##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

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,
2002

Commission file number: 0-31010




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AT&T Latin America Corp.

(Exact name of Registrant as Specified in Its
Charter)


|                                                                                           |  |                                         
|------------------------------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                                                   |  | 22-3687745                              
|(State or other jurisdiction of
    incorporation)                                         |  | (I.R.S. Employer
    Identification No.)
|                                                                                          
|220 Alhambra Circle,
    Coral Gables, Florida(Address of principal executive
    offices) |  | 33134(Zip code)                         

Registrants telephone number including
area code:

(305) 459-6300


None

(Former name, former address and former fiscal
year, if changed since last report.)


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 þ          No o

As of May 14, 2002, 45,579,017 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



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|CONSOLIDATED BALANCE SHEETS                                                          
|CONSOLIDATED STATEMENTS OF OPERATIONS                                                
|CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY                            
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                           
|MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                            
|LEGAL PROCEEDINGS                                                                    
|EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                           



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##### Table of Contents



INDEX

|                                                                                                                      |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                      |  | Page
|                                                                                                                      |  |     
|Consolidated Balance Sheets as of March 31,
    2002 (Unaudited) and December 31, 2001                                |  |      | 2  | 
|Unaudited Consolidated Statements of Operations
    for the Three Months Ended March 31, 2002 and 2001                |  |      | 3  | 
|Unaudited Consolidated Statement of Changes in
    Stockholders Equity for the Three Months Ended
    March 31, 2002 |  |      | 4  | 
|Unaudited Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2002 and 2001                |  |      | 5  | 
|Notes to Consolidated Financial Statements
    (Unaudited)                                                            |  |      | 6  | 
|Managements Discussion and Analysis                                                                                  |  |      | 17 | 
|Quantitative and Qualitative Disclosure about
    Market Risk                                                         |  |      | 26 | 
|Legal Proceedings                                                                                                     |  |      | 26 | 
|Exhibits and Reports on Form 8-K                                                                                      |  |      | 27 | 
|Signatures                                                                                                            |  |      | 28 | 

1



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##### Table of Contents



AT&T LATIN AMERICA CORP.

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







CONSOLIDATED BALANCE SHEETS

|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |          |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | --------- |  | ------- | -------- | --------- | 
|                                                                                                                                               |                                                                                                                                                                   | March 31,                                  |         | December 31,
|                                                                                                                                               |                                                                                                                                                                   | 2002                                       |         | 2001        
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |             
|                                                                                                                                               |                                                                                                                                                                   | (Unaudited)                                |         |             
|                                                                                                                                               |                                                                                                                                                                   |                                           
|                                                                                                                                               |                                                                                                                                                                   | (In thousands)                            
|ASSETS                                                                                                                                        
|Current Assets:                                                                                                                                |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               | Cash and cash equivalents                                                                                                                                         |                                            | $       | 92,239       |           |  | $       | 28,186   |          
|                                                                                                                                               | Accounts receivable, net of $9,195 and $8,250 of
    allowance for bad debts at March 31, 2002 and
    December 31, 2001, respectively                            |                                            |         | 44,681       |           |  |         | 41,973   |          
|                                                                                                                                               | Recoverable taxes                                                                                                                                                 |                                            |         | 14,003       |           |  |         | 15,219   |          
|                                                                                                                                               | Prepaid expenses and other current assets                                                                                                                         |                                            |         | 16,278       |           |  |         | 26,816   |          
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               |                                                                                                                                                                   | Total current assets                       |         |              | 167,201   |  |         |          | 112,194   | 
|Property and equipment, net                                                                                                                    |                                                                                                                                                                   |                                            | 486,196 |              |           |  | 493,568 |         
|Goodwill, net of accumulated amortization of
    $66,349 and $66,383 at March 31, 2002 and December 31,
    2001, respectively                 |                                                                                                                                                                   |                                            | 758,724 |              |           |  | 759,067 |         
|Other intangible assets, net of accumulated
    amortization of $12,377 and $10,598 at March 31, 2002 and
    December 31, 2001, respectively  |                                                                                                                                                                   |                                            | 22,523  |              |           |  | 24,130  |         
|Recoverable taxes                                                                                                                              |                                                                                                                                                                   |                                            | 17,757  |              |           |  | 24,841  |         
|Other assets                                                                                                                                   |                                                                                                                                                                   |                                            | 37,920  |              |           |  | 31,511  |         
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               |                                                                                                                                                                   | Total assets                               |         | $            | 1,490,321 |  |         | $        | 1,445,311 | 
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                                      
|Current liabilities:                                                                                                                           |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               | Current maturities of debt                                                                                                                                        |                                            | $       | 76,369       |           |  | $       | 87,051   |          
|                                                                                                                                               | Accounts payable and accrued expenses (including
    $3,303 and $2,209 due to AT&T Corp. or affiliates at
    March 31, 2002 and December 31, 2001, respectively) |                                            |         | 66,278       |           |  |         | 80,595   |          
|                                                                                                                                               | Other current liabilities                                                                                                                                         |                                            |         | 63,825       |           |  |         | 51,956   |          
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               |                                                                                                                                                                   | Total current liabilities                  |         |              | 206,472   |  |         |          | 219,602   | 
|Long-term debt (including $564,769 and $475,757
    due to AT&T Corp. or affiliates at March 31, 2002 and
    December 31, 2001, respectively) |                                                                                                                                                                   |                                            | 736,936 |              |           |  | 575,091 |         
|Deferred interest due to AT&T Corp. or
    affiliates                                                                                          |                                                                                                                                                                   |                                            | 839     |              |           |  | 31,010  |         
|Other liabilities                                                                                                                              |                                                                                                                                                                   |                                            | 6,596   |              |           |  | 6,289   |         
|Mandatorily Redeemable 15% Series B
    Preferred Stock (held by a wholly-owned subsidiary of AT&T
    Corp.)                                  |                                                                                                                                                                   |                                            | 223,147 |              |           |  | 215,232 |         
|                                                                                                                                               |                                                                                                                                                                   | Total liabilities                          |         |              | 1,173,990 |  |         |          | 1,047,224 | 
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|Commitments and contingencies (Note 7)                                                                                                         |                                                                                                                                                                   |                                            |        |              |           |  |        |         
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|Stockholders equity:                                                                                                                          |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               | Common stock (including 68.4% economic interest
    owned by AT&T Corp., representing 95.2% voting power at
    March 31, 2002)                                   |                                            |         | 11           |           |  |         | 11       |          
|                                                                                                                                               | Additional paid in capital                                                                                                                                        |                                            |         | 924,881      |           |  |         | 918,337  |          
|                                                                                                                                               | Unearned restricted stock                                                                                                                                         |                                            |         | (2,805       | )         |  |         | (2,627   | )        
|                                                                                                                                               | Accumulated deficit                                                                                                                                               |                                            |         | (523,965     | )         |  |         | (446,429 | )        
|                                                                                                                                               | Accumulated other comprehensive (loss) income                                                                                                                     |                                            |         | (71,784      | )         |  |         | (61,323  | )        
|                                                                                                                                               | Stockholder loan                                                                                                                                                  |                                            |         | (10,007      | )         |  |         | (9,882   | )        
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               |                                                                                                                                                                   | Total stockholders equity                 |         |              | 316,331   |  |         |          | 398,087   | 
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         
|                                                                                                                                               |                                                                                                                                                                   | Total liabilities and stockholders equity |         | $            | 1,490,321 |  |         | $        | 1,445,311 | 
|                                                                                                                                               |                                                                                                                                                                   |                                            |         |              |           |  |         |         

The accompanying footnotes are an integral part
of these consolidated financial statements.

2



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##### Table of Contents



AT&T LATIN AMERICA CORP.

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







CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                                            |                        |                                                                                             |         |        |         |   |         |        |         |  
|------------------------------------------------------------------------------------------- | ---------------------- | ------------------------------------------------------------------------------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                                                                            |                        |                                                                                            
|                                                                                            |                        | Three Months                                                                               
|                                                                                            |                        | Ended March 31,                                                                            
|                                                                                            |                        |                                                                                            
|                                                                                            |                        | 2002                                                                                        |         | 2001  
|                                                                                            |                        |                                                                                             |         |       
|                                                                                            |                        |                                                                                            
|                                                                                            |                        | (Unaudited)                                                                                
|                                                                                            |                        |                                                                                            
|                                                                                            |                        | (In thousands, except                                                                      
|                                                                                            |                        | per share data)                                                                            
|Revenue:                                                                                    |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            | Data-internet services |                                                                                             | $       | 26,488 |         |   | $       | 18,459 |        
|                                                                                            | Voice services         |                                                                                             |         | 17,673 |         |   |         | 13,211 |        
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            |                        | Total revenue                                                                               |         |        | 44,161  |   |         |        | 31,670  |  
|Cost of revenue                                                                             |                        |                                                                                             | 28,486  |        |         |   | 25,912  |       
|Selling, general and administrative expenses                                                |                        |                                                                                             | 29,171  |        |         |   | 32,616  |       
|Depreciation and amortization                                                               |                        |                                                                                             | 17,192  |        |         |   | 24,699  |       
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            |                        | Loss from operations                                                                        |         |        | (30,688 | ) |         |        | (51,557 | )
|Interest expense                                                                            |                        |                                                                                             | 21,802  |        |         |   | 15,851  |       
|Interest income                                                                             |                        |                                                                                             | 198     |        |         |   | 270     |       
|Other (expense) income, net                                                                 |                        |                                                                                             | (19,073 | )      |         |   | (5,945  | )     
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            |                        | Loss before provision for income taxes, minority
    interest income and extraordinary item |         |        | (71,365 | ) |         |        | (73,083 | )
|Provision for income taxes                                                                  |                        |                                                                                             |        |        |         |   |        |       
|Minority interest income                                                                    |                        |                                                                                             | 93      |        |         |   | 115     |       
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            |                        | Loss before extraordinary item                                                              |         |        | (71,272 | ) |         |        | (72,968 | )
|Extraordinary loss on debt restructuring                                                    |                        |                                                                                             | (6,264  | )      |         |   |        |       
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|                                                                                            |                        | Net loss                                                                                    |         | $      | (77,536 | ) |         | $      | (72,968 | )
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|Basic and diluted loss per common share before
    extraordinary loss on debt restructuring |                        | $                                                                                           | (0.60   | )      |         | $ | (0.63   | )     
|Extraordinary loss per common share on debt
    restructuring                               |                        |                                                                                             | (0.05   | )      |         |   |        |       
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|Basic and diluted net loss per common share                                                 |                        | $                                                                                           | (0.65   | )      |         | $ | (0.63   | )     
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       
|Weighted average common shares outstanding                                                  |                        |                                                                                             | 118,399 |        |         |   | 116,296 |       
|                                                                                            |                        |                                                                                             |         |        |         |   |         |       

The accompanying footnotes are an integral part
of these consolidated financial statements.

3



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##### Table of Contents



AT&T LATIN AMERICA CORP.

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







CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY

(Unaudited)


(In thousands)


|                                                |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |        |  |   |          |   |  |   |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | ------------ | ------- | ---------- |  | ---------- | -- | ----------- |  | ------------- | ------- | ----------- |  | ------------- | ------ | ------ |  | - | -------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                |  |              |         |            |  |            |    |             |  |               |         | Accumulated |  |               |        |       
|                                                |  |              |         |            |  |            |    |             |  | Other         |         |             |  |              
|                                                |  | Common Stock |         | Additional |  | Unearned   |    |             |  | Comprehensive |         |             |  | Total        
|                                                |  |              |         | Paid in    |  | Restricted |    | Accumulated |  | Income        |         | Stockholder |  | Stockholders
|                                                |  | Stock        |         | Amount     |  | Capital    |    | Stock       |  | Deficit       |         | (Loss)      |  | Loan          |        | Equity
|                                                |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |       
|Balance December 31, 2001                       |  |              | 118,305 |            |  | $          | 11 |             |  | $             | 918,337 |             |  | $             | (2,627 | )      |  | $ | (446,429 | ) |  | $ | (61,323 | ) |  | $ | (9,882  | ) |  | $ | 398,087 |  
|Interest accretion on stockholder loan          |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |        |  |   |         |   |  |   |        |   |  |   | (125    | ) |  |   | (125    | )
|Stock issued to employees                       |  |              | 285     |            |  |            |   |             |  |               | 280     |             |  |               |       |        |  |   |         |   |  |   |        |   |  |   |        |   |  |   | 280     |  
|Warrants issued to parent company               |  |              |        |            |  |            |   |             |  |               | 6,264   |             |  |               |       |        |  |   |         |   |  |   |        |   |  |   |        |   |  |   | 6,264   |  
|Unearned restricted stock                       |  |              |        |            |  |            |   |             |  |               |        |             |  |               | (178   | )      |  |   |         |   |  |   |        |   |  |   |        |   |  |   | (178    | )
|Net loss                                        |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |        |  |   | (77,536  | ) |  |   |        |   |  |   |        |   |  |   | (77,536 | )
|Foreign currency translation adjustments        |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |        |  |   |         |   |  |   | 9,744   |   |  |   |        |   |  |   | 9,744   |  
|Net unrealized losses on derivative instruments |  |              |        |            |  |            |   |             |  |               |        |             |  |               |       |        |  |   |         |   |  |   | (20,205 | ) |  |   |        |   |  |   | (20,205 | )
|                                                |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |        |  |   |          |   |  |   |         |   |  |   |         |   |  |   |         |  
|Balance March 31, 2002                          |  |              | 118,590 |            |  | $          | 11 |             |  | $             | 924,881 |             |  | $             | (2,805 | )      |  | $ | (523,965 | ) |  | $ | (71,784 | ) |  | $ | (10,007 | ) |  | $ | 316,331 |  
|                                                |  |              |         |            |  |            |    |             |  |               |         |             |  |               |        |        |  |   |          |   |  |   |         |   |  |   |         |   |  |   |         |  

The accompanying footnotes are an integral part
of these consolidated financial statements.

4



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##### Table of Contents



AT&T LATIN AMERICA CORP.

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







CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Unaudited)


|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |         |   |        |         |  
|---------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------------------- | ------------------------------------- | - | ------- | ------- | ------- | - | ------ | ------- | -
|                                               |                                                 |                                                                               
|                                               |                                                 | Three Months Ended                                                            
|                                               |                                                 | March 31,                                                                     
|                                               |                                                 |                                                                               
|                                               |                                                 | 2002                                                                           |                                                                      | 2001                                 
|                                               |                                                 |                                                                                |                                                                      |                                      
|                                               |                                                 |                                                                               
|                                               |                                                 | (In thousands)                                                                
|Cash flows from operating activities:          |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|                                               | Net loss                                        |                                                                                | $                                                                    | (77,536                               | ) |         | $       | (72,968 | )
|                                               |                                                 | Adjustment to reconcile net loss to net cash used
    in operating activities: |                                                                      |                                       |   |         |         |         |   |       
|                                               |                                                 |                                                                                | Depreciation and amortization                                        |                                       |   | 17,192  |         |         |   | 24,699 |        
|                                               |                                                 |                                                                                | Bad debt expense                                                     |                                       |   | 1,360   |         |         |   | 2,486  |        
|                                               |                                                 |                                                                                | Unrealized foreign exchange loss                                     |                                       |   | (10,481 | )       |         |   | 17,887 |        
|                                               |                                                 |                                                                                | Minority interest income                                             |                                       |   | (93     | )       |         |   | (115   | )      
|                                               |                                                 |                                                                                | Preferred stock accretion                                            |                                       |   | 7,915   |         |         |   | 6,896  |        
|                                               |                                                 |                                                                                | Loss on debt restructuring                                           |                                       |   | 6,264   |         |         |   |        |        
|                                               |                                                 |                                                                                | Stockholder loan accretion                                           |                                       |   | (125    | )       |         |   |       |        
|                                               |                                                 |                                                                                | Unearned restricted stock accretion                                  |                                       |   | 102     |         |         |   |       |        
|                                               |                                                 |                                                                                | Accrued interest characterized as debt                               |                                       |   | 12,426  |         |         |   |       |        
|                                               |                                                 |                                                                                | Changes in assets and liabilities net of effect
    of acquisitions: |                                       |   |         |         |         |   |        |        
|                                               |                                                 |                                                                                |                                                                      | Accounts receivable                   |   |         | (3,653  | )       |   |        | (13,836 | )
|                                               |                                                 |                                                                                |                                                                      | Recoverable taxes                     |   |         | 8,300   |         |   |        | (3,706  | )
|                                               |                                                 |                                                                                |                                                                      | Prepaid and other assets              |   |         | 10,538  |         |   |        | (5,194  | )
|                                               |                                                 |                                                                                |                                                                      | Other assets                          |   |         | (7,100  | )       |   |        | (20,787 | )
|                                               |                                                 |                                                                                |                                                                      | Accounts payable and accrued expenses |   |         | (15,145 | )       |   |        | (8,923  | )
|                                               |                                                 |                                                                                |                                                                      | Other current liabilities             |   |         | 11,869  |         |   |        | 2,220   |  
|                                               |                                                 |                                                                                |                                                                      | Other liabilities                     |   |         | 400     |         |   |        |        |  
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Net cash used in operating activities          |                                                 |                                                                                | (37,767                                                              | )                                     |   |         | (71,341 | )      
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Cash flows from investing activities:          |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|                                               | Purchase of property and equipment              |                                                                                |                                                                      | (7,334                                | ) |         |         | (46,689 | )
|                                               | Cash paid for acquisitions of licenses          |                                                                                |                                                                      | (146                                  | ) |         |         |        |  
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Net cash used in investing activities          |                                                 |                                                                                | (7,480                                                               | )                                     |   |         | (46,689 | )      
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Cash flows from financing activities:          |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|                                               | (Repayments) proceeds of debt, net              |                                                                                |                                                                      | (2,679                                | ) |         |         | (11     | )
|                                               | Proceeds from parent company credit facilities  |                                                                                |                                                                      | 47,243                                |   |         |         | 126,160 |  
|                                               | Proceeds from secured vendor financing          |                                                                                |                                                                      | 143,323                               |   |         |         |        |  
|                                               | Payments of interim notes payable for equipment |                                                                                |                                                                      | (73,803                               | ) |         |         |        |  
|                                               | Payments of Notes payable for equipment         |                                                                                |                                                                      | (4,690                                | ) |         |         |        |  
|                                               | Loans to stockholder                            |                                                                                |                                                                      |                                      |   |         |         | (8,796  | )
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Net cash provided by financing activities      |                                                 |                                                                                | 109,394                                                              |                                       |   |         | 117,353 |        
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Net increase in cash and cash equivalents      |                                                 |                                                                                | 64,147                                                               |                                       |   |         | (677    | )      
|Net effect of translation on cash              |                                                 |                                                                                | (94                                                                  | )                                     |   |         |        |        
|Cash and cash equivalents, beginning of period |                                                 |                                                                                | 28,186                                                               |                                       |   |         | 14,905  |        
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        
|Cash and cash equivalents, end of period       |                                                 | $                                                                              | 92,239                                                               |                                       |   | $       | 14,228  |        
|                                               |                                                 |                                                                                |                                                                      |                                       |   |         |         |        

Supplemental disclosure of non-cash investing
and financing activities:

In connection with the restructuring of our
facilities with AT&T Corp., we have characterized deferred
interest at December 31, 2001 of $30.2 million plus
the amount accrued from January 1, 2002 through
March 31, 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 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,
2001, we acquired property and equipment amounting to
approximately $45.9 million through vendor financing
arrangements.

The accompanying footnotes are an integral part
of these consolidated financial statements.

5



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##### Table of Contents



AT&T LATIN AMERICA CORP.

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







NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)


Note 1  Nature of the Business and
Summary of Significant Accounting Policies

AT&T Latin America Corp. was incorporated on
October 13, 1999, under the laws of the State of Delaware,
and along with its consolidated subsidiaries is referred to
collectively in these consolidated financial statements and
elsewhere in this quarterly report on Form 10-Q as
we, our, the Company,
AT&T Latin America, ATTLA 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 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 as of March 31, 2002.

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 generally
accepted accounting principles for complete financial statements
and should be read together with the audited financial
statements and notes thereto included in our annual report on
Form 10-K for the year ended December 31, 2001. The
balance sheet data as of December 31, 2001 was derived from
our audited financial statements but does not include all
disclosures required by generally accepted accounting
principles. Certain reclassifications have been made to conform
to the 2002 presentation. The financial information furnished
reflects all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the quarterly periods presented.
The results of operations for the periods presented are not
necessarily indicative of our future results of operations for
the entire year.

Our cumulative comprehensive loss was
$595.7 million and $507.8 million as of March 31,
2002 and December 31, 2001, respectively. The components of
the change in comprehensive loss for the three months ended
March 31, 2002 are net loss of $77.5 million, foreign
currency translation adjustment of $9.7 million and
unrealized losses on derivative instruments of
$20.2 million.

Our cumulative comprehensive loss was $233.6
million and $135.6 million as of March 31, 2001 and
December 31, 2000, respectively. The components of the
change in comprehensive loss for the three months ended
March 31, 2001 were net loss of $73.0 million and
foreign currency translation adjustment of $25.0 million.

Note 2  Liquidity

The unaudited consolidated financial statements
have been prepared on a basis that contemplates the realization
of assets and the satisfaction of liabilities and commitments in
the normal course of business. We have incurred net losses of
approximately $524.0 million from the period from inception
(October 13, 1999) through March 31, 2002. As of
March 31, 2002 we had a working capital deficit of
$39.3 million.

Our primary liquidity needs are for working
capital, capital expenditures and debt service. Currently, our
primary sources of liquidity are cash on hand, available funds
under our senior secured vendor financing, available funds under
the credit facilities from our parent company AT&T Corp. and
unsecured bank facilities in local Latin American credit markets.

6



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Our business is capital intensive and, as such,
has required substantial initial capital investment to date. We
have been building a high capacity network in the countries in
which we operate and are primarily focused on data-internet
services. As of the end of 2001, we had completed a substantial
portion of our planned capital deployment relating to core
network infrastructure. We expect our capital expenditures will
be reduced significantly in 2002 (ranging between $80.0 and
$100.0 million) and future periods as we continue to
increase the utilization of our existing networks. Moreover, we
expect that our capital expenditures in 2002 and future years
will become more correlated to increases in revenue.

We expect to continue incurring operating losses
and to generate negative cash flows from operations for the next
two years and to continue to generate net losses for the next
several years. We currently expect to show positive cash flow
from operations starting in 2004 and thereafter.

We believe that our cash on hand, together with
our available borrowing capacity under the senior secured vendor
financing and our credit facility with our parent company,
AT&T Corp., and local bank credit facilities in Latin
America markets will be sufficient to support our working
capital needs, capital expenditures and debt service for the
next several years. However, in the event that our future
working capital deficit becomes greater than expected, as a
result of lower than expected revenue, higher expenses or
greater capital investment needs, our inability to obtain
additional financing to fund such cash needs would result in a
material adverse effect on our business plan, our financial
condition and results of operations. There is no assurance that
we will be able to obtain the additional cash we may need on
acceptable terms and conditions or at all.

Note 3  Property and
Equipment

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

|                                                |  |             |         |              |  |              |         |   |  |  |         | 
|----------------------------------------------- |  | ----------- | ------- | ------------ |  | ------------ | ------- | - |  |  | ------- | 
|                                                |  |             |         |              |  | Estimated   
|                                                |  | March 31,   |         | December 31, |  | Useful Lives
|                                                |  | 2002        |         | 2001         |  | (in Years)  
|                                                |  |             |         |              |  |             
|                                                |  | (Unaudited) |         |              |  |             
|Switching equipment                             |  | $           | 121,991 |              |  | $            | 118,542 |   |  |  | 5       | 
|Transmission equipment                          |  |             | 137,330 |              |  |              | 125,936 |   |  |  | 7       | 
|Cables                                          |  |             | 43,351  |              |  |              | 40,323  |   |  |  | 10      | 
|Underground installation                        |  |             | 141,475 |              |  |              | 108,719 |   |  |  | 25      | 
|Construction in progress                        |  |             | 45,434  |              |  |              | 87,754  |   |  |  |        | 
|Office equipment, furniture, vehicles and other |  |             | 81,121  |              |  |              | 81,326  |   |  |  | 3 to 10 | 
|                                                |  |             |         |              |  |              |         |   |  |  |         | 
|                                                |  |             | 570,702 |              |  |              | 562,600 |   |  |  |         | 
|Less: Accumulated depreciation                  |  |             | (84,506 | )            |  |              | (69,032 | ) |  |  |         | 
|                                                |  |             |         |              |  |              |         |   |  |  |         | 
|                                                |  | $           | 486,196 |              |  | $            | 493,568 |   |  |  |         | 
|                                                |  |             |         |              |  |              |         |   |  |  |         | 

Depreciation expense related to property and
equipment was $14.8 million and $11.9 million for the
three months ended March 31, 2002 and March 31, 2001,
respectively.

7



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 4  Debt

Debt is comprised of the following (in thousands):

|                                                                                       |  |             |         |              |  |   |         |  
|-------------------------------------------------------------------------------------- |  | ----------- | ------- | ------------ |  | - | ------- | -
|                                                                                       |  | March 31,   |         | December 31,
|                                                                                       |  | 2002        |         | 2001        
|                                                                                       |  |             |         |             
|                                                                                       |  | (Unaudited) |         |             
|Senior secured vendor financing                                                        |  | $           | 143,323 |              |  | $ |        |  
|Subordinated credit facilities with parent company                                     |  |             | 564,769 |              |  |   |        |  
|Revolving credit facility, at LIBOR plus 3.75%
    (5.6% to 6.4% at December 31, 2001) |  |             |        |              |  |   | 100,000 |  
|Subordinated credit facility, at LIBOR plus 6.00%
    (8.1% at December 31, 2001)      |  |             |        |              |  |   | 200,000 |  
|Demand notes, at 15% fixed rate                                                        |  |             |        |              |  |   | 175,757 |  
|Interim notes payable for equipment, at varying
    rates                              |  |             |        |              |  |   | 73,803  |  
|Notes payable for equipment                                                            |  |             | 46,028  |              |  |   | 50,718  |  
|Other bank facilities                                                                  |  |             | 59,185  |              |  |   | 61,864  |  
|                                                                                       |  |             |         |              |  |   |         |  
|Total debt                                                                             |  |             | 813,305 |              |  |   | 662,142 |  
|Less current maturities                                                                |  |             | (76,369 | )            |  |   | (87,051 | )
|                                                                                       |  |             |         |              |  |   |         |  
|Long-term debt                                                                         |  | $           | 736,936 |              |  | $ | 575,091 |  
|                                                                                       |  |             |         |              |  |   |         |  



| |                                    
| | -----------------------------------
| | Senior Secured Vendor
    Financing

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

The facilities are divided into two portions
comprised of a first tranche of up $199.2 million to be
used to finance the purchase of equipment and related software
and services from the three vendors, and a second tranche of up
to $99.3 million to finance duties, taxes and interest on
the facility during the availability period. Immediately after
the effective date, approximately $143.3 million was drawn
under the facilities, of which $73.8 million was used to
pay outstanding interim notes. Draws under this facility are
available through June 2004. After that time principal of the
facilities amortizes on a scheduled quarterly basis until final
maturity in June 2008. We have available $155.2 million
under this facility as of March 31, 2002.

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

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

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

The facilities contain customary covenants
restricting our ability to engage in certain activities,
including limitations on debt, liens, investments (including
acquisitions), restricted payments, transactions with
affiliates, asset dispositions and changes in corporate
existence. We are also required to meet certain financial

8



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

tests over the term of the facilities, relating
to minimum revenue, minimum EBITDA (earnings before interest,
taxes, depreciation and amortization as defined in the governing
agreements), maximum capital expenditures, minimum liquid assets
and available undrawn credit, ratios of debt to equity and to
EBITDA and minimum on-network ports.

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



| |                                                     
| | ----------------------------------------------------
| | Subordinated Credit Facilities (Related
    Parties)

During the first quarter of 2002, we signed an
agreement with AT&T Corp. for the restructuring of the
financing provided under the $100.0 million and
$200.0 million credit facilities as well as
$98.0 million provided under demand notes. The
restructuring provided additional borrowings of
$150.0 million, which included the refinancing of
$87.0 million available via demand notes as of
December 31, 2001 (of which $77.8 million was
outstanding) and additional financing of up to
$63.0 million. The restructuring and additional financing
became effective concurrently with the senior secured vendor
financing on March 27, 2002. While the senior secured
vendor financing is outstanding, we are entitled to defer
payment of all accrued and future interest through the maturity
date of the loans of October 2008 and we are also entitled to
defer payment of accrued and future dividends on the Mandatorily
Redeemable 15% Series B Preferred Stock through that date.
As of March 31, 2001 we had available $25.0 million
under these facilities. A portion of $100.0 million, plus
capitalized interest, (Tranche A) of the loans
bear interest at LIBOR plus 3.75% until August of 2002, and
14.0% thereafter. The $200.0 million and $98.0 million
portions, plus capitalized interest (Tranches B
and C) are fixed at 15.0% interest rate. The
remaining $150.0 million portion pays a fixed interest of
15.3%. The weighted average interest rate as of March 31,
2002 was 13.4%. In connection with the restructuring of our
facilities with AT&T Corp., we have characterized deferred
interest at December 31, 2001 of $30.2 million plus
the amount accrued from January 1, 2002 through
March 31, 2002 of $12.4 million as part of the debt.

As part of the restructuring, we issued to
AT&T Corp. warrants to acquire approximately
4.9 million shares of our Class A common stock. Half
of these warrants are exercisable at a price of $8.00 per share
and the other half, are exercisable at a price of $0.01 per
share. The warrants were valued using the Black-Scholes pricing
model and have been included as part of our loss on debt
restructuring. The warrants are exercisable immediately. The
debt restructuring resulted in an extraordinary loss of
$6.3 million.

The debt facilities with AT&T Corp. include
customary covenants that are based on certain of the covenant
provisions contained in our equipment financing facilities.



| |                            
| | ---------------------------
| | Notes Payable for Equipment

In November 1998 a subsidiary of FirstCom (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, 2002, there were approximately
$8.0 million outstanding drawings under this vendor
financing bearing interest at a weighted average annual rate of
8.6%. The availability period for drawings under this financing
under this agreement expired on December 31, 2000.

9



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In July 2001 we entered into a short-term vendor
financing agreement providing for a maximum financing of
$4.0 million maturing in March 2002. This financing was
later amended to mature on May 31, 2002. As of
March 31, 2002, there was $4.0 million in outstanding
borrowings under this agreement bearing interest at a LIBOR plus
7.0%, or 10.9%.

In August and September 2001 we entered into
various long-term vendor financing agreements providing for a
maximum financing of $11.4 million maturing in April 2004.
As of March 31, 2002, there was $5.3 million in
outstanding borrowings under these agreements bearing interest
at a LIBOR plus 7.0%, or 10.9%.

In August 2001 we entered into a short-term
vendor financing agreement providing for a maximum financing of
$20.7 million maturing in May 2002. As of March 31,
2002, there was $15.0 million in outstanding borrowings
under this agreement bearing interest at a LIBOR plus 8.0%, or
11.9%.

In September 2001 we entered into various vendor
financing agreements providing for a maximum financing of
$12.0 million, of which $5.0 million matured in March
2002 and the remaining $7.0 million matures in April 2002.
As of March 31, 2002, there was $7.0 million in
outstanding borrowings under these agreements bearing interest
at a fixed rate of 12.0%.

We also entered into various short-term vendor
financing agreements providing for a maximum financing of
$4.0 million with maturities in July, August and September
2002. As of March 31, 2002, there was $3.6 million in
outstanding borrowings under these agreements bearing interest
at a fixed rate of 11.9% for the first 120 days and 17.5%,
thereafter.

In November 2001 we entered into a short-term
vendor financing agreement providing for a maximum financing of
$3.7 million maturing in March 2003. As of March 31,
2002, there was $3.1 million in outstanding borrowings
under this agreement bearing interest at a fixed rate of 17.5%.



| |                      
| | ---------------------
| | Other Bank Facilities

AT&T do Brasil is party to several local bank
facilities providing for borrowings of an aggregate amount of
$43.2 million maturing through February 2004. At
March 31, 2002, there was an aggregate of
$37.4 million outstanding under these facilities.
Borrowings under these facilities bear interest at fixed rates
ranging from 6.3% to 13.0% per annum and variable rates based
upon LIBOR plus a margin ranging from 0.4% to 1.9%.

AT&T Colombia is party to several local bank
facilities providing for borrowings of an aggregate amount of
$16.8 million maturing through May 2006. At March 31,
2002, there was an aggregate of $13.4 million outstanding
under these facilities. Borrowings under these facilities bear
interest at fixed rates ranging from 11.5% to 15.5% per annum
and variable rates based upon Depósito Tasa Fijo
(DTF) plus a margin ranging from 4.5% to 7.0%. The average
rate for Colombian peso interest rate or DTF for the three
months ended March 31, 2002 was 10.3%.

AT&T Peru is party to several local bank
facilities providing for borrowings of an aggregate amount of
$15.0 million. At March 31, 2002, there was an
aggregate of $7.6 million outstanding under these
facilities. Borrowings under these facilities bear interest at
fixed and variable rates ranging from 6.0% 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
$2.1 million. At March 31, 2002, there was an
aggregate of $0.8 million outstanding under these
facilities bearing interest at fixed interest rates ranging from
9.0% to 27.0%.

10



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 5  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
Preferred Stock having an aggregate liquidation value as of
March 31, 2002 and December 31, 2001 of
$223.1 million and $215.2 million, respectively. The
shares of Mandatorily Redeemable 15% Series B Preferred
Stock entitle Global Card Holdings to receive dividends at an
annual rate of 15%, payable semi-annually. In March 2002, Global
Card Holdings agreed to certain amendments to the terms of the
redeemable preferred stock. The amendments provided that the
first date of redemption at the option of any holder would be
deferred until October 2008 and that dividends would not be
payable in cash unless permitted under the Subordination
Agreement related to our senior secured vendor financing, in
each case subject to certain exceptions as permitted under the
vendor financing agreements. The accompanying statements of
operations for the three months ended March 31, 2002 and
2001 include $7.9 million and $6.8 million, respectively,
recorded as interest expense related to the dividend on our
Mandatorily Redeemable 15% Series B 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, 2002 and December 31, 2001,
45,509,017 and 45,224,017 shares, respectively, of
Class A common stock were issued and outstanding. At
March 31, 2002 and December 31, 2001, we had
73,081,595 shares of Class B common stock issued and
outstanding.

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

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, representing 95.2% of the
voting power and 68.4% of the economic interests of our common
stock as of March 31, 2002.

Note 6  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, 2002 and 2001 approximately 60.0% and 58.3%,
respectively, were generated from data-internet services. No
single customer or group of customers accounted for more that
10% of total revenue.

Our chief operating decision makers measure our
operating results by country and use EBITDA as an important
measure of our country operating results and performance. We
calculate EBITDA as loss from operations plus depreciation and
amortization expense. Management believes EBITDA is meaningful
to investors because it enables them to evaluate operating
results using the same measure used by our chief operating
decision makers. In addition, we believe that EBITDA allows
investors a means to evaluate the financial results of each
country operation in relation to our total operations. Our
calculation of EBITDA may or may not be consistent with the
calculation of this measure by other public companies. EBITDA
should not be viewed by investors as an alternative to generally
accepted accounting principles (GAAP) measure of income as a
measure of performance or to cash flows from operating,
investing and financing activities as a

11



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

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

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. Our managed service
offers include managed data, Internet and web hosting services.

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

The following table sets forth, for the three
months ended March 31, 2002 and 2001, certain information
about segment results of operations and segment assets (in
thousands):

|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |         |   |  |   |         |   |  |   |           |  
|----------------------------------- |  | --------------------------------- | ------- | ------ |  | ----- | ------- | -------- |  | ---- | ------ | -------- |  | ----- | ------ | - |  | - | ------- | - |  | - | ------- | - |  | - | --------- | -
|                                    |  |                                  
|                                    |  | 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 and Administrative |  |                                   | 3,523   |        |  |       | 9,019   |          |  |      | 3,036  |          |  |       | 2,232  |   |  |   | 3,771   |   |  |   | 7,590   |   |  |   | 29,171    |  
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |         |   |  |   |         |   |  |   |           |  
|EBITDA(2)                           |  |                                   | (2,773  | )      |  |       | (4,169  | )        |  |      | (175   | )        |  |       | (244   | ) |  |   | 1,455   |   |  |   | (7,590  | ) |  |   | (13,496   | )
|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(3)             |  | $                                 | 1,348   |        |  | $     | 735     |          |  | $    | 2,652  |          |  | $     | 605    |   |  | $ | 3,153   |   |  | $ | (1,159  | ) |  | $ | 7,334     |  

12



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|----------------------------------- |  | --------------------------------- | ------- | ------ |  | ----- | ------- | -------- |  | ---- | ------ | -------- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------- | - |  | - | --------- | -
|                                    |  |                                  
|                                    |  | Three Months Ended March 31, 2001
|                                    |  |                                  
|                                    |  | Argentina                         |         | Brazil |  | Chile |         | Colombia |  | Peru |        | Other(1) |  | Total
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |      
|                                    |  |                                  
|                                    |  | (Unaudited)                      
|Revenue:                            |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|Data-internet services              |  | $                                 | 278     |        |  | $     | 9,689   |          |  | $    | 2,895  |          |  | $     | 2,915  |   |  | $ | 2,682  |   |  | $ |        |   |  | $ | 18,459    |  
|Voice services                      |  |                                   | 714     |        |  |       | 1,551   |          |  |      | 6,643  |          |  |       |       |   |  |   | 4,672  |   |  |   | (369    | ) |  |   | 13,211    |  
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|Total Revenue                       |  |                                   | 992     |        |  |       | 11,240  |          |  |      | 9,538  |          |  |       | 2,915  |   |  |   | 7,354  |   |  |   | (369    | ) |  |   | 31,670    |  
|Cost of revenue                     |  |                                   | 2,105   |        |  |       | 11,952  |          |  |      | 7,302  |          |  |       | 1,242  |   |  |   | 3,680  |   |  |   | (369    | ) |  |   | 25,912    |  
|Selling, general and administrative |  |                                   | 7,166   |        |  |       | 9,363   |          |  |      | 3,421  |          |  |       | 2,703  |   |  |   | 4,104  |   |  |   | 5,859   |   |  |   | 32,616    |  
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|EBITDA(2)                           |  |                                   | (8,279  | )      |  |       | (10,075 | )        |  |      | (1,185 | )        |  |       | (1,030 | ) |  |   | (430   | ) |  |   | (5,859  | ) |  |   | (26,858   | )
|Depreciation and amortization       |  |                                   | 2,390   |        |  |       | 7,771   |          |  |      | 1,425  |          |  |       | 1,253  |   |  |   | 3,083  |   |  |   | 8,777   |   |  |   | 24,699    |  
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|Loss from operations                |  | $                                 | (10,669 | )      |  | $     | (17,846 | )        |  | $    | (2,610 | )        |  | $     | (2,283 | ) |  | $ | (3,513 | ) |  | $ | (14,636 | ) |  | $ | (51,557   | )
|                                    |  |                                   |         |        |  |       |         |          |  |      |        |          |  |       |        |   |  |   |        |   |  |   |         |   |  |   |           |  
|Total assets                        |  | $                                 | 153,340 |        |  | $     | 411,894 |          |  | $    | 58,416 |          |  | $     | 48,976 |   |  | $ | 91,228 |   |  | $ | 599,683 |   |  | $ | 1,363,537 |  
|Capital expenditures(3)             |  | $                                 | 45,265  |        |  | $     | 29,741  |          |  | $    | 3,926  |          |  | $     | 2,456  |   |  | $ | 6,229  |   |  | $ | 4,930   |   |  | $ | 92,547    |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists primarily of corporate operations,
    inter-company eliminations and the results of operations and
    related assets of the executive management Rabbi trust. All
    material inter-company accounts and transactions have been
    eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(2) | EBITDA is an important measure used by our chief
    operating decision makers to measure our country operating
    results and performance. We calculate EBITDA as loss from
    operations plus depreciation and amortization expense.
    Management believes EBITDA is meaningful to investors because it
    enables them to evaluate operating results using the same
    measures used by our chief operating decision makers. In
    addition, we believe that EBITDA allow investors a means to
    evaluate the financial results of each country operation in
    relation to our total operations. Our calculations of EBITDA may
    or may not be consistent with the calculation of these measures
    by other public companies. EBITDA should not be viewed by
    investors as an alternative to generally accepted accounting
    principles (GAAP) measures 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.
|   
|(3) | We calculate CAPEX, or capital expenditures, as
    gross property and equipment purchased, net of deletions, but
    excluding translation adjustments resulting from our countries
    that use local currencies as functional currencies. CAPEX
    includes property and equipment acquired through vendor
    financing arrangements of approximately $45.9 million in
    2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

There are no significant transfers between
geographic areas and segments. Loss from operations consists of
revenue less operating expenses and does not include interest
expense, interest income and other income (expense), minority
interest and income taxes. Total assets are those assets used in
our operations in each geographic area. Corporate assets which
are included under the Other column include cash and
cash equivalents, property and equipment, goodwill and other
intangible assets.

Note 7  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.

In August 2000 we entered into a capacity
purchase agreement with Global Crossing Bandwidth, Inc., which
was amended in late March 2001. The agreement with Global
Crossing provides for the acquisition of indefeasible rights of
use to high-speed transmission capacity connecting each of the
cities of São Paulo,

13



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Buenos Aires, Santiago and Lima to our point of
presence in the United States, effective for fifteen years at an
aggregate cost of $22.0 million payable as each link is
activated. As of March 31, 2002, $18.8 million had
been paid. Additionally, there is an initial annual maintenance
cost of approximately $1.1 million, subject to escalation
at 3% per year, compounded annually.

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.

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 8  New Accounting
Pronouncements

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

Effective January 1, 2002, we adopted
Statement of Financial Accounting Standards and 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 are
currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting
units goodwill carrying and fair values we expect an
impairment of our goodwill in connection with the initial
transitional impairment test. Although we are not yet able to
reasonably determine our actual goodwill impairment amount, we
expect a material goodwill impairment. We have begun the process
of comparing the implied fair value of our reporting units
goodwill, determined by allocating the reporting units
fair value to all of its assets and liabilities in a manner
similar to a purchase price allocation in accordance with SFAS
No. 141, to its carrying amount, both of which would be
measured as of the date of adoption. We expect to complete the
final determination during the second quarter and the
transitional impairment loss will be recognized as cumulative
effect of a change in accounting principle on our consolidated
statement of operations.

There has been no change to our goodwill carrying
amount since December 31, 2001, other than the change, which
resulted from using a different foreign currency translation
rate at March 31, 2002 compared to December 31, 2001.
If goodwill amortization of $10.8 million would not have
been recorded in our first quarter of 2001, our first quarter of
2001 adjusted net loss and basic and diluted adjusted loss per
share would have been $62.1 million and $0.53 per share,
respectively, instead of $73.0 million and $0.63 per share,
respectively.

Effective January 1, 2002 we also adopted
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144), 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

14



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##### Table of Contents



AT&T LATIN AMERICA CORP.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

15



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##### Table of Contents



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 of completion dates,
    construction costs, subsequent maintenance expenses and network
    expansion;                  
|
| |  | expectations and estimates as to the amount of
    cash requirements to implement our growth strategy and as to our
    ability to obtain financing;
|
| |  | expectations about the sources of revenues and
    the percentage breakdown of sources of revenues; and                                             
|
| |  | future financial performance, including growth in
    sales and income.                                                                             

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



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | inaccurate forecasts of customer or market demand;                                                                               
|
| |  | the rate of expansion of our networks and
    customer base;                                                                     
|
| |  | changes in communications technology and/or the
    pricing of competitive products and services;                                
|
| |  | highly competitive market conditions;                                                                                            
|
| |  | access to financing on acceptable terms and
    conditions;                                                                      
|
| |  | loss of one or more important customers;                                                                                         
|
| |  | acquisitions by us and our ability to integrate
    successfully any acquired businesses or technologies into our
    operations;
|
| |  | 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; 
|
| |  | volatility of our stock price;                                                                                                   
|
| |  | currency fluctuations; and                                                                                                       
|
| |  | changes in economic and political conditions in
    the countries in which we operate.                                           

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

16



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##### Table of Contents






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.

Overview

We provide business communications services under
the AT&T brand name to major metropolitan business in
Argentina, Brazil, Chile, Colombia and Peru. Our local, domestic
and international communications services include 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 mostly through our own technologically
advanced high speed, high capacity ATM/ IP, or asynchronous
transfer mode/ Internet protocol, networks, which interconnect
with other third party networks. In addition, we use our
installed network infrastructure to offer services to carriers,
including inbound domestic and regional voice termination
services and last-mile connectivity services. We also serve in
selected cases the mass market through distribution channels,
offering long distance, calling and prepaid cards and dial-up
Internet services. The mass market remains attractive because it
provides additional revenue as well as utilization of otherwise
idle network capacity.

Basis of
Presentation.Our financial statements
reflect operations for the three months ended March 31,
2002 and 2001.

AT&T Latin
America.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. include the
countries in South America and the Caribbean plus Panama, but
excluding Cuba and Venezuela.

Recent Events

Effective January 1, 2002, we adopted
Statement of Financial Accounting Standards and 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 are
currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting
units goodwill carrying and fair values we expect an
impairment of our goodwill in connection with the initial
transitional impairment test. Although we are not yet able to
reasonably determine our goodwill impairment amount, we expect a
material impairment. We have begun the process of comparing the
implied fair value of our reporting units goodwill,
determined by allocating the reporting units fair value to
all of its assets and liabilities in a manner similar to a
purchase price allocation in accordance with SFAS No. 141,
to its carrying amount, both of which would be measured as of
the date of adoption. We expect to complete the final
determination on our second quarter report and the transitional
impairment loss will be recognized as cumulative effect of a
change in accounting principle on our consolidated statement of
operations.

There has been no change to our goodwill carrying
amount since December 31, 2001, other than the change,
which resulted from using a different foreign currency
translation rate at March 31, 2002 compared to
December 31, 2001. If goodwill amortization of
$10.8 million would not have been recorded in our first
quarter of 2001, then our first quarter of 2001 adjusted net
loss and basic and diluted adjusted loss per common share would
have been $62.1 million and $0.53 per share, respectively,
instead of $73.0 million and $0.63 per share, respectively.

17



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##### Table of Contents



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,             
|                                                                                            |                                                                                             |                       
|                                                                                            |                                                                                             | 2002                   |         | 2001   
|                                                                                            |                                                                                             |                        |         |        
|                                                                                            |                                                                                             |                       
|                                                                                            |                                                                                             | (Unaudited)           
|                                                                                            |                                                                                             | (In thousands,        
|                                                                                            |                                                                                             | except per share data)
|Revenue                                                                                     |                                                                                             | $                      | 44,161  |         |   | $ | 31,670  |        
|Cost of revenue                                                                             |                                                                                             |                        | 28,486  |         |   |   | 25,912  |        
|Selling, general and administrative expenses                                                |                                                                                             |                        | 29,171  |         |   |   | 32,616  |        
|Depreciation and amortization                                                               |                                                                                             |                        | 17,192  |         |   |   | 24,699  |        
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|                                                                                            | Loss from operations                                                                        |                        |         | (30,688 | ) |   |         | (51,557 | )
|Interest expense                                                                            |                                                                                             |                        | 21,802  |         |   |   | 15,851  |        
|Interest income                                                                             |                                                                                             |                        | 198     |         |   |   | 270     |        
|Other (expense) income, net                                                                 |                                                                                             |                        | (19,073 | )       |   |   | (5,945  | )      
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|                                                                                            | Loss before provision for income taxes, minority
    interest income and extraordinary item |                        |         | (71,365 | ) |   |         | (73,083 | )
|Provision for income taxes                                                                  |                                                                                             |                        |        |         |   |   |        |        
|Minority interest income                                                                    |                                                                                             |                        | 93      |         |   |   | 115     |        
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|                                                                                            | Loss before extraordinary item                                                              |                        | $       | (71,272 | ) |   | $       | (72,968 | )
|Extraordinary loss on debt restructuring                                                    |                                                                                             |                        | (6,264  | )       |   |   |        |        
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|                                                                                            | Net loss                                                                                    |                        | $       | (77,536 | ) |   | $       | (72,968 | )
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|Basic and diluted loss per common share before
    extraordinary loss on debt restructuring |                                                                                             | $                      | (0.60   | )       |   | $ | (0.63   | )      
|Extraordinary loss per common share on debt
    restructuring                               |                                                                                             |                        | (0.05   | )       |   |   |        |        
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|Basic and diluted net loss per common share                                                 |                                                                                             | $                      | (0.65   | )       |   | $ | (0.63   | )      
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        
|Weighted average shares outstanding                                                         |                                                                                             |                        | 118,399 |         |   |   | 116,296 |        
|                                                                                            |                                                                                             |                        |         |         |   |   |         |        

18



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##### Table of Contents



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, 2002 and 2001:

|                                             |           |                              |        |        |         |      |      |      |       |    |        |        |         |   |       |      |        |   
|-------------------------------------------- | --------- | ---------------------------- | ------ | ------ | ------- | ---- | ---- | ---- | ----- | -- | ------ | ------ | ------- | - | ----- | ---- | ------ | --
|                                             |           |                             
|                                             |           | Three Months Ended March 31,
|                                             |           |                             
|                                             |           | 2002                         |        | %      |         | 2001 |      | %   
|                                             |           |                              |        |        |         |      |      |     
|                                             |           |                             
|                                             |           | (Unaudited)                 
|                                             |           | (In thousands)              
|Revenue:                                     |           |                              |        |        |         |      |      |      |       |    |        |        |         |   |       |     
|                                             | Argentina |                              | $      | 4,917  |         |      |      | 11.1 | %     |    | $      | 992    |         |   |       | 3.1  | %     
|                                             | Brazil    |                              |        | 14,476 |         |      |      | 32.8 | %     |    |        | 11,240 |         |   |       | 35.5 | %     
|                                             | Chile     |                              |        | 9,040  |         |      |      | 20.5 | %     |    |        | 9,538  |         |   |       | 30.1 | %     
|                                             | Colombia  |                              |        | 5,601  |         |      |      | 12.7 | %     |    |        | 2,915  |         |   |       | 9.2  | %     
|                                             | Peru      |                              |        | 10,405 |         |      |      | 23.6 | %     |    |        | 7,354  |         |   |       | 23.2 | %     
|                                             | Other     |                              |        | (278   | )       |      |      | (0.6 | )%    |    |        | (369   | )       |   |       | (1.2 | )%    
|                                             |           |                              |        |        |         |      |      |      |       |    |        |        |         |   |       |     
|                                             |           | Total revenue                |        |        | 44,161  |      |      |      | 100.0 | %  |        |        | 31,670  |   |       |      | 100.0  | % 
|Cost of revenue                              |           |                              | 28,486 |        |         |      | 64.5 | %    |       |    | 25,912 |        |         |   | 81.8  | %   
|Selling, general and administrative expenses |           |                              | 29,171 |        |         |      | 66.1 | %    |       |    | 32,616 |        |         |   | 103.0 | %   
|Depreciation and amortization                |           |                              | 17,192 |        |         |      | 38.9 | %    |       |    | 24,699 |        |         |   | 78.0  | %   
|                                             |           |                              |        |        |         |      |      |      |       |    |        |        |         |   |       |     
|                                             |           | Loss from operations         |        | $      | (30,688 | )    |      |      | (69.5 | )% |        | $      | (51,557 | ) |       |      | (162.8 | )%
|                                             |           |                              |        |        |         |      |      |      |       |    |        |        |         |   |       |     



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2002
    compared to Three Months Ended March 31, 2001

|         |                        |                    |   |        |        |   |   |        |        |  |   |       |        |  |  |      |      |  
|-------- | ---------------------- | ------------------ | - | ------ | ------ | - | - | ------ | ------ |  | - | ----- | ------ |  |  | ---- | ---- | -
|         |                        |                    |   |        |        |  
|         |                        | Three Months Ended |   |       
|         |                        | March 31,          |   | Change
|         |                        |                    |   |       
|         |                        | 2002               |   | 2001   |        | $ |   | %     
|         |                        |                    |   |        |        |   |   |       
|         |                        |                   
|         |                        | (Unaudited)       
|         |                        |                   
|         |                        | (In thousands)    
|Revenue: |                        |                    |   |        |        |   |   |        |        |  |   |       |        |  |  |     
|         | Data-internet services |                    | $ | 26,488 |        |   | $ | 18,459 |        |  | $ | 8,029 |        |  |  | 43.5 | %   
|         | Voice services         |                    |   | 17,673 |        |   |   | 13,211 |        |  |   | 4,462 |        |  |  | 33.8 | %   
|         |                        |                    |   |        |        |   |   |        |        |  |   |       |        |  |  |     
|         |                        | Total revenue      |   | $      | 44,161 |   |   | $      | 31,670 |  |   | $     | 12,491 |  |  |      | 39.4 | %
|         |                        |                    |   |        |        |   |   |        |        |  |   |       |        |  |  |     

Revenue.Revenue for
the three months ended March 31, 2002 was
$44.2 million, compared to revenue of $31.7 million
for the same period in 2001, representing an increase of
$12.5 million or 39.4%. This increase in revenue was mainly
generated in Argentina, Brazil and Peru, which combined
accounted for $10.2 million or 81.8% of the total revenue
increase. The increase in revenue resulted from increases in
customers and ports in service, which reflected increased
selling of services to both existing customers and new customers.

Our data-internet services segment grew from
$18.5 million during the three months ended March 31,
2001, to $26.5 million for the same period in 2002,
representing an increase of $8.0 million or 43.5%. The
increase in our data-internet services was mainly due to
increased demand for our services from our existing business
customers and to an increase in our customer base.

Data-internet services accounted for 60.0% of our
revenue in 2002. We anticipate that over the long-term,
data-internet services revenue will continue to represent a
majority of total revenue.

Revenue from voice services grew from
$13.2 million during the three months ended March 31,
2001, to $17.7 million for the same period in 2002,
representing an increase of $4.5 million or 33.8%. The
increase in our voice-related revenue was mainly due to the
increase in our customer base as well as an increase in total
minutes sold.

Cost of Revenue.Cost of revenue was $28.5 million for the three months
ended March 31, 2002, compared to $25.9 million for
the same period in 2001, representing an increase of
$2.6 million or 9.9%. Cost

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of revenue consists of leased line costs,
maintenance costs, and network and operating system costs,
including certain labor and other direct costs. We expect cost
of revenue to continue to increase in absolute terms on an
annual basis, although less than expected as result of the peso
devaluation in Argentina, as we continue to add capacity to our
networks and build or lease capacity on additional networks.
However, we expect to continue to increase the proportion of our
service revenue derived from our existing network capacity as
well as to benefit from better pricing from third party network
providers, resulting in continued gross margin improvement.


Selling, General and Administrative
Expenses.Selling, general and
administrative expenses were $29.2 million during the three
months ended March 31, 2002, compared to $32.6 million
for the same period in 2001, representing a decrease of
$3.4 million or 10.6%. The decrease in selling, general and
administrative expenses resulted primarily from the devaluation
of the Argentina peso in the first part of 2002, which resulted
in lower reported selling, general and administrative expenses
of approximately $3.5 million. We expect selling, general
and administrative expenses to be lower in 2002 than in 2001 but
thereafter to increase in absolute terms in future periods to
the extent that we continue to experience growth and to expand
our service offerings. We believe that the peso devaluation in
Argentina will continue to have a positive impact on our
selling, general and administrative expenses. We also expect
selling, general and administrative expenses as a percentage of
revenue to decrease in future periods. Selling, general and
administrative expenses are comprised primarily of compensation,
professional fees, travel expenses, marketing, office space and
indirect labor expenses.

Depreciation and
Amortization.Depreciation and
amortization was $17.2 million during the three months
ended March 31, 2002, compared to $24.7 million for
the same period in 2001, representing a decrease of
$7.5 million or 30.4%. The decrease in depreciation and
amortization was due mainly to the adoption of SFAS 142, under
which we no longer amortize goodwill but review it annually (or
more frequently if impairment indicators arise) for impairment.
If goodwill amortization would not have been recorded in our
first quarter of 2001, then our first quarter of 2001 adjusted
depreciation and amortization would have been
$13.9 million, compared to $17.2 million in first
quarter of 2002. We expect that depreciation expense will
continue to increase on a quarterly basis as we continue to
invest in capital required to support our business.

Interest Expense.Interest expense was $21.8 during the three months ended
March 31, 2002, compared to $15.9 million during the
same period in 2001, representing an increase of
$6.0 million or 37.5%. This increase in interest expense
was due mainly to higher debt outstanding during the period,
partially offset by lower interest rates. Interest expense is
mainly comprised of dividends related to our Mandatorily
Redeemable 15% Series B Preferred Stock, interest expense
related to our subordinated credit facility with AT&T Corp.,
our secured vendor financing, notes payable for equipment and
other bank loans.

Other (Expense) Income, Net.Other (expense) income, net was
$19.1 million for the three months ended March 31,
2002, compared to $5.9 million for the same period in 2001,
representing an increase of $13.1 million. Other (expense)
income, net was mainly due to foreign currency transaction
losses and unrealized losses on forward currency contracts and
amortization of forward points on hedge contracts.

Extraordinary loss on debt restructuring.Extraordinary loss on debt
restructuring was $6.3 million for the three months ended
March 31, 2002. As part of the restructuring of our loans
with our parent company, AT&T Corp., we issued to AT&T
Corp. warrants, which are immediately exercisable, to acquire
approximately 4.9 million shares of our Class A common
stock. The warrants were valued using the Black-Scholes pricing
model and have been included as part of our loss on debt
restructuring.

Net Loss.Net loss
was $77.5 million for the three months ended March 31,
2002, compared to net loss of $73.0 million for the same
period in 2001, representing an increase of $4.6 million or
6.3%. We expect to continue to incur net losses in the next
several years. In addition, as described above under
Recent Events, we expect a material goodwill
impairment next quarter, as the result of our adoption of SFAS
No. 142, which will result in a one-time material increase
in net loss.

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Liquidity and Capital Resources

Our primary liquidity needs are for working
capital, capital expenditures and debt service. Our primary
sources of liquidity are cash on hand, credit facilities from
our parent company AT&T Corp., financing facilities from
equipment vendors and unsecured bank facilities in local Latin
America credit markets.

Our business is capital intensive and, as such,
has required substantial capital investment to date. We have
been building a high capacity network in the countries in which
we operate and are primarily focused on data-internet services.
As of the end of 2001, we have completed a substantial portion
of our planned capital deployment relating to core network
infrastructure. We expect our capital expenditures will be
reduced significantly commencing in 2002 (ranging between $80.0
and $100.0 million) and future periods as we continue to
increase the utilization of our existing networks. Moreover, we
expect that our capital expenditures in 2002 and future years
will become more correlated to increases in revenue.

We have incurred net losses of approximately
$524.0 million from the period from inception
(October 13, 1999) through March 31, 2002. At
March 31, 2002 we had a working capital deficit of
$39.3 million. We expect to continue incurring operating
losses and generating negative cash flow from operations during
the next two years and to continue to generate net losses for
the next several years. We currently expect to have positive
cash flow from operations starting in 2004 and thereafter.

We believe that our cash on hand, together with
our available borrowing capacity under the senior secured vendor
financing, our credit facility with our parent company, AT&T
Corp., and local bank credit facilities in Latin America markets
will be sufficient to support our working capital needs, capital
expenditures and debt service for the next several years.
However, in the event that our future working capital deficit
becomes greater than expected, as a result of lower than
expected revenue, higher expenses or greater capital investment
needs, we will need to obtain additional financings. Our
inability to obtain additional financing to fund such cash needs
would result in a material adverse effect on our business plan,
our financial condition and results of operations. There is no
assurance that we will be able to obtain the additional cash we
may need on acceptable terms and conditions or at all.

Future
Commitments and Funding Sources

Our contractual cash obligations, with initial or
remaining terms in excess of one year of $757.7 million at
December 31, 2001, increased by $176.0 million as result of
draws made from our senior secured vendor facilities and credit
facilities with our parent company, AT&T Corp. of a combined
$151.1 million and to changes in the fair value of our forward
contracts of $24.9 million. The fair value of our net forward
contract liabilities is subject to market rates changes and the
ultimate liability at settlement may differ from the amount
herein presented.



| |             
| | ------------
| | Capital Uses

During the three months ended March 31,
2002, our net cash increased by $64.1 million. The increase
in cash reflected cash provided by financing activities of
$109.4 million, offset by cash used in operating and
investing activities of $45.2 million. Our uses of cash in
operations were mainly as a result of our net loss of
$77.5 million during the three months ended March 31,
2002 and the increase of our working capital deficit, offset by
non-cash activities such as depreciation and amortization and
preferred stock accretion.

We expect to continue to make capital
expenditures during 2002 and thereafter relating to our existing
and planned network development and operations. During 2002, we
expect that capital expenditures will range from
$80.0 million to $100.0 million. During the three
months ended March 31, 2002 we invested approximately
$7.3 million in the development of our networks.

We also expect to use capital resources to fund
our losses from operations and working capital needs. In
addition, we expect non-cash interest expense to increase in the
near term as a result of increased debt amounts. As a result of
our debt restructuring with AT&T Corp., while the senior
secured vendor financing is outstanding, payment of dividends on
our Mandatorily Redeemable 15% Series B Preferred Stock and
interest

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on the loans to us from AT&T Corp. will be
deferred to the maturity date of these loans and the redemption
date of the preferred stock, which will be October 2008.


In August 2000, we entered into a capacity
purchase agreement with Global Crossing Bandwidth, Inc., which
was amended in late March 2001. The agreement with Global
Crossing provides for the acquisition of indefeasible rights of
use to high-speed transmission capacity connecting each of the
cities of São Paulo, Buenos Aires, Santiago and Lima to our
point of presence in the United States, effective for fifteen
years at an aggregate cost of $22.0 million payable as each
link is activated. To date we have purchased $18.8 million
under this agreement. Additionally, there is an initial annual
maintenance cost of approximately $1.1 million, subject to
escalation at 3% per year, compounded annually.



| |                  
| | -----------------
| | Capital Resources



| |                                
| | -------------------------------
| | Senior Secured Vendor Financing

In December 2001 we entered into senior secured
credit facilities, governed by common terms, with each of Cisco,
Lucent and Nortel, in an aggregate principal amount of
$298.5 million. These facilities became effective on
March 27, 2002.

The facilities are divided into two portions
comprised of a first tranche of up $199.2 million to be
used to finance the purchase of equipment, and related software
and services from the three vendors, and a second tranche of up
to $99.3 million to finance duties, taxes and interest on
the facility during the availability period. Immediately after
the effective date, approximately $143.3 million was drawn
under the facilities, of which $73.8 million was used to pay
outstanding interim notes. Draws under this facility are
available through June 2004. After that time, principal of the
facilities amortizes on a scheduled quarterly basis until final
maturity in June 2008. We have available $155.2 million
under this facility as of March 31, 2002.

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

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

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

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

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



| |                                                     
| | ----------------------------------------------------
| | Subordinated Credit Facilities (Related
    Parties)

During the first quarter of 2002, we signed an
agreement with AT&T Corp. for the restructuring of the
financing provided under the $100.0 million and
$200.0 million credit facilities as well as amounts
provided under demand notes. The restructuring provided
additional borrowings of $150.0 million, which included the

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refinancing of $87.0 million available via
demand notes as of December 31, 2001 (of which
$77.8 million was outstanding) and additional financing of
up to $63.0 million. The restructuring and additional
financing became effective concurrently with the senior secured
vendor financing on March 27, 2002. While the senior
secured vendor financing is outstanding, we are entitled to
defer payment of all accrued and future interest through the
maturity date of the loans of October 2008 and we are also
entitled to defer payment of accrued and future dividends on the
Mandatorily Redeemable 15% Series B Preferred Stock through
that date. As of March 31, 2001 we have available
$25.0 million under these facilities. A portion of the
loans bear interest at LIBOR plus 3.75% until August 2002
(thereafter 15% fixed) and the remaining portion bears interest
at approximately 15%. The weighted average rate as of
March 31, 2002 was 13.4%. In connection with the
restructuring of our facilities with AT&T Corp., we have
characterized deferred interest at December 31, 2001 of
$30.2 million plus the amount accrued from January 1,
2002 through March 31, 2002 of $12.4 million as part
of the debt.


As part of the restructuring, we issued to
AT&T Corp. warrants, immediately exercisable, to acquire
approximately 4.9 million shares of our Class A common
stock. Half of these warrants are exercisable at a price of
$8.00 per share and the other half, are exercisable at a
price of $0.01 per share. The warrants were valued using
the Black-Scholes pricing model and have been included as part
of our loss on debt restructuring. The debt restructuring
resulted in an extraordinary non-cash loss of $6.3 million.

The debt facilities with AT&T Corp. include
customary covenants that are based on certain of the covenant
provisions contained in our equipment financing facilities.



| |                      
| | ---------------------
| | Other Bank Facilities

AT&T do Brasil is party to several local bank
facilities providing for borrowings of an aggregate amount of
$43.2 million maturing through February 2004. At
March 31, 2002, there was an aggregate of
$37.4 million outstanding under these facilities.
Borrowings under these facilities bear interest at a fixed rate
ranging from 6.3% to 13.0% per annum and variable rates based
upon LIBOR plus a margin ranging from 0.4% to 1.9%.

AT&T Colombia is party to several local bank
facilities providing for borrowings of an aggregate amount of
$16.8 million maturing through May 2006. At March 31,
2002, there was an aggregate of $13.4 million outstanding
under these facilities. Borrowings under these facilities bear
interest at a fixed rate ranging from 11.5% to 15.5% per annum
and variable rates based upon Depósito Tasa Fijo
(DTF) plus a margin ranging from 4.5% to 7.0%. The average
rate for Colombian peso interest rate or DTF for the three
months ended March 31, 2002 was 10.3%.

AT&T Peru is party to several local bank
facilities providing for borrowings of an aggregate amount of
$15.0 million. At March 31, 2002, there was an
aggregate of $7.6 million outstanding under these
facilities. Borrowings under these facilities bear interest at a
fixed and variable rate ranging from 6.0% 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
$2.1 million. At March 31, 2002, there was an
aggregate of $0.8 million outstanding under these
facilities bearing interest at fixed interest rates ranging from
9.0% to 27.0%.



| |                     
| | --------------------
| | Liquidity Assessment

We expect to have additional capital requirements
in the next several years related to funding our working capital
needs, operating losses and debt service obligations and our
development and expansion of our communications services and
networks.

Our cash needs in the next several years will be
affected by several factors, including, but not limited to:



| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | the amount of cash expected to be used in our
    operations;                   
|
| |  | our ability to increase revenue and the timing of
    collection of receivables;

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| |   |                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to collect accounts receivable as
    expected and the timing of collection;                                                                                                        
|
| |  | the level of competitive pressure on the pricing
    of our services;                                                                                                                           
|
| |  | our ability to manage and contain costs
    associated with the expected growth;                                                                                                                
|
| |  | whether we change our plans for building and
    expanding our networks;                                                                                                                        
|
| |  | whether interest rates fluctuate materially and
    the resulting increase in interest obligations under our
    floating rate facilities;                                                      
|
| |  | the impact of fluctuations in currency exchange
    rates in the countries in which we operate on our operations,
    including the effect on any current or future hedging
    instruments; and
|
| |  | whether we use cash, issue common stock or
    increase our debt to complete acquisitions and ventures.                                                                                         

As of March 31, 2002 we had cash and cash
equivalents of $92.2 million, $155.2 million available
under the secured vendor financing, $25.0 million available
under our facilities with our parent company AT&T Corp. and
$17.9 million available under our local bank facilities.

We believe that our cash on hand, together with
our available borrowing capacity under the senior secured vendor
financing, the credit facility with our parent company, AT&T
Corp., and local bank credit facilities in Latin American
markets will be sufficient to support our working capital needs,
capital expenditures and debt service for the next several
years. However, in the event that our future net cash generated
internally is less than expected, as a result of lower than
expected revenue, higher expenses or greater capital investment
needs, we will need to obtain additional financing. Our
inability to obtain additional financing to fund such cash needs
would result in a material adverse effect on our business plan,
our financial condition and results of operations. There is no
assurance that we will be able to obtain additional cash we may
need on acceptable terms and conditions or at all.



| |            
| | -----------
| | Seasonality

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



| |                    
| | -------------------
| | Impact of Inflation

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,
however, we expect that the recent political and economic crisis
in Argentina will result in lower than expected revenue growth
in U.S. dollar terms in Argentina.

Our customer contracts as well as certain direct
costs in Brazil provide for payment in local currency and are
generally indexed to various inflation indicators specific to
Brazil. Our customer contracts as well as certain direct costs
in Argentina have been subject to local regulatory changes due
to the recent political and economic crisis. The impact of the
recent Argentina political and economic crisis resulted in a
devaluation of the Argentina peso during the three months ended
March 31, 2002. It is uncertain the total impact of the
devaluation in Argentina for the rest of the year, however, it
is expected that our revenue growth in U.S. dollar terms in
Argentina will be materially, adversely affected in 2002.

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Effects of New Accounting Standards

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

Effective January 1, 2002, we adopted
Statement of Financial Accounting Standards and 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 are
currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting
units goodwill carrying and fair values we expect an
impairment of our goodwill in connection with the initial
transitional impairment test. Although we are not yet able to
reasonably determine our goodwill impairment amount, we expect a
material impairment. We have begun the process of comparing the
implied fair value of our reporting units goodwill,
determined by allocating the reporting units fair value to
all of its assets and liabilities in a manner similar to a
purchase price allocation in accordance with SFAS No. 141,
to its carrying amount, both of which would be measured as of
the date of adoption. We expect to complete the final
determination on our second quarter report and the transitional
impairment loss will be recognized as cumulative effect of a
change in accounting principle on our consolidated statement of
operations.

There has been no change to our goodwill-carrying
amount since December 31, 2001, other than the change, which
resulted from using a different foreign currency translation
rate at March 31, 2002 compared to December 31, 2001.
If goodwill amortization of $10.8 million would not have
been recorded in our first quarter of 2001, then our first
quarter of 2001 adjusted net loss and basic and diluted adjusted
loss per common share would have been $62.1 million and
$0.53 per share, respectively, instead of $73.0 million and
$0.63 per share, respectively.

In June 2001 the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). This standard
requires that obligations associated with the retirement of
tangible long-lived assets be recorded as liabilities when those
obligations are incurred, with the amount of the liability
initially measured at fair value. Upon initially recognizing a
liability for an asset retirement obligation, an entity must
capitalize the cost by recognizing an increase in the carrying
amount of the related long-lived asset. Over time, this
liability is accreted to its present value, and the capitalized
cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15,
2002, which for us means we will adopt SFAS No. 143
effective January 1, 2003. We do not expect that the
adoption of this statement will have a material impact on our
results of operations, financial position or cash flows.

Effective January 1, 2002 we adopted
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144), 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.

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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK

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

Exposure to Foreign Currency Exchange Rates.Our primary foreign currency exchange
risk relates to our operations in Latin America, where we
conduct business with more than one currency. We do not expect
that the impact of fluctuations in the foreign currency exchange
rate on our foreign currency denominated revenues and expenses
to materially affect our results of operations due primarily to
the natural hedges, which are expected to exist within our
operations. Management continues to monitor foreign currency
risk to determine if any actions, such as the issuance of
additional foreign currency denominated debt or other financial
instruments, would be warranted to reduce such risk. During the
three months ended March 31, 2002, Brazils currency
deteriorated in value against the U.S. dollar by approximately
1.81%, resulting in lower revenues and expenses in our Brazilian
operations when translated into our reporting U.S. dollar
currency.

At March 31, 2002, we had foreign currency
forward contracts that hedge certain activities with notional
amounts of $438.3 million, maturing in various dates
through November 2003. Based on a 10% strengthening or weakening
of the U.S. dollar compared to the currencies that we currently
hedge, the estimated fair value of undesignated forward
contracts would have resulted in additional unrealized gains of
$29.6 million or unrealized losses of $15.7 million,
respectively, for the three months ended March 31, 2002.
The effect of a 10% strengthening or weakening of the U.S.
dollar compared to the currencies that we currently hedge on our
cash flows forward contracts would have also resulted in
additional other comprehensive losses of $3.4 million or
additional unrealized other comprehensive gains of
$2.3 million, respectively.

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.Our senior secured vendor financing,
certain notes payable for equipment and a significant amount of
our local bank facilities bear interest at variable rates. Any
changes in the market interest rate will affect the amount of
our interest expense and the ultimate cash pay to these lenders.
To date we have not used interest rate swaps to fix the interest
costs on these loans.




LEGAL PROCEEDINGS

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 difficult to
predict. Consequently, we are unable to ascertain the ultimate
aggregate amount of monetary liability or financial impact with
respect to these matters at March 31, 2002. However, while
these matters could adversely 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.

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EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None.

(b) Reports on Form 8-K

None.

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SIGNATURES

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



| |                         
| | ------------------------
| | AT&T LATIN AMERICA CORP.



| |     |                     
| | --- | --------------------
| | By: | /s/ NELSON A. MURPHY

| |                               
| | ------------------------------
| |                               
| | Name: Nelson A. Murphy        
| | Title: Chief Financial Officer
| | (Principal Financial Officer) 



| |     |                       
| | --- | ----------------------
| | By: | /s/ LOURDES Z. MENESES

| |                               
| | ------------------------------
| |                               
| | Name: Lourdes Z. Meneses      
| | Title: Corporate Controller   
| | (Principal Accounting Officer)

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