Exhibit
        10.1

      


      CONFIDENTIAL
        SETTLEMENT AGREEMENT AND MUTUAL RELEASE

       

      
        ATSI
          Communications, Inc., a Nevada corporation (“ATSI”), formerly a Delaware
          corporation, and TELEMARKETING DE MEXICO S.A DE C.V., a Mexican Corporation,
          (“TELEMARKETING”) (collectively, the “Parties”), hereby enter into this
          Confidential Settlement Agreement and Mutual Release (the “Settlement
          Agreement”).

         

      

      RECITALS

      


      WHEREAS,
        the
        Parties are agreed
        that
        certain relationships between and among the Parties should be ended and any
        and
        all claims or liabilities between and among them be held for naught;
        and

      


      WHEREAS,
        the
        Parties entered into a share purchase agreement on May 22, 2003 regarding
        the
        sale by ATSI of 51% of its stock in ATSI Comunicaciones S.A de C.V. as defined
        in such Agreement; and

      


      WHEREAS,
        TELEMARKETING agreed to pay $598,000 in equal monthly payments initiating
        in May
        22, 2004. 

       

      WHEREAS,
        TELEMARKETING has defaulted in its obligations under the Share Purchase
        Agreement; and

      


      WHEREAS,
        all
        Parties wish to reach a full and final settlement of all matters and all
        causes
        and potential causes of action arising from any of their relationships with
        each
        other, including any and all disputes or rights or potential rights between
        or
        among the Parties arising from any transactions between or among them prior
        to
        the execution date of this Agreement, and now desire to set forth their
        agreement in writing.

      


      NOW,
        THEREFORE,
        in
        consideration of the foregoing and the mutual covenants and agreements set
        forth
        herein, and further good and valuable consideration, the Parties hereby agree
        and covenant as follows:

      


      
        
          
          

        

        
          Page
            1

          
            

          

        

        
          
          

        

      

      
        	 	
                1.

              	
                PAYMENT.
                  As
                  consideration for all amounts owed up to and including October
                  31, 2005 of
                  $598,000, ATSI shall deliver to TELEMARKETING the 2,680,077 shares
                  that
                  are being held as collateral and that represent 10% of ATSI Comunicaciones
                  S.A de C.V. total shares
                  outstanding.

              


      

      


      
        	 	
                2.

              	
                APPROVALS.
                  As
                  promptly as practicable after the date of this Settlement Agreement,
                  the
                  parties will file all of the Legal Requirements in Mexico necessary
                  in
                  order to consummate the Settlement agreement.


              


      

      


      
        	 	
                3.

              	
                RELEASE
                  BY ATSI.
                  In consideration of the receipt of the Payment, ATSI, with the
                  intention
                  of binding itself, and its officers, directors, shareholder, employees,
                  representatives, attorneys-in-fact, predecessors, successors and
                  assigns,
                  (the “ATSI Releasing Parties”) expressly releases, acquits, and discharges
                  and its respective officers, directors, shareholders, representatives,
                  attorneys, successors, and assigns (the “TELEMARKETING Released Parties”)
                  from all claims, demands, causes of action and potential claims
                  or causes
                  of action, of whatever nature that the ATSI Releasing Parties may
                  have or
                  claim to have against the TELEMARKETING Released Parties arising
                  from or
                  connected with, directly or indirectly, any and all claims the
                  ATSI
                  Releasing Parties may have or claim to have against the TELEMARKETING
                  Released Parties accruing before the execution date of this Release.
                  Notwithstanding the foregoing paragraph, the TELEMARKETING Released
                  Parties are not released from the obligations or indemnities set
                  forth in
                  this Settlement Agreement. 

              


      

      


      
        	 	
                4.

              	
                RELEASE
                  BY
                  TELEMARKETING. In further consideration of the foregoing, TELEMARKETING,
                  with the intention of binding itself and its respective officers,
                  directors, shareholders, employees, representatives, attorneys-in-fact,
                  predecessors, successors, assigns, and subsidiaries (the “ATSI Releasing
                  Parties”) expressly release, acquit, and discharge Telemarketing and its
                  officers, directors, shareholders, representatives, attorneys,
                  successors,
                  and assigns, (the “Telemarketing Released Parties”) from all claims,
                  demands, and causes of action or potential claims and causes of
                  action of
                  whatever nature that the ATSI Releasing Parties may have or claim
                  to have
                  against the Telemarketing Released Parties arising from or connected
                  with,
                  directly or indirectly, any relationship or transaction between
                  or among
                  the Parties, as well as any and all other or potential claims that
                  the
                  ATSI Releasing Parties may have or claim to have against the Torres
                  Released Parties accruing before the execution date of this Settlement
                  Agreement. Notwithstanding the foregoing paragraph, the TELEMARKETING
                  Released Parties are not released from the obligations of this
                  Settlement
                  Agreement.

              


      

       

      
        
          
          

        

        
          Page
            2

          
            

          

        

        
          
          

        

      


      
        	 	
                5.

              	
                NO
                  ADMISSION OF LIABILITY.
                  This settlement and the Payment made hereunder do not constitute
                  an
                  admission of liability by any Party hereto, and liability is expressly
                  denied by all Parties.

              


      

      


      
        	 	
                6.

              	
                CONFIDENTIALITY.
                  Except in ATSI’s “SEC” require disclosures, the Parties agree that they
                  will not disclose the terms of this Settlement Agreement, unless
                  necessary
                  to enforce the terms of this Settlement Agreement or after receipt
                  of
                  judicial process or lawful discovery procedures. In the event that
                  any
                  Party is served with notice to disclose such information by subpoena
                  or
                  otherwise, that Party agrees promptly to notify the other Parties
                  in
                  writing of such notice. The Party or Parties so notified in writing
                  shall
                  thereafter undertake the cost and obligation to maintain the propriety
                  and
                  confidentiality of the terms of such
                  information.

              


      

      


      
        	 	
                7.

              	
                NON-DISPARAGEMENT.
                  The Parties agree to use reasonable effort not to disparage or
                  interfere
                  with any other Party’s agreements or prospective agreements with any third
                  party. 

              


      

      


      
        
          
          

        

        
          Page
            3

          
            

          

        

        
          
          

        

      

      
        	 	
                8.

              	
                ENTIRE
                  AGREEMENT. This
                  Settlement Agreement contains the entire understanding and agreement
                  of
                  the Parties hereto with respect to the subject matters herein,
                  and may not
                  be amended or modified in any respect other than in a writing which
                  specifically refers to this Settlement Agreement and which is signed
                  by
                  all of the Parties hereto.

              


      

      


      
        	 	
                9.

              	
                GOVERNING
                  LAW.
                  This Settlement Agreement was negotiated in, and shall be governed
                  by and
                  construed according to, the laws of the State of Texas. In the
                  event that
                  any provision herein is deemed not enforceable, the remainder of
                  this
                  Settlement Agreement will remain unaffected. Venue for any action
                  relating
                  to the provisions of this Agreement shall be in Bexar County,
                  Texas.

              


      

       

      
        	 	
                10.

              	
                NO
                  ASSIGNMENT. By
                  signing this Settlement Agreement, each of the Parties represents
                  and
                  warrants that it has not assigned or subrogated any of its claims
                  or
                  potential claims, in whole or in part, to any third party.
                  

              


      

      


      
        	 	
                11.

              	
                MODIFICATION
                  AND ATTORNEY’S FEES.
                  This Settlement Agreement shall not be suspended, amended, or modified
                  in
                  any manner except by an instrument in writing signed by all Parties
                  to be
                  bound. Should it become necessary to enforce this Settlement Agreement,
                  or
                  any portion of it, or to declare the effect of any provision of
                  this
                  Settlement Agreement, the prevailing Party shall be entitled to
                  recover
                  costs incurred including reasonable attorney’s
                  fees.

              


      

      


      
        	 	
                12.

              	
                INFORMED
                  CONSENT.
                  The Parties acknowledge that they have had the opportunity to consult
                  with
                  their respective attorneys regarding the meaning and effect of
                  this
                  Settlement Agreement, and that none of the Parties has made any
                  representations, written or oral, upon which another Party relies
                  in
                  executing this Settlement
                  Agreement.

              


      

      


      
        	 	
                13.

              	
                COUNTERPARTS.
                  This Settlement Agreement may be executed in multiple counterparts.
                  A set
                  of counterpart copies which collectively contains the signature
                  and
                  acknowledgment of all Parties shall constitute an
                  original.

              


      

      


      
        
          
          

        

        
          Page
            4

          
            

          

        

        
          
          

        

      

      EXECUTED
        by an authorized representative of ATSI Communications, Inc., a Nevada
        corporation, on the date written below.

       

      
        
          
            
              	ATSI COMMUNICATIONS,
                      INC.	 	 	 
	 	 	 	 	 
	By:	 /S/
                      Arthur L. Smith 	 	 	 
	
                      Its:

                      Date:

                    	
                      President and Chief Executive
                        Officer

                      October 31, 2005 

                    	
                       

                    	
                      
                         

                      

                    	 


            

             

          

        

      

      EXECUTED
        by an authorized representative of Telemarketing de Mexico S.A de C.V.


       

      
         

        
          
            
              
                	TELEMARKETING
                        DE MEXICO S.A
                        DE C.V. 	 	 	 
	 	 	 	 	 
	By:	 /S/
                        Francisco Bunt  	 	 	 
	
                        Its:

                        Date:

                      	
                        Chief Executive Officer

                        October 31, 2005 

                      	
                         

                      	
                        
                           

                        

                      	 


              

            

          

        

      

       

      
        
          
          

        

        
          Page
            5