##### Table of Contents



As filed with the Securities and Exchange
Commission on March 29, 2002



---




SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549




---

Form 20-F

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|o          |  | REGISTRATION STATEMENT PURSUANT TO
	SECTION 12(B) OR (G)
	OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(D)
	OF THE SECURITIES EXCHANGE ACT OF 1934          
|          
|           |  | For the fiscal year ended: December 31,
	2001                                                   
|          
|o          |  | 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 333-59979



---

Versatel Telecom International N.V.

(Exact name of Registrant as specified in its
charter)


The Netherlands

(Jurisdiction of incorporation or
organization)


Hullenbergweg 101

1101 CL Amsterdam-Zuidoost


The Netherlands


+31 20 750 1000


(Address of principal executive
offices)


Securities registered or to be registered
pursuant to Section 12(b) of the Act:

None


Securities registered or to be registered
pursuant to Section 12(g) of the Act:

Ordinary
shares, par value NLG 0.05 per share


Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:

$225,000,000
13 1/4% Senior U.S. Dollar Notes due 2008


$150,000,000
13 1/4% Senior U.S. Dollar Notes due 2008


$180,000,000
11 7/8% Senior U.S. Dollar Notes due 2009


120,000,000
11 7/8% Senior Euro Notes due 2009


300,000,000
11 1/4% Senior Euro Notes due 2010


Indicate the number of outstanding shares of
each of the issuers classes of capital or common stock as
of the close of the period covered by the annual
report:

Ordinary shares issued and outstanding: 91,352,247

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days:

Yes þ          No o


Indicate by check mark which financial statement
item the Registrant has elected to follow:

Item 17 o          Item 18 þ



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---

TABLE OF CONTENTS



|                                                                                      |                                                                                       |                                                             |  |  |  |  |  | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|PART I                                                                               
|                                                                                      | ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        
|                                                                                      | ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                      
|                                                                                      | ITEM 3. KEY INFORMATION                                                              
|                                                                                      |                                                                                       | 3.A SELECTED FINANCIAL DATA                                
|                                                                                      |                                                                                       | 3.B CAPITALIZATION AND INDEBTEDNESS                        
|                                                                                      |                                                                                       | 3.C REASONS FOR THE OFFER AND USE OF PROCEEDS              
|                                                                                      |                                                                                       | 3.D RISK FACTORS                                           
|                                                                                      | ITEM 4. INFORMATION ON THE COMPANY                                                   
|                                                                                      |                                                                                       | 4.A HISTORY AND DEVELOPMENT OF THE COMPANY                 
|                                                                                      |                                                                                       | 4.B BUSINESS OVERVIEW                                      
|                                                                                      |                                                                                       | 4.C ORGANIZATIONAL STRUCTURE                               
|                                                                                      | 4.D PROPERTY, PLANT AND EQUIPMENT                                                    
|                                                                                      | ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 
|                                                                                      |                                                                                       | 5.A OPERATING RESULTS                                      
|                                                                                      |                                                                                       | 5.B LIQUIDITY AND CAPITAL RESOURCES                        
|                                                                                      |                                                                                       | 5.C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES         
|                                                                                      |                                                                                       | 5.D TREND INFORMATION                                      
|                                                                                      | ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   
|                                                                                      |                                                                                       | 6.A DIRECTORS AND SENIOR MANAGEMENT                        
|                                                                                      |                                                                                       | 6.B COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS       
|                                                                                      |                                                                                       | 6.C BOARD PRACTICES                                        
|                                                                                      |                                                                                       | 6.D EMPLOYEES                                              
|                                                                                      |                                                                                       | 6.E SHARE OWNERSHIP                                        
|                                                                                      | ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|                                                                                      |                                                                                       | 7.A MAJOR SHAREHOLDERS                                     
|                                                                                      |                                                                                       | 7.B RELATED PARTY TRANSACTIONS                             
|                                                                                      |                                                                                       | 7.C INTERESTS OF EXPERTS AND COUNSEL                       
|                                                                                      | ITEM 8. FINANCIAL INFORMATION                                                        
|                                                                                      |                                                                                       | 8.A CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|                                                                                      |                                                                                       | 8.B SIGNIFICANT CHANGES                                    
|                                                                                      | ITEM 9. THE OFFER AND LISTING                                                        
|                                                                                      |                                                                                       | 9.A LISTING DETAILS                                        
|                                                                                      |                                                                                       | 9.B PLAN OF DISTRIBUTION                                   
|                                                                                      |                                                                                       | 9.C MARKETS                                                
|                                                                                      |                                                                                       | 9.D SELLING SHAREHOLDERS                                   
|                                                                                      |                                                                                       | 9.E DILUTION                                               
|                                                                                      |                                                                                       | 9.F EXPENSES OF THE ISSUE                                  
|                                                                                      | ITEM 10. ADDITIONAL INFORMATION                                                      
|                                                                                      |                                                                                       | 10.A SHARE CAPITAL                                         
|                                                                                      |                                                                                       | 10.B ARTICLES OF ASSOCIATION                               
|                                                                                      |                                                                                       | 10.C MATERIAL CONTRACTS                                    
|                                                                                      |                                                                                       | 10.D EXCHANGE CONTROLS                                     
|                                                                                      |                                                                                       | 10.E TAXATION                                              
|                                                                                      |                                                                                       | 10.I SUBSIDIARY INFORMATION                                
|                                                                                      | ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|                                                                                      | ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|PART II                                                                              
|                                                                                      | ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|                                                                                      | ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|                                                                                      | ITEM 15. [RESERVED]                                                                  
|                                                                                      | ITEM 16. [RESERVED]                                                                  
|PART III                                                                             
|                                                                                      | ITEM 17. FINANCIAL STATEMENTS                                                        
|                                                                                      | ITEM 18. FINANCIAL STATEMENTS                                                        
|                                                                                      | ITEM 19. EXHIBITS                                                                    
|INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF VERSATEL TELECOM INTERNATIONAL N.V.
|Statement Re Ratio of Earnings                                                       
|List of Subsidiaries                                                                 
|Release Letter                                                                       



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##### Table of Contents



TABLE OF CONTENTS

|                                             |  |                                                                |   |      |    | 
|-------------------------------------------- |  | -------------------------------------------------------------- | - | ---- | -- | 
|                                             |  |                                                                |   | Page
|                                             |  |                                                                |   |     
|INTRODUCTION AND PRESENTATION OF INFORMATION |  |                                                                | 3 |     
|FORWARD-LOOKING STATEMENTS                   |  |                                                                | 3 |     
|ITEM 1.                                      |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
	ADVISERS         |   |      | 5  | 
|ITEM 2.                                      |  | OFFER STATISTICS AND EXPECTED
	TIMETABLE                       |   |      | 5  | 
|ITEM 3.                                      |  | KEY INFORMATION                                                |   |      | 5  | 
|                                             |  | 3.A   SELECTED FINANCIAL DATA                                  |   |      | 5  | 
|                                             |  | 3.B   CAPITALIZATION AND
	INDEBTEDNESS                         |   |      | 8  | 
|                                             |  | 3.C   REASONS FOR THE OFFER AND
	USE OF PROCEEDS               |   |      | 8  | 
|                                             |  | 3.D   RISK FACTORS                                             |   |      | 8  | 
|ITEM 4.                                      |  | INFORMATION ON THE COMPANY                                     |   |      | 19 | 
|                                             |  | 4.A   HISTORY AND DEVELOPMENT OF
	THE COMPANY                  |   |      | 19 | 
|                                             |  | 4.B   BUSINESS OVERVIEW                                        |   |      | 19 | 
|                                             |  | 4.C   ORGANIZATIONAL STRUCTURE                                 |   |      | 33 | 
|                                             |  | 4.D   PROPERTY, PLANT AND EQUIPMENT                            |   |      | 33 | 
|ITEM 5.                                      |  | OPERATING AND FINANCIAL REVIEW AND
	PROSPECTS                  |   |      | 35 | 
|                                             |  | 5.A   OPERATING RESULTS                                        |   |      | 35 | 
|                                             |  | 5.B   LIQUIDITY AND CAPITAL
	RESOURCES                         |   |      | 47 | 
|                                             |  | 5.C   RESEARCH AND DEVELOPMENT,
	PATENTS AND LICENSES          |   |      | 49 | 
|                                             |  | 5.D   TREND INFORMATION                                        |   |      | 49 | 
|ITEM 6.                                      |  | DIRECTORS, SENIOR MANAGEMENT AND
	EMPLOYEES                    |   |      | 50 | 
|                                             |  | 6.A   DIRECTORS AND SENIOR
	MANAGEMENT                         |   |      | 50 | 
|                                             |  | 6.B   COMPENSATION OF DIRECTORS
	AND EXECUTIVE OFFICERS        |   |      | 52 | 
|                                             |  | 6.C   BOARD PRACTICES                                          |   |      | 52 | 
|                                             |  | 6.D   EMPLOYEES                                                |   |      | 54 | 
|                                             |  | 6.E    SHARE OWNERSHIP                                         |   |      | 55 | 
|ITEM 7.                                      |  | MAJOR SHAREHOLDERS AND RELATED PARTY
	TRANSACTIONS             |   |      | 57 | 
|                                             |  | 7.A   MAJOR SHAREHOLDERS                                       |   |      | 57 | 
|                                             |  | 7.B   RELATED PARTY TRANSACTIONS                               |   |      | 58 | 
|                                             |  | 7.C   INTERESTS OF EXPERTS AND
	COUNSEL                        |   |      | 59 | 
|ITEM 8.                                      |  | FINANCIAL INFORMATION                                          |   |      | 59 | 
|                                             |  | 8.A   CONSOLIDATED STATEMENTS AND
	OTHER FINANCIAL INFORMATION |   |      | 59 | 
|                                             |  | 8.B   SIGNIFICANT CHANGES                                      |   |      | 59 | 
|ITEM 9.                                      |  | THE OFFER AND LISTING                                          |   |      | 61 | 
|                                             |  | 9.A   LISTING DETAILS                                          |   |      | 61 | 
|                                             |  | 9.B   PLAN OF DISTRIBUTION                                     |   |      | 62 | 
|                                             |  | 9.C   MARKETS                                                  |   |      | 62 | 
|                                             |  | 9.D   SELLING SHAREHOLDERS                                     |   |      | 62 | 
|                                             |  | 9.E    DILUTION                                                |   |      | 62 | 
|                                             |  | 9.F    EXPENSES OF THE ISSUE                                   |   |      | 62 | 

1



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|         |  |                                                                               |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                               |  | Page
|         |  |                                                                               |  |     
|ITEM 10. |  | ADDITIONAL INFORMATION                                                        |  |      | 63 | 
|         |  | 10.A  SHARE CAPITAL                                                           |  |      | 63 | 
|         |  | 10.B  ARTICLES OF ASSOCIATION                                                 |  |      | 63 | 
|         |  | 10.C  MATERIAL CONTRACTS                                                      |  |      | 68 | 
|         |  | 10.D  EXCHANGE CONTROLS                                                       |  |      | 70 | 
|         |  | 10.E  TAXATION                                                                |  |      | 70 | 
|         |  | 10.F  DIVIDENDS AND PAYING AGENTS                                             |  |      | 82 | 
|         |  | 10.G  STATEMENT BY EXPERTS                                                    |  |      | 82 | 
|         |  | 10.H  DOCUMENTS ON DISPLAY                                                    |  |      | 82 | 
|         |  | 10.I   SUBSIDIARY INFORMATION                                                 |  |      | 82 | 
|ITEM 11. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
	MARKET RISK                   |  |      | 83 | 
|ITEM 12. |  | DESCRIPTION OF SECURITIES OTHER THAN
	EQUITY SECURITIES                       |  |      | 83 | 
|ITEM 13. |  | DEFAULTS, DIVIDEND ARREARAGES AND
	DELINQUENCIES                              |  |      | 84 | 
|ITEM 14. |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF
	SECURITY HOLDERS AND USE OF PROCEEDS |  |      | 84 | 
|ITEM 15. |  | [RESERVED]                                                                    |  |      | 84 | 
|ITEM 16. |  | [RESERVED]                                                                    |  |      | 84 | 
|ITEM 17. |  | FINANCIAL STATEMENTS                                                          |  |      | 84 | 
|ITEM 18. |  | FINANCIAL STATEMENTS                                                          |  |      | 84 | 
|ITEM 19. |  | EXHIBITS                                                                      |  |      | 84 | 

2



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INTRODUCTION AND PRESENTATION OF
INFORMATION

Versatel Telecom International N.V. is a company
with limited liability (naamloze vennootschap) organized
under the laws of The Netherlands. Its principal executive
offices are located at Hullenbergweg 101, 1101 CL
Amsterdam-Zuidoost, The Netherlands and its telephone number is
+31 20 750 1000. Unless the context otherwise
requires in this Annual Report on Form 20-F (the
Annual Report), the terms the Company,
Versatel, our company, we
and us refer to Versatel Telecom International N.V.
and its subsidiaries as a combined entity, except where it is
made clear that such term means only the parent company.

As of January 1, 2000, we publish our
financial statements in euro. Prior to this date we published
our financial statements in Dutch guilders. We have restated the
financial statements and other financial data presented herein
for the periods prior to January 1, 2000 in euro using the
fixed conversion rate of NLG 2.20371 per
1.00 established
with the implementation of the third stage of Monetary Union.
Our financial statements are prepared in accordance with
accounting principles generally accepted in the United States
(U.S. GAAP).

References to euro or
 are
to the currency introduced at the start of the third stage of
Economic and Monetary Union pursuant to the Treaty establishing
the European Economic Community, as amended by the Treaty on
European Union, references to Dutch guilders or
NLG are to the former currency of The Netherlands,
and references to U.S. dollars or $
are to United States dollars. For a discussion of the effects of
exchange rate fluctuations on Versatel, see Operating and
Financial Review and Prospects.

For the convenience of the reader, this document
contains translations of certain euro amounts into
U.S. dollars at specified rates. These translations should
not be construed as representations that the euro amounts
actually represent such U.S. dollar amounts or could be
converted into U.S. dollars at the rate indicated or at any
other rate. Unless otherwise indicated, the translation of euro
into U.S. dollars has been made at $0.8901 per
1.00, based on
the noon buying rate in the City of New York for cable transfers
in euro as certified for customers purposes by the Federal
Reserve Bank of New York on December 31, 2001.



---

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F includes
forward-looking statements within the meaning of
Section 27A of the U.S. Securities Act of 1933, as
amended, and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended, relating to our business. Such
forward-looking statements can often be identified by the use of
forward-looking terminology such as believe,
expect, may, are expected
to, should, would be,
seek or anticipate or similar
expressions or comparable terminology, or by discussions of
strategy, plans or intentions. We have based these
forward-looking statements on our current expectations and
projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions
about us, including, among other things:



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Anticipated trends and conditions in our
	industry, including regulatory reforms and the liberalization of
	telecommunications service across Europe;
|
| |  | The impact of the recent slowdown in economic
	activity generally, and in the telecommunications industry in
	particular, on our business;           
|
| |  | Our ability to compete, both nationally and
	internationally;                                                                                        
|
| |  | Our intention and ability to introduce new
	products and services;                                                                                   
|
| |  | Our expectation of the competitiveness of our
	services;                                                                                             
|
| |  | The anticipated development of our network;                                                                                                          
|
| |  | Our expectation of the impact of this development
	on our revenue potential, cost basis and margins; and                                             

3



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| |   |                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The impact of our proposed financial
	restructuring through either an exchange offer or a court
	approved plan for all of our outstanding convertible notes and
	high yield notes on our financial condition and results of
	operations, whether or not the exchange offer is successful.

In light of these risks, uncertainties, and
assumptions, the forward-looking events discussed in this Annual
Report might not occur. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

4



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PART I




ITEM 1.     IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.




ITEM 2.     OFFER
STATISTICS AND EXPECTED TIMETABLE

Not applicable.




ITEM 3.     KEY
INFORMATION






3.A     SELECTED
FINANCIAL DATA


The following selected financial data of Versatel
as of and for the years ended December 31, 2001, 2000,
1999, 1998, and 1997 have been derived from our historical
financial statements and have been prepared in accordance with
U.S. GAAP. Our consolidated balance sheets as of
December 31, 2001 and 2000 and the consolidated statements
of operations, shareholders equity and cash flows for the
years ending December 31, 2001, 2000 and 1999 are included
elsewhere herein. The selected financial data should be read in
conjunction with Item 5. Operating and Financial
Review and Prospects and our historical financial
statements and the related notes thereto included elsewhere
herein.

As of January 1, 2000, we have published our
financial statements in euro. Prior to that date we published
our financial statements in Dutch guilders. We have restated the
financial statements and other financial data presented herein
for the periods prior to January 1, 2000 in euro using the
fixed conversion rate of NLG 2.20371 per
1.00. The
following selected financial data reported in euro depict the
same trend as would have been presented if Versatel had
continued to present financial statements in NLG. The selected
financial data for the years ended December 31, 1999, 1998
and 1997, will not be comparable to the financial statements of
other companies that report in euro and that have restated
amounts from a different currency than Dutch guilders.

5



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|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|---------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | --------- | - |  |  | --------- | - |  |  | --------- | -
|                                                                             |  |                                         
|                                                                             |  | Year Ended December 31,                 
|                                                                             |  |                                         
|                                                                             |  | 1997                                     |         | 1998 |  | 1999 |         | 2000 |  | 2001
|                                                                             |  |                                          |         |      |  |      |         |      |  |     
|                                                                             |  |                                         |         |     |  |     |         |     |  |    
|                                                                             |  |                                         
|                                                                             |  | (in thousands, except per share amounts)
|Statement of Operations Data:                                                |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Operating revenue(1)                                                         |  |                                          | 8,574   |      |  |      | 17,952  |      |  |      | 58,537    |   |  |  | 181,469   |   |  |  | 255,733   |  
|Operating expenses:                                                          |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Cost of revenue, excluding depreciation and
	amortization(2)                 |  |                                          | 7,898   |      |  |      | 14,439  |      |  |      | 45,657    |   |  |  | 133,565   |   |  |  | 154,399   |  
|Selling, general and administrative                                          |  |                                          | 7,953   |      |  |      | 21,660  |      |  |      | 70,250    |   |  |  | 206,360   |   |  |  | 165,614   |  
|Stock based compensation                                                     |  |                                          |        |      |  |      |        |      |  |      | 12,557    |   |  |  | 7,034     |   |  |  | 5,695     |  
|Tax penalties                                                                |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  |          |   |  |  | 2,978     |  
|Restructuring expense                                                        |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  |          |   |  |  | 11,240    |  
|Depreciation and amortization                                                |  |                                          | 1,469   |      |  |      | 2,937   |      |  |      | 26,412    |   |  |  | 91,518    |   |  |  | 138,592   |  
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Total operating expenses                                                     |  |                                          | 17,320  |      |  |      | 39,036  |      |  |      | 154,876   |   |  |  | 438,477   |   |  |  | 478,518   |  
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Operating loss                                                               |  |                                          | (8,746  | )    |  |      | (21,084 | )    |  |      | (96,339   | ) |  |  | (257,008  | ) |  |  | (222,785  | )
|Interest expense, net                                                        |  |                                          | 242     |      |  |      | 11,712  |      |  |      | 58,512    |   |  |  | 111,132   |   |  |  | 138,637   |  
|Results from investing activities                                            |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  | 3,131     |   |  |  | (21       | )
|Other expenses(3)                                                            |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  | 18,214    |   |  |  |          |  
|Foreign currency exchange (losses) gains, net                                |  |                                          | (24     | )    |  |      | 2,335   |      |  |      | (43,684   | ) |  |  | (32,695   | ) |  |  | (30,192   | )
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Loss before income taxes, minority interest and
	extraordinary item          |  |                                          | (9,012  | )    |  |      | (30,461 | )    |  |      | (198,535  | ) |  |  | (422,180  | ) |  |  | (391,593  | )
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Credit from (provision for) income taxes                                     |  |                                          |        |      |  |      | (3      | )    |  |      | 437       |   |  |  | 41        |   |  |  |          |  
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net loss before minority interest and
	extraordinary item                    |  |                                          | (9,012  | )    |  |      | (30,464 | )    |  |      | (198,098  | ) |  |  | (422,139  | ) |  |  | (391,593  | )
|Minority interest                                                            |  |                                          |        |      |  |      |        |      |  |      | 168       |   |  |  | 792       |   |  |  |          |  
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net loss before extraordinary item                                           |  |                                          | (9,012  | )    |  |      | (30,464 | )    |  |      | (197,930  | ) |  |  | (421,347  | ) |  |  | (391,593  | )
|Extraordinary item(4)                                                        |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  |          |   |  |  | 13,032    |  
|Net loss                                                                     |  |                                          | (9,012  | )    |  |      | (30,464 | )    |  |      | (197,930  | ) |  |  | (421,347  | ) |  |  | (378,561  | )
|                                                                             |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net loss per share before extraordinary item
	basic and diluted              |  |                                          | (0.50   | )    |  |      | (0.93   | )    |  |      | (3.89     | ) |  |  | (4.92     | ) |  |  | (4.31     | )
|Net loss per share after extraordinary item basic
	and diluted               |  |                                          | (0.50   | )    |  |      | (0.93   | )    |  |      | (3.89     | ) |  |  | (4.92     | ) |  |  | (4.17     | )
|Weighted average number of basic shares
	outstanding(5)                      |  |                                          | 18,084  |      |  |      | 32,622  |      |  |      | 50,929    |   |  |  | 85,611    |   |  |  | 90,872    |  
|Financial Data:                                                              |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Adjusted EBITDA(6)                                                           |  |                                          | (7,277  | )    |  |      | (18,147 | )    |  |      | (57,370   | ) |  |  | (158,456  | ) |  |  | (64,280   | )
|Capital expenditures                                                         |  |                                          | 6,587   |      |  |      | 35,057  |      |  |      | 173,804   |   |  |  | 466,884   |   |  |  | 251,926   |  
|Dividends per share                                                          |  |                                          |        |      |  |      |        |      |  |      |          |   |  |  |          |   |  |  |          |  
|Balance Sheet Data at Period End:                                            |  |                                          |         |      |  |      |         |      |  |      |           |   |  |  |           |   |  |  |           |  
|Cash, restricted cash and marketable securities                              |  |                                          | 678     |      |  |      | 264,813 |      |  |      | 1,050,831 |   |  |  | 1,203,876 |   |  |  | 722,105   |  
|Working capital (excluding cash, restricted cash
	and marketable securities) |  |                                          | (11,242 | )    |  |      | (21,260 | )    |  |      | (103,419  | ) |  |  | (216,157  | ) |  |  | (194,831  | )
|Capitalized finance cost, net                                                |  |                                          |        |      |  |      | 13,046  |      |  |      | 28,255    |   |  |  | 41,435    |   |  |  | 33,486    |  
|Property, plant and equipment, net                                           |  |                                          | 6,180   |      |  |      | 17,520  |      |  |      | 232,694   |   |  |  | 591,391   |   |  |  | 814,240   |  
|Construction in progress                                                     |  |                                          |        |      |  |      | 20,882  |      |  |      | 81,803    |   |  |  | 175,766   |   |  |  | 125,656   |  
|Goodwill, net                                                                |  |                                          |        |      |  |      | 2,067   |      |  |      | 196,973   |   |  |  | 245,663   |   |  |  | 217,939   |  
|Total assets                                                                 |  |                                          | 8,772   |      |  |      | 328,263 |      |  |      | 1,663,120 |   |  |  | 2,417,640 |   |  |  | 2,056,270 |  
|Total long-term obligations (including current
	portion)                     |  |                                          | 3,854   |      |  |      | 312,562 |      |  |      | 1,008,678 |   |  |  | 1,712,993 |   |  |  | 1,754,417 |  
|Total shareholders equity (deficit)                                         |  |                                          | (8,266  | )    |  |      | (15,462 | )    |  |      | 507,669   |   |  |  | 341,318   |   |  |  | (26,694   | )

6



---



##### Table of Contents



|                                                     |  |                                          |        |      |  |      |         |      |  |      |           |   |  |  |            |   |  |  |          |  
|---------------------------------------------------- |  | ---------------------------------------- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | --------- | - |  |  | ---------- | - |  |  | -------- | -
|                                                     |  |                                         
|                                                     |  | Year Ended December 31,                 
|                                                     |  |                                         
|                                                     |  | 1997                                     |        | 1998 |  | 1999 |         | 2000 |  | 2001
|                                                     |  |                                          |        |      |  |      |         |      |  |     
|                                                     |  |                                         |        |     |  |     |         |     |  |    
|                                                     |  |                                         
|                                                     |  | (in thousands, except per share amounts)
|Cash Flow Data:                                      |  |                                          |        |      |  |      |         |      |  |      |           |   |  |  |            |   |  |  |          |  
|Net cash provided by/(used in) operating
	activities |  |                                          | 2,616  |      |  |      | (16,932 | )    |  |      | (70,093   | ) |  |  | (191,039   | ) |  |  | (206,982 | )
|Net cash used in (from) investing activities         |  |                                          | (6,587 | )    |  |      | (50,839 | )    |  |      | (632,996  | ) |  |  | (1,516,187 | ) |  |  | 621,794  |  
|Net cash provided by financing activities            |  |                                          | 2,635  |      |  |      | 235,969 |      |  |      | 1,358,591 |   |  |  | 944,529    |   |  |  | 3,369    |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2000, we acquired Komtel in Germany.
	Until March 31, 2001, we accounted for the fees from
	certain premium dial-in services offered by Komtel on a gross
	basis. Gross billings (including all fee amounts received for
	the premium dial-in services offered by Komtel) for the year
	ended December 31, 2001 amounted to
	 274.4
	million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Total costs relating to gross billings for the
	year ended December 31, 2001 amounted to
	 173.1
	million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) | Consists of asset impairments of
	12.8 million
	relating to Versapoint and other write-offs for a total amount
	of
	5.4 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) | Represents the extraordinary gain related to the
	repurchase of high yield notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(5) | As adjusted to give effect to a 2-to-1 stock
	split on April 13, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(6) | Adjusted EBITDA consists of earnings (loss)
	before interest expense, income taxes, depreciation,
	amortization, restructuring expense, tax penalties, deferred
	compensation and foreign exchange gain (loss). Adjusted EBITDA
	is included because management believes it is a useful indicator
	of a companys ability to incur and service its
	indebtedness. Adjusted EBITDA should not be considered as a
	substitute for operating earnings, net income, cash flow or
	other statements of operations or cash flow data computed in
	accordance with U.S. GAAP or as a measure of our results of
	operations or liquidity. Funds depicted by this measure may not
	be available for managements discretionary use (due to
	covenant restrictions, debt service payments, the expansion of
	our network, and other commitments). Because all companies do
	not calculate Adjusted EBITDA identically, the presentation of
	Adjusted EBITDA contained herein may not be comparable to other
	similarly titled measures of other companies. Please note that
	the definition of Adjusted EBITDA as applied in the audited
	financial statements for the years 1997, 1998, 1999 and 2000 is
	different from the above definition. In the new definition for
	Adjusted EBITDA, deferred compensation, tax penalties and
	restructuring expenses are excluded.

Exchange Rates

As of January 1, 2000, we publish our
financial statements in euro. Prior to this date we published
our financial statements in Dutch guilders. We have restated the
financial statements and other financial data presented herein
for the periods prior to January 1, 2000 in euro using the
fixed conversion rate of NLG 2.20371 per
1.00.

U.S. Dollars to Euro

The table below sets forth, for the periods and
dates indicated, certain information concerning the noon buying
rates for euro expressed in U.S. dollars per euro. On
December 31, 2001, the noon buying rate for
U.S. dollars per euro was $0.89 per
1.00. On
March 22, 2002, the noon buying rate for U.S. dollars
per euro was $0.88 per
1.00.

|                              |  |      |      |     |  |            |      |        |  |  |      |  |  |  |      | 
|----------------------------- |  | ---- | ---- | --- |  | ---------- | ---- | ------ |  |  | ---- |  |  |  | ---- | 
|                              |  |      |      |     |  | Period     |      | Period
|Period                        |  | High |      | Low |  | Average(1) |      | End   
|                              |  |      |      |     |  |            |      |       
|1999                          |  |      | 1.18 |     |  |            | 1.00 |        |  |  | 1.06 |  |  |  | 1.01 | 
|2000                          |  |      | 1.03 |     |  |            | 0.83 |        |  |  | 0.92 |  |  |  | 0.94 | 
|2001                          |  |      | 0.95 |     |  |            | 0.84 |        |  |  | 0.89 |  |  |  | 0.89 | 
|September 2001                |  |      | 0.93 |     |  |            | 0.89 |        |  |  |      |  |  |  |      | 
|October 2001                  |  |      | 0.92 |     |  |            | 0.89 |        |  |  |      |  |  |  |      | 
|November 2001                 |  |      | 0.90 |     |  |            | 0.88 |        |  |  |      |  |  |  |      | 
|December 2001                 |  |      | 0.90 |     |  |            | 0.88 |        |  |  |      |  |  |  |      | 
|January 2002                  |  |      | 0.90 |     |  |            | 0.86 |        |  |  |      |  |  |  |      | 
|February 2002                 |  |      | 0.88 |     |  |            | 0.86 |        |  |  |      |  |  |  |      | 
|March 2002 (through March 22) |  |      | 0.88 |     |  |            | 0.87 |        |  |  |      |  |  |  |      | 






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | The average of the noon buying rates on the last
	day of each month during the period.

Fluctuations in the exchange rate between the
euro and the U.S. dollar in the past are not necessarily
indicative of fluctuations that may occur in the future.

7



---



##### Table of Contents



Dutch Guilders to
U.S. Dollars

The Netherlands has adopted the euro as of
January 1, 1999. The table below sets forth, for the
periods and dates indicated, certain information concerning the
noon buying rates for Dutch guilders expressed in Dutch guilders
per U.S. dollar through December 31, 1998.

|       |  |      |      |     |  |            |      |        |  |  |      |  |  |  |      | 
|------ |  | ---- | ---- | --- |  | ---------- | ---- | ------ |  |  | ---- |  |  |  | ---- | 
|       |  |      |      |     |  | Period     |      | Period
|Period |  | High |      | Low |  | Average(1) |      | End   
|       |  |      |      |     |  |            |      |       
|1997   |  |      | 2.12 |     |  |            | 1.73 |        |  |  | 1.95 |  |  |  | 2.03 | 
|1998   |  |      | 2.09 |     |  |            | 1.81 |        |  |  | 1.98 |  |  |  | 1.88 | 






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | The average of the noon buying rates on the last
	day of each month during the period.

Netherlands law does not impose restrictions that
would affect the remittance of dividend or other payments to
nonresident holders of the ordinary shares or any other foreign
exchange controls.




3.B     CAPITALIZATION
AND INDEBTEDNESS

Not applicable.




3.C     REASONS FOR
THE OFFER AND USE OF PROCEEDS

Not applicable.




3.D     RISK
FACTORS

Set forth below are certain of the risks that may
affect our business, financial condition and results of
operations from time to time.

Risks Related to our Business

Our history of substantial net losses may
continue indefinitely and make it difficult to fund our
operations.

For the year ended December 31, 2001, we had
a loss from operating activities of
222.8 million
and negative Adjusted EBITDA (which consists of earnings (loss)
before interest expense, income taxes, depreciation,
amortization, stock based compensation, tax penalties,
restructuring expense, extraordinary items, results from
investments and foreign exchange gain (loss)) of
64.3 million.
For the year ended December 31, 2000 we had a loss from
operating activities of
257.0 million
and negative Adjusted EBITDA of
158.5 million.
For the year ended December 31, 1999, we had a loss from
operating activities of
96.3 million
and negative Adjusted EBITDA of
57.4 million.
In addition, we had an accumulated deficit of
1,039.7 million
as of December 31, 2001. We expect to continue to incur
significant further operating losses for the foreseeable future.
Although our proposed exchange offer (described under
Item 8.B  Significant Changes.)
would result in a significant non-recurring net gain for
accounting purposes and tax purposes (consisting primarily of an
extraordinary gain resulting from the extinguishment of the high
yield notes and a one time charge to interest expense as a
result of the induced conversion related to the convertible
notes), we expect to continue to make losses in the future. You
should be aware that we cannot be certain that we will achieve
or, if achieved, be able to maintain operating profits in the
future.

If we cannot restructure our balance sheet,
we may be unable to meet our debt service obligations, which may
result in our outstanding indebtedness becoming due and
payable.

Our consolidated net interest expense for the
year ended December 31, 2001 was
138.6 million.
For the year ended December 31, 2001, we had a negative
Adjusted EBITDA of
64.3 million.
There is no certainty that we will be able to generate
sufficient cash flow from operating activities to pay interest
and principal on the high yield notes, the convertible notes or
any outstanding debt. We expect that our remaining cash balances
will provide with sufficient cash capital to fund our operations
and service our debt obligations until the beginning of 2004. If
we are unable to meet our payment obligations, we will have to
refinance our indebtedness, sell our

8



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##### Table of Contents



assets or obtain new capital. If current capital
market conditions prevail, under our current capital structure
we believe that we may not be able to raise such additional
capital beyond the beginning of 2004. If we cannot refinance or
otherwise satisfy our debt obligations we will be in default
under such obligations, which could in turn result in the high
yield notes, the convertible notes and other indebtedness
becoming immediately due and payable. Any default under the high
yield notes or the convertible notes would have a material
adverse effect on our shareholders equity. Although we
have announced our intention to commence an exchange offer and
consent solicitation for the high yield notes and the
convertible notes in order to reduce our indebtedness and net
interest expense and expect to launch such exchange offer in the
near future and an ad hoc committee of bondholders whose
members hold approximately 33% of our outstanding notes an
represent approximately 74% of the outstanding notes has agreed
to support the exchange offer, we can give no assurance that any
such exchange offer will be successful.


As part of our proposed exchange offer, we will
also be soliciting the irrevocable vote of holders of our high
yield notes and convertible notes in favor of a plan of
composition (ontwerp van akkoord) under section 252
of the Netherlands Bankruptcy Act (Faillissementswet) and
the irrevocable vote of holders of our high yield notes and
convertible notes and our shareholders in favor of a plan of
reorganization under chapter 11 of the U.S. Bankruptcy
Code. If we do not receive tenders of at least 99% in aggregate
initial principal amount of all notes currently outstanding, we
currently intend to effect our financial restructuring by filing
a request for suspension of payments with a Netherlands court if
we receive sufficient affirmative votes on the plan of
composition to seek its ratification by a Netherlands court. We
may also file a chapter 11 petition in a U.S. bankruptcy
court seeking confirmation of the plan of reorganization if we
receive sufficient affirmative votes to seek its confirmation,
but only concurrently with the filing of a request for
suspension of payments with a Netherlands court. For a
discussion for the risks associated with such a court
proceeding, please read the section Risk Factors in
our Form F-4, filed with the SEC on March 28, 2002.

We will need to obtain additional capital
in order to fund our operations and to expand our operations to
take advantage of business opportunities.

If we complete our proposed exchange offer or any
court approved restructuring, our existing cash balances will be
substantially reduced. Upon completion of our proposed exchange
offer or any court approved restructuring, we expect that our
remaining cash balance, together with anticipated cash flows
from operations, will provide us with sufficient capital to fund
our operations to at least the beginning of the second quarter
of 2003. In addition, we believe that we will still have an
additional funding requirement of up to
50.0 million.
To finance this funding requirement and if we wish to expand our
local access network in order to take advantage of attractive
business opportunities, we will require additional capital. A
failure to acquire additional capital on acceptable terms may
seriously and adversely affect the growth of our business and
may have an adverse effect on the valuation of our tangible and
intangible fixed assets and our ability to function as a going
concern.

Additional capital that we may raise is likely to
include debt, preferred shares and/or other financing that ranks
senior to our ordinary shares. You should be aware that, if we
complete our proposed exchange offer or any court approved
restructuring, our ability to incur additional indebtedness will
no longer be constrained by the restrictive covenants in our
indentures.

If the public perception of our proposed
exchange offer or any court approved restructuring is negative,
it could have an adverse effect on our business.

Regardless of whether our proposed exchange offer
or any court approved restructuring is successful, the public
perception of our company may be negatively impacted by the
proposed transactions. If, due to negative press articles or
otherwise, our current and potential customers and suppliers
perceive us as a company with financial difficulties, they may
decide not to purchase our products and services, or to no
longer supply us with their products or services or suppliers
may decide to supply these products and services to us on less
favorable terms. In particular, our ability to procure contracts
with larger customers, including government related entities,
which are usually awarded through bidding processes, may be
compromised. Such a public perception could also adversely
impact our future access to additional capital, make it more
difficult to hire and retain key employees and have other
material adverse effects on our business, results of operations
and financial condition.

9



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##### Table of Contents



Dissatisfied holders of the notes may
commence litigation or insolvency proceedings against
us.

Although an ad hoc committee of holders of the
notes has entered into an agreement with us to support our
financial restructuring and the plan of composition and the plan
of reorganization, this committee does not represent all the
holders of the notes. If some of the holders of the notes that
are not represented by this committee are not satisfied with the
terms of our proposed exchange offer, they may commence
litigation or liquidation proceedings against us. Any such
proceedings may divert management attention and could have a
material adverse effect on our business and financial condition
and on any financial restructuring.

If we successfully complete our proposed
exchange offer, we may have to pay corporate income tax sooner
than if we do not complete the exchange offer.

Although our proposed exchange offer would result
in a significant non-recurring net gain for accounting purposes
and tax purposes (consisting primarily of an extraordinary gain
resulting from the extinguishment of the high yield notes and a
one time charge to interest expense as a result of the induced
conversion related to the convertible notes), we expect to
continue to make losses in the future. We believe that we will
have sufficient current and future operating losses and other
tax losses that could be used to offset the gain. As a result,
we do not expect that the exchange or cancellation of the notes
will result in a net cash payment in respect of Netherlands
corporate income tax at this time. However, the use of tax
losses to offset the gain will result in us having to pay
corporate income tax sooner, in the event that we achieve
profitability in the future, than if we had not completed our
proposed exchange offer. Moreover, as part of our tax planning
in connection with our proposed exchange offer we may incur
temporary tax losses. In this event, the gains
sheltered by the temporary tax losses would be recognized as
taxable gains in future years, which could lead to increased tax
payments to the extent that we do not generate sufficient tax
losses to shelter such gains. In addition, the Netherlands tax
authorities could challenge the amount of such present and
future tax losses in any audit of our tax returns.

Covenants in our debt agreements restrict
our ability to borrow and invest, which could impair our ability
to finance our operations in the future.

The indentures governing our high yield notes
contain a number of covenants that impose significant operating
and financial restrictions on us and our subsidiaries. These
restrictions significantly limit, and in some cases prohibit,
among other things, our and certain of our subsidiaries
ability to incur secured indebtedness, create liens on assets,
enter into business combinations or engage in certain activities
with our subsidiaries. Additionally, raising capital in the form
of unsecured debt, which is under certain circumstances allowed
under our covenants, remains extremely difficult given the
current capital markets conditions. Moreover, raising additional
capital in the public or private equity markets remains
extremely difficult given our current capital structure.
Although we will seek to eliminate these restrictive covenants
in the proposed exchange offer and consent solicitation, we can
give no assurance that the exchange offer and consent
solicitation (or any court approved financial restructuring)
will be successful.

Obstacles associated with the effective
implementation of liberalization legislation in the European
telecommunications markets may adversely affect our
business.

The European telecommunications industry is
subject to a significant degree of regulation. The national
governments of the EU Member States were required to pass
legislation to liberalize the telecommunications markets within
their countries to implement European Commission directives.
Although most of the EU Member States have now implemented the
required legislation, they have done so on an inconsistent, and
sometimes unclear, basis. Implementation has also been slow in
certain EU Member States, including those EU Member States in
which we operate, as a result of such EU Member States
failure to provide the requisite powers to the regulatory bodies
in place. Our operations may also be affected by a less than
vigorous enforcement of the legislation by such regulatory
bodies. In Belgium, for example, we have experienced significant
delays in the implementation of the Carrier Preselect Service
(CPS) from Belgacom and gaining access to
Belgacoms central offices for the deployment of Digital
Subscriber Line (DSL) based services. The above
factors and other potential obstacles associated with the
effective implementation of liberalization legislation have had,
and

10



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##### Table of Contents



may continue to have, a material adverse effect
on our ability to expand our telecommunications network and
customer base.


We encounter strong competition from
dominant market participants and new entrants.

The telecommunications industry is a very
competitive market that is subject to both the continued
dominance of Postal, Telephone and Telegraph companies
(PTTs) and the arrival of new entrants. Recently,
several relatively new entrants have been forced into bankruptcy
or have otherwise withdrawn from the market in part as a result
of the significant competitive advantages PTTs maintain over
non-PTT market participants. These include:



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | cost advantages as a result of economies of scale;                                                                                             
|
| |  | greater financial resources, market presence and
	network coverage;                                                                            
|
| |  | greater brand name recognition, customer loyalty
	and goodwill;                                                                                
|
| |  | control over domestic transmission lines and
	control over the access to these lines by other participants; and                                
|
| |  | close ties to national regulatory authorities
	that may be reluctant to adopt policies that would adversely
	affect their competitive position.

Historically, our policy in this competitive
environment has been to price our products and services at a
discount to the PTTs and to offer high-quality customer service,
products and services. However, the prices of long distance
calls in most of our markets have decreased substantially and
our larger competitors have been able to use their greater
financial resources to create severe price competition.

Our competition in the Benelux and Germany also
comes from newer market entrants, including WorldCom, BT Ignite,
Energis, COLT Telecom and other more recent Internet-based
competitors. Sustained price competition could have a material
adverse effect on our business.

The financial difficulties currently experienced
by other participants in the telecommunications industry may
result in some of our competitors being able to purchase the
assets of these troubled companies at depressed prices which may
increase the competition that we face. As a result of our
financial difficulties, potential customers and suppliers may be
unwilling to do business with us and may prefer to do business
with competitors that have greater financial resources.

We are dependent on our competitors to
provide our customers with access to our network.

We do not own all the telecommunications
transmission infrastructure that we presently use to connect our
customers to our own network. We use the telecommunications
transmission infrastructure of other carriers in the Benelux and
Germany and we depend heavily on interconnection agreements with
these carriers to connect our customers to our own network. Most
of these carriers are our competitors. Our profitability
significantly depends on our ability to achieve access, on a
timely basis and at attractive rates, to the facilities of our
competitors, who may try to limit such access. The expansion of
our DSL-based services also depends heavily upon access to
central office facilities and existing copper infrastructure
controlled by the PTTs. In Belgium, for example, Belgacom
initially refused to give us access to its local loop
infrastructure on acceptable terms and we were forced to file a
complaint with the competition authorities of the European
Commission. As a result, we have not deployed DSL technology as
rapidly as we intended. There can be no assurance that the PTTs
will cooperate and give us access to their networks in a timely
fashion in the future.

In addition, a portion of Versatels network
consists of both indefeasible rights of use (IRUs or
onvervreembare gebruiksrechten) and transmission
agreements. In the event that the companies with which we have
entered into these agreements experience financial difficulties,
we may lose connectivity across a portion of our network or
experience a downgrade in the quality of service that we can
provide to customers who benefited from that connectivity. In
either of these events, our financial and operating results
could be adversely affected.

11



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##### Table of Contents



Our dependence on third parties to provide our
customers with access to our network makes us susceptible to
price fluctuations, service disruptions and cancellations that
are outside of our control. These service disruptions
historically have resulted in the loss of some customers and
could result in customer losses in the future. Such disruptions
may occur from time to time in the future. Interconnection rates
also fluctuate and may be increased as a result of cost
increases by the dominant providers.

We have encountered delays in implementing
elements of our business strategy, which could continue to
adversely affect our growth.

Our future success depends upon our ability to
expand and operate our telecommunications network, to
successfully sell and provision our existing products and
services and to develop and implement new products and services.
Our success will depend specifically on our ability to obtain
and maintain, among other things:



| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | strong regulatory oversight and action by both EU
	and national agencies;                                                                                                           
|
| |  | adequate and timely access to the local
	infrastructure of PTTs to deploy unbundled local loop
	technologies;                                                                       
|
| |  | a scalable and flexible Operating Support System
	(OSS), including billing and provisioning systems
	that support future growth, product development and technology
	developments;
|
| |  | cost effective access technologies that can
	provide bundled voice, data and Internet services to the mass
	market and meet the service demands of our customers; and               
|
| |  | experienced and qualified management and staff.                                                                                                                                     

In particular, we have encountered delays in
implementing elements of our business strategy as a result of a
less than vigorous enforcement of the legislation intended to
liberalize the telecommunications market by the relevant
regulatory bodies in the countries in which we operate combined
with national PTTs that are reluctant to give us access to their
networks and difficulties that we have experienced in obtaining
rights of way necessary to extend our network. In particular,
the delays experienced in obtaining central office facilities
have resulted in delays in the roll-out of our DSL-based
services.

The further development of our DSL-based
services may pose significant technical and operational
challenges.

Our DSL-based services are relatively new and we
have limited operating and financial data upon which to evaluate
these services. The further development of our DSL-based
services may pose significant technical and operational
challenges. Some of the risks we face in establishing a
successful DSL-based service offering include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to succeed in securing the unbundled
	local loops (copper lines) that connect each DSL end-user to our
	equipment located in the central offices of the PTTs. PTTs have
	in the past imposed significant obstacles on our ability to
	efficiently install our services and we expect that they will
	continue to do so, particularly as our DSL-based services may be
	a source of significant competition for their lucrative business
	of providing leased lines. In particular, these PTTs must
	cooperate with us for (a) the provision and maintenance of
	transmission facilities and (b) the use of their technology
	and capabilities to meet certain telecommunication needs of our
	customers and to maintain our service standards;
|
| |  | our ability to identify, access and provide
	services to customers in our target regions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | our ability to automate the provisioning of
	DSL-based services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | our ability to provide for timely and accurate
	billing for our services; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | technical issues related to DSL technology, for
	example, interference concerns related to the use of some types
	of DSL technology. Such technical issues have been, and we
	expect may in the future continue to be, used by the PTTs as a
	reason to delay the deployment of our services.                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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The market for DSL-based services is very
competitive. BBNed, an affiliate of Telecom Italia, for example,
has also significantly expanded its DSL-based services in our
target markets. In addition, competitors that offer, or are in
the process of developing, competing technologies may prove to
be more successful than companies that offer DSL-based services.

The further development and implementation
of our operational support and billing systems may pose
significant technical and operational challenges.

Sophisticated billing and information systems are
vital to our growth and ability to provision services, to bill
and to receive payments from customers, to reduce our credit
exposure and to monitor costs. We have planned and budgeted
enhancements of our operational support and billing systems to
handle the growth in the size and complexity of our business,
our customer base and product portfolio. As these enhancements
and further developments and implementation of our operational
support and billing systems are very complex and time consuming,
they may pose significant technical and operational challenges
which could have a material adverse effect on our business.

The products that we recently introduced or
intend to introduce in the near future may not be as successful
as we expect them to be.

We expect to derive a significant amount of
revenues from new products and services that we recently
introduced or that will be introduced in the near future. For
example, in The Netherlands we introduced bundled voice and
Internet broadband services over DSL technology to our customers
in the fourth quarter of 2001. If we experience delays in the
roll-out of these products and services or if these new products
and services are not as successful as we expect them to be, this
could have a material adverse effect on our business and our
results of operations.

If we do not adapt to the rapid
technological changes in the telecommunications industry, we
could lose customers or market share.

The telecommunications industry is in a period of
rapid technological evolution, marked by the introduction of new
products and services and increased availability of transmission
capacity, as well as the increasing utilization of
Internet-based technologies for voice and data transmission. Our
success will depend substantially on our ability to predict
which of the many possible current and future network products
and services will eventually be successful. In particular, as we
further expand and develop our network, we will become
increasingly exposed to the risks associated with the relative
effectiveness of our technology and equipment. The cost of
implementation of emerging and future technologies, such as
technologies relating to our DSL-based services and Internet
Protocol-based services, could be significant, and we cannot
assure you that we will select appropriate technology and
equipment or that we will obtain appropriate new technology on a
timely basis or on satisfactory terms. Our failure to anticipate
these technological changes may adversely affect our ability to
offer competitive products and services, the viability of our
operations and our ability to gain or maintain market share.

We may have difficulties in upgrading and
protecting our network.

The value of our network depends on our continued
ability to provide high-quality telecommunication services by
upgrading our systems and protecting our network from external
damage. As we grow, the timing and implementation of these
upgrades will become more important. We cannot guarantee you
that the quality and availability of our services will not be
disrupted because of our inability to make timely or error-free
upgrades to our network. Also, our network may be subject to
external damage, in particular from construction work, but also
from events such as floods and other accidents that can disrupt
service. While we have established design and management
techniques to address any disruptions that may occur, any
prolonged difficulty in accessing our network may threaten our
relationship with our customers and have a material adverse
impact on our business. For example, in connection with our
acquisition of Versatel Deutschland GmbH & Co. KG,
formerly known as VEW Telnet, we entered into a network
maintenance agreement with Versatel Deutschlands former
parent, VEW Energie, and, as a result, we are dependent on VEW
Energie to maintain and protect a portion of our network. In
addition, a portion of Versatels backbone and
international network consists of IRUs. In the event that the

13



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companies with which we have entered into these
agreements experience financial difficulties, we may lose
connectivity across a portion of our network, or experience a
downgrade in the quality of service that we can provide to
customers who benefited from that connectivity. In either of
these events, our financial and operating results could be
adversely affected.


Although we have initiated several
corporate restructurings in order to achieve synergies and cost
reductions in our operations, we may not be successful in
creating synergies and achieving cost reductions, and we may
have to initiate additional restructurings in the
future.

As a result of our increased scale, we have
announced several restructuring initiatives since March 2001 in
order to create operational synergies. For example, we have
downsized our operations in Belgium by combining our back office
operations in The Netherlands and Belgium. In addition, we have
also combined the back office operations of Komtel and Versatel
Deutschland in Germany. Although we continue to explore
opportunities to reduce our selling, general and administrative
expenses, we may not be able to realize synergies or fully
achieve our expected cost reductions. Given the downturn in the
economic conditions in Europe generally, and the
telecommunications industry in particular, we may be forced to
initiate additional restructurings in the future.

The general economic downturn could have a
material adverse effect on our business, results of operations
and financial condition.

In the last year there has been a downturn in
economic conditions in Europe generally, and in the
telecommunications industry in particular. Many
telecommunication companies have not achieved their financial
and operating goals and have been unable to obtain additional
financing. Accordingly, many of these companies are seeking to
reduce the level of their indebtedness or have sought bankruptcy
protection. If current market conditions do not improve, our
business, results of operations and financial condition could be
materially adversely affected.

The loss of, or failure to attract, key
personnel could adversely affect our growth and future
success.

Our success depends in significant part on the
continued employment of certain of our key executive officers,
including Raj Raithatha, our chief executive officer and
managing director. We do not have any key person
insurance. We will also need to continue to hire additional
qualified technical, sales and marketing, and support personnel
to successfully implement our business plan. Because there is
strong competition for qualified personnel in our industry in
Europe, the limited availability of qualified individuals could
become an issue in the future. Moreover, the performance of our
stock price, the financial restructuring of our company
contemplated by our proposed exchange offer, the financial
constraints imposed on our expansion plans and the need to
provide management with incentives through the adoption of new
stock option plans could also adversely affect our ability to
attract and retain key employees. The loss of key executive
officers or our inability to identify, attract and retain other
necessary qualified personnel could adversely affect our
business.

We may encounter delays and operational
problems if we are unable to acquire key equipment from our
major suppliers.

We are dependent on third-party suppliers of
hardware and software components. Although we attempt to
maintain a number of vendors for each product, a failure by a
supplier to deliver quality products to us on a timely basis or
our inability to develop alternate sources if and as required
could result in delays which could have a material adverse
effect on us. In addition, several suppliers of
telecommunications equipment are experiencing financial
difficulties as a result of the downturn in the
telecommunications industry. If one or more of our suppliers of
key equipment were to discontinue its operations or refuse to
deal with us on favorable terms, this could have a material
adverse effect on our business, results of operations and
financial condition.

In particular, the operation of our network
depends upon obtaining adequate supplies of DSL equipment and
support services on a timely basis. At present, Copper Mountain
is a substantial supplier of our DSL equipment used in the
Benelux. In addition, we rely on Copper Mountain and its agents
for the technical support required in managing our DSL
operations. Should Copper Mountain decide to cease its European
operations or otherwise

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suffer financial hardship and be unable to
provide equipment and support, we would need to find other
suppliers and/or make capital expenditures to invest in
replacement DSL equipment. In addition, our ability to provide
DSL-based services to our customers may be compromised. These
occurrences would have a significant negative impact on the
planned expansion of our DSL-based services and on our business,
results of operations and financial condition.


We must further develop Zon and enhance its
product offerings in order to compete effectively in the
residential Internet service market.

We believe that in order to further develop Zon,
our residential Internet service provider, we must continue to
invest marketing and other resources in order to maintain and
enhance the Zon brand. In addition, the general trend in the
market for residential Internet services is moving away from
providing Internet access without a subscription charge (the
customer pays local telephony charges on a per minute basis) to
a business model where the customer pays a fixed periodic access
fee to the Internet service provider but thereafter no longer
has to pay any per minute connection charges. The overwhelming
majority of Zons customers (other than those who subscribe
to the premium broadband Internet services that we recently
introduced) currently do not have to pay any periodic access
charge and we may lose many of Zons customers should we
decide to start charging such a fee. Moreover, we must be
successful in our introduction of broadband Internet services,
such as DSL-based services, to our Zon customers in order to
maintain and expand our market position. If we are unable to
successfully migrate Zons current customer base to the
premium broadband Internet services that we recently started
offering to our Zon customers, we will not be able to maintain
the substantial growth in revenues that we derive from
Zons customer base.

We have been operating our residential Internet
service under the Zon name since September 1999 and have applied
for trademark registration of the Zon name and logo.
Sun Microsystems has contested our use of the Zon name and we
are currently in discussion with them on this matter. We are not
certain that we will reach a satisfactory agreement with Sun
Microsystems enabling us to continue to use the Zon name.

The residential Internet services market is
extremely competitive. Zons competitors include many large
companies that have substantially greater market presence and
greater financial, technical, marketing and other resources. Zon
competes for registered and other users, and, consequently,
e-commerce and advertising revenue, directly or indirectly, with
the following categories of companies:



| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | online service providers which charge for
	Internet access, such as AOL, CompuServe, Planet Internet,
	Chello, Sky Net and Online Internet;                                                        
|
| |  | online service providers which do not charge a
	monthly Internet access fee such as Tiscali, Freeler and
	Wanadoo; and                                                                             
|
| |  | universal and specialized Internet sites
	containing comprehensive information and services, or portals,
	consisting primarily of U.S. sites such as Yahoo!, Excite,
	Lycos, Infoseek and Netscape.

Given the current financial constraints of
Versatel, we will have more limited financial resources with
which to expand and develop Zons business. In addition,
because Zons registered users have a variety of
alternatives to our service that do not charge subscription
fees, they may have more than one Internet account or may switch
to another Internet access provider if they are unable to gain
access to our service. As a result, usage of Zons services
by registered users may decrease and/or our subscriber churn may
increase. As a result of this competition, Zons user base
and revenues may decrease, which could have a material adverse
effect on our operations.

We may be subject to transfer tax on the
purchase of ducts in The Netherlands.

In past years, we purchased ducts in The
Netherlands. No transfer tax was paid on these purchases. In two
cases, both dated March 2, 2000, a Dutch Court ruled that a
central antenna infrastructure (centrale antenne
inrichting), including cable network and equipment, should
be considered real estate which would trigger a 6% transfer tax
on the purchase. Based on these court cases, The Netherlands tax
authorities might argue that we should have paid a 6% transfer
tax on ducts purchased in the past and the tax authorities might
raise transfer tax

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assessments. In both instances the parties
involved appealed against the decision to the Dutch Supreme
Court (Hoge Raad). On July 5, 2001, the
Advocate-General provided his advice to the Supreme Court. The
Advocate-General disagrees with the conclusions of the lower
court. In his view, a cable infrastructure should be considered
movable property which would not result in transfer tax on the
acquisition. The Dutch Supreme Court has not yet ruled in these
cases. Should we have to pay transfer tax on ducts purchased in
the past and any ducts to be purchased in the future, this could
have a material adverse effect on our results of operations and
financial condition.


We may be subject to municipal taxes for
unused telecommunication ducts in public land.

In order to liberalize the telecommunication
market in The Netherlands, the Dutch national government adopted
legislation to enable operators to build their own network. As a
result, local authorities have to permit operators to build and
lay their telecommunication cables (rights of way).
We have built an extensive network in The Netherlands that
consists of ducts which are in use or reserved for maintenance,
future expansion or held for sale. Some municipalities are in
the process of developing local ordinances in order to be able
to impose municipal taxes (precario heffing) on
telecommunication ducts that are in public land but are empty or
are not being used. Based on these proposed ordinances we may
also be forced to remove such telecommunication ducts if they
are empty or are not being used. If this were to occur, it could
have a material adverse effect on our business and on our
financial and operational results.

Other Risks Related to our Shares

The price of our shares will likely be very
volatile.

Completion of our proposed exchange offer or any
court approved restructuring will have a significant impact on
our existing capital structure and result in substantial
dilution for holders of our currently outstanding shares. If all
outstanding notes will be tendered or cancelled in such exchange
offer or any court approved restructuring, approximately 80% of
our shares will be held by our former high yield and convertible
note holders immediately following the completion of the
exchange offer or any court approved restructuring. We cannot
predict how the capital markets will perceive the prospects for
our company and business operations following the exchange offer
or any court approved restructuring and, therefore, what the
effect will be on the trading price of our shares. In addition,
participants in the exchange offer or any court approved
restructuring may seek to liquidate their holdings of shares,
which could have a negative effect on the trading price of the
shares.

In addition, stock markets in the United States
and Europe have experienced significant price and volume
fluctuations in recent years and the market prices of securities
of telecommunications service providers and technology companies
in particular have been highly volatile. Investors in such
securities may lose all or part of their investment. In the
past, following periods of volatility in the market price of a
companys securities, securities class action litigation in
the United States has often been instituted against such a
company. The institution of such litigation against us could
result in substantial costs and a diversion of our
managements attention and resources, which could
materially adversely affect our business, results of operations
and financial condition.

Our negative equity status could effect
trading prices of our shares.

As of December 31, 2001, we had a negative
equity of
26.7 million.
Under Rules and Regulations of Euronext Amsterdam N.V., we were
required to give notice regarding our negative equity position
and, as a result, we were put on the penalty bench
(strafbankje) as an indicator to investors and potential
investors of our negative equity position. Euronext Amsterdam
has confirmed that while the penalty bench serves as a warning
sign to investors that we have a negative equity position, it
will not result in our being de-listed from the Official Segment
of Euronext Amsterdam N.V. However, the stigma surrounding
the penalty bench in The Netherlands could have a material
adverse affect on the trading price of our shares.

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The price of our ordinary shares may be
depressed upon the expiration of lock-up agreements that we have
with some of our shareholders.

On July 24, 2002, lock-up agreements that we
have entered into with some of our shareholders will expire.
Pursuant to these agreements these shareholders agreed not to
sell 100% of their shares. These lock-up agreements cover
approximately 30% of our currently outstanding shares. Following
the expiration of the lock-up agreements, the price of our
shares may be depressed as these holders may seek to liquidate
their holdings.

Anti-takeover provisions could delay or
prevent a change in control.

Our articles of association provide for the
possible issuance of preference shares A, preference
shares B and one priority share. Such shares may be issued
pursuant to a resolution of the general meeting of shareholders.
However, the general meeting of shareholders granted and our
supervisory board approved, the management boards right to
issue preference shares and the priority share, subject to the
prior approval of the supervisory board. The issuance of
preference shares or the priority share may deter or prevent a
takeover attempt, including an attempt that might result in a
premium over the market price for our ordinary shares.

Preference shares A and preference shares B.Our management board has obtained
authority from the general meeting of shareholders to issue, or
grant rights to subscribe for, preference shares A and B,
subject to prior approval of the supervisory board, until
May 14, 2003. As a result, our management board has granted
and our supervisory board has approved a call option on
preference shares B, which will not exceed 100% of all our
other outstanding shares, to an independent foundation,
Stichting Continuïteit Versatel Telecom
International, established under Dutch law. In the event of
a threatened hostile take-over bid, this foundation may exercise
its option. The issuance of preference shares B could in
such event prevent or hinder a change of control. However, on
March 20, 2002, the Stichting Continuïteit Versatel
Telecom International agreed not to exercise its call option
on the preference shares until the earlier of the completion of
our financial restructuring or the expiration of the lock-up
agreements that we entered into with the ad hoc committee
of noteholders in connection with the proposed financial
restructuring (other than as a result of the completion of the
financial restructuring).

Priority share.Our
management board has obtained authority from the general meeting
of shareholders to issue, or grant a right to subscribe for, the
priority share, subject to prior approval of the supervisory
board, until May 14, 2003. As a result, our management
board has granted and our supervisory board has approved a call
option on the priority share to an independent foundation,
Stichting Prioriteit Versatel Telecom International,
established under Dutch law. In the event of a threatened
hostile take-over bid, this foundation may exercise its option.
The issuance of the priority share could in such event prevent
or hinder a change of control. However, on March 20, 2002,
the Stichting Prioriteit Versatel Telecom International
agreed not to exercise its call option on the priority share
until the earlier of the completion of our financial
restructuring or the expiration of the lock-up agreements that
we entered into with the ad hoc committee of noteholders
in connection with the proposed financial restructuring (other
than as a result of the completion of the financial
restructuring).

Under Netherlands corporate law we may be
required to remove our shareholders right to elect our
supervisory board.

Under Netherlands law, we would be required to
modify our system of corporate governance upon (a) the
filing of a statement with the trade register, as required by
law, that we meet the criteria under Netherlands corporate law
for large companies (the Large Company Rules) and
(b) the presence of such statement on file at the trade
register for an uninterrupted period of three years. The Large
Company Rules mandatorily shift authority from the shareholders
to our supervisory board and grant employees a degree of
codetermination of our affairs.

One of the criteria of the Large Company Rules
referred to above is the existence of a works council (at our
level or at the level of one of our subsidiaries). Although
under Netherlands law we are required to facilitate a works
council for our employees, as of the date of this annual report,
no works council exists. However, we expect to install a works
council in the first half of 2002, at the level of Versatel
Nederland B.V., our Dutch operating company. We, as a holding
company with no operations apart from engaging in financing
activities, would be exempt from the Large Company Rules, if
among other things, the majority of our employees and those of
our subsidiaries were employed outside The Netherlands. As of
December 31, 2001, over 54% of our

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employees were employed in The Netherlands. Under
the Large Company Rules, members of our supervisory board would
no longer be elected by the shareholders at the general meeting
of shareholders, but would be appointed by the supervisory board
itself. Each of the general meeting of shareholders and the
employees, acting through a works council, would have the right
to:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make non-binding recommendations for members of
	the supervisory board; and                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | object to proposed appointments of members of the
	supervisory board, but such appointment would still take place
	if the objection were declared unfounded by the Enterprise
	Chamber of the Amsterdam Court of Appeal. The general meeting of
	shareholders and the works council also must be informed by the
	supervisory board of the names of the persons to be appointed to
	the supervisory board before such appointments become final.

Accordingly, if we became subject to the Large
Company Rules, our shareholders would lose the ability to elect
and remove our supervisory board. In addition, under the Large
Company Rules the supervisory board appoints, and can suspend
and dismiss, members of the management board. The supervisory
board, however, cannot dismiss members of the management board
until the general meeting of shareholders has been consulted.
Currently, shareholders at the general meeting of shareholders
appoints the members of our management board.

Our shareholders have delegated their
authority to issue additional shares to our management board
until May 14, 2003 which could result in a dilution of your
interest in our company.

Our shareholders have delegated their authority
to issue, and to grant rights to subscribe for, ordinary shares
as well as preference shares A and B and the priority share, to
our management board, under prior approval of the supervisory
board, until May 14, 2003. Therefore, it is possible that
if you tender your notes in our proposed exchange offer and
receive shares in exchange, your interest in our company will be
diluted in the future, without the approval of a general
shareholders meeting, if our management board, after
approval of our supervisory board, uses its authority to issue
or grant rights to subscribe for additional shares (up to the
maximum authorized share capital under our articles of
association).

It is unlikely that dividends will be paid
in the foreseeable future.

We have never declared or paid any cash dividends
on our ordinary shares. We currently intend to retain any future
earnings to finance operations, expand our network, repay
outstanding obligations and finance future acquisitions.
Therefore, we do not expect to pay any dividends in the
foreseeable future. In addition, we are generally prohibited by
law from paying dividends except from retained earnings or other
distributable reserves.

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ITEM
4.     INFORMATION ON THE
COMPANY






4.A     HISTORY AND
DEVELOPMENT OF THE COMPANY


Versatel was incorporated under the laws of The
Netherlands on October 10, 1995, as a private company with
limited liability, referred to as besloten vennootschap met
beperkte aansprakelijkheid or a B.V. Versatel converted its
legal structure from a B.V. to a public company with limited
liability, referred to as naamloze vennootschap or an
N.V., on October 15, 1998. Versatel has its corporate seat
in Amsterdam, The Netherlands and is registered under
number 33272606 at the Commercial Register in Amsterdam,
The Netherlands. Our principal executive offices are located at
Hullenbergweg 101, 1101 CL Amsterdam Zuidoost, The Netherlands
and our telephone number is +31 20 750 1000.

We started as a switchless reseller of voice
telecommunications services in The Netherlands. In 1998, we
started the build-out of our broadband fiber network designed to
provide local access to our customers throughout our target
market.

Prior to May 1998, we financed our growth
primarily through equity and subordinated loans from our
shareholders. Since then, we have raised an aggregate of
approximately
2.6 billion
in net proceeds in a series of debt and equity offerings. For
the three years ended December 31, 2001, we had made
capital expenditures of
892.6 million
related to the build-out of our network. In addition, we had
invested
385.5 million
in a series of acquisitions and strategic relationships. Our
acquisitions to date have served to expand our product
portfolio, primarily in the data and Internet sectors, and
expand the geographic reach of our network, primarily in
northwest Germany.




4.B     BUSINESS
OVERVIEW

We are a competitive communications network
operator and a leading alternative to the former monopoly
telecommunications carriers in our target market of the Benelux
and northwest Germany. Our objective is to become the leading
fully integrated alternative provider of local access,
facilities based broadband services, including voice, data and
Internet services, to business customers in our target market.
We provide high-quality, competitively priced
telecommunications, data and Internet services to three targeted
market segments:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct Access Services  high bandwidth
	business and residential telecommunications subscribers that are
	directly connected to our network either through our own fiber,
	DSL technology, other copper access technologies or leased lines.
|
| |  | Indirect Access Services  business and
	residential telecommunications subscribers that are indirectly
	connected to our network through carrier preselection or our
	1611 carrier select code.                                           
|
| |  | Carrier Services  other
	telecommunications, data and Internet service providers.                                                                                                                                                           

In addition to our core business of providing
broadband services to business customers in the Benelux and
northwest Germany, we operate Zon, our residential Internet
service provider, to participate in the growing market for
residential Internet services in The Netherlands.

Our network has been designed to pass through all
the major business centers in the Benelux and to connect city
centers, business parks and buildings along its route. Our
networks design consists of three fully integrated
elements:



| |   |                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Backbone Infrastructure  multiple,
	integrated fiber optic rings connecting major population and
	business centers in our target market.                                                                                                                                                                             
|
| |  | Local Access Infrastructure  fiber
	optic business park rings, city rings and near overlay
	sections as well as DSL technology, ISDN infrastructure
	and points of presence that allow us to cost-effectively connect
	customers directly to our network utilizing our own fiber, DSL
	technology and leased lines.
|
| |  | International Infrastructure  fiber
	optic rings connecting our network with points of presence in
	cities, including London, Düsseldorf, Frankfurt and Paris.                                                                                                                                                       

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As of December 31, 2001, we had completed
construction of approximately 2,029 kilometers of
fiber-ready duct for the Benelux overlay sections. We had also
completed the construction of 60 business park rings,
28 city rings and 76 near overlay sections as
of December 31, 2001. Additionally, as of December 31,
2001, we had a total local access extension of
1,554  kilometers in the Benelux and 733 kilometers in
Germany. To date, most of the initially planned construction of
our backbone infrastructure has been completed. In addition, we
have an IRU for approximately 400 kilometers of backbone
fiber in the north of The Netherlands and we may continue to
expand our backbone and local access networks if attractive
business opportunities arise.

As of December 31, 2001, we had over 75,000
business customers and 1,382 employees. Our revenues grew
to
255.7 million
for the year ended December 31, 2001 from
181.5 million
for the year ended December 31, 2000.

Business Strategy

Our objective is to become the leading fully
integrated, alternative provider of local access,
facilities-based broadband services, including voice, data and
Internet services, to customers in our target market. The
principal elements of our strategy are:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue to Connect Customers to our Network.We intend to continue to seek to
	directly connect as many customers as possible to our network
	using our own fiber, DSL technology, leased lines and other
	technologies to the extent such technologies become effective
	and available. We believe directly connected customers represent
	a long-term asset. We further believe that we can better control
	the quality of our service and the amount and types of services
	that we provide to directly connected customers as opposed to
	indirectly connected customers.                                                                                                                                                                                                                                                                                                                     
|
| |  | Provide Bundled Services.We intend to continue to expand the
	number of customers we serve through direct connections to our
	network and enhance our ability to provide bundled services
	(voice, data and Internet) over a single connection. We believe
	providing multiple services over a single connection to a
	customer provides a competitive advantage in our target markets
	and allows us to provide additional or enhanced services with
	limited incremental expenditures.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Maintain Focus on Targeted Customer Segments.Historically, we have focused on
	providing services to small-and medium-sized businesses.
	However, as we continue to expand our service offering and local
	access network we are also able to provide services to large
	businesses with more sophisticated service requirements, such as
	the GAK Group and Achmea. We believe we are well positioned
	to successfully compete in the bidding processes generally
	conducted for these larger customers as a result of our service
	capabilities and cost advantages associated with our dense local
	network. We will continue to pursue the small-and medium-sized
	business market with a bundled service offering to appeal to the
	general market and generate a large volume of sales. We will
	also continue to leverage our network to provide services to
	other credit worthy carriers.
|
| |  | Leverage our Existing Network.We have deployed a network in the
	Benelux consisting of 2,029 km of backbone network,
	1,554 km of local access network and 126 central
	offices operational for the deployment of DSL infrastructure.
	Our network in Germany consists of 3,149 km of backbone
	network, 733 km of local access network and 274 central
	offices outfitted for ISDN and/or DSL infrastructure. As a
	result, we believe we are uniquely positioned to cost
	effectively deliver local access services to a large segment of
	the business market in the Benelux and northwest Germany.                                                                                                                                                                                                                                                                                            
|
| |  | Focus on Superior Customer Service.We strive to maintain a competitive
	advantage by providing superior customer service in terms of
	responsiveness, accuracy and quality. We believe that our target
	market has historically been underserved by the PTTs and that
	providing a high level of customer service is a key element to
	attracting and retaining customers. We intend to continue
	investing in our customer care and operational support systems
	to enable us to maintain a competitive advantage.                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Continue to Seek Operational Synergies.We have announced several initiatives
	since March 2001 in order to create operational synergies as the
	result of our increased scale. These initiatives include
	combining certain back office functions of our Versatel
	Deutschland and Komtel operations and a similar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | initiative combining our back office functions in
	Belgium with those in The Netherlands. We have planned and
	budgeted enhancements of our operating support and billing
	system to handle the growth in the size and complexity of our
	business, our customer base and product portfolio. We also
	expect to continue to deploy capital in the most efficient
	manner by selecting the appropriate access technology to connect
	new customers based on their service requirements.

Our Network

Our high bandwidth network has been designed and
built to provide flexible, broadband local access to major
business customers and population centers in the Benelux and
northwest Germany and to certain international destinations. Our
network carries voice, data and Internet traffic and supports
all major protocols, including Frame Relay, Asynchronous
Transfer Mode (ATM) and Internet Protocol
(IP). We connect with the major Internet exchanges
in Amsterdam, Brussels, London, Paris and Frankfurt and have
increased the number and quality of peering arrangements with
carriers of IP traffic to enhance our presence in the rapidly
expanding European Internet services market.

Our network consists of the following integrated
elements:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Backbone Infrastructure.Our backbone infrastructure carries
	voice, data and Internet traffic and supports all major
	protocols, including IP, ATM and Frame Relay. It extends to all
	major commercial and population centers in the Benelux and
	northwest Germany, including most interconnection points with
	PTTs, other telecommunications network operators and major
	Internet exchanges. As of December 31, 2001, we have
	completed construction of approximately 2,029 kilometers of
	fiber-ready duct in the Benelux for the Benelux overlay sections.                                                                                                                                                                                                                                                                                                   
|
| |  | Local Access Infrastructure.Fiber optic business park rings, city
	rings and near overlay sections as well as DSL
	infrastructure, ISDN infrastructure and points of presence allow
	us to cost effectively connect customers directly to our network
	utilizing our own fiber, DSL technology and leased lines. As of
	December 31, 2001, we have completed construction of 60
	business park rings, 28 city rings and 76 near overlay
	sections. Additionally, as of December 31, 2001, we
	had a total local access extension of 1,554 kilometers in the
	Benelux and 733 kilometers in Germany. In addition, as of
	December 31, 2001, we had 126 operational central office
	facilities in The Netherlands and 274 in Germany, allowing us to
	deploy DSL and ISDN based services to end customers in those
	regions.                                       
|
| |  | International Infrastructure.We have established a dark fiber based
	international network extending our backbone infrastructure to
	the major interconnection and Internet Exchange points in
	Western Europe. We have points of presence in London, Paris,
	Frankfurt and Düsseldorf with extensive Synchronous Digital
	Hierarchy (SDH) and IP connectivity to Amsterdam,
	Brussels, Dortmund and our high bandwidth network in the Benelux
	and Germany. We have also extended our network to New York City
	with capacity on AC-1 and AC-2 transatlantic cable systems to
	transport interconnect and Internet traffic to and from the
	United States. Our network reach in Germany has been extended by
	having SDH capacity from Düsseldorf to eight major cities
	in Germany (Hamburg, Berlin, Leipzig, Dresden, Nürnberg,
	Munich, Stuttgart and Cologne).

Service Platforms

Our network incorporates service platforms to
deliver each of the major service categories we offer or plan to
offer. A digital circuit-switching platform delivers voice and
ISDN services. A data communications platform based on ATM
supports all major data protocols with high quality service. An
IP platform supports the Internet services we provide to
end-users and our offering of outsourced services to Internet
service providers (ISPs) and content providers. An
SDH transmission platform provides highly reliable transmission
capacity for our other services and for capacity leased to other
operators, service providers and customers. In parallel, we have
an additional platform of IP equipment connected directly to
fiber, which currently supports our Internet and data services
and we intend to eventually support all types of services,
including voice. We believe that by integrating the functions of
SDH, ATM and circuit switching, this platform will eventually
provide a lower cost and a more flexible design than the
traditional SDH transmission platform.

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Network Management

We monitor our network 24 hours a day, seven
days a week, at our network operations center. Our network
operations center is able to identify network interruptions as
soon as they occur and allows us to reroute traffic to ensure
high quality service. Our network operations center also has an
uninterrupted power supply as well as redundant communications
access and computer processors. We control our own points of
presence in the Benelux which allows us immediate access to our
equipment and network for rapid service restoration when
necessary. We own our points-of-presence in Germany and VEW
Energie maintains certain of these points-of-presence.

We have a back-up network operations center in
the event our primary network operations center is forced
off-line. Our primary network operations center is located in
our headquarters building in Amsterdam.

Versatel Internet

During 2000, we reorganized our Internet
activities. Zon, our residential Internet service provider, is
now a separate business division. We have integrated our
business Internet service providers, Vuurwerk, CS Net and
ITinera, into the Versatel organization.

Zon

Launched in August 1999, along with our marketing
and distribution partners Radio 538, a leading commercial radio
station in The Netherlands among 15 to 35 year olds, and
Free Record Shop, a leading music retail chain in The
Netherlands, Zon has rapidly become one of the largest
residential Internet service providers in The Netherlands. Its
number of registered subscribers has grown from approximately
968,000 at the end of 2000 to over 1,436,000 registered
subscribers as of December 31, 2001. For the year ended
December 31, 2001 Zon customers generated over
2.3 billion minutes for Versatel. Zon focuses primarily on
individual Internet users in The Netherlands. Initially Zon only
offered subscribers Internet access and e-mail without
registration or subscription fees. These subscribers only pay
local dial-in telephone costs.

During 2000 Zon also launched a prepaid, flat fee
service, payable in advance, to its customers. This service
provides the subscriber with a fixed period of Internet access
without paying any termination charges. In addition, Zon also
introduced broadband Internet (ADSL) during the
first quarter of 2001. This gives a subscriber unlimited access
to broadband Internet for a monthly flat rate subscription fee.
As of December 31, 2001, Zon had 4,804 registered ADSL
customers, of which 823 were provisioned by Versatel and 3,981
provisioned by KPN.

Products and Services

We currently offer a wide range of business and
carrier products and services and continually evaluate potential
product and service offerings, including competitors
offerings, in order to retain and expand our customer base and
to increase revenue per customer. We also offer products and
services to residential customers. Our strategy is to bundle
multiple voice, data and Internet services over our local access
infrastructure to maximize customer satisfaction, revenues and
margins.

Business Products and Services
Offerings

We currently offer the following products and
services to business customers:

Local and Long Distance Telephony.We offer local, international and
national long distance telephony services to business customers
in the Benelux and Germany. Our telephony service is offered
through our 1611 carrier select code by dial-around
and least-cost routing software installed in our customer
Private Branch Exchanges (PBXs) in the Benelux and
by carrier pre-selection in the Benelux and Germany.

ISDN Services.We
offer ISDN primary rate services to our customers in the Benelux
and ISDN primary rate and basic rate services in Germany. These
services are principally targeted at the business market with
digital PBXs and high volumes of outgoing and incoming traffic.

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LAN to LAN Interconnect Services.We offer high speed LAN (local area
network) to LAN interconnect services for multi-site business
customers. This service addresses business customers that need
to interconnect their multiple LANs to share centralized
computer data and applications efficiently. We provide
end-to-end management of the wide area network, including the
routers, at customers premises.

Frame Relay and ATM services.We offer high speed Frame Relay and
ATM services mainly for large business customers. This service
addresses business customers that need Wide Area Network
capabilities between their multiple sites.

Dedicated Internet Connectivity.We offer dedicated high speed Internet
access services to business customers. This service provides
high bandwidth access to the Internet, domain names, e-mail
facilities, news feeds from news groups and web space for
hosting websites.

Remote Access Services.We offer efficient remote access
services to business customers, enabling employees to access the
corporate LAN from home. These home offices have secure access
to the corporate network, data and applications.

IP-based Electronic Transaction Services.We offer Internet-based,
business-to-business transaction services to customers in
similar industries that act as comprehensive sources of
information, interaction and electronic commerce for their users.

Dial-in Internet Access Services.We offer dial-in Internet access
services for small- and medium-sized businesses and package it
with our long distance telephony service.

Web-Hosting Services.We offer web-hosting services aimed at
the business market. This service consists of an integrated
package of a domain name, e-mail accounts, web space for hosting
corporate websites and online website statistics.

Toll-free (0800) Services.We offer both on-net and
off-net toll-free (0800) services to our
business customers. This service is positioned to serve both
business customers as well as internal and external call centers.

Data Centers and Central Office Facilities.We provide co-location services for
businesses that wish to extend and expand their networks by
housing their own computing and telecommunications equipment
inside our data centers and other central office facilities
within the Benelux, northwest Germany, Frankfurt and London.

Leased Circuit Services.We offer resilient E1, E3, T3 and
Synchronous Transport Module (STM-1) leased lines to
business customers within the Benelux. We provide high quality
and managed point-to-point or
point-to-multipoint circuits via our fiber and SDH
network.

Carrier Products and Services

We currently offer the following products and
services to carrier customers:

Call Termination Services.We offer switched services to other
telecommunications service providers, including international
and national call termination services in the Benelux and
Germany. As we complete our international network, we will be
able to offer competitive call termination services in France
and the United Kingdom.

Data Centers and Central Office Facilities.We provide co-location services for
carriers wishing to extend and expand their networks by housing
their own computing and telecommunications equipment inside our
data centers and access to certain other central office
facilities within the Benelux, northwest Germany, Frankfurt and
London.

Network Capacity Facilities.We sell and trade rights-of-way,
ducts, dark fiber, wavelength and high bandwidth SDH capacity to
other carriers. We also provide tele-housing and interconnect
facilities at our selected premises.

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Virtual Point-of-Presence Dial-In Services.We offer virtual point-of-presence
services for telecommunications, data and Internet service
providers in order to allow cost-efficient dial-in capability
and effective remote access capabilities for their customers.

Internet Transit Services.We offer Internet transit services to
telecommunications and Internet service providers seeking
transit services between major Internet exchanges.

Leased Circuit Services.We offer resilient E1, E3, T3 and
STM-1, STM-4, STM-16 leased lines to other carriers and services
providers within the Benelux. We provide high quality and
managed point-to-point or
point-to-multipoint circuits via our fiber and SDH
network.

Carrier Preselect Hosting Services.We provide hosting facilities for
carriers that want to offer carrier preselect telephony services.

ISP Hosting Services.We provide hosting facilities for
ISPs, which offers residential Internet access services.

Wholesale DSL Services.We offer Internet access and
point-to-point IP connectivity based on ADSL technology.

Residential Products and
Services

Local and Long Distance Telephony.We offer local, international and
national long distance telephony services to residential
customers in the Benelux and Germany. Our telephony service is
offered through our 1611 carrier select code by
dial-around in the Benelux and by carrier pre-selection in both
the Benelux and Germany.

ISDN Services.We
offer ISDN primary rate and basic rate services in
The Netherlands and Germany.

Internet Access Services.Our subsidiary Zon offers dial-up
Internet access services to residential customers in the Benelux
and introduced DSL Internet access service to residential
customers in The Netherlands during the first quarter of
2001.

Sales and Marketing

We believe that we have created a prominent brand
name in our target market that we expect to strengthen through
further marketing campaigns and leverage our sales efforts in
the Benelux and northwest Germany. We market the majority of our
products and services under the Versatel brand name through
several marketing channels, including database marketing,
targeted telemarketing, brand and promotional advertising,
direct mail and our sales force. In addition, among other brand
names, we have established Zon in The Netherlands and continue
to leverage the Komtel brand name in Germany, given its strong
regional recognition and historical brand equity.

Our sales force is comprised of direct sales
personnel, telemarketers, independent sales agents and systems
integrators. As of December 31, 2001, we had 83 sales
personnel in The Netherlands, 22 in Belgium and 53 in
Germany. In the future, based on our ability to continue to
provision customers directly to our network, we expect to
increase the number of our direct sales personnel. Our sales
personnel make direct calls to prospective and existing business
customers, analyze business customers usage and service
needs and demonstrate how our services may improve a
customers communications capabilities and costs. Each
member of our sales force is required to complete our intensive
training program. In addition, we have a telemarketing group
that screens prospective customers and monitors existing call
volumes to identify prospective customers.

Our sales force is generally organized in the
following three groups to target the primary customer segments
with a focused product portfolio that matches the needs of these
customer segments:

Corporate Services.Our corporate services sales force
targets high-end corporate customers along our network and
throughout our target market in the Benelux and northwest
Germany. The customers targeted by this group access our network
directly through our own fiber, DSL technology or leased lines
and are offered a high bandwidth service package consisting of
voice, data and Internet products. Given the size and service

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requirements of these customers, we generally
custom tailor our product set to meet the needs of the service
request which leads to larger contract amounts than our
traditional small- and medium-sized business customer base, but
also longer sales cycles and higher capital expenditures to
connect these customers to our network and provision services.


Business Services.Our business services sales force
targets business customers throughout our target market. The
customers targeted by this group access our network both
directly through our own fiber, DSL technology, other copper
access technologies or leased lines and indirectly through
carrier preselection or our 1611 carrier select
code. While we do custom tailor our product set for business
services customers, we focus our sales effort on existing
product sets in order to limit sales cycles and generate large
volumes of sales.

Carrier Services.Our carrier services sales force
markets our product portfolio to other telecommunications, data
and Internet service providers in our target market and the
countries reached by our international network. The customers
targeted by this group access our network both directly and
indirectly.

Customers

We market our services on a retail basis to
business and certain selected residential customers and on a
wholesale basis to other carriers and service providers.

Business Customers.Our target customers are primarily
business customers requiring voice and high bandwidth data
services. We focus particularly on business and industry
segments, that have required significant amounts of bundled
voice, data and Internet services such as financial services and
information technology sectors. Although we have historically
sought to take advantage of opportunities in underserved
business segments like the small- and medium-sized business
segment, with the density of our high bandwidth network and the
strength of our brand name we began in 1999 to address the large
corporate market as well.

Carrier Customers.Our carrier customers are global
and regional network operators, ISPs and switchless resellers
serving specific market segments in the Benelux and Germany. We
focus primarily on high capacity and high volume customers. We
believe that both alternative carriers and foreign PTTs that
provide voice, data or Internet services in the Benelux region
and Germany will require quality carrier services and high
bandwidth services to develop their market position. As our
network has expanded, we have increased our marketing efforts in
the carrier services segment to increase the use of our network
and to capture additional revenues. Because many of the service
providers to whom we provide carrier services have experienced
financial difficulties, we actively monitor our credit exposure
to other carriers and we have actively taken steps to reduce
this risk. We currently provide services such as leased lines,
transmission, IP uplink, co-location and voice origination
to other service providers such as COLT Telecom and Worldcom.

Residential Customers.Our residential customers in
The Netherlands are primarily subscribers to our ISP Zon.
Zon offers dial-up Internet access services, e-mail and certain
web-hosting services to residential subscribers as well as
general information content. Zon receives fees from KPN Telecom
based on the local call traffic generated by subscribers and
generates advertising revenues from banner advertisements. We
have also launched prepaid flat fee dial-in services and
broadband ADSL services for Zon customers. Historically, in the
Benelux, Versatel approached the residential market for voice
services by providing carrier services such as carrier select
hosting to resellers, who themselves target the residential
market. Recently, we have limited the services we provide to
other telecommunications service providers which solely focus on
the voice resale market. This is as a result of recent financial
difficulties experienced by certain of these service providers.
In Germany, we believe market dynamics, including the high
penetration of ISDN services, justify offering services directly
to the residential market in selected situations. The companies
we acquired in Germany have residential customers among their
customer base and this has resulted in a substantial increase in
our residential customer base.

Customer Service

Our goal is to maintain an advantage over our
competitors in our target markets by providing superior customer
service. We believe that providing a high level of customer
service is a key element to establishing customer loyalty and
attracting new customers. We have dedicated customer service
representatives who initiate

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contact with our customers on a routine basis to
ensure customer satisfaction and market new products. Customer
service representatives are available 24 hours a day,
365 days a year. In addition, we provide detailed monthly
billing statements and monthly call management reports which
identify savings to customers and enable them to manage their
telecommunications expenditures more effectively.


We also believe that technology plays an
important role in customer satisfaction. Advanced technological
equipment is crucial to enabling the provision of high quality
service to our customers. We seek to reduce technical risks as
much as possible by buying proven products from leaders in the
applicable technology. We have installed sophisticated
status-monitoring and diagnostic equipment at our network
operations center and plan to install similar units on our SDH
equipment and in our new network operations center. This
equipment allows us to identify and remedy network problems
before they are detected by customers. We believe that by
providing superior customer service and through the effective
use of technology, we can maintain a competitive advantage in
our target markets

Billing and Information Systems

During 1999 and 2000 we replaced our billing,
customer care and sales support systems. Sophisticated billing
and information systems are vital to our growth and our ability
to provision services, to bill and to receive payments from
customers, to reduce our credit exposure and to monitor costs.
Although we experienced multiple delays in the replacement of
our old billing system with a billing system designed by Saville
Systems, the implementation of our new billing system was
completed in March 2000. We have planned and budgeted
enhancements to our operational support and billing systems to
handle the growth in the size and complexity of our business,
our customer base and our product portfolio. An additional
enhancement to our operational support system (OSS)
will be the upgrade of ADC/Savilles convergent billing
platform (CBP) to Single View. We believe that this
will provide an upgrade path to support future IP products and
services.

Competition

Until recently, the telecommunications market in
each EU Member State was dominated by its respective PTT.
Starting with the implementation of a series of European
Commission directives in the beginning of the 1990s, the
EU Member States have liberalized their respective
telecommunications markets, permitting alternative
telecommunications providers to enter the market. Liberalization
has coincided with technological innovation to create an
increasingly competitive market, characterized by still-dominant
PTTs as well as a number of new market entrants. As a result of
the current capital market conditions and the inability of a
number of smaller alternative service providers to secure needed
financing, the number of competitors has declined since 2000.
Competition in the European long distance telecommunications
industry is driven by numerous factors, including price,
customer service, type and quality of services and customer
relationships.

In The Netherlands, Belgium and Germany, we
compete primarily with the national PTTs. As the former monopoly
providers of telecommunications services in these countries, the
PTTs have an established market presence, fully built networks
and financial and other resources that are substantially greater
than ours. In addition, the national PTTs own and operate
significant portions of the infrastructure, which we must
currently access to provide our services. We estimate that in
each of these countries the national PTT still controls the vast
majority of the telecommunications market, including the market
with respect to DSL based services.

In addition, various new providers of
telecommunications services have entered the market in each of
these countries, targeting various segments of the market.
Companies such as British Telecom, Global One Communications,
Worldcom and Energis compete with KPN Telecom for contracts with
large multinational companies in The Netherlands. Worldcom,
British Telecom, AT&T, TeleNet, France Telecom, COLT
Telecom, Unisource, a subsidiary of KPN Telecom, and Energis
compete with Belgacom for contracts with large multinational
companies in Belgium.

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The following table sets forth the important
competitors in the areas of voice, data, Internet, carrier and
DSL-based services:

|                           |  |                                                        |  |                                                                                                            |  |                                                                                                             |  | 
|-------------------------- |  | ------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | 
|Market                     |  | The Netherlands                                        |  | Belgium                                                                                                    |  | Germany                                                                                                    
|                           |  |                                                        |  |                                                                                                            |  |                                                                                                            
|Voice                      |  | KPN TelecomCOLT TelecomWorldcomBT Ignite               |  | Belgacom
        COLT Telecom
        KPN Telecom
        Telenet
        Worldcom
        BT Ignite       |  | Deutsche Telekom
        Worldcom
        Mobilcom
        Vodafone/ Mannesmann
        BT Ignite          
|Data and Business Internet |  | KPN TelecomCOLT TelecomEquantEnergisBT Ignite          |  | Belgacom-Skynet
        COLT Telecom
        BT Ignite
        KPN Telecom
        Codenet
        Telenet |  | Deutsche Telekom
        Worldcom
        COLT Telecom
        Vodafone/ Mannesmann
        AOL Bertelsmann
|Residential Internet       |  | Planet InternetHet NetTiscaliWanadooFreeler            |  | Mobistar
        Belgacom-Skynet
        Telenet                                                           |  | T-Online
        AOL
        CompuServe
        Tiscali                                                    
|Carrier Services           |  | KPN TelecomCOLT TelecomBT IgniteWorldcomLevel 3Energis |  | Belgacom
        UUNET
        Worldcom
        COLT Telecom
        KPN Telecom
        Codenet           |  | Deutsche Telekom
        Worldcom
        Vodafone/ Mannesmann
        BT Ignite                           
|DSL Based Services         |  | KPN TelecomBaby XLNovaxessCOLT TelecomInovarraBBNed    |  | Belgacom
        Easynet
        Wannadoo
        Eunet
        COLT Telecom                               |  | Deutsche Telekom
        Highway One
        QSC
        Riodata                                           

Regulation

In Europe, the traditional system of monopoly
PTTs ensured the development of broad access to
telecommunications services. However, it also restricted the
growth of high-quality and competitively priced voice and data
services. The liberalization of the European telecommunications
market was intended to address these market deficiencies by
ending PTTs monopolies, allowing new telecommunications
service providers to enter the market and increasing competition
within the European telecommunications market.

The current regulatory framework in the EU and,
in particular, in the countries in which we provide our services
is briefly described below. There can be no assurance that
future regulatory, judicial and legislative changes will not
have a material adverse effect upon us, that national or
international regulators or third parties will not raise
material issues with regard to our compliance or noncompliance
with applicable regulations, or that any changes in applicable
laws or regulations will not have a material adverse effect on
us.

European Union

Starting in 1987, the EC Green Paper on the
development of the common market for telecommunication services
and equipment charted the course for the current changes in the
EU telecommunications industry by advancing principles such as
separation of operators from regulators, transparency of
procedures and information,

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cost orientation of tariffs, access to monopoly
infrastructure networks and the liberalization of services.
These principles have been established in EU law via a number of
directives.


The Open Network Provision (ONP)
Framework Directive of 1990 established the conditions under
which competitors and users could gain cost-oriented access to
the PTTs public networks. In the same year, the EC
Services Directive abolished the existing monopolies on, and
permitted the competitive provision of, all telecommunications
services with the exception of voice telephony. In 1992, the EC
approved the ONP Leased Line Directive, which required all
telecommunications companies with significant market power on
the relevant market to lease lines to competitors and end-users,
and to establish cost accounting systems for those products by
the end of 1993. The national regulatory authorities were to use
this cost information to set cost-oriented tariffs for leased
lines.

In 1996, the EC issued the Full Competition
Directive, which requires EU Member States to permit alternative
infrastructure providers, such as existing networks of cable
companies, railroads, electric and other utility companies, to
resell capacity on these networks for the provision of services
other than voice telephony from July 1996. The Full Competition
Directive also established January 1, 1998 as the date by
which the EU Member States had to establish a legal framework,
which removes all remaining restrictions on the provision of
telecommunications services, including voice telephony.

The Licensing Directive of 1997 established a
common framework for general authorizations and individual
licenses in the field of telecommunication services. In the same
year, the Interconnection Directive was adopted, which governs
the manner in which alternative network operators and service
providers are permitted to interconnect with public
telecommunications networks, including the PTTs public
networks. Furthermore, the Interconnection Directive requires
that parties with significant market power ensure that
interconnection is provided for at cost-oriented rates in a
non-discriminatory and transparent manner. Under the
Interconnection Directive, the national regulatory authorities
have the power to force suppliers of public telecommunications
networks or services to interconnect, and in doing so, can
determine the underlying conditions of such interconnection. The
Numbering Directive, together with the amended Interconnection
Directive, provided for carrier selection (ensuring that
end-users can select the long distance or international carrier
of their choice on a call-by-call basis) as of January 1,
1998, and carrier pre-selection (ensuring that end-users can
select the long distance or international carrier of their
choice prior to the time calls are made) and number portability
(the ability of end-users to keep their numbers when changing
operators) by January 1, 2000.

The implementation, interpretation and
enforcement of these EC directives differs among the EU Member
States. While some EU Member States have embraced the
liberalization process and at present have achieved a high level
of openness, others have delayed the full implementation of the
directives and maintain several levels of restrictions on full
competition.

In 1999, the European Commission embarked on a
major review process of the various instruments of the European
Union regarding telecommunications. The draft directives
resulting from this review seek a higher level of harmonization
and more focus on sustainable competition. We are actively
participating in discussions on these drafts and have filed
position papers together with various other new entrants to the
European telecommunications market. We have no certainty of the
outcome of this process, which is expected to lead to a new
framework in 2002 or 2003.

In December 2000, the European Parliament and the
Council adopted a Regulation on Unbundled Access to the Local
Loop, which has direct effect in the Member States. It provides
a basis for unbundling the local loop, which is controlled by
the national PTTs and emphasizes the importance of access to
foster competition in the local loop for the provision of
(broadband) Internet access.

There are currently few laws and regulations that
specifically regulate communications on the Internet. European
and U.S. Government authorities and agencies are
considering laws and regulations that address issues such as
user privacy, pricing, on-line content regulation and taxation
of on-line products and services. In November 1995, the EC
adopted a general directive regarding certain privacy rights of
citizens of EU Member States and in December 1997, the EU
adopted another directive designed to specifically address
privacy rights in the area of telecommunications services. These
directives impose restrictions on the collection and use of

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personal data, guaranteeing citizens of EU Member
States the right of access to their data, the right to know
where the data originated and the right to recourse in the event
of unlawful processing.


An overview of the regulatory framework in the
individual markets where we operate or intend to operate is
described below. This discussion is intended to provide a
general outline, rather than a comprehensive discussion of the
more relevant regulations and current regulatory posture of
these jurisdictions. We require licenses, authorizations or
registrations to provide our services in all countries in which
we operate. Licenses, authorizations and/or registrations have
been obtained in The Netherlands, Belgium and Germany and we
have received an International Facilities License in the United
Kingdom. We also obtained licenses in France and Luxembourg in
2000.

The Netherlands

The current regulatory framework in The
Netherlands is provided by the Telecommunications Act of 1998.
The Telecommunications Act became effective on December 15,
1998, and remedied the old legislative and regulatory patchwork
that had existed as a result of the implementation of a series
of EC directives. The Telecommunications Act contains provisions
that give registered telecommunications service or network
providers rights-of-way, subject to certain conditions, thereby
facilitating the construction of the Versatel network. As part
of the liberalization of the telecommunications market in The
Netherlands, a new independent supervisory authority, OPTA, was
established by the Ministry of Traffic and Waterways.
OPTAs main tasks include ensuring compliance with the
telecommunications laws and regulations in The Netherlands,
granting licenses for telecommunications activities, and
resolving disputes among market participants, such as disputes
regarding interconnection rates. OPTAs performance and
position has been reviewed and its role as the Dutch regulatory
authority has been extended for an additional four years.

In August 1997, we obtained one of the first
Netherlands registrations to operate as a telecommunications
service provider of public voice telephony (other than KPN
Telecom). In September 1997, we obtained an infrastructure
license with rights-of-way for the construction and operation of
telecommunications facilities in a limited geographic area. In
December 1998, we obtained the first authorizations under the
new Telecommunications Act to operate as a public
telecommunications services provider and network operator.
Although we participated in the auction of licenses to provide
third-generation UMTS technology mobile telecommunications
licenses in The Netherlands, we were not able to obtain a
license. We have various legal procedures currently pending
which may lead to an annulment or a declaration of wrongful
execution of the UMTS frequency auction.

We were one of the first voice telephony
competitors in The Netherlands to interconnect with
KPN Telecom and to implement a carrier select code in all
of KPN Telecoms telephone switches. The introduction
of carrier pre-selection in The Netherlands, introduced on
January 1, 2000, provides customers with the option of
pre-selecting a carrier other than KPN Telecom for all their
international and domestic long distance calls.

In March 2001, OPTA granted our request for an
operator controlled model. Our efforts to obtain lower
interconnection rates from KPN Telecom are on-going. The terms
and conditions of interconnection have had, and will continue to
have, a material effect on Versatels competitive position.
When OPTA initially implemented the bottom-up long run
incremental cost (BULRIC) model for interconnection
rates, the result was a set of lower interconnection rates for
the 2001-2002 time frame. We also try to prevent interconnection
price levels that lead to unfair price squeezes between
wholesale and retail rates and saw OPTA develop and apply a test
to prevent such behavior by KPN Telecom.

Since our founding in October 1995, we have
adopted a proactive regulatory strategy. For example, in
December 1998, Versatel filed a complaint with OPTA asserting
that the limited access provided by KPN Telecom to the KPN
Telecom network hampered Versatels growth. Our customers
often experienced busy signals when they tried to dial into the
Versatel Network through our access code. Other Netherlands
telecommunications services providers expressed similar
complaints. As a result, OPTA determined that KPN Telecom was
required to allow us access to their entire interconnection
network. However, if KPN Telecom would not be able to comply
with this directive due to scarcity, OPTA ruled that KPN Telecom
should in that case supply the requested capacity to Versatel in
an alternative manner.

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In March 1999, OPTA issued a ruling, requiring
KPN Telecom to offer unbundled access to local customer access
lines at the MDF in KPN Telecoms central exchange offices.
Unbundled local access enables us to offer high-speed access to
end-users that are not directly connected to our network.
VersaPoints complaint of July 2000 regarding denial of a
sufficient number of central office sites, amongst other
matters, led to a March 2001 decision by OPTA which was very
favorable for Versatel. In February 2002, OPTA decided in a
follow-on complaint of Versapoint, that the tariffs charged in
the past by KPN for its colocation facilities were too high.

Since the end of 2000, Versatel, Telfort,
Worldcom, Energis and Priority have cooperated in the informal
Association of Competitive Telecom Operators (ACT).
The parties take regulatory actions with respect to issues of
common interest and seek to contribute to providing regulatory
incentives to increase the competition in the telecommunications
market.

Belgium

Belgium started the liberalization of its
telecommunications market in 1991 with an amendment to the
Belgian public post and telecommunications act. At the same time
a new regulatory body was introduced, the Belgium Institute for
Post and Telecommunications (Belgisch Instituut voor Post en
Telecommunicatie) (BIPT), under the Ministry of
Economy and Telecommunications. The Belgian public post and
telecommunications act was further amended by the Belgian
Parliament in December 1997. The current legislative process is
headed towards a new single regulatory framework, which includes
reforms to and extensions of BIPTs powers by increasing
its independence from the Minister that is also responsible for
state enterprises (such as Belgacom). The implementation of the
new legislation is expected no earlier than February 2002.

We were the first alternative telecommunications
services provider to obtain a definitive license for the
provision of voice services under the amended telecommunications
act. We have also obtained an infrastructure license in Belgium
and thereby obtained rights of way for all of Belgium. For
marketing purposes, we have reserved the same carrier select
code 1611 that we currently use in The Netherlands.

Pursuant to the Numbering Directive, Belgacom was
required to introduce number portability, carrier selection and
carrier pre-selection for all services, beginning
January 1, 2000. In accordance with a ruling of the BIPT,
carrier selection and carrier pre-selection was to occur on a
gradual basis after January 17, 2000, the result of which
was the implementation of the last carrier pre-selection
services (for fixed-to-mobile calls and local calls) in November
2000. Unfortunately, operators have experienced operational
problems as a result of the complex and cumbersome procedures
imposed by Belgacom.

In September 1999, Belgacom introduced a number
of new discount schemes which Versatel deemed to be
anti-competitive. Belgacom granted discounts on combined
revenues of its customers for local and long distance calls,
whereas at that time, carrier pre-select and carrier select
services were not opened to local calls. Versatel filed a
complaint with the Belgian competition court requesting
suspension of the discount schemes. The case was dropped in 2000
after Belgacom and Versatel reached an amicable settlement.

In 1999, Versatel and other alternative operators
filed another complaint with the Competition Council alleging
that Belgacom abused its dominant position by imposing new
interconnection and retail tariff conditions for a new Internet
access scheme via non-geographic numbers, accompanied by lower
retail tariffs and lower interconnection rates to be paid by
Belgacom to the alternative providers of telecommunication
services transporting Internet traffic for Belgacoms
customers. The new access scheme was not upheld by the court,
which held that Belgacom engaged in impermissible discrimination
by applying different retail rates and interconnection rates for
Internet access via geographic or non-geographic numbers. Unlike
for geographic dial-in numbers, alternative operators do not
receive termination revenues from Belgacom for Internet access
via non-geographic numbers (i.e., 0-800 or 0-900). A different
but somewhat similar scheme was launched by Belgacom in 2000,
but was again rejected by the courts after the scheme was
challenged by Versatel and the other operators in November 2000.
Belgacom has subsequently introduced two special Internet
packages, which according to the alternative providers of
telecommunication services, were in violation of the previous
judgment, and resulted in the commencement of enforcement
procedures in respect of such judgment. Belgacom has opposed
these enforcement procedures (Belgacom lost one case, which it
is currently appealing, and their opposition to the other is
on-going). There are continuing discussions between Belgacom,
the other alternative operators and the BIPT

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regarding the implementation of the
collecting model which is designed to remedy
Belgacoms efforts to decrease retail rates on the back of
the alternative providers of telecommunication services.


In July 2000, Versatel filed a complaint with the
European Commission competition authorities in connection with
Belgacoms refusal to provide Versatel with access to its
local loop following a request from Versatel on March 1,
2000. In November 2000, in anticipation of an imminent EC
Regulation mandating full and shared access to local loops
across Europe as of January 1, 2001, Belgacom extended a
commercial raw copper offer which, although
non-compliant with the draft text of the anticipated EC
Regulation (for example, it excluded shared access and DSL), led
to an agreement in December 2000 between Belgacom and Versatel
that allowed for a gradual ramp-up of Versatels DSL
roll-out.

As the result of the European Commissions
adoption of new regulations, along with a consultation process
with BIPT, Belgacom was ordered to make numerous amendments to
its initial reference offer. Belgacom is now required to provide
full and shared access to its central office facilities without
limitation as to the technologies that can be offered (i.e.,
DSL). The BIPT ruling also considerably reduced the roll-out and
provisioning timing limitations imposed by Belgacom under its
initial commercial raw copper offer. After steps taken by
Versatel and COLT Telecom, BIPT approved co-mingling
as a cheaper and faster co-location method, thus allowing the
alternative providers of telecommunication services to share
Belgacoms infrastructure for the installation of their DSL
equipment. The terms, conditions and pricing of co-mingling are
currently under discussion by BIPT, the alternative operators
and Belgacom.

Germany

The German Telecommunications Act of
July 25, 1996, ended the legal monopoly of Deutsche Telekom
AG for the provision of voice telephony and of public
telecommunications networks, and immediately liberalized all
telecommunications activities, but postponed effective
liberalization of voice telephony until January 1, 1998.
Since January 1, 1998, the German telecommunications market
has been completely open to competition and a new regulatory
authority, the Regulierungsbehörde für
Telekommunikation und Post (RTP), was installed.

Under the German regulatory scheme, the RTP can
grant licenses in four license classes. A license is required
for operation of transmission lines that extend beyond the
limits of a property and that are used to provide
telecommunications services for the general public. The licenses
required for the operation of transmission lines are divided
into three infrastructure license classes: mobile
telecommunications (license class 1); satellite (license
class 2); and telecommunications services for the general
public (license class 3). In addition to the infrastructure
licenses, an additional license is required for operation of
voice telephony services on the basis of self-operated
telecommunications networks (license class 4). A
class 4 license does not include the right to operate
transmission lines. We obtained both a class 3 license and
a class 4 license for the whole of Germany in 2000.

The RTP has approved, among other things,
distance-based interconnection rates which Deutsche Telekom can
charge alternative network operators to interconnect their
network and route their traffic through the network of Deutsche
Telekom. The RTP has extended the current rate regime, which
expired on December 31, 1999, for an interim period until a
new regime receives the RTPs approval. Although a new
interconnection regime containing element based rates instead of
distance based rates could be beneficial to our operations we
are not expecting these to be implemented in the near future.
However, the RTP has indicated that it might not consider
Deutsche Telekom as a market dominating carrier in all segments
of the market. These segments would fall outside the scope of
the rate regulation regime and Deutsche Telekom would no longer
be obliged to request prior approval of its rates from the RTP.

In the local loop, the market position of
Deutsche Telekom is still extremely strong and only a limited
number of competitors are currently operating. These alternative
carriers primarily focus on business customers in the
metropolitan areas. With the allocation of Wireless Local Loop
point-to-multipoint frequencies to alternative carriers in the
fall of 1999, it is expected that competition in the local loop
will increase in the near future. In addition, Deutsche Telekom
is in the process of selling its broadcasting cable network,
which has been split for this purpose into nine regions. The
broadcasting network is considered after further investments by
the

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new owners as the second alternative network in
the local loop. These networks are expected to compete in the
future with Versatel Deutschlands network.


Intellectual Property

We have registered the trademark
Versatel with the Benelux trademark bureau
(Benelux Merkenbureau). Applications for similar
registrations are pending in several other European Countries.
We have obtained rights to the Internet domain name
www.versatel.com and several related domain names
and initiated formal registration procedures with Internic, the
European Union domain registration authority.

We have been operating our residential Internet
service under the Zon name since September 1999 and have applied
for trademark registration of the Zon name and logo. Sun
Microsystems has contested our use of the Zon name and we are
currently in discussion with them on this matter. We are not
certain that we will reach a satisfactory agreement with Sun
Microsystems enabling us to continue to use the Zon name, nor
that our applications will be successful or that the Zon name
and logo will not be successfully attacked by third parties
alleging prior rights or that the trademark is otherwise valid.

Legal Proceedings

In October 2000 we were informed by the public
prosecutor in The Netherlands of potential civil and criminal
tax liabilities relating to certain employee stock options
granted prior to our initial public offering in July 1999.
Although we consulted with our Dutch tax advisors and the Dutch
tax authorities prior to issuing these options and we believe
the tax treatment of these options was correct, we have agreed
with the public prosecutor to a payment of
3.0 million
that was made in the fourth quarter of 2001, whereby all
criminal charges were dropped, without any admission of guilt by
us. Versatel intends to challenge the views of the Dutch tax
authorities regarding the valuation of the aforementioned
employee stock options. We have not made any provision for the
additional potential tax exposure, which could amount to up to
approximately
10.0 million.
Should Versatel be successful in its case with the Dutch tax
authorities, we intend to attempt to reclaim all or part of the
potential settlement that has been reached with the public
prosecutor.

On November 19, 2001, a class action
complaint was filed in the Southern District of New York against
Versatel, certain of its officers and directors and certain
underwriters of the Versatels initial public offering
alleging violations of Sections 11 and 15 of the Securities
Act of 1933 and Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934. The complaint alleges that Versatels
prospectus was false or misleading in that it failed to disclose
(i) that the underwriters allegedly were paid excessive
commissions by certain customers in return for receiving shares
in the initial public offering and (ii) that certain of the
underwriters customers allegedly agreed to purchase
additional shares of Versatel in the aftermarket in return for
an allocation of shares in the initial public offering.
Plaintiff contends that, as a result of those omissions from the
prospectus, the price of Versatels stock was artificially
inflated between July 23, 1999 and December 6, 2000
and that the defendants are liable for unspecified damages to
those persons who purchased stock during that period. Hundreds
of cases against numerous other issuers and their underwriters
that make similar allegations involving the initial public
offerings of those issuers were consolidated before a single
judge on August 9, 2001 for purposes of pretrial motions
and discovery only. The action against Versatel has been
consolidated along with those cases. Versatel intends to contest
the action vigorously.

Versatel has filed complaints in the past with
the European Commission, with OPTA and the Minister of Transport
and Waterways in The Netherlands, in Belgium, with the BIPT as
part of its regulatory strategy. We also make routine filings
with the regulatory agencies and governmental authorities in the
countries in which we operate or intend to operate.

Versatel is from time to time involved in routine
litigation in the ordinary course of business. We believe that
no currently pending litigation to which Versatel is a party
will have a material adverse effect on our financial position or
results of operations.

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4.C     ORGANIZATIONAL
STRUCTURE

Versatel Telecom International N.V. is a holding
company that conducts its business operations through its
subsidiaries. The table below sets forth, as of
December 31, 2001, the name, country of incorporation and
percentage of ownership of our major direct- and indirectly held
subsidiaries. For a complete list of our subsidiaries, please
refer to Exhibit 8.

|                                                                               |  |                 |  |               |      | 
|------------------------------------------------------------------------------ |  | --------------- |  | ------------- | ---- | 
|                                                                               |  | Country of      |  | Percentage of
|Name                                                                           |  | Incorporation   |  | Ownership    
|                                                                               |  |                 |  |              
|Versatel Telecom Europe B.V.                                                   |  | The Netherlands |  |               | 100% | 
|Versatel Telecom Netherlands B.V.                                              |  | The Netherlands |  |               | 100% | 
|Versatel Belgium N.V.                                                          |  | Belgium         |  |               | 100% | 
|Vuurwerk Internet B.V.                                                         |  | The Netherlands |  |               | 100% | 
|Versatel Deutschland GmbH & Co.KG                                              |  | Germany         |  |               | 100% | 
|Komtel Gesellschaft für Kommunikations und
	Informationsdienste mbH (Komtel) |  | Germany         |  |               | 80%  | 
|Komtel GmbH                                                                    |  | Germany         |  |               | 100% | 
|Zon Nederland N.V.                                                             |  | The Netherlands |  |               | 92%  | 

Effective January 1, 2002, a legal merger
took place within the Versatel group in The Netherlands, by
which Versatel Telecom Netherlands B.V., Svianed B.V.,
7-Klapper Beheer B.V., Vuurwerk Internet B.V. and
Vuurwerk Access B.V. amalgamated into Versatel Telecom
Europe B.V. Subsequently, the statutory name of Versatel
Telecom Europe B.V. was changed into Versatel
Nederland B.V. These changes in the corporate structure are
part of a corporate clean-up within the entire Versatel group. A
similar operation is currently in process within the Belgium
operating companies.

As of March 28, 2002, the major direct and
indirectly held subsidiaries are as follows:

|                                                                                  |  |                 |  |               |      | 
|--------------------------------------------------------------------------------- |  | --------------- |  | ------------- | ---- | 
|                                                                                  |  | Country of      |  | Percentage of
|Name                                                                              |  | Incorporation   |  | Ownership    
|                                                                                  |  |                 |  |              
|Versatel Nederland B.V.                                                           |  | The Netherlands |  |               | 100% | 
|Versatel Belgium N.V                                                              |  | Belgium         |  |               | 100% | 
|Versatel Deutschland GmbH & Co.KG                                                 |  | Germany         |  |               | 100% | 
|Komtel Gesellschaft für Kommunikations und
	Informationsdienste mbH (Komtel)(1) |  | Germany         |  |               | 82%  | 
|Komtel GmbH                                                                       |  | Germany         |  |               | 100% | 
|Zon Nederland N.V                                                                 |  | The Netherlands |  |               | 92%  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 15, 2002 Versatel Deutschland
	Holding GmbH purchased an additional 2% interest in Komtel from
	Stadtwerke Flensburg GmbH, the former shareholder,
	increasing Versatels interest to 82%. An amendment to the
	existing share and purchase agreement was signed for this
	purpose. It was further agreed upon to postpone the exercise of
	the option for the sale of the remaining 18% shareholding
	(against a purchase price of
	13.9 million).
	The option is now exercisable between July 1 and
	July 15 in each of 2002, 2003, 2004 or 2005. Versatel
	Deutschland Holding GmbH is further to ensure a minimum of 200
	full time employees (as opposed to 140 employees before) to be
	employed in the city of Flensburg until the option is exercised.
	If these criteria are not met, a penalty of a maximum of
	 0.8 million
	is due to Stadtwerke Flensburg GmbH.




4.D     PROPERTY,
PLANT AND EQUIPMENT

Network infrastructure

As of December 31, 2001, we had completed
construction of approximately 2,029 kilometers of fiber-ready
duct for the Benelux overlay sections. As of December 31,
2001, we had also completed the construction of 60 business park
rings, 28 city rings and 76 near overlay
sections. Additionally, as of December 31, 2001, we
had a total local access extension of 1,554 kilometers in
the Benelux and 733 kilometers in Germany. To date, most of the
initially planned construction of our backbone network has been
completed. In addition, we have negotiated

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an IRU for approximately 400 kilometers of
backbone fiber in the north of The Netherlands and we may
continue to expand our backbone network if attractive business
opportunities arise.


Properties

We have also leased office space in 25 buildings
in The Netherlands (41,026 m2), 10 buildings in
Belgium (10,794 m2), and six buildings in
Germany (9,877 m2). We use these locations
primarily as office space and for technical support to our
network. Lease contracts for these buildings have expiry dates
varying between 2002 and 2010.

Our country head offices are located at the
following addresses:

|                                                                |  |         |        |                      |  |  |               | 
|--------------------------------------------------------------- |  | ------- | ------ | -------------------- |  |  | ------------- | 
|Address                                                         |  | Area m2 |        | Expiry date of lease
|                                                                |  |         |        |                     
|Hullenbergweg 101, 1101 CL Amsterdam-Zuidoost,
	The Netherlands |  |         | 13,100 |                      |  |  | March 2010    | 
|Koningin Astridlaan 164, Wemmel, Belgium                        |  |         | 3,807  |                      |  |  | April 2009    | 
|Nordstrasse 2, 24937 Flensburg, Germany                         |  |         | 3,619  |                      |  |  | August 2009   | 
|Unterste Wilms Strasse 29, 44143 Dortmund, Germany              |  |         | 5,172  |                      |  |  | December 2002 | 

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ITEM 5.     OPERATING
AND FINANCIAL REVIEW AND PROSPECTS






5.A     OPERATING
RESULTS


Overview

We are a competitive communications network
operator and a leading alternative to the former monopoly
telecommunications carriers in our target market of the Benelux
and northwest Germany. Our objective is to become the leading
fully integrated alternative provider of local access,
facilities-based broadband services, including voice, data and
Internet services, to business customers in our target market.
We provide high-quality, competitively priced
telecommunications, data and Internet services to three targeted
market segments:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct Access Services  high bandwidth
	business and residential telecommunications subscribers that are
	directly connected to our network either through our own fiber,
	DSL technology, other copper access technologies or leased lines.
|
| |  | Indirect Access Services  business and
	residential telecommunications subscribers that are indirectly
	connected to our network through carrier preselection or our
	1611 carrier select code.                                           
|
| |  | Carrier Services  other
	telecommunications, data and Internet service providers.                                                                                                                                                           

In addition to our core business of providing
broadband services to business customers in the Benelux and
northwest Germany, we operate Zon, our residential Internet
service provider, to participate in the growing market for
consumer Internet services in The Netherlands.

Our growth is driven by our focus on providing
bundled broadband services to business customers. Historically,
we have focused on providing services to small- and medium-sized
businesses. However, as we continue to expand our service
offering and local access network we are also able to provide
services to larger businesses with more sophisticated service
requirements, such as the GAK Group and Achmea. We continually
strive to develop new products and services, which we are able
to provide to both existing and new customers. We believe
providing a bundled service offering comprised of voice and
Internet access over DSL technology will be crucial to
increasing our market share in the small- and medium-sized
business market. Another key component of our historic growth
was our expansion into northwest Germany which significantly
expanded our addressable market. A further key component of our
growth is the continued development of our network. We have
invested in developing a dense network in our target markets
which allows us to rapidly connect customers to our network and
to provide multiple services through a single connection.
Currently, we focus on connecting customers to our network
primarily through our own fiber, DSL technology, other copper
access technologies and leased lines. However, we will continue
to evaluate other opportunities. Once a customer is connected to
our network, we can generally expand services to such customer
without incurring substantial additional investment costs.

As we have developed our operations, we have
incurred substantial losses. We anticipate that net losses will
continue to be significant. We have incurred substantial losses
both as a result of our operating expenses and expenses related
to our outstanding indebtedness. Our operating expenses are
comprised primarily of the leasing of access and transmission
capacity, originating and terminating costs for voice traffic,
selling, general and administrative expenses related to the
expansion of our business and increasing depreciation and
amortization costs associated with the continuing build-out of
our network. We have incurred substantial interest expenses
associated with our outstanding debt and foreign exchange losses
as a result of currency fluctuations between the euro and
U.S. dollar as a result of our U.S. dollar denominated
indebtedness. Fluctuations between the U.S. dollar and the
euro may continue to adversely affect our results to the extent
that we continue to have U.S. dollar denominated
indebtedness.

During 2001, we announced two restructurings to
create operational synergies as a result of our increased scale
of operations. In March of 2001, we announced the first
restructuring plan for our operations in The Netherlands and
Germany. Under the plan, we identified approximately
300 employees to be terminated. Additionally, in September
2001, we identified approximately 100 employees to be
terminated in Belgium as part of the second restructuring plan.

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In total, Versatel recognized a charge of
11.2 million
in 2001 to cover employee termination costs and other
restructuring costs. Total annual savings in sales, general and
administrative expenses from the announced restructurings are
estimated to be approximately
21.2 million,
with
8.9 million
of such savings realized in 2001. As of December 31, 2001,
7.9 million
of the 11.2
restructuring reserve has been paid and a total of
413 Versatel employees have been terminated. We expect to
use the remaining portion of the restructuring reserve to cover
employee termination costs and other restructuring costs for
payments by the end of 2002.

Our operational metrics are summarized in the
following table:

Operational Metrics

|                                     |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |       |       | 
|------------------------------------ | ------------------- | ------------ | ----- | --------- | --- | -------- | ----- | ------------- | ----- | ------------ | ----- | ----- | ----- |  | ----- | ----- | ----- |  | ----- | ----- | ----- | 
|                                     |                     | December 31, |       | March 31, |     | June 30, |       | September 30, |       | December 31,
|                                     |                     | 2000         |       | 2001      |     | 2001     |       | 2001          |       | 2001        
|                                     |                     |              |       |           |     |          |       |               |       |             
|Operating Statistics                 |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|Internet Minutes Carried (in mm(1))  |                     |              | 1,965 |           |     |          | 735   |               |       |              | 691   |       |       |  | 703   |       |       |  | 2,901 |      
|Direct Access Fiber Customers        |                     |              | 413   |           |     |          | 585   |               |       |              | 692   |       |       |  | 745   |       |       |  | 796   |      
|MDF/DSL Business Customers           |                     |              | 4,648 |           |     |          | 5,950 |               |       |              | 7,253 |       |       |  | 8,592 |       |       |  | 9,656 |      
|Network Operational                  |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|Switches:                            |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 5         |     |          |       | 5             |       |              |       | 5     |       |  |       | 5     |       |  |       | 5     |      
|                                     | Germany             |              |       | 7         |     |          |       | 7             |       |              |       | 9     |       |  |       | 9     |       |  |       | 9     |      
|POPs:                               |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 26        |     |          |       | 27            |       |              |       | 32    |       |  |       | 32    |       |  |       | 32    |      
|                                     | Germany             |              |       | 72        |     |          |       | 80            |       |              |       | 82    |       |  |       | 82    |       |  |       | 82    |      
|Km of Ducts constructed:             |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 2,029     |     |          |       | 2,029         |       |              |       | 2,029 |       |  |       | 2,029 |       |  |       | 2,029 |      
|                                     | Germany             |              |       | 470       |     |          |       | 530           |       |              |       | 790   |       |  |       | 813   |       |  |       | 813   |      
|Km of Fiber installed:               |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 1,829     |     |          |       | 1,829         |       |              |       | 1,829 |       |  |       | 1,829 |       |  |       | 1,829 |      
|                                     | Germany             |              |       | 2,999     |     |          |       | 3,072         |       |              |       | 3,114 |       |  |       | 3,137 |       |  |       | 3,149 |      
|Broadband Local Access Network       |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|Business Park Rings                  |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 44        |     |          |       | 45            |       |              |       | 50    |       |  |       | 53    |       |  |       | 60    |      
|                                     | Germany             |              |       |          |     |          |       |              |       |              |       |      |       |  |       |      |       |  |       |      |      
|City Rings                           |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 21        |     |          |       | 22            |       |              |       | 26    |       |  |       | 27    |       |  |       | 26    |      
|                                     | Germany             |              |       | 2         |     |          |       | 2             |       |              |       | 2     |       |  |       | 2     |       |  |       | 2     |      
|Near Overlay Sections                |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 61        |     |          |       | 67            |       |              |       | 69    |       |  |       | 69    |       |  |       | 76    |      
|                                     | Germany             |              |       | N/A       |     |          |       | N/A           |       |              |       | N/A   |       |  |       | N/A   |       |  |       | N/A   |      
|Buildings Connected (Own Fiber Only) |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Netherlands         |              |       | 415       |     |          |       | 579           |       |              |       | 719   |       |  |       | 825   |       |  |       | 832   |      
|                                     | Belgium             |              |       | 112       |     |          |       | 142           |       |              |       | 189   |       |  |       | 226   |       |  |       | 276   |      
|                                     | Carrier Services(2) |              |       | 90        |     |          |       | 131           |       |              |       | 177   |       |  |       | 204   |       |  |       | 94    |      
|                                     | MDF (NL)            |              |       | 130       |     |          |       | 139           |       |              |       | 143   |       |  |       | 152   |       |  |       | 152   |      
|                                     | Germany             |              |       | 232       |     |          |       | 260           |       |              |       | 315   |       |  |       | 387   |       |  |       | 463   |      
|                                     |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     |                     | Total        |       |           | 979 |          |       |               | 1,251 |              |       |       | 1,543 |  |       |       | 1,794 |  |       |       | 1,817 | 
|Central offices (MDFs)
	Operational |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 53        |     |          |       | 75            |       |              |       | 85    |       |  |       | 105   |       |  |       | 126   |      
|                                     | Germany             |              |       | 111       |     |          |       | 160           |       |              |       | 202   |       |  |       | 249   |       |  |       | 274   |      
|Km of local access Fiber             |                     |              |       |           |     |          |       |               |       |              |       |       |       |  |       |       |       |  |       |      
|                                     | Benelux             |              |       | 925       |     |          |       | 960           |       |              |       | 1,137 |       |  |       | 1,473 |       |  |       | 1,554 |      
|                                     | Germany             |              |       | 646       |     |          |       | 663           |       |              |       | 663   |       |  |       | 733   |       |  |       | 733   |      

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|                                                          |         |              |  |           |  |          |  |               |  |              |  |         |  |  |  |         |  |  |  |         | 
|--------------------------------------------------------- | ------- | ------------ |  | --------- |  | -------- |  | ------------- |  | ------------ |  | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                                          |         | December 31, |  | March 31, |  | June 30, |  | September 30, |  | December 31,
|                                                          |         | 2000         |  | 2001      |  | 2001     |  | 2001          |  | 2001        
|                                                          |         |              |  |           |  |          |  |               |  |             
|Direct Access Voice Grade Equivalent Lines in
	Service(3) |         |              |  |           |  |          |  |               |  |              |  |         |  |  |  |         |  |  |  |        
|                                                          | Benelux |              |  | 11,190    |  |          |  | 14,730        |  |              |  | 17,910  |  |  |  | 21,630  |  |  |  | 23,580  | 
|                                                          | Germany |              |  | 90,050    |  |          |  | 112,227       |  |              |  | 138,111 |  |  |  | 160,675 |  |  |  | 175,255 | 






|    |                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The numbers per December 31, 2000 and 2001
	are for the full year, March 31, June 30 and
	September 30, 2001 numbers are only for the quarter.                                                                                    
|   
|(2) | The total number of Carrier Services buildings as
	of December 31, 2001 has decreased due to a
	re-classification of central office buildings connected for
	third parties where we also built fiber connections for our own
	use.
|   
|(3) | Includes direct access fiber, radio and central
	office customers only.                                                                                                                                                           

Information about Contractural Cash
Payments

The table below shows our contractural and
commercial commitments as of December 31, 2001:

|                                     |  |       |           |           |  |       |        |       |  |        |         |  |  |  |        |  |  |  |           | 
|------------------------------------ |  | ----- | --------- | --------- |  | ----- | ------ | ----- |  | ------ | ------- |  |  |  | ------ |  |  |  | --------- | 
|                                     |  |       |           | Less than |  | 2-3   |        | 4-5   |  | Over 5
|Contractural obligations             |  | Total |           | 1 year    |  | years |        | years |  | years 
|                                     |  |       |           |           |  |       |        |       |  |       
|Senior Debt                          |  |       | 1,728,875 |           |  |       |       |       |  |        | 718,742 |  |  |  |       |  |  |  | 1,010,133 | 
|Capital lease obligations            |  |       | 18,407    |           |  |       | 2,851  |       |  |        | 4,940   |  |  |  | 4,178  |  |  |  | 6,438     | 
|Committed capital expenditures       |  |       | 20,200    |           |  |       | 20,200 |       |  |        |        |  |  |  |       |  |  |  |          | 
|Rent and operating lease commitments |  |       | 93,788    |           |  |       | 15,263 |       |  |        | 26,530  |  |  |  | 18,392 |  |  |  | 33,603    | 
|                                     |  |       |           |           |  |       |        |       |  |        |         |  |  |  |        |  |  |  |           | 
|Total contractural cash obligations  |  |       | 1,861,270 |           |  |       | 38,314 |       |  |        | 750,212 |  |  |  | 22,570 |  |  |  | 1,050,174 | 
|                                     |  |       |           |           |  |       |        |       |  |        |         |  |  |  |        |  |  |  |           | 

Senior debt obligations relates to our high yield
and convertible notes, as described in Note 11 on
page F-22 of the financial statements annexed hereto.

Capital lease obligations relates primarily to
leases of telecommunications network and equipment, as described
in Note 9 on page F-21 of the financial statements annexed
hereto.

Committed capital expenditures obligations are
further described in Note 24 on page F-33 of the financial
statements annexed hereto.

Rent and operating lease commitments are further
described in Note 23 on page F-33 of the financial
statements annexed hereto.

Critical accounting policies

The discussion and analysis of our operating
results and financial condition are based upon our financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires
management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On
an on-going basis management evaluates its estimates and
judgments, including those related to impairment of long lived
assets, deferred tax assets and pending disputes and litigation.
Management bases its estimates on current information,
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities and the recognition of revenue
and expenses that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or circumstances.

We believe that the following discussion
addresses our most critical accounting policies, which are those
that are most important to the portrayal of our financial
condition and results and require managements most
difficult, subjective and complex judgments, often as a result
of the need to make estimates about the effect of matters that
are inherently uncertain.

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Impairment of long lived assets

Versatel reviews its long lived assets and
intangibles for impairment when events or changes in
circumstances indicate that the carrying value of such assets
may not be recoverable in accordance with Statement of Financial
Accounting Standard (SFAS) 121. This review is
done by comparing expected future undiscounted cash flows
without interest costs to the carrying amount of the group of
assets under review. The estimation period of the undiscounted
cash flows without interest is based on the estimated useful
life of the critical asset of the group of assets under review.
If the future undiscounted cash flows without interest costs or
the estimated useful life of the critical asset are less
favourable, assets may be impaired.

Income taxes/ Deferred tax assets

Versatel accounts for income taxes under the
asset and liability method. Based on this accounting principle
Versatel has provided a full valuation allowance related to its
substantial deferred tax asset. In the future if sufficient
evidence of Versatels ability to generate sufficient
future taxable income in certain tax jurisdictions become
apparent, Versatel may be required to reduce its valuation
allowances, resulting in income tax benefits in Versatels
consolidated statement of operations.

Allowances for disputes and
litigation

Versatels current estimated range of
liability related to some of the pending disputes with suppliers
and customers and related to litigation is based on claims for
which management can estimate the amount and range of loss. We
have recorded the minimum estimated liability related to those
disputes and claims, when there is a range of loss. Because of
the uncertainties related to both the amount and range of loss
on the remaining pending disputes and litigation, management is
unable to make a reasonable estimate of the liability that could
result from an unfavourable outcome. As additional information
becomes available we will assess the potential liability related
to our pending disputes and litigation and revise our estimates.
Such revisions in our estimates could impact our results of
operations and financial position.

Non-monetary transactions

Based on Versatels business plan certain
assets have been categorized as assets held for sale within
fixed assets. For the years ended December 31, 2001 and
2000, respectively, approximately
23.0 million
and
4.8 million
of Versatels revenues were derived from customers from
which Versatel also purchased assets for use in its own network.
The assets purchased have been recorded as purchases of
property, plant and equipment and include the international
fiber and capacity that Versatel required to complete its
international network. The gains realized on these transactions
in 2001 and 2000 amounted to
18.7 million
and
4.0 million,
respectively. For these revenues, we applied our accounting
principle for non-monetary transactions. These transactions are
not reflected in the consolidated statements of cash flows.
Taking the non-monetary transactions of 2001 into consideration
the gross capital expenditures amounted to
274.9 million.
Please see note 2(m) to our financial statements on page
F-17 for more information.

Recently issued accounting standards

Reference is made to note 2(n) to our
financial statements on page F-17 for recently issued
accounting standards.

Off-balance sheet arrangements

Versatel does not carry any off-balance sheet
arrangements other than those commitments in connection with the
rollout of capital expenditures relating to customer connections
and network build, which are not material in amount, and an
arrangement with the former shareholders of Komtel for the
purchase of the remaining 18% interest in Komtel at a value of
13.9 million.

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##### Table of Contents



Revenues

Generally, our services can be characterized as
voice, data and Internet services. As such, we derive our
revenues from both minutes of communications traffic carried by
our network which are variable by customer from period to period
(generally voice), and fixed monthly fees for services
provided to our customers (generally Internet and data). We
allocate our revenues to the period in which the traffic was
generated. The composition of our customer base, service
offerings and geographical focus has continued to evolve as a
result of the further development of our network, acquisitions,
including Svianed, Versatel Deutschland (formerly known as
VEW Telnet) and Komtel, and the expansion of our product
offering. As a result, we have significantly increased the
portion of our revenues generated from fixed monthly fees,
expanded our geographical focus to include northwest Germany and
expanded our customer base to include larger customers.

Historically, we have priced our variable
communications services (voice) at a discount to the local PTTs
and expect to continue this pricing strategy as we expand our
operations. In general, prices for communications services have
decreased over the last several years, both for voice traffic as
well as for data and Internet services. In The Netherlands,
KPN Telecom has reduced its price per minute of
telecommunications traffic from time to time in recent years,
however in December 2001, KPN raised its prices per minute of
telecommunications traffic. In Belgium, Belgacom introduced
several discount programs for selected customer groups, which we
subsequently matched. In Germany, we have experienced similar
levels of price reductions, which we have matched. These
reductions are expected to have an adverse impact on margins in
the near term as we have responded by reducing our prices. In
addition, the introduction of the euro has made pricing more
transparent in the European telecommunications market, which may
lead to further competition and price decreases. Our data and
Internet services continue to be priced at competitive market
levels, but are less influenced by the pricing power of the
incumbent operators.

A substantial portion of our revenues is
attributable to fixed monthly fees, primarily through the
provision of data and Internet services such as Internet
connectivity, local area network to local area network
(LAN-to-LAN) Interconnect services and Internet
web-hosting. For the year ended December 31, 2001, 50.6% of
our revenues were generated from the provision of data and
Internet services. Our variable revenues are generated by
minutes of communications billed for voice telephony services
originated by our customers, terminating voice telephony traffic
to customers directly connected with our network and the
termination of dial-up Internet traffic onto our network for
both Zon and other Internet service providers. Our consumer
Internet division generates revenues from the termination of
minutes of traffic onto our network as described above, selling
advertising on our portals and to a lesser extent receiving a
percentage of some of the e-commerce revenue generated by our
subscribers. We also recently began providing broadband Internet
access to Zons customers through DSL technology for a
fixed monthly fee.

In addition, a substantial portion of our
revenues is attributable to customers directly connected to our
network (commonly referred to as on-net revenues)
using our own fiber, DSL technology, other copper access
technologies or leased lines. For the year ended
December 31, 2001,
157.8 million
of our revenue was generated from customers directly connected
to our network.

In March 2000, we acquired Komtel in Germany.
Komtels activities include certain premium dial-in
services. For these services, Versatel collects per minute fees
from Deutsche Telekom and then passes a portion of these fees on
to a local content provider. As of April 1, 2001, we report
these fees on a net basis, whereby reported revenues only
include that portion of the fees from Deutsche Telekom that are
not passed on to a local content provider. Until March 31,
2001, we accounted for these services on a gross basis and
recognized as revenue all fee amounts received because we
determined that it was not materially different than if reported
on a net basis and there was no impact on operating loss, loss
before income taxes and net loss (after taxes).

We believe gross billings are an important
indicator of the volume of these premium dial-in services and
assist comparability to prior periods. Accordingly, this
document also discusses the level of gross billings for all
periods presented and the cost relating to gross billings which
includes the costs passed on to local content providers.
References herein to gross billings include all our revenues,
plus fee amounts passed on to local content providers for the
premium dial-in services offered by Komtel.

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Based on Versatels business plan, certain
assets have been categorized as assets held for sale within
fixed assets. For the years ended December 31, 2001 and
2000 approximately
23.0 million
and
4.8 million,
respectively, of Versatels revenues were derived from
customers from which Versatel also purchased assets for use in
its own network. The assets purchased have been recorded as
purchases of property, plant and equipment and include the
international fiber and capacity that Versatel required to
complete its international network. The gains realized on these
transactions in 2001 and 2000 amounted to
18.7 million
and
4.0 million,
respectively. For these revenues, we applied our accounting
principle for non-monetary transactions. These transactions are
not reflected in the consolidated statements of cash flows.
Taking the non-monetary transactions of 2001 into consideration
the gross capital expenditures amounted to
274.9 million.

The following table sets forth the total revenues
attributable to our operations for the years ended
December 31, 1999, 2000 and 2001.

|                           |          |                          |  |        |        |      |  |        |         |  |  |        |         | 
|-------------------------- | -------- | ------------------------ |  | ------ | ------ | ---- |  | ------ | ------- |  |  | ------ | ------- | 
|                           |          |                         
|                           |          | Years Ended December 31,
|                           |          |                         
|                           |          | 1999                     |  | 2000   |        | 2001
|                           |          |                          |  |        |        |     
|                           |          |                         
|                           |          | (euro in thousands)     
|Revenues                   |          |                          |  |        |        |      |  |        |         |  |  |       
|Business customers         |          |                          |  |        |        |      |  |        |         |  |  |       
|                           | Voice    |                          |  | 31,695 |        |      |  | 70,833 |         |  |  | 95,551 |        
|                           | Data     |                          |  | 14,109 |        |      |  | 25,909 |         |  |  | 45,616 |        
|                           | Internet |                          |  | 4,942  |        |      |  | 26,378 |         |  |  | 38,109 |        
|Residential customers      |          |                          |  |        |        |      |  |        |         |  |  |       
|                           | Voice    |                          |  | 405    |        |      |  | 9,012  |         |  |  | 13,776 |        
|                           | Internet |                          |  | 286    |        |      |  | 11,650 |         |  |  | 13,530 |        
|Carrier Services customers |          |                          |  |        |        |      |  |        |         |  |  |       
|                           | Voice(1) |                          |  | 5,194  |        |      |  | 18,098 |         |  |  | 16,985 |        
|                           | Data     |                          |  | 1,906  |        |      |  | 10,982 |         |  |  | 9,165  |        
|                           | Other(2) |                          |  |       |        |      |  | 8,607  |         |  |  | 23,001 |        
|                           |          |                          |  |        |        |      |  |        |         |  |  |       
|                           |          | Total(3)                 |  |        | 58,537 |      |  |        | 181,469 |  |  |        | 255,733 | 
|                           |          |                          |  |        |        |      |  |        |         |  |  |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2000, we acquired Komtel in Germany.
	Until March 31, 2001, we accounted for the fees from
	certain premium dial-in services offered by Komtel on a gross
	basis. Gross billings from voice services to carrier services
	customers (including all fee amounts received for the premium
	dial-in services offered by Komtel) for the year ended
	December 31, 2001 amounted to
	35.6 million.
|   
|(2) | Other sales consists of asset sales of
	telecommunications infrastructure.                                                                                                                                                                                                                                                                                                                             
|   
|(3) | Total gross billings for the year ended
	December 31, 2001 amounted to
	274.4 million.                                                                                                                                                                                                                                                                                                                

Geographical focus

We generate revenues in The Netherlands, Belgium
and Germany. The geographical composition of our revenues for
the years ended December 31, 1999, 2000 and 2001 was as
follows:

|                |          |                          |        |        |  |      |         |         |  |  |         |         | 
|--------------- | -------- | ------------------------ | ------ | ------ |  | ---- | ------- | ------- |  |  | ------- | ------- | 
|                |          |                         
|                |          | Years Ended December 31,
|                |          |                         
|                |          | 1999                     |        | 2000   |  | 2001
|                |          |                          |        |        |  |     
|                |          |                         
|                |          | (euro in thousands)     
|Revenues        |          |                          |        |        |  |      |         |         |  |  |         |        
|The Netherlands |          |                          | 52,323 |        |  |      | 105,939 |         |  |  | 159,241 |        
|Belgium         |          |                          | 4,417  |        |  |      | 21,634  |         |  |  | 35,050  |        
|Germany(1)      |          |                          | 1,797  |        |  |      | 53,896  |         |  |  | 61,442  |        
|                |          |                          |        |        |  |      |         |         |  |  |         |        
|                | Total(2) |                          |        | 58,537 |  |      |         | 181,469 |  |  |         | 255,733 | 
|                |          |                          |        |        |  |      |         |         |  |  |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2000, we acquired Komtel in Germany.
	Until March 31, 2001, we accounted for the fees from
	certain premium dial-in services offered by Komtel on a gross
	basis. Gross billings in Germany (including all fee amounts
	received for the premium dial-in services offered by Komtel) for
	the year ended December 31, 2001 amounted to
	80.1 million.
|   
|(2) | Total gross billings for the year ended
	December 31, 2001 amounted to
	274.4 million.                                                                                                                                                                                                                                                                        

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Customers

Historically, we generated our revenues from
small- and medium-sized business customers. Beginning in 1999,
we started to generate revenues from larger customers, such as
the GAK Group, which represented 4.7% of our revenues for the
year ended December 31, 2001 and 6.7% of our revenues for
the year ended December 31, 2000. We have extended a
portion of the GAK contract until May of 2003 and the remainder
of the contract until the end of 2003. Another large customer
that we obtained through a similar bidding process is Achmea,
from which we began to generate revenues in the last quarter of
2001. Although we continue to participate in such bidding
processes and believe we are well positioned to be awarded such
contracts as a result of our network and service offerings, it
has been more difficult to compete in such processes due to the
current concern of many potential customers regarding our
funding position. Also, we believe the general weakness in the
economy could delay the decision making process for potential
customers seeking communications services, as well as the timing
of upgrades for existing customers.

We will continue to focus on securing and
provisioning customers that can be directly connected to our
network utilizing our own fiber, DSL technology, other
copper-based access technologies or leased lines. We believe
these customers represent a long term asset and provide the best
economic return on our dense local access network. However, as
we begin to focus on more complex connections such as
Achmeas IP-VPN network, we expect a slow down in the
growth of the number of our fiber connections. Also, with the
recent introduction of Integrated Services Digital Network
(ISDN) voice and dedicated Internet services over
DSL to the business community in The Netherlands, we expect an
increase in the number of customers we provision over DSL
technology.

Historically, in the Benelux, Versatel has
approached the residential voice market by providing carrier
services such as carrier select hosting to resellers, who
themselves target the residential voice market. Recently, we
have limited the services we provide to other telecommunications
service providers who solely focus on the voice resale market.
This is as a result of recent financial difficulties experienced
by certain of these service providers. Also, in The Netherlands,
Versatel offers Internet services directly to the residential
Internet market through Zon. In Germany, we believe market
dynamics, including the high penetration of ISDN services,
justify offering services directly to the residential market in
select situations. As a result, our German operations service
residential customers, which has resulted in a substantial
increase in our residential customer base.

As our network has expanded, we have expanded our
ability to provide other carriers with telecommunications
services which will maximize the use of our network. We actively
monitor our credit exposure to other carriers and we have
actively taken steps to reduce this risk in the past. We
currently provide services such as leased lines, transmission,
IP uplink, co-location services and voice origination to other
service providers such as COLT Telecom and Worldcom. Also, we
believe that the decision of many other carriers to scale back
their operations, or even leave our market, will have a negative
impact on our revenues from other carriers in the forseeable
future.

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As a result of our continued growth, our total
number of business customers was more than 75,000 as of
December 31, 2001. The following table sets forth the total
number of customers for our services, for the years ended
December 31, 1999, 2000 and 2001.

|                 |         |                          |       |      |        |      |        |  |        |  |        |  |        | 
|---------------- | ------- | ------------------------ | ----- | ---- | ------ | ---- | ------ |  | ------ |  | ------ |  | ------ | 
|                 |         |                         
|                 |         | Years Ended December 31,
|                 |         |                         
|                 |         | 1999                     |       | 2000 |        | 2001
|                 |         |                          |       |      |        |     
|                 |         |                         
|                 |         | (at period end)         
|Customers(1)     |         |                          |       |      |        |      |        |  |        |  |        | 
|Business         |         |                          |       |      |        |      |        |  |        |  |        | 
|                 | Benelux |                          |       |      |        |      |        |  |        |  |        |  |       
|                 |         | Direct                   |       |      | 119    |      |        |  | 589    |  |        |  | 3,713  | 
|                 |         | Indirect                 |       |      | 11,303 |      |        |  | 23,881 |  |        |  | 23,653 | 
|                 |         | Web-hosting              |       |      | 10,535 |      |        |  | 21,707 |  |        |  | 30,100 | 
|                 | Germany |                          |       |      |        |      |        |  |        |  |        |  |       
|                 |         | Direct                   |       |      | 522    |      |        |  | 4,472  |  |        |  | 6,739  | 
|                 |         | Indirect                 |       |      | 3,899  |      |        |  | 7,962  |  |        |  | 11,347 | 
|Residential      |         |                          | 1,533 |      |        |      | 35,382 |  |        |  | 48,364 | 
|Carrier Services |         |                          | 45    |      |        |      | 146    |  |        |  | 104    | 






|    |                           
|--- | --------------------------
|(1) | Excluding Zon subscribers.

The number of registered subscribers to Zon, our
residential Internet Service Provider, has increased to
1,436,000 on December 31, 2001 from 968,000 on
December 31, 2000.

Cost of Revenues

Our costs of revenues are comprised of fixed
network costs and variable costs associated with the origination
and termination of minutes of communication traffic. To date,
our fixed network costs have primarily consisted of leased lines
for sections of our backbone network, leased lines for directly
connecting customers to our network, fees to other Internet
service providers for the termination of Internet traffic,
interconnection charges, and subscription charges. Origination
and termination costs represent the cost of carrying minutes of
communication traffic from our customers to our network and from
our network to the final destination, respectively.

We are experiencing a reduction in the costs
associated with leased lines as we replace leased lines with our
own local access and backbone network. However, we will continue
to deploy leased lines to directly connect customers to our
network in order either to accelerate such customers
connection to our network, in which case we will replace the
leased line with our own fiber; to connect a customer with
transaction volumes that do not justify the investment cost
associated with a direct connection on our own fiber; or, to
connect a customer that is located too far from our network
infrastructure to economically justify a direct connection with
our own fiber.

As a percentage of revenue, we expect fixed
network costs in the long run to decline due to the continuing
build out of our local access network, technological
improvements, further liberalization of the European
telecommunications market and increased availability of
transmission capacity.

We have experienced a decline in the variable
costs associated with minutes of communications traffic on a per
minute basis for several factors, including: (a) the
incremental build out of our network, which increases the number
of points we interconnect with the PTTs and the number of
carriers with which we interconnect, (b) the increase of
minutes we originate and terminate, which leads to higher volume
discounts available to us, (c) more rigorous implementation
of the European Community directives requiring cost-based
termination rates and leased line rates and (d) the
emergence of new telecommunication service providers and the
construction of new transmission facilities, which results in
increased competition. However, there can be no assurance that
the trend of decreasing variable costs will continue. If
reductions in variable costs do not in fact outpace reductions
in variable revenues, we may experience a substantial reduction
in our margins on minutes of communication traffic which, absent
a significant increase in billable minutes of traffic carried,
increased charges for other services, or a shift in the mix of
subscription and variable revenues to more subscription
revenues, would have a material adverse effect on our business
and financial results.

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Selling, General and Administrative
Expenses

Selling, general and administrative expenses are
comprised primarily of salaries, employee benefits, office and
administrative expenses, professional and consulting fees and
marketing costs for both our core business and our consumer
Internet business. These expenses have increased as we have
developed and expanded our operations. We expect selling,
general and administrative expenses both on an absolute basis
and as a percentage of revenue to decrease from the levels in
2001. Due to our restructurings announced in 2001, we expect to
realize total annual savings in selling, general and
administrative expenses of approximately
21.2 million,
with
8.9 million
of such savings realized in 2001. Although we will continue to
seek additional synergies in our operations, we cannot predict
the timing of any savings, if any, that may be achieved by such
efforts.

Adjusted EBITDA

Versatels Adjusted EBITDA consists of
earnings (loss) before interest expense, interest income, income
taxes, depreciation and amortization, stock based compensation,
tax penalties, restructuring expense, extraordinary items,
results from investing activities and foreign exchange gain
(loss).

Adjusted EBITDA is included because management
believes it is a useful indicator of a companys ability to
incur and service debt. Adjusted EBITDA should not be considered
as a substitute for operating earnings, net income, cash flow or
other statements of operations or cash flow data computed in
accordance with U.S. GAAP or as a measure of our results of
operations or liquidity. Because all companies do not calculate
Adjusted EBITDA or EBITDA identically, the presentation of
Adjusted EBITDA contained herein may not be comparable to other
similarly titled measures of other companies. Due to the
integrated nature of Versatels activities a meaningful
breakdown of the Adjusted EBITDA between services or per
customer type is not presented here.

Management allocates both network services and
corporate overhead costs to The Netherlands because the
Versatels headquarters, including the network operating
center, are located at Versatels main office in Amsterdam,
The Netherlands.

Versatels consolidated Adjusted EBITDA and
total consolidated EBITDA presented on a geographical basis is
divided as follows:

|                         |                                    |                          |         |         |   |      |         |          |   |  |         |         |  
|------------------------ | ---------------------------------- | ------------------------ | ------- | ------- | - | ---- | ------- | -------- | - |  | ------- | ------- | -
|                         |                                    |                         
|                         |                                    | Years Ended December 31,
|                         |                                    |                         
|                         |                                    | 1999                     |         | 2000    |   | 2001
|                         |                                    |                          |         |         |   |     
|                         |                                    |                         
|                         |                                    | (euro in thousands)     
|The Netherlands          |                                    |                          | (47,275 | )       |   |      | (81,426 | )        |   |  | (12,764 | )      
|Belgium                  |                                    |                          | (9,165  | )       |   |      | (19,183 | )        |   |  | (24,283 | )      
|Germany                  |                                    |                          | (930    | )       |   |      | (57,847 | )        |   |  | (27,233 | )      
|                         |                                    |                          |         |         |   |      |         |          |   |  |         |        
|                         | Total Consolidated Adjusted EBITDA |                          |         | (57,370 | ) |      |         | (158,456 | ) |  |         | (64,280 | )
|                         |                                    |                          |         |         |   |      |         |          |   |  |         |        
|Stock based compensation |                                    |                          | (12,557 | )       |   |      | (7,034  | )        |   |  | (5,695  | )      
|Tax penalties            |                                    |                          |        |         |   |      |        |          |   |  | (2,978  | )      
|Restructuring expense    |                                    |                          |        |         |   |      |        |          |   |  | (11,240 | )      
|                         |                                    |                          |         |         |   |      |         |          |   |  |         |        
|                         | Total Consolidated EBITDA          |                          |         | (69,927 | ) |      |         | (165,490 | ) |  |         | (84,193 | )
|                         |                                    |                          |         |         |   |      |         |          |   |  |         |        

Depreciation and Amortization

We capitalize and depreciate our fixed assets,
including switching and transmission equipment, routers, fiber
optic cable and rights of use, over periods ranging from three
to 30 years taking residual values into account.
Historically, we have capitalized and amortized the cost of
installing dialers and other equipment at customer sites. The
development of our network, including construction, indefeasible
rights of use, and equipment, will require capital expenditures
resulting in larger depreciation charges in the future. In
addition, the goodwill associated with our acquisitions will
account for a substantial portion of our depreciation and
amortization charge. We capitalize interest charges for the
costs related to that portion of our network which is under
construction, which among other things consists of overlay
sections, network equipment, and city rings, using the

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average interest rate of our outstanding debt. In
addition, self-manufactured assets include all direct expenses
incurred (e.g., work contracted out, direct labor and
material cost). Indirect expenses which can be attributed to
this activity (e.g., finance expenses) are also capitalized.


Foreign Exchange

A significant portion of our indebtedness is
denominated in U.S. dollars, but our revenues are generated
and costs incurred almost entirely in countries that have
adopted the euro. We are therefore exposed to fluctuations in
the U.S. dollar and the euro, which may result in foreign
exchange gains and/or losses, and our ability to pay interest
and principal due on our indebtedness will be affected by
changes in the exchange rate between the U.S. dollar and
the euro. A number of equipment purchases and consultancy
activities are billed to us in currencies other than euro. The
euro weakened by 6.0% in 2001 from $0.9465 per
1.00 on
January 1, 2001, to $0.8901 per
1.00 on
December 31, 2001. The completion of the proposed exchange
offer would significantly reduce our foreign exchange exposure
as a result of the retirement of almost all of our
U.S. dollar denominated senior notes.

Results of Operations

For the year ended December 31, 2001
compared to the year ended December 31, 2000

Revenues increased by
74.2 million
to
255.7 million
for the year ended December 31, 2001 from
181.5 million
for the year ended December 31, 2000, representing an
increase of 41%. Gross billings increased by
 92.9 million
to
274.4 million
for the year ended December 31, 2001 from
181.5 million
for the year ended December 31, 2000, representing an
increase of 51%. This increase is due to autonomous growth and
the full year consolidation of our acquisitions of Komtel in
Germany and Klavertel N.V. and its wholly owned subsidiaries
Compath and MDDI in Belgium. In contrast, for the year ended
December 31, 2000, these acquisitions were consolidated for
nine months, beginning in second quarter of 2000. New
revenues were generated primarily through the connection of new
customers, the provision of additional voice, data and Internet
services to existing customers in The Netherlands, Belgium,
and Germany, and an increase in carrier services sales. Included
in the revenues for the year ended December 31, 2001 are
sales from Komtel of
 36.6
million compared to
27.7 million
for the year ended December 31, 2000. In 2001 we did not
recognize
1.3 million
of revenue from a financially troubled voice reseller due to the
unlikely recovery of payment.

Included in the revenues are data and Internet
service revenues amounting to
106.4 million
for the year ended December 31, 2001 up from
74.9 million
for the year ended December 31, 2000, representing an
increase of 42.1%. Our voice revenues increased to
126.3 million
for the year ended December 31, 2001, from
97.9 million
in the year ended December 31, 2000. Gross voice billings
increased by
47.1 million
to
145.0 million
for the year ended December 31, 2001, up from
97.9 million
for the year ended December 31, 2001, representing an
increase of 48.1%.

In addition, approximately
23.0 million
of Versatels revenues for the year ended December 31,
2001 and
4.8 million
of Versatels revenues for the year ended December 31,
2000 were derived from customers from which Versatel also
purchased assets for use in its own network. The assets
purchased have been recorded as purchases of property, plant and
equipment and include the international fiber and capacity that
Versatel required to complete its international network. The
gains realized on these transactions in 2001 and 2000 amounted
to
18.7 million
and
4.0 million
respectively. For these revenues, we applied our accounting
principle for non-monetary transactions.

In Germany, gross billings were
80.1 million
for the year ended December 31, 2001 compared to
53.9 million
for the year ended December 31, 2000 (Komtel was
consolidated as of the second quarter of 2000). Komtel had gross
billings of
55.3 million
for the year ended December 31, 2001 compared to
27.7 million
for the year ended December 31, 2000. Versatel Deutschland
(formerly known as VEW Telnet) had revenues of
24.8 million
for the year ended December 31, 2001 compared to
26.2 million
for the year ended December 31, 2000.

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Our total number of business customers increased
to more than 75,000 as of December 31, 2001. As of
December 31, 2001, Zon had more than 1,436,000 subscribers
in The Netherlands.

Cost of revenuesincreased by
20.8 million
to
154.4 million
for the year ended December 31, 2001 from
133.6 million
for the year ended December 31, 2000. Costs relating to
gross billings increased by
39.5 million
to
173.1 million
for the year ended December 31, 2001 from
133.6 million
for the year ended December 31, 2000, representing an
increase of 29.6%, primarily reflecting an increase in billable
minutes, purchases of increased interconnect capacity,
additional leased lines to central office facilities and
Internet termination charges. Our acquisition of Komtel in
Germany added
24.7 million
to cost of revenues for the year 2001 and
11.8 million
for the year 2000 and our acquisition of Klavertel and its
wholly owned subsidiaries, Compath, Keys-Tone and MMDI in
Belgium added
3.9 million
for the year 2001 and
3.2 million
for the year 2000.

However, our cost of revenues were positively
impacted by a relative reduction in our dependency on leased
lines to connect our customers directly on to our backbone
network.

Selling, general and administrative expensesexcluding non-recurring expenses
relating to stock based compensation, tax penalties and
restructuring expenses decreased by
40.8 million
to
165.6 million
for the year ended December 31, 2001 from
206.4 million
for the year ended December 31, 2000, representing a
decrease of 19.8%. Excluded in these expenses are non-recurring
expenses relating to restructurings of
11.2 million,
a non-cash charge of
5.7 million
related to the issuance of employee stock options and a
non-recurring tax penalty payment of
3.0 million
as a result of a settlement with the Dutch authorities. This
primarily resulted from a decrease in the cost of staff
(including temporary personnel and consultants) in the areas of
network operations, customer service, sales and marketing,
installation services, accounting personnel and additional
facilities cost.

Depreciation and amortization expensesincreased by
47.1 million
to
138.6 million
for the year ended December 31, 2001 from
91.5 million
for the year ended December 31, 2000. Depreciation of fixed
assets increased to
110.3 million
for the year ended December 31, 2001 from
64.9 million
for the year ended December 31, 2000. This increase was
primarily related to depreciation resulting from capital
expenditures incurred in connection with the expansion of our
network, an increase in the number of buildings connected to our
network, the purchase of computer equipment and office
furniture. Included in these expenses is a non-recurring charge
of
1.3 million
for the write-off of our dialers in our Belgian operation as a
result of the introduction of carrier pre-select. Also included
is the amortization of goodwill of
28.3 million
for the year ended December 31, 2001 and
26.7 million
for the year ended December 31, 2000. In addition, property
and equipment include assets held for sale of
59.0 million
and
47.1 million
as of December 31, 2001 and 2000 respectively, which are
not depreciated. These assets held for sale consist of ducts on
specific routes in our network that we build with the intention
to sell to other carriers.

Currency exchange losses,
net, decreased by
2.5 million
to
30.2 million
for the year ended December 31, 2001, from a loss of
32.7 million
for the year ended December 31, 2000. The decrease can
primarily be attributed to a decrease in the devaluation of the
euro to the dollar by 6% in 2001 from $0.94 per
1.00 as of
December 31, 2000 to $0.89 per
1.00 as of
December 31, 2001, compared to a decrease of 9% in 2000.

Interest incomedecreased by
12.1 million
to
45.5 million
for the year ended December 31, 2001, from
57.6 million
for the year ended December 31, 2000. This decrease was
primarily a result of our lower cash balance.

Interest expenseincreased by
15.3 million
to
184.1 million
for the year ended December 31, 2001, from
168.8 million
for the year ended December 31, 2000. This increase is
primarily related to the additional interest expense as a result
of our debt offerings in March 2000.

Result from investing activitiesincreased by
3.1 million
from a loss of
3.1 million
for year ended December 31, 2000, to nil for the year ended
December 31, 2001. In 2001 we realized a book gain of
0.1 million
on the sale of Keys-Tone in Belgium, while we took an impairment
on our investment in Bornet in Germany of
0.1 million.
The
3.1 million
loss in 2000 resulted from the application of the equity
accounting method of our investment in Versapoint of
9.1 million
whilst we realized a profit with the sale of Telebel in Germany
for
4.1 million,
and a profit with the sale of Speedport for
1.9 million.

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Extraordinary Itemamounted to
13.0 million
for the year ended December 31, 2001. During the year
period ended December 31, 2001, Versatel repurchased in the
open market
22.1 million
in principal amount outstanding of its long-term debt securities
utilizing cash from its existing cash balances. We entered into
these transactions in an effort to retire a portion of the debt
securities that were trading at distressed levels.

For the year ended December 31, 2000
compared to the year ended December 31, 1999

Revenuesincreased
by
123.0 million
to
181.5 million
for the year ended December 31, 2000 from
58.5 million
for the year ended December 31, 1999, representing an
increase of 210 %. The growth in revenues resulted primarily
from the acquisitions of Svianed, VEW Telnet and Komtel, the
addition of new customers, the provision of additional data and
Internet services in The Netherlands, Belgium and Germany, and
an increase in carrier services. Versatel acquired Svianed on
June 1, 1999 and VEW Telnet on December 1, 1999.
Included in the revenues for 2000 are revenues from Svianed of
26.7 million
for the full year
(18.8 million
in 1999 for the seven months), and from VEW Telnet of
26.2 million
for the full year
(1.8 million
in 1999 for one month). Included in the revenues for the year
ended December 31, 2000 are revenues of Klavertel N.V. and
its wholly owned subsidiaries Compath, Keys-Tone and MMDI
(acquired on June 9, 2000) of
3.7 million
and Komtel GmbH (acquired March 24, 2000) of
27.7 million.
We also made one-time sales of excess duct capacity of
8.6 million
during 2000.

Included in the revenues are data and Internet
service revenues amounting to
74.9 million
for the year ended December 31, 2000 up from
21.2 million
for the year ended December 31, 1999, representing an
increase of 253.3%. The per minute revenue of voice
telecommunications has been negatively impacted by frequent
price reductions resulting from competitive pressures. However,
these per minute declines have been more than offset by an
increase in billable minutes. As a result, our voice revenues
increased by 163% to
97.9 million
in 2000 from
37.3 million
in 1999.

Our total number of business customers increased
to more than 58,000 as of December 31, 2000. As of
December 31, 2000, Zon had more than 968,000 registered
subscribers in The Netherlands.

Cost of revenuesincreased by
87.9 million
to
133.6 million
for the year ended December 31, 2000 from
45.7 million
for the year ended December 31, 1999, an increase of 192%,
primarily reflecting an increase in billable minutes, purchases
of increased interconnect capacity, additional leased lines to
co-location facilities and Internet termination charges. Our
acquisitions of Klavertel N.V. and its wholly owned
subsidiaries, Compath N.V., Keys-Tone N.V. and MMDI N.V. in
Belgium and Komtel GmbH in Germany added
3.2 million
and
11.8 million,
respectively, to cost of revenues for the period.

Included in the cost of revenues are
non-recurring expenses of approximately
8.0 million
related to interconnect charges for the consumer Internet
service of Sonne in Germany. Our flat fee consumer Internet
service in Germany has been terminated and all charges
associated with terminating these services have been recognized
as cost of revenues.

Our cost of revenues have also been negatively
impacted as Dutch mobile phone operators have instituted
call-blocking to prevent us from utilizing lower international
terminating alternatives compared to their higher cost
termination charges for fixed to mobile communications minutes.

However, our cost of revenues were positively
impacted by a relative reduction in our dependency on leased
lines to connect our customers directly on to our backbone
network.

Selling, general and administrative
expensesincreased by
130.6 million
to
213.4 million
for the year ended December 31, 2000 from
82.8 million
for the year ended December 31, 1999, representing an
increase of 157.7%. This primarily resulted from an increase in
the cost of staff (including temporary personnel and
consultants) in the areas of network operations, customer
service, sales and marketing, installation services, accounting
personnel, additional facilities cost, expenses related to the
expansion of our Belgium operations and additional expenses as a
result of the acquisitions of Svianed, VEW Telnet and Komtel.

Included in these expenses are a non-cash charge
of
7.0 million
related to the issuance of employee stock options, non-recurring
charges for a restructuring provision of
5.0 million
and a write-off of future marketing,

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advertising and related costs amounting to
10.0 as a result
of the suspension of our flat fee consumer Internet service in
Germany.


Depreciation and amortization
expensesincreased by
65.1 million
to
91.5 million
for the year ended December 31, 2000 from
26.4 million
for the year ended December 31, 1999. This increase was
primarily related to depreciation resulting from capital
expenditures incurred in connection with the expansion of our
network, an increase in the number of buildings connected to our
network, an increase in the number of dialers installed, the
purchase of computer equipment and office furniture. Also
included is the amortization of goodwill of
26.7 million.

Currency exchange losses,
net,decreased by
11.0 million
to
32.7 million
for the year ended December 31, 2000, from a loss of
43.7 million
for the year ended December 31, 1999. The decrease can
primarily be attributed to a decrease in the devaluation of the
euro to the dollar by 9% from
$1.02 per 1.00
to
$0.94 per 1.00
in 2000, compared to a decrease of 14% from
$1.18 per 1.00
to
$1.02 per 1.00
in 1999.

Interest incomeincreased by
44.7 million
to
57.6 million
for the year ended December 31, 2000, from
12.9 million
for the year ended December 31, 1999. This increase was
primarily related to our positive cash balance as a result of
our debt and equity offerings in 2000.

Interest expenseincreased by
97.4 million
to
168.8 million
for the year ended December 31, 2000, from
71.4 million
for the year ended December 31, 1999. This increase is
primarily related to the accrual of interest expense on the
notes issued as a result of our debt offerings in 2000.

Result from investing
activitiesamounted to a loss of
3.1 million
for the year ended December 31, 2000. Included in this
amount is our pro-rata result from our 50% equity stake in the
Versapoint participation for the period April 29, 2000 to
December 29, 2000, a loss of
9.1 million.
We realized a profit with the sale of Telebel in Germany of
4.1 million,
and a profit with the sale of Speedport of
1.9 million.
We did not realize any profits or losses from investments during
1999.

Other asset
impairmentsamounted to
12.8 million
and relate to Versatels share in the fixed assets written
off by Versapoint as a result of the integration of Versapoint
within Versatel. We did not incur any other asset impairments
during 1999.

Other expensesamounted to
5.4 million
and relate to a write off of our investments in Internet
Ventures Group B.V. (formerly known as Hot Orange) and
Cedron (formerly known as Consumer Desk) amounting to
2.3 million.
An additional
3.1 million
of dialer equipment was written off due to the introduction of
carrier pre-select during 2000 in The Netherlands. We did not
incur any other expenses during 1999.




5.B     LIQUIDITY AND
CAPITAL RESOURCES

We have incurred significant operating losses and
negative cash flows as a result of the development of our
business and network. Prior to May 1998, we financed our growth
primarily through equity and subordinated loans from our
shareholders. Since then, we have raised an aggregate of
approximately
2.6 billion
in proceeds, net of offering expenses, in a series of debt and
equity offerings, as follows:



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In May 1998, we issued $225,000,000 13 1/4%
	senior notes due 2008 and warrants to purchase 3.0 million
	ordinary shares;                                                                  
|
| |  | In December 1998, we issued $150,000,000
	13 1/4% senior notes due 2008 and warrants to purchase
	2.0 million ordinary shares;                                                             
|
| |  | In July 1999, we issued $180,000,000 11 7/8%
	senior notes due 2009,
	120,000,000
	11 7/8% senior euro notes due 2009 and sold
	22.2 million ordinary shares at
	10.00 per share;        
|
| |  | In December 1999, we issued
	300,000,000 4%
	senior convertible notes due 2004 and sold 15.0 million
	ordinary shares at
	35.00 per share;
	and                                          
|
| |  | In March 2000, we issued
	300,000,000
	11 1/4% senior euro notes due 2010,
	360,000,000 4%
	senior convertible notes due 2005 and sold 5.1 million
	ordinary shares at
	49.00 per share.

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We have used a significant amount of the net
proceeds of these debt and equity offerings to make capital
expenditures related to the expansion and development of our
network, to acquire various companies, to fund operating losses
and for other general corporate purposes. Our capital
expenditure for each of the years ended December 31, 2001,
2000 and 1999 was
251.9 million
466.9 million
and
173.8 million,
respectively. Taking the non-monetary transactions of 2001 into
consideration, our gross capital expenditures amounted to
274.9 million.
We expect total capital expenditure for 2002 to be significantly
below 2001 levels. In addition, we may have to purchase the
remaining stake in Komtel we do not already own for
approximately
13.9 million.

As of December 31, 2001, we had negative
working capital (excluding cash and marketable securities) of
194.8 million.
In the future we expect our working capital needs to increase.
This is largely due to an expected increase in our revenues and
a related increase in accounts receivable, at the same time that
we expect a significant reduction in our accounts payable as a
result of payments that are due with respect to equipment and
services purchased in connection with the construction of our
now largely completed network and a reduction in our selling,
general and administrative expenses. Also, as the focus of our
network construction has shifted to customer connection projects
with a shorter lead time, the length of time that the associated
accounts payable remain outstanding will decrease.

As of December 31, 2001, our cash and
marketable securities balance amounted to
722.1 million,
which together with anticipated cash flows from operations,
should provide us with sufficient capital to fund planned
capital expenditures, the introduction of new services,
anticipated losses and working capital requirements until the
beginning of 2004. If current capital market conditions prevail,
under our current capital structure we believe that we may not
be able to raise additional capital to fund our operations
beyond the beginning of 2004.

Our proposed exchange offer is to exchange up to
100% of our notes outstanding for cash and ordinary shares of
Versatel. Upon completion of the exchange offer, Versatel
believes that its remaining cash balance, together with
anticipated cash flow from operations, will provide it with
sufficient capital to fund its operations to at least the
beginning of the second quarter 2003. In addition, Versatel
believes that the substantial reduction in future interest
payments and principal repayments on the notes will reduce its
additional funding requirements to less than
50 million.
Versatel also believes that its remaining funding requirement
could potentially be further reduced through a combination of
creating further operating efficiencies and future capital
raising activities in the equity or debt markets, including
warrant and option exercises. However, if the proposed exchange
offer or any financial restructuring through a court proceeding
is unsuccessful and current conditions in the capital markets
prevail, under our current capital structure we believe that we
may not be able to raise additional capital to fund our
operations beyond the beginning of 2004.

The proposed exchange offer is conditioned on the
receipt of tenders of at least 99% in aggregate of the initial
principal amount of the notes currently outstanding. If we do
not receive tenders of at least 99% in aggregate of initial
principal amount of all notes currently outstanding, but we do
receive sufficient affirmative votes in favor of a plan of
composition, we currently intend to effect our financial
restructuring by filing a request for a suspension of payments
with a Netherlands court. If the plan of composition was to be
ratified, all holders of notes, including the holders of the
notes that do not tender their notes pursuant to the terms of
the exchange offer, would be bound to the terms of the plan of
composition, 100% of the notes would be cancelled and the
holders of notes would receive the same consideration that it is
offered in the exchange offer except for the early tender
payment. It is possible that the Netherlands court may decide
not to ratify the plan of composition and it is also possible
that the Netherlands court may declare Versatel bankrupt
simultaneously with its refusal to ratify the plan. Such a
declaration would put us into liquidation. Management believes
that the possibility of this outcome is limited. See Item
8.B  Significant Changes. Also reference is
made to note 1(a) to the financial statements as included
on page F-11.

Subsequent to the proposed exchange offer, if we
wish to take advantage of attractive business opportunities in
order to expand our local access network or otherwise, we will
require additional capital. This additional capital could be in
the form of equity or debt raised in the private or public
markets or from financial institutions. A failure to acquire
additional capital on acceptable terms may seriously and
adversely affect the growth of our business and may have an
adverse effect on the valuation of our tangible and intangible
fixed assets.

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The general rate of inflation has been low in the
Benelux and Germany in recent years. We do not expect that
inflationary pressures in the future, if any, will have a
material impact on our results of operations or financial
condition.

Net cash used in operating activities was
207.0 million
in the year ended December 31, 2001, compared to
191.0 million
during the year ended December 31, 2000. This increase was
primarily the result of a decrease in accounts payable and
accrued liabilities.

Net cash used in investing activities was
621.8 million
in the year ended December 31, 2001, primarily as a result
of a net disinvestment in marketable securities of
873.9 million
and capital expenditures of
251.9 million,
compared to
1,516.2 million
used in investing activities for the year ended
December 31, 2000. Taking the non-monetary transactions of
2001 into consideration, our gross capital expenditures amounted
to
274.9 million.
Included in the cash used in investing activities for the year
ended December 31, 2000 are non-recurring finance costs due
to our offerings of high yield notes and convertible notes in
March 2000 of
19.5 million,
and
103.5 million
paid in connection with the acquisition of and investment in new
businesses, which mainly consist of
61.6 million
paid to the former shareholder of Komtel,
32.0 million
invested in Versapoint,
4.3 million
paid for our investment in Klavertel and its subsidiaries,
1.4 million
paid in connection with our investment in Internet Ventures
Group B.V. (formerly known as Hot Orange) and
1.0 million
paid for Cedron (formerly known as Consumer Desk). Net
disinvestment in marketable securities for the year ended
December 31, 2001 amounted to
873.9 million
primarily due to cash requirements from operating activities and
capital expenditures. For the year ended December 31, 2000
the net investment in marketable securities amounted to
955.8 million,
primarily due to the successful debt and equity offerings during
March of 2000.

Net cash provided by financing activities was
3.4 million
in the year ended December 31, 2001, compared to
944.5 million
during the year ended December 31, 2000 primarily as a
result of the equity and debt offerings in March 2000. Included
in the cash provided by financing activities for the year ended
December 31, 2000 were the non-recurring proceeds from our
equity and debt offerings in March 2000.

During the year period ended December 31,
2001, Versatel repurchased in the open market
22.1 million
in principal amount outstanding of its long-term debt securities
utilizing cash from its existing cash balances realizing a one
time extraordinary gain of
13.0 million.




5.C     RESEARCH AND
DEVELOPMENT, PATENTS AND LICENSES

We did not incur, or capitalize any costs for
research and development, patents and licenses during 2001. We
purchase the technology required for our network from
independent third party suppliers.




5.D     TREND
INFORMATION

For a discussion of the trends affecting our
business please see Operational and Financial Review and
Prospects  Overview and Risk
Factors.

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ITEM
6.     DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES






6.A     DIRECTORS AND
SENIOR MANAGEMENT


The members of the supervisory board and the
management board of Versatel and other executive officers of
Versatel and their respective ages and positions are set forth
below.

Management Board

Raj M. Raithatha is the sole managing
director (statutair directeur) of Versatel.

Supervisory Board

|                        |  |     |    |                     |  |                    |  |              
|----------------------- |  | --- | -- | ------------------- |  | ------------------ |  | -------------
|Name                    |  | Age |    | Date of appointment |  | Position          
|                        |  |     |    |                     |  |                   
|R. Gary Mesch           |  |     | 48 |                     |  | September 29, 2000 |  | Chairman     
|Leo W. A. M. van Doorne |  |     | 42 |                     |  | December 1, 1995   |  | Vice Chairman
|Johan G. Wackwitz       |  |     | 47 |                     |  | August 14, 1998    |  | Member       
|James R. Meadows        |  |     | 49 |                     |  | August 14, 1998    |  | Member       
|Sander van Brummelen    |  |     | 60 |                     |  | July 23, 1999      |  | Member       
|H.S. Jörg Mohaupt       |  |     | 35 |                     |  | May 12, 2000       |  | Member       

Executive Board

|                              |  |     |    |                     |  |                    |  |                                                            
|----------------------------- |  | --- | -- | ------------------- |  | ------------------ |  | -----------------------------------------------------------
|Name                          |  | Age |    | Date of appointment |  | Position          
|                              |  |     |    |                     |  |                   
|Raj M. Raithatha              |  |     | 39 |                     |  | September 29, 2000 |  | Managing Director and Chief Executive Officer              
|Mark R. Lazar                 |  |     | 27 |                     |  | January 1, 2002    |  | Chief Financial Officer                                    
|Marc A. J. M. van der Heijden |  |     | 43 |                     |  | June 6, 1998       |  | Chief Regulatory Officer and Vice President
	Public Affairs
|Aad T. Beekhuis               |  |     | 55 |                     |  | March 1, 2000      |  | Chief Operations Officer                                   
|Jan A. van Berne              |  |     | 39 |                     |  | September 1, 2000  |  | General Counsel and Chief Development Officer              

Biographies

R. Gary
Meschhas served as Chairman of
the Supervisory Board since September 2000. Prior to his
appointment to the Supervisory Board he served as Managing
Director of Versatel individually or through his position as
President of Open Skies International Inc. (Open
Skies) since October 1995. In 1991 he founded and became
President of Open Skies, a telecommunications consultancy with
operations based in Amsterdam, which provided consulting for
early stage development of competitive European
telecommunications businesses. From 1991 to 1995 Open Skies
advised such clients as Unisource, PTT Telecom
International, Inmarsat, NEC and Eurocontrol. In 1984 he founded
and until 1990 he managed the commercial operations of NovaNet,
a Denver-based provider of satellite-based data communications
networks. NovaNet was acquired by ICG Communications in 1993.
From 1981 to 1983 he served as director of sales for Otrona
Advanced Systems, a Colorado-based manufacturer of high
performance computer systems. From 1975 to 1981 he served as a
senior systems engineer with Westinghouse Electric.
Mr. Mesch holds a B.S. in Electrical Engineering from the
University of Colorado and an M.B.A. from Denver University.

On March 21, 2002, Mr. Mesch announced
that upon successful completion of our financial restructuring
he will resign from the Supervisory Board.

Leo W. A. M. van
Doornehas served as a member of
the Supervisory Board of Versatel since December 1995, until
October 2000 in the capacity of Chairman. Mr. Van Doorne is
the Executive Vice President of OTB Group B.V., a company
involved in the development and supply of optical disc
production equipment. From September 1996 to December 2001 he
served as the Managing Director of NeSBIC Groep B.V., a venture
capital

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company and a subsidiary of Fortis. From 1994 to
1996 he served as Managing Director of NeSBIC Venture
Management B.V. From 1990 to 1994 he was Regional Director
of Banque de Suez Nederland N.V. Mr. Van Doorne serves as a
member of the supervisory board of various other companies.
Mr. Van Doorne holds a degree in law from the University of
Utrecht.


Johan G.
Wackwitzhas served as a member of
the Supervisory Board of Versatel since August 1998.
Mr. Wackwitz is a member of the management boards of COBEPA
S.A. and Paribas Deelnemingen N.V. From 1991 to 1993 he was
employed by Paribas in its capital markets division and
responsible for the Benelux within the investment-banking group.
From 1979 to 1991 he served at various management positions at
Bankers Trust Company. Mr. Wackwitz serves as a member of
the supervisory board of various other companies.
Mr. Wackwitz holds a degree in economics from the Rijks
Universiteit Groningen and an MBA from Columbia University.

James R.
Meadowshas served as a member of
the Supervisory Board of Versatel since August 1998.
Mr. Meadows is a member of the Board of Directors of
AshleyLaurent, a supplier of security software for the Internet.
He is the founder of Direct International, Inc., a
telecommunications company and the co-founder and former
President and CEO (from 1997 until 2000) of PrimeTec
International, a U.S.-based telecommunications services
provider. From 1989 to 1997 he served as Director of Government
Affairs at Capital Network System, Inc. (CNSI), a
telecommunications services provider. Mr. Meadows is a
member of the Board of Directors of Lone Star 2000, a public
policy foundation. Mr. Meadows holds a degree in history
from the University of Texas at Austin.

Sander van
Brummelenhas served as a member
of the Supervisory Board of Versatel since July 1999.
Mr. Van Brummelen is a member of the Executive Board of
PinkRoccade, an information and communication technology company
since the end of 2000. Prior to this appointment, he served as
Managing Director of GAK Holding beginning 1996. From 1992 to
1996 he served as a principal director of GAK and from 1982 to
1992 he served as IT director of GAK. From 1979 to 1982 he
served in managing positions at KPN Telecom. Mr. Van
Brummelen serves as a member of the supervisory boards of two
other companies, CC Drive and M&I Partners.
Mr. Van Brummelen holds a degree in technical engineering
from the University of Delft.

H.S. Jörg
Mohaupthas served as a member of
the Supervisory Board of Versatel since May 2000.
Mr. Mohaupt is Managing Director and founder of Continuum
Group Limited, a telecommunications infrastructure investment
firm. From 1999 to 2000 he served as Executive Director in the
Telecom Group at Morgan Stanley Dean Witter in London. From 1997
to 1999 he worked at Lehman Brothers in New York and London
as Vice-President and later Director in the Telecom Group. From
1996 to 1997 he worked at Cowen & Company in
New York. From 1994 to 1996 he worked as Senior Advisor
Internal Business Development at KPN. From 1993 to 1994 he
worked as a consultant at Coopers & Lybrand in the
telecommunications group and from 1992 to 1993 as a business
development manager at Cable & Wireless.
Mr. Mohaupt holds a degree in communications science from
the University of Amsterdam.

Raj M.
Raithathahas served as Chief
Executive officer and Managing Director of Versatel since
September 2000. From April 1998 to September 2000 he served as
Vice President Finance and Chief Financial Officer of Versatel.
From 1994 to April 1998 he served as Chief Financial Officer and
Director of Business Development of ACC Corp.s European
Operations. From 1992 to 1994 he served as Finance Director of
Bay Trading Company. From 1989 to 1992 he served as divisional
finance director at Securiguard Group plc and from 1987 to 1989
he was financial controller at Harrison Willis. From 1983 to
1987 he was employed by KPMG Peat Marwick. Mr Raithatha is a
member of the Carley Europe Venture Partners (CEVP) Advisory
Board. Mr. Raithatha holds a degree in economics and
mathematics from the University of Cardiff, Wales.

Mark R. Lazarhas served as Chief Financial Officer since January 1,
2002. Mr. Lazar has been with Versatel since early 1999,
most recently serving as Vice President of Finance with
responsibility for corporate finance and investor relations.
Prior to joining Versatel, Mr. Lazar was an associate with
a San Francisco based private equity investment firm, Gryphon
Investors, and a member of the telecommunications Investment
Banking group of Lehman Brothers in New York. Mr. Lazar
holds a degree in business administration from the University of
California at Berkeley.

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Marc A.J.M. van der
Heijdenco-founder of Versatel in
1995, became Versatels Chief Regulatory Officer and Vice
President Public Affairs in 1998. During the period 1995 to the
end of 1998 he served as outside regulatory counsel to Versatel
on matters of telecommunications and regulatory policy. Prior to
1995 he was an independent consultant specialized in
Telecommunications law and advisor to the European Commission
and the governments of both The Netherlands and the United
Kingdom. He also advised various other telecommunications
companies such as France Telecom and KPN Telecom as well as
financial institutions such as ABN AMRO and the Nederlandse
Investerings Bank. He worked as an expert for KPMG Peat Marwick
on bidding processes for mobile telephony and sale of cable
companies. Mr. Van der Heijden holds a degree in law from
the Vrije Universiteit of Amsterdam.

Aad T.
Beekhuishas served as Chief
Operations Officer since March 2000. From April 1999 to March
2000 Mr. Beekhuis served as Project Director of KPN Telecom
responsible for the strategy and rollout program for the ADSL
network. From July 1998 to March 1999 he served as Project
Director with Nokia where he was responsible for launch of the
BEN mobile network in The Netherlands. From 1995 to 1998
Mr. Beekhuis served as a Project Manager responsible for
the rollout of the fixed communications network, and later as an
interim manager responsible for TelForts rollout of its
mobile network. From 1993 to 1995 Mr. Beekhuis served as a
Managing Director with RAM Mobile Data C.V. From 1973 to 1993,
he worked in strategic marketing, sales and other positions at
KPN Telecom. Mr. Beekhuis holds a degree in Theoretic
Electricity Sciences from the Technical University of Delft and
a Bachelors degree in Economics from the Erasmus University of
Rotterdam.

Jan A. van
Bernewas appointed to
Versatels Executive Board in September 2000 and currently
holds the position of General Counsel and Chief Development
Officer. Mr. Van Berne has been responsible for
Versatels corporate legal affairs since December 1998. As
of March 2001, he also assumed responsibility for corporate
development. Prior to joining Versatel in December 1998, he
worked at SAIT-Radio Holland N.V. in Belgium from 1991 to 1998
holding various positions: from January 1998 to December 1998 as
programme manager Y2K of SAIT-Radio Holland N.V. and from 1997
to 1998 as manager legal affairs of SAIT-Radio Holland N.V. in
Brussels. From 1994 to 1995 he was legal counsel of Radio
Hollands subsidiary Debitel Nederland. Mr. Van Berne
holds a degree in law from the Vrije Universiteit of Amsterdam.




6.B     COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS

The total aggregate compensation for the
Supervisory Board of the Company as a group for 2001 was
0.1 million.
The total aggregate compensation (including amounts paid
pursuant to management and consulting agreements) of all
executive officers (including the Managing Director) of Versatel
as a group for 2001 was
2.0 million.
During 2001, an aggregate of 122,000 options to purchase 122,000
ordinary shares were granted to executive officers under the
2000 Stock Option Plan and 100,000 under the 2001 Stock Option
Plan. The options under the 2000 Stock Option Plan have an
exercise price of
0.02 and the
options under the 2001 Stock Option Plan have an exercise price
of 4.27. All
these options expire in seven years from the date the options
were granted. No options have been granted to any of our
supervisory board members. Included in the total aggregate
compensation for our executive officers is
0.1 million
to provide for pension and other retirement benefits for our
executive officers.




6.C     BOARD
PRACTICES

Supervisory Board

Under Netherlands law and the articles of
association of Versatel, the management of Versatel is entrusted
to the management board (statutaire directie) under the
supervision of the supervisory board (Raad van
Commissarissen). Under the laws of The Netherlands,
supervisory directors cannot at the same time be managing
directors of the same company. The primary responsibility of the
supervisory board is to supervise the policies pursued by the
management board and the general course of affairs of Versatel
and its business. In fulfilling their duties, the members of the
supervisory board are required to act in the best interests of
Versatel and its business.

Pursuant to the articles of association, the
supervisory board consists of such number of members as may be
determined by the general meeting of shareholders. The members
of the supervisory board are appointed by the general meeting of
shareholders. The holder of the priority share, if any, may
nominate members for appointment

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to the supervisory board. Resolutions of the
supervisory board require the approval of a majority of the
members. The supervisory board meets each time this is deemed
necessary by one of its members. Every retiring supervisory
director may be re-appointed, provided that such supervisory
director has not attained the age of 72. A member of the
supervisory board must retire not later than on the day of the
general meeting of shareholders held in the year in which such
member reaches the age of 72.


A member of the supervisory board may at any time
be suspended or dismissed by the general meeting of
shareholders. The members of the supervisory board will receive
such remuneration as determined by the general meeting of
shareholders.

None of the members of the supervisory board of
Versatel has an employment agreement with the Company, as such
is not allowed under Dutch law. For details on the period of
service for the individual members of the supervisory board, see
 Directors and Senior Management.

Management Board

The management of Versatel is entrusted to the
management board under the supervision of the supervisory board.
The articles of association provide that the management board
may lay down further rules and regulations with respect to its
procedures and internal organization. These rules require the
prior approval of the Supervisory Board. In addition, our
articles of association list certain actions, which require
prior approval of the supervisory board. Such actions include,
among other things, the issuance of shares against payment in
kind.

The management board consists of such number of
members as may be determined by the general meeting of
shareholders. In addition, the general meeting of shareholders
appoints the members of the management board.

The general meeting of shareholders has the power
to suspend or dismiss members of the management board. The
supervisory board also has the power to suspend members of the
management board. If a member of the management board is
temporarily prevented from acting, the remaining members of the
management board shall temporarily be responsible for the
management of Versatel. If all members of the management board
are prevented from acting, a person appointed by the supervisory
board (who may be a member of the supervisory board) will be
temporarily responsible for the management of Versatel. The
compensation and other terms and conditions of employment of the
members of the management board are determined by the
supervisory board.

Mr. Raj Raithatha was appointed to the
management board of Versatel in September 2000 and is currently
the sole member of the management board. Mr. Raithatha has
been appointed for an indefinite term.

Potential Application of Rules on Large
Companies

Under Netherlands law, we would be required to
modify our system of corporate governance upon (a) the
filing of a statement with the trade register, as required by
law, that we meet the criteria under Netherlands corporate law
for large companies (the Large Company Rules) and
(b) the presence of such statement on file at the trade
register for an uninterrupted period of three years. The Large
Company Rules mandatorily shift authority from the shareholders
to our supervisory board and grant employees a degree of
codetermination of our affairs.

Under the Large Company Rules, members of our
supervisory board would no longer be elected by the shareholders
at the general meeting of shareholders, but would be appointed
by the supervisory board itself. Each of the general meeting of
shareholders and the employees, through a works council, would
have the right to:



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | make non-binding recommendations for members of
	the supervisory board and                                                                                                                                                                                                                                                                                                                                                                      
|
| | (ii) | object to proposed appointments of members of the
	supervisory board, but such appointment would still take place
	if the objection were declared unfounded by the Enterprise
	Chamber of the Amsterdam Court of Appeal. The general meeting of
	shareholders and the works council must also be informed by the
	supervisory board of the names of the persons to be appointed to
	the supervisory board before such appointments become final.

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In addition, under the Large Company Rules the
supervisory board appoints, and can suspend and dismiss, members
of the management board. The supervisory board, however, cannot
dismiss members of the management board, before the general
meeting of shareholders has been consulted. Currently, the
general meeting of shareholders appoints the members of our
management board. The supervisory board would also adopt the
annual accounts of the Company under the Large Company Rules,
but the general meeting of shareholders has the right to approve
or not approve the annual accounts of the company. Furthermore,
certain corporate actions, including the issuance of debt or
equity, certain investments, the termination of a large number
of employees and far-reaching changes in the working conditions
of a large number of employees, require supervisory board
approval under the Large Company Rules.

One of the criteria of the Large Company Rules
referred to above is the existence of a works council (at our
level or at the level of one of our subsidiaries). Although
under Netherlands law we are required to facilitate a works
council for our employees, as of December 31, 2001, no
works council exists. However, we are in the process of
installing a works council on the level of the Dutch operating
company, Versatel Nederland BV, which is expected to be in place
by mid 2002. We, as a holding company with no operations apart
from engaging in financing activities, would be exempt from the
Large Company Rules, however, if, among other things, the
majority of our employees and those of our subsidiaries are
employed outside The Netherlands. As of the date of this annual
report, approximately 54% of our full-time employees were
employed in The Netherlands.

A works council is a representative body of the
employees of a Dutch company elected by the employees. The
management board of any company with a works council must seek
the non-binding advice of the works council before taking
certain decisions such as those related to a major restructuring
or a change of control. However, in certain of those cases, if
the decision is not in line with the advice of the works
council, the implementation of the relevant decision must be
suspended for one month, during which period the works council
may appeal the decision with the Enterprise Chamber of the Court
of Appeals in Amsterdam. Other decisions directly involving
employment matters which apply either to all employees, or
certain groups of employees, such as those affecting employee
compensation systems, or pension or profit sharing plans, may
only be taken with the works councils approval. Absent
such prior approval, the decision may nonetheless be taken with
the prior approval of the Cantonal Court (Kantongerecht).
A works council may recommend a candidate for the supervisory
board and may also object to the appointment of a proposed
candidate to the supervisory board.

Board Committees

Audit Committee.During the Supervisory Board Meeting
of December 11, 2000, an Audit Committee was established.
The Committee consists of Messrs. Leo van Doorne, Sander
van Brummelen and Jörg Mohaupt. The Committee reviews the
operating results with the CFO and independent auditors,
considers the adequacy of internal controls and audit procedures
and reviews non-audit services that are provided by the external
auditors.

Remuneration Committee.During the Supervisory Board Meeting
of December 11, 2000, a Remuneration Committee was
established. The Committee consists of Messrs. Gary Mesch,
James Meadows and Hans Wackwitz. The Committee makes
recommendations to the supervisory board concerning salaries and
incentive compensation for our employees and consultants,
including all executive officers and the Managing Director,
including the assessment of the Versatel stock option plans.

Financial Committee.During the Supervisory Board Meeting
of December 11, 2000, a Financial Committee was appointed.
The committee consists of Gary Mesch, Jörg Mohaupt and Mark
Lazar. The Committee makes recommendations to the supervisory
board regarding Versatels financial situation.




6.D     EMPLOYEES

On December 31, 2001, Versatel had 1,382
full-time employees, 30 temporary employees and
27 full-time consultants. On December 31, 2000,
Versatel had 1,760 full-time employees, 51 temporary
employees, and 91 full-time consultants. None of our
employees is represented by a labor union or covered by a
collective bargaining agreement, and we have never experienced a
work stoppage. Under Netherlands law, we are required to
facilitate a works council, but no works council existed as of
December 31, 2001. However, we expect to

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install a works council in the first half of 2002
at the level of Versatel Nederland B.V., the Dutch operating
company. We consider our employee relations to be good.


The following table sets forth the number of
full-time employees on a country basis at the end of 2001, 2000
and 1999.

|                |       |      |     |      |  |      |     |       |  |  |     |       | 
|--------------- | ----- | ---- | --- | ---- |  | ---- | --- | ----- |  |  | --- | ----- | 
|                |       | 1999 |     | 2000 |  | 2001
|                |       |      |     |      |  |     
|The Netherlands |       |      | 545 |      |  |      | 875 |       |  |  | 750 |      
|Belgium         |       |      | 134 |      |  |      | 293 |       |  |  | 153 |      
|Germany         |       |      | 223 |      |  |      | 587 |       |  |  | 479 |      
|France          |       |      |    |      |  |      | 3   |       |  |  |    |      
|United Kingdom  |       |      |    |      |  |      | 2   |       |  |  |    |      
|                |       |      |     |      |  |      |     |       |  |  |     |      
|                | Total |      |     | 902  |  |      |     | 1,760 |  |  |     | 1,382 | 
|                |       |      |     |      |  |      |     |       |  |  |     |      




6.E     SHARE
OWNERSHIP

The following table sets forth the number of
shares and options beneficially held by, or granted to, the
members of our supervisory board, management board and executive
officers as of March 22, 2002.

|                                 |  |        |           |            |  |  |         | 
|-------------------------------- |  | ------ | --------- | ---------- |  |  | ------- | 
|                                 |  | Shares |           | Options(1)
|                                 |  |        |           |           
|Supervisory Board                |  |        |           |            |  |  |         | 
|R. Gary Mesch(2)                 |  |        | 3,429,894 |            |  |  |        | 
|Leo W. A. M. van Doorne          |  |        |          |            |  |  |        | 
|Johan G. Wackwitz                |  |        |          |            |  |  |        | 
|James R. Meadows                 |  |        |          |            |  |  |        | 
|Sander van Brummelen             |  |        |          |            |  |  |        | 
|H.S. Jörg Mohaupt                |  |        |          |            |  |  |        | 
|Executive Officers               |  |        |           |            |  |  |         | 
|Raj M. Raithatha(2)              |  |        | 1,150,908 |            |  |  | 247,000 | 
|Mark Lazar(2)                    |  |        | *         |            |  |  | *       | 
|Marc A. J. M. van der Heijden(2) |  |        | *         |            |  |  | *       | 
|Aad T. Beekhuis(2)               |  |        | *         |            |  |  | *       | 
|Jan A. van Berne(2)              |  |        | *         |            |  |  | *       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Less than one percent of the ordinary shares of
	the Company outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(1) | Each option entitles the holder thereof to
	acquire one ordinary share of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | The number of shares held by all directors and
	executive officers as a group amounted to 5,275,040 shares. The
	aggregate number of options issued to the executive officers as
	a group amounted to 1,302,000. Of the options granted during
	1998 to the current executive officers 550,000 options are still
	outstanding. These options have an exercise price of
	1.16 and expire
	in June 2003. Of the options granted during 1999 to the current
	executive officers 230,000 options are still outstanding. Of
	these, 160,000 options have an exercise price of
	1.16 and an
	expiry date of June 2003 and the remaining 70,000 options have
	an exercise price of
	3.40 and an
	expiry date of May 2004. Of the options granted during 2000 to
	the current executive officers 350,000 options are still
	outstanding. These options have an exercise price of
	0.02 and expire
	in June 2007. Of the options granted during 2001 to the current
	executive officers 172,000 options are still outstanding. Of
	these, 47,000 options have an exercise price of
	0.02 and an
	expiry date of January 2008 and the remaining 125,000 options
	have an exercise price of
	4.27 and an
	expiry date of June 2008.

Option Plans

Versatel has established the following stock
option plans: the 1997 Stock Option Plan (the 1997
Plan), the 1998 Stock Option Plan (the
1998 Plan), the 1999 Stock Option Plan (the
1999 Plan), the 2000 Stock Option Plan (the
2000 Employee Plan) and the 2001 Stock Option Plan
(the 2001 Plan).

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1997 Stock Option Plan

In December 1996, Versatels shareholders
approved the 1997 Stock Option Plan. The 1997 Plan provides for
the grant of options to certain key employees of Versatel to
purchase ordinary shares of Versatel. Under the 1997 Plan, no
options have been granted with an expiration date of more than
five years after the granting of the option. The option exercise
price is determined in the particular grant of the option.

As of December 31, 2001, 398,000 options to
purchase 398,000 ordinary shares had been granted under the 1997
Plan. As of December 31, 2001, 335,500 options granted
under the 1997 Plan had been exercised for a total of 335,500
shares. A further 12,500 options are still outstanding under the
1997 Plan. The remaining options that were previously granted
under this stock option plan have subsequently been cancelled,
in most cases upon the termination of the employment of the
recipient of the options.

1998 Stock Option Plan

In March 1998, Versatels shareholders
approved the 1998 Stock Option Plan. The 1998 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence at the date
of the grant and will last five years. The option exercise price
is determined in the particular grant of the option.

As of December 31, 2001, 5,000,000 options
to purchase 5,000,000 ordinary shares have been granted under
the 1998 Plan. As of December 31, 2001, 4,263,766 options
granted under the 1998 Plan had been exercised for a total of
4,263,766 shares. A further 706,334 options are still
outstanding under the 1998 Plan. The remaining options that were
previously granted under this stock option plan have
subsequently been cancelled, in most cases upon the termination
of the employment of the recipient of the options.

1999 Stock Option Plan

In January 1999, Versatels shareholders
approved the 1999 Stock Option Plan. The 1999 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence at the date
of the grant and will last five years. The option exercise price
is determined in the particular grant of the option.

As of December 31, 2001, 1,908,500 options
to purchase 1,908,500 ordinary shares have been granted under
the 1999 Plan. As of December 31, 2001, 410,493 options
granted under the 1999 Plan had been exercised for a total of
410,493 shares. A further 900,475 options are still outstanding
under the 1999 Plan. The remaining options that were previously
granted under this stock option plan have subsequently been
cancelled, in most cases upon the termination of the employment
of the recipient of the options.

2000 Stock Option Plan

In December 1999, Versatels supervisory
board approved the 2000 Stock Option Plan. The 2000 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence two years
(except for an aggregate of 100,000 options which were
immediately exercisable) after the date of the grant and will
last five years. The option exercise price is determined in the
particular grant of the option.

As of December 31, 2001, options to purchase
2,688,850 ordinary shares have been granted under the 2000 Plan.
As of December 31, 2001, 100,000 options granted under the
2000 Plan had been exercised for a total of 100,000 shares. A
further 1,306,200 options are still outstanding under the 2000
Plan. The remaining options that were previously granted under
this stock option plan have subsequently been cancelled, in most
cases upon the termination of the employment of the recipient of
the options.

2001 Stock Option Plan

In May 2001, Versatels supervisory board
approved the 2001 Stock Option Plan. The 2001 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence

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two years after the date of the grant and will
last five years. The option exercise price is determined in the
particular grant of the option.


As of December 31, 2001, options to purchase
1,055,900 ordinary shares have been granted under the 2001 Plan.
As of December 31, 2001, 852,000 options are still
outstanding under the 2001 Plan. The remaining options that were
previously granted under this stock option plan have
subsequently been cancelled, in most cases upon the termination
of the employment of the recipient of the options.




ITEM 7.     MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS






7.A     MAJOR
SHAREHOLDERS


As of March 22, 2002, 91,352,247 ordinary
shares are issued and outstanding. On this date, none of the
preference shares or the priority share were issued and
outstanding. As of this date 1,286,799 ADS were issued and held
by 46 record holders. The following table sets forth information
regarding the beneficial ownership of the ordinary shares of
Versatel as of March 22, 2002, by each beneficial owner of
5.0% or more of the ordinary shares. All holders of ordinary
shares are entitled to one vote per share. There are no
cumulative voting rights.

|                            |  |           |            |                   |  |  |       | 
|--------------------------- |  | --------- | ---------- | ----------------- |  |  | ----- | 
|                            |  | Number    |            | Percent of Shares
|Name of Beneficial Owner    |  | of Shares |            | Outstanding(1)   
|                            |  |           |            |                  
|NeSBIC Venture Fund C.V.(2) |  |           | 12,357,521 |                   |  |  | 13.5% | 
|Paribas Deelnemingen N.V.   |  |           | 5,934,992  |                   |  |  | 6.5%  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Percentages do not give effect to dilution from
	the exercise of warrants covering 708,502 ordinary shares issued
	in the first high yield offering and the second high yield
	offering that have not been exercised as of March 22, 2002
	or to options outstanding to employees covering 3,777,509
	ordinary shares (all as adjusted to give effect to the 2-for-1
	stock split on April 13, 1999).
|   
|(2) | Includes 1,038,705 ordinary shares held by NeSBIC
	Groep B.V., an affiliate of NeSBIC Venture Fund C.V.                                                                                                                                                                                                                                                                                              

Lock-up Arrangements

At the time of our initial public offering, and
pursuant to Rules and Regulations of Euronext Amsterdam N.V.
then in effect, our shareholders and the members of our
supervisory board and management board entered into lock-up
agreements with ING Bank, our listing agent. The Rules and
Regulations of Euronext Amsterdam N.V. at that time prohibited
any member of our supervisory board or management board, subject
to the exception described below, from disposing, after the date
of the initial public offering on July 23, 1999, of any
ordinary shares acquired by such member before the date of the
initial public offering. In addition, under such Euronext
regulations, any holder of 5% or more of our outstanding share
capital before the date of the initial public offering could
not, for three years after the date of the initial public
offering, sell (collectively with all other holders of 5% or
more of our outstanding share capital acquired before the date
of the initial public offering) in the aggregate more than 25%
of the number of our ordinary shares outstanding before the date
of the initial public offering. If we report a profit, this
lock-up requirement also allowed such shareholders to dispose
collectively of a maximum up to (i) 50% of the shares
issued and outstanding before the date of the initial public
offering if a profit was made for one year or (ii) 75% of
the shares issued and outstanding before the date of the initial
public offering if a profit was made for two years. These
lock-up agreements expire on July 24, 2002 for our
shareholders and on July 24, 2003 for the members of our
management and supervisory board.

Under Rules and Regulations of Euronext Amsterdam
N.V. at the time of our initial public offering, holders of 5%
or more of our outstanding share capital could dispose of their
remaining interest if such disposition (i) was completed
through a public secondary offering involving a due diligence
investigation and the issuance of a prospectus,
(ii) complied with the listing rules of the Official
Segment of Euronext Amsterdam N.V. and (iii) occurred at
least one year after the date of the initial public offering. In
addition, the lock-up arrangements do not prohibit any member of
our supervisory board or management board from disposing of any
ordinary shares acquired after the date of the initial public
offering pursuant to the exercise of options which were granted
under our stock option plans prior to the initial public
offering.

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In November 2000, however, the Official Segment
of Euronext Amsterdam N.V. adopted new lock-up regulations which
provide a substantial relaxation of the old regime. Under the
new rules, the lock-up for shareholders and members of the
supervisory board and management board expires one year after
the date of the initial public offering. These new regulations
may provide a relaxation of the existing lock-up arrangements
for our shareholders and members of our supervisory board and
management board.

Obligations of Shareholders to Disclose
Holdings

The 1996 Act on Disclosure of Holdings in Listed
Companies applicable in The Netherlands (Wet melding
zeggenschap in ter beurze genoteerde vennootschappen 1996)
provides that any person who, directly or indirectly, acquires
or disposes of an interest in the capital and/or the voting
rights of a public limited liability company incorporated under
Dutch law with an official listing on a stock exchange within
the European Economic Area must give written notice of such
acquisition or disposal, if as a result of such acquisition or
disposal the percentage of capital interest or voting rights
held by such person falls within another percentage range as
compared to the percentage range held by such person prior to
such acquisition or disposal. The percentage ranges referred to
in the Disclosure of Holdings Act are 0% to 5%; 5% to 10%; 10%
to 25%; 25% to 50%; 50% to 66 2/3%; and over 66 2/3%.

Non-compliance with the obligations to the
Disclosure of Holdings Act is an economic offense and can lead
to criminal prosecution. In addition, a civil court can impose
measures against any person who fails to notify or incorrectly
notifies in accordance with the Disclosure of Holdings Act. The
company or one or more holders of shares who alone or together
with others represent at least 5% of the issued share capital
can institute a claim requiring that these measures be imposed.
The measures that the civil court may impose include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a court order requiring the person violating the
	Disclosure of Holdings Act to make disclosure in accordance with
	the Act;                                                                                                                                                                                                                                                                            
|
| |  | suspension of voting rights in respect of such
	persons shares for a period of up to three years as
	determined by the court;                                                                                                                                                                                                                                                                          
|
| |  | nullification of a resolution adopted by the
	companys general meeting of shareholders, if it determined
	that the resolution would not have been adopted but for the
	exercise of the voting rights of the person who is obliged to
	notify, or suspension of a resolution until such time as the
	companys general meeting of shareholders has had an
	opportunity to make such a determination; and
|
| |  | an order to the person violating the Disclosure
	of Holdings Act to refrain, during a period of up to five years,
	as determined by the court, from acquiring shares in the capital
	of the company and/or voting rights.                                                                                                                                                                               

The Dutch Act on the Supervision of the
Securities Trade 1995 (Wet Toezicht Effectenverkeer 1995)
contains provisions regarding insider trading and provides,
among other things, for an additional notification duty for
shareholders holding, directly or indirectly, a capital interest
of more than 25% in a listed company. Such shareholders are
obliged to notify the Securities Board of The Netherlands of any
and all transactions that they carry out or cause to be carried
out in securities issued by the company in which they would hold
an interest of over 25%. If a shareholder holding in excess of
25% of the shares is a legal entity and not an individual, the
obligation is extended to the managing directors and supervisory
directors of the legal entity.

Furthermore, the Securities Board of The
Netherlands has authority to impose administrative penalties
(bestuurlijke boetes en dwangsommen) in the event of a
violation of the Disclosure of Holdings Act and of the insider
trading rules. Violation of insider trading rules can also lead
to criminal sanctions.




7.B     RELATED PARTY
TRANSACTIONS

Transactions with Directors and
Officers

Versatel has loaned
265,792 to
Mr. Aad Beekhuis, one of its executive officers, in
connection with stock options granted to Mr. Beekhuis. As
of the date of this filing, no other loans were outstanding from
Versatel to any of its directors or executive officers.

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Versatel has entered into a consultancy agreement
with Jacmel Ltd., a company controlled by Mr. Jörg
Mohaupt, a member of the supervisory board, for consultancy
services relating to Versatels financial restructuring.
Under the agreement Jacmel has been paid
27,500 per
month for the period from September 15, 2001 up to
March 15, 2002. As of March 15, 2002, Jacmel will
receive
1,375 per
day for services rendered, if services are rendered for more
than five days per month. No fee will be due for the first five
days per month. In addition, a success fee consisting of
700,000 shares of Versatel will be paid upon successful
completion of Versatels financial restructuring.




7.C     INTERESTS OF
EXPERTS AND COUNSEL

Not applicable.




ITEM 8.     FINANCIAL
INFORMATION






8.A     CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION


1-3.     Consolidated
Financial Statements.Our audited consolidated financial
statements are included under Item 18 
Financial Statements. Except for our consolidated
financial statements included under Item 18, our auditors
have audited no other information in this annual report.

4.     Not applicable.

5.     Not applicable.

6.     Export
Sales. For a breakdown of our revenues in The Netherlands,
Belgium and Germany, see Item 5.A 
Operating Results.

7.     Legal and
Arbitration Proceedings. None of our current legal or
arbitration proceedings is expected to have a significant effect
on our financial position or profitability. None of our legal or
arbitration proceedings has had in the past a significant effect
on our financial position or profitability. See also
Item 4B. Business Overview  Legal
Proceedings.

8.     Dividend
Policy. We have never declared or paid any dividends on our
ordinary shares or ADSs and we do not anticipate paying any cash
dividends in the foreseeable future. The indentures that govern
our high yield notes limit and, for the foreseeable future,
effectively prohibit our ability to declare or pay cash
dividends.




8.B     SIGNIFICANT
CHANGES

On October 12, 2001, Versatel filed a
registration statement on Form F-4 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission
(the SEC) in connection with a proposed exchange
offer and consent solicitation in respect of its outstanding
high yield notes and convertible notes. On March 21, 2002,
Versatel announced that it had reached an agreement with an
ad hoc committee of bondholders to support the exchange
offer and consent solicitation. The committee is part of a wider
group of bondholders that collectively owns approximately 74% of
our outstanding notes. The committee collectively holds 33% of
our outstanding notes.

Versatel has amended its registration statement
on Form F-4 on March 28, 2002, to reflect this
agreement and intends to launch the exchange offer and consent
solicitation as soon as practical. Among other things, the
exchange offer and consent solicitation will be conditioned upon
the receipt of tenders of at least 99% in aggregate initial
principal amount of all notes currently outstanding.

The principal purpose of the exchange offer is to
eliminate substantially all of the Versatels outstanding
indebtedness and interest expense. The principal purpose of the
consent solicitation is to eliminate or modify substantially all
of the restrictive covenants and other provisions of the notes
in order to enhance the Versatels future financial and
operating flexibility.

Pursuant to the terms of the proposed exchange
offer, noteholders are being offered an amount in cash and
shares in return for tendering their notes and providing their
consents and waivers. Interest paid thereafter on any series of
notes will reduce the cash offered in respect of such series of
notes by the same amount.

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In addition, Versatel will offer (1) high
yield noteholders who tender their notes during the first seven
days that the exchange offer is open and do not withdraw such
notes on or prior to the expiration date of the exchange offer
and (2) convertible noteholders who tender their notes on
or prior to the termination or expiration date of the exchange
offer and do not withdraw such notes prior to the expiration
date, the right to receive an additional cash payment of $25.00
or 25.00 in
respect of each $1,000 or
1,000, as the
case may be, principal amount of notes tendered and for which
consents and waivers are delivered.

The aggregate amount of shares offered represents
approximately 80 percent of the shares of Versatel that
would be outstanding immediately following the completion of the
exchange offer, assuming 99% of Versatels currently
outstanding notes are tendered and not including any dilutive
impact of the warrants that will be issued to our existing
shareholders.

Concurrent with the completion of the exchange
offer or any court approved plan, our current shareholders will
be issued warrants entitling them to one share for every
4.80 shares held by such shareholders with a strike price
of 1.50,
exercisable at any time within two years after issuance of
the warrants. These warrants represent 4% of the shares that
would be outstanding immediately following completion of the
exchange offer.

Versatel will also be soliciting the irrevocable
vote from its noteholders in favor of a plan of composition that
may be filed in The Netherlands as part of a suspension of
payments proceeding (surseance van betaling) with a Dutch
court and in favor of a plan of reorganization that may be filed
as part of to a chapter 11 proceeding with a U.S.
bankruptcy court. If holders of at least 75% of the notes vote
in favor of the plan of composition but less than 99% of the
notes outstanding are tendered in the exchange offer, Versatel
currently intends to effect its financial restructuring by
filing a request for the suspension of payments proceeding in
The Netherlands. We may also file a chapter 11 petition in
a U.S. bankruptcy court, but only concurrently with the filing
of a petition for the suspension of payments in The Netherlands.

Any court procedure initiated by Versatel would
only involve Versatel Telecom International N.V., which is
a holding company. Our operating subsidiaries will not be
directly affected by any court proceedings and they intend to
pay all their obligations, including trade vendors, wages of
employees, rent, etc., when due.

Versatel believes the terms of the exchange offer
and consent solicitation are in the best interests of Versatel
and the holders of all its securities, including shareholders.

Upon completion of the exchange offer or any
court approved plan, Versatel believes that its remaining cash
balance, together with anticipated cash flow from operations,
will provide it with sufficient capital to fund its operations
to at least the beginning of the second quarter 2003. In
addition, Versatel believes that the substantial reduction in
future interest payments and principal repayments on the notes
will reduce its additional funding requirements to less than
50 million.
Versatel also believes that its remaining funding requirement
could potentially be further reduced through a combination of
creating further operating efficiencies and future capital
raising activities in the equity or debt markets, including
warrant and option exercises. However, if the exchange offer or
any court proceeding is unsuccessful and current conditions in
the capital markets prevail, under our current capital structure
we believe that we may not be able to raise additional capital
to fund our operations beyond the beginning of 2004.

Additionally, Gary Mesch the current Chairman of
the Supervisory Board, founder and former CEO, has announced
that upon successful completion of the financial restructuring
he will resign from the Supervisory Board.

As of December 31, 2001, Versatel had a
negative equity position of
26.7 million.
Consequently, Versatel was put on the penalty bench
(strafbankje) as of March 5, 2002, by Euronext Amsterdam
after notifying Euronext Amsterdam of its negative equity
position. Euronext Amsterdam has confirmed that while the
penalty bench serves as a warning sign to investors that we have
a negative equity position, it will not result in Versatel being
de-listed from Euronext Amsterdam. The penalty bench
will also not affect how we trade or our ability to remain a
listed stock on Euronext Amsterdam.

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ITEM 9.     THE OFFER
AND LISTING






9.A     LISTING
DETAILS


Our ordinary shares and our American Depositary
Shares (ADSs) have been traded on the Official
Segment of Euronext Amsterdam N.V. (Euronext) and
the NASDAQ National Market, respectively, under the symbol
VRSA since July 23, 1999, the date of our
initial public offering.

The following table sets forth, for the periods
indicated the high and low closing bid prices per ordinary share
in euro as reported on the Euronext.

|                              |  |      |       |     |  |  |       | 
|----------------------------- |  | ---- | ----- | --- |  |  | ----- | 
|Period                        |  | High |       | Low
|                              |  |      |       |    
|                              |  |     |       |   
|Third Quarter 1999(1)         |  |      | 14.75 |     |  |  | 10.15 | 
|Fourth Quarter 1999           |  |      | 41.20 |     |  |  | 10.10 | 
|First Quarter 2000            |  |      | 80.35 |     |  |  | 28.60 | 
|Second Quarter 2000           |  |      | 48.72 |     |  |  | 24.50 | 
|Third Quarter 2000            |  |      | 45.00 |     |  |  | 25.65 | 
|Fourth Quarter 2000           |  |      | 26.05 |     |  |  | 8.45  | 
|First Quarter 2001            |  |      | 17.85 |     |  |  | 5.37  | 
|Second Quarter 2001           |  |      | 6.66  |     |  |  | 2.93  | 
|Third Quarter 2001            |  |      | 3.14  |     |  |  | 0.48  | 
|Fourth Quarter 2001           |  |      | 1.37  |     |  |  | 0.60  | 
|September 2001                |  |      | 0.80  |     |  |  | 0.48  | 
|October 2001                  |  |      | 1.31  |     |  |  | 0.60  | 
|November 2001                 |  |      | 1.37  |     |  |  | 1.17  | 
|December 2001                 |  |      | 1.30  |     |  |  | 0.91  | 
|January 2002                  |  |      | 1.08  |     |  |  | 0.87  | 
|February 2002                 |  |      | 0.85  |     |  |  | 0.53  | 
|March 2002 (through March 22) |  |      | 0.74  |     |  |  | 0.41  | 






|    |                                                               
|--- | --------------------------------------------------------------
|(1) | Since July 23, 1999, the date of our initial
	public offering.

The closing bid price for our ordinary shares as
reported on Euronext Amsterdam on March 22, 2002, was
 0.55.

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The following table sets forth, for the periods
indicated the high and low closing bid per ADS as reported on
the Nasdaq National Market.

|                              |  |      |       |     |  |  |       | 
|----------------------------- |  | ---- | ----- | --- |  |  | ----- | 
|Period                        |  | High |       | Low
|                              |  |      |       |    
|                              |  | $    |       | $  
|Third Quarter 1999(1)         |  |      | 15.31 |     |  |  | 10.56 | 
|Fourth Quarter 1999           |  |      | 37.50 |     |  |  | 10.56 | 
|First Quarter 2000            |  |      | 76.56 |     |  |  | 29.75 | 
|Second Quarter 2000           |  |      | 48.13 |     |  |  | 22.50 | 
|Third Quarter 2000            |  |      | 43.38 |     |  |  | 22.63 | 
|Fourth Quarter 2000           |  |      | 22.69 |     |  |  | 7.50  | 
|First Quarter 2001            |  |      | 16.88 |     |  |  | 4.72  | 
|Second Quarter 2001           |  |      | 5.99  |     |  |  | 2.50  | 
|Third Quarter 2001            |  |      | 2.68  |     |  |  | 0.42  | 
|Fourth Quarter 2001           |  |      | 1.20  |     |  |  | 0.50  | 
|September 2001                |  |      | 0.76  |     |  |  | 0.42  | 
|October 2001                  |  |      | 1.17  |     |  |  | 0.50  | 
|November 2001                 |  |      | 1.20  |     |  |  | 1.06  | 
|December 2001                 |  |      | 1.16  |     |  |  | 0.82  | 
|January 2002                  |  |      | 0.97  |     |  |  | 0.80  | 
|February 2002                 |  |      | 0.76  |     |  |  | 0.51  | 
|March 2002 (through March 22) |  |      | 0.64  |     |  |  | 0.41  | 






|    |                                                               
|--- | --------------------------------------------------------------
|(1) | Since July 23, 1999, the date of our initial
	public offering.

The closing bid price for the American Depositary
Shares as reported on the Nasdaq National Market on
March 22, 2002, was $0.49.




9.B     PLAN OF
DISTRIBUTION

Not applicable.




9.C     MARKETS

Versatels ordinary shares are traded on the
Official Segment of Euronext Amsterdam and our ADSs on the
Nasdaq National Market under the symbol VRSA.
Versatels $225,000,000 13 1/4% Senior Notes due 2008,
its $150,000,000 13 1/4% Senior Notes due 2008, its
$180,000,000 11 7/8% Senior Notes due 2009, its
120,000,000
11 7/8% Senior Notes due 2009 are all listed on the
Luxembourg Stock Exchange. Versatels
300,000,000 4%
Senior Convertible Notes due 2004, its
360,000,000 4%
Senior Convertible Notes due 2005 and its
300,000,000
11 1/4% Senior Notes due 2010 are listed on the Euronext
Amsterdam exchange.




9.D     SELLING
SHAREHOLDERS

Not applicable.




9.E     DILUTION

Not applicable.




9.F     EXPENSES OF
THE ISSUE

Not applicable.

62



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ITEM
10.     ADDITIONAL
INFORMATION






10.A     SHARE
CAPITAL


Not applicable.




10.B     ARTICLES OF
ASSOCIATION

Versatel was incorporated under the law of The
Netherlands on October 10, 1995, as a private company with
limited liability, referred to as besloten vennootschap met
beperkte aansprakelijkheid or a B.V. Versatel converted its
legal structure from a B.V. to a public company with limited
liability, referred to as naamloze vennootschap or an
N.V., on October 15, 1998. Versatel has its corporate seat
in Amsterdam, The Netherlands. Versatel is registered under
number 33272606 at the Commercial Register in Amsterdam,
The Netherlands.

Set forth below is a summary of the relevant
provisions of the articles of association of Versatel and of
relevant provisions of Netherlands law. Our articles of
association were last amended on December 22, 1999. The
following summary of certain provisions of our articles of
association is qualified in its entirety by the articles of
association which are incorporated by reference in this annual
report.

Corporate Object

Article 3 of our articles of association
provides that Versatel has as its corporate object:



| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to provide telecommunication services;                                                                                                                                                                                       
|
| |  | to incorporate, to participate in, to manage and
	to be financially involved in any other way in other companies
	and enterprises;                                                                                           
|
| |  | to provide administrative, technical, financial,
	economic and management services to other companies, persons and
	enterprises;                                                                                             
|
| |  | to acquire, to dispose of, to manage and to
	exploit movable and immovable properties and other properties,
	including but not limited to patents, trade marks, licenses,
	permits and other industrial ownership rights; and
|
| |  | to borrow or to lend money, to grant
	security-rights, to warrant performances by third parties or to
	undertake joint and several liability for third parties.                                                              

All such acts as mentioned above, whether or not
performed in co-operation with third parties and including the
performance and promotion of all such acts connected therewith,
whether directly or indirectly, and all in the widest sense of
the word.

Share Capital

The authorized share capital of Versatel is
8.4 million,
consisting of 175 million ordinary shares with a par value
of NLG 0.05
(0.02) each,
20 million preference shares A with a par value of
NLG 0.05
(0.02) each,
175 million preference shares B with a par value of
NLG 0.05
(0.02) each and
one priority share with a par value of NLG 0.05
(0.02). Upon
approval by the general meeting of shareholders at a meeting to
be held prior to the completion of our proposed exchange offer,
the authorized share capital will be increased. The authorized
capital of Versatel may be increased by a shareholders
resolution and subsequent amendment of the articles of
association. The issued capital must at all times at least equal
20% of the authorized capital.

Ordinary Shares

Holders of ordinary shares are entitled to one
vote per share. There are no cumulative voting rights. Holders
of ordinary shares have pre-emptive rights with respect to an
issue of ordinary shares in proportion to the total par value of
their individual shareholdings. Each ordinary share is entitled
to participate equally in dividends and in the distribution of
funds in the event of liquidation or dissolution of Versatel
and, in each case, following distributions on preference shares
A, preference shares B and the priority share, if issued.

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Ordinary shares may be issued pursuant to a
resolution passed at a general meeting of shareholders or the
shareholders, at a general meeting, may delegate this power to
another corporate body. The ordinary shares may, at the option
of the shareholder, be in registered form or bearer form. The
ordinary shares shall, however, be made out to bearer unless the
shareholder indicates in writing to Versatel that it wishes to
receive an ordinary share in registered form. Only ordinary
shares in bearer form are eligible for trading on the Official
Segment of Euronext Amsterdam N.V.

Ordinary Bearer
Shares.Ordinary shares in bearer form
are represented by a single global share certificate which may
not be exchanged for single or other multiple physical
securities, and which Versatel has lodged with NECIGEF for
safe-keeping on behalf of the parties entitled to the underlying
ordinary shares. The ordinary shares may only be transferred
through the book-entry system maintained by NECIGEF and in
accordance with the articles of association of Versatel.

Ordinary Registered
Shares.Holders of ordinary shares in
registered form are entered in the register of shareholders,
which is updated regularly. Although no share certificates are
issued, each shareholder may request Versatel to issue an
extract from the shareholders register with respect to its
right to one or more registered shares. Versatel is required to
do this free of charge. A holder of an ordinary share in
registered form may at all times have such shares made out to
bearer as further described in the articles of association.

As of December 31, 2001, 91,352,247 shares
are issued and outstanding. Upon completion of our proposed
exchange offer and assuming that 99% of the notes currently
outstanding are exchanged for an aggregate of 361,758,266
(365,412,390 if 100% are exchanged) ordinary shares, an
aggregate of 453,110,513 (456,764,637 if 100% are exchanged)
ordinary shares will be issued and outstanding.

Preference Shares A

Holders of preference shares A will be entitled
to one vote per share. There are no cumulative voting rights.
Preference shares A have no pre-emptive rights. Preference
shares A are entitled to an annual dividend to be set by
the corporate body authorized to issue the preference
shares A.

Preference shares A may be issued pursuant to a
resolution passed at a general meeting of shareholders or the
shareholders, at a general meeting, may delegate this power to
another corporate body. The preference shares A will be in
registered form and share certificates will not be issued.

As of the date of this annual report, no
preference shares A are issued or outstanding.

Preference Shares B

Holders of preference shares B will be entitled
to one vote per share. There are no cumulative voting rights.
Preference shares B have no pre-emptive rights. Preference
shares B are entitled to a cumulative annual dividend calculated
on the basis of a fixed interest rate, as may be issued by the
European Central Bank from time to time, on the paid up portion
of the nominal value of the preference shares B, to the extent
of the distributable profits, prior to any dividend distribution
on any of our other shares being made.

Preference shares B may be issued pursuant to a
resolution passed at a general meeting of shareholders or the
shareholders, at a general meeting, may delegate this power to
another corporate body. See also  Delegation of
the Power to issue Shares. Notwithstanding such
delegation, an issue of preference shares B that would exceed
100% of the number of our other outstanding shares will require
the approval of our shareholders at a general meeting. The
preference shares B will be in registered form and share
certificates will not be issued.

As of the date of this annual report, no
preference shares B are issued or outstanding. See also
 Anti-Takeover Provisions below.

Priority Share

The holder of the priority share will be entitled
to one vote. There are no cumulative voting rights. However the
priority share will have certain special voting rights as
described below. The priority share has no pre-emptive

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rights. The priority share is entitled to a
nominal annual dividend of 20% of its nominal value, to the
extent of distributable profits.


The priority share may be issued pursuant to a
resolution passed at a general meeting of the shareholders or
the shareholders, at a general meeting, may delegate this power
to another corporate body. See also  Delegation
of the Power to issue Shares. The priority share will be
in registered form and share certificates will not be issued.

As of the date of this annual report, the
priority share is not issued or outstanding.

Holders of fully paid-up shares are not subject
to or liable for any further capital calls by Versatel. See also
 Anti-Takeover Provisions below.

Delegation of the Power to issue
Shares

On May 14, 2001 and for a period of two
years, the shareholders approved that the board of management,
under prior approval of the supervisory board, will be entitled
to issue, and grant rights to subscribe for, ordinary shares,
preference shares A and B as well as the priority share, up to
the amount of the authorized capital, as well as to restrict or
exclude the pre-emptive rights of shareholders.

Reduction of Share Capital

The general meeting of shareholders may pass a
resolution for the reduction of our issued capital by
(a) redeeming shares or (b) reducing the par value of
the outstanding shares by amendment of the articles of
association. Our issued and paid-in capital may not be reduced
below the minimum capital prescribed by law at the time of the
resolution. A resolution for the reduction of capital relating
to preference shares A and/or B may only be passed with the
prior or simultaneous approval of the meeting of said preference
shares A and/or B. If less than 50% of the issued and
outstanding capital is represented at the general meeting, a
resolution for the reduction of capital will require a majority
of at least two-thirds of the votes cast.

Changes in the Rights of
Shareholders

The rights of shareholders may be changed by
amendment of the articles of association. A resolution for an
amendment of a provision in the articles of association whereby
holders of preference shares have been granted any right or an
amendment whereby any such right will be prejudiced, will only
be valid upon approval of the holders of said shares.

Limitations on the Right to Own
Shares

Neither our articles of association nor
Netherlands law impose any limitations on the rights of
non-residents of The Netherlands to own shares in Versatel, nor
do they impose any limitation on the exercise of voting rights
on such shares.

Warrants and Employee Options

As of the date of this annual report there were
53,135 outstanding warrants to purchase 708,502 ordinary shares
at an exercise price of
1.16 per share.
All such warrants became exercisable upon the completion of our
initial public offering in July 1999. Concurrently with the
completion of our proposed financial restructuring, whether
effected through the proposed exchange offer, or a court
approved financial restructuring, we will issue to our existing
shareholders, at no cost to them, up to an additional 19,031,718
warrants to purchase a total of 19,031,718 ordinary shares at an
exercise price of
1.50 per share.
For a description of our employee stock option plans, see
Item 6. Directors, Senior Management and
Employees  Share Ownership  Option
Plans.

Dividends

The profits of Versatel are at the disposal of
the shareholders at a general meeting. Dividends shall be paid
after the adoption of the annual accounts of Versatel. We may
only pay dividends up to the distributable part of

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our equity. Under Netherlands law, the sum of the
called and paid-up capital and certain statutory reserves is not
distributable. Subject to the same limitation, the general
meeting of shareholders may resolve to pay dividends out of a
reserve not required by Netherlands law. Each ordinary share is
entitled to participate equally in dividends and in the
distribution of funds in the event of liquidation or dissolution
of Versatel. Preference shares A are entitled to an annual
dividend, to be set by the corporate body authorized to issue
such preference shares A, at the occasion of their first
issuance. Preference shares B will be paid a cumulative annual
dividend, calculated on the basis of a fixed interest rate on
the paid up portion of their nominal value, to the extent of
distributable profits. The priority share will be entitled to a
nominal annual dividend of 20% of the nominal value, to the
extent of distributable profits.


Any dividend not claimed within a period of five
years after the date on which it became payable will accrue to
the company.

Board

For a description of the role of our management
board and supervisory board in the management of our company,
please see Item 6. Directors, Senior Management and
Employees  Board Practices.

According to our articles of association, in case
of a conflict of interest between an individual member of the
management board and Versatel, prior approval of the supervisory
board is required before the management board can adopt the
resolution in question.

The supervisory board determines the compensation
of individual members of the management board. The compensation
of individual members of our supervisory board is determined by
the general meeting of shareholders.

Members of our management board and supervisory
board are not required to own any of our shares to serve on the
management board or supervisory board.

Annual Accounts

Within five months after the end of our financial
year, the board of managing directors is required to prepare the
annual accounts. This period may be extended by the general
meeting of shareholders for a period of six months on the basis
of special circumstances. The annual accounts, accompanied by an
annual report, must be submitted to the board of supervisory
directors for signing and must thereafter be adopted by the
general meeting of shareholders. The annual accounts and the
annual report will be available to the shareholders and holders
of depositary receipts of shares at the office of Versatel as
from the date of its preparation by the board of managing
directors.

General Meeting of Shareholders

The annual general meeting of shareholders will
be held within six months after the end of the financial year.
Extraordinary general meetings of shareholders may be convoked
when the management board or supervisory board deems such
necessary. In addition, extraordinary meetings of shareholders
will also be convoked if holders representing at least 10% of
our outstanding capital so request in writing to the management
board and/or supervisory board. Such request should specify the
topics to be discussed.

The management board or supervisory board will
send a convening notice for a general meeting of shareholders at
least 15 days prior to the day of the meeting. The notice
will be published in a newspaper with nationwide distribution in
The Netherlands as well as in such foreign newspapers as
designated by the management board. The notice will state the
topics to be discussed or will state where the agenda can be
obtained. It will also state the locations where and the date on
which shareholders can deposit documentary evidence of their
shareholdings against a receipt which may serve as an admission
ticket to the meeting. At the general meeting every share will
carry the right to cast one vote.

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Resolutions are adopted at general meetings of
shareholders by a majority of the votes cast (except where a
different proportion of votes is required by our articles of
association, or Dutch law), and there are generally no quorum
requirements applicable to such meetings.

Amendments to the Articles of
Association

The general meeting of shareholders may pass a
resolution to amend the articles of association or to dissolve
Versatel. If the priority share is outstanding, a resolution as
set forth in the previous sentence may only be adopted upon the
proposal of the holder of the priority share.

Dissolution

In the event of a dissolution of Versatel, the
assets of Versatel, after payment of all outstanding debts, will
be distributed as follows. First, the holders of preference
shares A and B and the priority share will be paid the paid-in
capital on such shares, plus any unpaid dividends for the
current financial year as well as any unpaid dividends for
preceding financial years in respect of preference shares B. The
balance then remaining will be distributed to the holders of
ordinary shares.

Anti-Takeover Provisions

The issuance of preference shares and the
priority share may have an anti-takeover effect and delay, defer
or prevent a tender offer or takeover attempt that a shareholder
might consider to be in that shareholders best interests,
including attempts that might result in a premium over the
market price to be paid for the ordinary shares.

Preference
Shares.Our management board has
obtained from the shareholders at a general meeting, the
authority to issue, or grant rights to subscribe for, preference
shares, subject only to the prior approval of the supervisory
board, until May 14, 2003. As a result, our management
board has granted a call option on preference shares B, which
will not exceed 100% of all our other outstanding shares, to an
independent foundation, Stichting Continuïteit Versatel
Telecom International, established under Netherlands law. In
the event of a threatened hostile takeover bid, the foundation
may exercise this option. The minimum amount required to be paid
on the preference shares upon issuance is 25% of the nominal
amount issued. On March 20, 2002, the Stichting
Continuïteit Versatel Telecom International agreed that
it will not exercise its call option on the preference shares B
until the completion of our proposed financial restructuring or
until the termination of the lock-up agreement between Versatel
and certain noteholders in connection therewith (other than as a
result of the completion of our financial restructuring).

Notwithstanding any delegation by the
shareholders at a general meeting of the power to authorize the
issuance of any preference shares, a proposed issuance of
preference shares B that would exceed 100% of the number of
our other outstanding shares will require the approval of our
shareholders at a general meeting. In all instances where
preference shares are issued without direct shareholder
approval, the management board must explain the reason for the
issuance within four weeks at a general meeting of shareholders.
Within two years after the first issuance of preference shares,
a general meeting of shareholders must be held to vote on
whether the preference shares should be repurchased or canceled.

Priority
share.Our management board has
obtained from the shareholders at a general meeting, the
authority to issue, or grant a right to subscribe for, the
priority share, subject only to the prior approval of the
supervisory board, until May 14, 2003. As a result, our
management board has granted a call option on the priority share
to an independent foundation, Stichting Prioriteit Versatel
Telecom International, established under Netherlands law. In
the event of a threatened hostile takeover bid, the foundation
may exercise this option. The priority share can only be
transferred with the approval of the management board and the
supervisory board. The priority share carries the following
special voting rights:



| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the right to nominate members for appointment to
	the management board and supervisory board, which nominations
	may only be set aside by a resolution of the general meeting of
	shareholders adopted by two-thirds of the votes cast
	representing more than one-half of the issued nominal capital,
	and

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| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | the exclusive right to propose amendments to our
	articles of association, our merger or de-merger transactions or
	our dissolution.

On March 20, 2002, the Stichting
Prioriteit Versatel Telecom International agreed that it
will not exercise its call option on the priority share until
the completion of our proposed financial restructuring or until
the termination of the lock-up agreement between Versatel and
certain noteholders in connection therewith (other than as a
result of the completion of our financial restructuring).




10.C     MATERIAL
CONTRACTS

Description of material
indebtedness.

Following our issuance of $225,000,000
13 1/4% Senior Dollar Notes due 2008 (the First High
Yield Offering) in May 1998, the $150,000,000 13 1/4%
Senior Dollar Notes due 2008 (the Second High Yield
Offering) in December 1998, the $180,000,000 11 7/8%
Senior Dollar Notes due 2009 (the Third High Yield
Offering) and the
120,000,000
11 7/8% Senior Euro Notes due 2009 (the Fourth High
Yield Offering) in July 1999 and the
300,000,000 4%
Senior Euro Convertible Notes due 2004 (the First
Convertible Offering) in December 1999, we issued the
following debt securities in 2000. Versatel did not issue any
debt securities in 2001.

The Fifth High Yield Notes
Offering

In March 2000, we issued
300,000,000 in
aggregate principal amount of 11 1/4% Senior Notes due
2010. The notes were sold to Lehman Brothers International
(Europe), Morgan Stanley & Co. International Limited
and ING Barings Limited, as placement agents, who subsequently
sold them to institutional investors in reliance on exemptions
under the Securities Act. Interest on the notes will be paid
semi-annually on March 30 and September 30. The notes
are redeemable at the option of Versatel, in whole or in part,
at any time on or after March 30, 2005, at 105.625% of
their principal amount, plus accrued interest, declining to 100%
of their principal amount, plus accrued interest, on or after
March 30, 2008.

The notes will also be redeemable at the option
of Versatel, in whole but not in part, at any time at a
redemption price equal to the aggregate principal amount
thereof, plus liquidated damages, if any, to the date fixed by
Versatel for redemption, and all additional amounts, if any,
then due and which will become due as a result of the redemption
or otherwise, in the event of changes affecting Netherlands
taxes or as a result of any change in the application of
Netherlands tax laws or regulations that require Versatel to pay
additional amounts that Versatel determines cannot be avoided by
taking reasonable steps. These notes rank equal in right of
payment to our other high yield notes, the convertible notes and
all other senior indebtedness of Versatel and will be senior in
right of payment to any future subordinated indebtedness of
Versatel.

The indenture that governs the notes contains
covenants applicable to Versatel and certain of its
subsidiaries, limitations and requirements with respect to
indebtedness, restricted payments, dividends and other payments
affecting restricted subsidiaries, the issuance and sale of
capital stock of restricted subsidiaries, transactions with
stockholders and affiliates, liens, asset sales, issuances of
guarantees of indebtedness by restricted subsidiaries,
sale-leaseback transactions, consolidations and mergers and
provision of financial statements and reports. The indenture
also requires Versatel to commence and consummate an offer to
purchase the notes for 101% of their aggregate principal amount,
upon events constituting or which may constitute a change of
control of Versatel. In addition, under certain circumstances,
Versatel is required by the indenture to offer to purchase the
notes with the proceeds of the sale of certain assets. The
indenture will also provide for events of default which, if any
of them occurs, would permit or require the principal of,
premium, if any, interest and any other monetary obligations on
the notes to become or to be declared to be immediately due and
payable. Holders of notes may under certain circumstances be
entitled to receive additional payments in respect of taxes and
similar charges in respect of payments on such. The terms of
such covenants, such required offers to purchase, such events of
default and their consequences and such additional payments, as
well as related definitions set forth in the indenture, also
includes an optional redemption provision whereby Versatel may,
for the first three years after the offering of these notes,
redeem up to 35% of the notes with the net proceeds of certain
equity offerings by Versatel.

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The Second Convertible Notes
Offering

In the Second Convertible Note Offering in March
2000, we issued
360,000,000 in
aggregate principal amount of 4% Senior Convertible Notes due
2004. The convertible notes were sold to Lehman Brothers
International (Europe), Morgan Stanley & Co. International
Limited and ING Bank N.V., as placement agents. Interest on the
convertible notes will be paid annually on March 30. The
convertible notes rank equal in right of payment to the high
yield notes, the other convertible notes and all other senior
indebtedness of Versatel, and will be senior in right of payment
to any future subordinated indebtedness of Versatel.

The convertible notes also require Versatel to
commence and consummate an offer to purchase the convertible
notes, for their accreted principal amount, upon certain events
constituting or which may constitute a change of control of
Versatel. The convertible notes also provide for events of
default which, if any of them occurs, would permit or require
the principal of, premium, if any, interest and any other
monetary obligations on the convertible notes to become or to be
declared to be immediately due and payable.

Under the terms of the convertible notes,
accreted principal amount, with respect to each
1,000 principal
amount of notes, will be determined so that, together with
accrued interest from the immediately preceding interest payment
date for the convertible notes or, if none, the closing date for
the convertible notes, and after taking into account any
interest paid in respect of such notes in preceding periods, it
represents for the holder thereof a gross yield to maturity
identical to that applicable in the case of redemption at
maturity, being 8.50% per annum and will be calculated in
accordance with the following formula, rounded (if necessary) to
two decimal places with 0.005 being rounded upwards (provided
that if the date fixed for redemption is an interest payment
date for the convertible notes, the accreted principal amount
shall be as set out in the table below in respect of such
interest payment date for the convertible notes):



|                            |  |                                                          
|--------------------------- |  | ---------------------------------------------------------
|Accreted Principal Amount = |  | (Previous Accreted
	Principal Amount × ((r × d) /p)) - AI

where



|                                     |  |                                                                                                                                                                                                                                                                                                                        
|------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Previous Accreted Principal Amount = |  | the
	Accreted Principal Amount on the interest payment date for the
	Second Convertible Notes immediately preceding the redemption
	date for the Second Convertible Notes (or, if the notes are to
	be redeemed prior to the first interest payment date for the
	Second Convertible Notes,
	1,000) as set
	out below:

|                      |  |                               |          | 
|--------------------- |  | ----------------------------- | -------- | 
|Interest Payment Date |  | Accreted Principal Amount ()
|                      |  |                              
|March 30, 2001        |  |                               | 1,045.00 | 
|March 30, 2002        |  |                               | 1,093.83 | 
|March 30, 2003        |  |                               | 1,146.80 | 
|March 30, 2004        |  |                               | 1,204.28 | 
|March 30, 2005        |  |                               | 1,266.64 | 




r  =  8.50% expressed as a
fraction.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|d  = | number of days from and including the immediately
	preceding interest payment date for the convertible notes (or,
	if the convertible notes are to be redeemed on or before the
	first interest payment date for the convertible notes, from and
	including the closing date for the convertible notes) to but
	excluding the date fixed for redemption, calculated on the basis
	of a 365 day year and, in the case of an incomplete year,
	the number of days elapsed.

p  =  365


|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|AI = | accrued interest on the principal amount of the
	convertible notes from and including immediately preceding
	interest payment date for the convertible notes (or, if the
	convertible notes are to be redeemed on or before the first
	interest payment date for the convertible notes, from and
	including the closing date for the convertible notes) to but
	excluding the redemption date for the convertible notes,
	calculated on the basis of a 365 day year and, in the case
	of an incomplete year, the number of days elapsed.

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10.D     EXCHANGE
CONTROLS

Netherlands law does not impose restrictions that
would affect the remittance of dividend or other payments to
nonresident holders of the ordinary shares, ADSs or notes or any
other foreign exchange controls.




10.E     TAXATION

NETHERLANDS TAX CONSIDERATIONS

The following discussion, subject to the
limitations set forth therein, describes the material
Netherlands tax consequences of the acquisition, ownership and
disposition of the Shares, ADSs, Notes and/or Warrants, and is
the opinion of Arthur Andersen, special Netherlands tax counsel
(belastingadviseurs) to Versatel. This opinion represents
Arthur Andersens interpretation of existing law and
jurisprudence. No assurance can be given that tax authorities or
courts in The Netherlands will agree with such interpretation.
This opinion does not address the income taxes imposed by any
political subdivision of The Netherlands or any tax imposed by
any other jurisdiction. This opinion does not discuss all the
tax consequences that may be relevant to the holders in light of
their particular circumstances or to holders that are subject to
special treatment under applicable law and is not intended to be
applicable in all respects to all categories of investors.
Changes in Versatels organizational structure or the
manner in which Versatel conducts its business may invalidate
this opinion. The laws upon which this opinion is based are
subject to change, sometimes with retroactive effect. Changes in
the applicable laws may invalidate this opinion and this opinion
will not be updated to reflect such subsequent changes.
Prospective investors should consult their tax advisors
regarding the particular tax consequences of their acquiring,
owning and disposing of the shares, ADSs, notes and/or warrants.

Substantial Interest

A shareholder that owns, either via shares,
warrants, conversion rights or options, directly or indirectly
5% or more of any class of shares, or 5% or more of the total
issued share capital of a company (a Substantial
Interest), is subject to special rules. Profit
participation rights which give the holder rights to 5% or more
of the annual profit or 5% or more of the liquidation proceeds
of the target company will also qualify as substantial interest.
A deemed substantial interest is present if (part of) a
substantial interest has been disposed of, or is deemed to have
been disposed of, on a non-recognition basis. With respect to
individuals, attribution rules exist in determining the presence
of a Substantial Interest.

In the situation that a shareholder has or is
deemed to have a Substantial Interest in Versatel, then, inter
alia, all the Shares, ADSs and/or Warrants such shareholder
holds will form a part of this Substantial Interest.

Unless indicated otherwise, the term
holder, as used herein, includes individuals and
entities as defined under Netherlands tax law holding the
Shares, ADSs, Notes and/or Warrants but does not include any
such person having a Substantial Interest in Versatel.

Dividend Withholding Tax

Dividends that Versatel distributes are subject
to withholding tax at a rate of 25%, unless:



| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the participation exemption applies and the
	Shares and/or ADSs are attributable to the business carried out
	in The Netherlands, or                                                                                                                                                        
|
| |  | dividends are distributed to a qualifying EU
	corporate shareholder satisfying the conditions of the EU
	directive, or                                                                                                                                                                      
|
| |  | the rate is reduced by treaty, or                                                                                                                                                                                                                                                           
|
| |  | Surtax (see below) was due on the dividend
	distribution and the recipient is a resident of The Netherlands,
	the Netherlands Antilles or Aruba, a Member State of the
	European Union or a country with which The Netherlands has
	concluded a treaty for the avoidance of double taxation.

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Dividends
may include:



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | distributions of cash;                                                                                                                                                                                                                                                                                                        
|
| |  | distributions of property in kind;                                                                                                                                                                                                                                                                                            
|
| |  | constructive dividends;                                                                                                                                                                                                                                                                                                       
|
| |  | hidden dividends;                                                                                                                                                                                                                                                                                                             
|
| |  | liquidation proceeds in excess of our recognized
	paid-in capital;                                                                                                                                                                                                                                                            
|
| |  | consideration for the repurchase of the Shares
	and/or ADSs by the Company (including a repurchase by a direct
	or indirect subsidiary of the Company) in excess of our
	recognized average paid-in capital, unless such repurchase is
	for temporary investment, or exempt on the basis of
	article 4c Dividend Tax Act 1965;
|
| |  | proceeds from the redemption of the Shares and/or
	ADSs in excess of our recognized paid-in capital;                                                                                                                                                                                                                          
|
| |  | stock dividends equal to their nominal value
	(unless distributed out of our recognized paid-in share
	premium), and                                                                                                                                                                                                          
|
| |  | the repayment of paid-in capital not recognized
	as capital.                                                                                                                                                                                                                                                                  

The term recognized paid-in capital
or share premium relates to our paid-in capital or
share premium as recognized for Netherlands tax purposes.

Generally, a shareholder that resides, or is
deemed to reside, in The Netherlands will be allowed a credit
against Netherlands income tax or corporation tax for the tax
withheld on dividends paid on the Shares and/or ADSs. A legal
entity resident in The Netherlands that is not subject to
Netherlands corporate income tax may, under certain conditions,
request a refund of the tax withheld.

According to a legislative proposal regarding
anti-dividend stripping  that is not yet approved by
Dutch parliament but that may have retroactive effect as of
April 27, 2001  no exemption from, or refund of,
Netherlands withholding tax is granted if the recipient of
dividend paid by Versatel is not considered to be the beneficial
owner of such dividend. Such recipient is not considered to be
the beneficial owner, if such recipient paid a consideration (in
cash or in kind) in connection with the dividend and such
payment forms part of a sequence of transactions and if it is
likely that (i) an individual or company (other than the
holder of the dividend coupon) benefited, in whole or in part,
directly or indirectly from the dividend and such individual or
company would be entitled to a less favorable exemption from, or
refund of, Netherlands withholding tax than the recipient of the
dividend and (ii) such individual or company, directly or
indirectly, retains or acquires a position in the shares that is
comparable with his/her or its position in similar shares that
he/she or it had before the sequence of transaction began. The
expression sequence of transactions as used herein
includes the sole acquisition of one or more dividend coupons
and the establishment of short term rights of enjoyment on
shares, while the transferor retains the ownership of the
shares. The Treaty in effect between The Netherlands and the
United States provides for a divergent definition of the
beneficial owner that generally will overrule the proposed
definition of the beneficial owner under the laws of The
Netherlands.

Dividends Versatel pays to a resident corporate
shareholder that qualifies for the participation
exemption (as defined in Article 13 of The
Netherlands Corporation Tax Act 1969 (the Corporation Tax
Act)) will not be subject to the dividend withholding tax
if the Shares and/or ADSs are attributable to the
shareholders business carried out in The Netherlands. A
resident corporate shareholder will generally qualify for the
participation exemption if, among other things, the resident
shareholder owns at least 5% of the nominal paid-up capital.

A non-resident shareholder may benefit from a
reduced dividend withholding tax rate pursuant to an income tax
treaty in effect between the shareholders country of
residence and The Netherlands. Under most Netherlands income tax
treaties, the withholding tax rate is reduced to 15% or less,
providedthat:



| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | the recipient shareholder does not have a
	permanent establishment in The Netherlands to which the Shares
	and/or ADSs are attributable, and

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| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | the recipient shareholder is the beneficial owner
	of the dividends.

Residents of the United States that qualify for,
and comply with the procedures for claiming benefits under the
income tax convention between the Netherlands and the United
States (the US/NL Income Tax Treaty), generally are
eligible for a reduction of the Netherlands withholding tax on
dividend income to 15%, which rate may under certain conditions
be reduced to 5% if the beneficial owner is a company which
holds directly at least 10% of the voting power of the Company.
Generally, a holder of the Shares and/or ADSs will qualify for
benefits under the US/NL Income Tax Treaty (subject to
compliance with the procedures for claiming benefits) if the
holder:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | is the beneficial owner of the dividends paid; and                                                                            
|
| |  | is resident in the United States according to the
	US/NL Income Tax Treaty; and                                               
|
| |  | does not hold the Shares and/or ADSs in
	connection with the conduct of business in The Netherlands; and                      
|
| |  | is an individual, an estate, a trust, a company
	and any other body of persons as defined in the US/NL Income Tax
	Treaty; and
|
| |  | qualifies under article 26 of the US/NL
	Income Tax Treaty (Limitation on Benefits).                                          

The US/NL Income Tax Treaty provides a complete
exemption for dividends received by exempt pension trusts and
exempt organizations, under the conditions as defined therein.

The withholding of tax on dividend distributions
on Shares and/or ADSs to a non-resident corporate shareholder
carrying on a business through a Netherlands permanent
establishment is not required as long as:

   the Netherlands
participation exemption applies, and

   the Shares and/or ADSs
form a part of the permanent establishments business
assets.

To qualify for the participation exemption, this
entity should generally hold at least 5% of our nominal paid-up
capital and meet other requirements.

Surtax

As a result of a major tax reform effective as of
January 1, 2001, the Company will be subject to 20%
corporate income tax on excessive dividends
distributed by the Company in the period from January 1,
2001 up to and including December 31, 2005
(Surtax).

Dividends (to be understood in the widest sense,
like distributions in cash, liquidation proceeds and proceeds at
the event of repurchase) are considered to be excessive if in a
certain calendar year the total amount of distributed dividends
exceeds the highest of the following amounts:



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 4% of the fair market value of the issued shares
	in the Company at the beginning of that certain calendar year;                                                                                                    
|
| |  | twice the amount of the average annual amount of
	dividends regularly distributed, as indicated in the
	surtax-legislation, by the Company during the three
	calendar years immediately preceding January 1, 2001;
|
| |  | the Companys result of the preceding book
	year (exclusive of certain results as indicated in the
	surtax  legislation).                                                                                        

The Surtax is reduced pro rata to the extent that
the Company can demonstrate that at the time of the
distribution, the Shares and/or ADSs were held, for an
uninterrupted period of three years, by individuals or entities
holding at least 5% of the Companys nominal paid-in
capital and that these shareholders are resident of the
Netherlands, the Netherlands Antilles or Aruba, a Member State
of the European Union or a country with which the Netherlands
has concluded a treaty for the avoidance of double taxation.
Shareholders holding 5% of the Shares and/or ADSs on
September 14, 1999 are deemed to hold the Shares and/or
ADSs for three years.

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The preceding paragraph does not apply to
investment institutions
(beleggingsinstellingen) as defined in the
Corporate Income Tax Act 1969.

The distribution tax is not levied to the extent
that the distributions by the Company exceed the retained
earnings and silent reserves present on December 31, 2000.

Interest Withholding Tax

The Netherlands will not levy withholding taxes
from holders on payments under the Notes.

Income Tax Consequences for Residents or
Deemed Residents of The Netherlands

Individual Income Tax

The individual resident or deemed resident holder
will be taxed on a deemed income from savings and
investments (sparen en beleggen), unless:



| |   |                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Shares, ADSs, Notes and/or Warrants are
	attributable to a trade or business carried on by the individual
	shareholder, or                                                                                                                                                                                               
|
| |  | form part of a Substantial Interest, or                                                                                                                                                                                                                                                                                      
|
| |  | the income derived from the Shares, ADSs and/or
	Notes and/or capital gains realized from the sale or exchange of
	the Shares, ADSs, Notes and/or Warrants qualify as taxable
	income from one or more activities which do not generate taxable
	profit or taxable wages (belastbaar resultaat uit
	overige werkzaamheden).

The deemed income from savings and investments
amounts to 4% of the average of the individuals
yield basis (rendementsgrondslag) at the
beginning of the year and the individuals yield basis at
the end of the year, insofar this average exceeds a certain
threshold. The (net) yield basis consists of the fair market
value of certain assets and liabilities of the individual.

The income from savings and investments is taxed
annually at a flat rate of 30%, regardless whether any dividend
is received, capital gains are realized or capital losses are
suffered.

Income derived from the Shares, ADSs and/or Notes
and capital gains realized from the sale or exchange of the
Shares, ADSs, Notes and/or Warrants by an individual resident
shareholder are subject to tax on a net income basis at the
progressive income tax rates, if the Shares, ADSs, Notes and/or
Warrants are attributable to a trade or business carried on by
the individual shareholder, or the income and/or capital gains
qualify as taxable income from one or more activities which do
not generate taxable profit or taxable wages.

Income derived from the Shares and/or ADSs and
capital gains realized from the sale or exchange of the Shares,
ADSs and/or Warrants by an individual resident shareholder that
holds a Substantial Interest are generally subject to income tax
at a rate of 25% on a net basis.

Corporate Income Tax

Dividends received from the Shares and/or ADSs
and capital gains realized from the sale or exchange of the
Shares and/or ADSs by a corporate shareholder that resides, or
is deemed to reside, in The Netherlands are subject to
Netherlands corporation tax on a net basis, generally if the
Shares and/or ADSs are (deemed) attributable to a trade or
business carried on (or deemed to be carried on) by the holder,
unless Versatels shareholding qualifies for the
participation exemption.

Income derived from the Notes and capital gains
realized from the sale or exchange of the Notes and/or Warrants
by a corporate shareholder that resides, or is deemed to reside,
in The Netherlands are subject to Netherlands corporation tax on
a net basis, generally if the Notes and/or Warrants are (deemed)
attributable to a trade or business carried on (or deemed to be
carried on) by the holder.

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If the Shares, ADSs, Notes and/or Warrants are
held by a qualifying pension fund, income derived from the
Shares, ADSs and/or Notes and capital gains realized from the
sale or exchange of the Shares, ADSs, Notes and/or Warrants are
exempt from Netherlands corporation tax.

Income Tax Consequences for Non-Residents of
The Netherlands

A non-resident holder of Shares, ADSs, Notes
and/or Warrants will not be subject to Netherlands income tax on
income received from the Shares, ADSs and/or Notes or capital
gains derived from the sale or disposition of the Shares, ADSs,
Notes and/or Warrants, provided such holder:



| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | does not carry on and has not carried on a
	business in The Netherlands through a permanent establishment or
	a permanent representative to which the Shares, ADSs, Notes
	and/or Warrants are attributable,                                                                                                                                          
|
| |  | does not hold and has not held a Substantial
	Interest in Versatels share capital or, in the event the
	non-resident holder holds or has held a Substantial Interest in
	Versatel, such interest is or was a business asset in the hands
	of the holder,                                                                                             
|
| |  | does not share and has not shared directly (not
	through the beneficial ownership of shares or similar
	securities) in the profits of an enterprise managed and
	controlled in The Netherlands which owned or was deemed to have
	owned Shares, ADSs, Notes and/or Warrants,                                                                          
|
| |  | does not carry out and has not carried out any
	activities which can be qualified as taxable income from
	one or more activities which do not generate taxable profit or
	taxable wages (belastbaar resultaat uit overige
	werkzaamheden) to which the holding of the Shares, ADSs,
	Notes and/or Warrants was connected,                           
|
| |  | does not carry out and has not carried out
	employment activities in The Netherlands or serves or served as
	a director or board member of any entity resident in The
	Netherlands, or serves or served as a civil servant of a
	Netherlands public entity with which the holding of the Shares,
	ADSs, Notes and/or Warrants is or was connected; and
|
| |  | is not an individual that has opted to be taxed
	as a resident of The Netherlands.                                                                                                                                                                                                                                                                    

Income derived from Shares and/or ADSs or capital
gains derived from the sale or disposition of Shares and/or ADSs
by a non-resident corporate shareholder, carrying on a business
through a permanent establishment in The Netherlands, are not
subject to Netherlands corporation tax, provided:



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | the Netherlands participation exemption applies,
	and                                   
|
| |  | the Shares and/or ADSs are attributable to the
	business carried out in The Netherlands.

To qualify for the participation exemption, the
shareholder must generally hold at least 5% of our nominal
paid-up capital and meet other requirements.

Under most Netherlands tax treaties, the right to
tax capital gains realized by a non-resident shareholder from
the sale or exchange of Shares, ADSs, Notes and/or Warrants is
in many cases allocated to the shareholders country of
residence.

Net Wealth Tax

As of January 1, 2001 the net wealth tax has
been abolished.

Gift Tax and Inheritance Tax

Residents or Deemed Residents of The
Netherlands

Netherlands gift tax or inheritance tax will be
due with respect to a gift or inheritance of Shares, ADSs, Notes
and/or Warrants from a person who resided, or was deemed to have
resided, in The Netherlands at the time of the gift or his or
her death. Netherlands tax will be due in the case of a gift of
Shares, ADSs, Notes and/or

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Warrants by an individual who at the time of the
gift was neither resident nor deemed to be resident in The
Netherlands, if such individual dies within 180 days after
the date of the gift, while being resident or deemed resident in
The Netherlands. A Netherlands national is deemed to have been
resident in The Netherlands if he or she was a resident in The
Netherlands at any time during the ten years preceding the date
of the gift or the date of his or her death.


For gift tax purposes, each person (regardless of
nationality) is deemed to be a Netherlands resident if he or she
was a resident in The Netherlands at any time during the
12 months proceeding the date of the gift. The ten-year and
12-month residency rules may be modified by treaty.

Liability for payment of the gift tax or
inheritance tax rests with the donee or heir, respectively. The
rate at which these taxes are levied is primarily dependent on
the fair market value of the gift or inheritance and the
relationship between the donor and donee or the deceased and his
or her heir(s). Exemptions may apply under specific
circumstances.

Non-Residents of The
Netherlands

A gift or inheritance of Shares, ADSs, Notes
and/or Warrants from a non-resident shareholder will not be
subject to Netherlands gift tax or inheritance tax in the hands
of the donee or heir provided the non-resident holder was not:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a Netherlands national who has been resident in
	The Netherlands at any time during the 10 years preceding
	the date of gift or the date of death or, in the event he or she
	was resident in The Netherlands during such period, the
	non-resident holder was not a Netherlands national at the time
	of gift or death;                                                                                                                        
|
| |  | solely for the purpose of the gift tax, a
	resident of The Netherlands at any time during the
	12 months preceding the time of the gift (however, in case
	of a gift by an individual who at the time of the gift was
	neither resident nor deemed to be resident in The Netherlands
	and such individual dies within 180 days after the date of
	the gift, while being resident or deemed to be resident in The
	Netherlands, tax will be due);
|
| |  | engaged in a business in The Netherlands through
	a permanent establishment or a permanent representative which
	included in its assets Shares, ADSs, Notes and/or Warrants; and                                                                                                                                                                                                                                                                
|
| |  | shared directly (not through the beneficial
	ownership of shares or similar securities) in the profits of an
	enterprise managed and controlled in The Netherlands which owned
	or is deemed to have owned Shares, ADSs, Notes and/or Warrants.                                                                                                                                                                                                 

European Union Proposal

In November 2000 the Council of Ministers of the
European Union agreed on the principles of a draft directive on
savings. As a result of this agreement the Netherlands intends
to institute an information exchange system to report to other
Member States the details of any interest payments (interest to
be understood in the widest sense) by a paying agent in the
Netherlands to individuals residing in other EU Member
States. If the directive on savings is adopted, it will apply to
payments made after December 31, 2002.

U.S. TAX CONSIDERATIONS

The following discussion describes the material
U.S. federal income tax consequences that may be relevant
to the purchase, ownership and disposition of Shares, Notes,
ADSs or Warrants to a prospective purchaser that is a
U.S. Holder (as defined below). This discussion is based on
the Internal Revenue Code of 1986, as amended (the
Code), existing and proposed Treasury regulations
(Regulations), administrative and judicial
interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive
effect, and differing interpretations. In addition, this
discussion deals only with Shares, Notes, ADSs and Warrants held
by a U.S. Holder as capital assets within the meaning of
Section 1221 of the Code. This discussion does not address
all of the tax consequences that may be relevant to prospective
purchasers of Shares, Notes, ADSs or Warrants in light of their
particular circumstances or to persons subject to special tax
rules, such as

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insurance companies, financial institutions,
dealers in securities or foreign currencies, tax-exempt
investors, persons holding Shares, Notes, ADSs or Warrants as a
position in a straddle, conversion or other
integrated transaction, persons owning, directly, indirectly or
constructively, 10% or more of the total combined voting power
of all classes of the Companys stock or persons whose
functional currency (as defined in Section 985 of the Code)
is not the U.S. dollar. Prospective purchasers of Shares,
Notes, ADSs or Warrants should consult with their own tax
advisors regarding the application of the U.S. federal
income tax laws to their particular situations as well as to any
additional tax consequences of purchasing, holding or disposing
of Shares, Notes, ADSs or Warrants, including the applicability
and effect of the tax laws of any state, local or foreign
jurisdiction.


As used in this section, the term
U.S. Holder means a beneficial owner of a
Share, Notes, ADS or Warrant who or that is for
U.S. federal income tax purposes (i) a citizen or
individual resident of the United States, (ii) a
corporation created or organized in or under the laws of the
United States or of any state thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation
regardless of its source or (iv) a trust if a court within
the United States is able to exercise primary supervision over
the administration of the trust and one or more
U.S. persons have the authority to control all substantial
decisions of the trust.

In general, for U.S. federal income tax
purposes, U.S. Holders of American depositary receipts
evidencing ADSs will be treated as the owners of the Shares
represented by the ADSs.

Warrants

Exercise of Warrants

Upon the exercise of a Warrant, a
U.S. Holder will not recognize gain or loss (except to the
extent of cash, if any, received in lieu of the issuance of
fractional Shares) and will have an adjusted tax basis in the
Shares acquired pursuant to such exercise equal to such
U.S. Holders tax basis in the Warrant plus the
exercise price of the Warrant. The holding period for such
Shares so acquired will commence on the date after the date of
exercise of the Warrant. If any cash is received in lieu of
fractional Shares, the U.S. Holder will recognize gain or
loss in an amount and of the same character that such
U.S. Holder would have recognized if such U.S. Holder
had received such fractional Shares and then immediately sold
them for cash back to the Company.

Sale, Exchange or Other Disposition of
Warrants

Subject to the discussion in Passive
Foreign Investment Company (PFIC) below, the
sale, exchange or other disposition of a Warrant will generally
result in the recognition of capital gain or loss to the
U.S. Holder in an amount equal to the difference between
the amount realized and such U.S. Holders tax basis
in the Warrant. As a result of certain limitations under the
foreign tax credit provisions of the Code, a U.S. Holder
may be unable to claim a foreign tax credit for Netherlands
withholding taxes, if any, imposed on the proceeds received upon
a sale, exchange or other disposition of Warrants.

Lapse

If a Warrant expires unexercised, a
U.S. Holder will recognize a capital loss equal to such
U.S. Holders tax basis in the Warrant. Such capital
loss may, subject to certain limitations, be used to offset
capital gains, if any, otherwise realized by a U.S. Holder.

Adjustments

Under Section 305 of the Code, adjustments
to the exercise price or conversion ratio of the Warrants which
occur under certain circumstances, or the failure to make such
adjustments, may result in the receipt of taxable constructive
dividends by a U.S. Holder to the extent of the
Companys current or accumulated earnings and profits,
regardless of whether there is a distribution of cash or
property, if such change has the effect of increasing the
holders proportionate interest in the earnings and profits
or assets of the Company. In general, anti-dilution adjustments
are not treated as resulting in taxable constructive dividends.

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Shares and ADSs

Cash Distributions

Subject to the PFIC discussion below, to the
extent that a distribution on Shares or ADSs (other than
liquidating distributions and certain distributions in
redemption of Shares or ADSs) is paid to a U.S. Holder out
of the Companys current or accumulated earnings and
profits (as determined for U.S. federal income tax
purposes), such distribution will be includible in the
U.S. Holders gross income as foreign source dividend
income in an amount equal to the U.S. dollar value of such
distribution (without reduction for any applicable foreign
withholding tax). Therefore, in the event that any foreign tax
is withheld from a distribution on the Shares or ADSs, a
U.S. Holder generally will be required to report gross
income in an amount greater than the cash received (although, as
discussed below, such U.S. Holder may be eligible to claim
a deduction or a foreign tax credit in respect of such foreign
tax in the taxable year). To the extent that the amount of any
distribution on the Shares or ADSs exceeds the current and
accumulated earnings and profits of the Company (as determined
for U.S. federal income tax purposes), a
U.S. Holders pro rata share of such excess amount
would be treated first as a nontaxable return of capital that
would be applied against and would reduce the
U.S. Holders tax basis in its Shares or ADSs (but not
below zero), and then as gain from the sale or exchange of
property. Distributions in excess of the Companys current
and accumulated earnings, and profits (as determined for
U.S. federal income tax purposes) generally will not give
rise to foreign source income and a U.S. Holder may be
unable to claim a foreign tax credit in respect of any
Netherlands or other foreign withholding tax imposed on such
distributions unless (subject to applicable limitations) the
U.S. Holder has other foreign source income in the
appropriate category for foreign tax credit purposes.

Subject to certain conditions and limitations
(including certain minimum holding period requirements), the
U.S. dollar value of the foreign income taxes, if any,
withheld from a distribution to a U.S. Holder on the Shares
or ADSs as calculated on the date of any such foreign
withholding may be claimed as a credit against the
U.S. Holders U.S. federal income tax liability.
Alternatively, a U.S. Holder may claim a deduction for such
amount of foreign income taxes withheld in a taxable year, but
only if such U.S. Holder does not elect to claim a foreign
tax credit in respect of any foreign taxes paid by it in the
taxable year. However, with respect to any withholding tax that
may be imposed by The Netherlands, because Netherlands tax law
may not require the Company to remit the full amount of such
withholding tax to The Netherlands taxing authorities,
U.S. Holders may be limited in their ability to deduct or
credit such Netherlands withholding tax for U.S. federal
income tax purposes. Dividends on Shares or ADSs generally will
constitute passive income or, in the case of certain
U.S. Holders, financial services income for
U.S. foreign tax credit purposes.

The rules relating to foreign tax credits are
extremely complex and the availability of a foreign tax credit
depends on numerous factors. U.S. Holders of Shares or ADSs
should consult their own tax advisors concerning the application
of the U.S. foreign tax credit rules to their particular
situations.

The U.S. dollar value of any distribution to
a U.S. Holder on Shares or ADSs that is paid in a foreign
currency will be calculated by reference to the spot rate in
effect at the time the distribution is received by the
U.S. Holder. A U.S. Holder generally should not
recognize any foreign currency gain or loss if such foreign
currency is converted into U.S. dollars on the day
received. If a U.S. Holder does not convert such foreign
currency into U.S. dollars on the date of receipt, however,
such Holder may recognize foreign currency gain or loss (which
generally will be taxable as ordinary income or loss) upon a
subsequent sale or other disposition of the foreign currency.

A corporate U.S. Holder will not be entitled
to a dividends received deduction with respect to distributions
on Shares or ADSs by the Company.

Sale, Exchange or Other Disposition of
Shares or ADSs

Except as otherwise noted in the PFIC discussion
below, a U.S. Holder generally will recognize gain or loss
on the sale or other disposition (including a redemption) of
Shares or ADSs equal to the difference between the amount
realized on that sale or other disposition and the
U.S. Holders adjusted tax basis in the Shares or
ADSs. Subject to the PFIC discussion below, such gain or loss
generally will be capital gain or loss. This capital gain or

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loss will be a long-term capital gain or loss of
the U.S. Holders holding period in the Shares or ADSs
exceeds one year. If you are an individual, gain or loss
recognized by a U.S. Holder generally will be
U.S. source gain or loss. The deductibility of capital
losses is subject to limitations.


Passive Foreign Investment Company
Status

In general, a foreign corporation will be
classified as a PFIC with respect to a U.S. Holder if, for
any taxable year in which the U.S. Holder held ordinary
shares, either (i) at least 75% of its gross income for the
taxable year consists of passive income or (ii) at least
50% of the average value (determined on the basis of a quarterly
average) of the corporations assets in a taxable year is
attributable to assets that produce or are held for the
production of passive income. For this purpose, passive income
generally includes dividends, interest, royalties, rents (other
than rents and royalties derived from the active conduct of a
trade or business and not derived from a related person),
annuities and gains from assets that produce passive income. The
Company was a PFIC for its 1998 taxable year, but was not a PFIC
for its 1999 and 2000 taxable year. Because this is a factual
determination that must be made annually, there is a significant
possibility that the Company may become a PFIC for its
2001 year. This will depend upon the sources of the
Companys income and the relative values of the
Companys passive assets such as cash and its non-passive
assets, including goodwill. The Company has substantial passive
assets in the form of cash from previous offerings. Furthermore,
since the goodwill of a publicly traded corporation such as the
Company is largely a function of the trading price of is shares,
the valuation of that goodwill is subject to significant change
throughout each year. Accordingly, it is possible that the
Company may become a PFIC due to changes in the nature of its
income or its assets, or as the result of a decrease in the
trading price of its shares.

If the Company were a PFIC, a special tax regime
would apply to both (a) any excess distribution
by the Company (generally, the U.S. Holders ratable
share of distributions in any year that are greater than 125% of
the average annual distributions received by such
U.S. Holder in the three preceding years or its holding
period, if shorter) and (b) any gain realized on the sale
or other disposition (including a pledge) of the ordinary
shares. Under this regime, any excess distribution and realized
gain would be treated as ordinary income and would be subject to
tax as if (a) the excess distribution or gain had been
realized ratably over the U.S. Holders holding
period, (b) the amount deemed realized had been subject to
tax in each year of that holding period at the highest
applicable tax rate in effect for that year, and (c) the
interest charge generally applicable to underpayments of tax had
been imposed on the taxes deemed to have been payable in those
years.

A U.S. Holder of Shares could elect,
provided the Company complies with certain reporting
requirements, to have the Company treated, with respect to that
U.S. Holders Shares, as a qualified electing
fund (QEF). If such an election is made in the
first taxable year that a U.S. Holder holds or is deemed to
hold the Companys stock and for which the Company is
determined to be a PFIC, such electing U.S. Holder would
include annually in gross income (but only for each year that
the Company actually meets the PFIC income or asset test) its
pro rata share of the Companys annual ordinary earnings
and annual net capital gains (at ordinary and capital gain
rates, respectively), whether or not such amounts are actually
distributed to the U.S. Holder. These amounts would be
included in income by an electing U.S. Holder for its
taxable year in which or with which the Companys taxable
year-ends.

The QEF election is made on a
shareholder-by-shareholder basis and can be revoked only with
the consent of the Internal Revenue Service. The Company will
supply the PFIC annual information statement to all shareholders
for each year, if any, in which it determines that it is a PFIC.
Prospective investors should consult their own tax advisors
concerning the advisability and timing of making a QEF election.
In addition, certain classes of investors, such as regulated
investment companies, may be subject to special rules and should
consult their own tax advisors concerning the application of
U.S. federal income tax rules governing PFICs in their
particular circumstances.

In certain circumstances, a U.S. Holder, in
lieu of being subject to the PFIC rules discussed above, may
make an election to include gain on the stock of a PFIC as
ordinary income under a mark-to-market method provided that such
stock is regularly traded on a qualified exchange. Under
recently finalized regulations, the AEX should constitute a
qualified exchange.

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U.S. Holders of ordinary shares are urged to
consult their own tax advisers concerning the application of the
PFIC rules (including the advisability and timing of making the
QEF or mark-to-market election).

Notes

Interest paid on a Note will be taxable to a
U.S. Holder as ordinary interest income at the time it is
received or accrued, depending on the U.S. Holders
method of accounting for U.S. federal income tax purposes.

In the case of interest paid in euro to a
U.S. Holder that uses the cash method of tax accounting,
the amount includable in income by such U.S. Holder will be
the U.S. dollar value of that interest payment, based on
the exchange rate in effect on the date of receipt, regardless
of whether the payment is in fact converted into
U.S. dollars. No foreign currency gain or loss will be
recognized with respect to the receipt of such interest payment.

In the case of interest paid in euro to a
U.S. holder that uses the accrual method of tax accounting,
such U.S. Holder will be required to include in income the
U.S. dollar value of the amount of interest accrued on a
Note during an accrual period. Such a U.S. Holder may
determine the amount of the interest to be recognized in
accordance with either of two methods. Under the first method,
the amount of interest accrued will be based on the average
exchange rate in effect during the interest accrual period or,
with respect to an accrual period that spans two taxable years,
the part of the period within the taxable year. Under the second
method, the U.S. Holder may elect to determine the amount
of interest accrued on the basis of the exchange rate in effect
on the last day of the accrual period or, in the case of an
accrual period that spans two taxable years, the exchange rate
in effect on the last day of the part of the period within the
taxable year. If the last day of the accrual period is within
five business days of the date the interest payment is actually
received, electing U.S. Holders may instead translate that
accrued interest at the exchange rate in effect on the day of
actual receipt. Any election to use the second method will apply
to all debt instruments held by such U.S. Holder at the
beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder, and will
be irrevocable without the consent of the Internal Revenue
Service.

A U.S. Holder utilizing either of the
foregoing two methods will recognize ordinary income or loss
with respect to accrued interest on the date of receipt of the
interest payment (including a payment attributable to accrued
but unpaid interest upon the sale or retirement of a Note). The
amount of ordinary income or loss will equal the difference
between the U.S. dollar value of the foreign currency
payment received (determined on the date the payment is
received) in respect of the accrual period and the
U.S. dollar value of interest that has accrued during that
accrual period (as determined under the method utilized by the
U.S. Holder).

Euro received as interest on the Notes will have
a tax basis equal to their U.S. dollar value at the time
the interest payment is received. Gain or loss, if any, realized
by a U.S. Holder on a sale or other disposition of that
foreign currency will be ordinary income or loss and will
generally be income from sources within the United States for
foreign tax credit limitation purposes.

Interest (and, with respect to the Second Notes,
OID) on the Notes will be treated as foreign source income for
U.S. federal income tax purposes, which may be relevant in
calculating a U.S. Holders foreign tax credit
limitation for U.S. federal income tax purposes. The
limitation on foreign taxes eligible for the United States
foreign tax credit is calculated separately with respect to
specific classes of income. For this purpose, the interest on
the Notes should generally constitute passive income
or, in the case of certain U.S. Holders, financial
services income.

Second Notes

The Second Notes were issued with original issue
discount (OID). Regardless of their method of
accounting, U.S. Holders of the Second Notes will be
required to include an amount equal to the sum of daily
portions of such OID attributable to each day during the
taxable year on which the U.S. Holder holds the Second Note
in income for federal income tax purposes as it accrues, in
accordance with a constant yield method based on a compounding
of interest, before the receipt of cash payments attributable to
such income. Under this

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method, U.S. Holders of the Second Notes
generally will be required to include in income increasingly
greater amounts of OID in successive accrual periods.


The daily portions of OID required to be included
in a U.S. Holders gross income in a taxable year will
be determined on a constant yield basis by allocating to each
day a pro rata portion of the OID on such Second Note that is
attributable to the accrual period in which such day
is included. Accrual periods with respect to a Second Note may
be of any length selected by the U.S. Holder and may vary
in length over the term of the Second Note as long as
(1) no accrual period is longer than one year and
(2) each scheduled payment of interest or principal on the
Second Note occurs on either the final or first day of an
accrual period.

The amount of the OID attributable to each
accrual period will be the difference between (1) the
product of the adjusted issue price of the Second
Note at the beginning of such accrual period and the yield
to maturity of the Second Note (stated in a manner
appropriately taking into account the length of the accrual
period), and (2) qualified stated interest allocable to the
accrual period. The yield to maturity is the
discount rate that, when used in computing the present value or
all payments to be made under the Second Note, produces an
amount equal to the issue price of the Second Note (specified in
the Offering Memorandum for the Second Notes). The adjusted
issue price of a Second Note at the beginning of an accrual
period is equal to the issue price of the Second Note, increased
by an OID accrued during prior accrual periods and decreased by
any cash payment (other than qualified stated interest) received
with respect to the Second Note on or before the first day of
the accrual period. Accordingly, a U.S. Holder of a Second
Note will be required to include OID thereon in gross income for
U.S. federal income tax purposes in advance of the receipt
of cash in respect of such income. The amount of OID allocable
to an initial short accrual period may be computed using any
reasonable method if all other accrual periods, other than a
final short accrual period, are of equal length. The amount of
OID allocable to the final accrual period at maturity of the
Second Note is the difference between (x) the amount
payable at the maturity of the Second Note (other than qualified
stated interest) and (y) the Notes adjusted issue
price as of the beginning of the final accrual period.

Market Discount; Acquisition
premium

If a U.S. Holder purchases a Note for an
amount that is less than the revised issue price of
the Note at the time of acquisition, the amount of such
difference will be treated as market discount for
U.S. federal income tax purposes, unless such difference is
less than a specified de minimis amount. The revised issue
price of a debt obligation generally equals the sum of its
issue price and the total amount of OID includable in the gross
income of all Holders for periods before the acquisition of the
debt obligation by the current Holder (without regard to any
reduction in such income resulting from acquisition premium) and
less any cash payments in respect of such debt obligation (other
than qualified stated interest). Under the market discount
rules, a U.S. Holder will be required to treat any
principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to
the extent of the market discount which has not previously been
included in income and is treated as having accrued on such Note
at the time of such payment or disposition. If a
U.S. Holder makes a gift of a Note, accrued market
discount, if any, will be recognized as if such U.S. Holder
has sold such Note for a price equal to its fair market value.
In addition, the U.S. Holder may be required to defer,
until the maturity of the Note or, in certain circumstances, the
earlier disposition of the Note in a taxable transaction, the
deduction of a portion of the interest expense on any
indebtedness incurred or continue to purchase or carry such Note.

Any market discount will be considered to accrue
on a straight-line basis during the period from the date of
acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on a constant
interest method. A U.S. Holder of a Note may elect to
include market discount in income currently as it accrues (on
either a straight-line basis or constant interest method), in
which case the rules described above regarding the deferral of
interest deductions will not apply. This election to include
market discount in income currently, once made, is irrevocable
and applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of
the Internal Revenue Service.

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U.S. Holder who purchases a Note for an
amount that is greater than the adjusted issue price of such
Note, but that is less than or equal to the sum of all amounts
payable on the Note after the purchase date, will be considered
to have purchased such Note at an acquisition
premium. Under the acquisition premium rules of the Code
and the OID Regulations, the amount of OID which such
U.S. Holder must include in its gross income with respect
to such Note for any taxable year will be reduced for each
accrual period by an amount equal to the product of (1) the
amount of OID otherwise includable for the period and (2) a
fraction, the numerator of which is the acquisition premium and
the denominator of which is the OID remaining from the date the
Note was purchased to its maturity date.

Sale, Exchange or Retirement of the
Notes

A U.S. Holders tax basis in a Note
will generally equal its U.S. dollar cost,
reduced by the amount of any payments received by the
U.S. Holder with respect to the Note that are not interest
payments. The U.S. dollar cost of a Note purchased with a
foreign currency will generally be the U.S. dollar value of
the purchase price on the date of purchase.

A U.S. Holder will generally recognize gain
or loss on the sale, exchange or retirement of a Note equal to
the difference between the amount realized on the sale, exchange
or retirement (except to the extent such amount is attributable
to accrued interest (and, with respect to the Second Notes,
OID), which will be taxable as ordinary income) and the adjusted
tax basis of the Note. The amount realized on the sale, exchange
or retirement of a Note for an amount of foreign currency will
be the U.S. dollar value of that amount on (i) the
date payment is received in the case of a cash basis
U.S. Holder or (ii) the date of disposition in the
case of an accrual basis U.S. Holder.

Gain or loss recognized by a U.S. Holder on
the sale, exchange or retirement of a Note that is attributable
to changes in currency exchange rates relating to the principal
thereof will be ordinary income or loss and will equal the
difference between the U.S. dollar value of the
U.S. Holders purchase price of the Note in foreign
currency determined on the date of the sale, exchange or
retirement, and the U.S. dollar value of the
U.S. Holders purchase price of the Note in foreign
currency determined on the date the U.S. Holder acquired
the Note. The foregoing foreign currency gain or loss will be
recognized only to the extent of the total gain or loss realized
by the U.S. Holder on the sale, exchange or retirement of
the Note, and will generally be treated as from sources within
the United States for U.S. foreign tax credit limitation
purposes.

Any gain or loss recognized by a U.S. Holder
in excess of foreign currency gain or loss recognized on the
sale, exchange or retirement of a Note would generally be
U.S. source capital gain or loss. In the case of an
individual U.S. Holder, any such gain will be subject to
preferential U.S. federal income tax rates if that
U.S. Holder satisfies certain prescribed minimum holding
periods. The deductibility of capital losses is subject to
limitations.

A U.S. Holder will have a tax basis in any
foreign currency received on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of the foreign
currency at the time of the sale, exchange or retirement. Gain
or loss, if any, realized by a U.S. Holder on a sale or
other disposition of that foreign currency will be ordinary
income or loss and will generally be income from sources within
the United States for foreign tax credit limitation purposes.

United States Information Reporting and Backup
Withholding

Dividend or interest payments (as to case may be)
made to holders, and proceeds paid from the sale, exchange,
redemption or disposal of Shares, Notes or ADSs may be subject
to information reporting to the Internal Revenue Service and
possible U.S. federal backup withholding at a 31% rate.
Certain exempt recipients (such as corporations) are not subject
to these information reporting requirements. Backup withholding
will not apply to a holder who furnishes a correct taxpayer
identification number or certificate of foreign status and makes
any other required certification, or who is otherwise exempt
from backup withholding. Any U.S. persons required to
establish their exempt status generally must file Internal
Revenue Service Form W-9 (Request for Taxpayer
Identification Number and Certification).
Non-U.S. holders generally will not be subject to
U.S. information reporting or backup withholding. However,
such holders may be required to provide certification of
non-U.S. status in connection with payments received in the
United States or through certain U.S.-related financial

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intermediaries. Finalized Treasury regulations
have generally expanded the circumstances under which
U.S. information reporting and backup withholding may apply.


Backup withholding is not an additional tax.
Amounts withheld as backup withholding may be credited against a
holders U.S. federal income tax liability. A holder
may obtain a refund of any excess amounts withheld under the
backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service and furnishing any
required information. Investors are urged to consult their
own tax advisers regarding the application of the information
reporting and U. S. backup withholding requirements, including
the finalized regulations, with respect to their particular
circumstances.

10.F     DIVIDENDS
AND PAYING AGENTS

Not applicable.

10.G     STATEMENT BY
EXPERTS

Not applicable.

10.H     DOCUMENTS ON
DISPLAY:

You may read and copy all or any portion of the
documents that we file with the SEC at the SECs public
reference room at 450 Fifth Street, N.W., Washington D.C.
20549. You can request copies of these documents, upon payment
of a duplication fee, by writing to the SEC. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of
the SECs public reference rooms. Also, the SEC maintains a
World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other
information regarding registrants that file electronically with
the SEC. Copies of the documents referred to herein may also be
inspected at our offices by contacting AJ Sauer, Investor
Relations, Versatel Telecom International N.V., Hullenbergweg
101, 1101 CL Amsterdam-Zuidoost, The Netherlands.




10.I     SUBSIDIARY
INFORMATION

Not applicable.

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|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
	MARKET RISK

Our financial department manages our funding,
liquidity and exposure to foreign exchange rate risks. It is our
policy not to enter into any transactions of a speculative or
trading nature.

Our debt obligations that are denominated in
U.S. dollars expose us to risks associated with changes in
the exchange rates between the U.S. dollar and the euro in
which our revenues are denominated.

The notes issued in the two high yield offerings
in 1998, $225,000,000 13 1/4% senior notes and $150,000,000
13 1/4% senior notes will mature on May 15, 2008. The
high yield notes issued in July 1999 of $180,000,000
11 7/8% senior notes and
120,000,000
11 7/8% senior notes will mature on July 15, 2009, and
the high yield notes issued in March 2000,
300,000,000
11 1/4% senior notes will mature on March 30, 2010.
Our convertible notes,
300,000,000 4%
senior convertible notes due 2004, and
360,000,000 4%
senior convertible notes due 2005 will mature on
December 17, 2004 and March 30, 2005, respectively.
Unless previously redeemed or converted, we are not required to
make any mandatory redemption (other than an offer to repurchase
these notes upon a change in control of Versatel) prior to
maturity of these notes. Since the interest rate on each of the
notes issued in the high yield offerings is fixed and the
effective interest rate on our convertible notes increases at
fixed increments, we have limited our exposure to risks due to
fluctuations of interest rates. At December 31, 2001, the
market value of the outstanding notes issued in the high yield
offerings was approximately
331.1 million
and the market value of our outstanding convertible notes was
approximately
165.0 million.

The costs and expenses relating to the
development of our network and of our sales and marketing
resources will largely be in euro. Therefore, the development of
our network and of our sales and marketing resources will also
be subject to currency exchange rate fluctuations as we exchange
the proceeds from the remaining proceeds from our dollar
denominates offerings to pay our development costs. As of
December 31, 2001, our dollar denominated cash balance
amounted to $2.3 million. Prior to the application of the
net proceeds from these offerings, such funds have been invested
in short term investment grade securities. Versatel from time to
time hedges a portion of its foreign currency risk in order to
lock into a rate for a given time.






|         |                                                        
|-------- | -------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
	SECURITIES

Not applicable.

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PART II




ITEM
13.     DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES

None.






|         |                                                                              
|-------- | -----------------------------------------------------------------------------
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF
	SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.




ITEM
15.     [RESERVED]






ITEM
16.     [RESERVED]





PART III




ITEM
17.     FINANCIAL STATEMENTS

Not applicable.




ITEM
18.     FINANCIAL STATEMENTS

The following financial statements are filed as
part of this Annual Report on Form 20-F.




ITEM
19.     EXHIBITS

|            |     |     |  |             |   |  |  |                                                                                                                                                                 
|----------- | --- | --- |  | ----------- | - |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |     |     |  | Description
|            |     |     |  |            
|            | 1   | (1) |  |             |  |  |  | Articles of Association (as amended) of the
	Company                                                                                                            
|            | 2.1 | (2) |  |             |  |  |  | Deposit Agreement between the Company and The
	Bank of New York, as depositary                                                                                  
|            | 2.2 | (3) |  |             |  |  |  | Indenture, dated May 27, 1998, between the
	Company and U.S. Trust Company of New York, as Trustee                                                              
|            | 2.3 | (4) |  |             |  |  |  | Indenture, dated December 3, 1998, between
	the Company and U.S. Trust Company of New York, as Trustee                                                          
|            | 2.4 | (5) |  |             |  |  |  | Indentures, dated July 28, 1998, between the
	Company and U.S. Trust Company of New York, as Trustee                                                            
|            | 2.5 | (6) |  |             |  |  |  | Indenture, dated March 30, 2000, between the
	Company and The Bank of New York, as Trustee                                                                      
|            | 2.6 | (7) |  |             |  |  |  | Principal Paying Agent, Conversion Agent,
	Conversion Calculation Agent and Registrar Agreement, dated
	December 17, 1999, between the Company and ING Bank N.V.
|            | 2.7 | (8) |  |             |  |  |  | Principal Paying Agent, Conversion Agent,
	Conversion Calculation Agent and Registrar Agreement, dated
	March 20, 2000, between the Company and ING Bank N.V.   
|            | 7   |     |  |             |  |  |  | Statement re ratio earnings to fixed charges.                                                                                                                   
|            | 8   |     |  |             |  |  |  | List of Subsidiaries.                                                                                                                                           
|            | 10  |     |  |             |  |  |  | Letter regarding representations by Arthur
	Andersen pursuant to SEC Release 33-8070.                                                                           






|    |                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as an exhibit to the
	Companys Registration Statement on Form 20-F, filed
	with the Securities and Exchange Commission on March 20,
	2000 and incorporated herein by reference.                                
|   
|(2) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-6 (File
	number 333-10516) initially filed with the Securities and
	Exchange Commission on July 13, 1999 and incorporated
	herein by reference.

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|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-59979) initially filed with the Securities and
	Exchange Commission on July 27, 1998 and incorporated
	herein by reference.   
|   
|(4) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-70449) initially filed with the Securities and
	Exchange Commission on January 12, 1999 and incorporated
	herein by reference.
|   
|(5) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-1 (File
	number 333-81329) initially filed with the Securities and
	Exchange Commission on June 22, 1999 and incorporated
	herein by reference.   
|   
|(6) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-43938) initially filed with the Securities and
	Exchange Commission on August 16, 2000 and incorporated
	herein by reference. 
|   
|(7) | Previously filed as an exhibit to the
	Companys Form 20-F, filed with the Securities and
	Exchange Commission on March 20, 2000 and incorporated
	hereby by reference.                                                             
|   
|(8) | Previously filed as an exhibit to the
	Companys Form 20-F, filed with the Securities and
	Exchange Commission on March 30, 2001 and incorporated
	hereby by reference.                                                             

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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

OF VERSATEL TELECOM INTERNATIONAL N.V.


|                                                                                                                  |  |      |      | 
|----------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                  |  | Page
|                                                                                                                  |  |     
|Reports of Independent Public Accountants                                                                         |  |      | F-2  | 
|Consolidated Balance Sheets as of
	December 31, 2000 and 2001                                                     |  |      | F-6  | 
|Consolidated Statements of Operations for the
	years ended December 31, 1999, 2000 and 2001                       |  |      | F-8  | 
|Consolidated Statements of Cash Flows for the
	years ended December 31, 1999, 2000 and 2001                       |  |      | F-9  | 
|Consolidated Statements of Changes in
	Shareholders Equity for the years ended December 31,
	1999, 2000 and 2001 |  |      | F-10 | 
|Notes to the Consolidated Financial Statements                                                                    |  |      | F-11 | 

F-1



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANT

To Versatel Telecom International N.V.

We have audited the accompanying consolidated
balance sheets as of December 31, 2000 and 2001 of VERSATEL
TELECOM INTERNATIONAL N.V. and the consolidated statements of
operations, shareholders equity and cash flows for each of
the three years in the period ended December 31, 2001.
These consolidated financial statements are the responsibility
of the companys management. Our responsibility is to
express an opinion on these financial statements based on our
audits. We did not audit the consolidated financial statements
of Versatel Deutschland Holding GmbH, the consolidated financial
statements of Komtel Gesellschaft für Kommunikations- und
Informationsdienste mbH and the financial statements of Versatel
Deutschland GmbH & Co. KG, as of and for the year
ended December 31, 2001, not presented separately herein,
which statements reflect total assets and total revenues of
21.1% and 24.0% of the related consolidated totals. We did not
audit the financial statements of VEW Telnet GmbH, as of and for
the year ended December 31, 1999, not presented separately
herein, which statements reflect total assets and total revenues
of 7.1% and 2.7% of the related consolidated totals. We did not
audit the financial statements of Komtel Gesellschaft für
Kommunikations- und Informationsdienste mbH, as of and for the
year ended December 31, 2000, not presented separately
herein, which statements reflect total assets and total revenues
of 2.7% and 15.3% of the related consolidated totals. Those
statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to
the amounts included for those entities, is based solely on the
reports of the other auditors.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation. We believe that our audits and the reports of the
other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the
reports of other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Versatel Telecom International N.V. as of
December 31, 2000 and 2001 and the result of their
operations and their cash flows for each of the years in the
period ended, in conformity with United States generally
accepted accounting principles.



| |                
| | ---------------
| | ARTHUR ANDERSEN

Amsterdam, The Netherlands

March 26, 2002

F-2



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

We have audited the consolidated balance sheet,
as of December 31, 2001, of Versatel Deutschland Holding
GmbH, Dortmund, and the consolidated statement of operations for
the year ended December 31, 2001. These consolidated
financial statements are the responsibility of the
companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation. We believe that our audit provides a reasonable
basis for our opinion. The consolidated financial statements of
the company were prepared for consolidation purposes.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Versatel Deutschland Holding GmbH, Dortmund, as of
December 31, 2001 and the result of its operations for the
one year period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America.

Flensburg, March 23, 2002



| |                                       
| | --------------------------------------
| | BDO Nordwestdeutsche Treuhand         
| | Gesellschaft mit beschränkter
	Haftung
| | Wirtschaftsprüfungsgesellschaft       
| | Steuerberatungsgesellschaft           

F-3



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

We have audited the balance sheet of Versatel
Deutschland GmbH & Co. KG, Dortmund, as of December 31,
2001, the statements of operations, shareholders equity
and cash flows for the year ended December 31, 2001. These
financial statements are the responsibility of the
companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Versatel Deutschland GmbH & Co. KG, Dortmund, as
of December 31, 2001, and the results of its operations and
cash flows for the one year period ended December 31, 2001,
in conformity with accounting principles generally accepted in
the United States of America.

Flensburg, March 23, 2002



| |                                       
| | --------------------------------------
| | BDO Nordwestdeutsche Treuhand         
| | Gesellschaft mit beschränkter
	Haftung
| | Wirtschaftsprüfungsgesellschaft       
| | Steuerberatungsgesellschaft           

F-4



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

We have audited the consolidated balance sheets
of Komtel Gesellschaft für Kommunikations- und
Informationsdienste mbH, Flensburg, as of December 31, 2000
and 2001 and the consolidated statements of operations,
shareholders equity and cash flows for the year ended
December 31, 2001 and for the nine month period ended
December 31, 2000. These consolidated financial statements
are the responsibility of the companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation. We believe that our audits provide a reasonable
basis for our opinion.

80% of the shares in Komtel Gesellschaft für
Kommunikations- und Informationsdienste mbH, Flensburg, are
owned by Versatel group.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Komtel Gesellschaft für
Kommunikations- und Informationsdienste mbH, Flensburg, as of
December 31, 2000 and 2001 and the results of its
operations and cash flows for the year ended December 31,
2001, and for the nine month period ended December 31,
2000, in conformity with accounting principles generally
accepted in the United States of America.

Flensburg, March 23, 2002



| |                                       
| | --------------------------------------
| | BDO Nordwestdeutsche Treuhand         
| | Gesellschaft mit beschränkter
	Haftung
| | Wirtschaftsprüfungsgesellschaft       
| | Steuerberatungsgesellschaft           

F-5



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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Consolidated balance sheets as of

December 31, 2000 and 2001


(Amounts in thousands of euro, except share and
per share amounts)

|                                   |                      |      |           |           |  |  |           |         | 
|---------------------------------- | -------------------- | ---- | --------- | --------- |  |  | --------- | ------- | 
|                                   |                      | 2000 |           | 2001     
|                                   |                      |      |           |          
|ASSETS                            
|Current Assets:                    |                      |      |           |           |  |  |           |        
|Cash                               |                      |      | 61,618    |           |  |  | 479,799   |        
|Marketable securities              |                      |      | 1,116,249 |           |  |  | 242,306   |        
|Restricted cash, current portion   |                      |      | 26,009    |           |  |  |          |        
|Accounts receivable, net           |                      |      | 74,807    |           |  |  | 68,884    |        
|Inventory                          |                      |      | 9,804     |           |  |  | 28,115    |        
|Unbilled revenues                  |                      |      | 12,327    |           |  |  | 11,078    |        
|Prepaid expenses and other         |                      |      | 51,568    |           |  |  | 26,719    |        
|                                   |                      |      |           |           |  |  |           |        
|                                   | Total current assets |      |           | 1,352,382 |  |  |           | 856,901 | 
|                                   |                      |      |           |           |  |  |           |        
|Fixed Assets:                      |                      |      |           |           |  |  |           |        
|Property, plant and equipment, net |                      |      | 591,391   |           |  |  | 814,240   |        
|Construction in progress           |                      |      | 175,766   |           |  |  | 125,656   |        
|                                   |                      |      |           |           |  |  |           |        
|                                   | Total fixed assets   |      |           | 767,157   |  |  |           | 939,896 | 
|                                   |                      |      |           |           |  |  |           |        
|Capitalized finance costs, net     |                      |      | 41,435    |           |  |  | 33,486    |        
|Other non-current assets           |                      |      | 11,003    |           |  |  | 8,048     |        
|Goodwill, net                      |                      |      | 245,663   |           |  |  | 217,939   |        
|                                   |                      |      |           |           |  |  |           |        
|Total assets                       |                      |      | 2,417,640 |           |  |  | 2,056,270 |        
|                                   |                      |      |           |           |  |  |           |        

See notes to the consolidated financial
statements.

F-6



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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Consolidated balance sheets as of

December 31, 2000 and 2001


(Amounts in thousands of euro, except share and
per share amounts)

|                                                                                                                                       |                            |      |           |           |  |  |            |           |  
|-------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---- | --------- | --------- |  |  | ---------- | --------- | -
|                                                                                                                                       |                            | 2000 |           | 2001     
|                                                                                                                                       |                            |      |           |          
|LIABILITIES AND SHAREHOLDERS
	EQUITY                                                                                                 
|Current Liabilities:                                                                                                                   |                            |      |           |           |  |  |            |          
|Accounts payable                                                                                                                       |                            |      | 128,716   |           |  |  | 118,651    |          
|Accrued liabilities                                                                                                                    |                            |      | 218,152   |           |  |  | 188,676    |          
|Unearned revenue                                                                                                                       |                            |      | 16,461    |           |  |  | 21,220     |          
|Current portion of capital lease obligations                                                                                           |                            |      | 1,334     |           |  |  | 1,080      |          
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|                                                                                                                                       | Total current liabilities  |      |           | 364,663   |  |  |            | 329,627   |  
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|Capital lease obligations, net of current portion                                                                                      |                            |      | 1,369     |           |  |  | 12,612     |          
|Long-term liabilities                                                                                                                  |                            |      | 25,648    |           |  |  | 11,850     |          
|Long-term debt                                                                                                                         |                            |      | 1,684,642 |           |  |  | 1,728,875  |          
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|                                                                                                                                       | Total liabilities          |      |           | 2,076,322 |  |  |            | 2,082,964 |  
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|Shareholders Equity:                                                                                                                  |                            |      |           |           |  |  |            |          
|Ordinary shares, NLG 0.05 par value,
	91,352,247 and 89,661,896 issued and outstanding as of
	December 31, 2001 and 2000, respectively |                            |      | 2,033     |           |  |  | 2,073      |          
|Additional paid-in capital                                                                                                             |                            |      | 1,019,015 |           |  |  | 1,022,572  |          
|Warrants                                                                                                                               |                            |      | 722       |           |  |  | 336        |          
|Deferred compensation                                                                                                                  |                            |      | (19,270   | )         |  |  | (11,932    | )        
|Accumulated deficit                                                                                                                    |                            |      | (661,182  | )         |  |  | (1,039,743 | )        
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|                                                                                                                                       | Total shareholders equity |      |           | 341,318   |  |  |            | (26,694   | )
|                                                                                                                                       |                            |      |           |           |  |  |            |          
|Total liabilities and shareholders equity                                                                                             |                            |      | 2,417,640 |           |  |  | 2,056,270  |          
|                                                                                                                                       |                            |      |           |           |  |  |            |          

See notes to the consolidated financial
statements.

F-7



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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Consolidated statements of
operations

for the years ended December 31, 1999,
2000 and 2001


(Amounts in thousands of euro, except share and
per share amounts)

|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|------------------------------------------------------------------------------------ |  | ---- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                                                                                     |  | 1999 |          | 2000 |  | 2001
|                                                                                     |  |      |          |      |  |     
|OPERATING REVENUE:                                                                   |  |      | 58,537   |      |  |      | 181,469  |   |  |  | 255,733  |  
|OPERATING EXPENSES:                                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|Cost of revenues, excluding depreciation and
	amortization                           |  |      | 45,657   |      |  |      | 133,565  |   |  |  | 154,399  |  
|Selling, general and administrative, excluding
	stock based compensation shown below |  |      | 70,250   |      |  |      | 206,360  |   |  |  | 165,614  |  
|Stock based compensation                                                             |  |      | 12,557   |      |  |      | 7,034    |   |  |  | 5,695    |  
|Tax penalties                                                                        |  |      |         |      |  |      |         |   |  |  | 2,978    |  
|Restructuring expense                                                                |  |      |         |      |  |      |         |   |  |  | 11,240   |  
|Depreciation and amortization                                                        |  |      | 26,412   |      |  |      | 91,518   |   |  |  | 138,592  |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Total operating expenses                                                             |  |      | 154,876  |      |  |      | 438,477  |   |  |  | 478,518  |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Operating loss                                                                       |  |      | (96,339  | )    |  |      | (257,008 | ) |  |  | (222,785 | )
|OTHER INCOME (EXPENSES):                                                             |  |      |          |      |  |      |          |   |  |  |          |  
|Foreign currency exchange (losses) gains, net                                        |  |      | (43,684  | )    |  |      | (32,695  | ) |  |  | (30,192  | )
|Interest income                                                                      |  |      | 12,861   |      |  |      | 57,629   |   |  |  | 45,466   |  
|Interest expense                                                                     |  |      | (71,373  | )    |  |      | (168,761 | ) |  |  | (184,103 | )
|Result from investing activities                                                     |  |      |         |      |  |      | (3,131   | ) |  |  | 21       |  
|Other asset impairments                                                              |  |      |         |      |  |      | (12,751  | ) |  |  |         |  
|Other expenses                                                                       |  |      |         |      |  |      | (5,463   | ) |  |  |         |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Total other expenses, net                                                            |  |      | (102,196 | )    |  |      | (165,172 | ) |  |  | (168,808 | )
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Loss before income taxes and minority interest
	and extraordinary item               |  |      | (198,535 | )    |  |      | (422,180 | ) |  |  | (391,593 | )
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Credit from income taxes                                                             |  |      | 437      |      |  |      | 41       |   |  |  |         |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Loss before minority interest and extraordinary
	item                                |  |      | (198,098 | )    |  |      | (422,139 | ) |  |  | (391,593 | )
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Minority interest                                                                    |  |      | 168      |      |  |      | 792      |   |  |  |         |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Loss before extraordinary item                                                       |  |      | (197,930 | )    |  |      | (421,347 | ) |  |  | (391,593 | )
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Extraordinary item                                                                   |  |      |         |      |  |      |         |   |  |  | 13,032   |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Net Loss                                                                             |  |      | (197,930 | )    |  |      | (421,347 | ) |  |  | (378,561 | )
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Net loss per share (basic and diluted) excluding
	extraordinary item                 |  |      | (3.89    | )    |  |      | (4.92    | ) |  |  | (4.31    | )
|Extraordinary item per share (basic and diluted)                                     |  |      |         |      |  |      |         |   |  |  | 0.14     |  
|                                                                                     |  |      |          |      |  |      |          |   |  |  |          |  
|Net loss per share (basic and diluted)                                               |  |      | (3.89    | )    |  |      | (4.92    | ) |  |  | (4.17    | )

See notes to the consolidated financial
statements.

F-8



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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Consolidated statements of cash
flows

for the years ended December 31, 1999,
2000 and 2001


(Amounts in thousands of euro, except share and
per share amounts)

|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |            |          |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | ------- | --------- | ------- | ---- | -------- | ---------- | -------- | - | ------- | ---------- | -------- | -
|                                                                            |                                                                   | 1999                                  |         | 2000      |         | 2001
|                                                                            |                                                                   |                                       |         |           |         |     
|CASH FLOW FROM OPERATING ACTIVITIES:                                        |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Net loss                                                          |                                       |         | (197,930  | )       |      |          | (421,347   | )        |   |         | (378,561   | )       
|Adjustments to reconcile net loss to net cash
	used in operating activities |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Depreciation and amortization                                     |                                       |         | 26,412    |         |      |          | 91,518     |          |   |         | 138,592    |         
|                                                                            | Amortization of finance cost                                      |                                       |         | 1,817     |         |      |          | 7,928      |          |   |         | 6,705      |         
|                                                                            | Currency translation movement                                     |                                       |         | 40,633    |         |      |          | 30,628     |          |   |         | 30,580     |         
|                                                                            | Gain on sale of fixed assets                                      |                                       |         |          |         |      |          | (6,511     | )        |   |         | (18,703    | )       
|                                                                            | Accreted interest on convertible notes                            |                                       |         |          |         |      |          | 26,538     |          |   |         | 32,203     |         
|                                                                            | Stock based compensation                                          |                                       |         | 12,557    |         |      |          | 7,034      |          |   |         | 5,695      |         
|                                                                            | Profit on extinguishment of debt                                  |                                       |         |          |         |      |          |           |          |   |         | (13,032    | )       
|Changes in other operating assets and liabilities                           |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Accounts receivable                                               |                                       |         | (3,579    | )       |      |          | (53,675    | )        |   |         | 5,923      |         
|                                                                            | Inventory                                                         |                                       |         | (526      | )       |      |          | (248       | )        |   |         | (18,311    | )       
|                                                                            | Prepaid expenses and other                                        |                                       |         | (33,753   | )       |      |          | (9,236     | )        |   |         | 31,385     |         
|                                                                            | Accounts payable                                                  |                                       |         | 47,593    |         |      |          | 27,107     |          |   |         | (10,064    | )       
|                                                                            | Due to related parties                                            |                                       |         | (366      | )       |      |          |           |          |   |         |           |         
|                                                                            | Unearned revenue                                                  |                                       |         | (1,479    | )       |      |          | 14,102     |          |   |         | 4,759      |         
|                                                                            | Accrued liabilities                                               |                                       |         | 38,528    |         |      |          | 95,123     |          |   |         | (24,153    | )       
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            |                                                                   | Net cash used in operating activities |         |           | (70,093 | )    |          |            | (191,039 | ) |         |            | (206,982 | )
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|CASH FLOW FROM INVESTING ACTIVITIES:                                        |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Capital expenditures                                              |                                       |         | (173,804  | )       |      |          | (466,884   | )        |   |         | (251,926   | )       
|                                                                            | Proceeds from disposal of fixed assets                            |                                       |         |          |         |      |          | 16,324     |          |   |         |           |         
|                                                                            | Finance costs of senior notes and convertible
	notes              |                                       |         | (17,025   | )       |      |          | (19,499    | )        |   |         |           |         
|                                                                            | Acquisition of business, net of cash acquired                     |                                       |         | (281,702  | )       |      |          | (103,540   | )        |   |         | (223       | )       
|                                                                            | Net proceeds from sale of business                                |                                       |         |          |         |      |          | 13,194     |          |   |         |           |         
|                                                                            | Purchase of marketable securities                                 |                                       |         | (160,465  | )       |      |          | (2,587,668 | )        |   |         | (1,067,303 | )       
|                                                                            | Sales of marketable securities                                    |                                       |         |          |         |      |          | 1,631,886  |          |   |         | 1,941,246  |         
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Net cash provided by investing activities                         |                                       |         | (632,996  | )       |      |          | (1,516,187 | )        |   |         | 621,794    |         
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|CASH FLOW FROM FINANCING ACTIVITIES:                                        |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Payments under capital lease obligations                          |                                       |         |          |         |      |          | (39,377    | )        |   |         | 205        |         
|                                                                            | Proceeds from (redemption of) short-term loans                    |                                       |         | 6,975     |         |      |          | 16,061     |          |   |         | (6,902     | )       
|                                                                            | Proceeds from (redemption of) long-term debt                      |                                       |         | 5,070     |         |      |          | 15,504     |          |   |         | (13,799    | )       
|                                                                            | Proceeds from (redemption of) senior notes and
	convertible loans |                                       |         | 591,674   |         |      |          | 655,611    |          |   |         | (9,079     | )       
|                                                                            | Restricted cash paid as interest                                  |                                       |         | 46,368    |         |      |          | 48,768     |          |   |         | 28,090     |         
|                                                                            | Proceeds from exercised warrants                                  |                                       |         |          |         |      |          | 2,369      |          |   |         | 293        |         
|                                                                            | Proceeds from exercised options                                   |                                       |         |          |         |      |          | 2,745      |          |   |         | 1,095      |         
|                                                                            | Shareholder contributions                                         |                                       |         | 708,504   |         |      |          | 242,848    |          |   |         | 3,466      |         
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Net cash provided by financing activities                         |                                       |         | 1,358,591 |         |      |          | 944,529    |          |   |         | 3,369      |         
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|Net increase (decrease) in cash                                             |                                                                   |                                       | 655,502 |           |         |      | (762,697 | )          |          |   | 418,181 |           
|Cash, beginning of the year                                                 |                                                                   |                                       | 168,813 |           |         |      | 824,315  |            |          |   | 61,618  |           
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|Cash, end of the year                                                       |                                                                   |                                       | 824,315 |           |         |      | 61,618   |            |          |   | 479,799 |           
|                                                                            |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                          |                                                                   |                                       |         |           |         |      |          |            |          |   |         |           
|                                                                            | Cash paid for                                                    |                                       |         |           |         |      |          |            |          |   |         |            |         
|                                                                            |                                                                   | Interest (net of amounts capitalized) |         |           | 46,368  |      |          |            | 120,206  |   |         |            | 136,809  |  
|                                                                            |                                                                   | Income taxes                          |         |           |        |      |          |            |         |   |         |            |         |  
|                                                                            | Acquisition of property through capital leases                    |                                       |         | 40,088    |         |      |          |           |          |   |         | 12,369     |         

F-9



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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Consolidated statements of shareholders
equity

for the years ended December 31, 1999,
2000, and 2001


(Amounts in thousands of euro, except for share
and per share amounts)

|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  
|---------------------------------------- |  | ----------- | ---------- | -------- |  | ---------- | ----- | -------- |  | ------------ | --------- | ----------- |  | ----- | ------ | - |  |  | ------- | - |  |  | ---------- | - |  |  | -------- | -
|                                         |  | Number of   |            |          |  | Additional |       |          |  |              |           |             |  |      
|                                         |  | shares      |            | Ordinary |  | paid-in    |       |          |  | Deferred     |           | Accumulated |  |      
|                                         |  | outstanding |            | shares   |  | capital    |       | Warrants |  | Compensation |           | deficit     |  | Total
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |      
|Balance, December 31, 1998               |  |             | 38,984,810 |          |  |            | 884   |          |  |              | 23,194    |             |  |       | 2,365  |   |  |  |        |   |  |  | (41,905    | ) |  |  | (15,462  | )
|Shareholder contributions                |  |             | 37,380,008 |          |  |            | 848   |          |  |              | 700,906   |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 701,754  |  
|Shares issued for acquisition            |  |             | 425,000    |          |  |            | 10    |          |  |              | 4,241     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 4,251    |  
|Stock options exercised                  |  |             | 1,940,000  |          |  |            | 44    |          |  |              | 1,915     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 1,959    |  
|Warrants exercised                       |  |             | 495,168    |          |  |            | 11    |          |  |              | 265       |             |  |       | (277   | ) |  |  |        |   |  |  |           |   |  |  | (1       | )
|Stock compensation charge                |  |             |           |          |  |            |      |          |  |              | 12,557    |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 12,557   |  
|Issuance of subsidiary shares            |  |             |           |          |  |            |      |          |  |              | 541       |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 541      |  
|Net loss                                 |  |             |           |          |  |            |      |          |  |              |          |             |  |       |       |   |  |  |        |   |  |  | (197,930   | ) |  |  | (197,930 | )
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  
|Balance, December 31, 1999               |  |             | 79,224,986 |          |  |            | 1,797 |          |  |              | 743,619   |             |  |       | 2,088  |   |  |  |        |   |  |  | (239,835   | ) |  |  | 507,669  |  
|Shareholders contributions               |  |             | 5,100,000  |          |  |            | 116   |          |  |              | 238,411   |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 238,527  |  
|Shares issued for acquisition            |  |             | 221,371    |          |  |            | 5     |          |  |              | 4,316     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 4,321    |  
|Stock options exercised                  |  |             | 2,221,626  |          |  |            | 49    |          |  |              | 2,696     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 2,745    |  
|Warrants exercised                       |  |             | 2,893,913  |          |  |            | 66    |          |  |              | 3,669     |             |  |       | (1,366 | ) |  |  |        |   |  |  |           |   |  |  | 2,369    |  
|Deferred compensation                    |  |             |           |          |  |            |      |          |  |              | 26,304    |             |  |       |       |   |  |  | (26,304 | ) |  |  |           |   |  |  |         |  
|Amortization of stock based compensation |  |             |           |          |  |            |      |          |  |              |          |             |  |       |       |   |  |  | 7,034   |   |  |  |           |   |  |  | 7,034    |  
|Net loss                                 |  |             |           |          |  |            |      |          |  |              |          |             |  |       |       |   |  |  |        |   |  |  | (421,347   | ) |  |  | (421,347 | )
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  
|Balance, December 31, 2000               |  |             | 89,661,896 |          |  |            | 2,033 |          |  |              | 1,019,015 |             |  |       | 722    |   |  |  | (19,270 | ) |  |  | (661,182   | ) |  |  | 341,318  |  
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  
|Shareholders contributions               |  |             |           |          |  |            |      |          |  |              | 2,941     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 2,941    |  
|Shares issued for acquisition            |  |             | 7,500      |          |  |            | 1     |          |  |              | 524       |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 525      |  
|Stock options exercised                  |  |             | 948,133    |          |  |            | 22    |          |  |              | 1,073     |             |  |       |       |   |  |  |        |   |  |  |           |   |  |  | 1,095    |  
|Warrants exercised                       |  |             | 734,718    |          |  |            | 17    |          |  |              | 662       |             |  |       | (386   | ) |  |  |        |   |  |  |           |   |  |  | 293      |  
|Deferred compensation                    |  |             |           |          |  |            |      |          |  |              | (1,643    | )           |  |       |       |   |  |  | 1,643   |   |  |  |           |   |  |  |         |  
|Amortization of stock based compensation |  |             |           |          |  |            |      |          |  |              |          |             |  |       |       |   |  |  | 5,695   |   |  |  |           |   |  |  | 5,695    |  
|Net loss                                 |  |             |           |          |  |            |      |          |  |              |          |             |  |       |       |   |  |  |        |   |  |  | (378,561   | ) |  |  | (378,561 | )
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  
|Balance, December 31, 2001               |  |             | 91,352,247 |          |  |            | 2,073 |          |  |              | 1,022,572 |             |  |       | 336    |   |  |  | (11,932 | ) |  |  | (1,039,743 | ) |  |  | (26,694  | )
|                                         |  |             |            |          |  |            |       |          |  |              |           |             |  |       |        |   |  |  |         |   |  |  |            |   |  |  |          |  

There is no other comprehensive income other than
the net losses for the period.

See notes to the consolidated financial
statements.

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##### Table of Contents



VERSATEL TELECOM INTERNATIONAL N.V.

Notes to the consolidated financial
statements

(Amounts in thousands of euro, except for share
and per share amounts)

1.   General

Versatel Telecom International N.V.
(Versatel or the Company), incorporated
in Amsterdam on October 10, 1995, provides international
and national telecommunication services in The Netherlands,
Belgium and northwest Germany.

As of January 1, 2000, Versatel published
its financial statements in euro. Prior to this date, Versatel
published its financial statements in Dutch guilders. We have
restated the financial statements and the notes presented herein
for the periods prior to January 1, 2000 in euro using the
fixed conversion rate of NLG 2.20371 per
1.00 established
in connection with the implementation of the third stage of
European Monetary Union.

The financial data reported in euro depict the
same trend as would have been presented if Versatel had
continued to present financial statements in NLG. The financial
data for the years ended December 31, 1999, 1998 and 1997,
will not be comparable to the financial statements of other
companies that report in euro and that restated amounts from a
different currency than Dutch Guilders.

(a)  Financial Condition, Operations
and Risks and Uncertainties

Since its founding, Versatel has invested
significant capital to build and operate its network and fund
its operating losses and interest expense.

For the year ended December 31, 2001, we had
a loss from operating activities of
222.8 million
and negative Adjusted EBITDA (which consists of earnings (loss)
before interest expense, income taxes, depreciation,
amortization, stock based compensation, tax penalties,
restructuring expense, extraordinary items, results from
investing activities and foreign exchange gain (loss)) of
64.3 million.
For the year ended December 31, 2000 we had a loss from
operating activities of
257.0 million
and negative Adjusted EBITDA of
158.5 million.
We expect to continue to incur significant further operating
losses for the foreseeable future. Although the proposed
exchange offer would result in a significant non-recurring net
gain for accounting purposes and tax purposes (consisting
primarily of an extraordinary gain resulting from the
extinguishment of the high yield notes and a one time charge to
interest expense as a result of the induced conversion related
to the convertible notes), we expect to continue to make losses
in the future. You should be aware that we cannot be certain
that we will achieve or, if achieved, be able to maintain
operating profits in the future.

In order to achieve positive Adjusted EBITDA,
Versatel will need to grow its revenues, control its network
costs by replacing leased lines and other temporary network
elements with its own network, and efficiently manage selling,
general and administrative costs. Adjusted EBITDA is included
because management believes it is a useful indicator of a
companys ability to incur and service debt. Adjusted
EBITDA should not be considered as a substitute for operating
earnings, net income, cash flow or other statements of
operations or cash flow data computed in accordance with
U.S. GAAP or as a measure of our results of operations or
liquidity. Because all companies do not calculate Adjusted
EBITDA or EBITDA, identically, the presentation of Adjusted
EBITDA contained herein may not be comparable to other similarly
titled measures of other companies. Please note that the
definition of Adjusted EBITDA as applied in the audited
financial statements for the years 1997, 1998, 1999 and 2000 is
different from the above definition. In the new definition for
Adjusted EBITDA, stock based compensation, tax penalties and
restructuring expenses are included.

The ability to attract and provision new
customers directly to our network with fiber, DSL technology,
other copper access technologies or leased lines will have a
significant impact on Versatels ability to achieve
positive Adjusted EBITDA and eventual net profit. To date,
Versatel has made significant progress in connecting new
buildings to its network. Versatel continues to invest in strong
sales and marketing efforts to attract new customers and enhance
Versatels brand image in its target markets, but no
assurances can be given by Versatel that it will be able to
continue to attract new customers and connect them directly to
its network.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

For the year ended December 31, 2001, the
company had a net loss of
378.6 million.
In addition, Versatel had an accumulated deficit of
1,039.7 million
as of December 31, 2001. We have used a significant amount
of the net proceeds of the debt and equity offerings to make
capital expenditures related to the expansion and development of
our network, to acquire various companies, to fund operating
losses and for other general corporate purposes. Our capital
expenditure for each of the years ended December 31, 2001,
2000 and 1999 was
251.9 million,
466.9 million
and
173.8 million,
respectively. Taking the non-monetary transactions of 2001 into
consideration the gross capital expenditures amounted to
274.9 million.
We expect total capital expenditure for 2002 to be significantly
below 2001 levels.

As of December 31, 2001, we had negative
working capital (excluding cash, cash equivalents and marketable
securities) of
194.8 million.
In the future we expect our working capital needs to increase.
This is largely due to an expected increase in our revenues and
a related increase in accounts receivable, at the same time that
we expect a significant reduction in our accounts payable as a
result of payments that are due with respect to equipment and
services purchased in connection with the construction of our
now largely completed network and a reduction in our sales,
general and administrative expenses. Also, as the focus of our
network construction has shifted to shorter lead time customer
connection projects, the length of time that the associated
accounts payable remain out standing will decrease.

On October 12, 2001, Versatel filed a
registration statement on Form F-4 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission
in connection with a proposed exchange offer and consent
solicitation in respect of its outstanding high yield notes and
convertible notes. On March 21, 2002, Versatel announced
that it had reached an agreement with an ad hoc committee
of holders of its notes in respect of a revised exchange offer
and consent solicitation. The committee is part of a wider group
of holders of notes that collectively own approximately 74% of
the initial principal amount of outstanding notes. The committee
collectively holds approximately 33% of such notes. The offer is
to exchange up to 100% of our notes outstanding for cash and
ordinary shares of Versatel.

Upon completion of the exchange offer, Versatel
believes that its remaining cash balance, together with
anticipated cash flow from operations, will provide it with
sufficient capital to fund its operations to at least the
beginning of the second quarter 2003. In addition, Versatel
believes that the substantial reduction in future interest
payments and principal repayments on the notes will reduce its
additional funding requirements to less than
50 million.
Versatel also believes that its remaining funding requirement
could potentially be further reduced through a combination of
creating future operating efficiencies and future capital
raising activities in the equity or debt markets, including
warrant and option exercises. However, if the exchange offer is
unsuccessful and current conditions in the capital markets
prevail, under our current capital structure we believe that we
may not be able to raise additional capital to fund our
operations beyond the beginning of 2004.

The exchange offer is conditioned on the receipt
of tenders of at least 99% in aggregate of the initial principal
amount of the notes currently outstanding. If we do not receive
tenders of at least 99% in aggregate of initial principal amount
of all notes currently outstanding, but we do receive sufficient
affirmative votes in favor of a plan of composition, we
currently intend to effect our financial restructuring by filing
a request for a suspension of payments with a Netherlands court.
If the plan of composition was to be ratified, all holders of
notes, including the holders of the notes that do not tender
their notes pursuant to the terms of the exchange offer, would
be bound to the terms of the plan of composition, 100% of the
notes would be cancelled and the holders of notes would receive
the same consideration that is offered in the exchange offer,
except for the early tender payment. It is possible that the
Netherlands court may decide not to ratify the plan of
composition and it is also possible that the Netherlands court
may declare Versatel bankrupt simultaneously with its refusal to
ratify the plan. Such a declaration would put us into
liquidation. Management believes that the possibility of this
outcome is limited.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

(b)  Principles of consolidation and
changes in consolidated interest

The accompanying consolidated financial
statements include the operations of the following subsidiaries
as of December 31, 2001:

|                                                                               |  |               |                 |               |  |  |      | 
|------------------------------------------------------------------------------ |  | ------------- | --------------- | ------------- |  |  | ---- | 
|                                                                               |  | Country of    |                 | Percentage of
|Name                                                                           |  | Incorporation |                 | Ownership    
|                                                                               |  |               |                 |              
|Versatel Telecom Europe B.V                                                    |  |               | The Netherlands |               |  |  | 100% | 
|Versatel Telecom Netherlands B.V                                               |  |               | The Netherlands |               |  |  | 100% | 
|Versatel Belgium N.V                                                           |  |               | Belgium         |               |  |  | 100% | 
|BizzTel Telematica B.V                                                         |  |               | The Netherlands |               |  |  | 100% | 
|CS Net B.V                                                                     |  |               | The Netherlands |               |  |  | 100% | 
|CS Engineering B.V                                                             |  |               | The Netherlands |               |  |  | 100% | 
|Itinera Services N.V                                                           |  |               | Belgium         |               |  |  | 100% | 
|7-Klapper Beheer B.V                                                           |  |               | The Netherlands |               |  |  | 100% | 
|Vuurwerk Internet B.V                                                          |  |               | The Netherlands |               |  |  | 100% | 
|Vuurwerk Access B.V                                                            |  |               | The Netherlands |               |  |  | 100% | 
|Svianed B.V                                                                    |  |               | The Netherlands |               |  |  | 100% | 
|Versatel Deutschland Holding GmbH                                              |  |               | Germany         |               |  |  | 100% | 
|Versatel Deutschland Verwaltungs GmbH                                          |  |               | Germany         |               |  |  | 100% | 
|Versatel Deutschland GmbH & Co.KG                                              |  |               | Germany         |               |  |  | 100% | 
|Komtel Gesellschaft für Kommunikations und
	Informationsdienste mbH (Komtel) |  |               | Germany         |               |  |  | 80%  | 
|Komtel Service GmbH                                                            |  |               | Germany         |               |  |  | 100% | 
|Klavertel N.V                                                                  |  |               | Belgium         |               |  |  | 100% | 
|Compath N.V                                                                    |  |               | Belgium         |               |  |  | 100% | 
|MMDI N.V                                                                       |  |               | Belgium         |               |  |  | 100% | 
|Versatel Internet Group N.V                                                    |  |               | The Netherlands |               |  |  | 100% | 
|Zon Nederland N.V                                                              |  |               | The Netherlands |               |  |  | 92%  | 
|Versatel Internet Group Belgium N.V                                            |  |               | Belgium         |               |  |  | 100% | 
|Versatel 3G N.V                                                                |  |               | The Netherlands |               |  |  | 100% | 
|Versapoint N.V                                                                 |  |               | The Netherlands |               |  |  | 100% | 
|Versapoint GmbH                                                                |  |               | Germany         |               |  |  | 100% | 
|Versapoint Private Ltd.                                                        |  |               | United Kingdom  |               |  |  | 100% | 
|Versapoint B.V                                                                 |  |               | The Netherlands |               |  |  | 100% | 
|Versapoint N.V                                                                 |  |               | Belgium         |               |  |  | 100% | 
|Versapoint S.A.                                                                |  |               | France          |               |  |  | 100% | 

The consolidated financial statements include the
accounts of Versatel and all entities in which Versatel has a
controlling voting interest (Subsidiaries). The
results of these Subsidiaries are included from the respective
dates of acquisition or incorporation by Versatel during 2001.
All significant intercompany transactions have been eliminated.

Minority interest in the consolidated statement
of operations represents the minority shareholders share
of the income or loss of the consolidated Subsidiaries. The
minority interest in the consolidated balance sheet reflect the
original investment by these minority shareholders in the
consolidated Subsidiaries, adjusted for their proportional share
of the income or loss of the Subsidiary. When the minority
interest amount in the consolidated balance sheet is fully
offset by losses of the Subsidiary, Versatel recognized the
entire net loss of such Subsidiary.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

(c)  Investments

Versatel holds certain investments accounted for
under the equity method. Versatel accounts for an investment
under the equity method if the investment gives Versatel the
ability to exercise significant influence, but not control, over
an investee. Significant influence is generally deemed to exist
if Versatel has an ownership interest in the voting stock of the
investee of between 20% and 50%, although other factors, such as
representation on the investees Board of Directors and the
impact of commercial arrangements, are considered in determining
whether the equity method of accounting is appropriate.

As of December 31, 2001, Versatel accounted
for the following investments at the lower of cost or net
realizable value:

|                                                             |  |               |                 |               |  |  |     | 
|------------------------------------------------------------ |  | ------------- | --------------- | ------------- |  |  | --- | 
|                                                             |  | Country of    |                 | Percentage of
|Name                                                         |  | Incorporation |                 | Ownership    
|                                                             |  |               |                 |              
|Internet Ventures Group B.V. (formerly known as
	Hot Orange) |  |               | The Netherlands |               |  |  | 9%  | 
|Cedron B.V. (formerly known as Consumerdesk)                 |  |               | The Netherlands |               |  |  | 5%  | 
|DOKOM Gesellschaft für Telekommunikation mbH                 |  |               | Germany         |               |  |  | 10% | 
|RuhrNET Gesellschaft für Telekommunikation
	mbH              |  |               | Germany         |               |  |  | 24% | 
|BORnet GmbH                                                  |  |               | Germany         |               |  |  | 5%  | 

(d)  Foreign Currency
Transactions

Versatels functional currency is the euro.
Transactions involving other currencies are converted into euro
using the exchange rates that are in effect at the time of the
transactions. At the balance sheet date, monetary assets and
liabilities, which are denominated in other currencies, are
adjusted to reflect the current exchange rates. Gains or losses
resulting from foreign currency re-measurements are reflected in
the accompanying statements of operations.

(e)  Reclassifications

Certain prior year balances have been
reclassified to conform to the current year presentation.

2.   Significant Accounting
Principles

(a)  Basis of Presentation

The accompanying consolidated financial
statements of Versatel have been prepared on the historical cost
basis, in accordance with United States generally accepted
accounting principles (U.S. GAAP).

Versatel maintains its accounts under local tax
and corporate regulations and has made certain out-of-book
memorandum adjustments to these records presenting the
accompanying financial statements in accordance with
U.S. GAAP.

(b)  Use of estimates

The preparation of the financial statements in
accordance with generally accepted accounting principles
requires the use of managements estimates. These estimates
are subjective in nature and involve judgements that affect the
reported amounts of assets and liabilities, the disclosures of
contingent assets and liabilities at year-end and the reported
amounts of revenues and expenses during the fiscal year. Actual
results could differ from those estimates.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

(c)  Cash, restricted cash and
marketable securities

Cash includes cash at hand and in hand at free
utilization of Versatel. Cash not available for free utilization
by Versatel is classified as restricted cash in the
accompanying balance sheet. Versatel has invested the majority
of its cash balances in investment grade commercial papers with
a maturity of between 3 and a maximum of 12 months.
Accordingly, these balances are classified as marketable
securities on the balance sheet and are valued at cost adjusted
for discount and premium amortization.

(d)  Accounts Receivable

Accounts receivable are stated at face value,
less allowance for possible uncollectable accounts.

(e)  Inventory

Inventory is stated at the lower of cost or net
realizable value with cost being determined on a first-in
first-out basis. Versatels inventory primarily consists of
routers and telecommunications equipment used to connect
customers directly to our network.

(f)  Property, plant and
equipment

Property, plant and equipment are stated at the
historical cost less accumulated depreciation. Tangible fixed
assets operated by Versatel under a financial lease agreement
are capitalized. The related debt is presented under capital
lease obligations.

Self-manufactured assets include all direct
expenses incurred (e.g. work contracted out, direct labor and
material cost). Indirect expenses which can be attributed to
this activity (e.g. finance expenses) are also capitalized.

Depreciation is calculated using the
straight-line method over the estimated useful life, taking into
account residual values, if any. Assets held for sale which meet
the criteria in FASB Statement No. 121 continue to be
included in fixed assets but are not depreciated.

(g)  Capitalized Finance
Costs

Capitalized finance costs are amortized over the
debt term, and are recorded as interest expense in the financial
statements.

(h)  Goodwill

Goodwill originating from the acquisition of
investments represents the difference of the fair value of the
net assets and the acquisition cost of the investments at the
time of the acquisition. The goodwill is amortized on a
straight-line basis over a period varying from 5 to
10 years.

(i)  Impairment of Assets

Versatel reviews its long-lived assets and
intangibles for impairment when events or changes in
circumstances indicate that the carrying value of such assets
may not be recoverable. This review consists of a comparison of
the carrying value of the asset with the assets expected
future undiscounted cash flow without interest costs. If the
expected future undiscounted cash flows exceed the carrying
value of the asset, no impairment is recognized. If the carrying
value of the asset exceeds the expected future undiscounted cash
flows, impairment exists and is measured by the excess of the
carrying value over the fair value of the asset.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

(j)   Stock option plan/stock
based compensation

Versatel applies the intrinsic value-based method
of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations, in
accounting for its fixed plan stock options. Compensation
expense is recorded on the date of grant if the current market
price of the underlying stock exceeds the exercise price. The
compensation expense is recognized over the vesting period of
the options.

(k)  Income Taxes

The Company accounts for income taxes under the
assets and liability method which requires recognition of
deferred tax assets and liabilities for the expected future
income tax consequences of transactions which have been included
in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the
difference between the financial statement and income tax bases
of assets, liabilities and carry forwards using enacted tax
rates in effect for the year in which differences are expected
to reverse or the carryforwards are expected to be utilized. Net
deferred tax assets are then reduced by a valuation allowance if
management believes it is more likely than not they will not be
realized.

(l)  Recognition of Operating
Revenues and Cost of Revenues

Operating revenues are recognized when the
service is rendered or assets are sold and collectability is
probable. Invoices sent and cash received in advance of services
rendered is recorded as unearned revenue. Cost of revenues is
recorded in the same period as the revenue is recorded.
Specifically, Versatels policies are as follows:

Voice Revenues:

Operating revenues derived from providing various
telecommunication services to customers include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General Voice
	services:Versatel generates revenues
	from voice services through carrier select, dial around and
	least cost routing, ISDN and call termination services. Revenues
	are measured in terms of traffic minutes processed and are
	recognized in the period in which the connection is provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Toll Free (0800) and premium
	dial-inServices:Versatel offers
	Toll-free (0800) and premium dial-in services. For Toll
	free services revenues are measured in terms of traffic minutes
	passed through to the customer and are recognized in the period
	in which these minutes are passed through. For premium dial-in
	services the company collects per minute fees and passes a
	portion of these fees on to a local content provider. As a
	result of Versatel acting as an agent, Versatel reports these
	fees on a net basis, whereby reported revenues only include that
	portion of the fees that are not passed on to a local content
	provider. These premium dial-in revenues are recognized in the
	period in which these minutes are passed through.

Data Revenues:

Operating revenues derived from providing various
data services to customers include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct Access
	services:Versatel provides high
	bandwidth services to business and residential customers and
	other local telecom and Internet service providers that are
	directly connected to its network. Invoices sent and cash
	received prior to services being rendered is recorded as
	unearned revenue and recognized ratably over the period of the
	specific arrangement.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)



| |   |                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Data Centers and Central Office Facilities
	services:Versatel provides
	co-location, telehousing and interconnect facilities services.
	Revenues related to these services are recognized ratably during
	the period in which these services are provided.

Internet Revenues:

Operating revenues derived from providing various
internet services to customers include revenues from Dedicated
Internet Connectivity, IP-Based Electronic Transaction services,
Web and ISP hosting services. Revenues from these services are
recognized in the period in which these services are provided.
For the IP-Based Electronic Transaction services, revenues are
derived from commissions on e-commerce transactions from
consumers utilizing Versatels network of websites. We
recognize such revenues in the period that the user made the
on-line purchase. Such revenues are recognized on a net basis,
as Versatel do not act as a principal in the transaction.

Other Carrier Services Revenues
(infrastructure sales):

Operating revenues derived from other Carrier
Service Revenues relate to transactions where Versatel has sold
infrastructure to other carriers. These transactions are
accounted for in accordance with the requirements of Statement
of Financial Accounting Standard (SFAS) No. 66,
Accounting for Sales of Real Estate. Versatel
recognizes revenue when the risks and rewards of ownership are
transferred to the purchaser and after delivery to and
acceptance by the buyer.

(m) Non-monetary transactions

Revenue is realized only when the earnings
process is complete and an asset held for sale is sold and a
productive asset is acquired. Furthermore, there must be a valid
business purpose for the acquired productive assets.
Non-monetary transactions of assets which meet the foregoing
criteria are based on fair value, which is the same basis as
that used in monetary transactions. Prices established for
non-monetary transactions are market prices and are comparable
to prices established for monetary sales and purchases. The
assets purchased have been recorded as part of property, plant
and equipment, and include the international fiber and capacity
that Versatel required to complete its international network.
Based on Versatels business plan certain assets have been
categorized as assets held for sale within fixed assets.

(n)  Recently Issued Accounting
Standards

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 141 requires the use of the purchase method of
accounting for all business combinations initiated after
June 30, 2001. SFAS No. 141 requires intangible assets
to be recognized if they arise from contractual or legal rights
or are separable, (i.e., it is feasible that they
may be sold, transferred, licensed, rented, exchanged or
pledged). As a result, it is likely that companies will
recognize more intangible assets under SFAS No. 141 than
its predecessor, Accounting Principles Board (APB)
Opinion No. 16, although in some instances previously
recognized intangibles will be subsumed into goodwill.

Under SFAS No. 142, goodwill will no longer
be amortised on a straight-line basis over its estimated useful
life, but will be tested for impairment on an annual basis and
whenever indicators of impairment arise. The goodwill impairment
test, which is based on fair value, is to be performed on a
reporting unit level. A reporting unit is defined as a SFAS
No. 131 operating segment or one level lower. Goodwill will
no longer be allocated to other long-lived assets for impairment
testing under SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of. Additionally, goodwill on equity method

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

investments will no longer be amortised; however,
it will continue to be tested for impairment in accordance with
APB Opinion No. 18, The Equity Method of Accounting
for Investments in Common Stock. Under SFAS No. 142,
intangible assets with indefinite lives will not be amortised.
Instead they will be carried at the lower of cost or market
value and tested for impairment at least annually. All other
recognized intangible assets will continue to be amortised over
their estimated useful lives.

SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001, although goodwill on
business combinations consumated after July 1, 2001 will
not be amortised. On adoption, the Company may need to record a
cumulative effect adjustment to reflect the impairment of
previously recognized intangible assets. In addition, goodwill
on prior business combinations will cease to be amortized.
Versatel is of the opinion that the adoption of SFAS
No. 142 will require the Company to recognize an impairment
on goodwill. The fair value of the goodwill to be impaired and
the resulting impact of the impairment on the results of
operations has not yet been assessed by Versatel.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS
No. 143 requires that the fair value of the liability for
an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of the fair value
can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived
asset. SFAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002.
Versatel has not determined the impact that SFAS No. 143
will have on the Companys results of operations, financial
position or cash flows.

On January 1, 2002, the Company adopted SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 establishes a single
accounting model for long-lived assets based on the framework
established in SFAS No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of. In addition, SFAS No. 144 establishes
criteria beyond that previously specified to determine when a
long-lived asset is held for sale. Among other things, those
criteria specify that (a) the asset must be available for
immediate sale in its present condition and (b) the sale of
the asset must be probable, and its transfer expected to qualify
for recognition as a completed sale, within one year, with
certain exceptions. It requires that a long-lived asset
exchanged for a similar productive long-lived asset shall
continue to be classified as held and used until it is disposed
of. In addition, SFAS No. 144 provides guidance on the
accounting for a long-lived asset classified as held for sale if
the asset is reclassified as held and used. With the adoption of
SFAS 144, the Company does not expect to recognize revenue on
non-monetary transactions in the future.

SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and interim periods
within those fiscal years, with early application encouraged.
The provisions of the statement are generally to be applied
prospectively. The Company currently has no plans to dispose of
any operations.

(o)  Recently Adopted Accounting
Standards

In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset
or liability measured at its fair value. The statement requires
that changes in the derivatives fair value be recognized
currently in earnings unless specific accounting criteria are
met. If a derivative instrument qualifies for hedge accounting,
the gains or losses from the derivative may offset results from
the hedged item in the statement of operations or other
comprehensive income, depending on the type of hedge. To adopt
hedge accounting, a company must formally document, designate
and assess the effectiveness of transactions that receive hedge
accounting.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

In June 2000, the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments, an
amendment of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 137
delayed the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000 (January 1, 2001 for
Versatel). SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their current
value. Changes in the current value of derivatives are recorded
in the statement of operations as comprehensive income,
depending on whether a derivative is designed as part of a hedge
transaction and the type of hedge transaction involved. The
Company subsequently implemented these statements as of
January 1, 2001. There was no material impact on the
financial position or results of operations.

3.   Earnings Per
Share

The reconciliation of the basic weighted average
outstanding shares and diluted weighted outstanding average
shares of the years ended December 31, 2001, 2000 and 1999
is as follows:

|                                            |                   |      |        |        |  |      |         |        |  |  |         |        | 
|------------------------------------------- | ----------------- | ---- | ------ | ------ |  | ---- | ------- | ------ |  |  | ------- | ------ | 
|                                            |                   | 1999 |        | 2000   |  | 2001
|                                            |                   |      |        |        |  |     
|Weighted average shares outstanding (000s) |                   |      |        |        |  |      |         |        |  |  |         |       
|                                            | Basic             |      |        | 50,929 |  |      |         | 85,661 |  |  |         | 90,872 | 
|Dilutive potential common shares            |                   |      |        |        |  |      |         |        |  |  |         |       
|                                            | Stock options     |      |        | 4,786  |  |      |         | 5,211  |  |  |         | 4,612  | 
|                                            | Warrants          |      |        | 4,765  |  |      |         | 2,996  |  |  |         | 953    | 
|                                            | Convertible notes |      |        | 477    |  |      |         | 11,363 |  |  |         | 12,837 | 
|                                            |                   |      |        |        |  |      |         |        |  |  |         |       
|                                            |                   |      | 60,957 |        |  |      | 105,231 |        |  |  | 109,274 |       
|                                            |                   |      |        |        |  |      |         |        |  |  |         |       

Convertible promissory notes, warrants and
options were not included in the computation of diluted earnings
per share for the years ended December 31, 2001, 2000 and
1999 because their effect was antidilutive.

4.   Restricted Cash

On December 31, 2001, Versatel does not have
a restricted cash balance. Restricted cash balances of
26.0 million
at December 31, 2000 included amounts restricted in
connection with the payment of interest to the holders of the
senior notes due May 15, 2001.

5.   Accounts
Receivable

Accounts receivable are presented net of an
allowance for doubtful accounts of
14.8 million
and
5.4 million
at December 31, 2001 and 2000, respectively. The movement
of the allowance for doubtful accounts receivable during the
years ended December 31, 2001 and 2000 was as follows:

|                         |  |      |       |      |  |  |        |  
|------------------------ |  | ---- | ----- | ---- |  |  | ------ | -
|                         |  | 2000 |       | 2001
|                         |  |      |       |     
|Balance on January 1,    |  |      | 735   |      |  |  | 5,407  |  
|Provision                |  |      | 4,229 |      |  |  | 11,843 |  
|Acquisitions             |  |      | 1,269 |      |  |  |       |  
|Utilization of allowance |  |      | (826  | )    |  |  | (2,432 | )
|                         |  |      |       |      |  |  |        |  
|Balance on December 31,  |  |      | 5,407 |      |  |  | 14,818 |  
|                         |  |      |       |      |  |  |        |  

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

6.   Prepaid Expenses and
Other

As of December 31, 2001, Versatels
prepaid expenses and other balance was
26.7 million
compared to a balance of
51.6 million
as of December 31, 2000. The 2001 and 2000 balance consists
primarily of value added tax receivables, prepaid maintenance
and interest receivable.

7.   Property, Plant and
Equipment

The movement for the property, plant and
equipment for the years ended December 31, 2001 and 2000 is
as follows:

|                         |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |   |  |  |           |  
|------------------------ |  | ------------ | ------ | --------- |  | -------------- | -------- | --------------- |  | ----- | ------- | - |  |  | ------- | - |  |  | --------- | -
|                         |  |             
|                         |  | 2001        
|                         |  |             
|                         |  |              |        | Other     |  |               
|                         |  | Leasehold    |        | Telecom   |  | Tangible Fixed |          | Construction in |  |      
|                         |  | Improvements |        | Equipment |  | Assets         |          | Progress        |  | Total
|                         |  |              |        |           |  |                |          |                 |  |      
|Book value Jan. 1, 2001  |  |              | 12,248 |           |  |                | 525,072  |                 |  |       | 54,071  |   |  |  | 175,766 |   |  |  | 767,157   |  
|Retirements              |  |              | (181   | )         |  |                | (4,016   | )               |  |       | (101    | ) |  |  |        |   |  |  | (4,298    | )
|Net additions/transfers  |  |              | 1,377  |           |  |                | 329,305  |                 |  |       | 6,724   |   |  |  | (50,110 | ) |  |  | 287,296   |  
|Depreciation             |  |              | (2,569 | )         |  |                | (92,899  | )               |  |       | (14,791 | ) |  |  |        |   |  |  | (110,259  | )
|                         |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |   |  |  |           |  
|Book value Dec. 31, 2001 |  |              | 10,875 |           |  |                | 757,462  |                 |  |       | 45,903  |   |  |  | 125,656 |   |  |  | 939,896   |  
|                         |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |   |  |  |           |  
|Original cost            |  |              | 16,650 |           |  |                | 952,011  |                 |  |       | 86,338  |   |  |  | 125,656 |   |  |  | 1,180,655 |  
|Accumulated depreciation |  |              | (5,775 | )         |  |                | (194,549 | )               |  |       | (40,435 | ) |  |  |        |   |  |  | (240,759  | )
|                         |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |   |  |  |           |  
|Book value Dec. 31, 2001 |  |              | 10,875 |           |  |                | 757,462  |                 |  |       | 45,903  |   |  |  | 125,656 |   |  |  | 939,896   |  
|                         |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |   |  |  |           |  

|                          |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |  |  |  |          |  
|------------------------- |  | ------------ | ------ | --------- |  | -------------- | -------- | --------------- |  | ----- | ------- | - |  |  | ------- |  |  |  | -------- | -
|                          |  |             
|                          |  | 2000        
|                          |  |             
|                          |  |              |        | Other     |  |               
|                          |  | Leasehold    |        | Telecom   |  | Tangible Fixed |          | Construction in |  |      
|                          |  | Improvements |        | Equipment |  | Assets         |          | Progress        |  | Total
|                          |  |              |        |           |  |                |          |                 |  |      
|Book value Jan. 1, 2000   |  |              | 4,386  |           |  |                | 151,141  |                 |  |       | 77,167  |   |  |  | 81,803  |  |  |  | 314,497  |  
|Retirements               |  |              | (72    | )         |  |                | (18,665  | )               |  |       | (10,557 | ) |  |  |        |  |  |  | (29,294  | )
|Acquisitions              |  |              | 1,157  |           |  |                | 37,639   |                 |  |       | 10,820  |   |  |  |        |  |  |  | 49,616   |  
|Net additions / transfers |  |              | 8,856  |           |  |                | 402,088  |                 |  |       | (7,712  | ) |  |  | 93,963  |  |  |  | 497,195  |  
|Depreciation              |  |              | (2,079 | )         |  |                | (47,131  | )               |  |       | (15,647 | ) |  |  |        |  |  |  | (64,857  | )
|                          |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |  |  |  |          |  
|Book value Dec. 31, 2000  |  |              | 12,248 |           |  |                | 525,072  |                 |  |       | 54,071  |   |  |  | 175,766 |  |  |  | 767,157  |  
|                          |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |  |  |  |          |  
|Original cost             |  |              | 15,454 |           |  |                | 626,654  |                 |  |       | 74,526  |   |  |  | 175,766 |  |  |  | 892,400  |  
|Accumulated depreciation  |  |              | (3,206 | )         |  |                | (101,582 | )               |  |       | (20,455 | ) |  |  |        |  |  |  | (125,243 | )
|                          |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |  |  |  |          |  
|Book value Dec. 31, 2000  |  |              | 12,248 |           |  |                | 525,072  |                 |  |       | 54,071  |   |  |  | 175,766 |  |  |  | 767,157  |  
|                          |  |              |        |           |  |                |          |                 |  |       |         |   |  |  |         |  |  |  |          |  

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

Listed below are the major classes of property
and equipment and their estimated useful lives in years as of
December 31, 2000 and 2001:

|                                                                      |  |        |      |      |  |      |          |   |  |  |           |  
|--------------------------------------------------------------------- |  | ------ | ---- | ---- |  | ---- | -------- | - |  |  | --------- | -
|                                                                      |  | Useful |      |      |  |     
|                                                                      |  | Life   |      | 2000 |  | 2001
|                                                                      |  |        |      |      |  |     
|Leasehold improvements                                                |  |        | 5    |      |  |      | 15,454   |   |  |  | 16,650    |  
|Telecommunications equipment                                          |  |        | 2-20 |      |  |      | 586,707  |   |  |  | 912,064   |  
|Telecommunications equipment under a
	30 years right to use agreement |  |        | 30   |      |  |      | 39,947   |   |  |  | 39,947    |  
|Other                                                                 |  |        | 3-5  |      |  |      | 74,526   |   |  |  | 86,338    |  
|                                                                      |  |        |      |      |  |      |          |   |  |  |           |  
|Property and equipment                                                |  |        |      |      |  |      | 716,634  |   |  |  | 1,054,999 |  
|Less: Accumulated depreciation                                        |  |        |      |      |  |      | (125,243 | ) |  |  | (240,759  | )
|                                                                      |  |        |      |      |  |      |          |   |  |  |           |  
|Property and equipment, net                                           |  |        |      |      |  |      | 591,391  |   |  |  | 814,240   |  
|                                                                      |  |        |      |      |  |      |          |   |  |  |           |  

Property and equipment include assets held for
sale of
59.0 million
and
47.1 million
as of December 31, 2001 and 2000 respectively, which are
not depreciated. These assets held for sale consist of ducts on
specific routes in our network that we build with the intention
to sell to other carriers.

8.   Construction in
Progress

Versatel continues to build out its network in
the Benelux region and secure rights-of-way. The resulting
assets as of December 31, 2001, have been recorded at cost
under the caption Construction in progress.

During the time of the construction, interest has
been capitalized at an average rate of 12.56%, (2000 
12.56%). Capitalized interest included in construction in
progress as of December 31, 2001, and December 31,
2000, respectively, amounted to
7.3 million
and
8.8 million.

9.   Capital Lease
Obligations

Versatel entered into a master lease agreement
with a finance company to lease certain telecommunications and
electronic data processing equipment. Further Versatel entered
into agreements for indefeasable rights of use
(IRUs) on fiber optic cable and network
capacity. These IRUs agreements are typically over a
20 year period and have no restrictions on use or no
bargain purchase options at the end of the terms. A substantial
portion of our IRU agreements have been pre-paid and therefore
are not included as capital lease obligations. These IRU
agreements are presented as telecommunications equipment. The
amortization charge applicable to capital leases is included in
depreciation and amortization expense.

Commitments for minimum rentals under
non-cancelable capital leases at the end of 2001 are as follows:

|                                            |  |  |        |  
|------------------------------------------- |  |  | ------ | -
|2002                                        |  |  | 2,851  |  
|2003                                        |  |  | 2,851  |  
|2004>                                       |  |  | 12,705 |  
|                                            |  |  |        |  
|Total minimum lease payments                |  |  | 18,407 |  
|Less amount representing interest           |  |  | (4,715 | )
|                                            |  |  |        |  
|Present value of net minimum lease payments |  |  | 13,692 |  
|                                            |  |  |        |  

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

Property, plant and equipment at
December 31, 2001 and 2000 include the following amounts
for capitalized leases:

|                                           |  |      |        |      |  |  |        | 
|------------------------------------------ |  | ---- | ------ | ---- |  |  | ------ | 
|                                           |  | 2000 |        | 2001
|                                           |  |      |        |     
|Telecommunications equipment at book value |  |      | 60,303 |      |  |  | 98,776 | 
|                                           |  |      |        |      |  |  |        | 

10. Goodwill and Finance Costs

The movement in goodwill and finance costs is as
follows:

|                         |  |          |         |               |  |       |         |   |  |  |         |  
|------------------------ |  | -------- | ------- | ------------- |  | ----- | ------- | - |  |  | ------- | -
|                         |  | Goodwill |         | Finance Costs |  | Total
|                         |  |          |         |               |  |      
|Book value Jan. 1, 2001  |  |          | 245,663 |               |  |       | 41,435  |   |  |  | 287,098 |  
|Additions                |  |          | 609     |               |  |       |        |   |  |  | 609     |  
|Dispositions             |  |          |        |               |  |       | (1,244  | ) |  |  | (1,244  | )
|Amortization             |  |          | (28,333 | )             |  |       | (6,705  | ) |  |  | (35,038 | )
|                         |  |          |         |               |  |       |         |   |  |  |         |  
|Book value Dec. 31, 2001 |  |          | 217,939 |               |  |       | 33,486  |   |  |  | 251,425 |  
|                         |  |          |         |               |  |       |         |   |  |  |         |  
|Original cost            |  |          | 283,909 |               |  |       | 48,649  |   |  |  | 332,558 |  
|Accumulated depreciation |  |          | (65,970 | )             |  |       | (15,163 | ) |  |  | (81,133 | )
|                         |  |          |         |               |  |       |         |   |  |  |         |  
|Book value Dec. 31, 2001 |  |          | 217,939 |               |  |       | 33,486  |   |  |  | 251,425 |  
|                         |  |          |         |               |  |       |         |   |  |  |         |  

|                         |  |          |         |               |  |       |        |   |  |  |         |  
|------------------------ |  | -------- | ------- | ------------- |  | ----- | ------ | - |  |  | ------- | -
|                         |  | Goodwill |         | Finance Costs |  | Total
|                         |  |          |         |               |  |      
|Book value Jan. 1, 2000  |  |          | 196,973 |               |  |       | 28,255 |   |  |  | 225,228 |  
|Additions                |  |          | 79,004  |               |  |       | 19,499 |   |  |  | 98,503  |  
|Dispositions             |  |          | (3,653  | )             |  |       |       |   |  |  | (3,653  | )
|Amortization             |  |          | (26,661 | )             |  |       | (6,319 | ) |  |  | (32,980 | )
|                         |  |          |         |               |  |       |        |   |  |  |         |  
|Book value Dec. 31, 2000 |  |          | 245,663 |               |  |       | 41,435 |   |  |  | 287,098 |  
|                         |  |          |         |               |  |       |        |   |  |  |         |  
|Original cost            |  |          | 283,300 |               |  |       | 49,893 |   |  |  | 333,193 |  
|Accumulated depreciation |  |          | (37,637 | )             |  |       | (8,458 | ) |  |  | (46,095 | )
|                         |  |          |         |               |  |       |        |   |  |  |         |  
|Book value Dec. 31, 2000 |  |          | 245,663 |               |  |       | 41,435 |   |  |  | 287,098 |  
|                         |  |          |         |               |  |       |        |   |  |  |         |  

11. Senior Debt

On May 20, 1998 and November 17, 1998,
Versatel issued two tranches of senior notes for respectively
$225.0 million and $150.0 million with an interest
rate of 13 1/4% due 2008, and warrants to purchase
3,000,000 (as adjusted) and 2,000,100 (as adjusted) shares
respectively.

The discount on the second tranche of senior
notes (amounting to 4%) is netted against the notes and is
amortized on a straight-line basis over a period equal to the
senior notes. The amortization charge is treated as an interest
expense in the income statement.

On July 23, 1999, Versatel issued two
tranches of senior notes for, US$180 million and
120 million,
with an interest rate of 11 7/8% due 2009.

On March 30, 2000, Versatel issued
300 million
11 1/4% senior notes due 2010.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

The discount on these senior notes is netted
against the notes and will be amortized over a period equal to
the senior note. The amortization charge is included in interest
expenses using the effective interest rate method as interest
expense in the Statement of Operations.

On December 9, 1999, Versatel issued 4%
senior convertible notes for
300 million
due 2004. The convertible notes can be converted into common
shares of Versatel at a conversion price of
43.40. In
addition to the regular interest payments, the principal of the
notes accretes at 4.5% per year. However, if the conversion
right is exercised, the growth of the principal lapses. No notes
were converted at year-end.

Versatel also issued
360 million
4% senior convertible notes due 2005. The convertible notes can
be converted into common shares of Versatel at a conversion
price of 60.76.
In addition to the normal interest, the principal of the loan
accretes at 4.5% per year. However, if the conversion right is
exercised, the growth of the principal lapses. No notes were
converted at year-end.

Versatel extinguished some of its long-term debt
instruments and realized an extraordinary profit of
13.0 million
on these transactions in 2001.

Our debt obligations that are denominated in
U.S. dollars expose us to risks associated with changes in
the exchange rates between the U.S. dollar and the euro.
Versatel has not hedged its foreign currency exposure.

On October 12, 2001, Versatel filed a
registration statement on Form F-4 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission
in connection with a proposed exchange offer and consent
solicitation in respect of its outstanding high yield notes and
convertible notes. On March 21, 2002, Versatel announced
that it had reached an agreement with an ad hoc committee
of holders of its notes in respect of a revised exchange offer
and consent solicitation. The committee is part of a wider group
of holders of notes that collectively own approximately 74% of
the initial principal amount of outstanding notes. The committee
collectively holds approximately 33% of such notes.

Upon completion of the exchange offer, Versatel
believes that its remaining cash balance, together with
anticipated cash flow from operations, will provide it with
sufficient capital to fund its operations to at least the
beginning of the second quarter 2003. In addition, Versatel
believes that the substantial reduction in future interest
payments and principal repayments on the notes will reduce its
additional funding requirements to less than
50 million.
Versatel also believes that its remaining funding requirement
could potentially be further reduced through a combination of
creating future operating efficiencies and future capital
raising activities in the equity or debt markets, including
warrant and option exercises. However, if the exchange offer is
unsuccessful and current conditions in the capital markets
prevail, under our current capital structure we believe that we
may not be able to raise additional capital to fund our
operations beyond the beginning of 2004.

SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, required disclosure of
fair value information about financial instruments whether or
not recognized in the balance sheet. The carrying amounts
reported in the consolidated balance sheets for cash, trade
receivables, accounts payable and accrued expenses approximate
fair value based on the short-term maturity of these
instruments. As of December 31, 2001, the fair value of the
Companys borrowings under the long-term debt amounts to
approximately
496.1 million.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

|                           |  |         |         |           |  |       |           |          |  |  |           |  |  |  |       | 
|-------------------------- |  | ------- | ------- | --------- |  | ----- | --------- | -------- |  |  | --------- |  |  |  | ----- | 
|                           |  |        
|                           |  | 2001   
|                           |  |        
|                           |  | Up to   |         | More than |  |       |           | Cash    
|                           |  | 5 years |         | 5 Years   |  | Total |           | Interest
|                           |  |         |         |           |  |       |           |         
|Senior notes due 2008      |  |         |        |           |  |       | 403,612   |          |  |  | 403,612   |  |  |  | 13.3% | 
|Senior notes due 2009      |  |         |        |           |  |       | 310,139   |          |  |  | 310,139   |  |  |  | 11.9% | 
|Senior notes due 2010      |  |         |         |           |  |       | 296,382   |          |  |  | 296,382   |  |  |  | 11.3% | 
|Convertible notes due 2004 |  |         | 329,106 |           |  |       |          |          |  |  | 329,106   |  |  |  | 4.0%  | 
|Convertible notes due 2005 |  |         | 389,636 |           |  |       |          |          |  |  | 389,636   |  |  |  | 4.0%  | 
|                           |  |         |         |           |  |       |           |          |  |  |           |  |  |  |       | 
|Total                      |  |         | 718,742 |           |  |       | 1,010,133 |          |  |  | 1,728,875 |  |  |  |       | 
|                           |  |         |         |           |  |       |           |          |  |  |           |  |  |  |       | 

|                           |  |         |         |           |  |       |         |          |  |  |           |  |  |  |       | 
|-------------------------- |  | ------- | ------- | --------- |  | ----- | ------- | -------- |  |  | --------- |  |  |  | ----- | 
|                           |  |        
|                           |  | 2000   
|                           |  |        
|                           |  | Up to   |         | More than |  |       |         | Cash    
|                           |  | 5 years |         | 5 Years   |  | Total |         | Interest
|                           |  |         |         |           |  |       |         |         
|Senior notes due 2008      |  |         |        |           |  |       | 392,367 |          |  |  | 392,367   |  |  |  | 13.3% | 
|Senior notes due 2009      |  |         |        |           |  |       | 309,793 |          |  |  | 309,793   |  |  |  | 11.9% | 
|Senior notes due 2010      |  |         |        |           |  |       | 295,943 |          |  |  | 295,943   |  |  |  | 11.3% | 
|Convertible notes due 2004 |  |         | 314,299 |           |  |       |        |          |  |  | 314,299   |  |  |  | 4.0%  | 
|Convertible notes due 2005 |  |         | 372,240 |           |  |       |        |          |  |  | 372,240   |  |  |  | 4.0%  | 
|                           |  |         |         |           |  |       |         |          |  |  |           |  |  |  |       | 
|Total                      |  |         | 686,539 |           |  |       | 998,103 |          |  |  | 1,684,642 |  |  |  |       | 
|                           |  |         |         |           |  |       |         |          |  |  |           |  |  |  |       | 

12. Accrued Liabilities

Accrued liabilities includes the short term
portion of long term liabilities and long term debt, capital
expenditure accruals, compensation accruals, network cost
accruals, current income tax accruals and other accruals.

13. Ordinary shares and stock
split

On April 13, 1999, a two-for-one stock split
was effected, resulting in all per share and weighted average
share amounts being restated to reflect this stock split.

On July 14, 1999, a general meeting of
shareholders approved an amendment to Versatels articles
of association to provide for, among other things, a
consolidation of its Class A shares and Class B shares
into one single class of ordinary shares and the possible
issuance of preference shares A, preference shares B and a
priority share.

The authorized share capital of Versatel was
increased on December 22, 1999 to NLG 18.5 million,
consisting of 175 million ordinary shares with a par value
of NLG 0.05 each, 20 million preference shares A with a par
value of NLG 0.05 each, 175 million preference shares B
with a par value of NLG 0.05 each and one priority share with a
par value of NLG 0.05.

On March 30, 2000, Versatel sold 5,100,000
shares at 49.00
per share. The aggregate net proceeds amounted to
238.4 million
after offering expenses.

As of December 31, 2001, 91,352,247 (2000:
89,661,896) ordinary shares are issued and outstanding.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

Warrants

As of December 31, 2001, Versatel has 53,135
warrants outstanding, giving right to purchase 708,502 ordinary
shares, with a strike price of
1.16 that were
issued in accordance with our first and second high yield
offerings.

Preference Shares A

Holders of preference shares A will be entitled
to one vote per share. There are no cumulative voting rights.
Preference shares A have no pre-emptive rights. Preference
shares A are entitled to an annual dividend, to be set by the
corporate body authorized to issue the preference shares A.

Preference shares A may be issued pursuant to a
resolution passed at a general meeting of shareholders or the
shareholders, at a general meeting, may delegate this power to
another corporate body. The preference shares A will be in
registered form and share certificates will not be issued.

Our management board has obtained from the
shareholders at a general meeting, the authority to issue, or
grant rights to subscribe for, preference shares, subject only
to the prior approval of the supervisory board, until
May 14, 2003.

As of the date of this annual report, no
preference shares A are issued or outstanding.

Preference Shares B

Holders of preference shares B will be
entitled to one vote per share. There are no cumulative voting
rights. Preference shares B have no pre-emptive rights.
Preference shares B are entitled to a cumulative annual dividend
calculated on the basis of a fixed interest rate, as set by the
European Central Bank from time to time, on the paid up portion
of the nominal value of the preference shares B, to the
extent of the distributable profits, prior to any dividend
distribution on any of our other shares being made.

Preference shares B may be issued pursuant
to a resolution passed at a general meeting of shareholders or
the shareholders, at a general meeting, may delegate this power
to another corporate body. Notwithstanding such delegation, an
issue of preference shares B that would exceed 100% of the
number of our other outstanding shares will require the approval
of our shareholders at a general meeting. The preference
shares B will be in registered form.

Our management board has obtained from the
shareholders at a general meeting, the authority to issue, or
grant rights to subscribe for, preference shares, subject only
to the prior approval of the supervisory board, until
May 14, 2003. As a result, our management board has granted
a call option on preference shares B, which will not exceed
100% of all our other outstanding shares, to an independent
foundation, Stichting Continuïteit Versatel Telecom
International, established under Netherlands law.

As of the date of this annual report, no
preference shares B are issued or outstanding.

Priority Share

The holder of the priority share will be entitled
to one vote. There are no cumulative voting rights. However, the
priority share will have certain special voting rights as
described below. The priority share has no pre-emptive rights.
The priority share is entitled to a nominal annual dividend of
20% of its nominal value, to the extent of distributable profits.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

The priority share may be issued pursuant to a
resolution passed at a general meeting of shareholders or the
shareholders, at a general meeting, may delegate this power to
another corporate body. The priority share will be in registered
form.

Our management board has obtained from the
shareholders at a general meeting, the authority to issue, or
grant a right to subscribe for, the priority share, subject only
to the prior approval of the supervisory board, until
May 14, 2003. As a result, our management board has granted
a call option on the priority share to an independent
foundation, Stichting Prioriteit Versatel Telecom International,
established under Netherlands law.

As of the date of this annual report, the
priority share is not issued or outstanding.

Holders of fully paid-up shares are not subject
to or liable for any further capital calls by the Company.

14. Employee Benefit Plans

Versatel has established the following stock
option plans: the 1997 Stock Option Plan (the 1997
Plan), the 1998 Stock Option Plan (the 1998
Plan), the 1999 Stock Option Plan (the 1999
Plan), the 2000 Stock Option Plan (the 2000 Employee
Plan) and the 2001 Stock Option Plan (the 2001
Plan).

1997 Stock Option Plan

In December 1996, Versatels shareholders
approved the 1997 Stock Option Plan. The 1997 Plan provides for
the grant of options to certain key employees of Versatel to
purchase ordinary shares of Versatel. Under the 1997 Plan, no
options have been granted with an expiration date of more than
five years after the granting of the option. The option exercise
price is determined in the particular grant of the option.

As of December 31, 2001, 398,000 options to
purchase 398,000 ordinary shares had been granted under the 1997
Plan. As of December 31, 2001, 335,500 options granted
under the 1997 Plan had been exercised for a total of 335,500
shares. A further 12,500 options are still outstanding under the
1997 Plan. The remaining options that were previously granted
under this stock option plan have subsequently been cancelled,
in most cases upon the termination of the employment of the
recipient of the options.

1998 Stock Option Plan

In March 1998, Versatels shareholders
approved the 1998 Stock Option Plan. The 1998 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence at the date
of the grant and will last five years. The option exercise price
is determined in the particular grant of the option.

As of December 31, 2001, 5,000,000 options
to purchase 5,000,000 ordinary shares have been granted under
the 1998 Plan. As of December 31, 2001, 4,263,766 options
granted under the 1998 Plan had been exercised for a total of
4,263,766 shares. A further 706,334 options are still
outstanding under the 1998 Plan. The remaining options that were
previously granted under this stock option plan have
subsequently been cancelled, in most cases upon the termination
of the employment of the recipient of the options.

1999 Stock Option Plan

In January 1999, Versatels shareholders
approved the 1999 Stock Option Plan. The 1999 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence at the date
of the grant and will last five years. The option exercise price
is determined in the particular grant of the option.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

As of December 31, 2001, 1,908,500 options
to purchase 1,908,500 ordinary shares have been granted under
the 1999 Plan. As of December 31, 2001, 410,493 options
granted under the 1999 Plan had been exercised for a total of
410,493 shares. A further 900,475 options are still outstanding
under the 1999 Plan. The remaining options that were previously
granted under this stock option plan have subsequently been
cancelled, in most cases upon the termination of the employment
of the recipient of the options.

2000 Stock Option Plan

In December 1999, Versatels supervisory
board approved the 2000 Stock Option Plan. The 2000 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence two years
(except for an aggregate of 100,000 options which were
immediately exercisable) after the date of the grant and will
last five years. The option exercise price is determined in the
particular grant of the option.

As of December 31, 2001, options to purchase
2,688,850 ordinary shares have been granted under the 2000 Plan.
As of December 31, 2001, 100,000 options granted under the
2000 Plan have been exercised for a total of 100,000 shares. A
further 1,306,200 options are still outstanding under the 2000
Plan. The remaining options that were previously granted under
this stock option plan have subsequently been cancelled, in most
cases upon the termination of the employment of the recipient of
the options.

2001 Stock Option Plan

In May 2001, Versatels supervisory board
approved the 2001 Stock Option Plan. The 2001 Plan allows
Versatel to grant options to employees to purchase ordinary
shares of Versatel. The option period will commence two years
after the date of the grant and will last five years. The option
exercise price is determined in the particular grant of the
option.

As of December 31, 2001, options to purchase
1,055,900 ordinary shares have been granted under the 2001 Plan.
As of December 31, 2001, 852,000 options are still
outstanding under the 2001 Plan. The remaining options that were
previously granted under this stock option plan have
subsequently been cancelled, in most cases upon the termination
of the employment of the recipient of the options.

In October 1995, FASB Statement No. 123
Accounting for Stock-Based Compensation was issued.
Versatel has adopted the disclosure provisions of FASB Statement
No. 123, but opted to remain under the expense recognition
provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees in accounting for options granted under the
Stock Option Plans. Accordingly, for the years ended
December 31, 1997 through December 31, 2001 no
compensation expense was recognized for options granted under
these schemes provided these options were not granted at a
discount to market price. Had compensation expense for share
options granted under these schemes been determined based on
fair value at the grant dates in accordance with FASB Statement
No. 123, the Companys net income and earnings per
share for 1999, 2000 and 2001 would have been reduced to the
following pro forma amounts shown below:

|                                        |             |      |  |          |   |      |  |          |   |  |  |          |  
|--------------------------------------- | ----------- | ---- |  | -------- | - | ---- |  | -------- | - |  |  | -------- | -
|                                        |             | 1999 |  | 2000     |   | 2001
|                                        |             |      |  |          |   |     
|Net income:                             |             |      |  |          |   |      |  |          |   |  |  |         
|                                        | As reported |      |  | (197,930 | ) |      |  | (421,437 | ) |  |  | (378,561 | )
|                                        | Pro forma   |      |  | (199,139 | ) |      |  | (433,217 | ) |  |  | (388,821 | )
|Net loss per share (basic and diluted): |             |      |  |          |   |      |  |          |   |  |  |         
|                                        | As reported |      |  | (3.89    | ) |      |  | (4.92    | ) |  |  | (4.17    | )
|                                        | Pro forma   |      |  | (3.92    | ) |      |  | (5.06    | ) |  |  | (4.28    | )

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

The movement in options outstanding during the
three years ended December 31, 1999, December 31, 2000
and December 31, 2001 is summarized in the following table:

|                                 |  |            |            |          |  |  |       | 
|-------------------------------- |  | ---------- | ---------- | -------- |  |  | ----- | 
|                                 |  | Number of  |            | Weighted
|                                 |  | Shares     |            | Average 
|                                 |  | Subject to |            | Exercise
|                                 |  | Option     |            | Price   
|                                 |  |            |            |         
|Outstanding at January 1, 1999   |  |            | 5,398,000  |          |  |  | 0.97  | 
|Exercised during 1999            |  |            | (1,940,000 | )        |  |  | 1.01  | 
|Lapsed during 1999               |  |            | (161,740   | )        |  |  | 2.00  | 
|Granted during 1999              |  |            | 1,908,500  |          |  |  | 3.40  | 
|                                 |  |            |            |          |  |  |       | 
|Outstanding at December 31, 1999 |  |            | 5,204,760  |          |  |  | 1.75  | 
|Exercised during 2000            |  |            | (2,221,626 | )        |  |  | 1.24  | 
|Lapsed during 2000               |  |            | (276,391   | )        |  |  | 3.40  | 
|Granted during 2000              |  |            | 2,538,850  |          |  |  | 26.77 | 
|                                 |  |            |            |          |  |  |       | 
|Outstanding at December 31, 2000 |  |            | 5,245,593  |          |  |  | 14.06 | 
|Exercised during 2001            |  |            | (948,133   | )        |  |  | 1.15  | 
|Lapsed during 2001               |  |            | (1,725,851 | )        |  |  | 26.36 | 
|Granted during 2001              |  |            | 1,205,900  |          |  |  | 3.75  | 
|                                 |  |            |            |          |  |  |       | 
|Outstanding at December 31, 2001 |  |            | 3,777,509  |          |  |  | 8.39  | 
|                                 |  |            |            |          |  |  |       | 

The weighted average fair value of options
granted in the year ended December 31, 2001, was estimated
at 5.26 (2000:
32.60) as at the
date of grant using the Black-Scholes stock option-pricing
model. The following weighted average assumptions were used:
dividend yield of 0.00% (2000: 0.00%) per annum, annual
standard deviation (volatility) of 123% (2000: 95%), risk
free interest rate of 4.90% (2000: 4.76%) and expected term
of 7 years. The exercise prices for options outstanding on
December 31, 2001, ranged from
0.02 to
35.00, (2000:
0.02 to
79.19) with a
weighted average exercise price of
 8.39
(2000: 15.06)
and a remaining weighted average contractual life of 3.98
(2000: 3.87) years.

The following table summarizes information about
the stock options outstanding December 31, 2001:

|                             |  |                     |           |                   |  |                |      |        |  |                |       |  |  |  |           |  |  |  |      | 
|---------------------------- |  | ------------------- | --------- | ----------------- |  | -------------- | ---- | ------ |  | -------------- | ----- |  |  |  | --------- |  |  |  | ---- | 
|                             |  |                     |           |                   |  |                |      |       
|                             |  |                     |           | Options Currently
|                             |  | Options Outstanding |           | Exercisable      
|                             |  |                     |           |                  
|                             |  |                     |           | Weighted Avg.     |  |                |      |       
|                             |  |                     |           | Remaining         |  | Weighted Avg.  |      |        |  | Weighted Avg. 
|Range of Exercise Prices () |  | Number              |           | Contract Life     |  | Exercise Price |      | Number |  | Exercise Price
|                             |  |                     |           |                   |  |                |      |        |  |               
|0.02  1.00                  |  |                     | 617,500   |                   |  |                | 5.47 |        |  |                | 0.03  |  |  |  | 12,500    |  |  |  | 0.29 | 
|1.00  5.00                  |  |                     | 2,458,809 |                   |  |                | 3.18 |        |  |                | 2.90  |  |  |  | 1,419,334 |  |  |  | 2.02 | 
|35.00                        |  |                     | 701,200   |                   |  |                | 5.50 |        |  |                | 35.00 |  |  |  |          |  |  |  |     | 
|                             |  |                     |           |                   |  |                |      |        |  |                |       |  |  |  |           |  |  |  |      | 
|Total                        |  |                     | 3,777,509 |                   |  |                | 3.98 |        |  |                | 8.39  |  |  |  | 1,431,834 |  |  |  | 2.00 | 
|                             |  |                     |           |                   |  |                |      |        |  |                |       |  |  |  |           |  |  |  |      | 

15. Restructuring Expenses

Restructuring expenses are those expenses related
to the termination of employees and related compensation
expense, and expenses incurred to terminate contracts for
equipment and facilities that have no future economic benefit.

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

During 2001, Versatel announced two
restructurings to create operational synergies as a result of
its increased scale of operations. In March of 2001, we
announced the first restructuring plan for our operations in The
Netherlands and Germany. Under the plan, we identified
approximately 300 employees to be terminated. Additionally,
in September 2001, we identified approximately
100 employees to be terminated in Belgium as part of the
second restructuring plan.

In total, Versatel recognized a charge of
11.2 million
in 2001 to cover employee termination costs and other
restructuring costs. As of December 31, 2001,
7.9 million
of the 11.2
restructuring reserve has been paid in cash and a total of
413 Versatel employees have been terminated. Versatel
expects to use the remaining portion of the restructuring
reserve to cover employee termination costs and other
restructuring costs for payments by the end of 2002.

16. Extraordinary Items

Versatel recognized a one time gain of
13.0 million
for the year ended December 31, 2001. During the year ended
December 31, 2001, Versatel repurchased in the open market
22.1 million
in principal amount outstanding of its long-term debt securities
utilizing cash from its existing cash balances. We entered into
these transactions in an effort to retire a portion of the debt
securities that were trading at distressed levels.

17. Taxes

Netherlands

In general, a Dutch holding company may benefit
from the so-called participation exemption. The
participation exemption is a facility in Dutch corporate tax
laws which allows a Dutch company to exempt, from Dutch income
tax, any dividend income and capital gains in relation to its
participation in subsidiaries which are legal entities residing
in The Netherlands or in a foreign country. Capital losses are
also exempted, apart from the liquidation losses (under
stringent conditions). Any costs in relation to participations,
to the extent these participations do not realize Dutch taxable
profit, are not deductible. These costs include costs to finance
such participations.

As of December 31, 2001, Versatel Telecom
International N.V. and its Dutch Subsidiaries had generated
net operating loss (NOL) carry forwards for income
tax purposes totalling approximately
652 million.
For Dutch corporate income tax purposes, NOL carry forwards may
be carried forward indefinitely. The current statutory rate for
The Netherlands is 35%.

Belgium

As of December 31, 2001, Versatel Belgium
had generated NOL carry forwards for income tax purposes
totalling approximately
100 million.
For Belgium income tax purposes NOL carry forwards may generally
be carried forward indefinitely. The current statutory rate for
Belgium is 40%.

Germany

As of December 31, 2001, the German
activities of Versatel had generated NOL carry forwards for
income tax purposes totalling approximately
187 million.
For German income tax purposes, NOL carry forwards may be
carried indefinitely. The current statutory rate for Germany is
39%

The company has recorded a valuation allowance
equal to the total net deferred tax assets as of
December 31, 2001 and 2000, due to the uncertainty of
realization through future operations. The valuation

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

allowance will be reduced at such time as
management believes it is more likely than not that the deferred
tax assets will be realized.

|                              |  |      |          |      |  |  |          |  
|----------------------------- |  | ---- | -------- | ---- |  |  | -------- | -
|                              |  | 2000 |          | 2001
|                              |  |      |          |     
|Deferred tax assets           |  |      |         |      |  |  |         |  
|Operating loss carry forwards |  |      | 226,128  |      |  |  | 341,929  |  
|                              |  |      |          |      |  |  |          |  
|Total deferred tax assets     |  |      | 226,128  |      |  |  | 341,929  |  
|Less valuation allowance      |  |      | (226,128 | )    |  |  | (341,929 | )
|                              |  |      |          |      |  |  |          |  
|Net deferred taxes            |  |      |         |      |  |  |         |  
|                              |  |      |          |      |  |  |          |  

The difference between the income tax expense
provided in the consolidated financial statements and the
expected income tax benefit at statutory rates related to the
Companys corporate and foreign subsidiary operations for
the years ended December 31, 2001, 2000 and 1999 is
reconciled as follows:

|                                                                    |                          |      |         |      |  |      |          |   |  |  |          |   | 
|------------------------------------------------------------------- | ------------------------ | ---- | ------- | ---- |  | ---- | -------- | - |  |  | -------- | - | 
|                                                                    |                          | 1999 |         | 2000 |  | 2001
|                                                                    |                          |      |         |      |  |     
|Expected income tax benefit at weighted avg.
	statutory rate of 37% |                          |      | 73,309  |      |  |      | 156,058  |   |  |  | 140,241  |  
|Amortization of goodwill                                            |                          |      |        |      |  |      | (6,556   | ) |  |  | (6,469   | )
|IPO costs                                                           |                          |      | 6,445   |      |  |      |         |   |  |  |         |  
|Stock based compensation                                            |                          |      |        |      |  |      | (7,256   | ) |  |  | (1,993   | )
|Other                                                               |                          |      | 444     |      |  |      | (2,704   | ) |  |  | (7,713   | )
|                                                                    |                          |      |         |      |  |      |          |   |  |  |          |  
|Valuation allowance                                                 |                          |      | (79,761 | )    |  |      | (139,542 | ) |  |  | (124,066 | )
|                                                                    |                          |      |         |      |  |      |          |   |  |  |          |  
|                                                                    | Total income tax benefit |      |         | 437  |  |      |          |  |  |  |          |  | 
|                                                                    |                          |      |         |      |  |      |          |   |  |  |          |  

18. Segmental Reporting

Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information has been
issued and is effective for years beginning after
December 15, 1997. SFAS No. 131 requires certain
disclosures about business segments of an enterprise.

Revenues

Until 1999, Versatel essentially managed its
business as one segment. Versatels substantial growth
during 2000 led us to formally manage its business by different
segments according to the geographic locations of its markets:
The Netherlands, Germany, and Belgium. Versatel generates
revenue by providing a full range of voice, data and Internet
services. Versatel has a separate management team for The
Netherlands, Germany and Belgium respectively due to the
distinct market dynamics of the regions in which we operate and
to better serve our customers.

In addition to our core business of providing
broadband services to business customers in the Benelux and
northwest Germany, Versatel operates Zon, our residential
Internet service provider, to participate in the growing market
for consumer Internet services in The Netherlands. Zons
financial and operating results are included in The Netherlands.

The key operating performance measures used to
evaluate the different segments are revenues and Adjusted
EBITDA. The accounting policies of the business segment are the
same as those described in Note 2: Significant Accounting
Policies.

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

In March 2000, we acquired Komtel in Germany.
Komtels activities include certain premium dial-in
services. For these services, Versatel collects per minute fees
from Deutsche Telekom and then passes a portion of these fees on
to a local content provider. As of April 1, 2001, we report
these fees on a net basis, whereby reported revenues only
include that portion of the fees from Deutsche Telekom that are
not passed on to a local content provider. Until March 31,
2001, we accounted for these services on a gross basis and
recognized as revenue all fee amounts received because we
determined that it was not materially different than if reported
on a net basis and there was no impact on operating loss, loss
before income taxes and net loss (after taxes).

We believe gross billings are an important
indicator of the volume of these premium dial-in services and
assist comparability to prior periods. Accordingly, this
document also discusses the level of gross billings for all
periods presented and the cost relating to gross billings which
includes the costs passed on to local content providers.
References herein to gross billings include all our revenues,
plus fee amounts passed on to local content providers for the
premium dial-in services offered by Komtel.

Versatels revenues presented on a
geographical basis is divided as follows:

|                |  |      |        |      |  |      |         |  |  |  |         | 
|--------------- |  | ---- | ------ | ---- |  | ---- | ------- |  |  |  | ------- | 
|                |  | 1999 |        | 2000 |  | 2001
|                |  |      |        |      |  |     
|The Netherlands |  |      | 52,323 |      |  |      | 105,939 |  |  |  | 159,241 | 
|Belgium         |  |      | 4,417  |      |  |      | 21,634  |  |  |  | 35,050  | 
|Germany(1)      |  |      | 1,797  |      |  |      | 53,896  |  |  |  | 61,442  | 
|                |  |      |        |      |  |      |         |  |  |  |         | 
|Total(2)        |  |      | 58,537 |      |  |      | 181,469 |  |  |  | 255,733 | 
|                |  |      |        |      |  |      |         |  |  |  |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2000, we acquired Komtel in Germany.
	Until March 31, 2001, we accounted for the fees from
	certain premium dial-in services offered by Komtel on a gross
	basis. Gross billings in Germany (including all fee amounts
	received for the premium dial-in services offered by Komtel) for
	the year ended December 31, 2001 amounted to
	80.1 million.
|   
|(2) | Total gross billings for the year ended
	December 31, 2001 amounted to
	274.4 million.                                                                                                                                                                                                                                                                        

Versatel has a substantial business relationship
with the GAK-Group in The Netherlands. For the years ended
December 31, 2001, 2000 and 1999, the GAK-Group accounted
for 4.7%, 6.7% and 15.6% of Operating Revenue amounting to
12.1 million,
12.1 million
and
9.1 million
in the respective years.

Further, Versatel believes the revenues per
service by customer type is an important indicator of the
evolution of its broadband services product portfolio.
Versatels revenues on a service by customer type is
divided as follows:

|                            |          |      |        |        |  |      |         |        |  |  |         |        | 
|--------------------------- | -------- | ---- | ------ | ------ |  | ---- | ------- | ------ |  |  | ------- | ------ | 
|                            |          | 1999 |        | 2000   |  | 2001
|                            |          |      |        |        |  |     
|Business customers:         |          |      |        |        |  |      |         |        |  |  |         |       
|                            | Voice    |      |        | 31,695 |  |      |         | 70,833 |  |  |         | 95,551 | 
|                            | Data     |      |        | 14,109 |  |      |         | 25,909 |  |  |         | 45,616 | 
|                            | Internet |      |        | 4,942  |  |      |         | 26,378 |  |  |         | 38,109 | 
|Residential customers:      |          |      |        |        |  |      |         |        |  |  |         |       
|                            | Voice    |      |        | 405    |  |      |         | 9,012  |  |  |         | 13,776 | 
|                            | Internet |      |        | 286    |  |      |         | 11,650 |  |  |         | 13,530 | 
|Carrier Services customers: |          |      |        |        |  |      |         |        |  |  |         |       
|                            | Voice(1) |      |        | 5,194  |  |      |         | 18,098 |  |  |         | 16,985 | 
|                            | Data     |      |        | 1,906  |  |      |         | 10,982 |  |  |         | 9,165  | 
|                            | Other(2) |      |        |       |  |      |         | 8,607  |  |  |         | 23,001 | 
|                            |          |      |        |        |  |      |         |        |  |  |         |       
|Total(3)                    |          |      | 58,537 |        |  |      | 181,469 |        |  |  | 255,733 |       
|                            |          |      |        |        |  |      |         |        |  |  |         |       




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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)



|    |                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 2000, we acquired Komtel in Germany.
	Until March 31, 2001, we accounted for the fees from
	certain premium dial-in services offered by Komtel on a gross
	basis. Gross billings in Germany (including all fee amounts
	received for the premium dial-in services offered by Komtel) for
	the twelve months ended December 31, 2001 amounted to
	35.6 million.
|   
|(2) | Other sales consists of asset sales of
	telecommunications infrastructure, see also note 19.                                                                                                                                                                                                                                                                            
|   
|(3) | Total gross billings for the year ended
	December 31, 2001 amounted to
	274.4 million.                                                                                                                                                                                                                                                                                 

Adjusted EBITDA

Versatels Adjusted EBITDA presented on a
geographical basis is divided as follows:

|                                   |  |      |         |      |  |      |          |   |  |  |         |  
|---------------------------------- |  | ---- | ------- | ---- |  | ---- | -------- | - |  |  | ------- | -
|                                   |  | 1999 |         | 2000 |  | 2001
|                                   |  |      |         |      |  |     
|The Netherlands                    |  |      | (47,275 | )    |  |      | (81,426  | ) |  |  | (12,764 | )
|Belgium                            |  |      | (9,165  | )    |  |      | (19,183  | ) |  |  | (24,283 | )
|Germany                            |  |      | (930    | )    |  |      | (57,847  | ) |  |  | (27,233 | )
|                                   |  |      |         |      |  |      |          |   |  |  |         |  
|Total consolidated Adjusted EBITDA |  |      | (57,370 | )    |  |      | (158,456 | ) |  |  | (64,280 | )
|                                   |  |      |         |      |  |      |          |   |  |  |         |  
|Stock based compensation           |  |      | (12,557 | )    |  |      | (7,034   | ) |  |  | (5,695  | )
|Tax penalties                      |  |      |        |      |  |      |         |   |  |  | (2,978  | )
|Restructuring expense              |  |      |        |      |  |      |         |   |  |  | (11,240 | )
|                                   |  |      |         |      |  |      |          |   |  |  |         |  
|Total consolidated EBITDA          |  |      | (69,927 | )    |  |      | (165,490 | ) |  |  | (84,193 | )

Management allocates both network services and
corporate overhead costs to The Netherlands because the
Companys headquarters, including the network operating
center, are located at Versatels main office in Amsterdam,
The Netherlands.

Fixed assets

Due to the integrated nature of our activities a
meaningful breakdown of the fixed assets between services per
customer type is not presented here.

Versatels fixed assets presented on a
geographical basis is divided as follows:

|                |  |      |         |      |  |      |         |  |  |  |         | 
|--------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                |  | 1999 |         | 2000 |  | 2001
|                |  |      |         |      |  |     
|The Netherlands |  |      | 142,317 |      |  |      | 346,494 |  |  |  | 460,141 | 
|Belgium         |  |      | 10,968  |      |  |      | 76,634  |  |  |  | 106,918 | 
|Germany         |  |      | 79,409  |      |  |      | 168,263 |  |  |  | 247,181 | 
|                |  |      |         |      |  |      |         |  |  |  |         | 
|Total           |  |      | 232,694 |      |  |      | 591,391 |  |  |  | 814,240 | 
|                |  |      |         |      |  |      |         |  |  |  |         | 

19. Non-monetary transactions

Based on Versatels business plan certain
assets have been categorized as assets held for sale within
fixed assets. For the year ended December 31, 2001 and
December 31, 2000 approximately
23.0 million
and
4.8 million
of Versatels revenues were derived from customers from
which Versatel also purchased assets for use in its own network.
The assets purchased have been recorded as purchases of
property, plant and equipment and include the international
fiber and capacity that Versatel required to complete its
international network. The gains realized on these transactions
in 2001 and 2000 amounted to
18.7 million
and
4.0 million
respectively. For these revenues, we applied the accounting
principle for non-monetary transactions. These transactions are
not reflected in the consolidated statements of cash flows.
Taking the non-monetary transactions of 2001 into consideration
the gross capital expenditures amounted to
274.9 million.

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

20. Result from Investing
Activities

Result from investing activities decreased by
3.1 million
from
3.1 million
for year ended December 31, 2000, to
0.0 million
for the year ended December 31, 2001. In 2001 we realized a
book gain of
0.1 million
on the sale of Keys-Tone in Belgium, while took an impairment on
our investment in Bornet in Germany of
0.1 million.
The
3.1 million
loss in 2000 resulted from the application of the equity
accounting method of our investment in Versapoint of
9.1 million
loss whilst we realized a profit with the sale of Telebel in
Germany for
4.1 million,
and a profit with the sale of Speedport for
1.9 million.

21. Other assets impairments

On 29 December 2000, Versatel made a
one-time payment to NorthPoint of
7.0 million
in order to purchase NorthPoints 50% stake in Versapoint,
amongst other things. In conjunction with this transaction,
Versatel has restructured the Versapoint business to facilitate
integration. Accordingly, Versatel performed a strategic review
of Versapoint and the pan-European and wholesale scope of the
original Versapoint venture has been altered to match
Versatels retail operations in the Benelux and
Northwestern German regions. The strategic review triggered an
impairment review of long-lived assets on the 50% stake already
owned by Versatel. We wrote-down Versapoints long-lived
assets based on detailed review of usable assets. Accordingly,
Versatel recorded a noncash impairment charge of
12.8 million.

22. Other Expenses

Versatel did not recognize any other income or
expense during 2001. Versatel wrote down its minority interest
in Internet Ventures Group B.V. and Cedron B.V.
amounting to
2.3 million
in 2000. An additional loss of
3.1 million
of dialer equipment was recognized in 2000.

23. Rent and Operating Lease
Commitments

Future minimum commitments in connection with
rent and other operating lease agreements are as follows at
December 31, 2001:

|                 |  |  |        | 
|---------------- |  |  | ------ | 
|2002             |  |  | 15,263 | 
|2003             |  |  | 14,366 | 
|2004             |  |  | 12,164 | 
|2005             |  |  | 9,437  | 
|2006             |  |  | 8,955  | 
|2007 and further |  |  | 33,603 | 
|                 |  |  |        | 
|Total            |  |  | 93,788 | 
|                 |  |  |        | 

Rent and operating lease expenses amounted to
approximately
2.1 million
in 1999,
15.2 million
in 2000 and
19.9 million
in 2001. The main part of future commitments relates to the
renting of Points-of-Presence for a ten-year period.

24. Commitments not reflected in the
Balance Sheet

Commitments in connection with the rollout of
Versatels capital expenditures relating to customer
connections and network build, not yet recorded on the balance
sheet amount to approximately
20.2 million
as of December 31, 2001.

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

25. Legal Proceeding

In October 2000 we were informed by the public
prosecutor in The Netherlands of potential civil and criminal
tax liabilities relating to certain employee stock options
granted prior to our initial public offering in July 1999.
Although we consulted with our Dutch tax advisors and the Dutch
tax authorities prior to issuing these options and we believe
the tax treatment of these options was correct, we have agreed
with the public prosecutor to a payment of
3.0 million,
whereby all criminal charges will be dropped, without any
admission of guilt by us. The Company intends to challenge the
views of the Dutch tax authorities regarding the valuation of
the aforementioned employee stock options. We have not made any
provision for the additional potential tax exposure, which could
amount to up to approximately
10.0 million.
Should the Company be successful in its case with the Dutch tax
authorities, we intend to attempt to reclaim all or part of the
potential settlement that has been reached with the public
prosecutor.

On November 19, 2001, a class action
complaint was filed in the Southern District of New York against
Versatel, certain of its officers and directors and certain
underwriters of the Versatels initial public offering
alleging violations of Sections 11 and 15 of the Securities
Act of 1933 and Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934. The complaint alleges that Versatels
prospectus was false or misleading in that it failed to disclose
(i) that the underwriters allegedly were paid excessive
commissions by certain customers in return for receiving shares
in the initial public offering and (ii) that certain of the
underwriters customers allegedly agreed to purchase
additional shares of Versatel in the aftermarket in return for
an allocation of shares in the initial public offering.
Plaintiff contends that, as a result of those omissions from the
prospectus, the price of Versatels stock was artificially
inflated between July 23, 1999 and December 6, 2000
and that the defendants are liable for unspecified damages to
those persons who purchased stock during that period. Hundreds
of cases against numerous other issuers and their underwriters
that make similar allegations involving the initial public
offerings of those issuers were consolidated before a single
judge on August 9, 2001 for purposes of pretrial motions
and discovery only. The action against Versatel has been
consolidated along with those cases. The Company intends to
contest the action vigorously.

If some of the holders of the notes that are not
represented by the ad hoc committee are not satisfied
with the terms of our proposed exchange offer, they may commence
litigation or liquidation proceedings against us. Any such
proceedings may divert management attention and could have a
material adverse effect on our business and financial condition
and on our restructuring.

Versatel has filed complaints in the past with
the European Commission, with OPTA and the Minister of Transport
and Waterways in The Netherlands, in Belgium, with the BIPT, as
part of its regulatory strategy. We also make routine filings
with the regulatory agencies and governmental authorities in the
countries in which we operate or intend to operate.

Versatel is from time to time involved in routine
litigation in the ordinary course of business. We believe that
no currently pending litigation to which Versatel is a party
will have a material adverse effect on our financial position or
results of operations.

26. Subsequent Events

Effective January 1, 2002, a legal merger
took place within the Versatel group in The Netherlands, by
which Versatel Telecom Netherlands B.V., Svianed B.V., 7-Klapper
Beheer B.V., Vuurwerk Internet B.V. and Vuurwerk Access B.V.
amalgamated into Versatel Telecom Europe B.V. Subsequently, the
statutory name of Versatel Telecom Europe B.V. was changed into
Versatel Nederland B.V. These changes in the corporate structure
are part of a corporate clean-up within the entire Versatel
group. A similar operation is currently in process within the
Belgium operating companies. We further incorporated Versatel
Finance B.V.

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Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

On January 15, 2002 Versatel Deutschland
Holding GmbH purchased an additional 2% interest in Komtel from
Stadtwerke Flensburg GmbH, the former shareholder, increasing
Versatels interest to 82%. An amendment to the existing
share and purchase agreement was signed for this purpose. It was
further agreed upon to postpone the exercise of the option for
the sale of the remaining 18% shareholding (against a purchase
price of
13.9 million).
The option is now exercisable between July 1 and
July 15 in each of 2002, 2003, 2004 or 2005. Versatel
Deutschland Holding GmbH is further to ensure a minimum of 200
full time employees (as opposed to 140 employees before) to be
employed in the city of Flensburg until the option is exercised.
If these criteria are not met, a penalty of a maximum of
0.8 million
is due to Stadtwerke Flensburg GmbH.

On March 5, 2002, Versatel was put on the
penalty bench (strafbankje) by Euronext
Amsterdam after indicating to Euronext Amsterdam that it
believed it had a negative equity position. Versatel has
confirmed with Euronext Amsterdam that while the penalty bench
serves as a warning sign to investors that Versatel has a
negative equity position, it will not result in Versatel being
de-listed from the Euronext Amsterdam exchange. The
penalty bench will also not affect how Versatel trades or its
ability to remain a listed stock on the Official Segment of
Euronext Amsterdam N.V.

On March 20, 2002, the Stichting
Continuïteit Versatel Telecom International agreed with
Versatel and certain noteholders that it will not exercise its
call option of the preference shares B until the completion of
our financial restructuring or until the termination of the
lock-up agreement (other than as a result of the completion of
our financial restructuring).

On March 20, 2002, the Stichting
Prioriteit Versatel Telecom International agreed with
Versatel and certain noteholders that it would not exercise its
call option on the priority share until the completion of our
financial restructuring or until the termination of the lock-up
agreement (other than as a result of the completion of our
financial restructuring).

On March 21, 2002, Versatel announced that
it had reached an agreement with an ad hoc committee of
holders of its notes in respect of a revised exchange offer and
consent solicitation. The committee is part of a wider group of
holders of notes that collectively owns approximately 74% of the
initial principal amount of outstanding notes. The committee
collectively holds approximately 33% of such notes.

Additionally, Gary Mesch, the current Supervisory
Board Chairman, founder and former CEO, has announced that upon
successful completion of the restructuring he will resign from
the Supervisory Board.

Daniel Hayes has resigned as Chief Information
Officer.

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VERSATEL TELECOM INTERNATIONAL N.V.




Notes to the consolidated financial
statements  (continued)


(Amounts in thousands of euro, except for share
and per share amounts)

SIGNATURES

The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual
report on its behalf.



| |                                    
| | -----------------------------------
| | VERSATEL TELECOM INTERNATIONAL N.V.



| |     |                  
| | --- | -----------------
| | By: | /s/ RAJ RAITHATHA

| |                    
| | -------------------
| | Name: Raj Raithatha

| |        |                      
| | ------ | ---------------------
| | Title: | Managing Director and

| |                        
| | -----------------------
| | Chief Executive Officer
|
| | Date: March 29, 2002   



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##### Table of Contents



INDEX TO EXHIBITS

|            |     |     |  |             |  |                                                                                                                                                                 
|----------- | --- | --- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |     |     |  | Description
|            |     |     |  |            
|            | 1   | (1) |  |            |  | Articles of Association (as amended) of the
	Company                                                                                                            
|            | 2.1 | (2) |  |            |  | Deposit Agreement between the Company and The
	Bank of New York, as depositary                                                                                  
|            | 2.2 | (3) |  |            |  | Indenture, dated May 27, 1998, between the
	Company and U.S. Trust Company of New York, as Trustee                                                              
|            | 2.3 | (4) |  |            |  | Indenture, dated December 3, 1998, between
	the Company and U.S. Trust Company of New York, as Trustee                                                          
|            | 2.4 | (5) |  |            |  | Indenture, dated July 28, 1998, between the
	Company and U.S. Trust Company of New York, as Trustee                                                             
|            | 2.5 | (6) |  |            |  | Indentures, dated March 30, 2000, between
	the Company and The Bank of New York, as Trustee                                                                     
|            | 2.6 | (7) |  |            |  | Principal Paying Agent, Conversion Agent,
	Conversion Calculation Agent and Registrar Agreement, dated
	December 17, 1999, between the Company and ING Bank N.V.
|            | 2.7 | (8) |  |            |  | Principal Paying Agent, Conversion Agent,
	Conversion Calculation Agent and Registrar Agreement, dated
	March 20, 2000, between the Company and ING Bank N.V.   
|            | 7   |     |  |            |  | Statement re ratio earnings to fixed charges.                                                                                                                   
|            | 8   |     |  |            |  | List of Subsidiaries.                                                                                                                                           
|            | 10  |     |  |            |  | Letter regarding representations by Arthur
	Andersen pursuant to SEC Release 33-8070.                                                                           






|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as an exhibit to the
	Companys Registration Statement on Form 20-F, filed
	with the Securities and Exchange Commission on March 20,
	2000 and incorporated herein by reference.                                   
|   
|(2) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-6 (File
	number 333-10516) initially filed with the Securities and
	Exchange Commission on July 13, 1999 and incorporated
	herein by reference.   
|   
|(3) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-59979) initially filed with the Securities and
	Exchange Commission on July 27, 1998 and incorporated
	herein by reference.   
|   
|(4) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-70449) initially filed with the Securities and
	Exchange Commission on January 12, 1999 and incorporated
	herein by reference.
|   
|(5) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-1 (File
	number 333-81329) initially filed with the Securities and
	Exchange Commission on June 22, 1999 and incorporated
	herein by reference.   
|   
|(6) | Previously filed as an exhibit to the
	Companys Registration Statement on Form F-4 (File
	number 333-43938) initially filed with the Securities and
	Exchange Commission on August 16, 2000 and incorporated
	herein by reference. 
|   
|(7) | Previously filed as an exhibit to the
	Companys Form 20-F, filed with the Securities and
	Exchange Commission on March 20, 2000 and incorporated
	hereby by reference.                                                             
|   
|(8) | Previously filed as an exhibit to the
	Companys Form 20-F, filed with the Securities and
	Exchange Commission on March 30, 2001 and incorporated
	hereby by reference.