  |      |        |          |  |      
|March 31, 2003                                 |               | Argentina |        | Brazil  |  | Chile |       | Colombia |  | Peru |        | Other(1) |  | Total
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |      
|(Unaudited)                                    |               |           |        |         |  |       |       |          |  |      |        |          |  |      
|REVENUE:                                       |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|Data-Internet services                         |               | $         | 2,350  |         |  | $     | 9,541 |          |  | $    | 3,303  |          |  | $     | 5,763 |        |  | $ | 4,518  |         |  | $ |       |        |   | $ | 25,475  |        
|Voice services                                 |               |           | 3,800  |         |  |       | 2,411 |          |  |      | 2,748  |          |  |       | 162   |        |  |   | 5,738  |         |  |   | (1,245 | )      |   |   | 13,614  |        
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|                                               | TOTAL REVENUE |           |        | 6,150   |  |       |       | 11,952   |  |      |        | 6,051    |  |       |       | 5,925  |  |   |        | 10,256  |  |   |        | (1,245 | ) |   |         | 39,089  | 
|Cost of revenue                                |               |           | 4,419  |         |  |       | 5,213 |          |  |      | 3,966  |          |  |       | 2,681 |        |  |   | 5,049  |         |  |   | (1,245 | )      |   |   | 20,083  |        
|Selling, general & administrative
    expenses |               |           | 1,547  |         |  |       | 3,640 |          |  |      | 2,064  |          |  |       | 1,362 |        |  |   | 2,841  |         |  |   | 7,818  |        |   |   | 19,272  |        
|Depreciation and Amortization                  |               |           | 4,080  |         |  |       | 3,373 |          |  |      | 2,148  |          |  |       | 2,741 |        |  |   | 3,745  |         |  |   | 901    |        |   |   | 16,988  |        
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|Loss from operations                           |               | $         | (3,896 | )       |  | $     | (274  | )        |  | $    | (2,127 | )        |  | $     | (859  | )      |  | $ | (1,379 | )       |  | $ | (8,719 | )      |   | $ | (17,254 | )      
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|                                               | Total assets  |           | $      | 126,673 |  |       | $     | 157,008  |  |      | $      | 52,870   |  |       | $     | 49,996 |  |   | $      | 107,246 |  |   | $      | 29,774 |   |   | $       | 523,567 | 
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|Capital expenditures                           |               | $         | (72    | )       |  | $     | 428   |          |  | $    | 94     |          |  | $     | 205   |        |  | $ | 1,122  |         |  | $ | 208    |        |   | $ | 1,985   |        
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|EBITDA                                         |               | $         | 184    |         |  | $     | 3,099 |          |  | $    | 21     |          |  | $     | 1,882 |        |  | $ | 2,366  |         |  | $ | (7,818 | )      |   | $ | (266    | )      
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|Restructuring expenses(2)                      |               | $         | 164    |         |  | $     | 82    |          |  | $    | 270    |          |  | $     | 13    |        |  | $ | 87     |         |  | $ | 4,349  |        |   | $ | 4,965   |        
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        
|EBITDAR                                        |               | $         | 348    |         |  | $     | 3,181 |          |  | $    | 291    |          |  | $     | 1,895 |        |  | $ | 2,453  |         |  | $ | (3,469 | )      |   | $ | 4,699   |        
|                                               |               |           |        |         |  |       |       |          |  |      |        |          |  |       |       |        |  |   |        |         |  |   |        |        |   |   |         |        

|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |           | 
|---------------------------------------------- | ------------- | --------- | ------ | ------- |  | ----- | ------ | -------- |  | ---- | ------ | -------- |  | ----- | ------ | ------ |  | - | ------ | ------- |  | - | ------ | ------- | - | - | ------- | --------- | 
|Three Months Ended                             |               |           |        |         |  |       |        |          |  |      |        |          |  |      
|March 31, 2002                                 |               | Argentina |        | Brazil  |  | Chile |        | Colombia |  | Peru |        | Other(1) |  | Total
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |      
|(Unaudited)                                    |               |           |        |         |  |       |        |          |  |      |        |          |  |      
|REVENUE:                                       |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|Data-Internet services                         |               | $         | 1,438  |         |  | $     | 12,730 |          |  | $    | 2,950  |          |  | $     | 5,498  |        |  | $ | 3,872  |         |  | $ |       |         |   | $ | 26,488  |          
|Voice services                                 |               |           | 3,479  |         |  |       | 1,746  |          |  |      | 6,090  |          |  |       | 103    |        |  |   | 6,533  |         |  |   | (278   | )       |   |   | 17,673  |          
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|                                               | TOTAL REVENUE |           |        | 4,917   |  |       |        | 14,476   |  |      |        | 9,040    |  |       |        | 5,601  |  |   |        | 10,405  |  |   |        | (278    | ) |   |         | 44,161    | 
|Cost of revenue                                |               |           | 4,167  |         |  |       | 9,626  |          |  |      | 6,179  |          |  |       | 3,613  |        |  |   | 5,179  |         |  |   | (278   | )       |   |   | 28,486  |          
|Selling, general & administrative
    expenses |               |           | 3,523  |         |  |       | 9,019  |          |  |      | 3,036  |          |  |       | 2,232  |        |  |   | 3,771  |         |  |   | 7,590  |         |   |   | 29,171  |          
|Depreciation and amortization                  |               |           | 3,424  |         |  |       | 4,848  |          |  |      | 1,604  |          |  |       | 2,394  |        |  |   | 2,520  |         |  |   | 2,402  |         |   |   | 17,192  |          
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|Loss from operations                           |               | $         | (6,197 | )       |  | $     | (9,017 | )        |  | $    | (1,779 | )        |  | $     | (2,638 | )      |  | $ | (1,065 | )       |  | $ | (9,992 | )       |   | $ | (30,688 | )        
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|                                               | Total assets  |           | $      | 207,998 |  |       | $      | 438,381  |  |      | $      | 61,521   |  |       | $      | 68,910 |  |   | $      | 115,891 |  |   | $      | 597,620 |   |   | $       | 1,490,321 | 
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|Capital expenditures                           |               | $         | 1,348  |         |  | $     | 735    |          |  | $    | 2,652  |          |  | $     | 605    |        |  | $ | 3,153  |         |  | $ | (1,159 | )       |   | $ | 7,334   |          
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|EBITDA                                         |               | $         | (2,773 | )       |  | $     | (4,169 | )        |  | $    | (175   | )        |  | $     | (244   | )      |  | $ | 1,455  |         |  | $ | (7,590 | )       |   | $ | (13,496 | )        
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          
|EBITDAR                                        |               | $         | (2,773 | )       |  | $     | (4,169 | )        |  | $    | (175   | )        |  | $     | (244   | )      |  | $ | 1,455  |         |  | $ | (7,590 | )       |   | $ | (13,496 | )        
|                                               |               |           |        |         |  |       |        |          |  |      |        |          |  |       |        |        |  |   |        |         |  |   |        |         |   |   |         |          



---



|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists primarily of corporate operations and
    inter-company eliminations. All material inter-company accounts
    and transactions have been eliminated.                                                       
|(2) | Restructuring expenses consist of professional
    fees to financial, legal and other advisors, as well as
    severance payments to personnel incurred in connection with the
    Companys reorganization process.

There are no significant transfers between
country operations. 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 and does
not include interest expense, interest income and other
(expense) income, net minority interest income and
provision for 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.

19



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)




|          |                              
|--------- | -----------------------------
|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.

On April 11, 2003, involuntary petitions
under chapter 11 of the United States Bankruptcy Code were
filed by MatlinPatterson Global Opportunities Partners, LP, one
of the Companys secured creditors, against AT&T Latin
America Corp., AT&T Argentina, S.A. and a special-purpose
entity related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of the
Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11
case. On the same day, April 17, 2003, certain other
subsidiaries of AT&T Latin America Corp. such as Frantis,
Inc., Nantis, Inc., Jamtis, Inc. and Jamtis, LLC each filed
voluntary petitions for relief under chapter 11. On
April 30, 2003, AT&T Argentina, S.A. also consented to
an order for relief. The foregoing cases are being jointly
administered. As a consequence of the bankruptcy petition,
pending claims and litigation against AT&T Latin America
Corp. and the other entities involved in the chapter 11
proceeding are stayed automatically by Section 362 of the
Bankruptcy Code, and absent further order of the Bankruptcy
Court, no party may take any action to recover any pre-petition
claims, enforce any lien against or obtain possession of any
property from the Company.

Prior to the initiation of the chapter 11
cases, we were 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 plantiffs attorneys fees and costs, and
alleges plaintiff has been a shareholder of the Company for a
relevant period. As a consequence of the bankruptcy petition,
this action has been stayed automatically by Section 362 of
the Bankruptcy Code.

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. In
November 2002 Siemens initiated a second, similar action,
covering approximately $4.0 million original face amount of
notes. We received an adverse judgment in the first proceeding
in October 2002 and in the second proceeding in January 2003. We
have appealed the first action and expect to appeal the second
action when judgment is formally entered. We also have
$3.7 million in additional notes to Siemens that were due
in March 2003. Prior to the chapter 11 proceeding we had
been in discussions with this creditor to resolve and reschedule
these obligations. In June 2002 we also received a complaint in
New York State Supreme Court from IIG Capital, an 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. As a consequence
of the bankruptcy petition, we believe all of these actions have
been stayed automatically by Section 362 of the Bankruptcy
Code.

In November 2002 Banco Itaú S.A. initiated a
legal proceeding in Brazil against our subsidiary, AT&T do
Brasil, concerning a loan in the amount of approximately US
$12.0 million. Banco Itaú S.A. has attempted

20



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


to accelerate payment of all amounts outstanding
under the loan of which approximately US $6.3 million at
March 31, 2003 was past due. In January 2003 AT&T do
Brasil filed a pre-executory exception in this collection action
which exception was reversed in March 2003. Also, at the request
of Banco Itaú S.A., in the same decision the court decided:
(i) to grant to Banco Itaú S.A. rights over certain
forward contracts totalling approximately $9.4 million (as
of March 14, 2003) in favor of the Company, which are
payable in April 2003; and (ii) to create a pledge of
credits and cash on certain bank accounts of AT&T do Brasil
indicated by Banco Itaú S.A. However, on March 24,
2003, AT&T do Brasil obtained a suspension on the pledge
order in an interlocutory appeal. The execution is suspended
until the interlocutory appeal is decided.

On November 17, 2002, HSBC initiated a legal
proceeding in Brazil against AT&T do Brasil asserting a
claim for attachment of assets and rights on an $8.4 million
loan. On December 13, 2002, AT&T do Brasil filed a
Provisional Remedy to suspend the effects of a cross default and
acceleration clause contained in two loan agreements entered
into with HSBC. The injunction was granted on December 16,
2002 and the ability of HSBC to accelerate the loan agreements
was suspended. On December 27, 2002, HSBC contested the
injunction but the court confirmed its decision. After
negotiation with HSBC, on April 17, 2003, we reached an
agreement to restructure the loan. In connection with the
restructuring we were able to extend the maturity of the loan
for six years with a two year grace period on principal
payments. As part of the restructuring we paid $2.0 million
of principal plus accrued interest. The balance of the debt will
carry an interest rate of LIBOR plus 1.625% and will be
converted into Brazilian Reais on January 16, 2004. At that
point, the Company will pay CDI (a floating rate in the local
market which as of March 31, 2003 was approximately 26%)
plus a margin of 5.0%, amounting to approximately 31% on an
all-in basis.

We have not paid approximately $8.2 million
under contracts with AT&T Corp., including approximately
$2.1 million under our service mark license agreements. We
are in discussions with AT&T Corp. regarding a restructuring
of our obligations under certain of these contracts.

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.



|          |                            
|--------- | ---------------------------
|NOTE  7  | OTHER EXPENSE (INCOME), NET

As of March 31, 2003, we had foreign
currency forward contracts that hedge certain transactions with
notional amounts of $147.8 million, maturing in various
dates through November 2003. The total $22.6 million fair
value of forward currency contract assets, which are included as
prepaid expenses and other current assets on our March 31,
2003 balance sheet, represents unrealized gains on our forward
currency contracts selling or buying foreign currencies as
result of the strengthening or weakening of the dollar compared
to the currencies that we hedge. In April 2003 all of our
forward contracts were settled in advance of their respective
maturity dates with our counter party financial institutions
resulting in net cash proceeds of approximately
$21.3 million.

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 March 31, 2002, we had deferred
losses of approximately $20.2 million in other
comprehensive income (loss) related to anticipated cash
transactions, all of which were settled during 2002.

21



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


In March 2002 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 is
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 a loss
which was included in other expense (income), net of
$6.3 million.



|          |                           
|--------- | --------------------------
|NOTE  8  | 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% 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
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
investment options made by the participants are included in our
consolidated statement of operations. To date we have included
approximately $0.2 million of investment losses with
respect to participants investment elections.

The plan entitled 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) was equal to 0.5384 multiplied by the participants
account balance upon distribution. As of December 31, 2002,
we had 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 December 31, 2002, the
amount recorded as deferred compensation in the plan was
approximately $2.8 million.

During January 2003 all participants having
undistributed balances in the deferred compensation plan waived
their rights to their additional amounts calculated as a
gross-up in lieu of early distribution of the then-current
balances that they had contributed in prior periods.
Participation in the plan was terminated in the first quarter of
2003.



|          |                    
|--------- | -------------------
|NOTE  9  | STOCK OPTIONS PLANS

In December 2002, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standard No. 148 (SFAS 148),
Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment to
FAS 123. This statement provides alternative methods
of transition for a voluntary change to the fair value method of
accounting for stock based employee compensation. In addition,
the statement amends the disclosure requirements of Statement of
Financial Accounting Standard No. 123 Accounting for
Stock Based Compensation (SFAS 123) to
require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock
based employee compensation and the effect of the method on
reported results. We do not intend to change to the fair value
method of accounting for stock based employee compensation. The
Company follows the disclosure-only provisions of SFAS 123
and in accordance with its provisions, applies APB
Opinion No. 25 Accounting for Stock Issued to
Employees. Pursuant to SFAS 123, we elected to use
the intrinsic value method of accounting for our employee and
director stock-based compensation awards. Our pro forma net loss
and loss per share for the

22



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


quarters ended March 31, 2003 and 2002, had
we elected to adopt the fair value approach of SFAS 123,
which charges earnings to estimated fair value of stock options,
would have been as follows:

|                                  |             |                    |   |         |   |  |   |          |  
|--------------------------------- | ----------- | ------------------ | - | ------- | - |  | - | -------- | -
|                                  |             |                   
|                                  |             | Three Months Ended
|                                  |             | March 31,         
|                                  |             |                   
|                                  |             | 2003               |   | 2002   
|                                  |             |                    |   |        
|Net loss:                         |             |                    |   |         |   |  |   |         
|                                  | As reported |                    | $ | (48,172 | ) |  | $ | (345,321 | )
|                                  |             |                    |   |         |   |  |   |         
|                                  | Pro forma   |                    | $ | (50,739 | ) |  | $ | (351,052 | )
|                                  |             |                    |   |         |   |  |   |         
|Basic and diluted loss per share: |             |                    |   |         |   |  |   |         
|                                  | As reported |                    | $ | (0.41   | ) |  | $ | (2.92    | )
|                                  |             |                    |   |         |   |  |   |         
|                                  | Pro Forma   |                    | $ | (0.43   | ) |  | $ | (2.96    | )
|                                  |             |                    |   |         |   |  |   |         

As determined using the Black-Scholes
option-pricing model the weighted-average fair values of options
we granted during 2002, was $1.71 per share, respectively, at
the dates of grant. We used the following weighted-average
assumptions for fiscal 2002; expected dividend yields of 0.00%;
volatility of 200.8%; risk free interest rates of 3.3%; and
expected option life of seven years in 2002. No stock-based
awards have been granted in 2003.



|           |                              
|---------- | -----------------------------
|NOTE  10  | NEW ACCOUNTING PRONOUNCEMENTS

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.

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 August 2001, FASB issued SFAS No. 143,
Accounting for Obligations Associated with the Retirement
of Long-Lived Assets. SFAS No. 143 requires
retirement obligations to be recognized when they are incurred
and displayed as liabilities, with a corresponding amount
capitalized as part of the related long-lived asset. The
capitalized element is required to be expensed using a
systematic and rational method over its

23



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


useful-life. We adopted SFAS 143 by the Company
commencing January 1, 2003 and its adoption did not impact
our financial position, results of operations or cash flows for
the period presented.

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. This
statement, among other things, changes the way gains and losses
from the extinguishment of debt are reported. Previously, all
gains and losses from the extinguishment of debt were required
to be reported as an extraordinary item, net of related tax
effect. Under FAS 145, gains and losses from the extinguishment
of debt should be reported as part of on-going operations,
unless the extinguishment of debt is both an unusual and
infrequent event for the entity. Previously reported
extraordinary gains and losses from the extinguishment of debt
that are not unusual or infrequent should be reclassified. This
statement is effective for calendar year 2003. Previously
reported extraordinary losses from the extinguishment of debt
have been reclassified. Accordingly, other expense (income), net
includes the loss associated with the restructuring of our debt
during 2002. The adoption of this statement did not impact
previously reported net income.

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). We adopted SFAS 146, and its adoption
did not impact our financial position, results of operations or
cash flows for the period presented.

In November 2002 the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). This
interpretation addresses the disclosures to be made by a
guarantor in its interim and annual financial statements about
its obligations under guarantees and clarifies when a liability
for the obligation undertaken should be recognized. The initial
measurement of the liability is the fair value of the guarantee
at its inception. This interpretation does not prescribe a
specific account for the guarantors offsetting entry when
it recognizes the liability at the inception of a guarantee nor
does it specify the subsequent measurement of the guarantors
recognized liability. The initial recognition and measurement
provisions shall be applied on a prospective basis to guarantees
issued or modified after December 31, 2002. The disclosure
requirements are included in Note 3. FIN 45 is not
expected to have a material effect on the Companys
consolidated results of operation and financial position.



|           |                  
|---------- | -----------------
|NOTE  11  | SUBSEQUENT EVENTS

On April 11, 2003, involuntary petitions
under chapter 11 of the United States Bankruptcy Code were
filed by MatlinPatterson Global Opportunities Partners, LP, one
of the Companys secured creditors, against AT&T Latin
America Corp., AT&T Argentina, S.A. and a special-purpose
entity related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of
the Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11
case. On the same day, April 17, 2003, certain other
subsidiaries of AT&T Latin America Corp. such as Frantis,
Inc., Nantis, Inc., Jamtis, Inc. and Jamtis, LLC each filed
voluntary petitions for relief under chapter 11. On

24



---



##### 



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 31, 2003 and December 31,
2002


(Unaudited)


April 30, 2003, AT&T Argentina, S.A.
also consented to an order for relief. The foregoing cases are
being jointly administered.

On April 11, 2003, the company completed a
multibank restructuring of approximately $7.1 million or
80% of its bank debt in Colombia. AT&T Colombia made an
initial down payment of approximately 12.0% of this outstanding
amount in consideration for a six year facility including a two
year grace period on payment of principal. The debt has an
interest rate of DTF (a floating rate in the local market which
as of March 31, 2003 was approximately 7.4%) plus a margin
of 5.5%, amounting to approximately 12.9% on an all-in basis. On
April 17, 2003, the company successfully restructured
$8.4 million of its bank debt with a Brazilian lender. In
consideration for a six year facility including a two year grace
period on principal payments, the company made an upfront
payment of $2.0 million plus accrued interest. The balance
of the debt will carry an interest rate of LIBOR plus 1.625% and
will be converted into Brazilian Reais on January 16, 2004.
At that point, the company will pay CDI (a floating rate in the
local market which as of March 31, 2003 was approximately
26%) plus a margin of 5.0%, amounting to approximately 31% on an
all-in basis.

* * * * *

25



---



##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 restructure
    successfully the capital structure of the Company, through
    discussions 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 other matters that are described
in this 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 report:



| |   |                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 problems;                                                                                                                                        
|
| |  | the outcome of litigation matters and asserted
    claims brought or made against us by various creditors;                                                                                                                                                                                                       
|
| |  | whether the chapter 11 case adversely affects the
    relationships with our customers, suppliers and employees, which
    adverse effects could, in turn, diminish liquidity and the going
    concern value of our business, particularly if the chapter 11
    case is protracted;                            
|
| |  | whether the chapter 11 case creates adverse
    commercial, financial, regulatory or other effects on the
    operations of our in-region operating subsidiaries (including
    operating subsidiaries that are not debtors in those
    proceedings) which could adversely affect the value of our
    business;
|
| |  | any plan of reorganization or disposition
    proposed by the Company as a part of the reorganization
    proceedings may not receive the requisite creditor votes to
    enable it to be confirmed or the Bankruptcy Court could approve
    a plan of reorganization other than one proposed by us;            
|
| |  | our operating subsidiaries, other than AT&T
    Argentina, may also be forced into reorganization proceedings
    (in the United States or under analogous proceedings under local
    laws);                                                                                                                    
|
| |  | a chapter 11 plan of reorganization may not be
    timely or fully confirmed or implemented by the Bankruptcy
    Court, which may require us to sell or liquidate the Company;                                                                                                                                  
|
| |  | our reorganization proceeding may have an adverse
    effect on our financial results;                                                                                                                                                                                                                           
|
| |  | whether economic and political conditions in the
    countries in which we operate improve or deteriorate compared to
    our current expectations;                                                                                                                                                              
|
| |  | inaccurate forecasts of customer or market demand;                                                                                                                                                                                                                                                               
|
| |  | currency fluctuations;                                                                                                                                                                                                                                                                                           

26



---



##### 





| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | our assessment of any 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 retain and build relationships
    with existing customers;                                                          
|
| |  | 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; and
|
| |  | our ability to retain key personnel.                                                                                                

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



| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations regarding debt service and
    principal payments owing on existing financing facilities;                                                                      
|
| |  | the amount of cash expected to be used in our
    operations;                                                                                                                   
|
| |  | our ability to maintain and 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 impact of fluctuations in currency exchange
    rates in the countries in which we operate, including the effect
    on any current or future currency hedging arrangements.

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 report.

27



---



##### 



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 other providers 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 consolidated financial statements
reflect operations for the three months ended March 31,
2003 and 2002, in accordance with accounting principles
generally accepted in the United States of America. The
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. The appropriateness of using the going
concern basis in the future, however, will be dependent upon our
ability to successfully implement a plan of reorganization or
other disposition or restructuring of the Company that is
approved by the U.S. Bankruptcy Court. There is no assurance
that we will be able to successfully implement such a plan of
reorganization, disposition or restructuring on acceptable terms
and conditions, or at all, and, accordingly, there is
substantial doubt about our ability to continue as a going
concern.

As a result of the pending chapter 11 case (see
the discussion below in Recent Events 
Restructuring Activities and chapter 11 Case), for
the period beginning April 11, 2003 and thereafter, the
Company will prepare its consolidated financial statements in
accordance with Statement of Position
(SOP) 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code.
SOP 90-7 requires, among other things, that pre-petition
liabilities subject to compromise be segregated in the
consolidated balance sheet as liabilities subject to compromise
and that revenues, expenses, realized gains and losses and
provisions for

28



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##### 



losses resulting from the reorganization and
restructuring of the Company be reported separately as
reorganization items in the consolidated statement of operations.


Recent Events  Restructuring
Activities and Chapter 11 Case

On April 11, 2003, involuntary petitions
under chapter 11 of the United States Bankruptcy Code were
filed by MatlinPatterson Global Opportunities Partners, LP, one
of the Companys secured creditors, against AT&T Latin
America Corp., AT&T Argentina, S.A. and a special-purpose
entity related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of the
Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11
case. On the same day, April 17, 2003, certain other
subsidiaries of AT&T Latin America Corp. such as Frantis,
Inc., Nantis, Inc., Jamtis, Inc. and Jamtis, LLC each filed
voluntary petitions for relief under chapter 11. On
April 30, 2003, AT&T Argentina, S.A. also consented to
an order for relief. The foregoing cases are being jointly
administered.

As a consequence of the bankruptcy petition,
pending claims and litigation against AT&T Latin America
Corp. and the other entities involved in the chapter 11
proceeding are stayed automatically by Section 362 of the
Bankruptcy Code, and absent further order of the Bankruptcy
Court, no party may take any action to recover any pre-petition
claims, enforce any lien against or obtain possession of any
property from the Company. In addition, pursuant to
Section 365 of the Bankruptcy Code, the Company may reject
or assume pre-petition executory contracts and unexpired leases,
and parties affected by rejections of theses contracts or leases
may file claims with the Bankruptcy Court in accordance with the
chapter 11 reorganization process.

The Company conducts its operations through
direct and indirect subsidiaries of AT&T Latin America Corp.
While AT&T Latin America Corp., its U.S. affiliates and
AT&T Argentina, S.A., are in the reorganization process, we
expect our other country operating subsidiaries (which include
AT&T do Brasil Ltda., AT&T Chile Long Distance S.A.,
AT&T Colombia S.A. and AT&T Peru S.A.) will continue to
operate in the ordinary course of business, as they are not
directly involved with the chapter 11 proceedings. We
believe that most of our trade suppliers, unsecured general
creditors, employees and customers will not be adversely
affected while we are involved in the chapter 11 bankruptcy
proceedings. During this reorganization process, we have
attempted to maintain normal and regular trade terms with our
suppliers and customers. However, there can be no assurance that
our suppliers will continue to provide normal trade credit or
credit on terms acceptable to us, if at all, or that customers
will continue to do business or enter into new business
with us.

If the process for implementing a plan of
reorganization or other disposition of the Company is delayed or
abandoned, we may encounter increased difficulty in retaining
customers and key employees which could, in turn, result in
significant declines in revenue, or increases in restructuring
and other costs that would adversely impact our liquidity and
reduce the time period for which our existing cash and cash
equivalents would fund our operations. If a plan of
reorganization or other disposition, or a comprehensive
restructuring is not completed, we may be forced to liquidate
under applicable provisions of the Bankruptcy Code. There can be
no assurance of the level of recovery our secured and unsecured
creditors would receive in such a liquidation. In the event that
such a plan of reorganization, other disposition or
restructuring of the Company and its affiliates (including
affiliates not included currently in the chapter 11
proceedings) is completed, all equity interests in the Company,
including shares of our Class A and Class B common
stock, likely will be cancelled and discharged and the holders
of such equity securities likely will not receive any
distribution.

On April 11, 2003, the company completed a
multibank restructuring of approximately $7.1 million or
80% of its bank debt in Colombia. AT&T Colombia made an
initial down payment of approximately 12.0% of this outstanding
amount in consideration for a six year facility including a two
year grace period on payment of principal. The debt has an
interest rate of DTF (a floating rate in the local market which
as of March 31, 2003 was approximately 7.4%) plus a margin
of 5.5%, amounting to approximately 12.9% on an all-in basis. On
April 17, 2003, the company successfully restructured
$8.4 million of its bank debt with a Brazilian lender. In
consideration for a six year facility including a two year grace
period on principal payments, the company

29



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made an upfront payment of $2.0 million plus
accrued interest. The balance of the debt will carry an interest
rate of LIBOR plus 1.625% and will be converted into Brazilian
Reais on January 16, 2004. At that point, the company will
pay CDI (a floating rate in the local market which as of
March 31, 2003 was approximately 26%) plus a margin of
5.0%, amounting to approximately 31% on an all-in basis.


Results of Operations

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

AT&T LATIN AMERICA CORP.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |         |        | 
|----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------- | ------- | ------ | - | -------- | ------- | ------ | 
|                                                                                                |                                                                                                                                   |                   
|                                                                                                |                                                                                                                                   | Three Months Ended
|                                                                                                |                                                                                                                                   | March 31,         
|                                                                                                |                                                                                                                                   |                   
|                                                                                                |                                                                                                                                   | 2003               |         | 2002   
|                                                                                                |                                                                                                                                   |                    |         |        
|Revenue:                                                                                        |                                                                                                                                   |                    |         |         |        |   |          |        
|                                                                                                | Data-Internet services                                                                                                            |                    | $       | 25,475  |        |   | $        | 26,488  |       
|                                                                                                | Voice services                                                                                                                    |                    |         | 13,614  |        |   |          | 17,673  |       
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|                                                                                                |                                                                                                                                   | Total revenue      |         |         | 39,089 |   |          |         | 44,161 | 
|Cost of revenue                                                                                 |                                                                                                                                   |                    | 20,083  |         |        |   | 28,486   |        
|Selling, general and administrative expenses                                                    |                                                                                                                                   |                    | 19,272  |         |        |   | 29,171   |        
|Depreciation and amortization                                                                   |                                                                                                                                   |                    | 16,988  |         |        |   | 17,192   |        
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|                                                                                                | Loss from operations                                                                                                              |                    |         | (17,254 | )      |   |          | (30,688 | )     
|Interest expense                                                                                |                                                                                                                                   |                    | 39,033  |         |        |   | 21,803   |        
|Interest income                                                                                 |                                                                                                                                   |                    | 359     |         |        |   | 198      |        
|Other (expense) income, net                                                                     |                                                                                                                                   |                    | 7,897   |         |        |   | (25,337  | )      
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|                                                                                                | Loss before provision for income taxes, minority
    interest income, and cumulative effect of change in accounting
    principle |                    |         | (48,031 | )      |   |          | (77,630 | )     
|Provision for income taxes                                                                      |                                                                                                                                   |                    | 141     |         |        |   |         |        
|Minority interest income                                                                        |                                                                                                                                   |                    |        |         |        |   | 94       |        
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|                                                                                                | Loss before cumulative effect of change in
    accounting principle                                                               |                    |         | (48,172 | )      |   |          | (77,536 | )     
|Cumulative effect of change in accounting
    principle                                         |                                                                                                                                   |                    |        |         |        |   | (267,785 | )      
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|Net loss                                                                                        |                                                                                                                                   | $                  | (48,172 | )       |        | $ | (345,321 | )      
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|Basic and diluted loss per common share
    cumulative effect of change in accounting principle |                                                                                                                                   | $                  | (0.41   | )       |        | $ | (0.66    | )      
|Cumulative effect of change in accounting
    principle loss per common share                   |                                                                                                                                   |                    |        |         |        |   | (2.26    | )      
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|Basic and diluted net loss per common share                                                     |                                                                                                                                   | $                  | (0.41   | )       |        | $ | (2.92    | )      
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        
|Weighted average common shares outstanding                                                      |                                                                                                                                   |                    | 118,672 |         |        |   | 118,399  |        
|                                                                                                |                                                                                                                                   |                    |         |         |        |   |          |        

30



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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 months ended March 31, 2003 and
2002:

|                                             |           |                      |        |        |         |      |      |      |       |    |        |        |         |   |      |      |       |   
|-------------------------------------------- | --------- | -------------------- | ------ | ------ | ------- | ---- | ---- | ---- | ----- | -- | ------ | ------ | ------- | - | ---- | ---- | ----- | --
|                                             |           |                     
|                                             |           | Three Months Ended  
|                                             |           | March 31,           
|                                             |           |                     
|                                             |           | 2003                 |        | %      |         | 2002 |      | %   
|                                             |           |                      |        |        |         |      |      |     
|                                             |           |                     
|                                             |           | ($s in thousands)  
|                                             |           |                     
|                                             |           | (Unaudited)         
|Revenue:                                     |           |                      |        |        |         |      |      |      |       |    |        |        |         |   |      |     
|                                             | Argentina |                      | $      | 6,150  |         |      |      | 15.7 | %     |    | $      | 4,917  |         |   |      | 11.1 | %    
|                                             | Brazil    |                      |        | 11,952 |         |      |      | 30.6 | %     |    |        | 14,476 |         |   |      | 32.8 | %    
|                                             | Chile     |                      |        | 6,051  |         |      |      | 15.5 | %     |    |        | 9,040  |         |   |      | 20.5 | %    
|                                             | Colombia  |                      |        | 5,925  |         |      |      | 15.2 | %     |    |        | 5,601  |         |   |      | 12.7 | %    
|                                             | Peru      |                      |        | 10,256 |         |      |      | 26.2 | %     |    |        | 10,405 |         |   |      | 23.6 | %    
|                                             | Other     |                      |        | (1,245 | )       |      |      | (3.2 | %)    |    |        | (278   | )       |   |      | (0.6 | %)   
|                                             |           |                      |        |        |         |      |      |      |       |    |        |        |         |   |      |     
|                                             |           | Total revenue        |        |        | 39,089  |      |      |      | 100.0 | %  |        |        | 44,161  |   |      |      | 100.0 | % 
|Cost of revenue                              |           |                      | 20,083 |        |         |      | 51.4 | %    |       |    | 28,486 |        |         |   | 64.5 | %   
|Selling, general and administrative expenses |           |                      | 19,272 |        |         |      | 49.3 | %    |       |    | 29,171 |        |         |   | 66.1 | %   
|Depreciation and amortization                |           |                      | 16,988 |        |         |      | 43.5 | %    |       |    | 17,192 |        |         |   | 38.9 | %   
|                                             |           |                      |        |        |         |      |      |      |       |    |        |        |         |   |      |     
|                                             |           | Loss from operations |        | $      | (17,254 | )    |      |      | (44.1 | %) |        | $      | (30,688 | ) |      |      | (69.5 | %)
|                                             |           |                      |        |        |         |      |      |      |       |    |        |        |         |   |      |     



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2003
    Compared to Three Months Ended March 31, 2002

|         |                        |                    |   |        |        |   |   |        |        |  |   |        |        |   |  |       |       |   
|-------- | ---------------------- | ------------------ | - | ------ | ------ | - | - | ------ | ------ |  | - | ------ | ------ | - |  | ----- | ----- | --
|         |                        |                    |   |        |        |  
|         |                        | Three Months Ended |   |       
|         |                        | March 31,          |   | Change
|         |                        |                    |   |       
|         |                        | 2003               |   | 2002   |        | $ |   | %     
|         |                        |                    |   |        |        |   |   |       
|         |                        |                   
|         |                        | ($s in thousands)
|         |                        |                   
|         |                        | (Unaudited)       
|REVENUE: |                        |                    |   |        |        |   |   |        |        |  |   |        |        |   |  |      
|         | Data-Internet services |                    | $ | 25,475 |        |   | $ | 26,488 |        |  | $ | (1,013 | )      |   |  | (3.8  | %)   
|         | Voice services         |                    |   | 13,614 |        |   |   | 17,673 |        |  |   | (4,059 | )      |   |  | (23.0 | %)   
|         |                        |                    |   |        |        |   |   |        |        |  |   |        |        |   |  |      
|         |                        | Total revenue      |   | $      | 39,089 |   |   | $      | 44,161 |  |   | $      | (5,072 | ) |  |       | (11.5 | %)
|         |                        |                    |   |        |        |   |   |        |        |  |   |        |        |   |  |      

Revenue.Revenue for
the three months ended March 31, 2003 was
$39.1 million, compared to revenue of $44.2 million
for the same period in 2002, representing a decrease of
$5.1 million or 11.5%. We experienced a revenue decrease in
Brazil, Chile and Peru. The decrease in revenue in
U.S. dollar terms generated in Brazil during the period
ended March 31, 2003 was due mainly to the currency
fluctuations of the Brazilian Real, causing a decrease of
approximately $4.6 million during the three months ended
March 31, 2003, when compared to the same period in 2002.
Brazil experienced volume increases during the three months
ended March 31, 2003, when compared to the same period in
2002, which generated approximately $2.1 million in
additional revenue in 2003. The decrease in Chiles revenue
was due mainly to a reduction of approximately $3.3 million
in voice services revenue, as Chile continues to reduce its low
margin voice services, offset by volume increase in
data-Internet services of approximately $0.4 million. The
decrease in Perus revenue was mainly due to a reduction of
$0.8 million in voice services revenue, as Peru continues
to experienced price competition by local carriers, offset by
volume increase in data-Internet services of approximately
$0.6 million. We experienced revenue increases in Argentina
and Colombia. The increases in Argentina and Colombia were
driven by volume increases in data-Internet and voice services,
generating approximately $4.6 million in additional revenue
during the three months ended March 31, 2003. This increase
was offset by currency devaluation of the Argentine peso of
approximately 52.3% during the period, resulting in
approximately $3.1 million lower reported revenue in
U.S. dollar terms, when compared to
March 31, 2002.

The net decrease in revenue resulted from a
reduction of voice services revenue in Chile and Peru and the
translation effect of the weakening of the Argentina peso and
the Brazilian real against the U.S. dollar, which
devaluated 52.3% and 46.6%, respectively, when compared to the
same period in 2002.

31



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##### 



Our data-Internet services revenue decreased from
$26.5 million during the three months ended March 31,
2002, to $25.5 million for the same period in 2003,
representing a decrease of $1.0 million or 3.8%. The
decrease in our data-Internet services was mainly due to the
translation effect of the weakening of the Argentina peso and
the Brazilian real against the U.S. dollar, offset by
increased demand for our data-Internet services from our
existing business customers and new customers. Data-Internet
services accounted for 65.2% of our revenue during the three
months ended March 31, 2003.

Revenue from voice services decreased from
$17.7 million during the three months ended March 31,
2002 to $13.6 million for the same period in 2003,
representing a decrease of $4.1 million or 23.0%. 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 and Brazil.

Cost of Revenue.Cost of revenue was $20.1 million
for the three months ended March 31, 2003, compared to
$28.5 million for the same period in 2002, representing a
decrease of $8.4 million or 29.5%. 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 a successful implementation of a company-wide effort
to renegotiate contracts with third-party vendors to secure more
favorable terms. We secured lower-cost 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 benefit
from lower pricing from third party network providers, or from
termination and substitution of non-cost effective contracts in
late 2002 and early 2003.

Selling, General and Administrative Expenses.Selling, general and administrative
expenses were $19.3 million during the three months ended
March 31, 2003, compared to $29.2 million for the same
period in 2002, representing a decrease of $9.9 million or
33.9%. 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 2002 as part of
our restructuring efforts. Headcount was reduced from 1,751 at
March 31, 2003 to 963 at March 31, 2003, a 45.0%
reduction. We anticipate selling, general and administrative
expenses will decrease in the near term as a result of further
cost improvement initiatives and the end of severance
obligations with respect to employees terminated, as well as
additional measures that may be undertaken in order to preserve
cash to improve the Companys liquidity situation. However,
we expect these reductions will be offset in part by higher
professional fees and expenses relating to our restructuring
initiatives, creditor negotiations and sale process. During the
three months ended March 31, 2003, we incurred
$5.0 million in restructuring expenses mainly comprised of
professional fees in connection with our restructuring efforts.
Selling, general and administrative expenses are comprised
primarily of compensation, professional fees, travel expenses,
marketing, office space and indirect labor expenses.

EBITDA.We calculate
EBITDA as loss from operations plus depreciation and
amortization expenses. EBITDA for the three months ended
March 31, 2003, was $(0.3) million, compared to EBITDA
of $(13.5) million for the same period in 2002. Our country
operations had a combined $7.6 million positive EBITDA for
the three months ended 2003. Corporate operations contributed a
$(7.8) million negative EBITDA, resulting in a consolidated
negative EBITDA of $(0.3) million for the three months
ended March 31, 2003. The improvement in EBITDA as a
percentage of revenue reflects our implementation of
cost-containment measures, lower headcount, lower cost of
revenue and lower selling and general administrative expenses
when compared to 2002. We expect EBITDA will continue to improve
in absolute terms and as a percentage of revenue during the
remainder of the year.

EBITDAR.We
calculate EBITDAR as EBITDA plus restructuring expenses. EBITDAR
for the three months ended March 31, 2003, was
$4.7 million, compared to EBITDAR of $(13.5) million for
the same period in 2002. All of our country operations had a
combined positive EBITDAR for the three months ended
March 31, 2003, except for corporate operations. The
improvement in EBITDAR in absolute terms and as a

32



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##### 



percentage of revenue reflects our implementation
of cost-containment measures, lower headcount, lower cost of
revenue and lower selling and general administrative expenses,
after excluding restructuring expenses, when compared to 2002.
We expect EBITDAR will continue to improve in absolute terms and
as a percentage of revenue during the remainder of the year.


The following table shows our calculation of
EBITDA and EBITDAR as of March 31, 2003 and 2002,
respectively.

|                                                                                          |       |                    |         |      |  |   |         |   | 
|----------------------------------------------------------------------------------------- | ----- | ------------------ | ------- | ---- |  | - | ------- | - | 
|                                                                                          |       |                   
|                                                                                          |       | Three Months Ended
|                                                                                          |       | March 31,         
|                                                                                          |       |                   
|                                                                                          |       | 2003               |         | 2002
|                                                                                          |       |                    |         |     
|                                                                                          |       |                   
|                                                                                          |       | (Unaudited)       
|Loss from operations plus:                                                                |       | $                  | (17,254 | )    |  | $ | (30,688 | )
|Depreciation and amortization                                                             |       |                    | 16,988  |      |  |   | 17,192  |  
|                                                                                          |       |                    |         |      |  |   |         |  
|EBITDA                                                                                    |       |                    | (266    | )    |  |   | (13,496 | )
|                                                                                          | plus: |                    |         |      |  |   |         |   | 
|Restructuring expenses (included within Selling,
    general and administrative expenses) |       |                    | 4,965   |      |  |   |        |  
|                                                                                          |       |                    |         |      |  |   |         |  
|EBITDAR                                                                                   |       | $                  | 4,698   |      |  | $ | (13,496 | )
|                                                                                          |       |                    |         |      |  |   |         |  

Depreciation and Amortization.Depreciation and amortization was
$17.0 million during the three months ended March 31,
2003, compared to $17.2 million for the same period in
2002, representing a decrease of $0.2 million. The decrease
in depreciation and amortization was attributable to a lower
base of assets subject to depreciation due to accelerated
depreciation recognized in the latter part of 2002 on certain
non-core assets and excess property and equipment not deployed
in our countries operation and a significant reduction in
our capital expenditures since early 2002.

Interest Expense.Interest expense was
$38.7 million (net of interest income of $0.4 million)
during the three months ended March 31, 2003, compared to
$21.6 million (net of interest income of $0.2 million)
during the same period in 2002, representing an increase of
$17.1 million or 79.0%. 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
and higher interest rate on the defaulted 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
$7.9 million of income for the three months ended
March 31, 2003, compared to $25.3 million of expense
for the same period in 2002, representing a positive increase of
$33.1 million. During the three months ended March 31,
2003, we experienced a favorable variance on our foreign
currency transactions in Brazil and certain undesignated forward
contracts resulting in income. During 2002, we experienced the
opposite resulting in foreign currency transactions losses and
losses related to our undesignated forward contracts. We cannot
predict the outcome of our future foreign currency transactions
results and due to our current credit capacity and higher margin
requirements needed by our counter party financial institutions
we are not able to continue manage our foreign currency
exposures. During the three months ended March 31, 2002, we
have recorded a net loss on debt restructuring of
$6.3 million related to debt restructuring with our parent
company.

Cumulative effect of change in accounting
principle.In connection with the
adoption of SFAS No. 142 we 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 $48.2 million for the three months ended March 31,
2003, compared to net loss of $345.3 million for the same
period in 2002, representing a decrease of $297.1 million.
The decrease in net loss was attributable to improvements in
costs of revenue, selling general and administrative expenses,
and the absence in 2003 of impairment loss on goodwill,
incremental depreciation on non-core assets and excess

33



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##### 



property and equipment and losses on forward
contracts, when compared to the same period on 2002. We expect
to continue to incur net losses in the next several years.


Liquidity and Capital Resources

As of the date of this quarterly report, we do
not have sufficient cash to meet our requirements in the near
term unless we continue to defer and restructure amounts owed to
our secured and unsecured creditors, and continue to execute
successfully the austerity measures undertaken late last year,
or obtain additional financing. Our restructuring efforts, and
the suspension of certain debt service and principal payment
obligations pending the resolution of negotiations with
creditors, have allowed us to preserve adequate cash to sustain
operations and substantially reduce our net use of cash in the
near term.

Our cash needs arise from operating losses and
other working capital requirements, capital expenditures, debt
service and loan commitment fees. We are continuing to conserve
cash on hand by not servicing material indebtedness and by
continuing to reduce operating expenses and capital
expenditures. While in effect, these austerity measures will
substantially impede our growth, and may result in decreased
revenue over the short and long term.

As of March 31, 2003, we had foreign
currency forward contracts that hedge certain transactions with
notional amounts of $147.8 million, maturing in various
dates through November 2003. The total $22.6 million fair
value of forward currency contract assets, which are included as
prepaid expenses and other current assets on our March 31,
2003 balance sheet, represents unrealized gains on our forward
currency contracts selling or buying foreign currencies as
result of the strengthening or weakening of the dollar compared
to the currencies that we hedge. In April 2003 all of our
forward contracts were settled in advance of their respective
maturity dates with our counter party financial institutions
resulting in net cash proceeds of approximately
$21.3 million.

On April 11, 2003, involuntary petitions
under chapter 11 of the United States Bankruptcy Code were filed
by MatlinPatterson Global Opportunities Partners, LP, one of the
Companys secured creditors, against AT&T Latin America
Corp., AT&T Argentina, S.A. and a special-purpose entity
related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of the
Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11 case. On
the same day, April 17, 2003, certain other subsidiaries of
AT&T Latin America Corp. such as Frantis, Inc., Nantis,
Inc., Jamtis, Inc. and Jamtis, LLC each filed voluntary
petitions for relief under chapter 11. On April 30, 2003,
AT&T Argentina, S.A. also consented to an order for relief.
The foregoing cases are being jointly administered.

The Company conducts its operations through
direct and indirect subsidiaries of AT&T Latin America Corp.
While AT&T Latin America Corp., its U.S. affiliates and
AT&T Argentina, S.A., are in the reorganization process, we
expect our other country operating subsidiaries (which include
AT&T do Brasil Ltda., AT&T Chile Holding S.A. and its
subsidiaries, AT&T Colombia S.A. and AT&T Peru S.A.)
will continue to operate in the ordinary course of business, as
they are not directly involved with the chapter 11 proceedings.
We believe that most of our trade suppliers, unsecured general
creditors, employees and customers will not be adversely
affected while we are involved in the chapter 11 bankruptcy
proceedings. During this reorganization process, we have
attempted to maintain normal and regular trade terms with our
suppliers and customers. However, there can be no assurance that
our suppliers will continue to provide normal trade credit or
credit on terms acceptable to us, if at all, or that customers
will continue to do business or enter into new business with us.

As a consequence of the bankruptcy petition,
pending claims and litigation against AT&T Latin America
Corp. and the other entities involved in the chapter 11
proceeding are stayed automatically by Section 362 of the
Bankruptcy Code, and absent further order of the Bankruptcy
Court, no party may take any action to recover any pre-petition
claims, enforce any lien against or obtain possession of any
property from the Company.

34



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##### 



We also remain actively engaged in discussions
with our various creditor constituencies and their advisors
regarding the restructuring of our debt. There can be no
assurance that current negotiations with the various creditors
will lead to a comprehensive debt restructuring agreement on
terms acceptable to all of our creditors, or that any
alternative transaction or reorganization as a part of the
chapter 11 proceeding will lead to a viable recapitalization
plan.

If the process for implementing a plan of
reorganization or other disposition of the Company is delayed or
abandoned, we may encounter increased difficulty in retaining
customers and key employees which could, in turn, result in
significant declines in revenue, or increases in restructuring
and other costs that would adversely impact our liquidity and
reduce the time period for which our existing cash and cash
equivalents would fund our operations. If a plan of
reorganization or other disposition, or a comprehensive
restructuring is not completed, we may be forced to liquidate
under applicable provisions of the Bankruptcy Code. There can be
no assurance of the level of recovery our secured and unsecured
creditors would receive in such a liquidation. In the event that
such a plan of reorganization, other disposition or
restructuring of the Company and its affiliates (including
affiliates not included currently in the chapter 11 proceedings)
is completed, all equity interests in the Company, including
shares of our Class A and B common stock, likely will be
cancelled and discharged and the holders of such equity
securities likely will not receive any distribution.

Absent a plan of reorganization, other
disposition or restructuring of the Company in the chapter 11
proceedings we do not believe it will be possible to attract
additional financing to fund operations in the longer term,
support increased growth or fill our funding needs. Moreover,
even assuming a successful plan of reorganization, 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.

On a consolidated basis, as of March 31,
2003 we had cash and cash equivalents of $26.9 million. As
of May 15, 2003, we had approximately $42.3 million in
cash, on a consolidated basis. The increase in cash compared to
March 31, 2003 was due primarily to the receipt of proceeds
from the early settlement of foreign currency forward contracts
in April 2003. We actively manage liquidity not only in terms of
preserving cash but also with a view toward projected cash needs
in each of our country operations. Our ability to maintain
adequate liquidity for our business as a whole may depend on our
ability to move cash between our country operations. However,
due to exchange control regulations and local fiduciary
considerations, we may not be able to transfer cash freely
within our corporate group, and restrictions on such
transactions could have an adverse effect on the liquidity of
one or more of our country operations. We presently do not have
available unused commitments under any credit facilities.

Implementation of our restructuring program will
require cash outlays during 2003, including for the
renegotiation of financing facilities and other contractual
commitments and for the engagement of professional advisors. The
amount of professional expenses, which we estimate between
$8.0 million and $15.0 million, will be payable in
part upon completion of a successful restructuring and will be
affected by factors such as the length of time required to
complete the restructuring and the amount of consideration that
may be received in any sale or investment transaction. We
believe it will be critical to the business to retain
effectively a number of key employees and officers, including
the chief executive officer during the restructuring process,
and accordingly we are pursuing Bankruptcy court approval to
implement a retention program under which retention payments
also will payable following completion of key milestones in the
restructuring process. We estimate the aggregate amounts payable
under the retention program will range from $2.2 million to
$3.6 million during 2003. The actual payments made under
this program may vary depending upon the amount of consideration
to be received by the Company in a sale transaction or upon
emerging from chapter 11 as well as upon the timing of
either the sale transaction or the confirmation of a
restructuring plan by the Bankruptcy court.

The 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. The
appropriateness of using the going concern basis in the future,
however, will be dependent upon our ability to successfully
implement a plan of reorganization or other disposition or
restructuring of the Company that is approved by the U.S.
Bankruptcy Court. There is no assurance that we will be able to
successfully implement

35



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##### 



such a plan of reorganization, disposition or
restructuring on acceptable terms and conditions, or at all,
and, accordingly, there is substantial doubt about our ability
to continue as a going concern.


Future Commitments and Funding
Sources

At March 31, 2003, our contractual cash
obligations, before entering into bankruptcy, were as set forth
below. We have reflected the entire outstanding balance of our
senior secured vendor financing facility current 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 in 2003, 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.

CONTRACTUAL CASH OBLIGATIONS

(In thousands)


|                                                 |                                       |       |         |                             |  |      |         |         |  |      |       |        |  |            |       |       |  |   |       |       |  |   |       |       |  |   |         |         | 
|------------------------------------------------ | ------------------------------------- | ----- | ------- | --------------------------- |  | ---- | ------- | ------- |  | ---- | ----- | ------ |  | ---------- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ------- | ------- | 
|                                                 |                                       |       |         |                            
|                                                 |                                       |       |         | Payments Due in Year Ending
|                                                 |                                       |       |         |                            
|                                                 |                                       | Total |         | 2003                        |  | 2004 |         | 2005    |  | 2006 |       | 2007   |  | Thereafter
|                                                 |                                       |       |         |                             |  |      |         |         |  |      |       |        |  |           
|Long-term debt, including current maturities(a)  |                                       | $     | 893,201 |                             |  | $    | 219,406 |         |  | $    | 8,668 |        |  | $          | 2,780 |       |  | $ | 3,381 |       |  | $ | 4,602 |       |  | $ | 654,364 |        
|Operating leases                                 |                                       |       | 21,308  |                             |  |      | 4,822   |         |  |      | 3,785 |        |  |            | 3,213 |       |  |   | 2,585 |       |  |   | 2,546 |       |  |   | 4,357   |        
|Capacity agreements (IRUs)                      |                                       |       | 16,518  |                             |  |      | 997     |         |  |      | 1,177 |        |  |            | 1,212 |       |  |   | 1,249 |       |  |   | 1,286 |       |  |   | 10,597  |        
|Purchase commitments for capital expenditures(b) |                                       |       | 157     |                             |  |      | 157     |         |  |      |      |        |  |            |      |       |  |   |      |       |  |   |      |       |  |   |        |        
|                                                 |                                       |       |         |                             |  |      |         |         |  |      |       |        |  |            |       |       |  |   |       |       |  |   |       |       |  |   |         |        
|                                                 | Total Contractual Cash obligations(c) |       | $       | 931,184                     |  |      | $       | 225,382 |  |      | $     | 13,630 |  |            | $     | 7,205 |  |   | $     | 7,215 |  |   | $     | 8,434 |  |   | $       | 669,318 | 
|                                                 |                                       |       |         |                             |  |      |         |         |  |      |       |        |  |            |       |       |  |   |       |       |  |   |       |       |  |   |         |        




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | See Note 3 to the consolidated financial
    statements for additional information regarding our debt.                                                                                                                                                                                                                                                                                                                                                                
|(b) | Reflects only contractual commitments at
    March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                          
|(c) | 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
    separation agreements), obligations in the case of redemption of
    our 15% Series B Cumulative Preferred Stock in 2008 or
    short-term lease obligations.

The amounts presented above may significantly
differ with the actual cash to be ultimately paid, as a
consequence of our proceedings under chapter 11.

Capital Uses

During the three months ended March 31,
2003, our net cash decreased by $6.9 million. The decrease
in cash reflected cash provided by financing activities of
$0.4 million, offset by cash used in operating and
investing activities of $7.3 million. Our uses of cash in
operations were mainly as a result of our net loss of
$48.2 million during the three months ended March 31,
2003, offset by a positive cash flows provided by the net
changes in assets and liabilities and non-cash activities of
$42.9 million.

Capital Resources

On a consolidated basis, as of March 31,
2003 we had cash and cash equivalents of $26.9 million. As
of May 15, 2003, we had approximately $42.3 million in
cash, on a consolidated basis. The increase in cash compared to
March 31, 2003 was due primarily to the receipt of proceeds
from the early settlement of foreign currency forward contracts
in April 2003. We actively manage liquidity not only in terms of
preserving cash but also with a view toward projected cash needs
in each of our country operations. Our ability to maintain
adequate liquidity for our business as a whole may depend on our
ability to move cash between our country operations. However,
due to exchange control regulations and local fiduciary
considerations, we may not be able to transfer cash freely
within our corporate group, and restrictions on such
transactions could have an

36



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##### 



adverse effect on the liquidity of one or more of
our country operations. We presently do not have available
unused commitments under any credit facilities.


Seasonality

We have not experienced significant seasonality
in our services offerings.

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 Argentina and Brazil provide for payment in local
currency as provided under law and are generally indexed to
various inflation indicators specific to their respective country



|        |                                                              
|------- | -------------------------------------------------------------
|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 currently seek to minimize these risks
through our regular operating and financing activities.

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 the present time we are
not able to enter into foreign currency forward contracts to
protect our transactions from the currency fluctuation risk.

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.

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 interest rate increase or
decrease of 100 basis points from interest rates as of
March 31, 2003, interest expense on our variable interest
rate portfolio would have increased $0.4 million or
decreased $0.4 million, respectively, for the three months
ended March 31, 2003.

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.

ITEM 4. Controls and
Procedures

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

37



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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

On April 11, 2003, involuntary petitions
under chapter 11 of the United States Bankruptcy Code were
filed by MatlinPatterson Global Opportunities Partners, LP, one
of the Companys secured creditors, against AT&T Latin
America Corp., AT&T Argentina, S.A. and a special-purpose
entity related to the secured vendor financing, Latin American
Equipment Finance, B.V., in the U.S. Bankruptcy Court of the
Southern District of Florida, Miami Division (Case
No. 03-13588). On April 17, 2003, AT&T Latin
America Corp. consented to an order for relief and its case
became converted effectively to a voluntary chapter 11
case. On the same day, April 17, 2003, certain other
subsidiaries of AT&T Latin America Corp. such as Frantis,
Inc., Nantis, Inc., Jamtis, Inc. and Jamtis, LLC each filed
voluntary petitions for relief under chapter 11. On
April 30, 2003, AT&T Argentina, S.A. also consented to
an order for relief. The foregoing cases are being jointly
administered. As a consequence of the bankruptcy petition,
pending claims and litigation against AT&T Latin America
Corp. and the other entities involved in the chapter 11
proceeding are stayed automatically by Section 362 of the
Bankruptcy Code, and absent further order of the Bankruptcy
Court, no party may take any action to recover any pre-petition
claims, enforce any lien against or obtain possession of any
property from the Company.

Prior to the initiation of the chapter 11
cases, we were 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. As a consequence of the bankruptcy petition,
this action has been stayed automatically by Section 362 of
the Bankruptcy Code.

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. In
November 2002 Siemens initiated a second, similar action,
covering approximately $4.0 million original face amount of
notes. We received an adverse judgment in the first proceeding
in October 2002 and in the second proceeding in January 2003. We
have appealed the first action and expect to appeal the second
action when judgment is formally entered. We also have
$3.7 million in additional notes to Siemens that were due
in March 2003. Prior to the chapter 11 proceeding we had
been in discussions with this creditor to resolve and reschedule
these obligations. In June 2002 we also received a complaint in
New York State Supreme Court from IIG Capital, an 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. As a consequence
of the bankruptcy petition, we believe all of these actions have
been stayed automatically by Section 362 of the Bankruptcy
Code.

In November 2002 Banco Itaú S.A. initiated a
legal proceeding in Brazil against our subsidiary, AT&T do
Brasil, concerning a loan in the amount of approximately US
$12.0 million. Banco Itaú S.A. has attempted to
accelerate payment of all amounts outstanding under the loan of
which approximately US $6.3 million at March 31, 2003
was past due. In January 2003 AT&T do Brasil filed a
pre-executory exception in this collection action which
exception was reversed in March 2003. Also, at the request of
Banco Itaú S.A., in the

38



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##### 



same decision the court decided: (i) to
grant to Banco Itaú S.A. rights over certain forward
contracts totalling approximately $9.4 million (as of
March 14, 2003) in favor of the Company, which are payable
in April 2003; and (ii) to create a pledge of credits and
cash on certain bank accounts of AT&T do Brasil indicated by
Banco Itaú S.A. However, on March 24, 2003, AT&T
do Brasil obtained a suspension on the pledge order in an
interlocutory appeal. The execution is suspended until the
interlocutory appeal is decided.


On November 17, 2002, HSBC initiated a legal
proceeding in Brazil against AT&T do Brasil asserting a
claim for attachment of assets and rights on an
$8.4 million loan. On December 13, 2002, AT&T do
Brasil filed a Provisional Remedy to suspend the effects of a
cross default and acceleration clause contained in two loan
agreements entered into with HSBC. The injunction was granted on
December 16, 2002 and the ability of HSBC to accelerate the
loan agreements was suspended. On December 27, 2002, HSBC
contested the injunction but the court confirmed its decision.
After negotiation with HSBC, on April 17, 2003, we reached
an agreement to restructure the loan. In connection with the
restructuring we were able to extend the maturity of the loan
for six years with a two year grace period on principal
payments. As part of the restructuring we paid $2.0 million
of principal plus accrued interest. The balance of the debt will
carry an interest rate of LIBOR plus 1.625% and will be
converted into Brazilian Reais on January 16, 2004. At that
point, the Company will pay CDI (a floating rate in the local
market which as of March 31, 2003 was approximately 26%)
plus a margin of 5.0%, amounting to approximately 31% on an
all-in basis.

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.

ITEM 2. Changes in Securities and Use
of Proceeds.

None.

ITEM 3. Defaults Upon Senior
Securities.

We are now in default under our senior secured
vendor financing 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, which is equal to $166.7 million at
March 31, 2003, 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 certain covenants under our senior secured vendor
financing facilities going forward, including the minimum
revenue covenant and covenants relating to minimum EBITDA and
liquidity targets. See Managements Discussion and
Analysis  Recent Events and Chapter 11
Case 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

None.

39



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ITEM 6. Exhibits and Reports on
Form 8-K

(a) Exhibits



| |      
| | -----
| | None.

(b) Reports on Form 8-K



| |      
| | -----
| | None.

40



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##### 



SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized in Washington, D.C. on May 20, 2003.



| |                         
| | ------------------------
| | AT&T Latin America Corp.



| |     |                      
| | --- | ---------------------
| | By: | /s/ LAWRENCE E. YOUNG

| |                        
| | -----------------------
| |                        
| | Name: Lawrence E. Young

| |        |                        
| | ------ | -----------------------
| | Title: | Chief Financial Officer

| |                         
| | ------------------------
| | (Principal Financial and
| | Accounting Officer)     

41



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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 registrant 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:                                                                                                                 



| |     |                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this quarterly reports is being prepared;



| |     |                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of the report
    (Evaluation Date); and



| |     |                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | 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):



| |     |                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |     |                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | The registrants other certifying 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

May 20, 2003

| |                            
| | ---------------------------
| | /s/ PATRICIO E. NORTHLAND  
| |                            
| | Patricio E. Northland      
| | Chairman, President and CEO

42



---



##### 



CERTIFICATION OF CHIEF FINANCIAL
OFFICER

I, Lawrence E. Young, 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 registrant 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:                                                                                                                 



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



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



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | The registrants other certifying 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

May 20, 2003

| |                        
| | -----------------------
| | /s/ LAWRENCE E. YOUNG  
| |                        
| | Lawrence E. Young      
| | Chief Financial Officer

43