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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2005



or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
                     to                     .



Commission File Number: 000-50780



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TELEGLOBE INTERNATIONAL HOLDINGS LTD

(Exact name of registrant as specified
in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Bermuda                                                       |  | 98-0417192                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)



P.O. Box HM 1154, 10
Queen Street

Hamilton HM EX, Bermuda

(Address of principal executive office, including zip code)



(441) 296-4856

(Registrants telephone number, including area code)



---



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



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



Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.



At
August 2, 2005, there were 39,181,220 shares of Common Stock, par value $0.01 per share, outstanding.



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



INDEX



|                              |  |                                                                                                             |  |     
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                             |  | Page
|Part I. Financial Information |  |                                                                                                            
|                              |  |                                                                                                            
|Item 1.                       |  | Financial Statements                                                                                        |  |     
|                              |  |                                                                                                            
|                              |  | Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004 (Unaudited)                           |  | 3   
|                              |  |                                                                                                            
|                              |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited) |  | 4   
|                              |  |                                                                                                            
|                              |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (Unaudited)           |  | 6   
|                              |  |                                                                                                            
|                              |  | Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2005 (Unaudited)           |  | 7   
|                              |  |                                                                                                            
|                              |  | Notes to Consolidated Financial Statements (Unaudited)                                                      |  | 8   
|                              |  |                                                                                                            
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 19  
|                              |  |                                                                                                            
|Item 3.                       |  | Quantitative and Qualitative Disclosure About Market Risk                                                   |  | 27  
|                              |  |                                                                                                            
|Item 4.                       |  | Controls and Procedures                                                                                     |  | 28  
|                              | 
|Part II. Other Information    |  |                                                                                                            
|                              |  |                                                                                                            
|Item 1.                       |  | Legal Proceedings                                                                                           |  | 29  
|                              |  |                                                                                                            
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                         |  | 29  
|                              |  |                                                                                                            
|Item 6.                       |  | Exhibits                                                                                                    |  | 29  
|                              | 
|Signatures                    |  | 30                                                                                                         



2



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##### Table of Contents

PART IFinancial Information



|Item 1. | Financial Statements
|------- | --------------------



TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Balance Sheets

(amounts in thousands of United States Dollars,
except share and per-share data)

(Unaudited)



|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                       |  | June 30,2005 |         |   | December 31,2004 |  
|ASSETS                                                                                                                                                                 |  |              |         |   |                  |   |         |  
|                                                                                                                                                                       |  |             
|Cash and cash equivalents                                                                                                                                              |  | $            | 18,497  |   |                  | $ | 27,512  |  
|Marketable securities                                                                                                                                                  |  |              | 851     |   |                  |   | 1,824   |  
|Accounts receivable, (net of allowance for doubtful accounts of $20,312 at June 30, 2005 and $25,068 at December 31, 2004)                                             |  |              | 213,869 |   |                  |   | 210,588 |  
|Prepaid assets                                                                                                                                                         |  |              | 9,703   |   |                  |   | 3,774   |  
|Other current assets                                                                                                                                                   |  |              | 5,230   |   |                  |   | 6,415   |  
|Restricted cash                                                                                                                                                        |  |              | 2,099   |   |                  |   | 4,724   |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                                                                   |  |              | 250,249 |   |                  |   | 254,837 |  
|Property and equipment, (net of accumulated depreciation of $34,756 at June 30, 2005 and $23,361 at December 31, 2004)                                                 |  |              | 131,439 |   |                  |   | 134,083 |  
|Prepaid pension asset                                                                                                                                                  |  |              | 18,240  |   |                  |   | 18,802  |  
|Other long-term assets                                                                                                                                                 |  |              | 2,227   |   |                  |   | 2,836   |  
|Investment                                                                                                                                                             |  |              | 1,628   |   |                  |   |        |  
|Intangible assets, (net of accumulated amortization of $15,957 at June 30, 2005 and $10,853 at December 31, 2004)                                                      |  |              | 47,302  |   |                  |   | 46,354  |  
|Goodwill                                                                                                                                                               |  |              | 96,877  |   |                  |   | 96,877  |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                                                           |  | $            | 547,962 |   |                  | $ | 553,789 |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|LIABILITIES                                                                                                                                                            |  |              |         |   |                  |   |         |  
|                                                                                                                                                                       |  |             
|Accounts payable and accrued liabilities                                                                                                                               |  | $            | 267,675 |   |                  | $ | 259,915 |  
|Employee related payables                                                                                                                                              |  |              | 11,260  |   |                  |   | 15,193  |  
|Accrued liabilitiesaffiliate company                                                                                                                                  |  |              | 77      |   |                  |   | 537     |  
|Current portion of capital lease obligations                                                                                                                           |  |              | 3,018   |   |                  |   | 2,182   |  
|Current portion of deferred revenue                                                                                                                                    |  |              | 3,527   |   |                  |   | 3,883   |  
|Current portion of senior notes payableaffiliate company                                                                                                              |  |              | 25,000  |   |                  |   |        |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                              |  |              | 310,557 |   |                  |   | 281,710 |  
|Deferred revenue                                                                                                                                                       |  |              | 8,431   |   |                  |   | 8,787   |  
|Deferred income tax liability                                                                                                                                          |  |              | 70      |   |                  |   | 940     |  
|Long-term portion of capital lease obligations                                                                                                                         |  |              | 1,590   |   |                  |   | 1,112   |  
|Other long-term liabilities                                                                                                                                            |  |              | 2,920   |   |                  |   | 3,090   |  
|Senior notes payableaffiliate company                                                                                                                                 |  |              | 75,000  |   |                  |   | 100,000 |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total non-current liabilities                                                                                                                                          |  |              | 88,011  |   |                  |   | 113,929 |  
|                                                                                                                                                                       |  |             
|Commitments and contingencies                                                                                                                                          |  |              |         |   |                  |   |         |  
|                                                                                                                                                                       |  |             
|STOCKHOLDERS EQUITY                                                                                                                                                   |  |              |         |   |                  |   |         |  
|                                                                                                                                                                       |  |             
|Common stock (39,108,492 shares at June 30, 2005 and 39,084,793 shares at December 31, 2004 issued and outstanding and 400,000,000 shares
authorized, par value $0.01) |  |              | 391     |   |                  |   | 391     |  
|Additional paid-in capital                                                                                                                                             |  |              | 188,550 |   |                  |   | 188,495 |  
|Deferred compensation expense                                                                                                                                          |  |              | (27     | ) |                  |   | (44     | )
|Accumulated other comprehensive loss                                                                                                                                   |  |              | (22     | ) |                  |   | (40     | )
|Accumulated deficit                                                                                                                                                    |  |              | (39,498 | ) |                  |   | (30,652 | )
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                             |  |              | 149,394 |   |                  |   | 158,150 |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                             |  | $            | 547,962 |   |                  | $ | 553,789 |  
|                                                                                                                                                                       |  |              |         |   |                  |   |         |  



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



3



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Statements of Operations

(amounts in thousands of United States Dollars, except share and per-share data)

(Unaudited)



|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------- | - | ---------- | -
|                                                                                                                                                |  | Three Months EndedJune 30, 2005 |            |   | Three Months EndedJune 30, 2004 |  
|Telecommunication revenues                                                                                                                      |  | $                               | 239,173    |   |                                 | $ | 230,651    |  
|Operating expenses                                                                                                                              |  |                                 |            |   |                                 |   |            |  
|Telecommunication                                                                                                                               |  |                                 | 169,596    |   |                                 |   | 169,370    |  
|Network, exclusive of amortization and depreciation shown below                                                                                 |  |                                 | 22,729     |   |                                 |   | 24,068     |  
|Selling, general and administrative, exclusive of stock-based compensation expense, bad debt expense, depreciation and amortization shown
below |  |                                 | 37,439     |   |                                 |   | 32,189     |  
|Stock-based compensation expense                                                                                                                |  |                                 | 6          |   |                                 |   | 5          |  
|Bad debt expense                                                                                                                                |  |                                 | 221        |   |                                 |   | 497        |  
|Depreciation                                                                                                                                    |  |                                 | 5,762      |   |                                 |   | 5,108      |  
|Amortization of intangible assets                                                                                                               |  |                                 | 2,648      |   |                                 |   | 1,960      |  
|Foreign exchange loss (gain)                                                                                                                    |  |                                 | 1,594      |   |                                 |   | (179       | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Total operating expenses                                                                                                                        |  |                                 | 239,995    |   |                                 |   | 233,018    |  
|Interest expense                                                                                                                                |  |                                 | (82        | ) |                                 |   | 2,933      |  
|Interest expenserelated party                                                                                                                  |  |                                 | 2,393      |   |                                 |   | 1,021      |  
|Interest income                                                                                                                                 |  |                                 | (210       | ) |                                 |   | (133       | )
|Gain on sale of property and other income                                                                                                       |  |                                 | (2,223     | ) |                                 |   | (67        | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Total expenses                                                                                                                                  |  |                                 | 239,873    |   |                                 |   | 236,772    |  
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Loss before income taxes                                                                                                                        |  |                                 | (700       | ) |                                 |   | (6,121     | )
|Income tax recovery                                                                                                                             |  |                                 | (299       | ) |                                 |   | (2,345     | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Net loss                                                                                                                                        |  | $                               | (401       | ) |                                 | $ | (3,776     | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Preferred stock dividends to parent company                                                                                                     |  |                                 |           |   |                                 |   | (1,583     | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Net loss attributable to common stockholders                                                                                                    |  | $                               | (401       | ) |                                 | $ | (5,359     | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Basic and diluted loss per share                                                                                                                |  | $                               | (0.01      | ) |                                 | $ | (0.17      | )
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  
|Number of common shares used for calculation                                                                                                    |  |                                 | 39,106,709 |   |                                 |   | 31,732,709 |  
|                                                                                                                                                |  |                                 |            |   |                                 |   |            |  



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



4



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Statements of Operations(Continued)

(amounts in thousands of United States Dollars, except share and per-share data)

(Unaudited)



|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ----------------------------- | - | ---------- | -
|                                                                                                                                                                        |  | Six Months EndedJune 30, 2005 |            |   | Six Months EndedJune 30, 2004 |  
|Telecommunication revenues                                                                                                                                              |  | $                             | 494,480    |   |                               | $ | 445,195    |  
|Operating expenses                                                                                                                                                      |  |                               |            |   |                               |   |            |  
|Telecommunication                                                                                                                                                       |  |                               | 359,176    |   |                               |   | 323,726    |  
|Network, exclusive of amortization and depreciation shown below                                                                                                         |  |                               | 45,508     |   |                               |   | 47,802     |  
|Selling, general and administrative, exclusive of stock-based compensation expense, bad debt recovery, restructuring charges, depreciation and
amortization shown below |  |                               | 75,371     |   |                               |   | 57,811     |  
|Stock-based compensation expense                                                                                                                                        |  |                               | 17         |   |                               |   | 5          |  
|Bad debt recovery                                                                                                                                                       |  |                               | (626       | ) |                               |   | (590       | )
|Depreciation                                                                                                                                                            |  |                               | 12,009     |   |                               |   | 9,237      |  
|Amortization of intangible assets                                                                                                                                       |  |                               | 5,103      |   |                               |   | 3,363      |  
|Restructuring charges                                                                                                                                                   |  |                               |           |   |                               |   | 893        |  
|Foreign exchange loss                                                                                                                                                   |  |                               | 3,520      |   |                               |   | 306        |  
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Total operating expenses                                                                                                                                                |  |                               | 500,078    |   |                               |   | 442,553    |  
|Interest expense                                                                                                                                                        |  |                               | 1,668      |   |                               |   | 5,398      |  
|Interest expenserelated party                                                                                                                                          |  |                               | 4,778      |   |                               |   | 1,021      |  
|Interest income                                                                                                                                                         |  |                               | (413       | ) |                               |   | (209       | )
|Gain on sale of property and other income                                                                                                                               |  |                               | (2,199     | ) |                               |   | (75        | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Total expenses                                                                                                                                                          |  |                               | 503,912    |   |                               |   | 448,688    |  
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Loss before income taxes                                                                                                                                                |  |                               | (9,432     | ) |                               |   | (3,493     | )
|Income tax recovery                                                                                                                                                     |  |                               | (586       | ) |                               |   | (2,197     | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Net loss                                                                                                                                                                |  | $                             | (8,846     | ) |                               | $ | (1,296     | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Preferred stock dividends to parent company                                                                                                                             |  |                               |           |   |                               |   | (3,958     | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Net loss attributable to common stockholders                                                                                                                            |  | $                             | (8,846     | ) |                               | $ | (5,254     | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Basic and diluted loss per share                                                                                                                                        |  | $                             | (0.23      | ) |                               | $ | (0.18      | )
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  
|Number of common shares used for calculation                                                                                                                            |  |                               | 39,100,830 |   |                               |   | 29,919,733 |  
|                                                                                                                                                                        |  |                               |            |   |                               |   |            |  



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



5



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Statements of Cash Flows

(amounts in thousands of United States Dollars)

(Unaudited)



|                                                                               |  |                               |        |   |                               |   |         |  
|------------------------------------------------------------------------------ |  | ----------------------------- | ------ | - | ----------------------------- | - | ------- | -
|                                                                               |  | Six Months EndedJune 30, 2005 |        |   | Six Months EndedJune 30, 2004 |  
|Cash flows from operating activities                                           |  |                               |        |   |                               |   |         |  
|Net loss                                                                       |  | $                             | (8,846 | ) |                               | $ | (1,296  | )
|Adjustments to reconcile net loss to net cash flows from operating activities: |  |                               |        |   |                               |   |         |  
|Depreciation and amortization                                                  |  |                               | 17,112 |   |                               |   | 12,600  |  
|Net gain on sale of property and equipment                                     |  |                               | (1,813 | ) |                               |   |        |  
|Bad debt recovery                                                              |  |                               | (626   | ) |                               |   | (590    | )
|Stock-based compensation expense                                               |  |                               | 17     |   |                               |   | 5       |  
|Deferred income taxes                                                          |  |                               | (870   | ) |                               |   | (395    | )
|Other items                                                                    |  |                               | 670    |   |                               |   | (527    | )
|Changes in operating assets and liabilities:                                   |  |                               |        |   |                               |   |         |  
|Accounts receivable                                                            |  |                               | (2,655 | ) |                               |   | 16,627  |  
|Prepaid assets                                                                 |  |                               | (5,929 | ) |                               |   | (1,280  | )
|Other current assets                                                           |  |                               | 1,185  |   |                               |   | (3,713  | )
|Accounts payable and accrued liabilities                                       |  |                               | 4,912  |   |                               |   | (35,764 | )
|Deferred revenue                                                               |  |                               | (949   | ) |                               |   | (878    | )
|Other liabilities                                                              |  |                               | (170   | ) |                               |   | 270     |  
|                                                                               |  |                               |        |   |                               |   |         |  
|Net cash flows from operating activities                                       |  |                               | 2,038  |   |                               |   | (14,941 | )
|                                                                               |  |                               |        |   |                               |   |         |  
|Cash flows from investing activities                                           |  |                               |        |   |                               |   |         |  
|Purchase of property and equipment                                             |  |                               | (9,898 | ) |                               |   | (4,930  | )
|Proceeds on disposal of property and equipment                                 |  |                               | 3,292  |   |                               |   |        |  
|Addition of intangible assets                                                  |  |                               | (4,707 | ) |                               |   | (1,004  | )
|Sale of marketable securities                                                  |  |                               | 991    |   |                               |   | 16,695  |  
|Increase in long-term investment                                               |  |                               | (1,628 | ) |                               |   |        |  
|Restricted cash                                                                |  |                               | 2,625  |   |                               |   | (451    | )
|Cash acquired from merger with ITXC, net of acquisition costs paid             |  |                               |       |   |                               |   | 4,854   |  
|                                                                               |  |                               |        |   |                               |   |         |  
|Net cash flows from investing activities                                       |  |                               | (9,325 | ) |                               |   | 15,164  |  
|                                                                               |  |                               |        |   |                               |   |         |  
|Cash flows from financing activities                                           |  |                               |        |   |                               |   |         |  
|Retirement of preferred stock-parent company                                   |  |                               |       |   |                               |   | (95,000 | )
|Dividend payment to parent company                                             |  |                               |       |   |                               |   | (9,448  | )
|Issuance of senior notes to affiliate company                                  |  |                               |       |   |                               |   | 100,000 |  
|Capital lease repayment                                                        |  |                               | (1,783 | ) |                               |   | (75     | )
|Issuance of common stock                                                       |  |                               | 55     |   |                               |   |        |  
|                                                                               |  |                               |        |   |                               |   |         |  
|Net cash flows from financing activities                                       |  |                               | (1,728 | ) |                               |   | (4,523  | )
|                                                                               |  |                               |        |   |                               |   |         |  
|Net decrease in cash and cash equivalents                                      |  |                               | (9,015 | ) |                               |   | (4,300  | )
|Cash and cash equivalents at beginning of period                               |  |                               | 27,512 |   |                               |   | 35,279  |  
|                                                                               |  |                               |        |   |                               |   |         |  
|Cash and cash equivalents at end of period                                     |  | $                             | 18,497 |   |                               | $ | 30,979  |  
|                                                                               |  |                               |        |   |                               |   |         |  



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



6



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Statement of Stockholders Equity

(amounts in thousands of United States Dollars)

(Unaudited)



|                                                     |  |             |     |                          |   |                    |  |   |                             |   |  |                                   |     |   |                          |   |     |   |  |   |         |  
|---------------------------------------------------- |  | ----------- | --- | ------------------------ | - | ------------------ |  | - | --------------------------- | - |  | --------------------------------- | --- | - | ------------------------ | - | --- | - |  | - | ------- | -
|Six Months ended June 30, 2005                       |  | CommonStock |     | AdditionalPaid-inCapital |   | AccumulatedDeficit |  |   | DeferredCompensationExpense |   |  | AccumulatedOtherComprehensiveloss |     |   | TotalStockholdersEquity |  
|December 31, 2004                                    |  | $           | 391 |                          | $ | 188,495            |  | $ | (30,652                     | ) |  | $                                 | (44 | ) |                          | $ | (40 | ) |  | $ | 158,150 |  
|Issuance of common stock                             |  |             |    |                          |   | 55                 |  |   |                            |   |  |                                   |    |   |                          |   |    |   |  |   | 55      |  
|Amortization of deferred compensation expense        |  |             |    |                          |   |                   |  |   |                            |   |  |                                   | 17  |   |                          |   |    |   |  |   | 17      |  
|Net unrealized holding gain on marketable securities |  |             |    |                          |   |                   |  |   |                            |   |  |                                   |    |   |                          |   | 18  |   |  |   | 18      |  
|Net loss                                             |  |             |    |                          |   |                   |  |   | (8,846                      | ) |  |                                   |    |   |                          |   |    |   |  |   | (8,846  | )
|                                                     |  |             |     |                          |   |                    |  |   |                             |   |  |                                   |     |   |                          |   |     |   |  |   |         |  
|June 30, 2005                                        |  | $           | 391 |                          | $ | 188,550            |  | $ | (39,498                     | ) |  | $                                 | (27 | ) |                          | $ | (22 | ) |  | $ | 149,394 |  
|                                                     |  |             |     |                          |   |                    |  |   |                             |   |  |                                   |     |   |                          |   |     |   |  |   |         |  



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



7



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1. Basis of Presentation



The consolidated financial statements include the accounts of Teleglobe International Holdings Ltd and its subsidiaries (the Company,
Teleglobe or TIH). The Companys controlling shareholder is Cerberus Capital Management, L.P (Cerberus). All significant intercompany balances and transactions have been eliminated in consolidation.



The financial statements for the three and six months ended
June 30, 2005 include the assets, liabilities and results of ITXC Corp. (ITXC). The merger with ITXC was consummated on May 31, 2004 and thus the financial statements for the three and six months ended June 30, 2004 include the assets,
liabilities and results of ITXC only from June 1, 2004.



The
June 30, 2005 and 2004 financial statements have been prepared by management of TIH and are unaudited. In the opinion of the Companys management, all adjustments (consisting of normal recurring adjustments except for purchase price
allocations) necessary to present fairly the consolidated financial position, results of operations and cash flows for the three and six months ended June 30, 2005 and 2004 have been made. Certain information and footnote disclosures required for
annual financial statements under accounting principles generally accepted in the United States have been omitted from the unaudited interim Consolidated Financial Statements and notes thereto presented herein pursuant to the rules and regulations
of the Securities and Exchange Commission. The unaudited interim Consolidated Financial Statements and notes thereto presented herein should be read in conjunction with the Consolidated Financial Statements of the Successor and the Combined
Financial Statements of the Predecessor and notes thereto included in the Companys annual Form 10-K for the year ended December 31, 2004 and filed on March 17, 2005. The results of operations of the Company for the three and six months
ended June 30, 2005 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year.



Certain comparative figures have been reclassified in order to conform to the presentation adopted in the current periods. Among the reclassified items,
is the reclassification of software from property and equipment to intangible assets.



For the three and six months ended June 30, 2005, the Companys operating results include $3.0 million of revenue due to major favorable settlement agreements with certain carriers and $0.9 million of similar
favorable agreements in network expense. Additionally, for the three and six months ended June 30, 2005, the Companys telecommunication expense was reduced by major favorable settlements with certain carriers for approximately $2.7 million and
$5.7 million respectively.



The accounting policies used in
preparation of these financial statements are consistent with those reported in the Consolidated Financial Statements of the Successor in its annual Form 10-K.



2. Acquisition



On May 31, 2004, the merger with ITXC was completed. The merger has been accounted for using the purchase method and the purchase price was allocated to
the acquired assets and liabilities based on the estimated fair values determined using managements best estimates and independent valuations as at the acquisition date. The allocation of the purchase price was finalized during the first
quarter of 2005 without change to the amounts reported in the year-end Consolidated Financial Statements. The excess of the purchase consideration over the estimated fair value of net assets acquired, in the amount of $96.9 million has been
accounted for as goodwill.



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The final allocation of the purchase consideration to the estimated fair value of the net assets
acquired is as follows:



|                                             |  |             |         |  
|-------------------------------------------- |  | ----------- | ------- | -
|                                             |  | ITXC(000s) |        
|Estimated fair value of net assets acquired: |  |             |         |  
|Cash and cash equivalents                    |  | $           | 7,915   |  
|Marketable securities                        |  |             | 27,348  |  
|Restricted cash                              |  |             | 6,317   |  
|Accounts receivable                          |  |             | 41,642  |  
|Prepaids, deposits and other assets          |  |             | 3,600   |  
|Property and equipment                       |  |             | 24,550  |  
|Intangible assets                            |  |             | 27,400  |  
|Goodwill                                     |  |             | 96,877  |  
|Accounts payable and accrued liabilities     |  |             | (53,763 | )
|Capital lease obligations                    |  |             | (1,227  | )
|Deferred compensation expense                |  |             | 77      |  
|                                             |  |             |         |  
|Net identifiable assets acquired             |  | $           | 180,736 |  
|                                             |  |             |         |  
|Purchase consideration:                      |  |             |         |  
|Fair value of common shares issued           |  | $           | 157,327 |  
|Fair value of warrants issued                |  |             | 2,788   |  
|Fair value of stock options issued           |  |             | 16,285  |  
|Acquisition costs                            |  |             | 4,336   |  
|                                             |  |             |         |  
|Total purchase consideration                 |  | $           | 180,736 |  
|                                             |  |             |         |  



The results of
operations of ITXC are included in the consolidated statement of operations of TIH from June 1, 2004.



3. Restricted Cash



In
conjunction with its letters of credit for its leased premises, the Company has $2.1 million in restricted cash as of June 30, 2005 that represents the collateral supporting the letters of credit. The majority of the $2.1 million relates to a letter
of credit for the leased premises in Princeton, New Jersey. The letters of credit related to the leased premises expire through July 2006.



4. Investment



During the first quarter of 2005, the Company purchased 2,207,202 shares of Wmode Inc. (Wmode), representing approximately 5% of the
outstanding equity, and exclusive distribution rights to Wmodes proprietary technology for $2.0 million Canadian dollars ($1.6 million US dollars equivalent). The exclusivity to the distribution rights are subject to attaining certain revenue
levels. Wmode is a Canadian based, privately held leading provider of mobile content distribution services for content providers, mobile operators and media and brand companies. Teleglobe has agreed to purchase up to 4,415,402 shares of Wmode for
total consideration of $4.0 million Canadian dollars in tranches upon the achievement of certain development and operational milestones throughout 2005. As at June 30, 2005, the remaining commitment to purchase shares of Wmode is $2.0 million
Canadian dollars. The total amount of shares to be issued to Teleglobe under this agreement would total approximately 10% of the total shares outstanding of Wmode. The Company is currently finalizing the accounting of this investment including an
allocation of the purchase consideration.



9



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



5. Comprehensive Loss



The components of comprehensive loss for the periods indicated are as follows:



|                                                            |  |                                  |      |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|----------------------------------------------------------- |  | -------------------------------- | ---- | - | -------------------------------- | - | ------ | ------------------------------ |  | - | ------------------------------ | - |  | - | ------ | -
|(amounts in thousands)                                      |  | Three Months Ended June 30, 2005 |      |   | Three Months Ended June 30, 2004 |   |        | Six Months Ended June 30, 2005 |  |   | Six Months Ended June 30, 2004 |  
|Net loss                                                    |  | $                                | (401 | ) |                                  | $ | (3,776 | )                              |  | $ | (8,846                         | ) |  | $ | (1,296 | )
|Net unrealized holding gain (loss) on marketable securities |  |                                  | 10   |   |                                  |   | (18    | )                              |  |   | 18                             |   |  |   | (18    | )
|                                                            |  |                                  |      |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|Comprehensive loss                                          |  | $                                | (391 | ) |                                  | $ | (3,794 | )                              |  | $ | (8,828                         | ) |  | $ | (1,314 | )
|                                                            |  |                                  |      |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  



6. Stock-Based Compensation Plans



The Company accounts for stock-based awards to employees
and directors using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Under the intrinsic value method, when the market price
of the underlying stock on the date of grant exceeds the exercise price of the Companys employee stock award, compensation expense is recognized over the vesting period. The Company is required under SFAS No. 123 to disclose pro-forma
information regarding stock-based award grants made to its employees based on specified valuation techniques that produce estimated compensation charges.



Fair Value Assumptions



The Company granted 120,000 stock options on January 31, 2005 at an exercise price of $4.02 per share, 190,000 stock options on March 2, 2005 at an
exercise price of $5.00 per share and 44,000 stock options on May 19, 2005 at an exercise price of $2.35. The exercise prices equal the NASDAQ closing price on the date of grants. The options vest at a rate of one third per year from the date of
grant and terminate no later than seven years after the grant date. The weighted-average fair value of the options granted on January 31, 2005 is $3.23 per stock option, $4.03 per stock option granted on March 2, 2005 and $1.89 per stock option
granted on May 19, 2005. The fair value was estimated using the Black-Scholes model with the following weighted-average assumptions:



|                         |  |             |   |  |              |   |  |                 |  
|------------------------ |  | ----------- | - |  | ------------ | - |  | --------------- | -
|                         |  | May 19,2005 |   |  | March 2,2005 |   |  | January 31,2005 |  
|Expected life (in years) |  | 6           |   |  | 6            |   |  | 6               |  
|Risk-free interest rate  |  | 3.86        | % |  | 4.20         | % |  | 3.92            | %
|Volatility               |  | 100         | % |  | 100          | % |  | 100             | %
|Dividend yield           |  | 0           | % |  | 0            | % |  | 0               | %



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The following table summarizes relevant information as to reported results under the Companys
intrinsic value method of accounting for stock options, with supplemental pro-forma information as if the fair value recognition provisions of SFAS No. 123 had been applied for the periods indicated:



|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | - | ------ | ------------------------------ |  | - | ------------------------------ | - |  | - | ------ | -
|(amounts in thousands)                                                                          |  | Three Months Ended June 30, 2005 |        |   | Three Months Ended June 30, 2004 |   |        | Six Months Ended June 30, 2005 |  |   | Six Months Ended June 30, 2004 |  
|Net loss                                                                                        |  | $                                | (401   | ) |                                  | $ | (3,776 | )                              |  | $ | (8,846                         | ) |  | $ | (1,296 | )
|Preferred stock dividends                                                                       |  |                                  |       |   |                                  |   | (1,583 | )                              |  |   |                               |   |  |   | (3,958 | )
|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|Net loss attributable to common stockholders                                                    |  |                                  | (401   | ) |                                  |   | (5,359 | )                              |  |   | (8,846                         | ) |  |   | (5,254 | )
|Add: stock-based compensation, as reported pursuant to APB 25                                   |  |                                  | 6      |   |                                  |   | 5      |                                |  |   | 17                             |   |  |   | 5      |  
|Deduct: total stock-based compensation determined under fair value based methods for all awards |  |                                  | (1,465 | ) |                                  |   | (1,214 | )                              |  |   | (3,073                         | ) |  |   | (1,214 | )
|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|Pro-forma net loss, fair value method for all stock-based awards                                |  |                                  | (1,860 | ) |                                  |   | (6,568 | )                              |  |   | (11,902                        | ) |  |   | (6,463 | )
|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|Basic and diluted net loss per share, as reported                                               |  | $                                | (0.01  | ) |                                  | $ | (0.17  | )                              |  | $ | (0.23                          | ) |  | $ | (0.18  | )
|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  
|Pro-forma basic and diluted net loss per share, SFAS 123                                        |  | $                                | (0.05  | ) |                                  | $ | (0.21  | )                              |  | $ | (0.30                          | ) |  | $ | (0.22  | )
|                                                                                                |  |                                  |        |   |                                  |   |        |                                |  |   |                                |   |  |   |        |  



7. Common Stock and Earnings per
Share



During the six months ended June 30, 2005, stock
options in respect of 23,699 common shares were exercised for cash consideration of $55,000.



Basic earnings per share is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period.



Diluted earnings per share is determined in the same manner as basic earnings
per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method. The diluted earnings per share amount equals basic earnings per share because the Company had a net
loss and the impact of the assumed exercise of the stock options and warrants is not dilutive.



Basic and diluted loss per share calculation is as follows (in thousands, except share and per-share data):



|                                             |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|-------------------------------------------- |  | -------------------------------- | ---------- | - | -------------------------------- | - | ---------- | ------------------------------ |  | - | ------------------------------ | - |  | - | ---------- | -
|                                             |  | Three Months Ended June 30, 2005 |            |   | Three Months Ended June 30, 2004 |   |            | Six Months Ended June 30, 2005 |  |   | Six Months Ended June 30, 2004 |  
|Net loss attributable to common stockholders |  | $                                | (401       | ) |                                  | $ | (5,359     | )                              |  | $ | (8,846                         | ) |  | $ | (5,254     | )
|Basic and diluted loss per share:            |  | $                                | (0.01      | ) |                                  | $ | (0.17      | )                              |  | $ | (0.23                          | ) |  | $ | (0.18      | )
|Weighted-average shares                      |  |                                  | 39,106,709 |   |                                  |   | 31,732,709 |                                |  |   | 39,100,830                     |   |  |   | 29,919,733 |  



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



8. Retention Bonuses



Prior to the consummation of the merger with ITXC, certain ITXC employees contractually agreed to complete a predetermined service period in order to
obtain agreed-upon retention bonuses. Receipt of these amounts is fully conditional upon completion of the entire service period. No other amounts are payable to these employees at the end of the service period. In the six months period ending June
30, 2005, some employees terminated their employment before the agreed upon-service period and other changes were made to the original terms of the contractual agreement of some employees. The Company is recognizing the total estimated liability of
$3.3 million associated with this obligation on a pro-rata basis as services are provided. These amounts are included in accrued liabilities and selling, general and administrative expenses. The remaining liability is expected to be paid by the end
of the third quarter of 2005.



The following table displays the
activity and balances of the retention bonus liability from December 31, 2004 to June 30, 2005 and from May 31 to June 30, 2004.



|                       |  |                             |       |          |   |             |  |                    |       |                                |   |     |  |   |      
|---------------------- |  | --------------------------- | ----- | -------- | - | ----------- |  | ------------------ | ----- | ------------------------------ | - | --- |  | - | -----
|(amounts in thousands) |  | Balance atDecember 31, 2004 |       | Incurred |   | Amountspaid |  | Amountswritten-off |       | Ending balance atJune 30, 2005
|Retention bonuses      |  | $                           | 1,731 |          | $ | 461         |  | $                  | 1,485 |                                | $ | 593 |  | $ | 114  
|                       |  |                             |       |          |   |             |  |                    |       |                                |   |     |  |   |      
|                       |  |                             |       |          |  
|(amounts in thousands) |  | Balance atMay 31, 2004      |       | Incurred |   | Amountspaid |  | Amountswritten-off |       | Ending balance atJune 30, 2004
|Retention bonuses      |  | $                           | 1,959 |          | $ | 249         |  | $                  | 31    |                                | $ | 0   |  | $ | 2,177
|                       |  |                             |       |          |   |             |  |                    |       |                                |   |     |  |   |      



9. Employee Benefit Plans



The following table presents the components of net
periodic benefit cost for pension benefits and other post-retirement health care and life insurance benefits:



|                          |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|------------------------- |  | ------------------------------- | ------ | - | ------------------------------- | - | ------ | ----------------------------- |  | - | ----------------------------- | - |  | - | ------ | -
|(amounts in thousands)    |  | Three Months EndedJune 30, 2005 |        |   | Three Months EndedJune 30, 2004 |   |        | Six Months EndedJune 30, 2005 |  |   | Six Months EndedJune 30, 2004 |  
|Service cost              |  | $                               | 726    |   |                                 | $ | 577    |                               |  | $ | 1,457                         |   |  | $ | 1,171  |  
|Interest cost             |  |                                 | 1,851  |   |                                 |   | 1,662  |                               |  |   | 3,714                         |   |  |   | 3,370  |  
|Return on assets          |  |                                 | (2,257 | ) |                                 |   | (1,988 | )                             |  |   | (4,529                        | ) |  |   | (4,031 | )
|                          |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Net periodic benefit cost |  | $                               | 320    |   |                                 | $ | 251    |                               |  | $ | 642                           |   |  | $ | 510    |  
|                          |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  



The Company did not
contribute to its pension plans during the three and six months ended June 30, 2005 and does not expect to contribute to its pension plans during the remainder of 2005 because the plans are in a surplus position. The Company contributed
approximately $33,000 and $68,000 to its post-retirement health care and life insurance plan in the three and six months ended June 30, 2005 respectively ($nil for the three and six months ended June 30, 2004) and expects to contribute similar
amounts in the remaining two quarters of 2005.



10. Interest Expense



Interest expense includes a recovery of $0.5 million and
an interest expense of $1.0 million for the three and six months ended June 30, 2005 respectively ($2.8 million and $5.0 million for the three and six months ended June 30, 2004 respectively) representing the accretion of the Comfone AG liability to
the amounts expected to be paid. During the three months ended June 30, 2005, the recovery of interest expense of $0.5 million was recorded to reflect the final negotiated agreement with Comfone AG. The joint venture agreement, acquired as part of
the acquisition of Old Teleglobe on May 30, 2003 as described in the Companys annual Form 10-K, was terminated in January 2004, requiring the Company to pay Comfone AG its share of any cash derived from the mobile



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



global roaming business until the end of fiscal 2004. At the time of the acquisition, management recorded its best estimate of the fair value of the
termination payment as an unfavorable contract in the purchase price allocation.



The three and six months ended June 30, 2005 include $2.4 million (net of $0.4 million interest capitalized) and $4.8 million (net of $0.7 million interest capitalized) respectively, of interest expense relating to
senior notes, with a related party, issued in the second quarter of 2004 ($1.0 million for the three and six months ended June 30, 2004).



11. Sale of Property



On June 30, 2005, as part of the Companys plan to reduce operational expenses, the Company disposed the land, building and office equipment located
in the Burnaby Vancouver Station for $3.2 million in cash, resulting in a pre-tax gain of $2.2 million, net of transaction costs of $0.2 million.



12. Restructuring Charges



During the first quarter of 2004, the Company reduced its workforce by 15 people and incurred restructuring costs of $893,000 consisting of certain
contractual amounts and other severance. As at June 30, 2004, the total severance liability was settled.



13. Intangible Assets



The following table summarizes the intangible assets at the dates indicated:



|                                                                |  |                     |        |                         |   |         |     |  |                     |        |                         |   |        |     |   |         |   |  |   |       
|--------------------------------------------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | --- |  | ------------------- | ------ | ----------------------- | - | ------ | --- | - | ------- | - |  | - | ------
|                                                                |  | June 30, 2005       |        | December 31, 2004      
|(amounts in thousands)                                          |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | Net |  | GrossCarryingAmount |        | AccumulatedAmortization |   |        | Net
|Customer relationships                                          |  | $                   | 8,700  |                         | $ | (3,696  | )   |  | $                   | 5,004  |                         | $ | 8,700  |     | $ | (2,838  | ) |  | $ | 5,862 
|Other intangibles                                               |  |                     | 2,121  |                         |   | (2,121  | )   |  |                     |       |                         |   | 2,121  |     |   | (2,121  | ) |  |   |      
|Tradenames                                                      |  |                     | 700    |                         |   | (108    | )   |  |                     | 592    |                         |   | 700    |     |   | (58     | ) |  |   | 642   
|Patents                                                         |  |                     | 6,500  |                         |   | (1,006  | )   |  |                     | 5,494  |                         |   | 6,500  |     |   | (542    | ) |  |   | 5,958 
|Technology                                                      |  |                     | 16,400 |                         |   | (2,538  | )   |  |                     | 13,862 |                         |   | 16,400 |     |   | (1,367  | ) |  |   | 15,033
|Origination and termination contracts and related relationships |  |                     | 1,500  |                         |   | (300    | )   |  |                     | 1,200  |                         |   | 1,500  |     |   | (150    | ) |  |   | 1,350 
|Software                                                        |  |                     | 27,338 |                         |   | (6,188  | )   |  |                     | 21,150 |                         |   | 21,286 |     |   | (3,777  | ) |  |   | 17,509
|                                                                |  |                     |        |                         |   |         |     |  |                     |        |                         |   |        |     |   |         |   |  |   |       
|Total intangible assets                                         |  | $                   | 63,259 |                         | $ | (15,957 | )   |  | $                   | 47,302 |                         | $ | 57,207 |     | $ | (10,853 | ) |  | $ | 46,354
|                                                                |  |                     |        |                         |   |         |     |  |                     |        |                         |   |        |     |   |         |   |  |   |       



The software acquired
during the six months period ending June 30, 2005 is being amortized over its estimated useful life of three to five years. The weighted-average amortization period for acquired intangibles in the six months ended June 30, 2005 equals approximately
4.1 years.



Amortization expense for intangible assets totaled
approximately $2.6 million and $5.1 million for the three and six months ended June 30, 2005 respectively and $2.0 million and $3.4 million for the three and six months ended June 30, 2004. Aggregate amortization expense for intangible assets is
estimated to be:



|                              |  |   |             
|----------------------------- |  | - | ------------
|Remainder of 2005             |  | $ | 5.5 million 
|Year ending December 31, 2006 |  | $ | 11.0 million
|Year ending December 31, 2007 |  | $ | 11.0 million
|Year ending December 31, 2008 |  | $ | 9.7 million 
|Year ending December 31, 2009 |  | $ | 8.6 million 



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



14. Property and Equipment



The components of property and equipment are as follows:



|                                     |  |                        |         |   |                  |   |         |  
|------------------------------------ |  | ---------------------- | ------- | - | ---------------- | - | ------- | -
|                                     |  | June 30,2005           |         |   | December 31,2004 |  
|                                     |  | (amounts in thousands) |        
|Land                                 |  | $                      | 1,430   |   |                  | $ | 2,000   |  
|Telecommunications equipment         |  |                        | 44,245  |   |                  |   | 38,411  |  
|Buildings and equipment              |  |                        | 4,827   |   |                  |   | 4,681   |  
|Cable systems                        |  |                        | 59,181  |   |                  |   | 59,168  |  
|Computer equipment                   |  |                        | 4,920   |   |                  |   | 4,240   |  
|Leasehold improvements               |  |                        | 3,205   |   |                  |   | 3,172   |  
|Construction in progress             |  |                        | 9,925   |   |                  |   | 8,395   |  
|                                     |  |                        |         |   |                  |   |         |  
|                                     |  |                        | 127,733 |   |                  |   | 120,067 |  
|Less: Accumulated depreciation       |  |                        | (28,877 | ) |                  |   | (19,280 | )
|                                     |  |                        |         |   |                  |   |         |  
|                                     |  |                        | 98,856  |   |                  |   | 100,787 |  
|Leased property under capital leases |  |                        | 38,462  |   |                  |   | 37,377  |  
|Less: Accumulated depreciation       |  |                        | (5,879  | ) |                  |   | (4,081  | )
|                                     |  |                        |         |   |                  |   |         |  
|                                     |  |                        | 32,583  |   |                  |   | 33,296  |  
|                                     |  |                        |         |   |                  |   |         |  
|Property and equipment, net          |  | $                      | 131,439 |   |                  | $ | 134,083 |  
|                                     |  |                        |         |   |                  |   |         |  



15. Related Party



The Company concluded the following transactions at exchange value with
related parties in the normal course of business.



|                                            |  |                                                                 |  |                                |       |                                |   |                              |  |                              |       |  |   |      
|------------------------------------------- |  | --------------------------------------------------------------- |  | ------------------------------ | ----- | ------------------------------ | - | ---------------------------- |  | ---------------------------- | ----- |  | - | -----
|(amounts in thousands)                      |  |                                                                 |  |                               
|Nature of transaction with therelated party |  | Classification in theCompanys consolidatedfinancial statements |  | Three MonthsEndedJune 30, 2005 |       | Three MonthsEndedJune 30, 2004 |   | Six MonthsEndedJune 30, 2005 |  | Six MonthsEndedJune 30, 2004
|Cerberus and affiliates                     |  |                                                                 |  |                                |       |                                |   |                              |  |                              |       |  |   |      
|Financing                                   |  | Interest expense (1)                                            |  | $                              | 2,758 |                                | $ | 1,021                        |  | $                            | 5,488 |  | $ | 1,021
|Preferred stock dividend                    |  | Preferred stock dividends to parent company                     |  | $                              |      |                                | $ | 1,583                        |  | $                            |      |  | $ | 3,958



Amounts payable to
related parties at June 30, 2005 total $100.1 million and $100.5 million at December 31, 2004.

---

|(1) | During the three and six months ended June 30, 2005, the Company capitalized approximately $0.4 million and $0.7 million respectively of the total $2.8 million and $5.5 million of
interest to property and equipment and software included in intangible assets ($nil for the three and six months ended June 30, 2004).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16. Contingencies



As previously reported, as part of its normal ongoing review of ITXCs operations in connection with the post-merger integration of Teleglobe and
ITXC, Teleglobe had identified potential instances of noncompliance with the United States Foreign Corrupt Practices Act (FCPA) relating to ITXCs operations in certain African countries prior to its merger with Teleglobe,
consummated on May 31, 2004. Teleglobe voluntarily notified the



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Securities and Exchange Commission (the SEC) and the U.S. Department of Justice (the DOJ) of the matter, and has been cooperating
fully with the SEC and the DOJ. The SEC had previously advised Teleglobe that it was conducting an informal inquiry into the matter. Teleglobe has been informed that the SEC issued a formal order of investigation on February 15, 2005 concerning
ITXCs possible violations of the FCPA and possible related violations of the securities laws. On July 27, 2005, the SEC issued a subpoena to the Company for documents relating to its investigation. Teleglobe intends to continue to cooperate
fully with the SEC and DOJ in the investigation. Teleglobe cannot predict the extent to which the SEC, the DOJ or any other governmental authorities will pursue administrative, civil or criminal proceedings, the imposition of fines or penalties or
other remedies or sanctions. Teleglobe has not identified, and does not believe it is likely that, any material adjustment to its financial statements is or will be required in connection with the results of this investigation, although it is
possible that a monetary penalty, if any, may be material to its results of operations in the period in which it is imposed.



On April 14, 2004, Acceris Communications Technologies, Inc. commenced a patent infringement suit in the United States District Court of the District of
New Jersey, against ITXC Corp., alleging that ITXCs VoIP services and systems infringe Acceris U.S. Patent No. 6,243,373, entitled Method and Apparatus for Implementing a Computer Network/Internet Telephone System. On May 7,
2004, ITXC filed a lawsuit against Acceris for infringement of a number of ITXCs VoIP patents. The suit alleged infringement of five of ITXCs United States Patents, numbers 5,889,774, 6,026,087, 6,404,864, 6,628,760 and 6,661,878,
directed generally to the transmission of telephone calls over the Internet and the completion of telephone calls by switching them off the Internet and onto a public switched telephone network (PSTN). On July 6, 2004, the Court rejected
Acceris initial motion to dismiss ITXCs case based upon alleged failure to conduct an adequate pre-complaint investigation. The Company intends to vigorously defend against the allegations of infringement in that case and believes it has
substantial defenses to them. However, an adverse result in this litigation could either result in injunctive relief precluding all or a portion of ITXCs VoIP activity or materially impact the Companys revenue and profitability.
Litigation of such matters may require significant management and financial resources of the Company and adverse outcomes in such lawsuits could materially adversely affect our financial condition or operating results.



ITXC and certain of its former officers/directors were named as defendants in
several purported shareholder class action lawsuits commenced in 2001. The lawsuits allege, among other things, that, in connection with ITXCs public offerings of securities, its Prospectus did not disclose certain alleged practices involving
its underwriters and their customers. These actions seek compensatory and other damages, and costs and expenses associated with the litigation. No discovery has taken place with respect to ITXC and the other issuer defendants. ITXC is one of
hundreds of issuers named as defendants in substantially identical lawsuits. Management believes that ITXC and its officers/directors did not engage in any improper or illegal conduct. All of these cases have been consolidated for pretrial purposes
before Judge Scheindlin in the Southern District of New York, who refused to dismiss the cases in an opinion issued in February 2003. All of the individual defendants who had been named as defendants in the Companys case have now been
dismissed from the proceeding without prejudice, pursuant to a stipulation with the plaintiffs. Neither the individual defendants nor the Company nor its insurers paid any consideration for these dismissals. The issuer defendants, their insurance
carriers and the plaintiffs have negotiated a settlement pursuant to which the insurance carriers would fund any monetary consideration, and it is anticipated that this proposed settlement will be submitted to the Court for approval in the near
future. This settlement was approved by the court on February 15, 2005 on a preliminary basis. Under the terms of the proposed settlement, the Company would be dismissed from the litigation with prejudice and should neither have future liability to
plaintiffs nor any significant expenses in connection with the litigation, except for a limited obligation to cooperate in discovery in the plaintiffs continuing cases against the underwriters.



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



We are routinely party to suits for collection, commercial disputes, claims from customers and/or
suppliers over reconciliation of payments for voice minutes, circuits, Internet bandwidth and/or access to the public switched telephone network, leased equipment, and claims from estates of bankrupt companies alleging that we received preferential
payments from such companies prior to their bankruptcy filings. While management currently believes that resolving such suits and claims, individually or in aggregate, will not have a material adverse impact on our financial position, the FCPA
investigation and other litigation proceedings noted above are subject to inherent uncertainties and managements view of these matters may change in the future. Were an unfavorable final outcome to occur, such an outcome could have a material
adverse impact on our financial position and results of operations for the period in which the effect becomes reasonably estimable.



17. Subsequent Events



i) Plan of Amalgamation



On July 25, 2005, the Company entered into an Agreement and Plan of Amalgamation (the Amalgamation Agreement) with Videsh Sanchar Nigam
Limited (VSNL) and VSNL Telecommunications (Bermuda) Ltd., a wholly owned subsidiary of VSNL (Amalgamation Sub). Pursuant to the Amalgamation Agreement, which is subject to approvals and closing conditions, Teleglobe will be
amalgamated with Amalgamation Sub, and the resulting company will be a wholly owned subsidiary of VSNL (the Amalgamation). At the effective time of the Amalgamation, each common share of Teleglobe issued and outstanding immediately prior
to the effective time (other than shares, if any, held directly or indirectly by Teleglobe, VSNL, Amalgamation Sub or any Teleglobe shareholder that has properly perfected its right to appraisal for such shares in accordance with the Companies Act
1981 of Bermuda (the Companies Act)) will be exchanged for the right to receive $4.50 per share, all in accordance with the provisions of the Companies Act and the Amalgamation Agreement. Upon consummation of the Amalgamation, each
option to purchase common shares of Teleglobe outstanding immediately prior to the effective time of the Amalgamation that has an exercise price per share less than $4.50 (whether or not then exercisable or vested) will entitle the holder thereof to
the right to receive a cash payment in an aggregate amount equal to the product of (A) the excess of $4.50 over the exercise price per share of such option and (B) the number of shares subject to such option, and such option will be terminated and
cancelled immediately prior to such effective time. Upon consummation of the Amalgamation, each option to purchase common shares of Teleglobe outstanding immediately prior to the effective time of the Amalgamation that has an exercise price per
share equal to or greater than $4.50 will automatically be terminated and cancelled, without any consideration, as of such effective time. Upon consummation of the Amalgamation, each warrant to purchase common shares of Teleglobe outstanding
immediately prior to the effective time of the Amalgamation (whether or not then exercisable or vested) shall entitle the holder thereof to the right to receive, upon exercise and payment of any applicable warrant consideration, a cash payment in an
aggregate amount equal to the product of (A) $4.50 and (B) the number of shares subject to such warrant.



Teleglobes Board of Directors has approved the Amalgamation Agreement. The Amalgamation is conditioned on, among other things, the approval of the
Amalgamation Agreement by the required vote of shareholders of at least a majority of the outstanding shares in Teleglobes common share capital, expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended and other applicable antitrust laws, the receipt of certain regulatory approvals specified in the Amalgamation Agreement, expiration of the time period for any applicable review process by the Committee on Foreign Investment
in the United States without any action or recommendation by such committee to prevent consummation of the Amalgamation, and the number of shares of shareholders properly exercising their appraisal rights pursuant to the Companies Act does not
exceed, in the aggregate, 5% of the outstanding Teleglobes common shares capital. The Amalgamation Agreement also includes certain termination rights and



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



provides that, upon termination of the Amalgamation Agreement under certain circumstances, Teleglobe would be required to pay VSNL a termination fee of $4.5
million. In addition, the Amalgamation agreement includes certain interim operating covenants, subject to certain exceptions, that required Teleglobe to obtain VSNLs prior written consent, which consent may not be unreasonably withheld, for
taking certain actions. In connection with the signed Amalgamation Agreement, the Company incurred professional fees from its financial advisor in the amount of $900,000. The fees became due upon the execution of the Amalgamation Agreement on July
25, 2005. The remaining portion of the fees will become due upon consummation of the Amalgamation.



In connection with the execution of the Amalgamation Agreement, Teleglobe Bermuda Holdings Ltd, an affiliate of Cerberus Capital Management, L.P. and the
holder of approximately 66.2% of Teleglobes outstanding common shares, has executed a voting agreement with VSNL pursuant to which it agreed to vote its Teleglobe shares in favor of the Amalgamation Agreement and the Amalgamation and against
any alternative transaction, not to transfer its Teleglobe shares, and not to take certain actions specified therein to encourage or facilitate any such alternative transaction. The voting agreement also provides for Teleglobe Bermuda Holdings Ltd
to pay to VSNL 75% of any proceeds in excess of $4.50 per share that may be received for its Teleglobe shares if the Amalgamation Agreement is terminated under certain circumstances. Certain trusts affiliated with Gerald Porter Strong, president and
chief executive officer of Teleglobe, and with Richard D. Willett II, chief operating officer of Teleglobe, have executed similar voting agreements with VSNL. Each of the above-referenced voting agreements will terminate on the earliest to occur of
(i) the effective time of the Amalgamation, (ii) the termination of such voting agreement by the mutual written agreement of the parties thereto, and (iii) the date of termination of the Amalgamation Agreement.



ii) Operating Lease for Administrative Office



On July 8, 2005, the Company signed a new lease agreement for its
administrative premises with an initial term of 15 years ending December 31, 2020. The total lease payments amounting to approximately $16.2 million have been included in Note 19, Commitments and Contingencies, of the Companys 2004
audited annual Consolidated Financial Statements. The Company provided the lessor a first-ranking collateral hypothec of $3.0 million Canadian dollars over one of its properties.



18. Recent Accounting Pronouncements



In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets, an amendment of APBNo. 29, Accounting for Nonmonetary
Transactions. SFAS 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within
reasonable limits or (2) the transactions lack commercial substance. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Companys adoption of this standard did not have any
impact on its Consolidated Financial Statements.



In December
2004, the FASB released its final revised standard, SFAS No. 123R, Share-Based Payment. SFAS 123R requires that a public entity measure the cost of equity based service awards based on the grant-date fair value of the award. That cost will be
recognized over the period during which an employee is required to provide service in exchange for the award or the vesting period. A public entity will initially measure the cost of liability based service awards based on its current fair value;
the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. Adoption of SFAS
123R is required for the fiscal year beginning after June 15, 2005. The Company is evaluating SFAS 123R and believes the impact on the financial statements should be consistent with the FAS 123 pro forma disclosure contained in Note 6 of the
unaudited interim Consolidated Financial Statements.



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections. SFAS 154
eliminates the requirement in APB Opinion No. 20, Accounting Changes, to include the cumulative effect of changes in accounting principle in the income statement in the period of change. Instead, to enhance the comparability of prior period
financial statements, SFAS 154 requires that changes in accounting principle be retrospectively applied. Under the retrospective application, the new accounting principle is applied as of the beginning of the first period presented as if that
principle had always been used. Adoption of SFAS 154 is required for accounting changes and corrections of errors made in the fiscal year beginning after December 15, 2005. The Company will adopt this new accounting standard on January 1st, 2006.



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



The following discussion and analysis should be read in conjunction with the audited Consolidated and Combined Financial
Statements, the related Notes to audited Consolidated and Combined Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Companys annual Form 10-K for the year ended
December 31, 2004 and filed with the Securities and Exchange Commission on March 17, 2005 and the unaudited interim Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Item 1 of Part I of this
Quarterly Report on Form 10-Q.



The Company has included in
this Quarterly Report certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning TIHs business, operations and financial condition. Forward-looking
statements consist of all non-historical information, and the analysis of historical information, including any references in this Quarterly Report to future revenue growth, future expense growth, future credit exposure, future profitability,
anticipated cash resources, anticipated capital expenditures, capital requirements, and the Companys plans for future periods. In addition, the words could, expects, anticipates, objective,
plan, may affect, may depend, believes, estimates, projects and similar words and phrases are also intended to identify such forward-looking statements.



Actual results could differ materially from those projected in the
Companys forward-looking statements due to numerous known and unknown risks and uncertainties, including, among other things, (i) uncertainties inherent in the execution of the Companys Amalgamation Agreement with VSNL, including but not
limited to, transactions costs, retention of key employees and customers through the acquisition process, the risk of approval with requirements, limitations or costs, disapproval, or delay by governmental entities of the proposed transaction, the
risks of delay in consummation of the transaction, the existence of undisclosed or unanticipated contingent liabilities, that material adverse changes to either entity may prevent the transaction from closing and (ii) other risks, including the
volatile and competitive environment for telecommunications; changes in domestic and foreign economic, market and regulatory conditions; the inherent uncertainty of financial estimates and projections; uncertainty inherent in litigation;
unanticipated technological difficulties; the risk that the Company may not be able to access sufficient capital; the creditworthiness of and relationship with our customers; the Companys debt level and the inherent lack of flexibility
resulting thereof; future transactions and risks inherent in being subject to significant regulation. (See also discussion on Risk Factors on page 48 of the Companys annual Form 10-K). All such forward-looking statements are current only as of
the date on which such statements were made. The Company does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the
occurrence of unanticipated events.



More details on the
Agreement and Plan of Amalgamation are provided in the Companys Form 8-K filed July 25, 2005 and in Note 17 of the unaudited interim Consolidated Financial Statements included herein.



The results of operations contained in the unaudited interim Consolidated
Financial Statements for the three and six months ended June 30, 2005 and 2004 are results of operations for such interim periods and are not necessarily indicative of the results to be expected for an entire year or for any other period.



Recently Issued Accounting Standards



In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary
Assets, an amendment of APBNo. 29, Accounting for Nonmonetary Transactions. SFAS 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received
nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. The Companys adoption of this standard did not have any impact on its Consolidated Financial Statements.



In December 2004, the FASB released its final revised standard, SFAS No. 123R, Share-Based Payment. SFAS 123R requires that a public entity measure
the cost of equity based service awards based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to



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provide service in exchange for the award or the vesting period. A public entity will initially measure the cost of liability based service awards based on
its current fair value; the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that
period. Adoption of SFAS 123R is required for the fiscal year beginning after June 15, 2005. The Company is evaluating SFAS 123R and believes the impact on the financial statements should be consistent with the FAS 123 pro forma disclosure contained
in Note 6 of the unaudited interim Consolidated Financial Statements.



In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections. SFAS 154 eliminates the requirement in APB Opinion No. 20, Accounting Changes, to include the cumulative effect of changes in accounting
principle in the income statement in the period of change. Instead, to enhance the comparability of prior period financial statements, SFAS 154 requires that changes in accounting principle be retrospectively applied. Under the retrospective
application, the new accounting principle is applied as of the beginning of the first period presented as if that principle had always been used. Adoption of SFAS 154 is required for accounting changes and corrections of errors made in the fiscal
year beginning after December 15, 2005. The Company will adopt this new accounting standard on January 1st, 2006.



ITXC Integration Plan



The following is an update on the Companys ITXC integration plan:



The Companys ITXC merger integration plan to achieve
annual post-merger benefits of approximately $25 to $30 million continued to progress in the second quarter of 2005. The integration plan centered around facility and headcount reductions, termination cost savings and consolidation of the Teleglobe
and ITXC networks resulting in reduced capital expenditures. The original completion date was set for the first quarter of 2005, however there was a delay of one quarter from the original plan exclusively related to planned integration of routing
capabilities. As of June 30, 2005, the Company estimates that $22.5 million of the annualized post-merger benefits have been realized with the remaining benefits from unified routing expected to be realized over the next two quarters. Prior to the
acquisition of ITXC by the Company, ITXC stand alone, reported a negative EBITDA of $27.8 million, including unusual charges of $7.3 million, for its twelve months ended December 31, 2003. Integration costs, including consultant fees, severances and
retention bonuses and other costs directly related to the integration of ITXC, of approximately $1.3 million, are included in the consolidated results of operations for the six months ended June 30, 2005.



ITXC access to Teleglobe IP network and Teleglobe
connectivity:



The combination of Teleglobe and ITXC provided
opportunities to lower the operating expenses of our network, resulting in a decrease in network expenses. IP access charges is a significant example. ITXC on a stand-alone basis purchased IP access services from Teleglobe as well as other
competitive wholesale IP service carriers. We have cancelled many of these third-party services, replacing access via Teleglobes network. The marginal cost of doing so is very low, yielding operating expense reductions.



We have also realized network savings in the short-term by migrating some
common customers from two interconnects to one, improving utilization rates. This provides us growth capacity with lower investment requirements for a period of time. In the longer term we anticipate benefits from network growth via VoIP, an
inherently more cost effective medium than TDM. To date, the Company has achieved its integration goal related to network consolidation. The benefits of our completed network consolidation is reflected in our network expenses.



Facilities and headcount reductions:



To date, the Company has achieved its integration goal related to closures
of overlapping facilities. Further savings may be achieved from the sublet of excess floor space. The two first quarters of 2005 have not been significantly impacted by savings from headcount reductions mainly because the results include retention
bonus earned in the period. However, SG&A for the third quarter of 2005 and onwards is expected to reflect net benefits from these reductions.



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Termination cost savings:



In the future, due to the nature of the international wholesale voice industry, the increase in volume from the merger with
ITXC will result in termination cost savings for the combined company with other carriers. The integration of the combined company least cost routing capabilities will allow the combined company to route traffic using the lowest cost available in
any of the combined companys routes. While our benefits to date are limited, we anticipate the synergies to occur in the future now that we have completed the unification of routing.



Results of OperationsComparison of the Three and Six Months Ended June 30, 2005
and 2004



Set forth below is a description of the
results of operations for the three and six months ended June 30, 2005 and June 30, 2004. The results of ITXC are included in the consolidated results of operations from June 1, 2004. Thus, the results of ITXC are included in the six months ended
June 30, 2005 and from June 1, 2004 in the three and six months ended June 30, 2004.



Non-GAAP Financial Data (Unaudited)



We are
presenting EBITDA (earnings before interest, taxes, depreciation and amortization) because management considers it an important supplemental measure of our performance and believe that it is frequently used by interested parties in the evaluation of
companies in our industry, in particular in connection with offerings of debt securities. However, EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported
under GAAP. Some of these limitations are:



| |  |  | EBITDA does not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | EBITDA does not reflect changes in, or cash requirements for, working capital needs;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any
cash requirements for such replacements;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | EBITDA reflects the impact on earnings of charges resulting from matters we consider not to be indicative of our ongoing operations; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



Because of these limitations, EBITDA should not be considered as a measure of
discretionary cash available to our company to invest in its business. We compensate for these limitations by relying primarily on the GAAP results and using EBITDA only in supplemental.



EBITDA (earnings before interest, taxes, depreciation and amortization)



|                       |  |                                 |       |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|---------------------- |  | ------------------------------- | ----- | - | ------------------------------- | - | ------ | ----------------------------- |  | - | ----------------------------- | - |  | - | ------ | -
|(amounts in thousands) |  | Three Months EndedJune 30, 2005 |       |   | Three Months EndedJune 30, 2004 |   |        | Six Months EndedJune 30, 2005 |  |   | Six Months EndedJune 30, 2004 |  
|Net loss               |  | $                               | (401  | ) |                                 | $ | (3,776 | )                             |  | $ | (8,846                        | ) |  | $ | (1,296 | )
|Add:                   |  |                                 |       |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Interest, net          |  |                                 | 2,101 |   |                                 |   | 3,821  |                               |  |   | 6,033                         |   |  |   | 6,210  |  
|Income taxes           |  |                                 | (299  | ) |                                 |   | (2,345 | )                             |  |   | (586                          | ) |  |   | (2,197 | )
|Depreciation           |  |                                 | 5,762 |   |                                 |   | 5,108  |                               |  |   | 12,009                        |   |  |   | 9,237  |  
|Amortization expense   |  |                                 | 2,648 |   |                                 |   | 1,960  |                               |  |   | 5,103                         |   |  |   | 3,363  |  
|                       |  |                                 |       |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|EBITDA                 |  | $                               | 9,811 |   |                                 | $ | 4,768  |                               |  | $ | 13,713                        |   |  | $ | 15,317 |  
|                       |  |                                 |       |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  



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The EBITDA for the three and six months ended June 30, 2005 includes a non-recurring gain of $2.2 million
relating to the disposal of the Burnaby Vancouver Station. See Note 11 of the unaudited interim Consolidated Financial Statements included herein for more details.



In addition, for the three and six months ended June 30, 2005, the Companys operating results include $3.0 million of
revenue due to major favorable settlement agreements with certain carriers and $0.9 million of similar favorable agreements in network expense. For the three and six months ended June 30, 2005, the Companys telecommunication expense was
reduced by major favorable settlements with certain carriers for approximately $2.7 million and $5.7 million respectively.



Revenues



The following table presents revenues derived from each product group and other relevant revenue-related information for the periods indicated. The
results of ITXC are included from June 1, 2004.



|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|----------------------------------------------------------- |  | -------------------------------- | ----- | - | -------------------------------- | - | ----- | ------------------------------ |  | - | ------------------------------ | - |  | - | ----- | -
|                                                            |  | Three Months Ended June 30, 2005 |       |   | Three Months Ended June 30, 2004 |   |       | Six Months Ended June 30, 2005 |  |   | Six Months Ended June 30, 2004 |  
|Revenues per line of business (in millions of U.S. dollars) |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Voicetransport                                             |  | $                                | 190   |   |                                  | $ | 183   |                                |  | $ | 396                            |   |  | $ | 349   |  
|Datatransport                                              |  |                                  | 25    |   |                                  |   | 26    |                                |  |   | 51                             |   |  |   | 54    |  
|Valueadded services                                        |  |                                  | 24    |   |                                  |   | 22    |                                |  |   | 47                             |   |  |   | 42    |  
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Total                                                       |  | $                                | 239   |   |                                  | $ | 231   |                                |  | $ | 494                            |   |  | $ | 445   |  
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Total revenues excluding Bell Canada (1) revenues           |  | $                                | 215   |   |                                  | $ | 211   |                                |  | $ | 443                            |   |  | $ | 403   |  
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|                                                            |  |                                  |       |  
|Minutes of traffic (in millions)                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Voicetransport                                             |  |                                  | 3,328 |   |                                  |   | 2,444 |                                |  |   | 6,760                          |   |  |   | 4,536 |  
|Other                                                       |  |                                  | 70    |   |                                  |   | 53    |                                |  |   | 134                            |   |  |   | 102   |  
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Total                                                       |  |                                  | 3,398 |   |                                  |   | 2,497 |                                |  |   | 6,894                          |   |  |   | 4,638 |  
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Average voice revenue per minute                            |  | $                                | 0.057 |   |                                  | $ | 0.075 |                                |  | $ | 0.059                          |   |  | $ | 0.077 |  
|Percentage of revenues from Bell Canada (1)                 |  |                                  | 10.1  | % |                                  |   | 8.6   | %                              |  |   | 10.4                           | % |  |   | 9.5   | %
|Number of customers at period-end                           |  |                                  | 1,487 |   |                                  |   | 1,328 |                                |  |   | 1,487                          |   |  |   | 1,328 |  
|Geographic distribution of revenues                         |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Asia                                                        |  |                                  | 7     | % |                                  |   | 9     | %                              |  |   | 7                              | % |  |   | 9     | %
|Canada                                                      |  |                                  | 15    | % |                                  |   | 11    | %                              |  |   | 15                             | % |  |   | 12    | %
|Europe                                                      |  |                                  | 32    | % |                                  |   | 28    | %                              |  |   | 33                             | % |  |   | 29    | %
|USA                                                         |  |                                  | 31    | % |                                  |   | 35    | %                              |  |   | 31                             | % |  |   | 34    | %
|Latin America                                               |  |                                  | 4     | % |                                  |   | 4     | %                              |  |   | 4                              | % |  |   | 5     | %
|Other                                                       |  |                                  | 11    | % |                                  |   | 13    | %                              |  |   | 10                             | % |  |   | 11    | %
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  
|Total                                                       |  |                                  | 100   | % |                                  |   | 100   | %                              |  |   | 100                            | % |  |   | 100   | %
|                                                            |  |                                  |       |   |                                  |   |       |                                |  |   |                                |   |  |   |       |  

---

|(1) | Bell Canada is Canadas largest telecommunications company.
|--- | -----------------------------------------------------------



Total revenues, excluding revenues from Bell Canada, increased by $4.2 million or 2.0% in the current quarter as compared to the same prior year period,
and by $40.2 million or 10.0% in the year-to-date period ended June 30, 2005 as compared to the same period in 2004. The increase in revenues, excluding the Bell Canada revenue, mainly results from the inclusion of ITXC revenue from June 1, 2004.
Revenues from Bell Canada increased by $4.4 million or 22.0% in the quarter ended June 30, 2005 as compared to the quarter ended June 30, 2004 and by $9.1 million or 21.4% in the six months ended June 30, 2005 as compared to the same period in 2004.
The increase is mainly due to abnormally low volume with Bell Canada in both comparative periods of 2004. The number of customers in the current quarter-end represents an increase of 159, including customers obtained through the merger with
ITXC, as compared to June 30, 2004.



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##### Table of Contents

Revenue generated from voice transport services increased by approximately $7.4 million or 4.0 % in the
current quarter as compared to the same prior year period. For the six months ended June 30, 2005, revenue generated from voice transport increased by $47.7 million or 13.7% as compared to the same prior year period. The increase is mainly explained
by the inclusion of ITXC revenue from June 1, 2004 and from an increase in minutes of traffic carried in both comparable periods. Minutes of traffic carried in the current quarter versus the same quarter in 2004 increased by 36.2% and increased by
49.1% for the six months ended June 30, 2005 as compared to the same period in 2004. The increase is mainly due to the inclusion of ITXC related minutes from June 1, 2004 while excluding such volume for the first five months of 2004. The increase in
revenue was offset by the current competitive pricing trends in the telecommunication industry.



During the quarter and the six months ended June 30, 2005, the average voice revenue per minute was approximately $0.057 and $0.059 as compared with
$0.075 and $0.077 per minute during the quarter and the six months ended June 30, 2004 respectively. The decrease in average revenue per minutes was primarily attributable to changes in our route destination mix and to an overall decline in rates
experienced in the telecommunication industry.



In the second
quarter of 2005, voice transport revenue includes the impact of major favorable settlement agreements with certain carriers for approximately $1.5 million. In addition, the second quarter of 2005 voice transport revenue includes an amount of $1.2
million resulting from a non-recurring favorable settlement of a dispute with a customer.



Data service revenue in the second quarter of 2005 was lower by approximately $1.2 million or 4.6% as compared to the second quarter of 2004. Data service revenue decreased by $3.4 million or 6.3% for the six months
ended June 30, 2005 as compared to the same prior year period of 2004. The Company experienced growth in new customers and in traffic volume in the three and six months ended June 30, 2005, however, these benefits were offset by price erosion. In
addition, Data service revenue includes the impact of a major favorable settlement agreement with a carrier for approximately $0.3 million in the three and six months ended June 30, 2005.



Revenue generated from value-added services increased by $2.4 million or
10.9% in the current quarter compared to the same quarter of 2004 and by $5.0 million or 11.9% for the year-to-date period ended June 30, 2005 as compared to the same period in 2004. The company experienced increases in signaling services and a
volume increase in our international toll free service (ITFS) in both periods as compared to the same periods in 2004.



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##### Table of Contents

Operating Expenses



The following table outlines operating costs as a percentage of revenue for the periods indicated. The results of ITXC are
included from June 1, 2004.



|                                                                                                                                                                                    |  |                                  |   |  |                                  |    |  |                                |    |  |                                |   
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | - |  | -------------------------------- | -- |  | ------------------------------ | -- |  | ------------------------------ | --
|                                                                                                                                                                                    |  | Three Months Ended June 30, 2005 |   |  | Three Months Ended June 30, 2004 |    |  | Six Months Ended June 30, 2005 |    |  | Six Months Ended June 30, 2004 |   
|Total operating revenues                                                                                                                                                            |  | 100.0                            | % |  | 100.0                            | %  |  | 100.0                          | %  |  | 100.0                          | % 
|Operating expenses                                                                                                                                                                  |  |                                  |   |  |                                  |    |  |                                |    |  |                                |   
|Telecommunication                                                                                                                                                                   |  | 70.9                             | % |  | 73.4                             | %  |  | 72.6                           | %  |  | 72.7                           | % 
|Network, exclusive of depreciation and amortization (shown below)                                                                                                                   |  | 9.5                              | % |  | 10.4                             | %  |  | 9.2                            | %  |  | 10.7                           | % 
|Selling, general and administrative exclusive of, bad debt expense (recovery), stock based compensation expense, depreciation, amortization
and restructuring charges (shown below) |  | 15.7                             | % |  | 14.0                             | %  |  | 15.2                           | %  |  | 13.0                           | % 
|Stock based compensation expense                                                                                                                                                    |  | 0.0                              | % |  | 0.0                              | %  |  | 0.0                            | %  |  | 0.0                            | % 
|Bad debt expense (recovery)                                                                                                                                                         |  | 0.9                              | % |  | 0.2                              | %  |  | (0.1                           | )% |  | (0.1                           | )%
|Depreciation                                                                                                                                                                        |  | 2.4                              | % |  | 2.2                              | %  |  | 2.4                            | %  |  | 2.1                            | % 
|Amortization of intangible assets                                                                                                                                                   |  | 1.1                              | % |  | 0.9                              | %  |  | 1.0                            | %  |  | 0.7                            | % 
|Restructuring charges                                                                                                                                                               |  |                                 | % |  |                                 | %  |  |                               | %  |  | 0.2                            | % 
|Foreign exchange loss (gain)                                                                                                                                                        |  | 0.7                              | % |  | (0.1                             | )% |  | 0.7                            | %  |  | 0.1                            | % 
|                                                                                                                                                                                    |  |                                  |   |  |                                  |    |  |                                |    |  |                                |   
|Total operating expenses as a percentage of revenues                                                                                                                                |  | 101.2                            | % |  | 101.0                            | %  |  | 101.0                          | %  |  | 99.4                           | % 
|                                                                                                                                                                                    |  |                                  |   |  |                                  |    |  |                                |    |  |                                |   



Telecommunication expense



Telecommunication expense during the three and six months
ended June 30, 2005 increased by approximately $0.2 million or 0.1% and by $35.5 million or 11% respectively as compared to the same periods in 2004. This is primarily explained by the inclusion of ITXCs results from June 1, 2004. The increase
was partially offset by lower voice termination costs reflecting benefits from price deflation. In addition, the second quarter of 2005 and the year-to-date results include favorable settlements with certain carriers for approximately $2.7 million
and $5.7 million respectively. As a percentage of revenue, telecommunication expense decreased for the three and six months ended June 30, 2005 as compared to prior year periods mainly due to a favorable mix of voice transport destinations with
lower average margin per minute and the unification of networks with ITXC.



Network expense



Network expense decreased by
approximately $1.3 million or 5.6% in the second quarter of 2005 compared to the second quarter of 2004. For the six months ended June 30, 2005, network expense decreased by $2.3 million or 4.8% from the comparable period in 2004. The decrease is
mainly due to the ongoing contract renegotiations with our suppliers and cancellations of unprofitable circuits and by the impact of a major favorable settlement agreement with a carrier for approximately $0.9 million. The decrease was partially
offset by the inclusion of ITXCs network expenses from June 1, 2004.



Network expense as a percentage of revenue decreased in the current quarter and in the year-to-date period as compared to prior year periods. The percentage decrease is a function of the decrease in network expenses
while revenues increased for the same comparative periods.



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##### Table of Contents

Selling, General and Administrative expenses



Selling, general and administrative (SG&A) expense has increased by approximately $5.2 million or 16.0% in the second
quarter of 2005 compared to the same quarter of 2004. For the six months ended June 30, 2005, SG&A expenses increased by $17.5 million or 30.2% compared to the same period in 2004. The increases are mainly due to the inclusion of ITXCs
SG&A expense from June 1, 2004. Furthermore, SG&A expense was adversely affected by the decline in value of the US dollar as compared to the Canadian dollar from the 2004 periods compared to the 2005 periods, resulting in an increase in our
SG&A expenses. The three and six months ended June 30, 2005 includes $1.1 million of professional fees incurred in connection with the Amalgamation Agreement of the Company with VSNL. In addition, the six months ended June 30, 2005 include $1.3
million of ITXC integration costs and also include professional fees incurred in connection with the Foreign Corrupt Practices Act investigation in the amount of $0.7 million. The integration of ITXC is completed and is expected to provide
significant synergies resulting in a decreased cost base. See update on ITXC integration in ITXC Integration Plan included herein.



Bad debt recovery



Bad debt recovery for the six months ended June 30, 2005 amounted to $0.6 million versus a similar amount for the corresponding period of 2004. During the
first six months of 2004, the Companys collection efforts resulted in the collection of accounts, which were previously identified as doubtful accounts. Since then, the Company has gained insight in the collectibility of accounts and
implemented more stringent credit review practices. The recovery in the first six months of 2005 reflects the revision of certain estimates resulting in a reduction in the allowance for doubtful accounts of approximately $0.8 million. This amount,
which is not related to the collection of previously identified doubtful accounts, increased operating income in the six months ended June 30, 2005.



Depreciation



Depreciation expense increased by $0.7 million or 12.8% in the current quarter versus the comparable quarter in 2004 mainly due to the inclusion of
ITXCs depreciation from June 1, 2004. Similarly, for the six months ended June 30, 2005, depreciation expense increased by $2.8 million or 30.0% compared to the same period in 2004.



Amortization of intangible assets



Amortization of intangible assets expense in the current quarter increased by $0.7 million or approximately by 35.1% from the same quarter in 2004. For
the six months ended June 30, 2005, amortization expense increased by $1.7 million or 51.7% as compared to the six months ended June 30, 2004. The increase is mostly due to intangible assets recorded in connection with the merger with ITXC.



Restructuring charges



During the six months ended June 30, 2004, the Company reduced its workforce
by 15 people and as consequence, incurred restructuring costs in the amount of $893,000. See Note 12 to the unaudited interim Consolidated Financial Statements included herein for more details.



The retention bonuses that are being paid to ITXC employees upon their
departure are being amortized over such employees agreed-upon service period and are included in SG&A expenses. See Note 8 to the unaudited interim Consolidated Financial Statements included herein for more details.



Foreign exchange loss



The foreign exchange loss of $1.6 million for the three months ended June 30, 2005 and $3.5 million for the six months ended
June 30, 2005 compared to a foreign exchange gain of $0.2 million and a foreign exchange loss of $0.3 million for the three and six months ended June 30, 2004 respectively are explained by the effect of



25



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##### Table of Contents

fluctuations in the Euro, Canadian dollar, British Pound and other currencies versus US Dollar on certain assets and liabilities of the Company. The
Companys reporting currency is the US dollar, however, the Company transacts business in several different currencies.



Other expenses



Interest expense



Interest expense, net of interest income for the current quarter of 2005 decreased by $1.7 million or by 45.0% as compared to the second quarter of 2004 and for the six months ended June 30, 2005, interest expense, net of interest income,
decreased by $0.2 million from the six months ended June 30, 2004. The decrease is mainly due to a reduction of the accretion related to the Comfone AG liability. During the three months ended June 30, 2005, a recovery of interest expense of $0.5
million was recorded to reflect the final negotiated agreement with Comfone AG.



Income taxes



Income tax recovery in the three
and six months ended June 30, 2005 amounted to $0.3 million and $0.6 million respectively and consists of $0.2 million and $0.3 million of current income tax expense, due to US state taxes and current income tax for a few foreign entities, offset by
deferred income tax recoveries of $0.5 million and $0.9 million due mostly to a reduction in deferred tax liabilities caused by unrealized foreign exchange losses incurred by a Luxembourg entity for the three and six months ended June 30, 2005
respectively.



Income tax recovery for the six-month period
ended June 30, 2004 of $2.2 million consisted of current income taxes of $1.8 million due mostly to a recorded taxes receivable related to the carry back of losses, plus $0.4 million of deferred tax recoveries.



Liquidity and capital resources



Cash flow from operations



For the six months ended June 30, 2005, the Companys cash flows from
operating activities amounted to $2.0 million made-up of a net loss of $8.8 million, reduced by adjustments of $14.4 million for non-cash items and increased by $3.6 million related to changes in operating assets and liabilities. The majority of the
non-cash items relate to depreciation and amortization and to the net gain on sale of property and equipment. The changes in operating assets and liabilities stem mostly from prepaids, other current assets and accounts payable and accrued
liabilities.



Investing Activities



Cash flows used in investing activities of $9.3 million in the six months
ended June 30, 2005 are mostly a result of capital expenditures and an increase in investments. These are partially offset by the proceeds received in the disposal of property and equipment and by changes in restricted cash. The purchase of property
and equipment in the amount of $9.9 million for the six months ended June 30, 2005, consists mostly of information technology upgrades and network equipment. The addition of intangible assets of $4.7 million relates to software purchases. The $1.6
million increase in investments is for the purchase of shares in Wmode Inc. as discussed in Note 4 of the unaudited interim Consolidated Financial Statements included herein. Together with its equity investment in Wmode Inc., the Company will have
exclusive distribution rights to Wmode Incs proprietary technology, assuming revenue targets are attained. This will contribute to the Companys plan to increase value-added service revenues. Cash flows for investing activities were
provided by the decrease in a commercial letter of credit affecting restricted cash and the sale of marketable securities.



Financing Activities



The cash flows used in financing activities of $1.7 million relates mostly to the repayment of capital lease obligations.



26



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##### Table of Contents

Liquidity



We believe that our current liquidity and anticipated future cash flows from operations will be sufficient to fund our operations in the next twelve
months and to fund the first principal repayment of $25 million, under our senior notes, due in the second quarter of 2006. Our expenditures for the remaining quarters in 2005 will be primarily attributable to operating expenses, capital
expenditures and interest payments. We cannot be certain, however, that additional cash will not be required, particularly if we make significant capital expenditures or other investments.



Our working capital at June 30, 2005 is in a negative position of $60.3
million versus a negative position of $26.9 million at December 31, 2004. The change in working capital is mostly due to the inclusion in current liabilities of the first principal repayment of $25 million, under our senior notes, which is due
within one year and by an increase in accounts payables and accrued liabilities mostly due to timing of PTT settlements. The settlement process in bilateral operating agreements has permitted the Company to operate successfully with negative working
capital. We cannot be certain that these conditions will not change in future periods.



The following summarizes the Companys contractual obligations as of June 30, 2005, and the effect such obligations are expected to have on the Companys liquidity and cash flow in future periods.



|                  |  |                           |         |                     |   |                          |  |                        |       |                           |   |                         |  |       |       |  |   |       |  |   |        
|----------------- |  | ------------------------- | ------- | ------------------- | - | ------------------------ |  | ---------------------- | ----- | ------------------------- | - | ----------------------- |  | ----- | ----- |  | - | ----- |  | - | -------
|Payments due      |  | OperatingLeaseObligations |         | PurchaseObligations |   | Capital LeaseObligations |  | Senior NoteObligations |       | OtherLong-termObligations |   | Investment inWmode Inc. |  | Total
|Remainder of 2005 |  | $                         | 12,332  |                     | $ | 4,710                    |  | $                      | 1,419 |                           | $ |                        |  | $     | 114   |  | $ | 1,654 |  | $ | 20,229 
|2006              |  |                           | 14,947  |                     |   | 3,001                    |  |                        | 2,283 |                           |   | 25,000                  |  |       | 217   |  |   |      |  |   | 45,448 
|2007              |  |                           | 13,133  |                     |   | 58                       |  |                        | 760   |                           |   | 25,000                  |  |       | 214   |  |   |      |  |   | 39,165 
|2008              |  |                           | 12,518  |                     |   |                         |  |                        | 146   |                           |   | 50,000                  |  |       | 211   |  |   |      |  |   | 62,875 
|2009              |  |                           | 12,327  |                     |   |                         |  |                        |      |                           |   |                        |  |       | 218   |  |   |      |  |   | 12,545 
|Thereafter        |  |                           | 69,099  |                     |   |                         |  |                        |      |                           |   |                        |  |       | 2,282 |  |   |      |  |   | 71,381 
|                  |  |                           |         |                     |   |                          |  |                        |       |                           |   |                         |  |       |       |  |   |       |  |   |        
|Total             |  | $                         | 134,356 |                     | $ | 7,769                    |  | $                      | 4,608 |                           | $ | 100,000                 |  | $     | 3,256 |  | $ | 1,654 |  | $ | 251,643
|                  |  |                           |         |                     |   |                          |  |                        |       |                           |   |                         |  |       |       |  |   |       |  |   |        



|                             |  |                        |       |                 |   |      
|---------------------------- |  | ---------------------- | ----- | --------------- | - | -----
|Other Commercial Commitments |  | Total AmountsCommitted |       | Less than1 Year
|Standby letters of credit    |  | $                      | 2,139 |                 | $ | 2,139
|                             |  |                        |       |                 |   |      
|Total commercial commitments |  | $                      | 2,139 |                 | $ | 2,139
|                             |  |                        |       |                 |   |      



Section 404 of the Sarbanes-Oxley
Act of 2002



The SEC announced on March 2, 2005, a
one-year extension for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), for Non-Accelerated Filers and Foreign Private Issuers. The compliance dates have been extended from the first fiscal year ending on or
after July 15, 2005 to the first fiscal year ending on or after July 15, 2006. Management has assessed that the Company satisfies the conditions to be a Non-Accelerated Filer, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, and is
therefore eligible for the Section 404 extension. Teleglobe must therefore be compliant to Section 404 beginning in its fiscal year ending December 31, 2006.



|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------



The Company and its subsidiaries operate internationally and therefore our major market risk exposure is related to foreign currency fluctuations. Due to
low levels of floating rate debt, we do not have material market risk exposures related to changes in interest rates. However, the Company is exposed to interest rate risk on its senior notes in that it is fixed and accordingly the fair value of the
debt may fluctuate if the interest rate is not commensurate with market rates. To mitigate foreign currency risks, we may use derivative financial instruments such as forward foreign exchange contracts, foreign currency swap contracts and foreign
currency denominated options. The derivative financial instruments are subject to standard credit terms and conditions, financial control management and risk monitoring procedures. However, no such instruments were entered into during the six months
ended June 30, 2005.



27



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##### Table of Contents

|Item 4. | Controls and Procedures
|------- | -----------------------



(a) Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities and Exchange Act of 1934, as amended as of the end of the period covered by this report. Our disclosure controls and procedures are designed to
provide reasonable assurance that information is recorded, processed, summarized and reported accurately and on a timely basis. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure
controls and procedures are effective.



(b) Changes to Internal
Control over Financial Reporting. There have been no significant changes in the Companys internal control over financial reporting that occurred during the Companys last fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



28



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##### Table of Contents

PART IIOther Information



|Item 1. | Legal Proceedings
|------- | -----------------



The legal proceedings and claims described under the heading captioned Contingencies in Note 16 of the Notes to the unaudited interim
Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report are hereby incorporated by reference.



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



On June 2, 2005, the Company held its Annual General Meeting of Shareholders in New York, New York. In addition to the election of three directors to
serve three-year terms, the shareholders approved the appointment of PricewaterhouseCoopers LLP as the Companys independent auditors for 2005 and authorized the Audit Committee of the Board of Directors to set the auditors remuneration.



The following votes were cast for each of the following
nominees for director or were withheld with respect to such nominees:



|                   |  |            |  |         
|------------------ |  | ---------- |  | --------
|Name               |  | For        |  | Withheld
|Thomas S. Rogers   |  | 33,880,144 |  | 210,797 
|Anthony J. Cassara |  | 33,829,718 |  | 261,223 
|Timothy F. Price   |  | 33,829,769 |  | 261,172 



The following votes
were cast for the proposal to approve the appointment of PricewaterhouseCoopers LLP as the Companys independent auditors for 2005 and authorize the Audit Committee of the Board of Directors to set the auditors remuneration:



|        |  |           
|------- |  | ----------
|For     |  | 34,054,739
|Against |  | 31,466    
|Abstain |  | 4,736     



|Item 6. | Exhibits
|------- | --------



(a) Exhibits:



|      |  |                                                                                                                                                                                                                                                                                           
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1  |  | Agreement and Plan of Amalgamation, dated as of July 25, 2005, by and among Videsh Sanchar Nigam Limited, VSNL Telecommunications (Bermuda) Ltd. and Teleglobe International Holdings Ltd.
(Incorporated by reference to Exhibit 2.1 of the registrants Form 8-K filed on July 25, 2005).
|      | 
|31.1* |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                   
|      | 
|31.2* |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                   
|      | 
|32.1* |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                    
|      | 
|32.2* |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                    

---

|* | Filed Herewith
|- | --------------



29



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



TELEGLOBE INTERNATIONALHOLDINGS LTDBy:

/s/    PIERRE DUHAMELPierre Duhamel Chief Financial Officer and Executive Vice President (principal financial officer and duly authorized officer)




Dated: August 10, 2005



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##### Table of Contents

EXHIBIT INDEX



|      |  |                                                                                                                                                                                                                                                                                           
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1  |  | Agreement and Plan of Amalgamation, dated as of July 25, 2005, by and among Videsh Sanchar Nigam Limited, VSNL Telecommunications (Bermuda) Ltd. and Teleglobe International Holdings Ltd.
(Incorporated by reference to Exhibit 2.1 of the registrants Form 8-K filed on July 25, 2005).
|      | 
|31.1* |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                   
|      | 
|31.2* |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                   
|      | 
|32.1* |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                    
|      | 
|32.2* |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                    

---

|* | Filed Herewith
|- | --------------



31