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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
September 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)



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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 by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange 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 November 2, 2005, there were 39,206,469 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 September 30, 2005 and December 31, 2004 (Unaudited)                            |  | 3   
|                                                                                              |  |                                                                                                                  
|                                                                                              |  | Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004 (Unaudited) |  | 4   
|                                                                                              |  |                                                                                                                  
|                                                                                              |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (Unaudited)           |  | 6   
|                                                                                              |  |                                                                                                                  
|                                                                                              |  | Consolidated Statement of Stockholders Equity for the Nine Months Ended September 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                             |  | 28                                                                                                               
|                                                                                              | 
|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)



|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                           |  | September 30, 2005 |         |   | December 31, 2004 |  
|ASSETS                                                                                                                                                                     |  |                    |         |   |                   |   |         |  
|                                                                                                                                                                           |  |                   
|Cash and cash equivalents                                                                                                                                                  |  | $                  | 31,658  |   |                   | $ | 27,512  |  
|Marketable securities                                                                                                                                                      |  |                    | 528     |   |                   |   | 1,824   |  
|Accounts receivable, (net of allowance for doubtful accounts of $16,170 at September 30, 2005 and $25,068 at December 31,
2004)                                            |  |                    | 192,974 |   |                   |   | 210,588 |  
|Prepaid assets                                                                                                                                                             |  |                    | 6,099   |   |                   |   | 3,774   |  
|Other current assets                                                                                                                                                       |  |                    | 5,461   |   |                   |   | 6,415   |  
|Restricted cash                                                                                                                                                            |  |                    | 2,099   |   |                   |   | 4,724   |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total current assets                                                                                                                                                       |  |                    | 238,819 |   |                   |   | 254,837 |  
|Property and equipment, (net of accumulated depreciation of $39,903 at September 30, 2005 and $23,361 at December 31,
2004)                                                |  |                    | 132,222 |   |                   |   | 134,083 |  
|Prepaid pension asset                                                                                                                                                      |  |                    | 17,956  |   |                   |   | 18,802  |  
|Other long-term assets                                                                                                                                                     |  |                    | 2,212   |   |                   |   | 2,836   |  
|Investment                                                                                                                                                                 |  |                    | 421     |   |                   |   |        |  
|Intangible assets, (net of accumulated amortization of $18,845 at September 30, 2005 and $10,853 at December 31,
2004)                                                     |  |                    | 47,974  |   |                   |   | 46,354  |  
|Goodwill                                                                                                                                                                   |  |                    | 96,877  |   |                   |   | 96,877  |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total assets                                                                                                                                                               |  | $                  | 536,481 |   |                   | $ | 553,789 |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|LIABILITIES                                                                                                                                                                |  |                    |         |   |                   |   |         |  
|                                                                                                                                                                           |  |                   
|Accounts payable and accrued liabilities                                                                                                                                   |  | $                  | 257,823 |   |                   | $ | 259,915 |  
|Employee related payables                                                                                                                                                  |  |                    | 15,081  |   |                   |   | 15,193  |  
|Accrued liabilitiesaffiliate company                                                                                                                                      |  |                    | 307     |   |                   |   | 537     |  
|Current portion of capital lease obligations                                                                                                                               |  |                    | 3,148   |   |                   |   | 2,182   |  
|Current portion of deferred revenue                                                                                                                                        |  |                    | 3,409   |   |                   |   | 3,883   |  
|Current portion of senior notes payableaffiliate company                                                                                                                  |  |                    | 25,000  |   |                   |   |        |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                  |  |                    | 304,768 |   |                   |   | 281,710 |  
|Deferred revenue                                                                                                                                                           |  |                    | 8,432   |   |                   |   | 8,787   |  
|Deferred income tax liability                                                                                                                                              |  |                    | 52      |   |                   |   | 940     |  
|Long-term portion of capital lease obligations                                                                                                                             |  |                    | 1,543   |   |                   |   | 1,112   |  
|Other long-term liabilities                                                                                                                                                |  |                    | 5,026   |   |                   |   | 3,090   |  
|Senior notes payableaffiliate company                                                                                                                                     |  |                    | 75,000  |   |                   |   | 100,000 |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total non-current liabilities                                                                                                                                              |  |                    | 90,053  |   |                   |   | 113,929 |  
|                                                                                                                                                                           |  |                   
|Commitments and contingencies                                                                                                                                              |  |                    |         |   |                   |   |         |  
|                                                                                                                                                                           |  |                   
|STOCKHOLDERS EQUITY                                                                                                                                                       |  |                    |         |   |                   |   |         |  
|                                                                                                                                                                           |  |                   
|Common stock (39,206,469 shares at September 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                                                                                                                                                 |  |                    | 188,673 |   |                   |   | 188,495 |  
|Deferred compensation expense                                                                                                                                              |  |                    | (20     | ) |                   |   | (44     | )
|Accumulated other comprehensive loss                                                                                                                                       |  |                    | (18     | ) |                   |   | (40     | )
|Accumulated deficit                                                                                                                                                        |  |                    | (47,366 | ) |                   |   | (30,652 | )
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                 |  |                    | 141,660 |   |                   |   | 158,150 |  
|                                                                                                                                                                           |  |                    |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                 |  | $                  | 536,481 |   |                   | $ | 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 Ended September 30, 2005 |            |   | Three Months Ended September 30, 2004 |  
|Telecommunication revenues                                                                                                                      |  | $                                     | 243,778    |   |                                       | $ | 276,789    |  
|Operating expenses                                                                                                                              |  |                                       |            |   |                                       |   |            |  
|Telecommunication                                                                                                                               |  |                                       | 177,656    |   |                                       |   | 208,322    |  
|Network, exclusive of amortization and depreciation shown below                                                                                 |  |                                       | 22,199     |   |                                       |   | 23,379     |  
|Selling, general and administrative, exclusive of stock-based compensation expense, bad debt expense, depreciation and amortization shown
below |  |                                       | 39,904     |   |                                       |   | 39,992     |  
|Stock-based compensation expense                                                                                                                |  |                                       | 7          |   |                                       |   | 15         |  
|Bad debt expense                                                                                                                                |  |                                       | 1,180      |   |                                       |   | 620        |  
|Depreciation                                                                                                                                    |  |                                       | 5,559      |   |                                       |   | 7,059      |  
|Amortization of intangible assets                                                                                                               |  |                                       | 2,909      |   |                                       |   | 2,869      |  
|Foreign exchange loss (gain)                                                                                                                    |  |                                       | 77         |   |                                       |   | (233       | )
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Total operating expenses                                                                                                                        |  |                                       | 249,491    |   |                                       |   | 282,023    |  
|Interest expense                                                                                                                                |  |                                       | 284        |   |                                       |   | 3,605      |  
|Interest expenserelated party                                                                                                                  |  |                                       | 2,340      |   |                                       |   | 2,786      |  
|Interest income                                                                                                                                 |  |                                       | (255       | ) |                                       |   | (120       | )
|Other income                                                                                                                                    |  |                                       | (347       | ) |                                       |   | (309       | )
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Total expenses                                                                                                                                  |  |                                       | 251,513    |   |                                       |   | 287,985    |  
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Loss before income taxes                                                                                                                        |  |                                       | (7,735     | ) |                                       |   | (11,196    | )
|Income tax expense (recovery)                                                                                                                   |  |                                       | 133        |   |                                       |   | (165       | )
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Net loss                                                                                                                                        |  | $                                     | (7,868     | ) |                                       | $ | (11,031    | )
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Basic and diluted loss per share                                                                                                                |  | $                                     | (0.20      | ) |                                       | $ | (0.28      | )
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  
|Number of common shares used for calculation                                                                                                    |  |                                       | 39,174,520 |   |                                       |   | 38,985,663 |  
|                                                                                                                                                |  |                                       |            |   |                                       |   |            |  





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



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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)



|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---------- | - | ------------------------------------ | - | ---------- | -
|                                                                                                                                                                       |  | Nine Months Ended September 30, 2005 |            |   | Nine Months Ended September 30, 2004 |  
|Telecommunication revenues                                                                                                                                             |  | $                                    | 738,258    |   |                                      | $ | 721,984    |  
|Operating expenses                                                                                                                                                     |  |                                      |            |   |                                      |   |            |  
|Telecommunication                                                                                                                                                      |  |                                      | 536,832    |   |                                      |   | 532,048    |  
|Network, exclusive of amortization and depreciation shown below                                                                                                        |  |                                      | 67,707     |   |                                      |   | 71,181     |  
|Selling, general and administrative, exclusive of stock-based compensation expense, bad debt expense, depreciation, amortization and
restructuring charges shown below |  |                                      | 115,275    |   |                                      |   | 97,803     |  
|Stock-based compensation expense                                                                                                                                       |  |                                      | 24         |   |                                      |   | 20         |  
|Bad debt expense                                                                                                                                                       |  |                                      | 554        |   |                                      |   | 30         |  
|Depreciation                                                                                                                                                           |  |                                      | 17,568     |   |                                      |   | 16,295     |  
|Amortization of intangible assets                                                                                                                                      |  |                                      | 8,012      |   |                                      |   | 6,233      |  
|Restructuring charges                                                                                                                                                  |  |                                      |           |   |                                      |   | 893        |  
|Foreign exchange loss                                                                                                                                                  |  |                                      | 3,597      |   |                                      |   | 73         |  
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Total operating expenses                                                                                                                                               |  |                                      | 749,569    |   |                                      |   | 724,576    |  
|Interest expense                                                                                                                                                       |  |                                      | 1,952      |   |                                      |   | 9,003      |  
|Interest expenserelated party                                                                                                                                         |  |                                      | 7,118      |   |                                      |   | 3,807      |  
|Interest income                                                                                                                                                        |  |                                      | (668       | ) |                                      |   | (329       | )
|Gain on disposal of property and other income                                                                                                                          |  |                                      | (2,546     | ) |                                      |   | (384       | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Total expenses                                                                                                                                                         |  |                                      | 755,425    |   |                                      |   | 736,673    |  
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Loss before income taxes                                                                                                                                               |  |                                      | (17,167    | ) |                                      |   | (14,689    | )
|Income tax recovery                                                                                                                                                    |  |                                      | (453       | ) |                                      |   | (2,362     | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Net loss                                                                                                                                                               |  | $                                    | (16,714    | ) |                                      | $ | (12,327    | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Preferred stock dividends to parent company                                                                                                                            |  |                                      |           |   |                                      |   | (3,958     | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Net loss attributable to common stockholders                                                                                                                           |  | $                                    | (16,714    | ) |                                      | $ | (16,285    | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Basic and diluted loss per share                                                                                                                                       |  | $                                    | (0.43      | ) |                                      | $ | (0.49      | )
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  
|Number of common shares used for calculation                                                                                                                           |  |                                      | 39,125,569 |   |                                      |   | 32,941,710 |  
|                                                                                                                                                                       |  |                                      |            |   |                                      |   |            |  





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



5



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



Consolidated Statements of Cash Flows

(amounts in thousands of United States Dollars)

(Unaudited)



|                                                                               |  |                                      |         |   |                                      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------------ | ------- | - | ------------------------------------ | - | ------- | -
|                                                                               |  | Nine Months Ended September 30, 2005 |         |   | Nine Months Ended September 30, 2004 |  
|Cash flows from operating activities                                           |  |                                      |         |   |                                      |   |         |  
|Net loss                                                                       |  | $                                    | (16,714 | ) |                                      | $ | (12,327 | )
|Adjustments to reconcile net loss to net cash flows from operating activities: |  |                                      |         |   |                                      |   |         |  
|Depreciation and amortization                                                  |  |                                      | 25,580  |   |                                      |   | 22,528  |  
|Net gain on disposal of property and equipment                                 |  |                                      | (1,851  | ) |                                      |   |        |  
|Bad debt expense                                                               |  |                                      | 554     |   |                                      |   | 30      |  
|Stock-based compensation expense                                               |  |                                      | 24      |   |                                      |   | 20      |  
|Deferred income taxes                                                          |  |                                      | (888    | ) |                                      |   | (327    | )
|Other items                                                                    |  |                                      | 960     |   |                                      |   | (3,819  | )
|Changes in operating assets and liabilities:                                   |  |                                      |         |   |                                      |   |         |  
|Accounts receivable                                                            |  |                                      | 17,060  |   |                                      |   | (4,933  | )
|Prepaid assets                                                                 |  |                                      | (2,325  | ) |                                      |   | 2,331   |  
|Other current assets                                                           |  |                                      | 942     |   |                                      |   | (3,419  | )
|Accounts payable and accrued liabilities                                       |  |                                      | 610     |   |                                      |   | (18,690 | )
|Deferred revenue                                                               |  |                                      | (1,066  | ) |                                      |   | (266    | )
|Other liabilities                                                              |  |                                      | (62     | ) |                                      |   | 320     |  
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Net cash flows from operating activities                                       |  |                                      | 22,824  |   |                                      |   | (18,552 | )
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Cash flows from investing activities                                           |  |                                      |         |   |                                      |   |         |  
|Purchase of property and equipment                                             |  |                                      | (14,713 | ) |                                      |   | (17,045 | )
|Proceeds on disposal of property and equipment                                 |  |                                      | 3,431   |   |                                      |   |        |  
|Addition of intangible assets                                                  |  |                                      | (8,542  | ) |                                      |   | (1,892  | )
|Sale of marketable securities                                                  |  |                                      | 1,318   |   |                                      |   | 23,946  |  
|Increase in long-term investment                                               |  |                                      | (421    | ) |                                      |   |        |  
|Restricted cash                                                                |  |                                      | 2,625   |   |                                      |   | (401    | )
|Cash acquired from merger with ITXC, net of acquisition costs paid             |  |                                      |        |   |                                      |   | 4,854   |  
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Net cash flows from investing activities                                       |  |                                      | (16,302 | ) |                                      |   | 9,462   |  
|                                                                               |  |                                      |         |   |                                      |   |         |  
|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                                                        |  |                                      | (2,554  | ) |                                      |   | (276    | )
|Issuance of common stock                                                       |  |                                      | 178     |   |                                      |   |        |  
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Net cash flows from financing activities                                       |  |                                      | (2,376  | ) |                                      |   | (4,724  | )
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Net increase (decrease) in cash and cash equivalents                           |  |                                      | 4,146   |   |                                      |   | (13,814 | )
|Cash and cash equivalents at beginning of period                               |  |                                      | 27,512  |   |                                      |   | 35,279  |  
|                                                                               |  |                                      |         |   |                                      |   |         |  
|Cash and cash equivalents at end of period                                     |  | $                                    | 31,658  |   |                                      | $ | 21,465  |  
|                                                                               |  |                                      |         |   |                                      |   |         |  



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)



|                                                     |  |              |     |                            |   |                     |  |   |                               |   |  |                                      |     |   |                            |   |     |   |  |   |         |  
|---------------------------------------------------- |  | ------------ | --- | -------------------------- | - | ------------------- |  | - | ----------------------------- | - |  | ------------------------------------ | --- | - | -------------------------- | - | --- | - |  | - | ------- | -
|Nine Months endedSeptember 30, 2005                  |  | Common Stock |     | Additional Paid-in Capital |   | Accumulated Deficit |  |   | Deferred Compensation Expense |   |  | Accumulated Other Comprehensive loss |     |   | Total Stockholders Equity |  
|December 31, 2004                                    |  | $            | 391 |                            | $ | 188,495             |  | $ | (30,652                       | ) |  | $                                    | (44 | ) |                            | $ | (40 | ) |  | $ | 158,150 |  
|Issuance of common stock                             |  |              |    |                            |   | 178                 |  |   |                              |   |  |                                      |    |   |                            |   |    |   |  |   | 178     |  
|Amortization of deferred compensation expense        |  |              |    |                            |   |                    |  |   |                              |   |  |                                      | 24  |   |                            |   |    |   |  |   | 24      |  
|Net unrealized holding gain on marketable securities |  |              |    |                            |   |                    |  |   |                              |   |  |                                      |    |   |                            |   | 22  |   |  |   | 22      |  
|Net loss                                             |  |              |    |                            |   |                    |  |   | (16,714                       | ) |  |                                      |    |   |                            |   |    |   |  |   | (16,714 | )
|                                                     |  |              |     |                            |   |                     |  |   |                               |   |  |                                      |     |   |                            |   |     |   |  |   |         |  
|September 30, 2005                                   |  | $            | 391 |                            | $ | 188,673             |  | $ | (47,366                       | ) |  | $                                    | (20 | ) |                            | $ | (18 | ) |  | $ | 141,660 |  
|                                                     |  |              |     |                            |   |                     |  |   |                               |   |  |                                      |     |   |                            |   |     |   |  |   |         |  









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



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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 nine months ended
September 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 nine months ended September 30, 2004
include the assets, liabilities and results of ITXC only from June 1, 2004.



The September 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 nine months ended September 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 Report on 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 nine months ended September 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 nine months ended September 30, 2005, the Companys operating results include a favorable impact of $1.8 million in
telecommunication expense due to the revision of estimates on disputed accounts payables and accrued liabilities with certain carriers and the benefit associated with negotiated retroactive rate adjustments totaling $1.6 million on certain
contracts. For the nine months ended September 30, 2005, the Companys operating results include $3.0 million of revenue due to major favorable settlement agreements with certain carriers. Additionally, for the nine months ended
September 30, 2005, the Companys telecommunication expense and network expense were reduced by major favorable settlements with certain carriers for approximately $5.7 million and $0.9 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 Report on Form 10-K.



2. Plan of Amalgamation with VSNL



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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 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 and the result of the vote of October 25, 2005, the Company incurred professional fees from its financial advisor in the amount of $4.5 million. A portion of the fees amounting to
$900,000 became due upon the execution of the Amalgamation Agreement on July 25, 2005 and the remaining portion of the fees, which amounts to $3.6 million 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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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.



On October 25, 2005, the Company held a Special General
Meeting of shareholders to vote on the Plan of Amalgamation with VSNL. The Companys shareholders approved Teleglobes acquisition by VSNL. Over 99% of all votes cast at the special shareholders meeting representing over 78% of
Teleglobes shares outstanding were in favor of the transaction, which required the approval of a majority of the shares outstanding.



More details on the Agreement and Plan of Amalgamation are provided in the Companys Definitive Proxy Statement filed on September 26, 2005.



3. 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. 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 |  
|                                             |  |              |         |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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



4. Restricted Cash



In conjunction with its letters of credit for its leased premises, the
Company has $2.1 million in restricted cash as of September 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, which expires in July 2006.



5. Investment in Wmode



During the nine months ended September 30, 2005, the Company
purchased 3,311,552 shares of Wmode Inc. (Wmode), representing approximately 7.5% of the outstanding share capital for a cash consideration of $3.0 million Canadian dollars ($2.4 million US dollars equivalent). Concurrently, the Company
entered into a five-year agreement for the exclusive distribution rights to Wmodes proprietary technology and a revenue sharing agreement whereby Teleglobe would retain a portion of total revenues generated from Wmodes proprietary
technology. The exclusivity to the distribution rights is subject to attaining certain revenue levels. Wmode is a Canadian based, privately held 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 cash consideration of $4.0 million Canadian dollars in tranches upon the achievement of certain development and operational milestones throughout 2005. The
total amount of shares to be issued to Teleglobe under this agreement would represent approximately 10% of the total shares outstanding of Wmode.



The cash consideration paid for the shares is allocated on a pro-rated basis between the investment in Wmodes share capital and the exclusive
distribution rights to Wmodes proprietary technology based on the estimated fair value of both elements as determined by Teleglobes management. The cash consideration paid to- date has been allocated to investment for $0.4 million and to
the exclusive distribution rights to Wmodes proprietary technology for $2.0 million as of September 30, 2005. The distribution rights is recorded as an amortizable intangible asset (see Note 14).



6. Comprehensive Loss



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



|                                                            |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|----------------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------------------------------- | - | ------- | ------------------------------------ |  | - | ------------------------------------ | - |  | - | ------- | -
|(amounts in thousands)                                      |  | Three Months Ended September 30, 2005 |        |   | Three Months Ended September 30, 2004 |   |         | Nine Months Ended September 30, 2005 |  |   | Nine Months Ended September 30, 2004 |  
|Net loss                                                    |  | $                                     | (7,868 | ) |                                       | $ | (11,031 | )                                    |  | $ | (16,714                              | ) |  | $ | (12,327 | )
|Net unrealized holding gain (loss) on marketable securities |  |                                       | 4      |   |                                       |   | (42     | )                                    |  |   | 22                                   |   |  |   | (60     | )
|                                                            |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Comprehensive loss                                          |  | $                                     | (7,864 | ) |                                       | $ | (11,073 | )                                    |  | $ | (16,692                              | ) |  | $ | (12,387 | )
|                                                            |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  



7. 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



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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                | %



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 September 30, 2005 |        |   | Three Months Ended September 30, 2004 |   |         | Nine Months Ended September 30, 2005 |  |   | Nine Months Ended September 30, 2004 |  
|Net loss                                                                                        |  | $                                     | (7,868 | ) |                                       | $ | (11,031 | )                                    |  | $ | (16,714                              | ) |  | $ | (12,327 | )
|Preferred stock dividends                                                                       |  |                                       |       |   |                                       |   |        |                                      |  |   |                                     |   |  |   | (3,958  | )
|                                                                                                |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Net loss attributable to common stockholders                                                    |  |                                       | (7,868 | ) |                                       |   | (11,031 | )                                    |  |   | (16,714                              | ) |  |   | (16,285 | )
|Add: stock-based compensation, as reported pursuant to APB 25                                   |  |                                       | 7      |   |                                       |   | 15      |                                      |  |   | 24                                   |   |  |   | 20      |  
|Deduct: total stock-based compensation determined under fair value based methods for all awards |  |                                       | (1,358 | ) |                                       |   | (2,165  | )                                    |  |   | (4,431                               | ) |  |   | (3,379  | )
|                                                                                                |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Pro-forma net loss, fair value method for all stock-based awards                                |  |                                       | (9,219 | ) |                                       |   | (13,181 | )                                    |  |   | (21,121                              | ) |  |   | (19,644 | )
|                                                                                                |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Basic and diluted net loss per share, as reported                                               |  | $                                     | (0.20  | ) |                                       | $ | (0.28   | )                                    |  | $ | (0.43                                | ) |  | $ | (0.49   | )
|                                                                                                |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Pro-forma basic and diluted net loss per share,SFAS 123                                         |  | $                                     | (0.24  | ) |                                       | $ | (0.34   | )                                    |  | $ | (0.54                                | ) |  | $ | (0.60   | )
|                                                                                                |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  



8. Common Stock and Earnings per
Share



During the three and nine months ended
September 30, 2005, stock options in respect of 97,977 and 121,676 common shares were exercised for cash consideration of $123,000 and $178,000 respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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.



9. Retention Bonuses



Plan of Amalgamation with VSNL



Following the Plan of Amalgamation announced on July 25, 2005 with VSNL, the Company implemented a retention program under which certain employees
have to complete a predetermined service period in order to obtain agreed-upon retention bonuses. The Company is recognizing the estimated liability of $3.6 million associated with this obligation on a pro-rata basis as services are provided. The
amount of $0.7 million is included in accrued liabilities and selling, general and administrative expenses to-date and the remaining liability of $2.9 million is expected to be recorded over the next two quarters and paid no later than May 1,
2006.



ITXC Merger



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 was conditional upon completion of the entire service period. No other amounts were payable to these employees
at the end of the service period. In the nine-month period ending September 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. These changes amounting to $595,000 are reflected as amounts written-off. The Company has recognized the total liability of $3.3 million associated with this obligation on a pro-rata basis as services were provided.
These amounts were included in accrued liabilities and selling, general and administrative expenses. The remaining liability is expected to be paid by the end of 2005.



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



|                       |  |                              |       |          |   |              |  |                     |       |                                      |   |     |  |   |      
|---------------------- |  | ---------------------------- | ----- | -------- | - | ------------ |  | ------------------- | ----- | ------------------------------------ | - | --- |  | - | -----
|(amounts in thousands) |  | Balance at December 31, 2004 |       | Incurred |   | Amounts paid |  | Amounts written-off |       | Ending balance at September 30, 2005
|Retention bonuses      |  | $                            | 1,731 |          | $ | 461          |  | $                   | 1,584 |                                      | $ | 595 |  | $ | 13   
|                       |  |                              |       |          |   |              |  |                     |       |                                      |   |     |  |   |      
|                       |  |                              |       |          |  
|(amounts in thousands) |  | Balance at May 31, 2004      |       | Incurred |   | Amounts paid |  | Amounts written-off |       | Ending balance at September 30, 2004
|Retention bonuses      |  | $                            | 1,959 |          | $ | 660          |  | $                   | 485   |                                      | $ | 0   |  | $ | 2,134
|                       |  |                              |       |          |   |              |  |                     |       |                                      |   |     |  |   |      



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



10. 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 Ended September 30, 2005 |        |   | Three Months Ended September 30, 2004 |   |        | Nine Months Ended September 30, 2005 |  |   | Nine Months Ended September 30, 2004 |  
|Service cost              |  | $                                     | 734    |   |                                       | $ | 586    |                                      |  | $ | 2,191                                |   |  | $ | 1,757  |  
|Interest cost             |  |                                       | 1,871  |   |                                       |   | 1,685  |                                      |  |   | 5,585                                |   |  |   | 5,055  |  
|Return on assets          |  |                                       | (2,282 | ) |                                       |   | (2,016 | )                                    |  |   | (6,811                               | ) |  |   | (6,047 | )
|                          |  |                                       |        |   |                                       |   |        |                                      |  |   |                                      |   |  |   |        |  
|Net periodic benefit cost |  | $                                     | 323    |   |                                       | $ | 255    |                                      |  | $ | 965                                  |   |  | $ | 765    |  
|                          |  |                                       |        |   |                                       |   |        |                                      |  |   |                                      |   |  |   |        |  



The Company did not
contribute to its pension plans during the three and nine months ended September 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 $34,000 and $102,000 to its post-retirement health care and life insurance plan in the three and nine months ended September 30, 2005 respectively ($nil for the three and nine months ended September 30, 2004) and expects to
contribute a similar amount in the remaining last quarter of 2005.



11.
Interest Expense



Interest expense includes an interest
expense of $1.0 million for the nine months ended September 30, 2005 (interest expense of $8.3 million for the nine months ended September 30, 2004) representing the accretion of the Comfone AG liability to the amounts paid. During the
second quarter of 2005, a recovery of interest expense of $0.5 million was recorded to reflect the final negotiated agreement reached 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 Report on Form 10-K, was terminated in January 2004 and required the Company to pay Comfone AG its share of any cash derived from the mobile 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 nine months ended September 30, 2005 include $2.3 million (net of $0.5 million interest capitalized) and
$7.1 million (net of $1.2 million interest capitalized) respectively, of interest expense relating to senior notes, with a related party, issued in the second quarter of 2004 ($2.8 million and $3.8 million for the three and nine months ended
September 30, 2004 respectively).



12. Disposal of Property



On June 30, 2005, as part of the Companys plan
to reduce operational expenses, the Company disposed of 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.



13. 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.



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TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



14. Intangible Assets



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



|                                                                |  |                       |        |                          |   |         |     |  |                       |        |                          |   |        |     |   |         |   |  |   |       
|--------------------------------------------------------------- |  | --------------------- | ------ | ------------------------ | - | ------- | --- |  | --------------------- | ------ | ------------------------ | - | ------ | --- | - | ------- | - |  | - | ------
|                                                                |  | September 30, 2005    |        | December 31, 2004       
|(amounts in thousands)                                          |  | Gross Carrying Amount |        | Accumulated Amortization |   |         | Net |  | Gross Carrying Amount |        | Accumulated Amortization |   |        | Net
|Customer relationships                                          |  | $                     | 8,700  |                          | $ | (4,125  | )   |  | $                     | 4,575  |                          | $ | 8,700  |     | $ | (2,838  | ) |  | $ | 5,862 
|Other intangibles                                               |  |                       | 2,121  |                          |   | (2,121  | )   |  |                       |       |                          |   | 2,121  |     |   | (2,121  | ) |  |   |      
|Tradenames                                                      |  |                       | 700    |                          |   | (133    | )   |  |                       | 567    |                          |   | 700    |     |   | (58     | ) |  |   | 642   
|Patents                                                         |  |                       | 6,500  |                          |   | (1,238  | )   |  |                       | 5,262  |                          |   | 6,500  |     |   | (542    | ) |  |   | 5,958 
|Technology                                                      |  |                       | 16,400 |                          |   | (3,124  | )   |  |                       | 13,276 |                          |   | 16,400 |     |   | (1,367  | ) |  |   | 15,033
|Origination and termination contracts and related relationships |  |                       | 1,500  |                          |   | (375    | )   |  |                       | 1,125  |                          |   | 1,500  |     |   | (150    | ) |  |   | 1,350 
|Software                                                        |  |                       | 28,859 |                          |   | (7,572  | )   |  |                       | 21,287 |                          |   | 21,286 |     |   | (3,777  | ) |  |   | 17,509
|Distribution rights                                             |  |                       | 2,039  |                          |   | (157    | )   |  |                       | 1,882  |                          |   |       |     |   |        |   |  |   |      
|                                                                |  |                       |        |                          |   |         |     |  |                       |        |                          |   |        |     |   |         |   |  |   |       
|Total intangible assets                                         |  | $                     | 66,819 |                          | $ | (18,845 | )   |  | $                     | 47,974 |                          | $ | 57,207 |     | $ | (10,853 | ) |  | $ | 46,354
|                                                                |  |                       |        |                          |   |         |     |  |                       |        |                          |   |        |     |   |         |   |  |   |       



The software acquired
during the nine-month period ending September 30, 2005 is being amortized over its estimated useful life of three to five years. The amount recorded under distribution rights represents the cash consideration paid to-date allocated to the
exclusive distribution rights to Wmodes proprietary technology and is being amortized over a five-year period. The weighted-average amortization period for acquired intangibles in the nine months ended September 30, 2005 equals
approximately 4.6 years.



Amortization expense for intangible
assets totaled approximately $2.9 million and $8.0 million for the three and nine months ended September 30, 2005 respectively and $2.9 million and $6.2 million for the three and nine months ended September 30, 2004. Aggregate amortization
expense for intangible assets is estimated to be:



|                              |  |   |             
|----------------------------- |  | - | ------------
|Remainder of 2005             |  | $ | 2.9 million 
|Year ending December 31, 2006 |  | $ | 11.7 million
|Year ending December 31, 2007 |  | $ | 11.7 million
|Year ending December 31, 2008 |  | $ | 10.4 million
|Year ending December 31, 2009 |  | $ | 6.4 million 



15



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



15. Property and Equipment



The components of property and equipment are as follows:



|                                     |  |                        |         |   |                   |   |         |  
|------------------------------------ |  | ---------------------- | ------- | - | ----------------- | - | ------- | -
|                                     |  | September 30, 2005     |         |   | December 31, 2004 |  
|                                     |  | (amounts in thousands) |        
|Land                                 |  | $                      | 1,430   |   |                   | $ | 2,000   |  
|Telecommunications equipment         |  |                        | 46,622  |   |                   |   | 38,411  |  
|Buildings and equipment              |  |                        | 4,959   |   |                   |   | 4,681   |  
|Cable systems                        |  |                        | 57,219  |   |                   |   | 59,168  |  
|Computer equipment                   |  |                        | 4,961   |   |                   |   | 4,240   |  
|Leasehold improvements               |  |                        | 4,691   |   |                   |   | 3,172   |  
|Construction in progress             |  |                        | 12,627  |   |                   |   | 8,395   |  
|                                     |  |                        |         |   |                   |   |         |  
|                                     |  |                        | 132,509 |   |                   |   | 120,067 |  
|Less: Accumulated depreciation       |  |                        | (33,028 | ) |                   |   | (19,280 | )
|                                     |  |                        |         |   |                   |   |         |  
|                                     |  |                        | 99,481  |   |                   |   | 100,787 |  
|Leased property under capital leases |  |                        | 39,616  |   |                   |   | 37,377  |  
|Less: Accumulated depreciation       |  |                        | (6,875  | ) |                   |   | (4,081  | )
|                                     |  |                        |         |   |                   |   |         |  
|                                     |  |                        | 32,741  |   |                   |   | 33,296  |  
|                                     |  |                        |         |   |                   |   |         |  
|Property and equipment, net          |  | $                      | 132,222 |   |                   | $ | 134,083 |  
|                                     |  |                        |         |   |                   |   |         |  



On July 8, 2005, the
Company provided a first-ranking collateral hypothec of $3.0 million Canadian dollars, expiring in January 2018, on one of its properties to the lessor of its administrative premises.



16. 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 the Companys consolidated financial statements |  | Three Months Ended September 30, 2005 |       | Three Months Ended September 30, 2004 |   | Nine Months Ended September 30, 2005 |  | Nine Months Ended September 30, 2004
|Cerberus and affiliates                     |  |                                                                   |  |                                       |       |                                       |   |                                      |  |                                      |       |  |   |      
|Financing                                   |  | Interest expense (1)                                              |  | $                                     | 2,786 |                                       | $ | 2,786                                |  | $                                    | 8,274 |  | $ | 3,807
|Preferred stock dividends                   |  | Preferred stock dividends to parent company                       |  | $                                     |      |                                       | $ |                                     |  | $                                    |      |  | $ | 3,958



Amounts payable to
related parties at September 30, 2005 total $100.3 million and $100.5 million at December 31, 2004.

---

|(1) | During the three and nine months ended September 30, 2005, the Company capitalized approximately $0.5 million and $1.2 million respectively of the total $2.8 million and $8.3
million of interest to property and equipment and software included in intangible assets ($nil for the three and nine months ended September 30, 2004).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17. 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



16



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##### Table of Contents

TELEGLOBE INTERNATIONAL HOLDINGS LTD



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



countries prior to its merger with Teleglobe, consummated on May 31, 2004. Teleglobe voluntarily notified the 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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##### Table of Contents

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.



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 evaluated SFAS 123R and believes the impact on the financial statements should be consistent with the SFAS 123 pro forma disclosure contained in Note 7 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 1, 2006.



18



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##### Table of Contents

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 Report on 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 Report on 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 Definitive Proxy Statement filed on September 26, 2005 and in Note 2 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 nine months ended September 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.



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##### Table of Contents

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 evaluated SFAS 123R and believes the impact on the financial statements should be consistent with the SFAS 123 pro-forma disclosure contained in Note 7 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 1, 2006.



ITXC Integration Plan



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



The Companys ITXC merger integration
plan was to achieve annual post-merger benefits of approximately $25 to $30 million. 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, we continue to experience further delays in the integration of the voice systems deployment. As of September 30, 2005, the Company has
substantially completed the integration plan and estimates that $22.5 million of annualized post-merger benefits have been realized with the remaining benefits expected to be realized in the future. Prior to the Companys merger with ITXC, 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 $1.3 million, are included in the consolidated results of operations for the nine months ended September 30, 2005 ($nil in the current quarter).



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 are 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 are reflected in our network expenses.



20



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##### Table of Contents

Facilities and headcount reductions:



The Company has achieved its integration goal related to closures of
overlapping facilities, including the sublet of excess floor space. For the six-month period ending June 30, 2005, savings from headcount reduction have not been significant mainly because the results include retention bonus earned in the
period. However, SG&A for the third quarter of 2005 reflects net benefits from these reductions.



Results of OperationsComparison of the Three and Nine Months Ended September 30, 2005 and 2004



Set forth below is a description of the results of operations for the three and nine months ended September 30, 2005 and September 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 nine months ended September 30, 2005 and in the three months ended September 30, 2004 and from
June 1, 2004 in the nine months ended September 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 as a supplemental measure of our performance.



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



|                       |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|---------------------- |  | ------------------------------------- | ------ | - | ------------------------------------- | - | ------- | ------------------------------------ |  | - | ------------------------------------ | - |  | - | ------- | -
|(amounts in thousands) |  | Three Months Ended September 30, 2005 |        |   | Three Months Ended September 30, 2004 |   |         | Nine Months Ended September 30, 2005 |  |   | Nine Months Ended September 30, 2004 |  
|Net loss               |  | $                                     | (7,868 | ) |                                       | $ | (11,031 | )                                    |  | $ | (16,714                              | ) |  | $ | (12,327 | )
|Add:                   |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|Interest, net          |  |                                       | 2,369  |   |                                       |   | 6,271   |                                      |  |   | 8,402                                |   |  |   | 12,481  |  
|Income taxes           |  |                                       | 133    |   |                                       |   | (165    | )                                    |  |   | (453                                 | ) |  |   | (2,362  | )
|Depreciation           |  |                                       | 5,559  |   |                                       |   | 7,059   |                                      |  |   | 17,568                               |   |  |   | 16,295  |  
|Amortization           |  |                                       | 2,909  |   |                                       |   | 2,869   |                                      |  |   | 8,012                                |   |  |   | 6,233   |  
|                       |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  
|EBITDA                 |  | $                                     | 3,102  |   |                                       | $ | 5,003   |                                      |  | $ | 16,815                               |   |  | $ | 20,320  |  
|                       |  |                                       |        |   |                                       |   |         |                                      |  |   |                                      |   |  |   |         |  



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The Companys EBITDA for the three and nine months ended September 30, 2005 include a favorable
impact of $1.8 million in telecommunication expense due to the revision of estimates on disputed accounts payables and accrued liabilities with certain carriers, the benefit associated with negotiated retroactive rate adjustments totaling $1.6
million on certain contracts and non-recurring special charges incurred in SG&A in connection with the Plan of Amalgamation with VSNL totaling $6.8 million and $7.9 million respectively for the two periods.



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



The nine months ended September 30, 2005 also includes a non-recurring net gain of $2.2 million relating to the disposal of the Burnaby Vancouver
Station. See Note 12 of the unaudited interim Consolidated Financial Statements included herein for more details.



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 September 30,2005 |       |   | Three Months Ended September 30,2004 |   |       | Nine Months Ended September 30, 2005 |  |   | Nine Months Ended September 30, 2004 |  
|Revenues per line of business (in millions of U.S. dollars) |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Voicetransport                                             |  | $                                    | 191   |   |                                      | $ | 226   |                                      |  | $ | 587                                  |   |  | $ | 575   |  
|Datatransport                                              |  |                                      | 25    |   |                                      |   | 26    |                                      |  |   | 76                                   |   |  |   | 80    |  
|Valueadded services                                        |  |                                      | 28    |   |                                      |   | 25    |                                      |  |   | 75                                   |   |  |   | 67    |  
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Total                                                       |  | $                                    | 244   |   |                                      | $ | 277   |                                      |  | $ | 738                                  |   |  | $ | 722   |  
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Total revenues excluding Bell Canada (1) revenues           |  | $                                    | 222   |   |                                      | $ | 251   |                                      |  | $ | 665                                  |   |  | $ | 654   |  
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Minutes of traffic (in millions)                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Voicetransport                                             |  |                                      | 3,470 |   |                                      |   | 3,297 |                                      |  |   | 10,230                               |   |  |   | 7,833 |  
|Other                                                       |  |                                      | 78    |   |                                      |   | 61    |                                      |  |   | 212                                  |   |  |   | 163   |  
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Total                                                       |  |                                      | 3,548 |   |                                      |   | 3,358 |                                      |  |   | 10,442                               |   |  |   | 7,996 |  
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Average voice revenue per minute                            |  | $                                    | 0.055 |   |                                      | $ | 0.069 |                                      |  | $ | 0.058                                |   |  | $ | 0.073 |  
|Percentage of revenues from Bell Canada (1)                 |  |                                      | 8.8   | % |                                      |   | 9.3   | %                                    |  |   | 9.9                                  | % |  |   | 9.3   | %
|Number of customers at period-end                           |  |                                      | 1,574 |   |                                      |   | 1,346 |                                      |  |   | 1,574                                |   |  |   | 1,346 |  
|                                                            |  |                                      |       |  
|Geographic distribution of revenues                         |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Asia                                                        |  |                                      | 7     | % |                                      |   | 8     | %                                    |  |   | 8                                    | % |  |   | 9     | %
|Canada                                                      |  |                                      | 14    | % |                                      |   | 13    | %                                    |  |   | 14                                   | % |  |   | 12    | %
|Europe                                                      |  |                                      | 34    | % |                                      |   | 29    | %                                    |  |   | 33                                   | % |  |   | 29    | %
|USA                                                         |  |                                      | 31    | % |                                      |   | 33    | %                                    |  |   | 31                                   | % |  |   | 34    | %
|Latin America                                               |  |                                      | 4     | % |                                      |   | 4     | %                                    |  |   | 4                                    | % |  |   | 4     | %
|Other                                                       |  |                                      | 10    | % |                                      |   | 13    | %                                    |  |   | 10                                   | % |  |   | 12    | %
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  
|Total                                                       |  |                                      | 100   | % |                                      |   | 100   | %                                    |  |   | 100                                  | % |  |   | 100   | %
|                                                            |  |                                      |       |   |                                      |   |       |                                      |  |   |                                      |   |  |   |       |  

---

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



Overall Revenues



Total revenues, excluding revenues from Bell Canada, decreased by $28.8 million or 11.5% in the current quarter as compared to the same prior year
quarter. The decrease in revenues mainly results from voice



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transports current competitive pricing trends. For the year-to-date period ended September 30, 2005, total revenues, excluding revenues from Bell
Canada, increased by $11.5 million or 1.8% compared to the same period in 2004. The increase in revenues results from the inclusion of ITXC revenue from June 1, 2004 partially offset by the competitive pricing trends in the telecommunications
industry.



Revenues from Bell Canada decreased by $4.2 million
or 16.4% in the quarter ended September 30, 2005 as compared to the quarter ended September 30, 2004. The decline is mostly explained by higher volume in the third quarter of 2004 and by the repricing of Bells IP service in 2005. In
the nine months ended September 30, 2005, revenues from Bell Canada increased by $4.8 million or 7.1% compared to the same period in 2004. The increase was driven by abnormally low volume with Bell Canada in the comparative period of
2004. The number of customers in the current quarter-end represents an increase of 228 compared to September 30, 2004, which were obtained through new service offerings in voice transport line of business.



Revenues per Line of Business



Voice Transport Revenues



Revenue generated from voice transport services decreased by approximately
$34.6 million or 15.3% in the current quarter as compared to the same prior year period. The decrease is primarily explained by price erosion and route destination mix. For the nine months ended September 30, 2005, revenue generated from voice
transport increased by $13.1 million or 2.3% compared to the same prior year period. The increase is 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 5.2% and increased by 30.6% for the nine months ended September 30, 2005 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 nine months ended September 30, 2005, the
average voice revenue per minute was approximately $0.055 and $0.058 compared with $0.069 and $0.073 per minute during the quarter and the nine months ended September 30, 2004 respectively. The decrease in average revenue per minutes was
primarily attributable to an overall decline in rates experienced in the telecommunication industry and to changes in our route destination mix.



The year-to-date voice transport revenue includes the impact of major favorable settlement agreements with certain carriers for approximately $1.5 million
and also includes an amount of $1.2 million resulting from a non-recurring favorable settlement of a dispute with a customer.



Data Transport Revenues



Data transport revenues in the third quarter of 2005 was lower by approximately $1.1 million or 4.4% compared to the third quarter of 2004. Data transport
revenues decreased by $4.6 million or 5.7% for the nine months ended September 30, 2005 compared to the same prior year period of 2004. The Company experienced growth in new customers and in traffic volume in the three and nine months ended
September 30, 2005, however, these benefits were offset by price erosion. In addition, data transport revenues includes the impact of a major favorable settlement agreement with a carrier for approximately $0.3 million in the nine months ended
September 30, 2005.



Value-added Service Revenues



Revenue generated from value-added services increased by $2.7 million or
10.8% in the current quarter compared to the same quarter of 2004 and by $7.7 million or 11.5% for the year-to-date period ended September 30, 2005 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 compared to the same periods in 2004.



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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 September 30,2005 |   |  | Three Months Ended September 30,2004 |    |  | Nine Months Ended September 30, 2005 |   |  | Nine Months Ended September 30, 2004 |  
|Total telecommunication revenues                                                                                                                                       |  | 100.0                                | % |  | 100.0                                | %  |  | 100.0                                | % |  | 100.0                                | %
|Operating expenses                                                                                                                                                     |  |                                      |   |  |                                      |    |  |                                      |   |  |                                      |  
|Telecommunication                                                                                                                                                      |  | 72.9                                 | % |  | 75.3                                 | %  |  | 72.7                                 | % |  | 73.7                                 | %
|Network, exclusive of depreciation and amortization shown below                                                                                                        |  | 9.1                                  | % |  | 8.4                                  | %  |  | 9.2                                  | % |  | 9.9                                  | %
|Selling, general and administrative, exclusive of stock based compensation expense, bad debt expense, depreciation, amortization and
restructuring charges shown below |  | 16.4                                 | % |  | 14.4                                 | %  |  | 15.6                                 | % |  | 13.5                                 | %
|Stock based compensation expense                                                                                                                                       |  | 0.0                                  | % |  | 0.0                                  | %  |  | 0.0                                  | % |  | 0.0                                  | %
|Bad debt expense                                                                                                                                                       |  | 0.5                                  | % |  | 0.2                                  | %  |  | 0.1                                  | % |  | 0.0                                  | %
|Depreciation                                                                                                                                                           |  | 2.3                                  | % |  | 2.9                                  | %  |  | 2.4                                  | % |  | 2.5                                  | %
|Amortization of intangible assets                                                                                                                                      |  | 1.2                                  | % |  | 0.7                                  | %  |  | 1.1                                  | % |  | 0.6                                  | %
|Restructuring charges                                                                                                                                                  |  |                                     | % |  |                                     | %  |  |                                     | % |  | 0.1                                  | %
|Foreign exchange loss (gain)                                                                                                                                           |  | 0.3                                  | % |  | (0.1                                 | )% |  | 0.5                                  | % |  | 0.0                                  | %
|                                                                                                                                                                       |  |                                      |   |  |                                      |    |  |                                      |   |  |                                      |  
|Total operating expenses as a percentage of revenues                                                                                                                   |  | 102.7                                | % |  | 101.8                                | %  |  | 101.6                                | % |  | 100.3                                | %
|                                                                                                                                                                       |  |                                      |   |  |                                      |    |  |                                      |   |  |                                      |  



Telecommunication expense



Telecommunication expense during the three months ended
September 30, 2005 decreased by approximately $30.7 million or 14.7% compared to the same prior year period. This decrease is mostly due to lower voice termination cost. For the nine months ended September 30, 2005, telecommunication
expense increased by $4.8 million or 0.9% compared to the same period in 2004. This increase is primarily explained by the inclusion of ITXCs results from June 1, 2004, which was mostly offset by lower voice termination costs reflecting
benefits from price deflation. In addition, the three and nine months ended September 30, 2005 includes favorable impact due to the revision of estimates on disputed accounts payables and accrued liabilities for approximately $1.8 million and
the benefit associated with negotiated retroactive rate adjustments totaling $1.6 million on certain contracts. The year-to-date expenses also include favorable settlements with certain carriers for approximately $5.7 million. As a percentage of
revenue, telecommunication expense decreased for the three and nine months ended September 30, 2005 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



Ongoing contract renegotiations with our suppliers and cancellations of
unprofitable circuits continue to reduce our network expense by approximately $1.2 million or 5.0% in the third quarter of 2005 compared to the same quarter of 2004 and by approximately $3.5 million or 4.9% for the nine months ended
September 30, 2005 from the comparable period in 2004. Furthermore, for the year-to-date period, the decrease was impacted by a major favorable settlement agreement with a carrier for approximately $0.9 million and partially offset by the
inclusion of ITXCs network expenses from June 1, 2004.



Selling,
General and Administrative (SG&A) expenses



For the
nine months ended September 30, 2005, SG&A expenses increased by $17.5 million or 17.9% compared to the same period in 2004. The increase is in part due to non-recurring special charges recorded in the



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third quarter of 2005 incurred in connection with the Plan of Amalgamation of the Company with VSNL announced on July 25, 2005. These non-recurring
special charges amounting to $7.9 million include $5.6 million in professional fees, $1.6 million in retention bonuses and other compensation costs for Teleglobe employees (see Note 9 in the unaudited interim Consolidated Financial Statement
included herein for more details) and $0.7 million of other. SG&A expense was also adversely affected by the decline in value of the US dollar as compared to the Canadian dollar from the 2004 period compared to the 2005 period, resulting in an
increase in our SG&A expenses and by the inclusion of ITXCs SG&A expenses from June 1, 2004. In addition, the nine months ended September 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.



For the three months ended September 30, 2005, SG&A expenses totaled $39.9 million compared to $40.0 million in the third quarter of 2004. The
synergies and the decrease in cost base following the completion of the integration of ITXC were offset by the non-recurring special charges incurred in connection with the Plan of Amalgamation with VSNL as mentioned above.



The retention bonuses for ITXC employees included in SG&A expenses for
the nine month period ended September 30, 2005 were paid upon their departure and were amortized over such employees agreed-upon service period. See Note 9 to the unaudited interim Consolidated Financial Statements included herein for more
details.



Bad debt expense



Bad debt expenses for the three months ended September 30, 2005,
increased by $0.6 million to $1.2 million compared to $0.6 million for the corresponding period of 2004. This increase reflects additional allowance recorded in the current quarter for certain specific customers. For the nine-month period ended
September 30, 2005, bad debt expense totaled $0.6 million and includes the recovery recognized in the first quarter of 2005 following the revision of certain estimates and resulting in a reduction in the allowance for doubtful account of
approximately $0.8 million. For the nine months ended September 30, 2004, bad debt expense amounted to $30,000 and reflected the Companys collection efforts resulting 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.



Depreciation



Depreciation expense decreased by $1.5 million or 21.2% in the current quarter versus the comparable quarter in 2004. Depreciation for certain fiber
capacities have ceased as they have been fully depreciated in January 2005. For the nine months ended September 30, 2005, depreciation expense increased by $1.3 million or 7.8% compared to the same period in 2004. This is attributed to the
inclusion of ITXCs depreciation from June 1, 2004.



Amortization
of intangible assets



Amortization of intangible assets
expense in the current quarter remained in line with the same quarter in 2004. However, for the nine months ended September 30, 2005, amortization expense increased by $1.8 million or 28.5% as compared to the nine months ended
September 30, 2004. The increase is mostly due to intangible assets recorded in connection with the ITXC merger.



Restructuring charges



During the nine months ended September 30, 2004, the Company reduced its workforce by 15 people and as consequence, incurred restructuring costs in
the amount of $893,000. See Note 13 to the unaudited interim Consolidated Financial Statements included herein for more details.



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Foreign exchange loss



The foreign exchange loss of $77,000 for the three months ended September 30, 2005 and $3.6 million for the nine months ended September 30, 2005
compared to a foreign exchange gain of $0.2 million and a foreign exchange loss of $73,000 for the three and nine months ended September 30, 2004 respectively are explained by the effect of fluctuations in the Euro, British Pound, Canadian
dollar and other currencies versus US Dollar on certain net monetary assets of the Company. The Companys reporting currency is the US dollar, however, the Company transacts business in several different currencies.



Interest expense



Interest expense, net of interest income, for the current quarter of 2005 decreased by $3.9 million or by 62.2% compared to
the third quarter of 2004 and for the nine months ended September 30, 2005, interest expense, net of interest income, decreased by $4.1 million or by 32.7% from the nine months ended September 30, 2004. The decreases are mainly due to the
accretion related to the Comfone AG liability that was recorded in 2004. At the end of the first quarter of 2005, the Company had completely accreted for the Comfone AG liability and a recovery of interest expense of $0.5 million was recorded to
reflect the final negotiated agreement with Comfone AG reached during the second quarter of 2005.



Other income



The
increase in other income of $2.2 million in the nine months ended September 30, 2005 compared to the same period in 2004 is primarily due to the net gain on disposal of the land, building and office equipment located in the Burnaby Vancouver.
See Note 12 to the unaudited interim Consolidated Financial Statements included herein for more details.



Income taxes



Income
tax expense for the three-month period ended September 30, 2005 totaled $133,000 and mainly consisted of current income tax resulting from the filing of the 2004 US income tax return. The income tax recovery for the nine-month period ended
September 30, 2005 of $453,000 resulted from a deferred tax recovery of $887,000 mostly due to a reduction in deferred tax liabilities caused by unrealized foreign exchange losses incurred by a Luxembourg entity and offset by current tax
expense of $434,000 due to taxes payable in the US and in some foreign entities.



Income tax recovery for the nine-month period ended September 30,2004 of $2.4 million included a current tax recovery of $2.1 million due mostly to a recorded tax receivable related to the carry back of losses,
and a $0.3 million of deferred tax recoveries.



Liquidity and capital
resources



Cash flow from operations



For the nine months ended September 30, 2005, the Companys cash
flow generated $22.8 million from operating activities. It is composed of a net loss of $16.7 million, reduced by adjustments of $24.4 million for non-cash items and by $15.1 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 disposal of property and equipment. The changes in operating assets and liabilities mostly stem from a reduction in accounts receivable and an increase in
prepaid assets. In certain cases, the collection of accounts receivables can be facilitated by the Companys ability to offset with accounts payables of the corresponding carrier.



Investing Activities



Cash flows used in investing activities of $16.3 million in the nine months ended September 30, 2005 are mostly a result of capital expenditures and
acquisition of intangible assets. These are partially offset by the



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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 $14.7
million for the nine months ended September 30, 2005, consists mostly of information technology upgrades and network equipment. The addition to intangible assets of $8.5 millions relates to software as well as distribution rights from Wmode
Inc. as described in Note 4 of the unaudited interim Consolidated Financial Statements included herein.



Financing Activities



The cash flows used in financing activities of $2.4 million relates mostly to the repayment of capital lease obligations.



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 May 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 September 30, 2005 is in a negative position of $65.9 millions versus a negative position of
$26.9 million at December 31, 2004. This change in working capital is mostly explained by the inclusion in current liabilities of the first principal repayment of $25 million, under our senior notes, which is due in May 2006 and by use of cash
and accrued liabilities for investments, additions to property and equipment and intangible assets. Furthermore, non-recurring special charges related to the Plan of Amalgamation with VSNL contributed to the decline of our working capital. 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
September 30, 2005, and the effect such obligations are expected to have on the Companys liquidity and cash flow in future periods.



|                  |  |                             |         |                      |   |                           |  |                         |       |                             |   |                          |  |       |       |  |   |     |  |   |        
|----------------- |  | --------------------------- | ------- | -------------------- | - | ------------------------- |  | ----------------------- | ----- | --------------------------- | - | ------------------------ |  | ----- | ----- |  | - | --- |  | - | -------
|Payments due      |  | Operating Lease Obligations |         | Purchase Obligations |   | Capital Lease Obligations |  | Senior Note Obligations |       | Other Long-term Obligations |   | Investment in Wmode Inc. |  | Total
|Remainder of 2005 |  | $                           | 5,401   |                      | $ | 3,869                     |  | $                       | 923   |                             | $ |                         |  | $     | 64    |  | $ | 862 |  | $ | 11,119 
|2006              |  |                             | 18,442  |                      |   | 1,935                     |  |                         | 2,610 |                             |   | 25,000                   |  |       | 223   |  |   |    |  |   | 48,210 
|2007              |  |                             | 14,731  |                      |   | 203                       |  |                         | 949   |                             |   | 25,000                   |  |       | 220   |  |   |    |  |   | 41,103 
|2008              |  |                             | 12,739  |                      |   | 152                       |  |                         | 210   |                             |   | 50,000                   |  |       | 216   |  |   |    |  |   | 63,317 
|2009              |  |                             | 12,405  |                      |   |                          |  |                         |      |                             |   |                         |  |       | 223   |  |   |    |  |   | 12,628 
|Thereafter        |  |                             | 69,769  |                      |   |                          |  |                         |      |                             |   |                         |  |       | 2,474 |  |   |    |  |   | 72,243 
|                  |  |                             |         |                      |   |                           |  |                         |       |                             |   |                          |  |       |       |  |   |     |  |   |        
|Total             |  | $                           | 133,487 |                      | $ | 6,159                     |  | $                       | 4,692 |                             | $ | 100,000                  |  | $     | 3,420 |  | $ | 862 |  | $ | 248,620
|                  |  |                             |         |                      |   |                           |  |                         |       |                             |   |                          |  |       |       |  |   |     |  |   |        



|                             |  |                         |       |                  |   |      
|---------------------------- |  | ----------------------- | ----- | ---------------- | - | -----
|Other Commercial Commitments |  | Total Amounts Committed |       | Less than 1 Year
|Standby letters of credit    |  | $                       | 2,153 |                  | $ | 2,153
|                             |  |                         |       |                  |   |      
|Total commercial commitments |  | $                       | 2,153 |                  | $ | 2,153
|                             |  |                         |       |                  |   |      



Section 404 of the
Sarbanes-Oxley Act of 2002



The SEC announced on
September 21, 2005, a further extension for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), for Non-Accelerated Filers and Foreign Private Issuers that are non-accelerated filers from the
announcement made on March 2, 2005. The compliance dates have been extended



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from the first fiscal year ending on or after July 15, 2006 to the first fiscal year ending on or after July 15, 2007 (instead of 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, 2007, assuming the Company continues to
meet the requirements of a Non-Accelerated Filer.



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 nine
months ended September 30, 2005.



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.



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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 17 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 October 25, 2005, the Company held its Special General Meeting of Shareholders in Hamilton, Bermuda. The shareholders approved the Agreement and Plan of Amalgamation among Videsh Sanchar Nigam Limited, VSNL
Telecommunications (Bermuda) Ltd., and Teleglobe entered into on July 25, 2005.



The following votes were cast for the proposal to approve the Agreement and Plan of Amalgamation:



|        |  |           
|------- |  | ----------
|For     |  | 30,569,108
|Against |  | 246,932   
|Abstain |  | 8,759     



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 Annex A of the registrants Definitive Proxy Statement filed on September 26, 2005).
|     |  
|10.2 | * |  | Amendment to Letter Agreement, dated as of November 9, 2005 by and between Teleglobe Canada ULC and Pierre Duhamel.                                                                                                                                                                                          
|     |  
|10.3 | * |  | Amendment to Letter Agreement, dated as of November 9, 2005 by and between Teleglobe International Holdings Ltd and Pierre Duhamel.                                                                                                                                                                          
|     |  
|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.                                                                                                                                                       

---

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|- | --------------



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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 INTERNATIONAL HOLDINGS
LTDBy:

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




Dated: November 9, 2005



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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 Annex A of the registrants Definitive Proxy Statement filed on September 26, 2005).
|     |  
|10.2 | * |  | Amendment to Letter Agreement, dated as of November 9, 2005 by and between Teleglobe Canada ULC and Pierre Duhamel.                                                                                                                                                                                          
|     |  
|10.3 | * |  | Amendment to Letter Agreement, dated as of November 9, 2005 by and between Teleglobe International Holdings Ltd and Pierre Duhamel.                                                                                                                                                                          
|     |  
|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