As filed with the Securities and Exchange Commission on March 30, 2001
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 20-F
(Mark One)
[ ]      REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE
         SECURITIES EXCHANGE ACT OF 1934
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the fiscal year ended: December 31, 2000
[ ]      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:
         American Depositary Shares, each representing one ordinary share, par
         value NLG 0.05 per share 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
         Euro 120,000,000 11 7/8% Senior Euro Notes due 2009
         Euro 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: 89,661,896

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    X             No
                          -------              ---------
Indicate by check mark which financial statement item the Registrant has elected
to follow:

                     Item 17                 Item 18     X
                             ---------               --------
================================================================================
<PAGE>
                                TABLE OF CONTENTS

                                                                           Page
INTRODUCTION AND PRESENTATION OF INFORMATION..................................1
ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS..............3
ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE............................3
ITEM 3.    KEY INFORMATION....................................................3
           3.A      Selected Financial Data...................................3
           3.B      Capitalization and Indebtedness...........................6
           3.C      Reasons for the offer and use of proceeds.................6
           3.D      Risk factors..............................................7
ITEM 4.    INFORMATION ON THE COMPANY........................................22
           4.A      HISTORY AND DEVELOPMENT OF THE COMPANY...................22
           4.B      BUSINESS OVERVIEW........................................22
           4.C      ORGANIZATIONAL STRUCTURE.................................43
           4.D      PROPERTY, PLANTS AND EQUIPMENT...........................43
ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS......................45
           5.A      OPERATING RESULTS........................................45
           5.B      LIQUIDITY AND CAPITAL RESOURCES..........................54
           5.C      RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES...........55
           5.D      TREND INFORMATION........................................55
ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES........................57
           6.A      DIRECTORS AND SENIOR MANAGEMENT..........................57
           6.B      COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.........60
           6.C      BOARD PRACTICES..........................................60
           6.D      EMPLOYEES................................................63
           6.E      SHARE OWNERSHIP..........................................64
ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.................67
           7.A      MAJOR SHAREHOLDERS.......................................67
           7.B      RELATED PARTY TRANSACTIONS...............................67
           7.C      INTERESTS OF EXPERTS AND COUNSEL.........................67
ITEM 8.    FINANCIAL INFORMATION.............................................67
           8.A      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
                    INFORMATION..............................................67
           8.B      SIGNIFICANT CHANGES......................................68
ITEM 9.    THE OFFER AND LISTING.............................................68
           9.A      LISTING DETAILS..........................................68
           9.B      PLAN OF DISTRIBUTION.....................................70
           9.C      MARKETS..................................................70
           9.D      SELLING SHAREHOLDERS.....................................70
           9.E      DILUTION.................................................70
           9.F      EXPENSES OF THE ISSUE....................................71
ITEM 10.   ADDITIONAL INFORMATION............................................71
           10.A     SHARE CAPITAL............................................71
           10.B     ARTICLES OF ASSOCIATION..................................71
           10.C     MATERIAL CONTRACTS.......................................77
           10.D     EXCHANGE CONTROLS........................................83
           10.E     TAXATION.................................................83
           10.F     DIVIDENDS AND PAYING AGENTS..............................99
           10.G     STATEMENT BY EXPERTS.....................................99

<PAGE>

           10.H     DOCUMENTS ON DISPLAY.....................................99
           10.I     SUBSIDIARY INFORMATION...................................99
ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
           MARKET RISK......................................................100
ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY
           SECURITIES.......................................................101
ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................102
ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
           HOLDERS AND USE OF PROCEEDS......................................102
ITEM 15.   [RESERVED].......................................................102
ITEM 16.   [RESERVED].......................................................102
ITEM 17.   FINANCIAL STATEMENTS.............................................102
ITEM 18.   FINANCIAL STATEMENTS.............................................102
ITEM 19.   EXHIBITS.........................................................102




<PAGE>

                  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 Euro 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").

         In this document, references to "euro" or "Euro " 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 currency of The Netherlands, and references to "U.S. dollars" or "$" are to
United States dollars. Solely 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 $0.9388
per Euro 1.00, the noon buying rate on December 31, 2000. The noon buying rate
is the rate announced by the Federal Reserve Bank of New York for customs
purposes as the rate in the City of New York for cable transfers in foreign
currencies.

                                   -----------


                           FORWARD-LOOKING STATEMENTS

         This Annual Report 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:

          o    Our anticipated expansion plans for our network and growth
               strategies,

                                       1
<PAGE>

          o    Our expectation of the impact of this expansion on our revenue
               potential, cost basis and margins,

          o    Our expectation of the competitiveness of our services,

          o    Our intention to introduce new products and services,

          o    Anticipated trends and conditions in our industry, including
               regulatory reform and the liberalization of telecommunications
               services across Europe, and

          o    Our ability to compete, both nationally and internationally.

          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.


                                       2
<PAGE>

                                     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, 2000, 1999, 1998, 1997 and 1996 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, 2000 and 1999 and
the consolidated statements of operations, shareholders' equity and cash flows
for the years ending December 31, 2000, 1999 and 1998 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. The selected
financial data set forth below as of and for the years ended December 31, 1999,
1998, 1997 and 1996 have been derived from financial statements which were
originally prepared in Dutch guilders. We have restated such selected financial
data in euro using the fixed conversion rate of NLG 2.20371 per Euro 1.00
established in connection with the implementation of the third stage of Monetary
Union.




                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                            ----------------------------------------------------------------------------
                                             1996          1997         1998          1999          2000         2000
                                            ------        ------       -------      --------      --------      --------
                                             Euro          Euro         Euro          Euro          Euro         $(1)
                                                              (in thousands, except per share amounts)

<S>                                          <C>           <C>          <C>           <C>          <C>           <C>
Operating revenue ...................        2,917         8,574        17,952        58,537       181,469       170,363
Operating expenses:
  Cost of revenue, excluding
  depreciation and amortization .....        2,248         7,898        14,439        45,657       133,565       125,391
  Selling, general and administrative        2,489         7,953        21,660        82,807       213,394       200,334
  Depreciation and amortization .....          205         1,469         2,937        26,412        91,518        85,917
                                            ------        ------       -------      --------      --------      --------
    Total operating expenses ........        4,942        17,320        39,036       154,876       438,477       411,642

Operating loss ......................       (2,025)       (8,746)      (21,084)      (96,339)     (257,008)     (241,279)

Interest expense, net ...............          122           242        11,712        58,512       111,132       104,330
Results from investing activities ...         --            --            --            --           3,131         2,940
Other ...............................         --            --            --            --          18,214        17,099
Foreign currency exchange (losses)
gains, net ..........................         --             (24)        2,335       (43,684)      (32,695)      (30,694)
                                            ------        ------       -------      --------      --------      --------
Loss before income taxes and
minority Interest ...................       (2,147)       (9,012)      (30,461)     (198,535)     (422,180)     (396,342)
                                            ------        ------       -------      --------      --------      --------
Credit from (provision for) income
taxes ...............................         --            --              (3)          437            41            38
                                            ------        ------       -------      --------      --------      --------
  Loss before minority interest .....       (2,147)       (9,012)      (30,464)      198,098      (422,139)     (396,304)
  Minority interest .................         --            --            --             168           792           744
                                            ------        ------       -------      --------      --------      --------
  Net loss ..........................       (2,147)       (9,012)      (30,464)     (197,930)     (421,347)     (395,560)
                                            ======        ======       =======      ========      ========      ========
Net loss per share basic ............        (0.21)        (0.50)        (0.93)        (3.89)        (4.92)        (4.62)
Weighted average number of shares
outstanding (2) .....................       10,008        18,084        32,622        50,929        85,661        85,661

Financial Data:

Adjusted EBITDA (3) .................       (1,820)       (7,277)      (18,147)      (69,927)     (165,490)     (155,362)
Capital expenditures ................        1,165         6,587        35,057       173,804       466,884       438,310
Dividends per share .................         --            --            --            --            --            --

Balance Sheet Data as of December 31:
Cash and restricted cash ............        2,016           678       264,813     1,050,831     1,203,876     1,130,198
Working capital (excluding cash and
restricted cash) ....................       (1,227)      (11,242)      (21,260)     (103,419)     (216,157)     (202,928)
Capitalized finance cost, net .......         --            --          13,613        17,025        19,499        18,306
Property, plant and equipment, net ..        1,062         6,180        17,520       232,694       591,391       555,198
Construction in progress ............         --            --          20,882        81,803       175,766       165,009
Goodwill, net .......................         --            --           2,067       196,973       245,663       230,628
Total assets ........................        3,703         8,772       328,263     1,663,120     2,417,640     2,269,680
Total long-term obligations
(including current portion) .........        1,899         3,854       312,562     1,008,678     1,712,993     1,608,158
Total shareholders' equity (deficit)            66        (8,266)      (15,462)      507,669       341,318       320,429
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                            ----------------------------------------------------------------------------
                                             1996          1997         1998          1999          2000         2000
                                            ------        ------       -------      --------      --------      --------
                                             Euro          Euro         Euro          Euro          Euro         $(1)
                                                              (in thousands, except per share amounts)

<S>                                          <C>           <C>          <C>           <C>          <C>           <C>
Cash Flow data:
Net cash provided by/ (used in)
operating activities.....................      (780)       2,616        (16,932)       (70,093)    (191,039)     (179,347)
Net cash used in investing activities....    (1,165)      (6,587)       (50,839)      (472,531)    (560,405)     (526,108)
Net cash provided by financing
activities...............................     3,889        2,635         235,969      1,358,591     944,529       886,724
</TABLE>
-----------------------
(1)  Solely for the convenience of the reader, euro amounts have been translated
     into U.S. dollars at the noon buying rate on December 31, 2000 of $0.9388
     per Euro 1.00.
(2)  As adjusted to give effect to a 2-to-1 stock split on April 13, 1999.
(3)  Adjusted EBITDA consists of earnings (loss) before interest expense, income
     taxes, depreciation, amortization 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. 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 entitled measures of other companies.

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 Euro 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, 2000, the noon buying rate for U.S. dollars per euro
was $0.94 per Euro 1.00. On March 27, 2001, the noon buying rate for U.S.
dollars per euro was $0.89 per Euro 1.00.


                                       5
<PAGE>
<TABLE>
<CAPTION>

                                                                              Period
Period                                                        High   Low    Average (1)   Period End
------                                                        ----   ---    -----------   ----------
<S>                                                           <C>    <C>       <C>           <C>
1999......................................................... 1.18   1.00      1.06          1.01
2000......................................................... 1.03   0.83      0.92          0.94
September 2000............................................... 0.90   0.85        -            -
October 2000................................................. 0.88   0.83        -            -
November 2000................................................ 0.87   0.84        -            -
December 2000................................................ 0.94   0.88        -            -
January 2001................................................. 0.95   0.92        -            -
February 2001................................................ 0.94   0.91        -            -
March 2001 (through March 27)................................ 0.93   0.89        -            -
</TABLE>
--------------------
(1)  For the years ended December 31, 1999 and 2000, the period average is
     calculated by using the average of the noon buying rates on the last day of
     each full 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.

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.

<TABLE>
<CAPTION>

                                                                              Period
Period                                                        High   Low    Average (1)   Period End
------                                                        ----   ---    -----------   ----------
<S>                                                           <C>    <C>       <C>           <C>
1996......................................................... 1.76   1.61       1.69         1.73
1997......................................................... 2.12   1.73       1.95         2.03
1998......................................................... 2.09   1.81       1.98         1.88
</TABLE>
--------------------
(1) The average of the noon buying rates on the last day of each full 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.

                                       6
<PAGE>

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.

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

        For the year ended December 31, 2000 we had a loss from operating
activities of Euro 257.0 million and negative Adjusted EBITDA of Euro 165.5
million. For the year ended December 31, 1999, we had a loss from operating
activities of Euro 96.3 million and negative Adjusted EBITDA of Euro 69.9
million. For the year ended December 31, 1998, we had a loss from operating
activities of Euro 21.1 million and negative Adjusted EBITDA of Euro 18.1
million. In addition, we had an accumulated deficit of Euro 661.2 million as of
December 31, 2000. We expect to continue to incur significant further operating
losses for the future as we incur additional costs in the build out of our
network, the expansion of our marketing and sales force and the introduction of
new communications services and products. Although we have experienced revenue
growth since we commenced operations in 1995, there can be no assurance our
revenues will continue to grow. You should also be aware that the prices of
voice, data and Internet communications services have fallen significantly in
Europe in recent years, and as competition increases, we expect that prices will
continue to decline. The cost of providing services has also decreased in recent
years and we expect the costs of providing services to continue to decline. As a
result, we expect these price reductions to be partially offset by these cost
reductions. However, 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.

Although we have substantial indebtedness, we may still incur more indebtedness.

        We have substantial indebtedness. In May 1998, we issued and sold units
consisting of $225,000,000 13 1/4% Senior Notes due 2008 and warrants to
purchase 3,000,000 (as adjusted) ordinary shares of Versatel. In December 1998,
we issued and sold units consisting of $150,000,000 13 1/4% Senior Notes due
2008 and warrants to purchase 2,000,100 (as adjusted) ordinary shares of
Versatel. In July 1999, we issued and sold $180,000,000 11 7/8% Senior Dollar
Notes due 2009 and Euro 120,000,000 11 7/8% Senior Euro Notes due 2009. In
December 1999, we issued and sold Euro 300,000,000 11 1/4% Senior Euro Notes due
2010 and Euro 300,000,000 4% Senior Convertible Notes due 2004, and in March
2000 we issued and sold Euro 360,000,000 4% Senior Convertible Notes due 2005.
As of December 31, 2000, our total long-term obligations (including current
portion) were approximately Euro 1,713 million. Subject to limits imposed by our
indebtedness, we may continue to incur substantial additional indebtedness
because the indentures governing the notes issued in our four high yield
offerings as well as the terms of our two convertible note offerings do not
limit the amount of indebtedness that we may incur to finance the cost of the
development of our network and for certain other purposes. In addition, our
failure to comply with the covenants and restrictions contained in the
agreements governing any additional borrowings could trigger defaults under such
agreements. We anticipate that we will incur additional indebtedness in the
future. If we incur additional indebtedness, the related risks that we now face
could intensify.

                                       7
<PAGE>

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

        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 more indebtedness, create liens on assets, enter into business
combinations or engage in certain activities with our subsidiaries. These
covenants will also likely prohibit us from paying dividends or making other
distributions in respect of the ordinary shares for the foreseeable future. A
failure to comply with these restrictions would constitute a default under the
indentures governing our high yield notes, as well as under our convertible
notes, and as a consequence the high yield notes and the convertible notes could
become immediately due and payable, which would seriously adversely affect our
business and our shareholders' equity.

        Our high level of indebtedness and the limits imposed by our
indebtedness could have the following effects, among others:

         o    we may have difficulty in paying the interest on our outstanding
              debt and any newly incurred debt,

         o    we may have difficulty finding sources of financing for working
              capital, our capital expenditure requirements and the interest
              payments on our outstanding debt,

         o    we will be unable to use a significant portion of our cash flow
              in our business and we may be unable to react to industry or
              economic changes, because of the portion of cash flow directed to
              paying interest and principal on our debt, and

         o    we may be unable to react as quickly to changes in our business
              as our competitors who have less debt and financial restrictions,
              which may put us at a disadvantage and make us more vulnerable to
              adverse changes in economic conditions.

        In order to obtain additional flexibility with respect to our operations
generally, we may seek consents from holders of the high yield notes and
convertible senior notes to amend certain of our covenants. Such consents would
likely involve the payment of fees to such holders. We can provide no assurance,
however, that we will successfully obtain such consents on satisfactory terms.

Possible inability to meet our debt service obligations may result in our
outstanding indebtedness becoming due and payable.

        Our consolidated net interest expense for the year ended December 31,
2000 was Euro 111.1 million. For the year ended December 31, 2000 we had a
negative Adjusted EBITDA of Euro 165.5 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
other

                                       8
<PAGE>

outstanding debt. After May 15, 2001, our funds that have been placed in escrow
to cover interest payments on the high yield notes issued in 1998 will have been
exhausted and, as a result, we will need to increase substantially our net cash
flow in order to meet our debt service obligations. In addition, the convertible
notes that we issued in December 1999 and March 2000 are convertible into
ordinary shares at a share price of Euro 43.40 and Euro 60.76, respectively.
However, on March 27, 2001 our share price was Euro 6.39 and a substantial
increase in our share price is required for these convertible notes to be
converted into ordinary shares. If these convertible notes are not converted
into ordinary shares their principal amount will continue to accrete at a rate
of 4.5% per year, representing a total yield on these notes of 8.5% per year.
Our ability to improve our operating performance and financial results will
depend not only on our ability to successfully implement our business plan, but
also upon economic, financial, competitive, regulatory and other factors beyond
our control, including fluctuations in exchange rates and general economic
conditions in the Benelux and Germany. If we are unable to meet our payment
obligations, we may have to refinance our indebtedness, including the high yield
notes and the convertible notes, sell our assets or obtain new financing. We
cannot assure you that any such refinancing would be possible or that any such
sales of assets or additional financing could be achieved. 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.

We will need to obtain considerable capital to expand our network, which may not
be available on acceptable terms.

        We will require significant amounts of capital to further develop and
expand our network, our sales and marketing efforts and our product and service
offerings, including our DSL and Internet services. We expect that our existing
cash balances, together with other available financing and cash flows from
operations, will provide us with sufficient capital to fund planned capital
expenditures to expand our local access network, expand our service offering and
anticipated losses for the next 24 to 36 months. However, we continually
re-evaluate our business objectives and are considering further acquisitions,
expansions of our services and acceleration of our current plans and we may need
to raise additional capital earlier than anticipated. In the past, we have
raised substantially more capital more quickly than we had originally
anticipated for similar reasons. A failure to acquire additional capital on
acceptable terms may seriously and adversely affect our business. We also have
substantial discretion with respect to how we use any capital we raise. Although
we believe that additional capital would enable us to accelerate our expansion
plans, we cannot assure you that we will utilize any additional proceeds
effectively.

We may encounter delays in implementing elements of our business strategy, which
could adversely affect our growth.

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

                                       9
<PAGE>

          o    experienced and qualified management and staff,

          o    additional switch, MDF and co-location sites,

          o    interconnection with the networks of former monopoly
               telecommunications services providers in the European Union,
               commonly known as PTTs, and other carriers,

          o    necessary licenses,

          o    additional transmission facilities, and

          o    the necessary easements and rights-of-way from property owners,
               competitors and various levels of government.

          We are not certain that our current cost estimates are correct or that
we will meet our current development schedule relating to construction of the
network. We and certain other carriers are currently experiencing difficulties
in obtaining a right-of-way necessary to extend our networks, and to connect
customers in Brussels. In addition, we have experienced additional delays in the
past in the planned construction of the network due to flooding resulting from
severe weather conditions. More recently, due to funding difficulties at our
Versapoint joint venture, we have experienced delays in the rollout of our DSL
services. We have since acquired full ownership of Versapoint and currently
control our own DSL operations.

          The successful implementation of our construction and expansion
strategy will be subject to a variety of other risks, including:

          o    operating and technical problems,

          o    regulatory uncertainties,

          o    delays in the full implementation of the European Commission
               directives regarding telecommunications liberalization,

          o    competition,

          o    the availability of capital; and

          o    the risk of damage to software and hardware resulting from
               adverse weather conditions, fire, power loss, natural disasters
               and other causes.

          Any significant increase in costs or any further delay in the
construction of our network could have a material adverse effect on our
financial condition. Even if we successfully develop our network, we cannot
assure you that we will be able to operate it efficiently. The development of
our network is based on our projections of the growth in traffic volumes and
routing preferences and the most cost-effective means of constructing our
network. If our projections prove to be incorrect, it could have a material
adverse effect on our business.

                                       10
<PAGE>

If we fail to manage our rapid growth, our business will be adversely affected.

        Our growth strategy has placed and will continue to place a significant
strain on our management resources. In particular, our acquisitions and their
integration will continue to require a significant amount of management time and
resources. Our ability to manage this growth required us to substantially
enhance our management, financial and information systems and effectively
develop and train our rapidly increasing number of employees. For example,
although we replaced our billing system in 1999, we experienced substantial
delays in implementing some of the system's upgrades. We also experienced
problems as a result of the continuing increase in the volumes of traffic, which
resulted in not all such traffic being billed immediately to the customer.
Although we have implemented new automation, auditing and manual procedures to
ensure and verify that all traffic and fees are billed, we cannot assure you
that similar problems will not occur in the future, and any such occurrence
could have a material adverse effect on customer relations and results of
operations. Our inability to achieve or effectively manage this growth could
materially and adversely affect our business.

We may have difficulties in upgrading and protecting our network.

        The success of our network also 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. In addition, in connection with our acquisition
of VEW Telnet, we entered into a network maintenance agreement with VEW Telnet's
former parent VEW Energie and, as a result, we will be dependent on VEW Energie
to maintain and protect a portion of our network.

Our margins and capital expenditure may be affected, depending on the
transmission mode selected for our customers.

        We have a choice between different technologies to connect customers to
our fiber network. These technologies include our own fiber to the customer,
leased lines from our competitors, DSL products and wireless products. The
operating cost of each of these access methods differs significantly from each
other. Our choice between these access methods, to connect customers to our
network will have a significant impact on our margins and capital expenditures.
Especially the use of leased capacity has a negative impact on our margins.
However, we believe that in the long term we will be able to reduce our
dependency on leased capacity, which should result in higher margins.

                                       11
<PAGE>

One customer represents a significant portion of our revenues.

        As a result of our acquisition of Svianed in June 1999, 14.7% of our
revenues for the year ended December 31, 2000, came from the Gak group of
companies. The Gak group is under contract to use our data services until May
2001. We started discussions with the Gak group during November 2000, and we
expect that our contracts to provide services to the Gak group will be extended.
However, we cannot assure that we will be able to retain the Gak group as a
customer after May 2001 or that our revenues from the Gak group would not
thereafter be significantly curtailed. We cannot assure you either that any such
lost revenues could be replaced. A loss of the revenues derived from the Gak
group, without significant replacement revenue from other sources could have a
material adverse effect on our business.

Our limited history and experience could place us at a disadvantage to
established competitors and may not be a reliable basis for evaluating our
prospects.

        We were founded in October 1995 and, as a result, we have limited
experience as an operating company and have generated only limited revenues. We
entered the Belgian market in the third quarter of 1998 and the German market in
December 1999. In both of these markets, we had no prior operating experience
and telecommunications services had previously been provided primarily by the
national PTTs. Through several acquisitions starting in November 1998 as well as
through our launch of Zon in August 1999, we have entered several markets for
Internet-based services which represent new and rapidly developing markets for
us. Accordingly, you should consider our prospects in light of the risks,
expenses and delays inherent in establishing operations in markets with long
established competitors and other recent entrants and the risks associated with
establishing operations in new technologically advanced industries.

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 networks 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
service technology 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 and the
viability of our operations and could result in us losing customers or market
share.

                                       12
<PAGE>

The loss of our key personnel could 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
expansion plans. Because there is intense competition for qualified personnel in
our industry in Europe, the limited availability of qualified individuals could
become an issue of increasing concern in the future. The loss of key executive
officers or our inability to identify, attract and retain other necessary
qualified personnel could adversely affect our business.

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
extensively the telecommunications transmission infrastructure of other carriers
in the Benelux and Germany and we depend 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. In Belgium, for
example, Belgacom refused to give us access to its local loop on acceptable
terms and we have filed a complaint with the competition authorities of the
European Commission. The expansion of our DSL business also depends heavily upon
access to co-location facilities and existing copper infrastructure controlled
by the PTTs. In addition, we have not yet completed the entire migration of
Svianed's traffic onto our own network and as a result, Svianed still depends
partially on leased lines procured from KPN Telecom.

        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 on the side of the dominant providers.

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 PTTs and the arrival of new entrants.
PTTs have significant competitive advantages over non-PTT market participants,
which include:

         o    cost advantages as a result of economies of scale,

         o    greater financial resources, market presence and network
              coverage,

         o    greater brand name recognition, customer loyalty and goodwill,

                                       13
<PAGE>

         o    control over domestic transmission lines and control over the
              access to these lines by other participants, and

         o    close ties to national regulatory authorities that may be
              reluctant to adopt policies that would adversely affect their
              competitive position.

        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. We believe that prices will continue to decrease for
the foreseeable future and that PTTs and other providers will continue to
improve their product offerings, which will increase these competitive
pressures.

        Our competition in the Benelux and Germany also comes from newer market
entrants including MCI WorldCom, Telfort, GTS/Esprit Telecom, COLT Telecom and
other more recent Internet-based competitors. Further, we believe that, as a
result of the introduction of the euro, there will be a greater transparency in
prices in our markets, which may lead to further price competition. Sustained
price competition could have a material adverse effect on our business.

Exchange rate fluctuations may adversely affect our business.

        A significant portion of our indebtedness is denominated in U.S.
dollars. However, our revenues are generated entirely in countries that have
adopted the euro. Therefore, our ability to pay the interest and principal due
on our indebtedness will be affected by changes in the exchange rate between the
U.S. dollar and the euro. Furthermore, we publish our financial statements in
euro while we maintain significant U.S. dollar denominated liabilities, so our
reported results of operations may be significantly affected by exchange rate
movements.

Any inability to identify future acquisition opportunities and to pursue such
opportunities may hinder our growth.

        As part of our business strategy, we may enter into strategic alliances
with, or make investments in, companies in business areas that are complementary
to our current operations. Any such future strategic alliances, acquisitions or
investments would involve risks. Our strategy presents risks inherent in
assessing the value, strengths and weaknesses of acquisition and investment
opportunities and in integrating and managing newly acquired operations and
improving their operating efficiency. In addition, such acquisitions and
investments could divert our resources and consume the time of our management.
We cannot assure you that any desired strategic alliance, acquisition or
investment can be made in a timely manner or on terms and conditions acceptable
to us. We cannot assure that we will be successful in identifying attractive
acquisition candidates, completing and financing additional acquisitions on
favorable terms, or integrating the acquired businesses or assets into our
existing operations.

                                       14
<PAGE>

We may encounter delays, operational problems and increased cost 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. Recently, for
example, there have been shortages in the market for fiber optic cable.

        Our recourse against suppliers who fail to deliver products to us on a
timely basis is restricted by contractual liability limitations in supply
agreements and purchase orders and, in many cases, by practical considerations
relating to our desire to maintain good relationships with suppliers. Moreover,
we cannot be sure that we will be able to obtain such products on the scale we
require at an affordable cost or at all. Neither can we be certain that our
suppliers will not enter into exclusive arrangements with our competitors or
stop selling their products or components to us at commercially reasonable
prices or at all. Any failure of our sole or limited-source suppliers to provide
products or components that comply with our standards could have a material
adverse effect on us.

Obstacles associated with the effective implementation of the liberalization 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 as a result of such EU Member State's
failure to dedicate the resources necessary to have a functioning regulatory
body in place. Our operations may also be affected by a less than vigorous
enforcement of the legislation by such regulatory body. In Belgium, for example,
we have experienced significant delays in the implementation of the Carrier
Preselect Service (CPS) from Belgacom.

        Although we have obtained the necessary licenses, authorizations and
registrations to operate our business in the jurisdictions in which we currently
operate, we will have to obtain additional licenses and authorizations if we
expand our business to other countries. We are not certain that we will be able
to obtain such licenses and authorizations on a timely basis. The above factors
and other potential obstacles associated with the effective implementation of
liberalization could have a material adverse effect on our operations by
preventing us from expanding our operations as quickly as currently intended.

Volatility of Share Prices.

        Recently, stock markets in the United States and Europe have experienced
significant price and volume fluctuations and the market prices of securities of
telecommunications service providers and technology companies, particularly
Internet and telecommunications related companies, have been highly volatile.
Investors may lose all or part of their investment. In the

                                       15
<PAGE>

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 conditions.

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 the management board the
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 place for our ordinary shares:

         o    Preference shares A and preference shares B. Our management board
              has obtained authority from the general meeting of shareholders
              to issue preference shares A and B, subject to prior approval of
              the Supervisory Board, until December 22, 2001. During this
              period, our management board is expected to grant a call option
              on preference shares B, which will not exceed 100% of all our
              other outstanding shares, to an independent foundation,
              "Stichting Continuiteit 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.

         o    Priority share. Our management board has obtained authority from
              the general meeting of shareholders to issue the priority share,
              subject to prior approval of the Supervisory Board, until
              December 22, 2001. During this period, our management board is
              expected to grant 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.

Netherlands corporate law may remove our shareholders' right to elect our
supervisory board.

        Under Netherlands law, we would be required to modify our system of
corporate governance after the end of the third consecutive financial year
following the year in which we continuously satisfy the requirements under Dutch
corporate law for large companies (the "Large Company Rules"). The Large Company
Rules shift authority from the shareholders to the supervisory board and grant
employees a degree of codetermination of our affairs.

        We would be subject to the Large Company Rules and be required to revise
our system of corporate governance, inter alia, three years after we or one of
our subsidiaries institutes a work council under the Netherlands Works Council
Act. Under Netherlands law, we are required to

                                       16
<PAGE>

facilitate a works council, but no works council existed as of December 31,
2000. We 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 51%
of our 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, 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 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 will 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, the general meeting of
shareholders appoints the members of our management board.

Establishment of our DSL business will require us to make significant capital
investments and may pose significant technical and operational challenges.

        The expansion of our DSL business will require a significant capital
investment. Because our DSL business is relatively new, we have limited
operating and financial data upon which to evaluate this business. Our DSL
business is in a developmental stage and is operating in a new and rapidly
evolving market. Some of the risks we face in establishing a successful DSL
business include:

         o    the timing and willingness of the PTTs, to provide us with
              central office space and the prices, terms and conditions on
              which they make the space available to us. Central office space
              is an important factor in our DSL strategy because we must secure
              physical space from these entities for our equipment in order to
              provide our services in our targeted markets,

         o    our ability to identify, access and initiate service in our
              target regions,

         o    our ability to succeed in securing the unbundled lines or
              telephone wires that connect each DSL end-user to our equipment
              located in the central offices of the PTTs,

                                       17
<PAGE>

        o    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 services
             will be a source of significant competition for their lucrative
             business of providing leased fiber optic 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, and

        o    certain tests indicate that some types of DSL technology may
             cause interference with and are interfered with by other signals
             present in PTTs' copper plant, usually with lines in close
             proximity. Such interference concerns have been, and we expect
             may in the future continue to be, used by the PTTs as a reason to
             delay the development of our services.

        The DSL business is expected to be very competitive. COLT Telecom, for
example, has also announced its intention to significantly expand its DSL
business efforts throughout Europe.

Our DSL business may not grow as rapidly as anticipated as a result of
NorthPoint's divestiture of its stake in Versapoint.

        On March 8, 2000, we entered into a joint venture agreement with
NorthPoint Communications to form Versapoint and to start providing DSL services
on a wholesale basis throughout western Europe, drawing on Versatel's local
expertise and access network and NorthPoint's expertise in providing DSL
services. However, on December 29, 2000, we agreed to buy NorthPoint's 50% stake
in Versapoint. As a result NorthPoint will no longer provide any funding to
Versapoint and we will have to fund the capital expenditure related to the
rollout of our DSL services and network alone. In addition, Versapoint will no
longer be able to draw on NorthPoint's expertise in providing DSL services. We
recently announced a restructuring of Versapoint to integrate it within the
Versatel organization. We will focus our efforts on providing DSL services now
only in our target market of the Benelux and northwest Germany and no longer
seek to offer DSL services on a wholesale basis throughout western Europe.

We must establish and enhance our Zon brand in order to compete effectively in
the Internet service market.

        We believe that in order to further develop Zon, we must continue to
invest significant marketing and other resources in order to establish, maintain
and enhance the Zon brand. Also, we must successfully introduce broadband
Internet services, such as DSL to our Zon customers in order to maintain and
expand our market position. We have been operating our free 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. We are also not
certain that our applications will be successful and that the Zon name and logo
will not be successfully attacked by third parties alleging prior rights or that
the trademark is otherwise valid. In order to attract and retain users and to
promote and maintain our brand or

                                       18
<PAGE>

future brands we may need to substantially increase our marketing and
development expenditures. Our ability to raise financing for these activities,
on a stand-alone basis or otherwise, is limited by the terms of our current debt
instruments. Our business could be adversely affected if our efforts are
unproductive or if we cannot maintain and increase our brand awareness.

The competition for users in the Internet service market is very intense and may
result in a decrease in our user base and in our revenue.

        Our Internet division operates in the Internet services market, which is
extremely competitive. Our Internet competitors include many large companies
that have substantially greater market presence and greater financial,
technical, marketing and other resources. Our Internet operations compete for
registered and other users, and, consequently, e-commerce and advertising
revenue, directly or indirectly, with the following categories of companies:

        o    online service providers which charge for Internet access, such
             as AOL, CompuServe, Planet Internet, Worldonline, World Access,
             Chello, Sky Net and Online Internet,

        o    online service providers which do not charge a monthly Internet
             access fee such as Freeler, Wanadoo, Wish, Freebel and NOKNOK,
             and

        o    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.

        Competition in the Internet area is heightened because the Internet
services market has no substantial barriers to entry, low or no switching costs
for registered users and no switching costs for other users. Because Versatel
Internet's registered users have a variety of low-cost and no-cost alternatives
to our service, 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 Versatel Internet's services by registered users
may decrease and/or our customer turnover may increase. This would reduce our
connectivity, e-commerce and advertising revenues and may make it more difficult
for us to attract and retain advertisers. As a result of this competition, our
Internet division's user base, as well as our connectivity, e-commerce and
advertising revenue may decrease, which could have a material adverse effect on
our operations.

The market for Internet advertising is uncertain and our advertising revenue may
decrease.

        Our Internet division expects to derive a substantial amount of revenue
from advertising. However, the demand and market acceptance for Internet
advertising is uncertain. Recently, many Internet companies have been forced to
reduce their spending levels and, as a result, have decreased their own Internet
advertising spending. Furthermore, other companies that have thus far relied
upon traditional advertising media such as newspapers, magazines, radio and
television, may remain reluctant to advertise on the Internet. Versatel
Internet's business would be adversely affected if the recent softening of the
Internet advertising market continues or if the market for Internet advertising
develops more slowly than expected.

                                       19
<PAGE>

Versatel Internet's ability to collect personal data on its registered users may
be restricted and may hinder our ability to generate e-commerce or advertising
revenue.

        We must comply with applicable data protection legislation, which limits
our ability to collect and use personal information relating to our users.
Increased awareness on the part of the public of privacy issues and changes to
legislation with which we may have to comply could impact our ability to use
such personal information for the benefit of our business, which could affect
our financial results.

Versatel Internet may be liable if third parties misappropriate our users'
personal information.

        If third parties penetrate our security systems or otherwise
misappropriate our users' personal information or credit card information, we
could be subject to liability. These liabilities could include claims for
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. They could also include claims for violation of data
protection rights. If such claims are not settled, they could result in
litigation, which could have an adverse effect on our business.

Internet security concerns could hinder e-commerce.

        The need to transmit confidential information securely over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any well-publicized compromise of security could deter people from
using the Internet or using it to conduct transactions that involve transmitting
confidential information. Versatel Internet may incur significant costs to
protect itself against the threat of security breaches or to alleviate problems
caused by such breaches. Versatel Internet's business may also be affected by
problems caused by computer viruses, security breaches and other inappropriate
uses of our network, such as e-mail spamming or junk e-mail. In addition,
alleviating these problems may cause interruptions, delays or cessation in
service to our users, which could cause them to stop using our service or assert
claims against Versatel Internet or cause us to lose revenues for the time our
site is not operational.

Regulation of the Internet is uncertain.

        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, infringement pricing, on-line content regulation, intellectual property
ownership and taxation of on-line products and services. The EU has adopted two
directives that impose restrictions on the collection and use of 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. Moreover, a court in France recently imposed liability
on and fined Yahoo! for any continued availability of certain content on its
portal. Similar court rulings or any future regulation of the Internet that
imposes restrictions on the way we conduct our business could seriously
adversely affect our business, financial condition and results of operations.

                                       20
<PAGE>

Limitations on payments of dividends.

        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, the indentures governing our high yield notes
severely limit, and for the foreseeable future effectively prohibit, our ability
to pay cash dividends on our ordinary shares.

We may be classified as an investment company.

        We may qualify as an investment company under the U.S. Investment
Company Act of 1940 if we own investment securities that have a value exceeding
40% of our unconsolidated assets not including U.S. government securities and we
may not qualify for any exemption under the Investment Company Act. If we
qualify as an investment company we will effectively be precluded from offering
our securities in the United States until such time as we are not an investment
company. This would materially adversely affect our ability to raise additional
capital.

Passive foreign investment company consequences.

        For the year 1998, we were a "passive foreign investment company" (a
"PFIC") for U.S. federal income tax purposes. Although we were not a PFIC for
1999 or 2000, there is a significant possibility that we may become a PFIC in
2001. This will depend upon the sources of our income and the relative values of
our passive assets (such as cash) and our non-passive assets (such as goodwill).
We currently hold a substantial amount of cash as working capital. Furthermore,
the value of our goodwill is a function of the trading price of our shares and
therefore is subject to significant change throughout the year. A decrease in
the market value of our shares therefore could cause us to become a PFIC. U.S.
Holders that own ordinary shares, ADSs or warrants at any time during a taxable
year for which we are a PFIC will be subject to a complex set of rules under the
Internal Revenue Code and, generally, could in effect be subject to additional
tax upon certain distributions by us or upon a sale or other disposition of such
ordinary shares, ADSs or warrants. We urge investors to consult their own tax
advisors regarding the application of the PFIC rules to their particular
circumstances.

Original Issue Discount Consequences.

        Holders of the high yield notes issued in December 1998 will be required
to include original issue discount and stated interest on their notes in gross
income for such purposes. See Item 10.E "Taxation -- U.S. Tax Considerations"
for a more detailed discussion of the U.S. federal income tax consequences for
the holders of the such notes.

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<PAGE>

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 Euro 1,960 million and $565 million in net proceeds, net of
offering expenses, in a series of debt and equity offerings. In the three years
ended December 31, 2000, we had made capital expenditures of Euro 675.8 million
related to the build-out of our network. In addition, we had invested Euro 387.4
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.

        During 2001, we expect to continue to make significant capital
expenditures to expand our local access network in both the Benelux and
northwest Germany. We may also make selective acquisitions to accelerate our
growth and augment our existing operations. Our existing cash balances, together
with other available financing and cash flows from operations, will provide us
with sufficient capital to fund these planned capital expenditures, as well as
for acquisitions and anticipated losses for the next 24 to 36 months. Thereafter
we expect to raise additional funds through public or private financings from
financial institutions or through asset disposals. Although we currently
maintain significant cash balances, we may require additional capital earlier
than anticipated to continue funding the expansion and development of our
network and service offerings as well as for acquisitions.

4.B     BUSINESS OVERVIEW

        We are a rapidly growing competitive communications network operator in
our target market of the Benelux and northwest Germany. We are a leading
alternative to the former monopoly telecommunications carriers in these regions.
Our objective is to become the leading alternative local access network operator
in our target market. We provide telecommunications services to three market
segments:

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<PAGE>

          o    Direct Access Services -- high bandwidth business and residential
               telecommunications subscribers that are directly connected to our
               network either through our own fiber, leased lines, DSL or radio
               technologies.

          o    Indirect Access Services -- business and residential
               telecommunications subscribers that are indirectly connected to
               our network through carrier preselection or our "1611" carrier
               select code.

          o    Carrier Services -- other telecommunications, data and Internet
               service providers that are either directly or indirectly
               connected to our network.

          In addition to our core business of providing broadband services to
business customers in the Benelux and northwest Germany, we have created the
Versatel Internet Group to further participate in the rapidly growing market for
Internet services, primarily through Zon, a residential ISP/portal in The
Netherlands and Belgium that focuses on individual internet users and offers
both indirect dial-in services and DSL services.

          We focus primarily on the business market, but through our Zon
subsidiary and our acquisitions in Germany, we offer voice and Internet services
to residential customers as well. Our broadband local access network provides
end-to-end connectivity to our customers. Our network has been designed to pass
through all the major population and business centers in the Benelux and to
connect city centers business parks and buildings along its route. We believe
that our German acquisitions along with the continued expansion of our network
in Germany will further our ability to provide local access services to German
customers. Our network's design consists of three fully integrated elements:

          o    Backbone Infrastructure -- multiple, integrated fiber optic rings
               connecting major population and business centers in our target
               market.

          o    Local Access Infrastructure -- direct connections to customers
               along our network route using our own fiber to the customer, DSL
               products or radio connectivity.

          o    International Infrastructure -- fiber optic rings connecting our
               network with points of presence in London, Dusseldorf, Frankfurt
               and Paris.

          As of December 31, 2000, we have completed construction of
approximately 2,029 kilometers of fiber-ready duct in the Benelux for the
Benelux overlay sections. We have also completed the construction of 44 business
park rings, 23 city rings and 61 "near overlay sections" as of December 31,
2000, with a total local access extension of 925 kilometers in the Benelux and
646 kilometers in Germany. To date, the majority of the initially planned
construction of our backbone network has been completed. However, we are still
negotiating an indefeasible right of use (IRU) for approximately 400 kilometers
of backbone fiber in the north of The Netherlands and we will continue to expand
our backbone network as attractive business opportunities arise.

          As of December 31, 2000, we had over 58,000 customers and over 1,600
employees. Our revenues grew from Euro 58.5 million for the year ended December
31, 1999, to Euro 181.5 million for the year ended December 31, 2000.

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<PAGE>

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:

o    Continue to Expand Our Broadband Local Access Network. We intend to
     continue to expand our broadband local access network to allow us to
     provide voice, data and Internet services to an increasing number of
     customers throughout our target market. Currently, we provide both direct
     and indirect telecommunications services to our customers and we intend to
     continue to expand our network in order to increase our addressable market
     in our target regions. We intend to continue to identify and implement the
     most advanced technologies in order to maximize the capacity of our network
     and to expand our service offerings. In order to obtain the highest return
     on our investment per customer, we use the most cost-effective access
     technology depending on the targeted customer.

o    Maintain Focus on Targeted Customer Segments. We have continued and will
     continue to tailor our network, sales, support and products to meet the
     needs of business customers directly or indirectly connected to our network
     and carrier customers along our network within our target market. Through
     our subsidiary Zon and, to a lesser extent, our German operations, we will
     continue to serve the residential market.

o    Expand Direct Access Services. We believe that direct access services
     represent a strong opportunity to grow our revenues and margins and
     therefore the expansion of these services has been and will continue to be
     a main focus for our management team. We also believe that the control of
     end-to-end connectivity through direct access is important to our long-term
     margin and revenue development. By leveraging our extensive fiber network
     and deploying multiple access methods including fiber, DSL and radio, we
     believe we are in a good position to grow our direct access customer base.

o    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 were one of the first communications companies in our target market to
     provide detailed monthly billing statements and monthly call management
     reports. We intend to continue investing in our customer care and
     operational support systems to enable us to maintain a competitive
     advantage.

o    Pursue Selective Acquisitions and Strategic Relationships. We plan to
     continue to acquire or enter into partnerships with other
     telecommunications, data and Internet service providers in order to
     accelerate the growth of our customer base, our network and our service
     portfolio when prudent. Through a number of acquisitions starting in
     November 1998, we have significantly expanded our Internet services product
     offerings and expertise, expanded our customer base and established a
     presence in northwest

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<PAGE>

     Germany. We will continue to pursue additional strategic relationships and
     selective acquisitions that will serve to accelerate the growth of or
     augment our existing operations.

Developments during 2000

     On March 24, 2000, we acquired 80% of the shares of KomTel GmbH, an
alternative fiber network operator in the Schleswig-Holstein and Hamburg regions
of northern Germany, from Stadtwerke Flensburg GmbH and other shareholders for
Euro 61.6 million in cash and the assumption of approximately Euro 13.0 million
in existing debt. We have an option to purchase the remaining 20% from
Stadtwerke Flensburg GmbH in 2002 for Euro 15.4 million. On June 9, 2000, we
acquired 100% of the outstanding shares of Klavertel N.V. and its wholly owned
subsidiaries Compath N.V., Keys-Tone N.V. and MMDI N.V. from @Value B.V. and
other shareholders. We paid Euro 2,833,333 to the sellers in shares of Versatel
at Euro 32.475 per share (87,246 shares). On November 16, 2000, an additional
amount of Euro 1,416,667 was paid to the sellers in shares of Versatel at Euro
18.25 per share (77,625 shares) pursuant to earn-out arrangements. On August 4,
2000, we sold Amstel Alpha B.V. and its wholly owned subsidiaries Speedport N.V.
and Glabana U.S.A. Inc. to Conxion Corporation, USA for $10 million in cash,
free of debt.

     On March 30, 2000, Versatel and some of its shareholders sold 10,200,000
ordinary shares at Euro 49 per share, with Versatel selling 5,100,000 of these
shares. The aggregate net proceeds to Versatel were Euro 238.3 million, after
offering expenses. Concurrently, we issued Euro 360 million 4% senior
convertible notes due 2005 for aggregate net proceeds, after offering expenses,
of approximately Euro 350.0 million. In addition, we issued Euro 300 million 11
1/4% Senior Notes due 2010 for aggregate net proceeds, after offering expenses,
of approximately Euro 282.0 million.

     In April 2000, we launched Versapoint in a joint venture with NorthPoint
Communications Group, Inc., a U.S. based DSL service provider. Versapoint was
created to provide wholesale DSL services to communications providers in The
Netherlands, Germany, France, United Kingdom and Belgium. However, on December
29, 2000 we reached an agreement with NorthPoint to buy its 50% interest in
Versapoint. We have since restructured and integrated the activities of
Versapoint, which will now focus its efforts on providing DSL services on a
retail basis in our target markets in the Benelux and northwest Germany. As of
December 31, 2000, Versatel's DSL business had 62 co-location facilities
operational in The Netherlands and 42 co-location facilities operational in
Germany, and it had been awarded another 101 co-location facilities in The
Netherlands and 178 in Germany.

     In June of 2000, we launched a "flat fee" service under the brand name
Sonne in Germany for unlimited Internet access without any of the associated per
minute telephony charges. However, in September 2000, we discontinued Sonne's
flat fee product offering, because the interconnect charges associated with
providing this service were beyond our expectations due to a higher than
expected number of customers utilizing this service and a higher than average
usage per customer. Subsequently, we have not offered any other flat fee
consumer Internet services in Germany and do not have any intentions of offering
such services in future. We incurred approximately Euro 19 million in
non-recurring charges related to these services.

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<PAGE>

Our Network

        Our high bandwidth network has been designed and built to provide
flexible, broadband local access to business customers with connectivity to
major business 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, ATM
and 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.

Network Design Principles

        Our network is designed to be scalable, flexible, reliable and
efficient:

o       Scalability. Our network offers high capacity in all of its components,
        including ducts, fibers, DWDM, SDH and operating support system
        platforms. We have multiple ducts, each of which is capable of carrying
        up to 144 fibers, on all routes in the Benelux. We believe this will
        provide sufficient excess capacity for future growth and will allow us
        to trade and sell a portion of our excess capacity to other operators.
        We have installed DWDM equipment on our initial fibers, which allows us
        to transmit multiple frequencies of light on the same fiber strand. As a
        result, the capacity of a single fiber can be currently increased by 32
        to 160 times. Our SDH equipment is currently capable of transmitting at
        the rate of 10 Gbps (STM-64), with the ability to make 1.6 tetrabits per
        second available, if necessary. We have also obtained on an indefeasible
        right of use (IRU) to the fiber networks of VEW Energie and AVU on which
        we operate SDH equipment with speeds up to 10Gbps (STM-64) with the
        ability make 20 Gbps available if necessary. We have also obtained the
        right to use VEW Energie's right-of-way when VEW Energie expands its
        network. We believe that this will give us a cost-effective way of
        building additional fiber network connections in the northwest Rhine
        region of Germany.

o       Flexibility. Our network's design enables us to respond to changes in
        service offerings and network standards and protocols. We currently have
        two Nortel DMS 100 digital circuit switches in Amsterdam and one in each
        of Rotterdam, Antwerp and 's-Hertogenbosch. We also have six Nokia
        switches and four Siemens EWSD switches in Germany. We use Newbridge
        (Alcatel) ATM switches in The Netherlands (26 locations) and Ascend data
        switches in eleven locations in Germany. The Nokia, Siemens and Nortel
        switches enable us to support multiple data communications protocols
        including IP, IPX (Nortell), ATM and Frame Relay. We are also
        continuously modifying our network to ensure that it can support new
        technologies, such as high speed, high capacity DSL Internet and network
        access services, as they become available. During 2000 our IP backbone
        became operational with a 2.5 Gb capacity, connecting 20 locations in
        the Benelux. We expect to extend this backbone into Germany during the
        second quarter of 2001.

o       Reliability. Our network provides redundancy at multiple levels by using
        a self-healing, shared protection ring structure to provide dual
        direction routing capability in the event of

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<PAGE>

        cable damage or equipment failure. SDH equipment automates most of the
        functions of routing and connecting service bandwidth and reroutes these
        functions in the event of failure. Our data and voice/ISDN networks also
        have alternate routing capability to assure high availability of the
        services they deliver. We have selected transmission equipment from
        recognized international vendors such as Nortel, Nokia, Cisco,
        Newbridge, Ascend and Siemens.

o       Efficiency. We have constructed our network in a manner, which we
        believe will provide us with excess capacity to allow for future growth
        in an efficient manner. We also believe that our use of high quality
        components and equipment in the maintenance of our network contributes
        to its efficient operation.

Network Elements

        Our network consists of the following integrated elements:

o       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 the northwest Rhine region of Germany,
        including most interconnection points with PTTs, other
        telecommunications network operators and major Internet exchanges. We
        have designed the route of our backbone infrastructure so that it passes
        through as many businesses as possible by going through business
        communities and past major bandwidth users. Approximately 90,000
        businesses are located within one kilometer and approximately 270,000
        businesses are located within five kilometers of our network backbone in
        the Benelux. A small portion of our network is being constructed jointly
        with other carriers and some rural sections are being completed by
        purchases of dark fiber and, pending the completion of construction,
        through leased lines. As of December 31, 2000, we have completed
        construction of approximately 2,029 kilometers of fiber-ready duct in
        the Benelux for the Benelux overlay sections. To date, the majority of
        the initially planned construction of our backbone network has been
        completed. However, we are still negotiating an IRU for approximately
        400 kilometers of backbone fiber in the north of The Netherlands and we
        will continue to expand our backbone network as attractive business
        opportunities arise.

o       Local Access Infrastructure. Our local access network infrastructure
        consists of city rings and business park rings. As of December 31, 2000,
        we have completed construction of 44 business park rings, 23 city rings
        and 61 "near overlay sections" with a total local access extension of
        925 kilometers in the Benelux and 646 kilometers in Germany.

o       International infrastructure. As of December 31, 2000, 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 Dusseldorf with extensive SDH and IP connectivity
        to Amsterdam, Brussels, Dortmund and our Local Access network in the
        Benelux and Germany. We have also extended our network to New York City
        with

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<PAGE>

        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
        Dusseldorf to eight major cities in Germany (Hamburg, Berlin, Leipzig,
        Dresden, Nuremberg, Munchen, 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 Internet
services platform supports the Internet services we provide to end-users and our
offering of outsourced services to 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 are implementing an additional new platform of IP
equipment connected directly to DWDM/fiber, which is intended to support all
types of services. We believe that by integrating the functions of SDH, ATM and
circuit switching, this platform will provide a lower cost and a more flexible
design than traditional equipment.

Data Centers

        We have Data Center and Co-location facilities available throughout the
Benelux. As of December 31, 2000, we have established 35 locations, including
two major Data Centers (with over 4,000 m2 each) in Amsterdam and Brussels,
eight Data Centers in other key cities and 25 Co-location facilities spread
throughout the Benelux area. All Data Centers are carrier independent or carrier
neutral, ensuring route diversity and security. These locations support both
basic housing and advanced 24-hour support services in an environmentally
controlled facility. All our facilities support co-location, suites, cages,
interconnectivity, carrier rooms, internal cable trays, redundant power feeds,
temperature controlled, geared for fire detection and suppression. We provide
and deliver fully managed facility solutions to our customers and furthermore
customizes our services to their specific requirements. We provide managed
co-location services including: Onsite support, Back-up, Maintenance, Logistic
and cabling services.

Peering and Transit Arrangements

        As of December 31, 2000, we have established more than 50 private
peering arrangements in AMIX (Amsterdam), 20 in BNiX (Brussels) and 20 in LNIX
(London) exchanging more than 20% of our Internet traffic directly with our
peering partners. In addition, we have agreements with UUNet and Conxion to
provide us global transit services where we do not have network presence. We
plan to enter into additional peering arrangements with network-based ISPs and
content providers in the existing Internet exchanges and in SFINX (Paris) and
DE-CIX (Frankfurt).

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

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<PAGE>

occur and allows us to reroute traffic to ensure termination. 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 provided for a back-up network operations center in the event our
primary network operations center is forced off-line. We have constructed a new
network operations center in our new headquarters building. The network
operations center became operational during the second quarter of 2000.

Network Implementation

        We have entered into a framework agreement with Nortel to supply most of
our transmission equipment, including SDH, radio, voice/ISDN switching and the
SDH network management system. We have also entered into similar agreements with
Cisco and Newbridge to provide our data communications platforms and related
support services. We have agreements with leading construction companies in The
Netherlands, Belgium and Germany for network construction. These construction
companies are responsible for obtaining rights-of-way, civil engineering,
physical construction and testing of our network. We have retained experienced
agents in each of The Netherlands, Belgium and Germany to assist the
construction companies in obtaining rights-of-way.

Versatel Internet Group

        During 2000 we reorganized our Internet activities into a separate
business unit. This business unit focuses primarily on the small business and
residential Internet markets. The Versatel Internet Group consists of the
following businesses.

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 provider in The Netherlands. Its number of registered subscribers has
grown from approximately 275,000 at the end of 1999 to over 968,000 registered
subscribers as of December 31, 2000. For the year ended December 31, 2000, Zon
customers generated over 1,965 million terminating minutes for Versatel. Zon
focuses primarily on individual Internet users in The Netherlands. Zon initially
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 more extensive prepaid service to its
customers. A flat fee payable in advance gives the subscriber a fixed period of
Internet access without paying any termination charges. Zon also introduced
broadband Internet (ASDL) during the first quarter of 2001. This gives a
subscriber unlimited access to broadband Internet for a monthly flat rate
subscription fee.

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<PAGE>

Vuurwerk

        Vuurwerk Internet B.V. is the leading web hosting provider in The
Netherlands. As of December 31, 2000, it hosts over 17,000 websites for over
18,000 small and medium sized companies and has registered more than 63,000
domain names. In addition, Vuurwerk also offers co-location facilities and
certain related services to its customers.

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.

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
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. Currently, ISDN is the fastest
growing service for business telephony in the Western European market.

        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 Native 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.

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<PAGE>

        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
web-site 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 Co-location 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
co-location facilities within the Benelux, northwest Germany, Frankfurt and
London.

        Leased Circuit Services. We offer resilient E1, E3, T3 and 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.

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.

        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.

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 Co-location 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 other
co-location facilities within the Benelux, northwest Germany, Frankfurt and
London.

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<PAGE>

        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.

        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 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 such as
Zon, which offers residential Internet access services.

Sales and Marketing

        We seek to capitalize on our position as a competitive communications
service provider that offers comprehensive customer service and competitively
priced communications services in the Benelux and northwest Germany. We believe
that we have created a prominent brand name in our target market that we expect
to apply successfully throughout 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.

        Our sales force is comprised of direct sales personnel, telemarketers
and independent sales agents. At December 31, 2000, we had 85 direct sales
personnel in The Netherlands, 52 in Belgium and 53 in Germany. In the future, we
expect to increase the number of our direct sales personnel and open additional
sales offices in selected locations. 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 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:

        Direct Access Services. Our direct access services sales force targets
high bandwidth business and residential telecommunications customers along our
network. The customers targeted by this group access our network directly
through our own fiber, leased lines, DSL or

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<PAGE>

radio technologies and are offered a high bandwidth service package consisting
of voice, data and Internet products.

        Indirect Access Services. Our indirect access services sales force
targets business and residential telecommunications customers throughout our
target market. The customers targeted by this group access our network
indirectly through carrier preselection or our "1611" carrier select code.

        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 high bandwidth data services. We focus particularly on
business and industry segments, which have historically generated significant
volumes of national and international traffic, such as financial services,
information technology services, transportation and import and export sectors.
We also believe that the PTTs and the major alternative service providers have
historically underserved the small- and medium-sized business segment.

        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 new entrants to the telecommunications services
market 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.

        Residential Customers. Our residential customers in The Netherlands are
primarily subscribers to our free 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. In the Benelux, Versatel approaches the
residential market for voice services by providing carrier services such as
carrier select hosting to resellers, who themselves target the residential
market. 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
revenues and margins from markets we do not target directly. 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.

                                       33
<PAGE>

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 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 world 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 bill and 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
information 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. 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. Since the implementation of a series of
European Commission directives beginning in 1990, 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 an increasing number of new
market entrants. 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.

                                       34
<PAGE>

        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 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 Telfort, a company owned by British Telecom and
Nederlandse Spoorwegen N.V., the Netherlands railroad company, as well as Global
One Communications, MCI Worldcom, GTS/Esprit Telecom and EnerTel, compete with
KPN Telecom for contracts with large multinational companies in The Netherlands.
MCI Worldcom, British Telecom, AT&T, TeleNet, France Telecom, COLT Telecom,
Unisource, a subsidiary of KPN Telecom, and GTS/Esprit Telecom compete with
Belgacom for contracts with large multinational companies in Belgium.

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




                                       35
<PAGE>



<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
  Market                        The Netherlands              Belgium              Germany
-------------------------------------------------------------------------------------------------------
<S>                             <C>                          <C>                  <C>
  Voice                         KPN Telecom                  Belgacom             Deutsche Telekom
                                COLT Telecom                 COLT Telecom         MCI Worldcom
                                MCI Worldcom                 KPN Telecom          Mobilcom
                                                             Telenet              Vodafone/
                                                             Worldcom             Mannesmann
                                                             British Telecom      Viag Interkom
-------------------------------------------------------------------------------------------------------

  Data and Business Internet    KPN Telecom                  Belgacom-Skynet      Deutsche Telekom
                                COLT Telecom                 COLT Telecom         MCI Worldcom
                                                             British Telecom      COLT Telecom
                                                             KPN Telecom          Vodafone/ Mannesmann
                                                             Telenet
                                                                                  AOL Bertelsmann
-------------------------------------------------------------------------------------------------------

  Residential Internet          Planet Internet              Belgacom-Skynet      T-Online
                                Het Net                      Telenet              AOL
                                Worldonline                                       CompuServe
                                Wanadoo                                           Worldonline
-------------------------------------------------------------------------------------------------------

  Carrier Services              KPN Telecom                  Belgacom             Deutsche Telekom
                                COLT Telecom                 UUNET                MCI Worldcom
                                                             Worldcom             Vodafone/
                                                             COLT Telecom         Mannesmann
                                                             KPN Telecom          Viag Intercom
                                                             Bru Telecom
-------------------------------------------------------------------------------------------------------

  DSL Services                  KPN Telecom                  Belgacom             Deutsche Telekom
                                Baby XL                      Easynet              Highway One
                                Novaaxess                    Wannadoo             QSC
                                COLT Telecom                 Eunet                Riodata
                                                             COLT Telecom

-------------------------------------------------------------------------------------------------------
</TABLE>




                                       36
<PAGE>

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 in 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 the competition within the European telecommunications market.

        The current regulatory framework in the EU and 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 on 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 Telecommunications 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, cost orientation of tariffs, access
to monopoly infrastructure networks and the liberalization of services. These
principles have been established in EU law in 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 the PTTs 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 the PTTs' public networks. The
Interconnection Directive requires national regulators to ensure that
interconnection agreements with parties with significant market power provide
for access at cost-

                                       37
<PAGE>

oriented rates. The Interconnection Directive has been amended to provide 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 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
drafts 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 European new entrants. 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 and emphasizes the importance
of access to foster competition in the local loop for the provision of 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 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 in all countries in which we
operate to provide our services. 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.

                                       38
<PAGE>

The Netherlands

        The Telecommunications Act of 1998 provides the current regulatory
framework in The Netherlands. This new telecommunications act came into force 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 new telecommunications act contains provisions that give registered
telecommunication services providers rights-of-way, subject to certain
conditions, thereby facilitating the construction of the Versatel network. As
part of the liberalization of the Netherlands telecommunications market, 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.

        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.
We also received licenses, which allowed us to test point-to-multipoint radio
technology in The Netherlands. These tests finished in 2000 when an auction for
spectrum finally seemed imminent. However, the Dutch government has not been
able to organize the auction due to legal issues and we have no certainty that
this will happen in the near future. 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 a re-auction of the
UMTS frequencies.

        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, which was introduced on January 1, 2000, allows customers
the option to pre-select a carrier other than KPN Telecom for all their
international and national long distance calls. We continue to seek to obtain
lower interconnection rates from KPN Telecom. The terms and conditions of
interconnection have had and will continue to have a material effect on the
competitive position of Versatel.

        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 voiced similar
complaints. OPTA ruled that KPN Telecom must allow us access to their entire
interconnection network. In addition, OPTA ruled that KPN Telecom would be
responsible for the additional costs associated with the implementation of such
ruling.

        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.


                                       39
<PAGE>

Unbundled local access enables us to offer a high-speed access to end-users that
are not directly connected to our network.

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 entity was introduced, the Belgium Institute for
Post and Telecommunications (Belgisch Instituut voor Post en Telecommunicatie)
(BIPT), under the Ministry of Economy and Telecommunications. A new act was
adopted by the Belgian Parliament in December 1997, but it was not until 2000
that one new single regulatory framework was finally put in place.

        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 in all of Belgium and a special
interconnect tariff which is 15% below the tariff for non-facilities based voice
service providers. For marketing purposes, we have reserved the same carrier
select code "1611" as we currently use in The Netherlands.

        Pursuant to the new telecommunications act, Belgacom was required to
introduce number portability, carrier selection and carrier pre-selection for
all services, beginning January 1, 2000. However, the implementation of carrier
selection and carrier pre-selection occurred only gradually from January 17,
2000 onwards, resulting in the implementation of the last carrier pre-selection
services (for fixed-to-mobile calls and local calls) in November 2000 only. In
addition, operators have experienced operational problems as a result of the
complex and cumbersome procedures imposed unilaterally by Belgacom.

        In September 1999, Belgacom introduced a number of new discount schemes
which Versatel deemed to be anti-competitive. Versatel filed a complaint at the
relevant court dealing with competition issues requesting the court to suspend
these discount schemes. The court case was dropped in 2000 after Belgacom and
Versatel reached an amicable settlement at the initiative of Belgacom.

        In 1999, Versatel and other alternative operators also filed a complaint
with the Competition Council for abuse of Belgacom's dominant position by
unilaterally imposing new interconnect and retail tariff conditions for a new
internet access scheme. This new access scheme was not upheld in court. A new
but similar scheme was launched by Belgacom in 2000, but was again successfully
challenged in court by Versatel and the other operators. Discussions continue
between Belgacom, the other alternative operators and the BIPT on this issue.

        In July 2000, Versatel filed a complaint with the European Commission
competition authorities in connection with Belgacom's refusal to give it access
to its local loop following Versatel's request of March 1. In November 2000,
allegedly in voluntarily anticipation of an imminent EC Regulation that would
mandate 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, led to an
agreement between Belgacom and Versatel on December 14, 2000.

                                       40
<PAGE>

        As a result of the adoption by the European Commission of this new
regulation and the outcome of a consultation process that ended with the
approval by the BIPT of Belgacom's reference offer, Belgacom is now required to
provide full and shared access to its MDF-facilities without limitation as to
the technologies that can be offered (i.e. DSL). This allows multiple access
modes and considerably reduces the rollout and provisioning timings imposed
unilaterally by Belgacom under its commercial raw copper offer. However, we
still await an advice of the BIPT on the pricing initially proposed by Belgacom,
which appears to be at the high-end of the range in the EC benchmark.

        On February 15, 2001, the Belgium Institute for Post and
Telecommunications granted four general licenses for the utilization of
point-to-multipoint systems for broadband fixed wireless access. Versatel was
granted only very limited licenses for four cities in Belgium. We have refused
these licenses, as we do not consider them commercially exploitable and have
requested the regulator to communicate the motivation underlying the selection
decision.

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 Regulierungsbehorde fur 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. It is expected that the new interconnection regime will contain
element-based rates instead of distance-based rates as well as several changes
in the standard interconnection agreements. The RTP announced that it might
consider Deutsche Telekom not in all segments of the market as a market
dominating carrier. 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.

                                       41
<PAGE>

        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 new owners
as the second alternative network in the local loop. These networks are expected
to compete in the future with VEW Telnet'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 domainnames and
initiated formal registration procedures with Internic, the European Union
domain registration authority.

        We have been operating our free 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 that the tax treatment
of these options was correct, we are in negotiations with the public prosecutor
to settle these charges (without admitting or denying guilt). The public
prosecutor has indicated that he intends to seek a penalty and tax payment up to
approximately Euro 15.0 million. We intend to vigorously challenge both the tax
payment as well as the payment of any significant penalty amount.

        Versatel also took part in the Dutch UMTS auction during 2000, but we
were unable to obtain a license. Although we still have various administrative
procedures pending, which may eventually lead to a re-auction of the UMTS
frequencies, we do not expect any material adverse effect on our financial
position or results of operations if we are ultimately unable to obtain a
license.

        Versatel has filed complaints in the past with the European Commission,
with OPTA and the Minister of Transport and Waterways in The Netherlands, and 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. For a detailed

                                       42
<PAGE>

discussion on the regulatory environment in which we operate, you are referred
to Item 4.B. "Business Overview - Regulation".

        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.

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
at December 31, 2000, 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.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Name                                                     Country of           Percentage of
                                                         Incorporation          Ownership
---------------------------------------------------------------------------------------------
<S>                                                      <C>                       <C>
Versatel Telecom Europe B.V.                             The Netherlands           100%
Versatel Telecom Netherlands B.V.                        The Netherlands           100%
Versatel Telecom Belgium N.V.                            Belgium                   100%
Vuurwerk Internet B.V.                                   The Netherlands           100%
Versatel Deutschland GmbH & Co.KG                        Germany                   100%
KomTel Gesellschaft fur Kommunikations und
Informationsdienste mbH ("KomTel")                       Germany                    80%
KomTel GmbH                                              Germany                   100%
Zon Nederland N.V.                                       The Netherlands            92%
---------------------------------------------------------------------------------------------
</TABLE>

4.D     PROPERTY, PLANTS AND EQUIPMENT

Network infrastructure

        As of December 31, 2000, we have completed construction of approximately
2,029 kilometers of fiber-ready duct in the Benelux for the Benelux overlay
sections. As of December 31, 2000, we have also completed the construction of 44
business park rings, 23 city rings and 61 "near overlay sections" with a total
local access extension of 925 kilometers in the Benelux and 646 kilometers in
Germany. To date, the majority of the initially planned construction of our
backbone network has been completed. However, we are still negotiating an IRU
for approximately 400 kilometers of backbone fiber in the north of The
Netherlands.

Properties

        We have also leased office space in 25 buildings in The Netherlands
(41,026m(2)), 10 buildings in Belgium (10,794m(2)), and six buildings in Germany
(9.877m(2)). We use these locations primarily as office space and for the
technical support to our network. Lease contracts for these buildings have
expiry dates varying between 2001 and 2010.

        Our country head offices are located at the following addresses:

                                       43
<PAGE>

--------------------------------------------------------------------------------
Address                                      Area m2    Expiry date of lease
--------------------------------------------------------------------------------
Hullenbergweg 111, Amsterdam-Zuidoost,       13,100     March, 2010
The Netherlands
--------------------------------------------------------------------------------
Koningin Astrid laan 164, Wemmel,             3,807     April, 2009
Belgium
--------------------------------------------------------------------------------
Unterste Wilms Strasse 29, 44143              5,172     December 31, 2001
Dortmund, Germany
--------------------------------------------------------------------------------




                                       44
<PAGE>


ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A     OPERATING RESULTS

Overview

        We are a rapidly growing, competitive communications network operator in
our target market of the Benelux and northwest Germany. We are a leading
alternative to the former monopoly telecommunications carriers in these regions.
Our objective is to become the leading fully integrated 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:

        o    Direct Access Services -- high bandwidth business and residential
             telecommunications subscribers that are directly connected to our
             network either through our own fiber, leased lines, DSL or radio
             technologies.

        o    Indirect Access Services -- business and residential
             telecommunications subscribers that are indirectly connected to
             our network through carrier preselection or our "1611" carrier
             select code.

        o    Carrier Services -- other telecommunications, data and Internet
             service providers that are either directly or indirectly
             connected to our network.

        In addition to our core business of providing broadband services to
business customers in the Benelux and northwest Germany, we have created the
Versatel Internet Group to further participate in the rapidly growing market for
Internet services. The Versatel Internet Group consists of our consumer Internet
operations in The Netherlands, Belgium and other related investments.

        Our growth is driven by our focus on providing bundled broadband
services to business customers. Historically, we have focussed on providing
services to small- and medium sized businesses. However, as we continue to
expand our service offering and local access network are also able to provide
services to larger businesses. We continually strive to develop new products and
services which we are able to provide to both existing and new customers.
Another key component of our growth is 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 allow us to rapidly
connect customers to our network. Currently, we focus on connecting customers to
our network primarily through own fiber and DSL. However, we will continue to
evaluate other opportunities. Once a customer is connected to our network, we
can easily expand services to such customer without incurring substantial
investment cost.

        As of December 31, 2000, we have completed construction of approximately
2,029 kilometers of fiber-ready duct in the Benelux for the Benelux overlay
sections. As of December 31, 2000, we have also completed the construction of 44
business park rings, 23 city rings and 61

                                       45
<PAGE>

"near overlay sections" with a total local access extension of 925 kilometers in
the Benelux and 646 kilometers in Germany. To date, the majority of the
initially planned construction of our backbone network has been completed.
However we are still negotiating an IRU for approximately 400 kilometers of
backbone fiber in the north of The Netherlands and we will continue to expand
our backbone network as attractive business opportunities arise. Also, we had
747 buildings connected to our network in the Benelux (including 130 co-location
facilities) and 121 buildings directly connected to our network in Germany
(including 189 co-location facilities).

        As we continue to expand our operations, we anticipate that net losses
also will continue to be significant due to the selling, general and
administrative costs related to the expansion of our business, the leasing of
access and transmission capacity, and increasing depreciation and amortization
costs resulting from the continuing build-out of our network and interest
charges associated with our outstanding debt. In addition, currency fluctuations
between the euro and the U.S. dollar may have an adverse impact on our net
income as a result of our U.S. dollar denominated indebtedness.

        We have initiated an organizational restructuring which is expected to
lead to a reduction of approximately 300 employees. We have implemented our
organizational restructuring in order to realize synergies existing in our
operations resulting from our increased scale. As a result of this
restructuring, Versatel expects to recognize a one-time charge of approximately
Euro 7.5 million in the first quarter of 2001 to cover employee termination
costs. Total annual savings in sales, general and administrative expenses are
estimated to be approximately Euro 15.0 million, with Euro 10.0 million of such
savings expected to be realized in 2001.

Revenues

        Generally, our services can be characterized as Internet, data and voice
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 (Svianed, 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 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 reduced its prices
per minute of telecommunications traffic several times in the past two years,
most recently in October 2000. Such reductions are expected to have an adverse
impact on margins in the near term as we have responded by reducing our prices.
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. In addition, the

                                       46
<PAGE>

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 Internet Web-hosting and LAN-to-LAN Interconnect services.
For the year ended December 31, 2000, 46% 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.

        The following table sets forth the total revenues attributable to our
operations for the years ended December 31, 1998, December 31, 1999 and December
31, 2000.


                                                    Years Ended December 31,
                                                --------------------------------
                                                 1998         1999        2000
                                                ------       ------      -------
                                                      (euro in thousands)
Revenues
   Business customers
       Telephony ........................       15,643       31,695       70,833
       Data .............................         --         14,109       25,909
       Internet .........................          407        4,942       26,378
   Residential customers
       Telephony ........................          175          405        9,012
       Internet .........................         --            286       11,650
   Carrier Services customers
       Telephony ........................        1,727        5,194       18,098
       Data .............................         --          1,906       10,982
       Other ............................         --           --          8,607
                                                ------       ------      -------
         Total ..........................       17,952       58,537      181,469


Customers

        Historically, we generated our revenues from small- and medium-sized
business customers. Following the acquisition of Svianed in 1999, we started to
generate revenues from larger customers, such as the Gak Group, which
represented 14.7% of our revenues for the year ended December 31, 2000. In the
Benelux, Versatel approaches the residential market by providing carrier
services such as carrier select hosting to resellers, who themselves target the

                                       47
<PAGE>

residential market. 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 revenues and margins from markets we do not target directly. 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.

        As a result of our continued growth, our total number of business
customers, including data and Internet customers was more than 58,000 as of
December 31, 2000. The following table sets forth the total number of customers
for our services, for the years ended December 31, 1998, December 31, 1999 and
December 31, 2000:


                                                  Years Ended December 31,
                                            ------------------------------------
                                             1998           1999           2000
                                            ------         ------         ------
                                                        (at period end)
Customers
Business customers ................          6,640         15,835         58,581
Residential customers .............          1,698          3,148         35,382
Wholesale customers................              4             45            146
                                            ------         ------         ------
  Total ...........................          8,342         19,028         94,109

Business web-hosting ..............             78         10,535         21,707


        The number subscribers to Zon, our free Internet Service Provider, has
increased to 968,000 on December 31, 2000 from 275,000 on December 31, 1999.

Geographical focus

        We generate revenues in The Netherlands, Belgium and Germany. The
geographical composition of our revenues for the years ended December 31, 1998,
December 31, 1999 and December 31, 2000 was as follows:

                                                  Years Ended December 31,
                                            ------------------------------------
                                             1998           1999           2000
                                            ------         ------         ------
                                                     (euro in thousands)
Revenues
  The Netherlands.........................  17,844         52,323        116,804
  Belgium ................................     108          4,417         21,634
  Germany                                       --          1,797         43,031
                                            ------         ------        -------
    Total.................................  17,952         58,537        181,469

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<PAGE>

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 network. However, in order to
accelerate deployment of our local access strategy, we have connected customers
to our network temporarily through leased lines. We expect fixed network costs
in the long run to decline due to the continuing build out of our network,
technological improvements, and 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.

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 as a percentage of revenue to vary from period to period. Due to the
recently announced restructuring, we expect to realize total annual savings in
sales, general and administrative expenses of approximately Euro 15.0 million,
with Euro 10.0 million of such savings expected to be realized in 2001.

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<PAGE>

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 20 years taking residual values into account.
Historically, we have capitalized and amortized the cost of installing dialers
at customer sites. The development of our network, including construction,
indefeasible rights of use, and equipment, will require large 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 average interest rate of our
outstanding debt. In addition, we capitalize selling, general and administrative
expenses to the extent that they relate to network development activities, IT
development or product development. Increased capital expenditures will
adversely affect our future operating results due to increased depreciation
charges.

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 those linked to the euro. The euro
weakened by 6% from Euro 0.99 on January 1, 2000, to Euro 0.94 on December 31,
2000.

Results of Operations

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

        Revenues increased by Euro 123.0 million to Euro 181.5 million for the
year ended December 31, 2000 from Euro 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 Euro 26.7 million for the
full year (Euro 18.8 million in 1999 for the seven months), and from VEW Telnet
of Euro 26.2 million for the full year (Euro 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 N.V., Keys-Tone N.V.
and MMDI N.V. (acquired on June 9, 2000) of Euro 3.7 million and KomTel GmbH
(acquired March 24, 2000) of Euro 27.7 million. We also made one-time sales of
excess duct capacity of Euro 8.6 million during 2000.

        Included in the revenues are data and Internet service revenues
amounting to Euro 74.9 million for the year ended December 31, 2000 up from
Euro 21.2 million for the year ended

                                       50
<PAGE>

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 Euro 97.9 million in 2000 from
Euro 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 revenues increased by Euro 87.9 million to Euro 133.6 million
for the year ended December 31, 2000 from Euro 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
Euro 3.2 million and Euro 11.8 million, respectively, to cost of revenues for
the period.

        Included in the cost of revenues are non-recurring expenses of
approximately Euro 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 expenses increased by Euro 130.6
million to Euro 213.4 million for the year ended December 31, 2000 from
Euro 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 Euro 7.0 million
related to the issuance of employee stock options, non-recurring charges for a
restructuring provision of Euro 5.0 million and a write-off of future marketing,
advertising and related costs amounting to Euro 10.0 as a result of the
suspension of our flat fee consumer Internet service in Germany.

        Depreciation and amortization expenses increased by Euro 65.1 million to
Euro 91.5 million for the year ended December 31, 2000 from Euro 26.4 million
for the year ended December 31, 1999. This increase was primarily related to
depreciation resulting from capital expenditures incurred in

                                       51
<PAGE>

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 for our new
headquarters and datacenter. Also included is the amortization of goodwill of
Euro 26.7 million.

        Currency exchange losses, net, decreased by Euro 11.0 million to
Euro 32.7 million for the year ended December 31, 2000, from a loss of Euro 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 Euro 1.00 to $0.94 per Euro 1.00 in 2000, compared to a decrease of
14% from $1.18 per Euro 1.00 to $1.02 per Euro 1.00 in 1999.

        Interest income increased by Euro 44.7 million to Euro 57.6 million for
the year ended December 31, 2000, from Euro 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 expense increased by Euro 97.4 million to Euro 168.8 million
for the year ended December 31, 2000, from Euro 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 activities amounted to a loss of Euro 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 Euro 9.1 million. We realized a
profit with the sale of Telebel in Germany of Euro 4.1 million, and a profit
with the sale of Speedport of Euro 1.9 million. We did not realize any profits
or losses from investments during 1999.

        Other asset impairments amounted to Euro 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 expenses amounted to Euro 5.4 million and relate to a write off of
our investments in Hot Orange and Consumer Desk amounting to Euro 2.3 million.
An additional Euro 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.

For the year ended December 31, 1999 compared to the year ended December 31,
1998

        Revenues increased by Euro 40.6 million to Euro 58.5 million for the
year ended December 31, 1999 from Euro 17.9 million for the year ended December
31, 1998, representing an increase of 226.1%. The growth in revenues resulted
primarily from the addition of new customers, the introduction of national long
distance data and Internet services in The Netherlands, the acquisition of
Svianed, the introduction of national and international long distance services
in Belgium and an increase in wholesale traffic. Included in the revenues for
the year ended December 31, 1999 are the revenues of Svianed, from the date of
the acquisition (June 1, 1999) of Euro 41.5 million and the revenues of VEW
Telnet, from the date of the acquisition (December 1,

                                       52
<PAGE>

1999) of Euro 4.0 million. Revenues for the year ended December 31, 1999 as
compared to the same period in 1998 were negatively impacted by frequent price
reductions resulting from competitive pressures.

        The number of customers for telephony services increased by 10,686 to
19,028 as of December 31, 1999 from 8,342 as of December 31, 1998. As a result
of acquisitions, the total number of customers increased to more than 30,000 as
of December 31, 1999.

        Cost of revenues increased by Euro 31.3 million to Euro 45.7 million for
the year ended December 31, 1999 from Euro 14.4 million for the year ended
December 31, 1998, representing an increase of 216.2%. This increase is
primarily the result of an increase in operations, including increases in
billable minutes, interconnect capacity and short-term network capacity
requirements (leased lines) in Belgium, Internet uplinks and international
leased lines to London and Frankfurt. Leased line costs also increased as a
result of using leased lines to connect customers directly to our backbone
network as demand for services exceeded our ability to build out these customer
connections without unreasonable delay to the customer. We also experienced
delays in migrating Svianed traffic from leased lines to our backbone network.
Finally, cost of revenues also has increased as Dutch mobile operators
instituted call blocking to prevent lower cost international refiling
alternatives for fixed-to-mobile calls. The acquisitions of Svianed and VEW
Telnet added Euro 9.5 million and Euro 1.2 million, respectively, to cost of
revenues for the period.

        Selling, general and administrative expenses increased by Euro 61.2
million to Euro 82.8 million for the year ended December 31, 1999 from Euro 21.6
million for the year ended December 31, 1998, representing a 282.3% increase.
The increase was partially due to a one-time, non-cash charge of Euro 12.6
million during the second quarter of 1999 related to a revaluation of employee
stock options. Excluding this one-time charge the selling, general and
administrative expenses increased by Euro 48.7 million to Euro 70.2 million,
representing an increase of 224.3%, primarily as a result of an increase in the
cost of staff (including temporary personnel and consultants, the use of which
increased significantly during the current year) 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, additional expenses as a result of the
acquisitions of VEW Telnet, Svianed, Vuurwerk, ITinera and start-up expenses
related to Zon.

        Depreciation and amortization expenses increased by Euro 23.5 million to
Euro 26.4 million for the year ended December 31, 1999 from Euro 2.9 million for
the year ended December 31, 1998. This increase primarily resulted from the
expansion of the network, including the expansion of the Nortel DMS-100 switch
in Amsterdam and the deployment of a Nortel DMS 100 switch in Antwerp and
Rotterdam and CISCO data switches in Amsterdam, Rotterdam and Antwerp. The
increase in depreciation and amortization expense also resulted from the
purchase of additional IT-equipment for new customer support systems, an
increase in the number of dialers, the purchase of computer equipment and office
furniture for new employees as well as amortization of goodwill of Euro 9.1
million and Euro 0.2 million as a result of the respective acquisitions of
Svianed and VEW Telnet.

        Interest income increased by approximately Euro 7.5 million to Euro 12.9
million for the year ended December 31, 1999 from Euro 5.4 million for the year
ended December 31, 1998. This

                                       53
<PAGE>

increase was primarily related to Versatel's positive cash balance as a result
of its debt and equity offerings.

        Interest expense increased by Euro 54.3 million to Euro 71.4 million for
the year ended December 31, 1999 from Euro 17.1 million for the year ended
December 31, 1998. This increase is primarily related to the accrual of interest
expense on its indebtedness.

        Currency exchange losses, net, increased by Euro 46.0 million to Euro
43.7 million for the year ended December 31, 1999 from a net gain of Euro 2.3
million for the year ended December 31, 1998 due to currency exchange losses on
Versatel's U.S. dollar denominated liabilities resulting from appreciation of
the U.S. dollar against the euro.

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 Euro 1,960 million and
$565 million in net proceeds, net of offering expenses, in a series of debt and
equity offerings, most recently in March 2000, when we (i) issued Euro 300
million 11 1/4% Senior Euro Notes due 2010, (ii) sold 10,200,000 ordinary shares
(5,100,000 of which were sold by a number of selling shareholders) as well as
(iii) issued Euro 360 million of 4% Senior Convertible Notes due 2005. We raised
net proceeds, after transaction expenses, of Euro 282.0 million, Euro 238.3
million and Euro 350.0 million, in these offerings, respectively.

        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 existing cash balances, together with other available financing and
cash flows from operations, should provide us with sufficient capital to fund
planned capital expenditures to expand our local access network, invest in
Internet and data services, as well as for acquisitions and anticipated losses
for the next 24 to 36 months. We expect to raise additional funds in 2002
through public or private financing or from financial institutions.

        Although we currently maintain significant cash balances, we may require
additional capital earlier than anticipated to continue funding the expansion
and development of our network and service offerings as well as for
acquisitions.

        To date, we have made limited use of bank facilities and capital lease
financing. We may seek to raise senior secured debt financing in the future to
fund the expansion of our network and for general corporate purposes.

        After May 15, 2001, our funds that have been placed in escrow to cover
interest payments on the high yield notes issued in 1998 will have been
exhausted and, as a result, we will need to increase substantially our net cash
flow in order to meet our debt service obligations.

                                       54
<PAGE>

        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 Euro 191.0 million in the year
ended December 31, 2000, compared to Euro 70.1 million during the year ended
December 31, 1999. This increase was primarily the result of an increase in
operating losses and the increase in accounts receivable as a result of
increased revenues.

        Net cash used in investing activities was Euro 560.4 million in the year
ended December 31, 2000, compared to Euro 472.5 million during the year ended
December 31, 1999. This increase was the result of the formation of, and the
acquisition of Northpoint's stake in, Versapoint, the acquisitions of KomTel and
Compath, substantial ongoing capital expenditures to expand our network and
operations as well as finance cost incurred in the first quarter as a result of
the equity and debt offerings in March 2000.

        Net cash provided by financing activities was Euro 944.5 million in the
year ended December 31, 2000, primarily as a result of the equity and debt
offerings in March 2000, compared to Euro 1,358.6 million during the year ended
December 31, 1999.

5.C     RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

        We have not incurred, or capitalized any costs for research and
development, patents and licenses during 2000. We purchase the technology
required for our network from independent third party suppliers.

5.D     TREND INFORMATION

Increase in demand for telecommunications services

        The telecommunications market in our target markets continues to grow.
We believe that this growth can be attributed to a globalization of the business
community and an increase in the demand for bandwidth. However, in general, per
unit prices for communications services have decreased over the last several
years, both for voice services as well as for data and Internet services.
Although we have seen a stabilization, and in limited cases an increase, of per
unit prices for certain communications services, there can be no assurances that
we will not experience future per unit price declines. Through our direct access
and carrier services, we also generate revenues on a subscription basis. We have
experienced a decline in the variable costs associated with minutes of
communications traffic as well as the cost of Internet Protocol (IP)
transmission. 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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<PAGE>

Regulatory developments

        The European telecommunications industry is still in a process of
gradual deregulation. Despite a number of regulatory initiatives supporting the
liberalization of the telecommunications market, many EU Member States have only
recently liberalized their telecommunications markets and established
competitive regulatory structures and a national regulatory authority to replace
the monopolistic environment in which the national PTTs previously operated. In
addition, the national PTTs in the markets in which we operate have tried to
delay the liberalization process, which resulted in delays in the introduction
of some of our services.

Technological developments

        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 networks 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 the technology and equipment that we have installed.

Introduction of the euro

        On January 1, 1999, the euro was introduced and became legal tender in
the 11 member states of the European Union that are participating in the third
stage of the European Monetary Union. These member states include The
Netherlands, Belgium and Germany. The conversion rates between the national
currencies of these member states and the euro was fixed on December 31, 1998.
On January 1, 2002, euro bank notes and coins are expected to enter circulation
and by July 1, 2002 all participating national currencies are expected to be
removed from circulation. We believe that, as a result of the introduction of
the euro, there will be a greater transparency in prices in our markets, which
may lead to further price competition.




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<PAGE>

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

Supervisory Board

Name                               Age    Date of appointment     Position
---------                        -------- ----------------------- -----------

R. Gary Mesch (1) ...............   47    September 29, 2000      Chairman
Leo W. A. M. van Doorne..........   41    December 1, 1995        Member
Johan G. Wackwitz................   46    August 14, 1998         Member
James R. Meadows.................   48    August 14, 1998         Member
Sander van Brummelen.............   59    July 23, 1999           Member
Jorg Mohaupt.....................   34    May 12, 2000            Member

------------------
(1) Until his appointment as Chairman of the Supervisory Board on September 29,
    2000, R. Gary Mesch was Versatel's Managing Director and Chief Executive
    Officer.

Executive Board

<TABLE>
<CAPTION>
Name                               Age    Date of appointment     Position
---------                        -------- ----------------------- -----------
<S>                                 <C>   <C>                     <C>
Raj Raithatha ....................  38    September 29, 2000      Managing Director and Chief
                                                                  Executive Officer
Philippe Santin ..................  46    October 23, 2000        Chief Financial Officer
Marc A. J. M. van der Heijden.....  42    June 6, 1998            Chief Regulatory Officer and
                                                                  Vice President Public Affairs
Aad T. Beekhuis...................  54    March 1, 2000           Chief Operations Officer
Jan van Berne.....................  38    September 1, 2000       General Counsel and Vice
                                                                  President Legal and Corporate
                                                                  Affairs
Daniel Hayes......................  41    June 1, 2000            Chief Information Officer
</TABLE>

Biographies

        R. Gary Mesch has 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,

                                       57
<PAGE>

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. Gary Mesch holds a B.S. in Electrical Engineering from the
University of Colorado and an M.B.A. from Denver University.

        Leo W. A. M. van Doorne has served as a member of the Supervisory Board
of Versatel since December 1995, until October 2000 in the capacity of Chairman.
Since 1996, Mr. van Doorne has been the Managing Director of NeSBIC Groep B.V.,
a venture capital company and a subsidiary of Fortis, an international group of
more than 200 companies operating in the fields of insurance, banking and
investments. 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. Wackwitz has served as a member of the Supervisory Board of
Versatel since August 1998. Mr. Wackwitz is a member of the management board 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. Meadows has 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 Brummelen has 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.

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<PAGE>

        Jorg Mohaupt has 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.

        Raj Raithatha has 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 holds a degree in economics and mathematics
from the University of Cardiff, Wales.

        Philippe Santin has served as Chief Financial Officer of Versatel since
November 2000. Prior to this time, he held the position of Chief Financial
Officer with Impress Group B.V., a privately owned metal packaging organization
with 7,200 employees operating in 13 countries, since its formation in 1997.
Previous to his position at Impress Group he held several financial controller
positions at Pechiney. At Pechiney, he worked in its subsidiaries Food Europe
(1991-1997), Pechiney Corporation in the U.S. (1986-1991) and Aluminerie De
Becancour in Quebec, Canada (1983-1986).

        Marc van der Heijden, co-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. Marc van der Heijden holds a degree in law.

        Aad T. Beekhuis has 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 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.

                                       59
<PAGE>

        Jan A. van Berne was appointed to Versatel's Executive Board in
September 2000 as General Counsel and Vice-President Legal and Corporate
Affairs. Mr. Van Berne has been responsible for Versatel's corporate legal
affairs since December 1998. Prior to joining Versatel in December 1998, he
worked at Radio Holland N.V. from 1991 to 1998 where he held 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.

        Daniel Hayes joined Versatel in March 2000 on an interim basis from
Andersen Consulting and permanently accepted the position of Chief Information
Officer in May 2000. Mr. Hayes oversees all IT related activities and
departments. Prior to joining Versatel, he was an Associate Partner in the
Dallas, Texas office and part of the Global Communications Industry Group at
Andersen Consulting. During the last seven years of his 15 year career with
Andersen Consulting, he worked primarily with middle market accounts where he
developed programs to improve basic infrastructures related to core OSS
capabilities for communication companies. Prior to joining Andersen Consulting
he worked in the retail industry for 13 years.

6.B     COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

        The total aggregate compensation for the Supervisory Board of the
Company as a group for 2000 was Euro 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 2000 was Euro 1.8 million. During 2000, an aggregate of
650,000 options to purchase 650,000 ordinary shares were granted to executive
officers under the 2000 Stock Option Plan. 450,000 of these options have an
exercise prices of Euro 0.02 and 200,000 options have an exercise price of
Euro 79.19. 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 Euro 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 (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

                                       60
<PAGE>

supervisory board are appointed by the general meeting of shareholders.
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 or service 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 after the end of the third consecutive financial year
following the year in which we

                                       61
<PAGE>

continuously satisfy the requirements under Dutch corporate law for large
companies ("Structuurvennootschappen") as set out in Sections 152 through 164 of
Book 2 of the Dutch Civil Code (the "Large Company Rules"). The Large Company
Rules shift authority from the shareholders to the 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 a 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.

        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 must approve
such adoption. 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.

        We would be subject to the Large Company Rules and be required to revise
our system of corporate governance, inter alia, three years after we or one of
our subsidiaries institutes a work council under the Netherlands Works Council
Act. Under Netherlands law, we are required to facilitate a works council, but
no works council existed as of December 31, 2000. We 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 51% 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. Other decisions directly involving employment matters, such
as those affecting employee compensation systems, or pension or profit sharing
plans, may only be taken with the works council's approval. 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.

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<PAGE>

Board Committees

        Versatel is listed on the Nasdaq National Market and the Euronext/AEX.
Netherlands Law and the Euronext/AEX listing rules do not require listed
companies to establish any committees. Nasdaq rules however, require an Audit
Committee and recommend certain other 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 Jorg 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, Jorg Mohaupt and Philippe Santin. The Committee makes recommendations to
the supervisory board regarding Versatel's financial situation.

6.D     EMPLOYEES

        On December 31, 2000, Versatel had 1,760 full-time employees, 51
temporary employees and 91 full-time consultants. On December 31, 1999, Versatel
had 902 full-time employees, 55 temporary employees, and 180 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. 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 2000, 1999 and 1998.

                                              2000           1999           1998
                                              ----           ----           ----

The Netherlands ...................            875            545            175
Belgium ...........................            293            134             16
Germany ...........................            587            223           --
France ............................              3           --             --
United Kingdom ....................              2           --             --
                                             -----          -----          -----
  Total ...........................          1,760            902            191
                                             =====          =====          =====

        Included in the number of employees on December 31, 2000, are 188
employees of Versapoint (106 employees in The Netherlands, 77 employees in
Germany, three in France, and

                                       63
<PAGE>

two in the United Kingdom). Versatel acquired a 100% interest in Versapoint on
December 29, 2000.

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 16, 2001.

                                                Shares       Options (1)
                                                ------       -----------

Supervisory Board
R. Gary Mesch (2)(3).........................  4,529,894             -
Leo W. A. M. van Doorne......................          -             -
Johan G. Wackwitz............................          -             -
James R. Meadows.............................          -             -
Sander van Brummelen.........................          -             -
Jorg Mohaupt.................................          -             -

Executive Officers
Raj Raithatha (3)............................  1,265,908       247,000
Philippe Santin (3)..........................          *             *
Marc A. J. M. van der Heijden (3)............          *             *
Aad T. Beekhuis (3)..........................          *             *
Jan A. van Berne (3).........................          *             *
Daniel Hayes (3).............................          *             *
-----------------
 *   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)  R.Gary Mesch has informed Versatel that he has entered into a share
     management agreement in 2001 with MeesPierson N.V. pursuant to which
     MeesPierson will manage, and may sell up to, 1.1 million of Versatel's
     ordinary shares owned by Gary Mesch. Under the agreement, MeesPierson will
     have absolute discretion in managing the shares and R. Gary Mesch is not
     permitted to give any instructions or otherwise exercise any subsequent
     influence over how, when, or whether any shares will be sold. The agreement
     contains a written formula specifying the price limits below which no
     shares may be sold under the agreement. R.Gary Mesch may reset these limits
     once a year, but only during the five business days following the
     announcement of Versatel's annual results.
(3)  The number of shares held by all directors and executive officers as a
     group amounted to 6,486,590 shares. The aggregate number of options issued
     to the executive officers as a group amounted to 1,432,000. 200,000 of
     these options have an expiry date of March 2007 and an exercise price of
     Euro 79.19, 710,000 of these options have an expiry date of June 2003 and
     an exercise price of Euro 1.16, 400,000 options have an expiry date of June
     2007 and an exercise price of Euro 0.02, and 122,000 options have an expiry
     date of January 2008 and an exercise price of Euro 0.02.

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") and the 2000 Stock Option
Plan (the "2000 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

                                       64
<PAGE>

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, 2000, 398,000 options to purchase 398,000 ordinary
shares had been granted under the 1997 Plan. No further options will be granted
under the 1997 Plan. As of December 31, 2000, 323,000 options granted under the
1997 Plan had been exercised for a total of 323,000 shares.

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. We reserved 5,000,000 ordinary shares for
issuance under the 1998 Plan.

        As of December 31, 2000, 5,000,000 options to purchase 5,000,000
ordinary shares have been granted under the 1998 Plan and Versatel does not
intend to grant any more options under the 1998 Plan. As of December 31, 2000,
3,435,716 options granted under the 1998 Plan had been exercised for a total of
3,435,716 shares.

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 determined in the
particular grant of the option. We have reserved 2,500,000 ordinary shares for
issuance under the 1999 Plan.

        As of 31 December 2000, 1,908,500 options to purchase 1,908,500 ordinary
shares have been granted under the 1999 Plan. Versatel expects to grant the
remaining 591,500 options under the terms and conditions of the 2000 Plan. As of
December 31, 2000, 335,910 options granted under the 1999 Plan had been
exercised for a total of 335,910 shares.

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
after the date of the grant and will last five years. The option exercise price
shall be determined by Versatel. We have reserved 3,000,000 ordinary shares for
issuance under the 2000 Plan.

        As of December 31, 2000, options to purchase 2,538,850 ordinary shares
have been granted under the 2000 Plan. We expect to grant the remaining 461,150
options to purchase ordinary shares under the 2000 Plan along with the remaining
591,500 options under the 1999

                                       65
<PAGE>

plan in 2001. As of December 31, 2000, 67,000 options granted under the 2000
Plan had been exercised for a total of 67,000 shares.







                                       66
<PAGE>


ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A     MAJOR SHAREHOLDERS

        As of March 16, 2001, 89,929,607 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 3,926,745 ADS were issued and held
by 20 record holders. The following table sets forth information regarding the
beneficial ownership of the ordinary shares of Versatel as of March 16, 2001, 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          13.7%
Minister of Finance, Singapore.................  6,191,581           6.9%
Paribas Deelnemingen N.V.......................  5,934,992           6.6%
R. Gary Mesch (3)..............................  4,529,894           5.0%
-------------
(1)  Percentages do not reflect the issuance of an aggregate of 12,500 shares
     approved for issuance by our shareholders in connection with earn-out
     obligations relating to the acquisitions ITinera. Does not give effect to
     dilution from the exercise of warrants covering 1,524,209 ordinary shares
     issued in the first high yield offering and the second high yield offering
     that have not been exercised as of December 31, 2000 or to options
     outstanding to employees covering 5,245,593 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.
(3)  R.Gary Mesch has informed Versatel that he has entered into a share
     management agreement in 2001 with MeesPierson N.V. pursuant to which
     MeesPierson will manage, and may sell up to, 1.1 million of Versatel's
     ordinary shares owned by Gary Mesch. Under the agreement, MeesPierson will
     have absolute discretion in managing the shares and R. Gary Mesch is not
     permitted to give any instructions or otherwise exercise any subsequent
     influence over how, when, or whether any shares will be sold. The agreement
     contains a written formula specifying the price limits below which no
     shares may be sold under the agreement. R.Gary Mesch may reset these limits
     once a year, but only during the five business days following the
     announcement of Versatel's annual results.

Lock-up Arrangements

        At the time of our initial public offering, and pursuant to AEX
regulations 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. AEX regulations 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 AEX regulations, any holder of 5% or
more of our outstanding share capital before that 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.

        Under AEX regulations 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) is consummated through a public
secondary offering involving a due diligence investigation and the issuance of a
prospectus, (ii) complies with the listing rules of the AEX and (iii) occurs 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.

        In November 2000, however, the AEX 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
AEX regulations may provide relief for our shareholders and members of our
supervisory board and management board with respect to their lock-up
arrangements.

7.B     RELATED PARTY TRANSACTIONS

Loans to Directors and Officers

        As of the date hereof no loans were outstanding from Versatel to any of
its directors or executive officers.

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

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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

        We have initiated an organizational restructuring which is expected to
lead to a reduction of approximately 300 employees. We have implemented our
organizational restructuring in order to realize synergies existing in our
operations resulting from our increased scale.

        As a result of this restructuring, Versatel expects to recognize a
one-time charge of approximately Euro 7.5 million in the first quarter of 2001
to cover employee termination costs. Total annual savings in sales, general and
administrative expenses are estimated to be approximately Euro 15.0 million with
Euro 10.0 million, of such savings to be realized in 2001.

Item 9. THE OFFER AND LISTING

9.A     LISTING DETAILS

        Our ordinary shares and our American Depositary Shares ("ADSs") have
been traded on the Amsterdam Stock Exchange ("AEX") and the Nasdaq National
Market, respectively, under the symbol "VRSA" since July 23, 1999, the date of
our initial public offering.

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        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 AEX.

Period                                                     High           Low
----------                                               --------        ------
                                                           Euro            Euro
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..................................      48.70          26.60
Third Quarter 2000...................................      45.30          26.10
Fourth Quarter 2000..................................      26.30           8.45
September 2000.......................................      36.80          26.10
October 2000.........................................      26.30          14.50
November 2000........................................      25.45          11.50
December 2000........................................      10.90           8.45
January 2001.........................................      18.00           8.75
February 2001........................................      15.45          10.50
March 2001 (through March 27)........................      11.00           6.05
------------------
(1)  Since July 23, 1999, the date of our initial public offering.

        The closing bid price for our ordinary shares as reported on the AEX on
March 27, 2001, was Euro 6.39.




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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)...............................    15.38          10.63
Fourth Quarter 1999..................................    37.50          10.88
First Quarter 2000...................................    77.25          30.00
Second Quarter 2000..................................    48.25          22.75
Third Quarter 2000...................................    43.94          23.00
Fourth Quarter 2000..................................    22.94           7.50
September 2000.......................................    31.88          23.00
October 2000.........................................    22.94          12.88
November 2000........................................    21.50           9.13
December 2000........................................     9.13           7.50
January 2001.........................................    16.88           8.31
February 2001........................................    14.50          10.13
March 2001 (through March 27)........................    10.13           5.56
-----------
(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 Marked on March 27, 2001, was $5.94.

9.B     PLAN OF DISTRIBUTION

        Not applicable.

9.C     MARKETS

        Versatel's ordinary shares are traded on the Euronext/AEX and our ADSs
on the Nasdaq National Market. 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 Euro 120,000,000 11 7/8% Senior Notes due 2009 are
all listed on the Luxembourg Stock Exchange. Versatel's 11 1/4% Euro 300,000,000
Senior Euro Notes due 2010, its Euro 300,000,000 4% Senior Convertible Notes due
2004, its Euro 360,000,000 4% Senior Convertible Notes due 2005 and its Euro
300,000,000 11 1/4% Senior Notes due 2010 are listed on the Euronext/AEX.

9.D     SELLING SHAREHOLDERS

        Not applicable.

9.E     DILUTION

        Not applicable.

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9.F     EXPENSES OF THE ISSUE

        Not applicable.

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 and 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. The
following summary of certain provisions of our articles of association is
qualified in its entirety by the articles of association filed as Exhibit 1 to
this annual report.

Corporate Object

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

        o    to provide telecommunication services;

        o    to incorporate, to participate in, to manage and to be
             financially involved in any other way in other companies and
             enterprises;

        o    to provide administrative, technical, financial, economic and
             management services to other companies, persons and enterprises;

        o    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

        o    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.

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Share Capital

        The authorized share capital of Versatel is NLG 18,500,000.05 (Euro 8.39
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. The authorized capital of Versatel may
further 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. The right to demand a distribution of dividend will lapse five
years after the date upon which such dividend became payable.

        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
AEX/Euronext.

        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
Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. ("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. No
share certificates are issued, however 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.

        89,929,607 Ordinary shares are issued and outstanding as of March 16,
2000. These ordinary shares represent 51% of Versatel's authorized capital.

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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 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.

        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.

        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.

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

        On December 17, 1999 and for a period ending December 22, 2001, the
shareholders authorized the board of management, under prior approval of the
supervisory board, to issue ordinary shares, preference shares A and B as well
as to restrict or exclude the pre-emptive rights of shareholders. On September
29, 2000 and for a period ending December 22, 2001, the

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shareholders authorized the board of management, under prior approval of the
supervisory board, to issue the priority share as defined in article 4 of
paragraph 1 of the articles of association.

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

Reduction of Share Capital

        The general meeting of shareholders may pass a resolution for the
reduction of the issued capital of the Company by (i) redeeming shares or (ii)
reducing the par value of the outstanding shares by amendment of the articles of
association. The issued and paid-in capital of the Company 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. A resolution for the reduction of capital
will require a majority of at least two-thirds of the votes cast, in case less
than 50% of the issued and outstanding capital is represented at the general
meeting.

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
our company nor do they impose any limitation on the exercise of voting rights
on such shares.

Warrants

        As of the date of this annual report, there were 114,310 outstanding
warrants to purchase 1,524,209 ordinary shares at an exercise price of NLG 2.55
(Euro 1.16) per share. All such warrants became exercisable upon the completion
of our initial public offering in July 1999.

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
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. Preference shares B will be paid a cumulative annual
dividend

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<PAGE>

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.

Board

        For a description of the role of our management board and supervisory
board in the management of our company, see "Item 6.C - Board Practices."

        According to our articles of association, in case of a conflict of
interest between an individual member of the management board and the Company,
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.

        A member of the supervisory board is required to resign from office at
the end of the general meeting of shareholders during which the annual accounts
of the Company are considered in the year in which he reaches the age of 72.

        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
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 the outstanding capital
of the Company 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

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<PAGE>

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.

Amendments to the Articles of Association

        The general meeting of shareholders may pass a resolution to amend the
articles of association or to dissolve the Company. 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 the Company, the assets of the Company,
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.

Notification of Share Holdings

        Netherlands law provides that any person, foreign or Dutch, who has
acquired or transferred shares of a public limited company incorporated under
Dutch law which shares have been admitted to the official listing of a
securities exchange situated and operating in a member state of the European
Union, shall report in writing the acquisition or transfer forthwith to the
company and the Securities Board of the Netherlands (STE), if:

        o    the acquisition of shares in the capital of the company or the
             number of votes for all shares in the company results in the
             acquirer's share reaching or exceeding any of the thresholds of
             5, 10, 25, 50, and 66 2/3 %, or

        o    the transfer of shares in the capital of the company or the
             number of votes for all shares in the company results in the
             acquirer's share falling below any of the thresholds described in
             (1) above.

Anti-Takeover Provisions

        The issuance of preference shares and priority shares 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 preference shares,
subject to the prior approval of the supervisory board, until December 22, 2001.
During this period, our management board is expected to grant a call option on
the preference shares B not exceeding 100% of all our other

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outstanding shares to an independent foundation, "Stichting Continuiteit
Versatel Telecom International", incorporated on August 29, 2000, and
established under Netherlands law. In the event of a (threatened) hostile
takeover bid, the foundation may exercise this option. The foundation will be
entrusted with the obligation to take into consideration our best interests and
to prevent influences that may threaten our continuity, independence or
identity. The minimum amount required to be paid on the preference shares upon
issuance is 25% of the nominal amount issued.

        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 a priority share, subject to the
prior approval of the supervisory board, until December 22, 2001. During this
period, our management board is expected to grant a call option on the priority
share to an independent foundation, "Stichting Prioriteit Versatel Telecom
International", incorporated on August 29, 2000 and 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:

        o    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

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

10.C    MATERIAL CONTRACTS

Description of material indebtedness.

        Following our issuance of $225,000,000 in aggregate principal amount of
13 1/4% Senior Dollar Notes due 2008 (the "First High Yield Offering") and
$150,000,000 in aggregate principal amount of 13 1/4% Senior Dollar Notes due
2008 (the "Second High Yield Offering") in May 1998 and December 1998,
respectively, we issued the following debt securities during 1999 and 2000:

The Third High Yield Notes Offering

        In July 1999, concurrently with the initial public offering of our
shares, we issued $180,000,000 in aggregate principal amount of 11 7/8% Senior
Dollar Notes due 2009 and

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Euro 120,000,000 in aggregate principal amount of 11 7/8% Senior Dollar Euro
Notes due 2009. The notes were sold to Lehman Brothers International (Europe),
ING Barings LLC and ING Barings limited, as underwriters. Interest on the notes
will be paid semi-annually on January 15 and July 15. The notes are redeemable
at the option of Versatel, in whole or in part, at any time on or after July 15,
2004, at 105.937% of their principal amount, plus accrued interest, declining to
100% of their principal amount, plus accrued interest, on or after July 15,
2007.

        The notes may 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.
The notes rank equal in right of payment to each other, 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 indentures governing these high yield notes contain 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 indentures also require
Versatel to commence and consummate an offer to purchase the high yield 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 indentures to offer to purchase the
high yield notes with the proceeds of the sale of certain assets. The indentures
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 high yield notes to become or to be declared to be
immediately due and payable. Holders of these high yield 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 governing each series of notes also include an optional redemption
provision whereby Versatel may, for the first three years after the offering of
these notes, redeem up to 35% of such series of notes with the net proceeds of
certain public equity offerings by Versatel.

The Fourth High Yield Notes Offering

        In March 2000, we issued Euro 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%

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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.

The First Convertible Notes Offering

        In the First Convertible Note Offering in December 1999, we issued
Euro 300,000,000 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
December 17. The convertible notes are redeemable at the option of Versatel, in
whole or in part, at any time on or after December 24, 2002 at their accreted
principal amount, plus accrued interest. 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

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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 Euro 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 X((r X d)/p))-AI
     where
Previous Accreted Principal
   Amount                 = the Accreted Principal Amount on the interest
                            payment date for the First Convertible Notes
                            immediately preceding the redemption date for the
                            First Convertible Notes (or, if the notes are to be
                            redeemed prior to the first interest payment date
                            for the First Convertible Notes,Euro 1,000) as set
                            out below:

Interest Payment Date                          Accreted Principal Amount (Euro)
---------------------                          --------------------------------
December 17, 2000............................             1,045.00
December 17, 2001............................             1,093.83
December 17, 2002............................             1,146.80
December 17, 2003............................             1,204.28
December 17, 2004............................             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.

                                       80
<PAGE>

The Second Convertible Notes Offering

        In the Second Convertible Note Offering in March 2000, we issued
Euro 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 Euro 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 X((r X 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,Euro 1,000) as set
                            out below:

Interest Payment Date                          Accreted Principal Amount (Euro)
---------------------                          --------------------------------
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

                                       81
<PAGE>

        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.

Settlement Agreement with Cromwilld Limited

        On July 20, 1999, Versatel entered into, along with its other
shareholders and certain other parties, a settlement agreement with Cromwilld
Limited, one of its shareholders, in order to resolve disputes arising out of a
pre-existing shareholders' agreement and other matters. The major terms of the
settlement agreement provided for:

        o    the transfer of 146,988 of our ordinary shares held by Telecom
             Founders B.V. to Cromwilld;

        o    the issuance of 200,000 shares of Versatel on July 20, 1999 to
             Cromwilld at a price of NLG 7.50 per ordinary share;

        o    the ability of Cromwilld to include 1,800,000 of its ordinary
             shares in our initial public offering;

        o    certain piggyback registration rights in favor of Cromwilld that
             took effect 180 days from the date of our initial public
             offering;

        o    the payment by us of U.S. $300,000 for Cromwilld's fees and
             expenses related to the Settlement Agreement and certain other
             matters;

        o    the acknowledgement by all parties to the shareholders' agreement
             of Versatel that the shareholders' agreement would terminate
             concurrently with the closing of our initial public offering;

        o    with withdrawal by Cromwilld of its pending legal proceedings
             against Versatel and its shareholders;

        o    Cromwilld's full cooperation with our initial public offering;
             and

        o    the obligation of Versatel's shareholders, including Cromwilld,
             to procure the resignation or dismissal of Cromwilld's nominee,
             Denis O'Brien, from the Supervisory Board of the Company, after
             the completion of our initial public offering.

        As of December 31, 2000, all of the terms of the Settlement Agreement,
except with respect to certain piggyback registration rights provided to
Cromwilld, have been completed.

                                       82
<PAGE>

        All other contracts concluded by Versatel during the two years preceding
this filing were entered into in the ordinary course of business.

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.

                                       83
<PAGE>

        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:

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

        2.   dividends are distributed to a qualifying EU corporate
             shareholder satisfying the conditions of the EU directive, or

        3.   the rate is reduced by treaty, or

        4.   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.

        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.

                                       84
<PAGE>

        Anti-abuse legislation relating to the beneficial ownership status of
the dividend recipient has been proposed, however, this legislation has not
entered into force yet. The entry into force depends on the discussions between
the banking sector and the Ministry of Finance, and could be effected by a Royal
Decree. The measure, when entered into force, would disallow non-beneficial
owner dividend recipients the credit of dividend withholding tax.

        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,
provided that:

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

        2.   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:

        o    is the beneficial owner of the dividends paid; and

        o    is resident in the United States according to the US/NL Income
             Tax Treaty; and

        o    does not hold the Shares and/or ADSs in connection with the
             conduct of business in The Netherlands; and

        o    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

        o    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.

                                       85
<PAGE>

        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:

        1.   the Netherlands participation exemption applies, and

        2.   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:

        1.   4% of the fair market value of the issued shares in the Company
             at the beginning of that certain calendar year;

        2.   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;

        3.   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.

        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.

                                       86
<PAGE>

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:

        1.   the Shares, ADSs, Notes and/or Warrants are attributable to a
             trade or business carried on by the individual shareholder, or

        2.   form part of a Substantial Interest, or

        3.   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

                                       87
<PAGE>

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.

        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:

        1.   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,

        2.   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,

        3.   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,

        4.   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,
             and

        5.   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.

                                       88
<PAGE>

        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:

        1.   the Netherlands participation exemption applies, and

        2.   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 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.

                                       89
<PAGE>

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:

        1.   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;

        2.   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);

        3.   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

        4.   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

                                       90
<PAGE>

prospective purchasers of Shares, Notes, ADSs or Warrants in light of their
particular circumstances or to persons subject to special tax rules, such as
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.

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<PAGE>

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.

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

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<PAGE>

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 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

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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.

                                       94
<PAGE>

        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.

                                       95
<PAGE>

        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
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.

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<PAGE>

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.

        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.

                                       97
<PAGE>

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

                                       98
<PAGE>

               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, and at the regional offices of the SEC located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citcorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. 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 Mark Lazar, 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. However, in conjunction with our
two high yield offerings in 1998 we have placed in escrow and pledged for the
benefit of the holders of the notes issued in these two high yield offerings
U.S. government securities sufficient to pay interest due on such notes until
and including the scheduled interest payment on May 15, 2001.

        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 Euro 120,000,000 11 7/8% Senior Notes will mature on July 15,
2009, and the high yield notes issued in March 2000, 11 1/4% Euro 300,000,000
Senior Notes will mature on March 30, 2010. Our convertible notes, Euro
300,000,000 4% Senior Convertible Notes due 2004, and Euro 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, 2000, the fair value of the notes issued in the
high yield offerings was approximately Euro 595.1 million and the fair value of
our convertible notes was approximately Euro 372.0 million.

        We have substantial amounts of debt denominated in US dollars. For a
discussion on the movement between the euro and the U.S. dollar, you are
referred to Item 3.A "Selected Financial Data".

        The costs and expenses relating to the construction of our network and
the development of our sales and marketing resources will largely be in euro.
Therefore, the construction of our network and the development 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
denominated offerings to pay our construction costs. However, as of December 31,
2000, we had exchanged all but $0.5 million of the proceeds from these offerings
into Dutch guilders or euro. 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. In addition, we may become
subject to greater foreign exchange fluctuations as we continue to expand our
operations outside The Netherlands and receive more revenues denominated in
currencies other than Dutch guilders, although the introduction of the euro has
largely eliminated these risks as all three Benelux countries and Germany have
adopted the euro as their legal currency.

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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    Description
No.

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) --      Indenture, dated March 30, 2000, between the Company and The Bank
               of New York, as Trustee

2.6(7) --      Escrow Agreement, dated May 27, 1998, between Versatel and U.S.
               Trust Company of New York, as Trustee and Escrow Agent

                                      102
<PAGE>

2.6(8) --      Escrow Agreement, dated December 3, 1998, between Versatel and
               U.S. Trust Company of New York, as Trustee and Escrow Agent

2.7(9) --      Principal Paying Agent, Conversion Agent, Conversion Calculation
               Agent and Registrar Agreement, dated December 17, 1999, between
               the Company and ING Bank N.V.

2.8    --      Principal Paying Agent, Conversion Agent, Conversion Calculation
               Agent and Registrar Agreement, dated March 20, 2000, between the
               Company and ING Bank N.V.

4.1(10)--      Agreement for the sale and purchase of shares of Svianed B.V.,
               dated June 11, 1999, between the Company, Gak Holding B.V. and
               Svianed B.V.

7      --      Statement re ratio earnings to fixed charges.

8      --      List of Subsidiaries.

-----------------

(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 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.

(8) - 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, 2000 and incorporated herein by
      reference.

(9) - 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.

(10)- Previously filed as an exhibit to the Company's Form 6K/A, filed with the
      Securities and Exchange Commission on June 23, 1999 and incorporated
      hereby by reference.

                                      103
<PAGE>

                 Index to the consolidated financial statements
                     of Versatel Telecom International N.V.


Reports of Independent Public Accountants ................................   F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999..............   F-5

Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998..........................................   F-7

Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998..........................................   F-8

Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 2000, 1999 and 1998..........................   F-9

Notes to the Consolidated Financial Statements............................  F-10



                                      F-1
<PAGE>



                     Report of independent public accountant



To Versatel Telecom International N.V.

         We have audited the accompanying consolidated balance sheets as of
December 31, 1999 and 2000 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, 2000. 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 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 fur 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, 1999 and 2000 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 8, 2001



                                      F-2
<PAGE>



                     Report of independent public accountant



To Versatel Telecom International N.V.

         We have audited the balance sheet of KomTel Gesellschaft fur
Kommunikations- und Informationsdienste mbH, Flensburg, as of December 31, 2000
and the statements of operations, shareholders' equity and cash flows for the
nine months period ended December 31, 2000. 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 United States generally
accepted auditing standards. 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.

         80% of the shares in KomTel Gesellschaft fur Kommunikations- und
Informationsdienste mbH, Flensburg, are owned by Versatel group. The financial
statements of the company were prepared for consolidation purposes. As described
in Note 2, Versatel Deutschland Holding GmbH, Dortmund, the parent of KomTel
Gesellschaft fur Kommunikations- und Informationsdienste mbH, Flensburg, has
guaranteed the continued financial support of the company in the future.

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


Flensburg, February 11, 2001
                                               BDO Nordwestdeutsche Treuhand
                                           Gesellschaft mit beschrankter Haftung
                                              Wirtschaftsprufungsgesellschaft
                                                Steuerberatungsgesellschaft



                                      F-3
<PAGE>



                     Report of independent public accountant



To Versatel International N.V.

         We have audited the balance sheet of VEW Telnet Gesellschaft fur
Telekommunikation und Netzdienste mbH, Dortmund, as of December 31, 1999 and the
statements of operations, shareholders' equity and cash flows for the one month
ended December 31, 1999. 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 Germany which do not differ in any significant respect from United
States generally accepted auditing standards. 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.

         VEW Telnet Gesellschaft fur Telekommunikation and Netzdienste mbH,
Dortmund is a wholly owned subsidiary of the Versatel group. The financial
statements of the company were prepared for consolidation purposes. As described
in Note 2, Versatel Telecom International N.V., Amsterdam, Niederlande, the
ultimate Parent of VEW Telnet Gesellschaft fur Telekommunikation und Netzdienste
mbH, Dortmund, has guaranteed the continued financial support of the Company
through January 1, 2001.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of VEW Telnet
Gesellschaft fur Telekommunikation und Netzdienste mbH, Dortmund, as of December
31, 1999, and the results of its operations and cash flows for the one month
ended December 31, 1999, in conformity with United States generally accepted
accounting principles.


BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft

Dusseldorf, Germany
February 11, 2000


                                      F-4
<PAGE>



                       VERSATEL TELECOM INTERNATIONAL N.V.


                        Consolidated balance sheets as of
                           December 31, 2000 and 1999

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



                                                         2000             1999
                                                        ------           ------

ASSETS

Current Assets:
Cash .............................................      1,177,867        984,782
Restricted cash, current portion .................         26,009         44,580
Accounts receivable, net .........................         74,807         13,377
Inventory, net ...................................          9,804          2,028
Unbilled revenues ................................         12,327         13,221
Prepaid expenses and other .......................         51,568         29,594
                                                        ---------      ---------
    Total current assets .........................      1,352,382      1,087,582
                                                        ---------      ---------

Fixed Assets:
Property, plant and equipment, net ...............        591,391        232,694
Construction in progress .........................        175,766         81,803
                                                        ---------      ---------
    Total fixed assets ...........................        767,157        314,497
                                                        ---------      ---------


Restricted cash, net of current portion ..........           --           21,469
Capitalized finance costs, net ...................         41,435         28,255
Other non-current assets .........................         11,003         14,344
Goodwill, net ....................................        245,663        196,973
                                                        ---------      ---------

Total assets .....................................      2,417,640      1,663,120
                                                        =========      =========

















               See notes to the consolidated financial statements.

                                      F-5
<PAGE>


                       VERSATEL TELECOM INTERNATIONAL N.V.

                        Consolidated balance sheets as of
                           December 31, 2000 and 1999


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



                                                             2000          1999
                                                       ----------    ----------


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable ...................................      128,716        71,165
Accrued liabilities ................................      218,152        73,249
Unearned revenue ...................................       16,461         2,359
Current portion of capital lease obligations .......        1,334        14,866
                                                       ----------    ----------
    Total current liabilities ......................      364,663       161,639
                                                       ----------    ----------

Capital lease obligations, net of current portion ..        1,369        27,214
Long-term liabilities ..............................       25,648         5,071
Long-term debt .....................................    1,684,642       961,527
                                                       ----------    ----------

    Total liabilities ..............................    2,076,322     1,155,451
                                                       ----------    ----------

Shareholders' Equity:
Ordinary shares, NLG 0.05 par value, 89,661,896
    and 79,224,986 issued and outstanding as of
    December 31, 2000 and 1999, respectively .......        2,033         1,797
Additional paid-in capital .........................    1,019,015       743,619
Warrants ...........................................          722         2,088
Deferred compensation ..............................      (19,270)         --
Accumulated deficit ................................     (661,182)     (239,835)
                                                       ----------    ----------
    Total shareholders' equity .....................      341,318       507,669
                                                       ----------    ----------

Total liabilities and shareholders' equity .........    2,417,640     1,663,120
                                                       ==========    ==========












               See notes to the consolidated financial statements.

                                      F-6
<PAGE>


                       VERSATEL TELECOM INTERNATIONAL N.V.

                      Consolidated statements of operations
              for the years ended December 31, 2000, 1999 and 1998

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

<TABLE>
<CAPTION>
                                                            2000        1999        1998
                                                          --------    --------     ------
<S>                                                        <C>          <C>         <C>
OPERATING REVENUE: ....................................    181,469      58,537      17,952

OPERATING EXPENSES:
Cost of revenues, excluding depreciation and
amortization ..........................................    133,565      45,657      14,439
Selling, general and administrative ...................    213,394      82,807      21,660
Depreciation and amortization .........................     91,518      26,412       2,937
                                                          --------    --------     -------
Total operating expenses ..............................    438,477     154,876      39,036
                                                          --------    --------     --------

Operating Loss ........................................   (257,008)    (96,339)    (21,084)

OTHER INCOME (EXPENSES):
Foreign currency exchange (losses) gains, net .........    (32,695)    (43,684)      2,335
Interest income .......................................     57,629      12,861       5,380
Interest expense- third parties .......................   (168,761)    (71,373)    (17,026)
Interest expense- related parties .....................       --          --           (66)
Result from investing activities ......................     (3,131)       --          --
Other asset impairments ...............................    (12,751)       --          --
Other .................................................     (5,463)       --          --
                                                          --------    --------     --------
Total other expenses, net .............................   (165,172)   (102,196)     (9,377)
                                                          --------    --------     --------

Loss before income taxes and minority interest ........   (422,180)   (198,535)    (30,461)
                                                          --------    --------     --------

Credit from/(provision for) income taxes ..............         41         437          (3)
                                                          --------    --------     --------

Loss before minority interest .........................   (422,139)   (198,098)    (30,464)

Minority interest .....................................        792         168        --
                                                          --------    --------     --------

Net loss ..............................................   (421,347)   (197,930)    (30,464)
                                                          ========    ========     =======

Net loss per share (basic) ............................      (4.92)      (3.89)      (0.93)

Weighted average number of shares outstanding
Basic .................................................     85,661      50,929      32,621
Diluted ...............................................    105,231      60,957      37,927
</TABLE>





               See notes to the consolidated financial statements.


                                      F-7
<PAGE>


                       VERSATEL TELECOM INTERNATIONAL N.V.

                      Consolidated statements of cash flows
              for the years ended December 31, 2000, 1999 and 1998

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

<TABLE>
<CAPTION>
                                                                                2000          1999        1998
                                                                             ----------    ----------    --------
<S>                                                                           <C>           <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
    Net loss .............................................................    (421,347)     (197,930)    (30,464)
Adjustments to reconcile net loss to net cash used in
    operating activities
    Depreciation and amortization ........................................      91,518        26,412       2,937
    Amortization of finance cost .........................................       7,928         1,817         567
    Currency translation movement ........................................      30,628        40,633          67
    Gain on sale of investments ..........................................      (6,511)         --          --
    Interest accrual on convertible notes ................................      26,538          --          --
    Stock based compensation .............................................       7,034        12,557        --
Changes in other operating assets and liabilities
    Accounts receivable ..................................................     (53,675)       (3,579)     (2,767)
    Inventory ............................................................        (248)         (526)       (301)
    Prepaid expenses and other ...........................................      (9,236)      (33,753)     (4,953)
    Accounts payable .....................................................      27,107        47,593       8,712
    Due to related parties ...............................................        --            (366)        252
    Unearned revenue .....................................................      14,102        (1,479)       (200)
    Accrued liabilities ..................................................      95,123        38,528       9,218
                                                                            ----------    ----------    --------
      Net cash used in operating activities ..............................    (191,039)      (70,093)    (16,932)
                                                                            ==========    ==========    ========

CASH FLOW FROM INVESTING ACTIVITIES:
    Capital expenditures .................................................    (466,884)     (173,804)    (35,057)
    Cash received from disposal of fixed assets ..........................      16,324          --          --
    Finance costs capitalized ............................................     (19,499)      (17,025)    (13,613)
    Acquisition of business, net of cash acquired ........................    (103,540)     (281,702)     (2,169)
    Net proceeds from sale of business ...................................      13,194          --          --
                                                                            ----------    ----------    --------
    Net cash used in investing activities ................................    (560,405)     (472,531)    (50,839)
                                                                            ==========    ==========    ========

CASH FLOW FROM FINANCING ACTIVITIES:
    Payments under capital lease obligations .............................     (39,377)         --          (135)
    Repayment of subordinated convertible shareholder loans ..............        --            --        (3,678)
    Proceeds from short-term loans .......................................      16,061         6,975        --
    Proceeds from long-term debt .........................................      15,504         5,070         304
    Proceeds from senior notes and convertible loans .....................     655,611       591,674     312,209
    Restricted cash ......................................................      48,768        46,368     (96,000)
    Proceeds from exercised warrants .....................................       2,369          --         2,365
    Proceeds from exercised options ......................................       2,745          --          --
    Shareholder contributions ............................................     242,848       708,504      20,904
                                                                            ----------    ----------    --------
    Net cash provided by financing activities ............................     944,529     1,358,591     235,969
                                                                            ==========    ==========    ========

Net increase in Cash .....................................................     193,085       815,969     168,201
Cash, beginning of the year ..............................................     984,782       168,813         611
                                                                            ----------    ----------    --------
Cash, end of the year ....................................................   1,177,867       984,782     168,812
                                                                            ==========    ==========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid for--
      Interest (net of amounts capitalized) ..............................     120,206        46,368      11,916
      Income taxes .......................................................        --            --          --
         Acquisition of property through capital leases ..................        --          40,088        --
</TABLE>


               See notes to the consolidated financial statements.


                                      F-8
<PAGE>


                       VERSATEL TELECOM INTERNATIONAL N.V.

                 Consolidated statements of shareholders' equity
              for the years ended December 31, 2000, 1999 and 1998

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


<TABLE>
<CAPTION>
                                 Number of                 Additional
                                   shares       Ordinary    paid-in                    Deferred      Accumulated
                                outstanding      shares      capital      Warrants   Compensation      deficit        Total
                                ---------------------------------------------------------------------------------------------
                                                  Euro        Euro          Euro          Euro           Euro         Euro
<S>                              <C>               <C>      <C>             <C>          <C>          <C>           <C>
Balance, December 31,1997 ....   19,159,286          434        2,740         --            --         (11,440)       (8,266)
Shareholder contribution .....   19,695,524          447       20,307        2,365          --            --          23,119
Shares issued for acquisition       130,000            3          147         --            --            --             150
Net loss .....................         --           --           --           --            --         (30,465)      (30,465)
                                 ----------       ------    ---------       ------       -------      --------      --------
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
Warrants exercised ...........      495,168           11          265         (277)         --            --              (1)
Stock options exercised ......    1,940,000           44        1,915         --            --            --           1,959
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 deferred
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)
                                 ==========       ======    =========       ======       =======      ========      ========
</TABLE>






               See notes to the consolidated financial statements.


                                      F-9
<PAGE>


                       VERSATEL TELECOM INTERNATIONAL N.V.

                 Notes to the consolidated financial statements

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, the Company published its financial statements
in euro. Prior to this date, the Company 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 Euro 1.00 established in connection
with the implementation of the third stage of European Monetary Union.

(a)      Financial Condition and Operations

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

         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 consists of earnings (loss)
before interest expense, income taxes, depreciation, amortization and foreign
exchange gain (loss). However, no assurance can be given that positive Adjusted
EBITDA will be achieved or, if achieved, will be maintained.

         The ability to attract and provision new direct access and carrier
services customers will have a significant impact on Versatel's ability to
achieve positive Adjusted EBITDA and eventual net profit. To date, the Company
has made significant progress in connecting new buildings to its network. The
Company 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.

         For the year ended December 31, 2000, the Company had a net loss of
Euro 421.3 million. In addition, the Company had an accumulated deficit of Euro
661.2 million as of December 31, 2000.

         Although the Company expects to incur operating losses and net losses
for the foreseeable future as it incurs additional costs associated with the
development and expansion of the Company's network, the expansion of its
marketing and sales organization and the introduction of new telecommunications
services, it has a positive working capital of Euro 987.7 million at December
31, 2000, which should enable it to continue its operations for the next 24 to
36 months.


                                      F-10

<PAGE>

(b)      Principles of consolidation and changes in consolidated interest

         The accompanying consolidated financial statements include the
operations of the following subsidiaries:


--------------------------------------------------------------------------------
                                                 Country of         Percentage
Name                                             Incorporation      of Ownership
--------------------------------------------------------------------------------
Versatel Telecom Europe B.V.                     The Netherlands            100%

Versatel Telecom Netherlands B.V.                The Netherlands            100%

Versatel Telecom 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%

Numedi Net N.V.                                  Belgium                     70%

7-Klapper Beheer B.V.                            The Netherlands            100%

Vuurwerk Internet B.V.                           The Netherlands            100%

VuurWerk Access B.V.                             The Netherlands            100%

Itinera Services N.V.                            Belgium                    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 fur Kommunikations und
Informationsdienste mbH ("KomTel")               Germany                     80%

KomTel Service GmbH                              Germany                    100%

Klavertel N.V.                                   Belgium                    100%

Compath N.V.                                     Belgium                    100%

Keys-Tone Communications 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 results of the subsidiaries are included from the respective dates
of acquisition or incorporation by the Company. All significant intercompany
accounts and transactions have been eliminated.


                                      F-11
<PAGE>

(c)      Investments

         The Company holds certain investments accounted for under the equity
method. The Company accounts for an investment under the equity method if the
investment gives the Company the ability to exercise significant influence, but
not control, over an investee. Significant influence is generally deemed to
exist if the Company 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.

         Additionally, as of December 31, 2000, the Company accounted for the
following investments at the lower of cost or net realizable value:

                                                   Country of        Percentage
Name                                              Incorporation     of Ownership
----                                              -------------     ------------
Hot Orange B.V.                                   The Netherlands        9%
Consumerdesk B.V.                                 The Netherlands        5%
DOKOM Gesellschaft fur Telekommunikation mbH      Germany               10%
RuhrNET Gesellschaft fur Telekommunikation mbH    Germany               24%
BORnet GmbH                                       Germany                5%


(d)      Foreign Currency Transactions

         The Company'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.


                                      F-12

<PAGE>


Significant Accounting Principles

(a)      Basis of Presentation

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

         The Company maintains its accounts under Dutch 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.

(c)      Cash and restricted cash

         Cash includes cash at hand and in hand at free utilization of the
Company. Cash not available for free utilization by the company is classified as
"restricted cash" in the accompanying balance sheet.

(d)      Inventory

         Inventory is stated at the lower of cost or net realizable value with
cost being determined on a first-in first-out basis.

(e)      Property, plant and equipment

         Property, plant and equipment are stated at the historical cost less
accumulated depreciation.

         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 into account, taking into account residual values.

(f)      Capitalized Finance Costs

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


                                      F-13

<PAGE>

(g)      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.

(h)      Recognition of Operating Revenues and Cost of Revenues

         Operating revenues are recognized when the service is rendered. Income
is determined based on historical cost. Losses are recognized as soon as they
are probable and measurable. Cost of revenues is recorded in the same period as
the revenues are recorded.

(i)      Recently Issued Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (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.

         In June 2000 the Financial Accounting Standards Board (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.
133 is effective for all 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 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, if it is the type of hedge transaction. SFAS 137 delayed the effective date
of SFAS 133 to fiscal years beginning after June 15, 2000. A Company may
implement the statements as of the beginning of any fiscal quarter after
issuance; however, SFAS No. 133 cannot be applied retroactively.

3.       Acquisitions

Versapoint N.V.

         Versatel acquired Northpoint's 50% stake in the joint venture
Versapoint. Versapoint was formed as a 50/50 joint venture between Versatel and
Northpoint and was accounted for by Versatel under the equity method. The
acquisition of the remaining 50% share of the shares of Versapoint on December
29, 2000 was accounted for as a purchase. Accordingly, the purchase price was
allocated to the net assets acquired based upon their estimated fair market
values. The


                                      F-14
<PAGE>

excess purchase price over the estimated fair value of net assets acquired
amounted to approximately Euro 9.8 million, which has been accounted for as
goodwill and is being amortized over ten years using the straight-line method.
This allocation was based on preliminary estimates and may be revised at a later
date. The accompanying consolidated statements of operations reflect the
operating results of Versapoint since the acquisition. The unaudited
consolidated operating results of Versapoint for the years ended December 31,
2000 and 1999, are summarized below:

                                                   The year ended
                                                     December 31
                                                ---------------------
                                                  2000         1999
                                                --------     --------
                                                     (unaudited)
                           Net sales.......         290        N/A
                           Net loss........     (18,190)       N/A

Klavertel and its subsidiaries

         The acquisition in June 2000 of Klavertel N.V. and its subsidiaries
Compath N.V., Keys-Tone N.V. and MMDI N.V. was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets acquired based
upon their estimated fair market values. The excess purchase price over the
estimated fair value of net assets acquired amounted to approximately Euro 4.7
million, which has been accounted for as goodwill and is being amortized over 10
years using the straight line method. This allocation was based on preliminary
estimates and may be revised at a later date. The accompanying consolidated
statements of operations reflect the operating results of Euro (0.3) million
since the acquisition. The unaudited consolidated operating results of Klavertel
and its subsidiaries for the years ended December 31, 2000 and 1999, are
summarized below:

                                                   The year ended
                                                     December 31
                                                ---------------------
                                                  2000         1999
                                                --------     --------
                                                     (unaudited)
                      Net sales.............     2,988        4,662
                      Net profit/(loss).....    (1,363)       1,628

KomTel

         The acquisition in March 24, 2000 of KomTel GmbH was accounted for as a
purchase. Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess purchase
price over the estimated fair value of net assets acquired amounted to
approximately Euro 69.9 million, which has been accounted for as goodwill and is
being amortized over ten years using the straight line method. This allocation
was based on preliminary estimates and may be revised at a later date. The
accompanying consolidated statements of operations reflect the operating results
of Euro (10.8) million since the acquisition. The unaudited consolidated
operating results for KomTel for the years ended December 31, 2000 and 1999 are
summarized below:



                                      F-15
<PAGE>

                                                   The year ended
                                                     December 31
                                                ---------------------
                                                  2000         1999
                                                --------     --------
                                                     (unaudited)
                      Net sales.............     37,749       30,688
                      Net loss..............    (17,846)      (9,021)

4.       Restricted Cash

         Restricted cash balances of Euro 26.0 million at December 31, 2000
include amounts restricted in connection with the payment of interest to the
holders of the Senior Notes due May 15, 2001. On December 31, 1999, our
restricted cash amounted to Euro 66.1 million.

5.       Accounts Receivable

         Accounts receivable are presented net of an allowance for doubtful
accounts of Euro 5.4 million and Euro 0.7 million at December 31, 2000 and 1999,
respectively. The movement of the allowance for doubtful accounts receivable
during the years ended December 31, 2000, 1999 and 1998 was as follows:


                                                      2000     1999   1998
                                                      ----     ----   ----
                                                      Euro     Euro   Euro
          Balance on January 1,.................        735     157     29
          Provision.............................      4,229     676    222
          Acquisitions..........................      1,269       -      -
          Utilization of allowance..............       (826)    (98)   (94)
                                                     ------    ----   ----
          Balance on December 31,...............      5,407     735    157
                                                     ------    ----   ----

6.       Prepaid Expenses and Other

         Prepaid Expenses and Other as of December 31, 2000, and December 31,
1999, include an amount of Euro 27.7 million and Euro 17.2 million respectively,
which relates mainly to value added taxes.

7.       Property and Equipment

         Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on a straight-line basis over the
estimated useful life of the related asset. Property and equipment operated by
the Company under capital lease agreements are capitalized.

         Listed below are the major classes of property and equipment and their
estimated useful lives in years as of December 31, 2000, 1999 and 1998:


                                      F-16
<PAGE>


                                          Useful
                                           Life       2000     1999      1998
                                          ------      ----     ----      ----
                                                      Euro     Euro      Euro
Leasehold improvements ................        5     15,454     5,334    1,613
Telecommunications equipment ..........     2-20    594,385   140,410   16,909
Telecommunications equipment under a
30 years right to use agreement .......       30     57,769    36,795      --
Other .................................      3-5     49,026   104,529    3,598
                                                   --------   -------   ------
Property and equipment ................             716,634   287,068   22,120
Less: Accumulated depreciation ........            (125,243)  (54,374)  (4,601)
                                                   --------   -------   ------
Property and equipment, net ...........             591,391   232,694   17,519
                                                   ========   =======   ======

8.       Construction in Progress

         The Company continues to build out its network in the Benelux region
and securing rights-of-way. The resulting assets as of December 31, 2000, 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%, (1999 -- 13.1%). Capitalized interest included in
construction in progress as of December 31, 2000, and December 31, 1999,
respectively, amounted to Euro 8.8 million and Euro 6.7 million.

9.       Capital Lease Obligations

         The Company entered into a master lease agreement with a finance
company to lease certain telecommunications and EDP equipment.

         Commitments for minimum rentals under non-cancelable leases at the end
of 2000 are as follows:

           2001................................................   1,585

           2002................................................     762
           2003................................................     762
           Total minimum lease payments........................   3,109
           Less amount representing interest...................    (406)
                                                                -------
           Present value of net minimum lease payments.........   2,703
                                                                =======

         Property, plant and equipment at December 31, 2000 and 1999 include the
following amounts for capitalized leases:

                                                         2000        1999
                                                         ----        ----
                                                         Euro        Euro
           Telecommunications equipment at
           book value................................   34,200      41,931
           Other.....................................      969          13
                                                        ------      ------
                                                        35,169      41,944
                                                        ======      ======


                                      F-17
<PAGE>

10.      Senior Debt

         On July 23, 1999, the Company issued two tranches of Senior Notes for,
US$180 million and Euro 120 million, with an interest rate of 11 7/8% due 2009.

         The discount on the 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, the Company issued 4% Senior Convertible Notes for
Euro 300 million due 2004. The Convertible Notes can be converted into common
shares of the Company at a conversion price of Euro 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.

         On March 30, 2000, the Company issued Euro 300 million 11 1/4% Senior
Notes due 2010.

         The Company also issued Euro 360 million 4% Senior Convertible Notes
due 2005. The Convertible Notes can be converted into common shares of the
Company at a conversion price of Euro 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.

         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, 2000, the fair value of the Company's
borrowings under the long-term debt amounts to approximately Euro 968.0 million.
As of December 31, 1999, the carrying amount of the company's borrowings under
the long-term debt agreement approximated fair value.

11.      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.


                                      F-18
<PAGE>

         On March 30, 2000, the Company sold 5,100,000 shares at Euro 49.00 per
share. The aggregate net proceeds amounted to Euro 238.5 million after offering
expenses.

         As of December 31, 2000, 89,661,896 (1999: 79,224,986) ordinary shares
are issued and outstanding.

12.      Employee Benefit Plans

         The Company has established four 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") and the 2000 Stock Option Plan (the
"2000 Plan").

1997 Stock Option Plan

         In December 1996, the Company'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, 2000 398,000 options to purchase 398,000 ordinary
shares had been granted under the 1997 Plan and Versatel does not intend to
grant any more options under the 1997 Plan. As of December 31, 2000, 323,000
options granted under the 1997 Plan had been exercised for a total of 323,000
shares.

1998 Stock Option Plan

         In March 1998, the Company'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. The Company reserved 5,000,000
ordinary shares for issuance under the 1998 Stock Option Plan.

         As of December 31, 2000, 5,000,000 options to purchase 5,000,000
ordinary shares have been granted under the 1998 Plan and the Company does not
intend to grant any more options under the 1998 Plan. As of December 31, 2000,
3,435,716 options have been exercised for a total of 3,435,716 shares.

1999 Stock Option Plan

         In January 1999, the Company'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 determined
in the particular grant of the option. The Company reserved 2,500,000 ordinary
shares for issuance under the 1999 stock option plan.

         As of December 31, 2000 1,908,500 options to purchase 1,908,500
ordinary shares have been granted under the 1999 Plan. The Company does not
expect to grant any more options


                                      F-19

<PAGE>

under the 1999 Plan. The company expects to grant the remaining 591,500 options
under the terms and conditions of the 2000 Plan. As of December 31, 2000,
335,910 options granted under the 1999 Plan had been exercised for a total of
335,910 shares.

2000 Stock Option Plan

         In December 1999, the Company'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 after the date of the grant and will last five years. The option exercise
price shall be determined by Versatel. We have reserved 3,000,000 ordinary
shares for issuance under the 2000 Plan.

         As of December 31, 2000, 2,538,850 options to purchase 2,538,850
ordinary shares have been granted under the 2000 Plan. Versatel expects to grant
the remaining 461,150 options under the 2000 Stock Option Plan along with the
591,500 options remaining under the 1999 plan, in 2001. As of December 31, 2000,
67,000 options granted under the 2000 Plan had been exercised for a total of
67,000 shares.

         In October 1995, FASB Statement No. 123 "Accounting for Stock-Based
Compensation" was issued. The Company 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, 2000 no compensation expense was recognized for options granted
under these schemes. 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 2000, 1999 and 1998 would have been reduced to the following pro
forma amounts shown below:

                                                 2000         1999        1998
                                                 ----         ----        ----
                                                 Euro         Euro        Euro
        Net income:
         As reported ......................    (421,437)    (197,929)   (30,465)
         Pro Forma ........................    (433,217)    (199,139)   (31,494)
        Net loss per share (Basic and
        diluted): .........................
        As reported .......................       (4.92)       (3.88)     (0.93)
        Pro Forma .........................       (5.06)       (3.88)     (0.93)


                                      F-20
<PAGE>

         The movement in options outstanding during the three years ended
December 31, 1998, December 31, 1999 and December 31, 2000 is summarized in the
following table:

                                                        Number of     Weighted
                                                          Shares       Average
                                                        subject to    exercise
                                                          option        price
                                                          ------        -----
                                                                         Euro
              Outstanding at January 1, 1998.........      398,000       0.25
              Exercised during 1998..................           --         --
              Lapsed during 1998.....................           --         --
              Granted during 1998....................    5,000,000       1.03
                                                         ---------
              Outstanding at December 31, 1998.......    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

         The weighted average fair value of options granted in the year ended
December 31, 2000, was estimated at Euro 5.70 (1999: Euro 2.27) 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% (1999: 0.00%)
per annum, annual standard deviation (volatility) of 95% (1999: 81.62%), risk
free interest rate of 4.76% (1999: 3.42%) and expected term of five years.

         The exercise prices for options outstanding on December 31, 2000,
ranged from Euro 0.02 to Euro 79.19, (1999: Euro 0.00 to Euro 3.40) with a
weighted average exercise price of Euro 15.06 (1999: Euro 1.75) and a remaining
contractual life of 3.87 (1999: 3.65) years.

         All costs related to stock option plans are included in selling,
general and administrative expenses.

         The following table summarizes information about the stock options
outstanding December 31, 2000:

<TABLE>
<CAPTION>
                                                                                  Options
                  Options outstanding                                      currently exercisable
---------------------------------------------------------------------  --------------------------------
                                Weighted average
Range of exercise               Remaining            Weighted average             Weighted average
     prices          Number     Contractual life     Exercise price     Number    exercise price
-----------------  ----------   ----------------     ----------------  ---------  ----------------
<S>                <C>               <C>                  <C>          <C>           <C>
Euro 0.02--1.00      658,000         4.91                 0.03            --          --

Euro 1.00--5.00    2,748,743         1.77                 2.10         1,280,520      0.57

Euro 35.00         1,368,850         6.50                35.00            --          --

Euro 79.19           200,000         4.16                79.19            34,000     79.19
</TABLE>


                                      F-21
<PAGE>

13.      Taxes

         The Company had income tax carry forwards of approximately Euro 81.7
million at December 31, 1999 and Euro 420.0 million at December 31, 2000, which
may be utilized to reduce future income taxes payable mainly in The Netherlands.

         These income tax carry forwards do not expire and can be utilized
indefinitely under Netherlands tax legislation. A valuation allowance has been
established for the entire amount of the net operating loss carry forwards due
to the uncertainty of its recoverability.

14.      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. Until
1999, the Company essentially managed its business as one segment. The Company's
substantial growth during 2000 led the company to formally manage its business
by different segments on a service per customer type level and on a geographical
basis. Accordingly, these segments are presented below.

Revenues

         The Company's revenues on a service by customer type is divided as
follows:


                                                    2000      1999    1998
                                                    ----      ----    ----
                                                      (euro in thousands)
     Business customers
       Telephony...............................    70,833    31,695  15,643
       Data....................................    25,909    14,109       -
       Internet................................    26,378     4,942     407
     Residential customers
       Telephony...............................     9,012       405     175
       Internet................................    11,650       286       -
     Carrier Services customers
       Telephony...............................    18,098     5,194   1,727
       Data....................................    10,982     1,906       -
       Other...................................     8,607         -       -
                                                  -------    ------  ------
     Total.....................................   181,469    58,537  17,952
                                                  =======    ======  ======


                                      F-22

<PAGE>

         The Company's revenues presented on a geographical basis is divided as
follows:

                                                  2000     1999      1998
                                                  ----     ----      ----
                                                     (euro in thousands)

            The Netherlands.................     116,804   52,323   17,844
            Belgium.........................      21,634    4,417      108
            Germany.........................      43,031    1,797        -
                                                 -------   ------   ------
            Total...........................     181,469   58,537   17,952
                                                 =======   ======   ======

         The company has a substantial business relationship with the Gak-Group.
For the years ended December 31, 2000 and 1999, the Gak-Group accounted for
14.7% and 15.6% of Operating Revenue amounting to Euro 26.7million and Euro 9.1
million in the respective years. No Operating Revenue from the Gak-Group was
realized in the year ended 1998.

Adjusted EBITDA

         Due to the integrated nature of the Company's activities a meaningful
breakdown of the Adjusted EBITDA between services per customer type is not
presented here.

         The Company's Adjusted EBITDA presented on a geographical basis is
divided as follows:

                                                    2000       1999       1998
                                                 ---------   --------   -------
                                                       (euro in thousands)

            The Netherlands................       (88,460)   (59,832)   (18,147)
            Belgium........................       (19,183)    (9,165)       --
            Germany........................       (57,847)      (930)       --
                                                 --------    -------    -------
            Total..........................      (165,490)   (69,927)   (18,147)
                                                 ========    =======    =======

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.

         The Company's fixed assets presented on a geographical basis is divided
as follows:

                                            2000       1999        1998
                                          --------   --------    --------
                                                 (euro in thousands)

            The Netherlands..............  346,494    142,317     17,520
            Belgium......................   76,634     10,968          -
            Germany......................  168,263     79,409          -
                                           -------    -------     ------
            Total........................  591,391    232,694     17,520
                                           =======    =======     ======


                                      F-23
<PAGE>

15.      Advertising Expenses

         Advertising costs are expensed as incurred and amounted to Euro 20.4
million, Euro 5.9 million and Euro 2.4 million in 2000, 1999 and 1998
respectively.

16.      Result from Investing Activities

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

17.      Other assets impairments

         On 29 December 2000, the Company made a one-time payment to NorthPoint
of Euro 7.0 million in order to purchase NorthPoint's 50% stake in Versapoint.
In conjunction with this transaction, the Company has restructured the
Versapoint business to facilitate integration. Accordingly, The Company
performed a strategic review of Versapoint and the pan-European and wholesale
scope of the original Versapoint venture has been altered to match The Company'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 the Company. The Company wrote-down Versapoint's long-lived
assets based on detailed review of usable assets. Accordingly, the Company
recorded a noncash impairment charge of Euro 12.8 million.

18.      Other

         The Company also wrote down its minority interest in Hot Orange and
Consumer Desk amounting to Euro 2.3 million. An additional loss of Euro 3.1
million of dialer equipment was recognized in 2000. We did not realize any other
income or expenses during 1999.

19.      Rent and Operating Lease Commitments

         Future minimum commitments in connection with rent and other operating
lease agreements are as follows at December 31, 2000:


                 2001.......................  14,141
                 2002.......................  11,195
                 2003.......................  10,274
                 2004.......................   7,863
                 2005.......................   6,008
                 2006 and further...........  28,604
                                              ------
                 Total......................  78,085
                                              ======


                                      F-24
<PAGE>

         Rent and operating lease expenses amounted to approximately Euro 0.9
million in 1998, Euro 2.1 million in 1999 and Euro 15.2 million in 2000. The
main part of future commitments relates to the renting of Points-of-Presence for
a ten-year period.

20.      Commitments not reflected in the Balance Sheet

         Commitments in connection with the rollout of the Company's network,
not yet recorded on the balance sheet amount to approximately Euro 36.9 million
as of December 31, 2000.

         The Company has entered into earn-out arrangements with the former
shareholder of ITinera Services N.V., which will require the company to issue
shares of the Company to the former shareholders of ITinera, if certain revenue
and income thresholds are met. On December 31, 2000, 12,500 shares relating to
the earnout agreement were still outstanding. Accordingly, no such adjustments
have been recorded related to the earn-out arrangements.

         The issued guarantees at December 31, 2000 on behalf of third parties
amount to Euro 7.6 million.

21.      Legal Proceeding

         Taxation on share option plan

         In October 2000, the Company was informed by the public prosecutor of
potential civil and criminal tax liabilities relating to certain employee stock
options granted prior to the Company's initial public offering in July 1999.
Although the Company consulted with its Dutch tax advisors and the Dutch tax
authorities prior to issuing these options and believes that its tax treatment
of these options was correct, the Company is in negotiations with the public
prosecutor to settle these charges (without admitting or denying guilt). The
public prosecutor has indicated that he intends to seek a penalty and tax
payment up to approximately Euro 15.0 million. The Company intends to vigorously
challenge both the tax payment as well as the payment of any significant penalty
amount.

         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.

         Cromwilld settlement agreement finalized in 1999

         Cromwilld, one of the shareholders of the Company, objected to the 1998
recapitalization as described in footnote 5 and to the issuance of the two
tranches of units consisting of warrants and senior notes as described in
footnote 12, and threatened to challenge in court certain of the Company's
actions in connection therewith. In January 1999, Cromwilld filed, pursuant to
article 2:345 of the Netherlands Civil Code, a petition with the Enterprise
Chamber of the Court of Appeals in Amsterdam requesting the appointment of one
or more experts to investigate the management and affairs of the Company. In May
1999, the Enterprise Chamber denied Cromwilld's request.


                                      F-25
<PAGE>

         On July 20, 1999, the Company entered into, along with its shareholders
and certain other parties, a Settlement Agreement with Cromwilld Limited, in
order to resolve disputes arising out of our shareholders' agreement and other
matters. The major terms of the Settlement Agreement provide for:

         o    the transfer of 146,988 of our ordinary shares held by Telecom
              Founders B.V. to Cromwilld;

         o    the issuance of 200,000 shares of the Company on July 20, 1999 to
              Cromwilld at a price of NLG 7.50 per ordinary share;

         o    the ability for Cromwilld to include 1,800,000 of its ordinary
              shares in initial public offering of the Company;

         o    certain piggyback registration rights in favor of Cromwilld that
              will take effect 180 days from the date of the initial public
              offering of the Company;

         o    the payment by us of $300,000 from Cromwilld's fees and expenses
              related to the Settlement Agreement and certain other matters;

         o    the acknowledgment by all parties to the shareholders' agreement
              of the Company that the shareholders' agreement will be terminated
              concurrently with the closing of the initial public offering of
              the Company;

         o    the withdrawal by Cromwilld of its pending legal proceedings
              against the Company and its shareholders;

         o    Cromwilld's full cooperation with the initial public offering of
              the Company; and

         o    the obligation of the Company's shareholders, including Cromwilld,
              to procure the resignation or dismissal of Cromwilld's nominee,
              Denis O'Brien, from Supervisory Board of the Company, after the
              completion of the initial public offering.

         As of December 31, 2000, all of the terms of the Settlement Agreement,
except with respect to certain piggyback registration rights provided to
Cromwilld (which have not yet taken effect), have been completed.

         The expense related to this legal proceeding was classified as "Other
expense, net" in the income statement for the year ended December 31, 1999. This
agreement had no effect on the results for the year ended December 31, 2000.


                                      F-26
<PAGE>

22.      Subsequent Events

         We have initiated an organizational restructuring which is expected to
lead to a reduction of approximately 300 employees. We have implemented our
organizational restructuring in order to realize synergies existing in our
operations resulting from our increased scale.

         As a result of this restructuring, Versatel expects to recognize a
one-time charge of approximately Euro 7.5 million in the first quarter of 2001
to cover employee termination costs. Total annual savings in sales, general and
administrative expenses are estimated to be approximately Euro 15.0 million with
Euro 10.0 million, of such savings to be realized in 2001.



                                      F-27
<PAGE>



                                   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 30, 2001


                                      By:     /s/ PHILIPPE SANTIN
                                         ---------------------------------------
                                      Name:   Philippe Santin
                                      Title:  Chief Financial Officer


                                      Date:     March 30, 2001


<PAGE>



                                INDEX TO EXHIBITS

Exhibit       Description
No.

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) --     Indenture, dated March 30, 2000, between the Company and The Bank
              of New York, as Trustee

2.6(7) --     Escrow Agreement, dated May 27, 1998, between Versatel and U.S.
              Trust Company of New York, as Trustee and Escrow Agent

2.6(8) --     Escrow Agreement, dated December 3, 1998, between Versatel and
              U.S. Trust Company of New York, as Trustee and Escrow Agent

2.7(9) --     Principal Paying Agent, Conversion Agent, Conversion Calculation
              Agent and Registrar Agreement, dated December 17, 1999, between
              the Company and ING Bank N.V.

2.8    --     Principal Paying Agent, Conversion Agent, Conversion Calculation
              Agent and Registrar Agreement, dated March 20, 2000, between the
              Company and ING Bank N.V.

4.1(10)--     Agreement for the sale and purchase of shares of Svianed B.V.,
              dated June 11, 1999, between the Company, GAK Holding B.V. and
              Svianed B.V.

7      --     Statement re ratio earnings to fixed charges.

8      --     List of Subsidiaries.


----------------------

(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.

<PAGE>

(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 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.

(8) -    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, 2000 and incorporated herein by
         reference.

(9) -    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.

(10)-    Previously filed as an exhibit to the Company's Form 6K/A, filed with
         the Securities and Exchange Commission on June 23, 1999 and
         incorporated hereby.