UNITEDTable STATESof SECURITIES AND EXCHANGE COMMISSION Contents

~~Washington,~~UNITED DCSTATES ~~20549~~

~~FORM~~SECURITIES ~~10-K~~ AND EXCHANGE COMMISSION

xWashington, ~~ANNUAL~~DC ~~REPORT~~20549 ~~PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~FORM ~~the~~10-K ~~fiscal year ended December 31, 2002~~

OR x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

oFor ~~TRANSITION~~the ~~REPORT~~fiscal ~~PURSUANT~~year TOended ~~SECTION~~December 31, 132006 ~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OR ~~the transition period from to~~

~~Commission~~¨ ~~File~~TRANSITION ~~Number~~REPORT ~~000-29085~~ PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~IMPSAT~~For ~~Fiber~~the ~~Networks,~~transition ~~Inc.~~period from to

~~(Exact~~Commission ~~name~~File ofNumber ~~registrant~~000-29085 ~~as specified in its charter)~~

Delaware		52-1910372
(state or other jurisdiction of incorporation or		(IRS employer identification
organization)		number)

IMPSAT Fiber Networks, Inc.

~~Elvira~~(Exact ~~Rawson~~name deof ~~Dellepiane~~registrant ~~150~~ as specified in its charter)

Piso 8, C1107BCA

Delaware

52-1910372

(state or other jurisdiction of

incorporation or organization)

(IRS employer

identification number)

~~Buenos~~Elvira ~~Aires,~~Rawson ~~Argentina~~ de Dellepiane 150

~~(5411) 5170-0000~~ Piso 8, C1107BCA

~~(Address,~~Buenos ~~including zip code~~Aires, ~~and~~Argentina ~~telephone number, including area code, of registrant’s principal executive offices)~~

~~Securities registered pursuant to Section 12~~(b5411) of5170-0000 ~~the Act: None~~

~~Name~~(Address, ofincluding zip ~~Each~~code, ~~Exchange~~and ~~Title~~telephone number, including area code, of ~~Each~~registrant’s ~~Class~~principal onexecutive ~~Which~~offices) ~~Registered~~

Securities registered pursuant to Section 12(gb) of the Act: ~~common stock,~~None ~~par value $0.01 per share~~

~~Indicate~~Title byof ~~check~~Each ~~mark~~Class ~~whether~~Name ~~the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)~~ of ~~the~~Each ~~Securities~~ Exchange ~~Act~~On ofWhich 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 o Registered

~~Indicate~~Securities byregistered ~~check mark if disclosure of delinquent filers~~ pursuant to ~~Item~~Section ~~405~~12(g) of ~~Regulation S-K~~ ~~is not contained herein, and will not be contained, to~~ the ~~best~~Act: ofcommon ~~registrant’s knowledge~~stock, ~~in definitive~~par ~~proxy~~value ~~or information statements incorporated by~~$0.01 ~~reference~~per inshare ~~Part III of this Form 10-K or any amendment to this Form 10-K. o~~

Indicate by check mark ~~whether~~if the registrant is an ~~accelerated~~a ~~filer~~well-known (seasoned issuer, as defined in ~~Securities~~Rule ~~Exchange~~405 of the Securities Act ~~Rule 12b-2)~~. ~~Yes o No~~ YES ¨ NO x

Indicate by check mark ~~whether~~if the registrant ~~has filed~~is ~~all~~not ~~documents~~required ~~and~~to file reports ~~required~~pursuant to ~~be filed by~~ Section ~~12,~~ 13, or Section 15(d) of the ~~Securities Exchange~~ Act ~~of 1934 subsequent to the distribution of securities under a plan confirmed by a court~~. ~~Yes~~ YES ¨ NO x ~~No o~~

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether ~~our~~the ~~common stock~~registrant ~~held~~(1) has byfiled ~~non-affiliates~~all ~~was~~reports ~~approximately~~required ~~$0.3 million~~to asbe ~~of June~~filed by Section ~~28,~~13 ~~2002,~~or 15(d) of the ~~last~~Securities ~~business~~Exchange ~~day~~Act of ~~our~~1934 ~~most~~during ~~recently completed~~the ~~second~~preceding ~~fiscal~~12 ~~quarter~~months (~~based~~or ~~upon~~for ~~the~~such ~~closing~~shorter ~~price for~~period that the ~~common~~registrant ~~stock~~was asrequired ~~reported~~to onfile such ~~date~~reports), byand (2) has been subject to such filing requirements for the ~~Nasdaq Over-The-Counter~~past ~~Bulletin~~90 ~~Board)~~days. YES x NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to ~~There~~Item 405 ~~were~~of 10Regulation S-K (§229.405 of this chapter) is not contained herein,~~000~~ and will not be contained,~~000~~ ~~shares~~to the best of ~~common~~registrant’s ~~stock outstanding~~knowledge, onin ~~March~~definitive proxy or information statements incorporated by reference in Part ~~31,~~III of ~~2003~~this Form 10-K or any amendment to this Form 10-K. ¨

~~TABLE~~Indicate OFby ~~CONTENTS~~check mark whether the registrant is large accredited filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act.

CERTAIN CONSIDERATIONS		4
PART I		15
Item 1.	BUSINESS	15
Item 2.	PROPERTIES	24
Item 3.	LEGAL PROCEEDINGS	25
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS	27
PART II		28
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	28
Item 6.	SELECTED FINANCIAL DATA	28
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	52
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	54
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	54
PART III		55
Item 10.	DIRECTORS AND OFFICERS	55
Item 11.	EXECUTIVE COMPENSATION	58
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	65
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	68
Item 14.	CONTROLS AND PROCEDURES	69
PART IV		70
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	70
SIGNATURES		71
CERTIFICATIONS		73

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by ~~Outlook~~check ~~and~~mark ~~Uncertainties~~ whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x

~~Certain~~Indicate ~~information~~by incheck ~~this~~mark ~~Report~~whether ~~contains “forward-looking statements” within~~ the ~~meaning~~registrant ofhas ~~Section 21E~~filed ofall ~~the~~documents Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and ~~objectives~~ ofreports ~~management~~required ~~for~~to future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be ~~identified~~filed by ~~the use of terminology such as “may”~~Section 12, ~~“will”~~13, ~~“expects”,~~ ~~“plans”, “anticipates”, “estimates”, “potential”,~~ or ~~“continue”,~~ or15(d) ~~the~~of ~~negative thereof or other comparable terminology. Although IMPSAT Fiber Networks, Inc. believes that~~ the ~~expectations~~Securities ~~reflected~~Exchange inAct ~~its forward-looking statements are reasonable, it can give no assurance that such expectations or any~~ of ~~its~~1934 ~~forward-looking~~subsequent ~~statements will prove~~ to bethe ~~correct,~~distribution ~~and~~of ~~actual~~securities ~~results~~under ~~could~~a ~~differ~~plan ~~materially~~confirmed ~~from those~~by ~~projected~~a ~~or assumed in these forward-looking statements~~court. YES x NO ¨

~~Our~~The ~~Internet~~aggregate ~~address~~market isvalue ~~www.IMPSAT.com.~~of ~~We make~~our ~~available~~common ~~free~~stock ofheld ~~charge,~~by onnon-affiliates orwas ~~through~~approximately ~~the~~$61.2 ~~investor relations~~million ~~section~~as of ~~our web site~~June 30, ~~annual reports on Form 10-K~~2006, ~~quarterly~~the ~~reports~~last onbusiness ~~Form 10-Q~~day ~~and current~~of ~~reports~~our onmost ~~Form 8-K~~recently ~~and~~completed ~~amendments~~second tofiscal ~~those~~quarter ~~reports filed or furnished pursuant to Section 13~~(a)based orupon ~~15(d) of~~ the ~~Securities~~ ~~Exchange~~closing ~~Act~~price offor ~~1934~~the ascommon ~~soon~~stock as ~~reasonably practicable~~reported ~~after~~on ~~we electronically file~~ such ~~material~~date ~~with,~~by ~~or furnish~~the itNasdaq ~~to,~~ Over-the-Counter ~~U.S.~~Bulletin ~~Securities and Exchange Commission (“SEC”~~Board).

2 There were 10,153,231 shares of common stock outstanding on March 31, 2007.

The terms VSAT®, Dataplus®, Teledatos®, Regional Teleport®, Difusat®, Interplus®, Global Fax®, Minidat®, ConeXia® and Telecampus® are service marks or trademarks of IMPSAT Fiber Networks, Inc. or its subsidiaries that are registered or otherwise protected under the laws of various jurisdictions. In this Report, “~~company~~Company,” “IMPSAT,” “we,” “us” and “our” refer to IMPSAT Fiber Networks, Inc. and its subsidiaries.

3 Table of Contents

~~CERTAIN~~TABLE ~~CONSIDERATIONS~~ OF CONTENTS

In addition to other information in this Report, the following risk factors should be carefully considered in evaluating IMPSAT and its business because such factors currently may have a significant impact on IMPSAT’s business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this Report and the risks discussed in IMPSAT’s other SEC filings, actual results could differ materially from those projected in any forward-looking statements.


			Page
PART I			3
	ITEM 1.	BUSINESS	3
	ITEM 1A.	RISK FACTORS	12
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	23
	ITEM 2.	PROPERTIES	23
	ITEM 3.	LEGAL PROCEEDINGS	24
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS	25

PART II			26
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26
	ITEM 6.	SELECTED FINANCIAL DATA	28
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	56
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	57
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	57
	ITEM 9A.	CONTROLS AND PROCEDURES	57
	ITEM 9B.	OTHER INFORMATION	58

PART III			58
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	58
	ITEM 11.	EXECUTIVE COMPENSATION	60
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	69
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	71
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	72

PART IV			73
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS	73
EXHIBIT INDEX			74
SIGNATURES			76

We2 ~~have emerged from Chapter 11 bankruptcy and will potentially need additional financing for working capital purposes~~

OnTable June 11, 2002, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). On October 23, 2002, we also filed with the Bankruptcy Court our plan of reorganization (as amended, the “Plan”). By order dated December 16, 2002, the Bankruptcy Court confirmed the Plan. In accordance to the terms of the Plan, we formally emerged from bankruptcy on March 25, 2003 (the “Effective Date”). Our recent emergence from Chapter 11 bankruptcy may adversely affect our ability to negotiate favorable trade terms with lenders, suppliers and vendors. Contents

~~Our~~PART ~~projections~~I contained in the Plan contemplate a $20 million financing in 2005 for working capital purposes, regarding which there also can be no assurances that such financing will be achieved. In addition, the new guaranteed senior notes issued under the Plan (the “New Guaranteed Senior Notes”) must be repaid, or refinanced, upon the maturity date of such notes eight years after the Effective Date. We may be required to refinance all or a portion of such indebtedness at such time in order to repay the New Guaranteed Senior Notes because we may not have sufficient internally-generated funds to do so. In such event, we anticipate that we would be able to arrange refinancing by means of the issuance of debt or the infusion of equity at such time. However, there can be no assurances that any such refinancing will be achieved. In such event, the holders of the New Guaranteed Senior Notes will be entitled to enforce their rights and remedies under the New Guaranteed Senior Notes.

WeItem ~~are~~1. ~~in default under certain of our operating subsidiary indebtedness~~ BUSINESS

~~Although~~General we have emerged from bankruptcy, we remain in default under indebtedness owed to certain creditors who voted against the Plan. Under the Plan, the claims of these creditors were contingent obligations arising under guarantees by our parent holding company of certain primary indebtedness of our operating subsidiaries. In accordance with the Plan, these holders will receive, in full satisfaction of their contingent guarantee claims (“Post-Effective Date Contingencies”), a pro rata share of the 9.8 million shares of our new common stock (“New Common Stock”) issuable to our creditors under the Plan. See “Business — Chapter 11 Filing and Emergence.” Notwithstanding our settlement of the Post-Effective Date Contingencies, as a consequence of the occurrence of our Chapter 11 bankruptcy, an event of default has occurred and is continuing with respect to certain of the related primary underlying indebtedness of our operating subsidiaries. These defaults, which relate to indebtedness totaling approximately $18.6 million in outstanding principal amount, give the respective creditors the right to accelerate such indebtedness and seek the immediate repayment of all outstanding amounts and accrued interest thereon. We may lack the financial resources to meet our obligations under some or all of such defaulted indebtedness. We are currently conducting negotiations at the level of our operating subsidiaries with these creditors with a view to rescheduling or otherwise restructuring these defaulted debt obligations. There is no assurance, however, that we will be successful in these negotiations or that we will reach a definitive agreement with these creditors to reschedule or restructure such obligations. Under those circumstances, certain of our operating subsidiaries could be forced to seek protection or liquidate under the bankruptcy laws of their respective jurisdictions. Any such event would have a material adverse effect upon our entire company and could threaten our ability to continue as a going concern.

We ~~have~~are a ~~history~~provider of ~~incurring~~private ~~losses~~network ~~that~~telecommunications, ~~may make~~Internet itand ~~difficult~~information technology services to ~~fund~~over ~~our~~4,700 ~~future~~corporate ~~operations~~and government clients in Latin America. We offer integrated data transmission, data center and value added services, Internet solutions and voice solutions, with an emphasis on broadband transmission, for national and multinational companies, financial institutions, governmental entities and other business customers. We have operations in Argentina, Colombia, Venezuela, Ecuador, Brazil, Chile, Peru and the United States. Through these operations, we provide our customers with services throughout Latin America and the Caribbean. We provide our services through our networks, which consist of owned fiber optic and wireless links, teleports, data centers and earth stations and leased fiber optic and satellite links.

We ~~commenced~~have ~~commercial~~an ~~operations~~extensive inpan-Latin ~~1990~~American infrastructure, comprised of our Broadband Network (as defined below) and ~~have~~ ~~experienced~~data ~~rapid~~center ~~growth~~facilities. At December 31, ~~increasing~~2006, our ~~annual~~Broadband ~~revenues~~Network (“Broadband Network”) consisted of 15 metropolitan area fiber optic networks and wireless links extending over 1,000 route kilometers in some of the largest cities in Latin America, long-haul ~~from~~fiber ~~$8.2 million~~optic backbones in ~~1991~~Brazil, toArgentina, ~~$128~~Chile and Colombia extending over 8,880 route kilometers and capacity on undersea cable systems.4 ~~million~~Our inBroadband ~~1996~~Network enables connections between and among major Latin American countries, combined with ~~$230.2 million~~satellite capabilities, global telecommunications connections and Internet access connecting major cities to other locations in ~~2002~~Latin America, the Caribbean and the United States. WeOur ~~recorded~~extensive infrastructure also includes 15 data centers (“Data Centers”) owned and operated by us, located in the largest cities in Argentina, Brazil, Colombia, Peru, Ecuador, Chile and Venezuela, which complement the Broadband Network.

4Our comprehensive solutions consist of any combination of our service offerings, including the enhanced and additional services that we are able to offer using our Broadband Network and Data Center facilities. Our Broadband Network supports a variety of advanced transmission technologies including Dense Wave Division Multiplexing, or DWDM, Asynchronous Transfer Mode, or ATM, Multi-protocol Label Switching, or MPLS and Internet Protocol, or IP. Through our Data Centers, we are able to manage mission critical applications and co-location services to carriers, including the rental of secure space, equipment provisioning and operation maintenance services and interconnections in meet-me-room facilities.

~~net~~History losses of $34.0 million in 1998, $131.5 million in 1999, $154.1 million in 2000, $715.3 million in 2001, and $204.5 million in 2002. Increased competition, adverse economic conditions in our countries of operation and other factors have negatively affected our rates of revenue growth and expansion. As a result, our revenue growth has not produced results capable of funding our operations and repaying its indebtedness when due. We expect our net losses to continue. We will need to raise additional financing to achieve and sustain profitability, and to fund our operating requirements.

AsOur aoperations ~~result~~began ofin Argentina in 1990 under the ~~implementation~~name ofIMPSAT S.A. (“IMPSAT Argentina”). We began expanding our ~~plan~~operations outside of Argentina with the establishment of ~~reorganization~~operations wein ~~now~~Colombia, ~~have~~IMPSAT S.A. (“IMPSAT Colombia”) in 1991, and Venezuela, Telecomunicaciones Impsat S.A. (“IMPSAT Venezuela”) in 1992. In 1994, IMPSAT Corporation was organized as a Delaware ~~significant~~holding ~~concentration~~company ofto combine the then-current Impsat businesses in Argentina, Colombia and Venezuela and its future businesses. Thereafter, new operating subsidiaries were created in Ecuador, Impsatel del Ecuador S.A. (“IMPSAT ~~holders~~Ecuador”) ofin 1994, the United States, IMPSAT USA, Inc. (“Impsat USA”) in 1995, and Brazil, Impsat Comunicacoes Ltda. (“IMPSAT Brazil”) in 1998. In January 2000, we changed our ~~shares~~Company’s ofname ~~New~~from ~~Common~~IMPSAT ~~Stock~~Corporation to IMPSAT Fiber Networks, Inc. During 2001, we commenced operations in Chile, Impsat Chile S.A. (“IMPSAT Chile”), and Peru, Impsat Peru S.A. (“IMPSAT Peru”).

On ~~the~~June 11, ~~Effective Date~~2002, ~~certain~~we ~~holders~~filed ofa ~~claims have~~voluntary ~~received~~petition orfor ~~will~~relief ~~receive~~under ~~distributions~~Chapter 11 of athe ~~significant number~~United ofStates ~~shares~~Bankruptcy ofCode ~~New~~with ~~Common~~the ~~Stock~~bankruptcy orcourt. On September 4, 2002, we filed our plan of ~~securities convertible~~reorganization, ~~into~~which orwe ~~exercisable~~refer ~~for~~to ~~such~~as ~~New~~the ~~Common~~Plan, ~~Stock~~with the bankruptcy court. ~~If such~~During ~~holders~~our ofbankruptcy ~~significant~~proceedings, ~~numbers~~we ofoperated ~~shares~~our ofbusiness ~~the~~and ~~New~~managed ~~Common Stock~~our ~~were~~assets toin ~~act~~the ordinary course as a debtor-in-possession. ~~group~~By order dated December 16, 2002, ~~such~~the ~~holders~~bankruptcy ~~may~~court beconfirmed inthe aPlan. ~~position to~~In ~~control~~accordance with the ~~outcome~~terms of ~~actions~~the ~~requiring stockholder approval~~Plan, ~~including~~we ~~the~~formally ~~election~~emerged offrom ~~directors.~~bankruptcy ~~The~~on ~~concentration of~~March 25, ~~ownership~~2003, ~~could~~which ~~also~~we ~~facilitate~~refer orto ~~hinder~~as athe ~~negotiated~~Effective ~~change~~Date. ofAs ~~control~~a result of ~~the~~our ~~company~~Chapter ~~and,~~11 ~~consequently,~~reorganization ~~affect~~we ~~the~~reduced ~~value~~our ~~of the~~indebtedness ~~New~~by ~~Common~~more ~~Stock~~than $700 million.

~~Further,~~Proposed ~~the~~Acquisition ~~possibility that one or more~~ of the ~~holders~~ ofCompany ~~significant~~by ~~numbers of shares of the New Common Stock~~Global ~~may~~Crossing ~~determine to sell all or a large portion of their shares of New Common Stock in a short period of time may adversely affect the market price of the New Common Stock.~~

~~There~~The isMerger ~~a lack of an established market for our New Common Stock~~

On ~~There~~October 26, is2006, ~~currently~~we noentered ~~trading~~into ~~market~~a ~~for~~definitive ~~the~~agreement ~~New Common~~with ~~Stock~~Global Crossing Limited, ~~nor~~a isBermuda itcorporation ~~known~~(“Global ~~whether~~Crossing”) orand ~~when~~GC ~~one~~Crystal ~~would~~Acquisition, ~~develop~~Inc. ~~There~~, ~~can~~a beDelaware nocorporation ~~assurance~~(“MergerCo.”), ~~that~~a anwholly ~~active~~owned subsidiary ~~market~~of ~~will~~Global ~~develop therefor.~~Crossing ~~Further,~~(the ~~there~~“Merger ~~can~~Agreement”) to be noacquired ~~assurance~~in asa tomerger transaction (the ~~degree~~“Merger”). Under the terms of ~~price~~ ~~volatility~~the inMerger aAgreement, ~~such~~our ~~market~~stockholders will receive $9.32 Noin ~~assurance~~cash, ~~can~~without beinterest, ~~given~~for aseach share toof our common stock they hold (the ~~market~~“Merger ~~prices~~Consideration”). ~~that~~Each ~~will~~outstanding ~~prevail~~option ~~for~~or ~~the~~warrant ~~New~~to ~~Common~~purchase ~~Stock following~~our ~~the~~common ~~Effective~~stock ~~Date.~~of a per share

~~There~~3 ~~is a lack of an established market for our New Guaranteed Senior Notes~~

OnTable the Effective Date, in accordance with the Plan, the company issued the New Guaranteed Senior Notes to certain impaired classes of creditors, some of whom may prefer to liquidate their investment rather than to hold it on a long-term basis. There is currently no trading market for the New Guaranteed Senior Notes, nor is it known whether or when one would develop. There can be no assurance that an active market will develop therefor. Further, there can be no assurance to the degree of price volatility in any such market. Contents

Weexercise ~~are~~price ~~restricted~~lower inthan ~~our~~the ~~ability~~Merger Consideration will be converted into the right to ~~issue~~receive a cash amount equal to the Merger Consideration less the ~~dividends~~exercise price for such option or warrant, as the case may be, net of any applicable taxes. In addition, Global Crossing will refinance, purchase, defease, repay or assume the Company’s outstanding indebtedness as of the effective time of the Merger. As a result of the Merger, the Company will become a wholly-owned subsidiary of Global Crossing and will cease to be a public company.

We doexpect ~~not~~the ~~anticipate~~Merger ~~paying~~to ~~any~~be ~~dividends~~completed onbefore May 25, 2007 after the ~~New~~ ~~Common~~satisfaction ~~Stock~~or inwaiver of the ~~foreseeable~~conditions ~~future.~~precedent Inset ~~addition~~forth in the Merger Agreement, including the ~~covenants~~ ~~under~~receipt of the ~~indentures~~remaining ~~governing~~regulatory ~~our~~approval ~~New~~in ~~Guaranteed~~Venezuela. On ~~Senior~~February 22, ~~Notes~~2007, ~~limit~~the ~~(and~~parties ~~any~~amended ~~future~~the ~~financing~~Merger ~~facility~~Agreement, among other things, to ~~which we~~extend ~~are~~the adate ~~party~~by ~~will~~which ~~likely~~either ~~also~~party ~~limit)~~may terminate the ~~ability~~Merger ofAgreement, ~~our company~~from March 26, 2007 to ~~pay~~April 16, ~~dividends.~~2007, ~~Certain~~to ~~institutional~~allow ~~investors~~for ~~may~~more time to satisfy the ~~only~~conditions ~~invest~~precedent in(the ~~dividend-paying~~“Final ~~equity~~Termination ~~securities~~Date”). orOn ~~may~~March 15, ~~operate under~~2007, ~~other~~the ~~restrictions~~parties ~~that~~further ~~may~~amended ~~prohibit~~the orMerger ~~limit~~Agreement ~~their~~to additionally extend the Final Termination Date to May 25, 2007, coincident with the date on which an ~~ability~~affiliate of Global Crossing is required to ~~invest~~redeem incertain ~~our~~notes ~~New~~if ~~Common~~the ~~Stock~~Merger Agreement has not theretofore closed.

Upon the closing of ~~Economic~~the Merger, shares of our common stock will be held by Global Crossing and ~~political~~will ~~conditions~~no inlonger ~~Latin~~be traded on the Nasdaq OTC Bulletin Board. See “Recent Developments” and “Forward Looking Statements” for additional information. The ~~America~~Merger ~~pose~~Agreement ~~numerous~~contains ~~risks~~certain termination rights for both us and Global Crossing. The Merger Agreement provides that in certain circumstances, upon termination, we would be required to ~~our~~pay ~~operations~~Global Crossing a termination fee of $5,000,000. A more detailed description of the Merger Agreement is available in the Current Report on Form 8-K that we filed with the SEC on October 30, 2006.

~~Substantially~~In ~~all~~connection ofwith ~~our~~the ~~revenues~~Merger ~~are~~Agreement, ~~derived from~~Morgan ~~operations~~Stanley & inCo., ~~Latin~~Incorporated ~~America~~(“Morgan Stanley”), W.R. ~~During~~Huff ~~2001~~Asset ~~and~~Management ~~2002~~Co., ~~we derived~~LLC ~~approximately~~(“WR ~~40.2%~~Huff”), ~~and~~as ~~24.6%~~well as several of our ~~consolidated~~officers ~~net revenues~~and ~~from~~a ~~services~~director ~~provided~~(in bytheir capacities ~~IMPSAT~~as ~~Argentina, approximately~~either ~~20.4%~~a stockholder and/or ~~25.3%~~beneficial byowner ~~IMPSAT~~of ~~Colombia~~our ~~and approximately~~common ~~14.7%~~stock and/or ~~15.6%~~a bynoteholder), ~~IMPSAT~~entered ~~Brazil.~~into ~~Our~~support ~~company~~agreements ~~also has~~with ~~operations~~Global inCrossing. ~~Venezuela,~~Pursuant ~~Mexico,~~to the ~~United~~support ~~States~~agreements, ~~Ecuador, Chile~~the parties agreed to support and ~~Peru.~~vote ~~Other~~in ~~than~~favor of the Merger ~~United States~~Agreement, ~~each~~the ~~country~~Merger ~~where we~~and ~~have~~the ~~significant~~other ~~operations~~transactions ~~has~~contemplated ~~experienced~~by ~~political~~the ~~and economic~~Merger ~~instability~~Agreement inand ~~recent~~WR ~~years.~~Huff ~~Moreover,~~and asMorgan ~~events~~Stanley inagreed ~~the Latin~~to ~~American~~tender ~~region~~all ~~have~~of ~~demonstrated,~~their ~~negative~~Series ~~economic~~A ~~or political~~6% ~~developments~~Senior inGuaranteed ~~one~~Senior ~~country~~Notes indue 2011 (the ~~region~~“Series ~~can~~A ~~lead~~Notes”) toand Series orB ~~exacerbate~~6% ~~economic~~Senior orGuaranteed ~~political~~Senior ~~crises~~Notes ~~elsewhere~~due in2011 (the ~~region.~~ ~~Furthermore,~~“Series ~~events~~B Notes”) in ~~recent~~the ~~years~~offer into ~~other~~purchase ~~developing markets~~the ~~have~~Series ~~placed~~A ~~pressures~~Notes onand the ~~stability~~Series ofB Notes as contemplated in the ~~currencies of~~Merger aAgreement. ~~number~~The ofsupport ~~countries~~agreements inwill ~~Latin~~terminate ~~America,~~upon ~~including~~the ~~Argentina, Brazil,~~earlier ~~Colombia~~of ~~and~~the consummation ~~Venezuela.~~of ~~Continued~~the ~~pressures~~Merger onor the ~~local currencies~~termination inof the ~~countries~~Merger inAgreement. ~~which~~The weMerger ~~operate~~Agreement ~~are~~and ~~likely~~the ~~to have~~forms anof ~~adverse~~the ~~effect~~support onagreements ~~many~~are ofattached ~~our~~as ~~customers,~~an ~~which,~~exhibit into ~~turn, could~~a ~~adversely~~Current ~~affect~~Report ~~us.~~on ~~Volatility~~Form in8-K ~~regional~~filed ~~currencies~~by ~~and capital~~us ~~markets~~with ~~has~~the ~~also~~SEC ~~had~~on anOctober 30, ~~adverse~~2006.

5 Stockholder Merger Approval

A special ~~effect~~meeting onof ~~our~~the ~~ability~~Company’s ~~and~~stockholders ~~that~~was ofheld ~~our~~on ~~customers to~~January 17, ~~gain~~2007, ~~access~~and tothe ~~international~~shareholders ~~capital~~voted ~~markets~~in ~~for~~favor ~~necessary financing~~of ~~and~~the ~~refinancing.~~adoption Aof ~~lack~~the ofMerger ~~international~~Agreement. ~~capital sources~~The ~~for~~results ~~emerging~~of ~~market~~the ~~borrowers~~stockholder ~~could~~meeting ~~have~~were reported in a ~~material adverse~~Current ~~effect~~Report on Form 8-K filed by us ~~and~~with ~~many~~the ofSEC ~~our~~on ~~customers~~January 17, 2007.

~~According~~Tender toOffer published reports, during 2002, Argentina’s gross domestic product (GDP) contracted by 10.9%, while Brazil experienced 1.5% growth in GDP. During 2002, Colombia’s GDP grew by 1.8% and Venezuela’s GDP contracted by 8.9%. Published reports have forecasted 2003 GDP growth of 1.1% for Argentina, 1.8% for Brazil and 2.0% for Colombia, and a 7.6% contraction for Venezuela. We do not expect fundamental improvements in macroeconomic conditions in Latin America in the short term.

~~Argentina~~Pursuant ~~faces~~to athe ~~severe~~terms ~~political~~of the Merger Agreement, we commenced an offer to purchase all of the outstanding Series A Notes and ~~financial~~ ~~crisis~~Series B Notes at 101% of the outstanding principal amount thereof, plus accrued interest thereon (if any) to the payment date. The closing of the offer to purchase is contingent upon the occurrence of the closing of the Merger.

Consent ASolicitation significant portion of our operations, properties and customers are located in Argentina. Revenues from services from our Argentine operations, acting through IMPSAT Argentina, for each of 2001 and 2002 represented approximately 40.2% and 24.6% of our consolidated net revenues from services during those years. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing from time to time in Argentina. The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth and high and variable levels of inflation.

In ~~the~~addition, ~~fourth~~we ~~quarter~~commenced ofa ~~1998,~~separate ~~the~~consent ~~Argentine economy~~solicitation ~~entered~~with ~~into~~respect ato ~~recession~~each ~~that~~of ~~caused~~the indentures for the ~~gross~~Series ~~domestic~~A Notes ~~product~~and toSeries ~~decrease~~B byNotes, 3%which insought ~~1999,~~certain ~~0.5%~~amendments into ~~2000,~~the ~~4.5%~~indentures inthat ~~2001, and~~will ~~10.9%~~only inbecome ~~2002~~effective upon consummation of the Merger. ~~Beginning~~Because inwe received the ~~second~~requisite ~~half~~consents offrom ~~2001, Argentina’s~~the ~~recession~~holders ~~worsened~~of ~~significantly,~~the ~~precipitating a~~Series ~~severe~~A ~~political~~Notes and ~~economic~~the ~~crisis.~~holders Inof ~~December~~the ~~2001~~Series B Notes, the ~~Argentine~~ ~~government~~Company ~~introduced~~executed aand ~~partial~~delivered ~~freeze~~supplemental ~~on bank deposits~~indentures, which ~~resulted~~set inforth ~~widespread~~the ~~political~~amendments ~~protests~~to ~~and social~~the ~~disturbances~~indentures ~~and~~governing the ~~resignation~~Notes. The results of ~~Argentina’s~~the ~~then president,~~consent ~~Fernando~~solicitation dealong lawith ~~Rua.~~the ~~Such~~supplemental ~~protests~~indentures ~~and~~were ~~disturbances~~filed on a Current Report on ~~have~~Form ~~persisted~~8-K asfiled ~~the~~by ~~Argentine~~us ~~economy~~with ~~has~~the ~~continued~~SEC ~~to deteriorate~~on November 17, 2007.

~~Argentina~~Our isOrganizational ~~currently~~Structure trying to negotiate a multibillion-dollar financial aid package from the International Monetary Fund (the “IMF”) to help overcome that country’s debilitating economic crisis. To date, the IMF and other multilateral and official sector lenders have indicated an unwillingness to provide financial aid until a sustainable economic program has been presented. Although in January 2003 the IMF refinanced $7 billion of Argentina’s indebtedness to the IMF that had fallen due, there has since been little progress on critical reforms or on the timing of any new agreement with the IMF. It is unclear whether Argentina’s current president, Eduardo Duhalde, has the necessary support to implement the reforms required to restore economic growth and public confidence. In addition, presidential elections are scheduled in Argentina during April 2003, and a change in governmental policies in Argentina, along with investor reactions to any such changes, could have further adverse effects on the Argentine economy. The rapid and radical nature of the recent changes in the Argentine social, political, economic and legal environment and the absence of a clear political consensus in favor of any particular set of economic policies, have created an atmosphere of great uncertainty. As a result, commercial and financial activities have been disrupted, further aggravating the economic recession that precipitated the current crisis. These conditions have had, and can be expected to continue to have, a material adverse effect on IMPSAT Argentina’s and our overall financial condition and results of operations.

~~The~~Our ~~political~~organizational ~~and~~structure ~~financial~~currently ~~crisis~~consists ~~has resulted~~of infour ~~the~~operational ~~devaluation~~units, ofas ~~the~~follows: ~~Argentine peso~~

In4 late December 2001, Argentina’s ongoing political and financial crisis deepened and the country defaulted on its massive foreign debt. In early January 2002, the government of President Eduardo Duhalde abandoned the decade-old fixed peso-dollar exchange rate and permitted the peso to float freely against the U.S. dollar. The peso free market opened on January 11, 2002 and traded at 1.65 pesos to the U.S. dollar and has traded as low as 3.87 pesos to the U.S. dollar on June 26, 2002. At March 31, 2003, the exchange rate was 2.88 pesos to the U.S. dollar. The devaluation of the Argentine pesoaffects our consolidated financial statements by generating foreign exchange transaction gains or losses on dollar-denominated monetary assets and liabilities of IMPSAT Argentina and generally results in a decrease, in U.S. dollar terms, in our revenues, costs and expenses in Argentina.

6 Table of Contents

In• ~~February~~Sales ~~2002,~~& ~~the Argentine government instituted the “pesification”decree. Generally~~Services, ~~this~~ decree mandates that all monetary obligations arising from agreements subject to Argentine law denominated in foreign currency and existing as of January 6, 2002 are mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso. Such obligations generally may be adjusted pursuant to an index published by the Argentine central bank called the “coeficiente de estabilización de referencia” (“CER”), which is ~~based~~responsible onfor ~~the~~sales ~~Argentine consumer price index. Contracts denominated in pesos before the decree continue to be denominated in pesos, unaffected by the decree. The devaluation~~ and ~~the “pesification”~~for ofensuring ~~agreements~~customer ofsatisfaction with our ~~company governed by Argentine law may have adverse, unknown and unforeseeable effects on us.~~ services;

~~Since~~• ~~the~~Products ~~“pesification”~~& ~~decree~~Marketing, a ~~significant~~which ~~number~~manages of IMPSAT Argentina’s customer contracts and a large percentage of its operating cash inflows are now denominated in pesos. However, IMPSAT Argentina’s debt service payments and a significant portion of its costs (including capital equipment purchases and payments for certain leased satellite and terrestrial capacity) remain denominated and payable in U.S. dollars. Accordingly, our ~~financial~~ ~~condition~~comprehensive ~~and~~portfolio ~~results~~ of ~~operations in Argentina are dependent upon IMPSAT Argentina’s ability to generate sufficient pesos (in U.S. dollar terms) to pay its costs~~products, ~~expenses~~ ~~and~~product to satisfy its debt service requirements. Because of the recent nature of these events and the significant uncertainties regarding the extent and duration of the devaluation and the direction of the fiscal policies in Argentinaupgrades, ~~management~~new ~~cannot~~product ~~presently~~development ~~determine or reasonably estimate the impact a continued economic crisis in Argentina could possibly have on IMPSAT Argentina’s~~ and ~~our consolidated cash flows, financial condition, and results of operations.~~ launches;

On• ~~March 5,~~Network ~~2003~~Operations, ~~Argentina’s~~which ~~Supreme Court~~manages ~~declared~~our ~~the~~telecommunications ~~“pesification”decree unconstitutional~~infrastructure to the extent that it required the mandatory redenomination of U.S. dollar bank deposits to pesos. Although the ruling applies only to amounts held by the petitioner in that case on deposit at a state-owned bank, the decision will likely strengthen existing (and ~~create~~searches afor ~~profusion of similar) claims by other depositors seeking to “redollarize” their deposits. This could force~~ the ~~Argentine~~ ~~government~~most toefficient ~~issue~~technologies ~~long-term~~available ~~bonds~~ in ~~satisfaction of such claims, which, in turn, could increase Argentina’s public debt burden and cause a further deterioration of its national economy. The future judicial implementation of~~ the ~~Argentine~~ ~~Supreme~~market; ~~Court’s decision as well as any legislative or executive response could take an unknown variety of forms. Accordingly, its potential impact on the Argentine economy~~ and ~~on our operations in that country presently cannot be estimated.~~

~~Numerous~~• ~~uncertainties~~Corporate ~~exist~~Services, ~~surrounding~~which ~~the ultimate~~provides ~~resolution~~support ofto ~~Argentina’s~~our ~~economic~~Sales and ~~political instability~~Services, Product and ~~actual~~Marketing ~~results could differ from those estimates~~ and ~~assumptions~~Network ~~utilized.~~Operations ~~The~~units ~~Argentine~~through ~~economic~~its ~~and political~~five ~~situation~~subdivisions: ~~continues~~Administration ~~to evolve~~ and ~~the Argentine government may enact future regulations or policies that~~Audit, ~~when finalized~~Finance and ~~adopted~~Treasury, ~~may~~Human ~~adversely and materially impact~~Resources, ~~among~~ ~~other~~Planning ~~items:~~and ~~(i) the~~Control realized revenues we receive for services offered in Argentina; (ii) the timing of repatriations of any dividends or other cash flows from IMPSAT Argentina to our holding company in the United States; (iii) our asset valuations; and ~~(iv) our peso-denominated~~Process ~~monetary assets~~ and ~~liabilities~~Information Technology.

~~Brazilian~~The ~~economic~~objective of these units is to provide consistent delivery of services to our customers across the Company. These units have served, and ~~political~~are ~~conditions~~expected to continue to serve, as the foundation for our success and sustained growth. Our ~~may~~current ~~have~~structure aenables ~~direct~~us ~~impact~~to focus on our ~~operations~~customers’ needs and clearly define accountability within our organization. Furthermore, it assists us in controlling our expenses and investments and attaining operational efficiency. We believe this structure has played an important role in the Company’s achievements, which we expect will continue into 2007.

Our ~~operations~~Services in Brazil, which commenced in 1998, are less developed than in several of our other main countries of operation. However, Brazil, as the largest country and economy in Latin America, represents a significant existing and potential market for us. Our company, acting through IMPSAT Brazil, has expanded its operations in Brazil since that subsidiary’s inception. Revenues from services from our Brazilian operations for 2001 and 2002 represented approximately 14.7% and 15.6%, respectively, of our consolidated net revenues from services for such periods. For 2002, our operations in Brazil represented the third largest source of revenues among the nine countries in which we operate. Accordingly, our operations in Brazil subject our financial condition and results of operations to various additional economic and political risks.

~~The~~Our ~~Brazilian~~comprehensive ~~government~~solutions ~~has~~consist ~~frequently intervened~~of inany ~~the~~combination ~~Brazilian~~of ~~economy~~our ~~and~~service ~~occasionally~~offerings, ~~makes drastic~~including ~~changes~~the inenhanced ~~policy.~~and ~~The~~additional ~~Brazilian~~services ~~government’s actions~~that towe ~~control~~are ~~inflation~~able ~~and~~to offer ~~effect~~using ~~other~~our ~~policies~~Broadband ~~have often~~Network ~~involved~~and ~~wage~~Data ~~and~~Center ~~price~~facilities. ~~controls,~~These ~~currency~~service ~~devaluations, capital~~offerings ~~controls~~are ~~and~~currently ~~limits~~classified oninto ~~imports~~four categories, ~~among~~specifically, ~~other~~broadband ~~things.~~and ~~Luiz Inacio~~satellite ~~Lula~~data datransmission ~~Silva~~services, ~~the~~value ~~left-wing~~added ~~candidate~~services, ~~was~~Internet ~~elected~~services, and ~~president~~telephony ofservices, ~~Brazil~~which onare ~~October 27,~~ more fully described below.

7Data Transmission Services. We offer our customers a broad range of end-to-end network service combinations for their point-to-point and point-to-multipoint telecommunications needs, ranging from simple connections to customized private network solutions. We offer our network services over our proprietary and leased networks, which are comprised of metropolitan area fiber optic rings and wireless networks, fiber optic and satellite links.

~~2002~~• Connection Services. ~~The~~We ~~economic~~provide our customers with IP multiple protocol label switching (“IP MPLS”) services, clear channels, frame relay services and ~~fiscal~~ATM ~~policies~~services ~~of Mr~~to support their specific transmission requirements. ~~Lula~~ daIncreasingly, ~~Silva~~companies ~~could~~are ~~have~~selecting anIP ~~adverse~~Services ~~effect~~to onmeet their transmission requirements. IP MPLS, frame relay and ATM services are typically purchased by customers requiring the ~~Brazilian~~ ~~economy~~reliable and ~~our~~rapid ~~company’s~~transmission ~~financial~~of ~~condition~~voice, data and ~~results~~ video traffic. Clear channels are typically purchased by customers that constantly transmit large amounts of ~~operation~~such traffic. For corporate customers, speed connections vary from low capacity (sub-rates) to 100 Mbps. For Carriers, bandwidth may go up to 10 gigabits per second. We are able to access customers with multiple technologies, such as copper, wireless, fiber and satellite.

~~Our~~• ~~business,~~Private ~~financial~~Network ~~condition~~Services. For customers that require significant bandwidth and ~~result~~reliable data transmission between a number of ~~operations~~ insites, ~~Brazil~~we ~~may~~offer becustomized ~~adversely~~private ~~affected~~networks bythat ~~changes~~combine ~~in policy~~fiber ~~involving~~optic, ~~factors~~fixed ~~outside~~wireless and satellite technology. Our IP MPLS transport capabilities allow us to offer a variety of ~~our~~other integrated services including, VoIP, video conferencing, network monitoring, trouble shooting reports, quality control and other value added services. Our consultative sales process ensures that each private network is designed to meet the evolving specific business and systems requirements of each customer. In addition, ~~such~~we ~~as:~~ offer an outsourcing solution for customers without technical personnel, or who choose not to operate, manage and maintain their own telecommunications networks.

•Value ~~monetary~~Added ~~and~~Services. ~~fiscal~~We ~~policies;~~offer •value ~~currency~~added ~~fluctuations;~~services, •including ~~energy~~managed ~~shortages;~~security and •applications ~~other~~hosting ~~political,~~services ~~social~~through our advanced data center facilities. We also offer information technology solutions and data ~~economic~~center ~~developments~~services indesigned orto ~~affecting~~facilitate ~~Brazil~~our customers’ needs and optimize our customers’ business processes.

In• ~~early~~Data ~~1999,~~Center ~~the~~Services. ~~Brazilian~~We ~~government~~have ~~allowed the~~established ~~real~~15 todata ~~float~~center ~~freely,~~facilities ~~resulting~~that inoffer ahosting ~~38%~~services ~~devaluation against~~by ~~the~~integrating ~~U.S.~~our ~~dollar~~broadband ~~from~~services ~~January 14,~~with ~~1999~~advanced ~~through December 31,~~value ~~2000~~added solutions in the region. ~~During~~We ~~2002,~~offer ~~Brazil’s~~our ~~currency experienced~~clients ~~further~~a ~~significant~~complete ~~devaluations~~set ~~against~~of ~~the~~data ~~U.S. dollar.~~center ~~These~~services ~~and~~ranging ~~prior~~from ~~devaluations~~housing ~~have~~and ~~had~~hosting, ato ~~negative~~more ~~effect on~~complex ~~our~~managed ~~real-denominated~~solutions, ~~revenues.~~including Indisaster ~~addition~~recovery, ~~currency devaluations~~applications ~~can~~management, ~~also~~business ~~create~~continuity, ~~inflationary~~and ~~pressures.~~security ~~Inflation itself~~services, asin ~~well~~order asto ~~some~~manage ~~governmental~~mission ~~measures~~critical applications. We also offer co-location services to ~~combat inflation~~carriers, ~~have~~including ~~had~~the ~~significant~~rental ~~negative~~of ~~effects~~secure onspace, ~~the Brazilian~~equipment ~~economy~~provisioning and operation, maintenance services and interconnections in ~~the~~meet-me-room ~~past~~facilities.

~~IMPSAT~~• ~~Brazil’s~~Information ~~results~~Technology ~~have been affected by the devaluation of the Brazilian real against the U~~Solutions.~~S. dollar.~~ AtAs ~~December 31,~~part ~~2001, the real traded at a rate~~ of ~~R$2.41 = $1.00.~~our ~~The~~end-to-end ~~real depreciated during 2002~~solutions, ~~reaching~~we aalso ~~low~~offer of R$4.03 = $ 1.00 during the third and fourth quarters of that year, and closing at R$3.53 = $1.00 at December 31, 2002. This volatility eroded IMPSAT Brazil’s revenues by approximately $16.0 million during 2002. At March 31, 2003, the real traded at a ~~rate~~variety of ~~R$3.46 = $1.00.~~information ~~The devaluation~~technology ~~of the realand the decline in growth in the Brazilian economy have been caused in part by the continued recession in the region~~services, aincluding ~~general aversion to emerging markets by foreign direct and financial investors and~~ the ~~overall decline~~design in worldwide economic production. In addition, Brazil experienced economic uncertainty in the months leading up to the election of Mr. Lula da Silva as President of Brazil on October 27, 2002, as investors feared that the leftist Lula administration would fail to maintain fiscal discipline and ~~that the~~implementation ~~nation would default on its debt obligations. In the aftermath~~ of ~~the~~business ~~election~~continuity ~~however~~solutions, ~~policy~~disaster ~~promises~~recovery and ~~cabinet appointments~~managed bysecurity ~~the~~services ~~Lula administration have generally appeased the investor community~~ and ~~caused~~other ~~Brazilian~~consulting ~~markets to react positively~~services. ~~The~~As ~~political~~companies ~~and~~increasingly ~~economic~~rely ~~volatility~~on intheir ~~Brazil~~networks ~~have had,~~ and ~~can~~attacks beare ~~expected~~more tofrequent ~~continue~~and ~~to have~~sophisticated, ainformation ~~material~~security ~~adverse effect~~has onbecome ~~IMPSAT~~indispensable. ~~Brazil’s~~Our ~~and~~managed ~~our overall financial condition and results of operations.~~ security

~~Recent~~5 ~~civil and political unrest in Venezuela may have an adverse impact on our operations~~

InTable the first weeks of April 2002, political instability and civil unrest plagued Venezuela after the policies of that country’s head of state, President Hugo Chavez, brought him into conflict with managers at Petroleos de Venezuela SA (or, PDVSA), the state oil monopoly. The million-member Venezuelan Workers Confederation called a general strike to support PDVSA executives in protesting Mr. Chavez’s policies and demanding Mr. Chavez’s removal from office. The general strike was supported by the Venezuelan business association, Fedecamaras. Mr. Chavez was temporarily deposed and detained by military forces on April 12, 2002, after a massive opposition demonstration ended with gunmen reportedly killing at least a dozen opposition protesters and wounding hundreds others. An interim administration held office for less than two days after tens of thousands of pro-Chavez demonstrators took to the streets of Caracas to demand Mr. Chavez’s reinstatement. Mr. Chavez was restored to power on April 15, 2002. Contents

Inportfolio ~~December~~goes ~~2002,~~from ~~opposition groups launched~~ a ~~nationwide~~ ~~labor~~basic ~~strike.~~firewall ~~The~~to ~~strike,~~a ~~which~~complex ~~lasted~~consultancy ~~for two months, brought the Venezuelan economy~~ to ancomply ~~almost~~with ~~standstill and severely curtailed~~ the ~~production~~International ~~and~~Organization ~~export~~for ~~of oil, the major source of Venezuela~~Standardization’s ~~foreign~~standard ~~exchange~~27001. ~~Venezuela’s~~ ~~recent~~These ~~political~~offerings ~~instability~~are ~~has~~differentiated ~~caused~~through ~~the many~~our ~~private~~infrastructure ~~businesses throughout the country to close temporarily~~ and ~~has~~our ~~disrupted Venezuela~~specialists’s ~~petroleum industry~~skills, which ~~provides~~address ~~the government with more than half its revenue. In response, the government imposed foreign exchange and price controls, which make it difficult for~~ our customers’ ~~in Venezuela~~needs towith ~~obtain the U.S. dollars needed to make payments due to us in U.S. dollars on~~ a ~~timely~~consultancy ~~basis~~approach. ~~These foreign exchange controls could also limit our ability to convert local currency into U.S. dollars and~~

8Internet Services. We have offered Internet access services to corporate and ISP customers since 1996. Our Broadband Network links our Latin American Internet backbone, which is managed as a single autonomous system, to the U.S. Internet through our U.S.-based point of presence using our fiber optic and leased satellite links.

~~transfer~~• ~~funds~~Corporate ~~out~~Internet ~~of Venezuela~~Services. ~~At December 31,~~As ~~2001,~~part ~~the bolivartraded at a rate~~ of ~~Bs.769.00 = $1.00,~~ atproviding ~~December 31,~~our ~~2002,~~customers ~~it traded~~with at a ~~rate~~total oftelecommunications ~~Bs.1~~solution,~~392.00 = $1.00,~~ ~~and~~we ~~at February 5,~~currently ~~2003,~~offer itour ~~traded~~corporate atcustomers ~~the~~Internet ~~rate~~access ~~of Bs.1,924 = $1.00.~~services Onincluding ~~February 6,~~line ~~2003~~provisioning, ~~the Venezuelan~~managed ~~government~~security ~~set~~services aand ~~single~~consulting, ~~fixed~~media ~~exchange~~streaming ~~rate for the bolivar against the U.S. dollar of approximately Bs.1~~services,~~600 = $1.00~~ asequipment ~~part~~provisioning ~~of the new currency controls. There is a risk that a continuation or worsening of these conditions could materially~~ and ~~adversely impact our future business~~installation, ~~operations,~~primary ~~financial condition~~ and ~~results~~secondary ~~of operations.~~domain Ofregistration ~~our~~and ~~total~~maintenance ~~consolidated~~and ~~net~~technical ~~revenue from services for the year ended December 31, 2002, we generated approximately 13~~support.~~7% from our operations in Venezuela.~~

• Wholesale Internet Services. We ~~are~~provide ~~vulnerable~~a tocomplete ~~currency~~Internet ~~fluctuations~~service for ISPs, ~~devaluations~~ including managed line provisioning for domestic and ~~restrictions~~international ~~that~~backbone ~~may~~connections ~~increase~~between points of presence, access to our ~~losses~~co-location sites and ~~cause~~ ~~fluctuations~~server inservices (e-mail and hosting services), managed security services, managed modem and roaming services, as well as the use of our ~~operating~~network ~~results~~ operation and help desk services.

ATelephony ~~significant~~Services. ~~portion~~We ofprovide ~~our~~switched ~~costs,~~telephony ~~including lease~~services ~~payments~~as ~~for~~permitted ~~certain~~by ~~satellite~~the ~~and~~licenses ~~fiber~~granted ~~optic~~in ~~capacity,~~the ~~purchases~~countries ~~of capital equipment, and payments of interest and principal on our indebtedness is payable~~ in ~~U.S.~~which ~~dollars.~~we ~~Our results of operations and financial conditions are therefore vulnerable to currency devaluations~~operate. ~~Following~~In ~~the “pesification” decree~~Argentina, ~~our~~Brazil ~~contracts~~and ~~that~~Peru ~~were governed~~we byoffer ~~Argentine~~basic ~~law,~~local ~~denominated~~and inlong ~~foreign~~distance ~~currency~~services ~~and existing~~ as ofwell ~~January 6,~~as ~~2002~~a ~~were~~complete ~~mandatorily~~portfolio ~~converted into monetary obligations denominated in pesos at an exchange rate~~ of ~~one~~value ~~U.S.~~added ~~dollar~~services, toincluding ~~one~~toll-free ~~peso~~numbers, ~~subject~~calling ~~to adjustment~~cards, ~~pursuant~~VoIP toservices, ~~the~~public ~~Argentine~~telephony ~~CER consumer price index.~~and Inwholesale ~~Brazil,~~long ~~our~~distance ~~customer~~services ~~contracts~~to ~~cannot be denominated in U~~carriers.~~S. dollars~~ orIn ~~linked~~Chile ~~to the exchange rate between the Brazilian real~~ and the ~~U.S.~~United ~~dollar~~States, ~~although~~ we ~~are~~only ~~permitted~~offer ~~to amend~~wholesale ~~the~~international ~~pricing of our services for our~~ long-~~term telecommunications~~distance, ~~service~~and ~~contracts~~we ~~with~~are ~~our~~interconnected ~~customers~~with ~~annually based~~major oninternational ~~changes in the consumer price index in Brazil for the prior year~~carriers. The ~~inflation~~switching ~~adjustment~~platform ~~provisions~~that insupports ~~these laws do not eliminate completely~~ the ~~currency exchange risk facing our~~telephony operations inincludes ~~Argentina~~both ~~and~~traditional ~~Brazil.~~circuit For example, contracts entered into between Argentine parties after the “pesification” decree’s enactment that are initially denominated in pesos may not thereafter be adjusted according to the CER or any other consumer price index. Also, changes in the consumer price indices in Argentina and ~~Brazil~~ ~~may~~new ~~lag~~packet orswitching ~~be lower than changes in the exchange rate between the Argentine and Brazil local currency and the U~~technologies.~~S. dollar~~ ~~and~~Through ~~therefore~~this may not fully allow us to address the impact of a devaluation of those currencies against the U.S. dollar. Our operations in Argentina and Brazil represented a significant proportion of our consolidated net revenues in 2002platform, ~~and~~ ~~this~~we ~~can~~offer bemanaged ~~expected to increase in future periods in connection with the progression of our operations in Brazil. Accordingly~~services, ~~our~~such ~~operations~~as invirtual ~~Argentina~~ and ~~Brazil~~hosted ~~have exposed us~~PBX, ~~and~~web ~~will~~conferencing ~~increase~~and ~~our~~broadband ~~exposure, to exchange rate risks~~telephony.

~~Except~~The infollowing ~~Argentina~~table ~~(since~~shows ~~the “pesification”~~our ~~decree,~~Company’s tonet ~~the~~revenues ~~extent~~breakdown ~~discussed above)~~by ~~and~~service ~~Brazil, the contracts of the company and its subsidiaries with customers generally provide~~ for ~~payment in U.S. dollars or for payment in local currency linked to~~ the ~~exchange~~ ~~rate~~years ~~between~~ended ~~the local currency and the U.S. dollar at the time of invoicing. Accordingly~~December 31, ~~inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our revenues during 2002. However~~ 2004, ~~given~~ ~~that~~2005 ~~the exchange rate is generally set at the date of invoicing~~ and ~~that we in some cases experience substantial~~2006: ~~delays in collecting receivables, our operations in those other countries are also exposed to exchange rate risk.~~

Substantial or continued devaluations in local currencies relative to the U.S. dollar could have a material adverse effect on the ability of our customers to absorb the costs of a devaluation. This could result in our customers seeking to renegotiate their contracts with us or, failing satisfactory renegotiation, defaulting on or canceling their contracts. Our competitors and potential future competitors, including the monopoly public telephony operators (“PTOs”) and large, multinational telecommunications companies, may be less exposed to currency risk or may be better able to hedge their currency risk and could thereby gain a relative competitive advantage in the event of a currency devaluation. In addition, Latin American economies have experienced shortages in foreign currency reserves and restrictions on the ability to expatriate local earnings and convert local currencies into U.S. dollars. Currency devaluations in one country may have adverse effects in another country.


	December 31, 2004		December 31, 2005		% change⁽¹⁾		December 31, 2006		% change⁽¹⁾
	(dollar amounts in thousands)
Broadband and satellite	$	161,964	$	172,852	6.7	%	$	184,668	6.8	%
Internet		26,125		30,591	17.1			36,063	17.9
Value added services⁽²⁾		16,674		24,874	49.2			35,755	43.7
Telephony		21,673		24,967	15.2			27,293	9.3

Total net revenues from services	$	226,436	$	253,284	11.9	%	$	283,779	12.0	%

~~Our~~(1) ~~earnings~~Increase ~~will~~(decrease) ~~deteriorate~~compared ifto weprevious ~~cannot collect on our customer accounts~~ year.

We(2) ~~provide~~“Value ~~trade~~added ~~credit~~services” toincludes ~~our~~revenues ~~customers~~from inour ~~the normal~~data ~~course~~center ~~of business. As of December 31~~services, ~~2002, approximately~~systems ~~32.0%~~integration ofand ~~our~~other ~~gross~~information ~~accounts~~technology ~~receivable~~solutions ~~were past due more than six months~~services. ~~We recorded a~~

9 Our Infrastructure

~~provision~~Our ~~for~~infrastructure ~~doubtful~~is comprised ~~accounts~~ of ~~$13.1 million~~ ina ~~2002~~fully ~~compared~~integrated toterrestrial ~~$16.8 million~~fiber ~~for 2001.~~optic ~~At December 31~~network, ~~2002~~long-haul, ~~our~~high ~~provision~~capacity ~~for~~fiber ~~doubtful accounts~~optic ~~covered~~backbones ~~approximately~~and ~~116%~~capacity ofon ~~our~~undersea ~~gross~~cable ~~trade~~systems, ~~accounts receivable~~all ~~past~~enabling ~~due~~connections ~~more~~between ~~than~~and ~~six~~among ~~months.~~major AsLatin ~~our~~American ~~business increases~~countries, combined with satellite ~~small~~capabilities, ~~and~~global ~~medium~~telecommunications ~~customers~~connections and asInternet ~~economic contractions~~access ~~continue~~connecting inmajor ~~our~~cities ~~principal~~to ~~countries~~other oflocations ~~operation~~in Latin America, we ~~may~~the ~~experience~~Caribbean anand ~~increase~~the inUnited ~~uncollectable~~States, ~~accounts receivable.~~and Wefifteen ~~anticipate~~advanced ~~that~~data wecenter ~~could~~facilities ~~also~~throughout ~~experience~~major ancities ~~increase~~ in ~~our~~Latin ~~uncollectable~~America. ~~accounts~~We ~~receivables~~also ~~due~~maintain toNetwork, ~~the ongoing~~Data ~~political~~Center and ~~financial~~Security ~~crises~~Operations inCenters ~~Argentina~~to monitor and ~~Venezuela~~ ~~(See~~manage ~~“— Economic~~service performance, and ~~political conditions~~offer inadditional ~~Latin~~value ~~America~~added ~~pose~~services. ~~numerous~~Our ~~risks~~extensive infrastructure, which is adaptable to ~~our~~new technologies, ~~operations”)~~allows us to offer customers an array of interconnection and ~~their~~service ~~adverse~~solutions, ~~impact~~high onquality ~~the creditworthiness~~services and ~~solvency~~the support of ~~our~~a ~~customers~~reputable and ~~its~~reliable ~~potential adverse~~telecommunications ~~effects~~provider. onOur infrastructure also reduces our ~~customers~~costs infor ~~neighboring~~leased ~~countries.~~satellite capacity ~~Anticipated~~and ~~difficulties~~leased intelecommunications ~~collecting~~links ~~amounts~~as ~~due~~a ~~from~~percentage of our ~~Argentine~~ net revenues, creates a high capacity, pan-Latin American IP backbone and ~~Venezuelan~~allows ~~customers~~us ~~during~~to ~~coming~~cost-effectively ~~periods~~develop ~~could have~~new asolutions ~~material~~to ~~adverse~~meet ~~effect~~the onchanging ~~our~~needs ~~business~~of, ~~results~~and ofoffer more bandwidth ~~operations~~intensive ~~and~~services ~~financial~~to, ~~condition~~our customers.

~~Our~~The ~~future~~Broadband ~~success~~Network ~~depends upon our ability to implement and manage our resources effectively~~

~~Our~~Metropolitan ~~future~~Area ~~success~~Networks. ~~will~~We ~~require~~operate us15 tometropolitan ~~continue~~area ~~to implement~~networks, ~~and~~composed ~~improve~~of ~~our~~a ~~operating,~~combination ~~financial~~of ~~and~~fiber ~~accounting systems~~optic and tomicrowave ~~hire~~links, ~~train~~covering ~~and~~a total ~~manage~~of ~~new~~more ~~employees.~~than ~~Among other things~~1,000 ~~the~~route ~~continued~~kilometers. ~~development~~Our offirst ~~our~~metropolitan ~~business~~area ~~will~~network ~~also depend~~was ~~upon~~established ~~our~~in ~~ability~~Buenos Aires, ~~directly~~Argentina in 1990. In addition, orwe ~~through~~currently provide services over our ~~subsidiaries,~~metropolitan area networks in ~~to:~~

•6 successfully exploit our Broadband Network and implement related strategies; • design and effectively market integrated private telecommunications services; • secure financing; • install telecommunications infrastructure as our operations require; • obtain any required government authorizations or licenses as the telecommunications sector continues to deregulate; and • attract and retain qualified employees.

InTable addition, we must perform these tasks in a timely manner, at reasonable costs and on satisfactory terms and conditions. Failure to effectively manage our resources could have a material adverse effect on our business, results of operations and financial condition. Contents

WeCórdoba, ~~cannot~~Mendoza ~~provide~~and ~~any~~Rosario, ~~assurance~~Argentina; ~~that~~Bogotá, weMedellín ~~will~~and ~~be successful~~Cali, orColombia; ~~timely~~Rio inde ~~developing~~Janeiro, ~~and~~Curitiba, ~~marketing~~São ~~service enhancements~~Paulo orand ~~new~~Belo Horizonte, ~~services~~Brazil; ~~that respond to technological change~~Caracas, ~~changes~~Venezuela; inQuito ~~customer~~and ~~requirements~~Guayaquil, Ecuador; and ~~emerging~~Lima, ~~industry standards~~Peru.

Fiber Optic Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless long-haul, high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from Santiago, Chile to Buenos Aires, Argentina, passing through Mendoza, Córdoba and Rosario; in Brazil, it covers Curitiba, Belo Horizonte, Rio de Janeiro and São Paulo. It also includes a fiber optic connection between Paraná, Argentina and Curitiba, Brazil, which is currently unlit. We ~~face~~also ~~numerous~~own ~~risks~~and ~~that~~operate ~~could~~a ~~adversely~~long ~~affect~~haul ~~our~~fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network ~~strategy~~to other parts of Latin America and the world, we have purchased IRU capacity on Global Crossing’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network, as well as leased capacity from other undersea fiber optic cable operators. This capacity enables us to transmit telecommunications traffic seamlessly from the United States to major countries in South America using the latest fiber optic technology.

~~Operating~~Teleports. ~~the~~We ~~Broadband~~own ~~Network~~or ~~may~~lease, ~~have~~and aoperate, teleports in Buenos Aires, Argentina; São Paulo, Brazil; Bogotá, Colombia; Caracas, ~~negative~~Venezuela; ~~impact~~Quito, onEcuador; ~~our~~Lima, ~~results~~Peru; ofand ~~operations~~Fort Lauderdale, Florida, United States. We also own and operate regional teleports in Mendoza, Córdoba, Rosario, Argentina; Medellín, Cali Colombia; Guayaquil, Ecuador; and Rio de Janeiro and Curitiba, Brazil, as well as operate over 150 other small network nodes.

Satellite Services. Our ~~operation~~satellite ofsystems ~~the~~use ~~Broadband~~both ~~Network~~C-band (4-6 GHz) and Ku-band (11-14 GHz) frequencies. As of December 31, ~~which~~2006, ~~may include~~we ~~the~~had ~~expansion~~a ~~into~~total ~~new~~available ~~services~~leased ~~for~~capacity ~~our~~of approximately 633 MHz. We will contract additional leased satellite capacity if business requires. A portion of our satellite ~~customers~~capacity is leased by our wholly-owned subsidiary, ~~could~~International ~~involve~~Satellite ~~any~~Capacity ~~one~~Holding, orLtd. ~~more~~This subsidiary’s principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our operating subsidiaries. We believe that this method of centralizing our leasing of telecommunications capacity provides us with better terms. We are currently in the ~~following:~~process of upgrading the technologies used to provide satellite services, which we believe will allow us to optimize our satellite capacity.

•The ~~regulatory~~Data ~~risks,~~Centers ~~including obtaining the appropriate licenses; • interconnection difficulties; • capital expenditures; and • competition from large, well-financed international telecommunications carriers.~~

~~Our~~To ~~operation~~complement ofour ~~the~~ Broadband Network, ~~may~~we ~~have~~operate ~~a negative~~15 ~~impact~~advanced ondata ~~our~~center ~~results~~hosting facilities with an aggregate of ~~operations~~approximately 500,000 atgross ~~least~~square feet, ~~over~~including ~~the short~~functional ~~term~~facilities, building shell, space for new modules, and corresponding office space, in major cities in Latin America. These facilities, which are capable of supporting advanced application hosting services, are located in Buenos Aires, Mendoza, Córdoba and Rosario, Argentina; São Paulo, Rio de Janeiro and Curitiba, Brazil; Santiago, Chile; Fort Lauderdale, Florida, United States; Bogotá and Cali, Colombia; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru.

10Data center services are managed through our Data Center Operations Centers (“DOCs”), which currently are responsible for the delivery, service, support and operations processes of every data center in the region and the management of service level agreements for data center services, seven days a week, 24 hours a day. Following the consummation of the Merger, however, our U.S. data center will only be managed through a DOC that is located in the United States, pursuant to an amendment to Global Crossing’s existing Network Security Agreement (defined below). See “Business—Regulation.” Our processes and procedures are based on the Information Technology Infrastructure Library (“ITIL”), the international standards for IT operations, and overseen by highly-skilled personnel. The DOCs enable customers to delegate IT operations and support to a specialized company to provide services in world-class data centers, and focus on their core business.

~~Our~~In ~~ability~~addition, we maintain a Security Operation Center (“SOC”), operating seven days a week, 24 hours a day, which offers monitoring and management of systems to ~~obtain~~detect ~~new~~viruses, ~~capital~~worms ~~that~~and weillegal access and ~~might~~real ~~require~~time inintrusion ~~the~~detection ~~future~~and ~~may~~vulnerability management to prevent attacks before they can be ~~negatively~~executed ~~affected~~and bycause ~~many~~costly damage. The SOC provides analysis, implementation and maintenance of security polices, on-line follow up, auditing of security ~~factors~~policies, ~~beyond~~executive ~~our~~and ~~control~~technical reports, incident response and crisis management. The SOC offers the customer the ability to outsource its monitoring and administration requirements and to maintain a single point of contact for security administration.

~~Our~~7 ~~future capital requirements will depend upon many factors, including:~~

•Table the cost, timing and extent of upgrading or maintaining our networks and services; • our enhancement and development of services, directly or through our subsidiaries; • our ability to react to developments in the industry, including regulatory changes; • the status of competing services; and • our results of operations.Contents

~~Further development of the Broadband~~ Network ~~will~~Operation ~~require~~Centers ~~additional resources that we may not have~~

WeTo ~~may~~monitor ~~need~~our tonetwork ~~adapt~~and the ~~Broadband~~provision ~~Network~~of services to our customers, we have local Network Operations Centers (“NOCs”) in each country in ~~respond~~which ~~to:~~we operate. The NOCs support local network operations by offering customer service and technical support 24 hours a day, 7 days a week. We also maintain a global network operations center (“GNOC”) in Argentina. The GNOC proactively monitors the backbone throughout the region and works in conjunction with the local NOCs to resolve issues detected.

•Customers ~~requests by our customers for coverage of our Broadband Network beyond its existing footprint; • changes in our customers’ service requirements; and • technological advances by our competitors.~~

Overview. We ~~may~~have ~~require~~grown ~~additional~~rapidly ~~financial,~~since ~~operational and~~the ~~managerial~~commencement ~~resources~~of toour ~~expand~~operations orin ~~adapt~~1990. ~~the~~Our ~~Broadband~~customer base has increased from 125 corporate customers in ~~Network.~~two Ifcountries weat ~~are~~December 31, ~~unable~~1992 to ~~expand~~4,718 orcorporate ~~adapt~~customers ~~the~~in ~~Broadband Network~~eight tocountries ~~respond~~at toDecember 31, ~~these~~2006. ~~developments~~Larger onentities, awhich ~~timely~~often ~~basis~~have significant needs for reliable, cost- effective data transmissions and other telecommunications atservices, awere ~~commercially~~the ~~reasonable~~first ~~cost~~to use our customized telecommunications services. As a result, ~~then~~a significant portion of our ~~business~~revenues ~~will~~has ~~be materially~~been ~~adversely~~derived ~~affected~~from our largest customers. InA ~~light~~significant number of our ~~current~~customers, ~~financial~~including a number of our largest ~~condition~~customers, ~~and~~are ~~the~~in ~~political~~Argentina and ~~economic~~Colombia, ~~crises~~which, having commenced in ~~Latin America~~1990 and 1992, werespectively, doare ~~not~~the ~~anticipate~~locations ~~having~~of our longest-standing operations. Our customer base in Brazil has grown from 48 at the ~~ability~~end of 1998 to ~~make~~533 ~~capital~~at the end of 2006. As ~~expenditures~~our ~~during~~business ~~2003~~further tomatures ~~expand~~and oras ~~enhance~~we ~~significantly~~extend the ~~Broadband~~ ~~Network.~~operation ~~Our~~of ~~inability~~the toBroadband ~~make~~Network, ~~such~~we ~~expenditures~~expect ~~could have~~that anthe ~~adverse~~average ~~effect~~size onof our ~~customer~~customers ~~retention~~will ~~and expansion~~decline.

WeOur ~~are~~customers ~~negatively~~consist ~~impacted~~of byleading national and multinational corporations and private sector companies, financial institutions, major governmental agencies, and carriers, including Global Crossing’s ~~insolvency~~Ltd., Instituto Nacional de Hipodromos, British Telecom, Petrobras and HSBC. These customers typically have complex telecommunications and IT needs that require customized solutions and high level of customer satisfaction. Our ten largest customers accounted for approximately 21.4% of our revenues in 2006 and approximately 19.7% in 2005.

WeOur ~~are~~ten ~~party~~largest tocustomers aas ~~series~~ of agreements with several subsidiaries of Global Crossing Ltd. for the provision of telecommunications services. Pursuant to those agreements, which were initially signed in 1999, we constructed a terrestrial portion of Global Crossing’s South American network between landing points on the Atlantic Ocean in Argentina and the Pacific Ocean in Chile, granted Global Crossing a series of indefeasible rights of use (IRU)December ~~over ducts and dark fiber on our Broadband Network in Argentina~~31, ~~Brazil~~ ~~and~~2006 ~~Peru, provided Global Crossing with collocation space~~were: and related services in our data centers in Argentina, Brazil, Chile, Venezuela and Peru, and provided Global Crossing with maintenance services for their telecommunications assets in Latin America. In addition, we acquired IRU and leased capacity on Global Crossing’s South American undersea fiber optic cable system in order to connect our Broadband Network with other parts of Latin America and the world.

In• ~~January~~subsidiaries ~~2002, Global Crossing Ltd. filed for protection under Chapter 11~~ of ~~the U.S. Bankruptcy Code. Although the~~ Global Crossing ~~subsidiaries to whom we provide services and infrastructure were not originally included in Global Crossing~~ Ltd.~~’s Chapter 11 filing~~, during August 2002, Global Crossing Ltd. amended its Chapter 11 proceeding to include its subsidiaries that are counterparties to the agreements with us. At March 7, 2003, Global Crossing was in default for a ~~total~~Bermuda-headquartered ofcorporation ~~$4.8 million~~ that ~~we invoiced~~offers tocarrier ~~them during 2002~~ and ~~for~~wholesale ~~the~~telecommunications ~~first~~services ~~quarter~~over ofworldwide ~~2003. We~~terrestrial ~~have~~and ~~recorded~~submarine afiber ~~provision~~optic ~~for doubtful accounts of $2.8 million against these receivables.~~ networks;

~~Although~~• ~~Global~~British ~~Crossing’s reorganization plan was approved in December 2002~~Telecom, ~~Global~~one ~~Crossing is awaiting receipt~~ of certain regulatory approvals and satisfaction of other conditions to the effectiveness of its plan of reorganization, and there is no guaranty as to when or whether it will emerge from bankruptcy. The difficulties being experienced by Global Crossing, including Global CrossingEurope’s ~~Chapter 11~~ ~~proceeding,~~leading ~~have~~providers had an adverse effect on our financial condition and operations. At a minimum, Global Crossing’s bankruptcy proceedings have caused delays in our efforts to enforce our contracts with Global Crossing. In the event of atelecommunications ~~rejection of any of the contracts by Global Crossing, any pre-petition damages that we might have in respect of~~ services;

• Petrobras, Brazil’s largest industrial corporation, a global integrated energy company that explores, produces, refines, markets and transports petroleum and its by-products worldwide, with operations in 11 other countries;

~~such~~• ~~rejected~~Corporacion ~~contracts~~Nacional ~~would~~de beAhorro ~~treated~~y ~~as claims in the applicable Global Crossing bankruptcy proceedings~~Vivienda, ~~which~~ ~~claims~~or ~~may not realize any meaningful recovery to us. In this regard~~Conavi, ~~in connection with Global Crossing’s filing at the end of August 2002 to include certain of its subsidiaries in its Chapter 11 proceedings, Global Crossing rejected~~ one of ~~its~~ ~~agreements with us, pursuant to which agreement IMPSAT~~ Colombia’s ~~had~~largest ~~agreed~~financial to lease space in its telehouse in Bogota, Colombia to Global Crossing, and Global Crossing has indicated in other filings made in its Chapter 11 proceedings that it might reject some or all of the other agreements that it has with us. institutions;

We• ~~have~~Instituto ~~filed~~Nacional ~~motions~~de inHipodromos, Global Crossing’s bankruptcy proceeding seeking an order that Global Crossing make payment to us of the amounts claimed by us and that Global Crossing either accept or reject its contracts with us. Global Crossing has disputed that it owes us any amounts under the contracts at issue and has filed a ~~proceeding~~Venezuelan ~~seeking~~horse ~~that~~racing ~~the bankruptcy court grant Global Crossing a property right in the IRUs that it acquired from us.~~ track;

To• ~~link~~subsidiaries ~~our Broadband Network to other parts~~ of ~~Latin~~ ~~America and the world~~AT&T, we have secured IRU and leased capacity on Global Crossing’s undersea fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American networkInc. Global Crossing has not yet affirmed or rejected these agreements. If Global Crossing rejects these contracts or is unable to successfully reorganize and were to sell or terminate its South American operations as part of its bankruptcy proceedings, itone is unclear what rights we would have to continue to utilize the IRUs that we have purchased from Global Crossing. It is possible that our agreements with Global Crossing would be terminated, and we would need to seek substitute sources of ~~IRU or other capacity from competing undersea fiber optic systems to link our operations, including our Broadband Network, to other parts of Latin America and~~ the ~~world.~~ ~~There~~global ~~can~~leaders bein ~~no assurance that such substitute capacity would be available to us on acceptable terms or at all. If we were required to acquire such substitute capacity~~local, welong ~~believe that our operations would be adversely affected for the period in which we reconfigured our telecommunications network. In addition~~distance, weInternet ~~would be required to incur additional costs for such capacity that are not currently included in our operating~~ and ~~capital~~transaction-based ~~expenditures~~voice ~~budgets. The occurrence of these circumstances would have a material adverse effect on our business, results of operations~~ and ~~financial~~data ~~condition.~~ services;

~~Our~~• ~~failure~~subsidiaries toof ~~acquire~~Telefónica S.A., ~~integrate~~a global telecommunications operator, offering local and ~~operate new~~long ~~technologies~~distance, ~~could~~cellular, ~~harm~~and ~~our~~Internet ~~competitive~~and ~~position~~ transaction-based voice and data services;

~~The~~• ~~telecommunications~~HSBC ~~industry~~Bank isBrasil ~~characterized by rapid and significant technological advancements and the introduction of new products and services~~S. ~~We do not possess significant intellectual property rights with respect to the technologies we use and are dependent on third parties for the development of and access to new technology~~A. ~~In addition~~, ~~we generally~~one ~~own~~of the ~~customer~~largest ~~premises~~privately-owned ~~equipment~~banks used to provide our services and we own the fiber optic networks, including switching equipment, that constitute the Broadband Network. Therefore, technological changes that render our equipment and the Broadband Network out of date, less efficient or more expensive to operate than newer equipment could require us to incur substantial increases in ~~capital expenditures to upgrade or replace such equipment.~~ Brazil;

We• ~~cannot~~AMERICANAS.COM ~~predict~~S/A ~~the~~COMÉRCIO ~~effect~~ELETRÔNICO, onone ~~our business~~ of ~~technological~~ ~~changes,~~the ~~such~~largest ascompanies ~~changes~~focused ~~relating~~on toretail ~~emerging wireline~~commerce ~~and~~through ~~wireless transmission technologies and the use of the~~ Internet ~~for traditional voice~~, ~~data or other broadband services. In addition~~telephone, itcatalogue isand ~~impossible~~television for us to predict with any certainty which emergent technology relevant to our business will prove to be the most economic, efficient or capable of attracting new customers. A reduction in the demand for data transmission services ~~or a failure by us to obtain and adapt to new technology~~ in ~~our~~Latin ~~markets~~America; ~~could have a material adverse effect on our ability to compete successfully.~~ and

We• ~~face~~Government ~~significant~~of ~~competition~~the inProvince ~~Latin America~~ of Buenos Aires, the local government of the Province of Buenos Aires.

~~The~~8 telecommunications industry in Latin America is highly competitive and is generally characterized by low barriers to entry. We expect that competition in the industry will maintain its intensity. We compete on the basis of our experience, quality, customer service, range of services offered and price.

WeTable have experienced pricing pressure for some of our services, and we expect to continue to face pricing pressure. We may further experience declining operating profit margins as the PTOs in the countries in which we operate become more competitive and place greater emphasis on data telecommunications. Contents

12 The following table shows our customer concentration by country as of the dates indicated.

PTOs have competitive advantages in the marketplace


Country	As of December 31,
	2004			2005			2006
	(number of customers and percentage of total)
Argentina	1,236	37.3	%	1,842	42.5	%	2,087	44.2	%
Colombia	788	23.8		839	19.4		762	16.2
Brazil	451	13.6		502	11.6		533	11.3
Venezuela	200	6.0		244	5.6		284	6.0
Ecuador	263	7.9		401	9.2		466	9.9
USA	85	2.6		100	2.3		93	2.0
Chile	113	3.4		126	2.9		125	2.6
Peru	178	5.4		282	6.5		368	7.8

Total	3,314	100	%	4,336	100	%	4,718	100	%

InCustomer ~~most~~Contracts. ofOur ~~our~~contracts ~~markets,~~with our ~~principal~~customers ~~competitor is~~have in the ~~local~~past ~~PTO~~typically orranged anin duration ~~affiliate~~from ofsix ~~the~~months ~~local~~to ~~PTO.~~five ~~The~~years ~~PTOs generally~~and have ~~significant~~generally ~~competitive~~been ~~advantages~~three-year contracts. ~~These advantages~~Our ~~generally~~top ~~include:~~ 30 customers have had contracts with us for an average length of approximately 7 years.

•Except ~~close~~in ~~ties~~Argentina and Brazil, the majority of our contracts with ~~national~~customers ~~regulatory~~provide ~~authorities~~for •payment ~~control~~in ~~over~~U.S. ~~connections~~dollars or for payment in local currency linked to the exchange rate between the local ~~telephone~~currency ~~lines~~and •the ~~ability~~U.S. todollar ~~subsidize~~at ~~competitive~~the ~~services~~time ~~with~~of invoicing. The revenues ~~generated~~of ~~from~~our ~~services~~customers ~~they~~are ~~provide~~generally ondenominated ain ~~monopoly~~local currencies. Although our customers include some of the largest and most financially sound companies and financial institutions in their markets, devaluation of local currencies relative to the U.S. dollar and foreign exchange controls restricting the exchange or ~~duopoly~~convertibility ~~basis~~of •such ~~reluctance~~currencies could have a material adverse effect on the ability of ~~regulators~~our customers to ~~adopt~~pay ~~policies~~us for our services. Currency devaluations and ~~grant~~foreign ~~regulatory~~exchange ~~approvals~~controls ~~that~~could ~~will~~also result in ~~increased~~our ~~competition~~customers seeking to renegotiate their contracts with us or, alternatively, defaulting on their contracts.

~~For example~~Sales, ~~our~~Marketing ~~principal competitors in Argentina are Telecom Soluciones S.A.~~ and ~~Advance Telecomunicaciones~~Customer ~~S.A.,~~Services which are data transmission companies controlled by Telecom Argentina STET-France Telecom S.A. (“Telecom Argentina”) and Telefonica de Argentina S.A. (“Telefonica”), respectively. Telecom Argentina and Telefonica are the PTOs in Argentina. In Brazil, our principal competitors are Embratel and Telemar.

InWe ~~the~~view ~~future,~~our ~~the~~relationship ~~PTOs~~with ~~may~~our ~~devote~~customers ~~substantially more~~as ~~resources~~a tolong-term ~~the~~partnership ~~sale,~~in ~~marketing~~which ~~and~~customer ~~provision~~satisfaction is of ~~services that~~paramount ~~compete~~importance. ~~with~~For usthis reason, ~~which~~we ~~could~~ have aorganized ~~material~~our ~~adverse~~sales ~~effect~~ and marketing efforts to focus on our ~~business~~target customer groups, developed ~~results~~a oftiered ~~operations~~approach to customer service, and ~~financial~~integrated ~~condition~~our sales, marketing and customer service functions. We emphasize the highest quality in our sales, marketing and customer services and an enduring commitment to providing fast and flexible responses to customer demands.

~~International~~Sales & ~~telecommunications~~Marketing ~~carriers have greater resources than we do~~

We ~~also~~have ~~compete~~563 ~~with~~employees ~~operators~~in ofour ~~satellite~~sales ~~data transmission networks~~ and ~~terrestrial~~marketing ~~telecommunications~~group ~~links, and~~(including ~~face~~a ~~actual~~sales orforce ~~potential~~of ~~competition from large international telecommunications carriers and from other industry participants. International telecommunications carriers~~173), ~~whose~~who ~~principal~~are ~~focus~~focused ~~has traditionally been long distance telephony services, may increasingly focus~~ on ~~the private~~three ~~telecommunications~~types ~~network systems segment~~ of ~~the~~customers: ~~telecommunications~~(i) multi-national ~~market as deregulation continues. For example~~corporations, ~~since~~large ~~the~~established ~~introduction~~national ofcompanies ~~full~~(segregated ~~competition~~by ~~in Argentina’s~~industry ~~long~~sector) ~~distance~~and ~~telephony~~government ~~market~~agencies; ~~in November 2000, these large international telecommunications~~ (ii) carriers ~~can enter~~and ~~that~~wholesale ~~market~~customers; and ~~provide~~(iii) small ~~data transmission services. Many of these potential competitors have substantially greater financial~~ and ~~other~~medium-sized ~~resources than we do. In addition, consolidation of telecommunications~~ companies ~~and~~in ~~the~~specific ~~formation of strategic alliances within the telecommunications industry could give rise to significant new competitors~~sectors.

The sales team assigned to multi-national corporations, large established national companies and government agencies is further subdivided ~~Our~~and ~~competitors~~assigned ~~could~~to ~~take~~specific ~~advantage~~industries, ofincluding ~~new~~Financial Services, Oil & Gas, Retail, Utilities, Technology and Government. Its approach is consultative, offering customized and integrated solutions, and focuses on establishing a long-term orpartnership ~~competing~~with ~~technologies~~these customers, enabling both up-selling and cross-selling opportunities. The sales teams assigned to ~~our~~carriers ~~detriment~~and wholesale customers focus on developing strategic partnerships to meet large volume requirements on a commoditized basis for incorporation into their product offerings. The sales team assigned to small and medium-sized companies in specific sectors focuses on identifying new customer opportunities, offering customers customized solutions utilizing standard products and bundling of services. We also use the services of third-party sales representatives to assist in generating sales and to manage the contractual process with potential customers.

~~Although~~In weaddition ~~believe we have the flexibility~~ to ~~act~~ ~~quickly~~their tosales ~~take advantage of any significant technological development~~responsibilities, ~~new competing technologies may negatively affect~~ our ~~business.~~sales ~~For~~teams example, technologies such as digital subscriber line, or DSL, significantly enhances the speed of traditional copper lines. DSL or other technologies enable our PTO competitors to offer high-speed services without undergoing the expense of replacing their existing copper networks. Widespread use of DSL in our markets could have a material adverse effect on our “last mile” advantage. Our telecommunications network services also may face competition from entities that use new or emerging voice and data transmission services or technologies that currently are ~~not widely~~deeply ~~available~~involved in ~~Latin~~the America. Furthermore, competing technologies may gain market and commercial acceptance. We are limited by our existing cash resources and our anticipated constraints on availability of financing from making any significant capital expenditures to acquire any new technologies. If these developing or new technologies are successful, they may provide significant longpost-~~term~~sale ~~competition that~~customer ~~could~~service ~~have a material adverse effect on our business, results of operations and financial condition~~function.

~~The~~Customer ~~downturn~~Service ~~in the telecommunications industry negatively affects us~~

~~The~~In ~~regional~~order ~~economic recession, which has~~to ~~persisted~~efficiently ~~since~~meet ~~2001, has had a materially negative impact on~~ the ~~telecommunications~~customer ~~market~~service inneeds ~~Latin~~of ~~America.~~our ~~The~~customers, ~~rate~~we ~~at which~~adapt ~~the~~and ~~industry~~tailor ~~improves~~our iscustomer ~~critical~~service tofunction ~~our ability~~ to ~~improve~~ ~~overall~~match ~~financial~~the ~~performance.~~scale ~~The~~and ~~financial difficulties~~complexity ~~currently~~of ~~experienced by other participants in~~ the ~~telecommunications~~ ~~industry~~solutions ~~may~~we ~~result~~provide, inas ~~some~~specified ofbelow. ~~our competitors being able to purchase~~

13 • Customers that utilize complex, customized solutions composed of a variety of different services are assigned a multi-task customer service team, comprised of a sales executive and service delivery and assurance engineers. This

~~the~~9 assets of these troubled companies at depressed prices. This consolidation could result in multiple smaller competitors being absorbed into relatively few large entities (with significantly greater financial and other resources than we have, including greater access to financing), thereby increasing the operating profit margin pressures that we face. As a result of our financial difficulties, potential customers and suppliers may be unwilling to do business with us and may prefer to do business with competitors that have greater financial and other resources.

WeTable faceof regulatory risks and uncertainty with respect to local laws and regulations Contents

~~Our~~team’s ~~business~~objective is ~~dependent~~to ~~upon~~develop ~~the procurement~~ and ~~maintenance~~maintain oflong-term, ~~licenses~~cooperative torelationships ~~provide~~with ~~various telecommunications~~these ~~network~~customers ~~services~~and ~~in the countries in which we operate. We believe that we have all licenses required for the conduct of our current operations. We expect that those licenses that are subject~~ to ~~expiration~~provide ~~will~~us bewith ~~renewed~~an in-depth ~~due~~understanding ~~course upon~~of ~~our application to~~ the ~~appropriate~~customer’s ~~authorities.~~evolving ~~Due~~telecommunications toservice ~~the political~~requirements and ~~economic~~levels risks associated with the countries in which we operate, we cannot assure you that we will be able to maintain our licenses or that they will be renewed upon their expiration. The loss, or substantial limitation upon the terms, of ~~our~~service ~~licenses could have a material adverse effect on our results of operations~~satisfaction. WeThis ~~cannot~~team ~~assure~~oversees ~~you that we will succeed in obtaining~~ all ~~requisite~~phases ~~regulatory~~of ~~approvals~~initial tocustomer ~~operate~~contact, ~~in those~~service ~~countries~~planning, ininstallation ~~which~~and weongoing ~~may desire to do business~~service.

~~Local~~• ~~laws~~Customers ~~and~~who ~~regulations~~require ~~differ~~standardized ~~significantly among~~or ~~the~~bundled ~~jurisdictions~~solutions ~~in which we operate and in which we may operate in the future. The interpretation and enforcement of these laws and regulations vary and~~ are ~~often~~serviced ~~based~~by ondedicated ~~the informal~~sales ~~views~~teams ofwith ~~the~~shared ~~local~~centralized ~~ministries which~~support, inalong ~~some~~with ~~cases, might~~available beassistance ~~subject~~from ~~to influence by the PTOs. The conditions governing~~ our ~~service~~call ~~offerings~~centers, ~~may~~which beoperate ~~altered~~24 byhours ~~future legislation~~a ~~or regulation. In some of our principal existing and target markets~~day, ~~laws~~365 ~~and~~days ~~regulations~~a ~~prohibit or limit our provision of certain telecommunications services~~year.

14 Competition

~~PART~~We Icompete on the basis of our experience, network quality and coverage, customer service, range of services offered and price. Our competitors fall into four broad categories:

~~Item~~• 1.the ~~Business~~monopoly public telephony operators (“PTOs”) in each country where we operate;

~~General~~ • other large international telecommunications carriers;

We• ~~are~~companies athat ~~leading~~operate ~~provider~~competing ofsatellite ~~private telecommunications network~~ and ~~Internet~~terrestrial ~~services in Latin America. We offer integrated~~ data, ~~voice, and Internet solutions, with an emphasis on broadband~~ transmission, ~~for national~~businesses; and multinational companies, financial institutions, governmental agencies and other business customers. We have operations in Argentina, Colombia, Brazil, Venezuela, Ecuador, Mexico, Chile, Peru and the United States and also provide our services in other countries in Latin America. We provide telecommunications and Internet services through our networks, which consist of owned fiber optic and wireless links, teleports, earth stations and leased fiber optic and satellite links. We own and operate 15 metropolitan area networks in some of the largest cities in Latin America, including Buenos Aires, Bogotá, Caracas and São Paulo.

In• ~~the~~information ~~fourth~~technology quarter of 2000, we completed the construction of an extensive pan-Latin American broadband fiber optic network (which we call our Broadband Network) connecting major cities across Argentina and Brazil, and the commencement of commercial operation of the full Broadband Network in those locationsproviders. Our Broadband Network allows us to enhance the services we presently provide and significantly increase our transmission speed and capacity. At December 31, 2002, the Broadband Network comprised twelve metropolitan area fiber optic networks and wireless links, extending over 1,000 route kilometers in the largest cities in Argentina, Brazil, Colombia and Peru, and long-haul fiber optic backbones in Brazil, Argentina, Chile and Colombia extending over 8,880 route kilometers. Our Broadband Network uses advanced transmission technologies, including dense wave division multiplexing, or DWDM, asynchronous transfer mode, or ATM, and Internet protocol, or IP.

~~IMPSAT~~The ~~Fiber~~PTOs ~~Networks,~~have ~~Inc.~~extended ~~was~~their ~~organized~~focus inbeyond ~~1994 as~~local aand ~~Delaware~~long-distance ~~holding~~telephony ~~company to combine the IMPSAT businesses in Argentina~~services, ~~Colombia~~dedicating ~~and~~resources ~~Venezuela.~~towards ~~Our~~the ~~operations~~private ~~started~~telecommunications ~~in Argentina~~network insystems ~~1990~~segment, ~~under~~our ~~the~~primary ~~name~~target ~~IMPSAT S~~segment.A. ~~(IMPSAT~~PTOs ~~Argentina). We~~generally ~~began~~have ~~operations outside of Argentina with the establishment~~significant ofcompetitive ~~IMPSAT~~advantages, ~~S.A.~~including (~~IMPSAT Colombia~~i) close inties ~~1991~~with ~~and~~national ~~the~~regulatory ~~establishment of~~authorities, ~~Telecomunicaciones Impsat S.A.~~ (~~IMPSAT Venezuela~~ii) control inover ~~1992. New~~connections ~~operating~~to ~~subsidiaries~~local ~~were~~telephone ~~created~~lines, ~~in Ecuador~~ (~~Impsatel~~iii) the ~~del Ecuador~~ability ~~S.A.,~~to ~~which~~subsidize wecompetitive ~~call~~services ~~IMPSAT~~with ~~Ecuador)~~revenues ~~and~~generated ~~Mexico~~from ~~(Impsat~~other ~~S.A.~~services dethey ~~C.V.,~~provide ~~which~~on wea ~~call~~monopoly ~~IMPSAT~~or ~~Mexico)~~duopoly inbasis ~~1994, in the United States (IMPSAT USA, Inc.) in 1995~~ and ~~in Brazil~~ (~~Impsat Comunicacoes Ltda., which we call IMPSAT Brazil~~iv) a inreluctance ~~1998.~~of ~~In January~~regulators ~~2000, we changed our company’s name from IMPSAT Corporation~~ to ~~IMPSAT~~adopt ~~Fiber~~policies ~~Networks,~~and ~~Inc.~~grant ~~During~~regulatory ~~2001,~~approvals ~~we commenced~~that ~~operations~~will result in ~~Chile~~increased ~~(Impsat Chile S~~competition.~~A.,~~ ~~or IMPSAT Chile) and Peru (Impsat S.A., or IMPSAT Peru).~~

Additionally, other major telecommunications carriers, including PTOs, have entered, or indicated their intention to enter, the Latin American ~~Chapter 11~~telecommunications ~~Filing~~market as deregulation in Latin America and ~~Emergence~~elsewhere opens new market opportunities. In particular, PTOs, including Telmex in Mexico and Telefonica in Spain have expanded their regional presence through acquisitions of competitors in specific countries.

OnWe ~~June 11,~~believe ~~2002,~~that weby ~~filed~~maintaining aour ~~voluntary petition~~position ~~for~~as ~~relief~~a ~~under~~reliable, ~~Chapter~~high 11quality provider of ~~the United States~~telecommunications ~~Bankruptcy~~services, ~~Code~~while ~~with~~strengthening the ~~Bankruptcy~~quality ~~Court.~~of Onour ~~September 4, 2002,~~network weand ~~filed~~ the ~~Plan~~breadth ~~with~~of ~~the~~service ~~Bankruptcy~~offerings ~~Court.~~through ~~During~~ our ~~bankruptcy~~ ~~proceedings~~Broadband Network, we ~~operated~~will be able to maintain our ~~business~~current customers and ~~managed~~successfully ~~our assets~~attract innew customers, even with competition from the PTOs ~~ordinary~~and ~~course~~other asinternational acarriers ~~debtor-in-possession~~entering our market.

We believe that we are able to compete successfully in data transmission Byservices ~~order~~because ~~dated~~we ~~December 16,~~offer ~~2002~~a broad array of services, ~~the Bankruptcy~~provide ~~Court~~high ~~confirmed~~quality, ~~the~~custom-designed ~~Plan.~~services Inthat ~~accordance~~are ~~with~~tailored to meet the ~~terms~~ specific needs of ~~the~~each ~~Plan,~~customer weand ~~formally~~have ~~emerged~~a ~~from~~greater ~~bankruptcy~~geographical onfootprint ~~the~~for our Broadband Network than our current ~~Effective~~competitors ~~Date,~~among ~~March 25,~~these ~~2003~~providers.

~~Under~~By ~~the~~delivering ~~Plan, we issued shares of New Common Stock~~ end-to-end ~~holders~~solutions ofthrough our ~~13 3/4%~~data ~~Senior~~center ~~Notes due 2005~~ and ~~12 3/8%~~ ~~Senior~~broadband ~~Notes~~infrastructure, ~~due~~we ~~2008 (the “2005/2008~~compete ~~Holders”)~~with inlarge ~~full~~international ~~satisfaction~~IT ofvendors ~~their claims thereunder, including the outstanding principal~~ and ~~all~~local ~~accrued~~integrators ~~and~~by ~~unpaid interest.~~capitalizing ~~The~~on ~~2005/2008 Holders received their ratable portion of 9.8 million shares of New Common Stock, as may be decreased to allow for~~ the ~~allocation~~convergence of atelecommunications ~~ratable number of such shares of New Common Stock to the holders of the Post-Effective Date Contingencies~~ and ~~certain~~IT ~~other claims of unsecured creditors of our parent holding company~~services. (See “Certain Considerations — We are in default under certain of our operating subsidiary indebtedness.”) Under the Plan, the dollar value of the Post-Effective Date Contingencies and other unsecured claims is to be determined after

15Our principal competitors include:

~~the~~• ~~Effective~~Telmex, ~~Date based on factors at~~ the ~~level of~~leading ~~our~~telecommunications ~~operating~~company ~~subsidiaries.~~in ~~Accordingly~~Mexico, ~~the~~which ~~Plan~~offers ~~required~~long ~~us to~~distance establish on the Effective Date a reserve (the “Common Stock Reserve Pool”) consisting of an estimated sufficient portion of such 9.8 million shares of New Common Stock to enable us to make any distributions after the Effective Date on account of Post-Effective Date Contingencies and ~~other~~basic ~~unsecured claims.~~telephony ~~To this end~~services, ~~based~~data ~~on the estimated maximum value of the Post-Effective Date Contingencies~~ and ~~other~~video ~~unsecured claims~~services, ~~we and~~Internet ~~the~~access ~~creditors~~as ~~committee~~well ~~under~~as ~~the~~integrated ~~Plan~~telecommunications ~~determined~~solutions ~~that~~for ~~the Common~~corporate ~~Stock~~customers ~~Reserve~~in ~~Pool shall be composed of 686~~Mexico,~~000~~ ~~shares of New Common Stock. Accordingly~~and, ~~the~~reinforced ~~2005/2008~~by ~~holders have initially received on~~ the ~~Effective~~acquisition ~~Date 9.1 million shares~~ of ~~New Common Stock, net of~~ the ~~Common~~assets ~~Stock Reserve Pool. Pursuant to the Plan, any settlements or distributions from the Common Stock Reserve Pool with the holders~~ of ~~the~~several ~~Post-Effective Date~~telecommunications ~~Contingencies~~companies ~~and other unsecured claims shall be made~~ in ~~accordance~~ ~~with~~Latin ~~the~~America, ~~disputed~~including ~~claims~~AT&T ~~resolution~~Latin ~~process~~America, ~~contained therein.~~Techtel, ~~Following~~Embratel, ~~the resolution of these claims~~Chilesat, we will distribute any shares of New Common Stock remaining in the Common Stock Reserve Pool ratably among the 2005/2008 Holders in accordance with the terms of the Plan. Holders of our pre-Chapter 11 common stock (the “Old Common Stock”) and ~~holders of any other equity interest received no distribution under the Plan~~Metrored. ~~All Old Common Stock and all other equity interests were cancelled on the Effective Date.~~

In• ~~addition~~Spain’s Telefonica S.A., onwhich orprovides ~~shortly~~through ~~after~~its ~~the~~affiliates ~~Effective Date~~fixed ofline ~~the~~and ~~Plan~~cellular telecommunications services, wedata ~~consummated~~transmission ~~several~~services ~~transactions~~and ~~pursuant to~~audiovisual ~~the~~content ~~Plan.~~and ~~We:~~ media services in Spain, Latin America and other regions.

• ~~filed~~Telecom ~~with~~Italia ~~the~~SpA, ~~Delaware Secretary of State~~ a ~~Restated~~global ~~Certificate~~telecommunications ~~of Incorporation (the “Certificate of Incorporation”); • amended and restated our Bylaws (the “Bylaws”) • cancelled all Old Common Stock~~provider, ~~and~~which ~~all~~operates ~~other~~through ~~existing~~affiliates ~~securities and agreements to issue or purchase any equity interests; • issued $67,531,000~~ in ~~aggregate~~Latin ~~principal~~America ~~amount~~principally ~~of Series A 6% Senior Guaranteed Convertible Notes due 2011 (initially convertible,~~ in the ~~aggregate,~~field ~~into 22.8%~~ of ~~the~~mobile ~~New~~telephony ~~Common Stock on a fully diluted basis)~~ (~~the~~but ~~“Series~~also Afixed-network, ~~Notes”) to holders of our former 12 1/8% Senior Guaranteed Notes due 2003 (the “2003 Noteholders”)~~Internet, indata ~~full satisfaction of the claims of the 2003 Noteholders~~transmission, ~~including~~telex ~~the outstanding principal~~ and ~~all accrued and unpaid interest thereon; • issued to (i~~telegraphy) ~~holders~~services ofin ~~debt~~Argentina ~~under our pre-Effective Date Broadband Network vendor financing agreements~~ (~~the~~through ~~“Original~~its ~~Vendor~~ownership ~~Financing~~stake ~~Agreements”)~~in ~~and~~Telecom ~~(ii)~~Argentina ~~other~~held ~~creditors~~through ofNortel ~~our operating subsidiaries holding guarantees by our parent holding company of such indebtedness who voted to accept the Plan~~Inversora), ~~a combination of new senior secured indebtedness totaling $143.8 million~~Bolivia, ~~$23.9~~Brazil ~~million in the aggregate of new Series B 6% Senior Guaranteed Notes due 2011~~ (~~“Series~~through Bits ~~Notes”)~~wholly-owned ~~(initially~~TIM ~~convertible~~Brasil ~~in the aggregate into 5.3% of the New Common Stock on a fully diluted basis~~Group), and ~~eight-year~~Paraguay, ~~warrants~~with topublicly-announced ~~acquire~~goals ~~15.3% in the aggregate~~ of ~~the~~developing ~~New Common Stock (on~~ a ~~fully~~continent-wide ~~diluted~~GSM ~~basis);~~network ~~• issued 200,000 shares of New Common Stock to certain officers of the Company~~ in ~~accordance~~South with our 2003 Stock Incentive Plan (the “2003 Stock Incentive Plan”); and • agreed, subject to our compensation committee’s approval, to issue options for 1,646,332 shares of New Common Stock to senior officersAmerica.

~~Under~~• ~~our~~System ~~Certificate~~integration ~~of Incorporation, our authorized capital stock as of the Effective Date consists of (i) 50,000,000 shares of the New Common Stock, with a par value of $0.01 per share~~ and ~~(ii) 5,000,000~~outsourcing ~~shares~~providers ~~of Preferred Stock~~IBM, ~~with a par value of $0.01 per share (the “Preferred Stock”). No Preferred Stock has been issued. Pursuant to the Certificate of Incorporation~~EDS, ~~Preferred Stock~~HP may be issued in one or more series as determined from time to time by our board of directors (the “Board”) without further approval of our stockholders. Upon issuance of any series of Preferred Stock, the Board will fix the voting powers, designations, preferences, and ~~relative, participating, optional, redemption, conversion, exchange or~~ other ~~special rights,~~local ~~qualifications,~~vendors ~~limitations or restrictions of~~ such ~~Preferred~~ ~~Stock,~~as ~~to the extent permitted by law. Pursuant to the Certificate of Incorporation~~Tivit, ~~we may not create~~Sonda, ~~designate~~Synapsis, ~~authorize~~ orGMD ~~cause~~and ~~to be issued any~~ Adexus.

16 10

classTable or series of nonvoting stock to the extent prohibited by Section 1123 of the United States Bankruptcy Code. Contents

InCompeting ~~connection~~technologies ~~with~~may ~~the~~not ~~reorganization~~become ~~our~~available ~~Board was~~that ~~reconstituted~~could ~~and~~negatively isaffect ~~composed~~our ~~of seven directors~~position. ~~In accordance~~For ~~with the Plan and the Certificate of Incorporation~~example, ~~the~~technologies ~~directors~~such (the “Directors”) consist of (1) our Chief Executive Officer; (2) two individuals (the “Category 2 Directors”) elected by the initial holders of Series A Notes issued under the Plan (the “Initial Series A Noteholders”) for so long as ~~the~~ ~~sum~~DSL ofcan ~~(x) the~~significantly ~~aggregate~~enhance ~~number of shares of New Common Stock issuable upon conversion of Series A Notes issued to and held by~~ the ~~Initial~~speed ~~Series A Noteholders or any~~ of ~~their~~ ~~respective~~traditional ~~affiliates,~~copper and (y) the aggregate number of shares of New Common Stock issued to and held by the Initial Series A Noteholders or such affiliates upon conversion of such Series A Notes continues to represent in the aggregate 7lines.5% orThese ~~more~~technologies ofenable ~~the New Common Stock on a fully diluted basis (but excluding for purposes of this calculation shares of New Common Stock issued or issuable pursuant to~~ our ~~2003~~PTO ~~Stock Incentive~~competitors Plan or subsequent stock plan adopted by the Board, or any modification, renewal or extension thereof) (a “Fully Diluted Basis”); (3) one individual elected by Nortel Networks Limited (“Nortel”), as an initial holder of Series B Notes and warrants to ~~purchase~~offer ~~New~~customers ~~Common~~high-speed ~~Stock (the~~services ~~“Warrants”)~~without ~~issued~~undergoing ~~to Nortel under~~ the ~~Plan,~~expense ~~for so long as the sum~~ of ~~(x)~~replacing ~~the~~their ~~aggregate~~existing ~~number of shares of New~~twisted-pair ~~Common~~copper ~~Stock~~networks. ~~issuable~~Our ~~upon~~private ~~conversion~~telecommunications ofservices ~~Series B~~could ~~Notes~~also ~~and Warrants~~face ~~issued~~future tocompetition ~~and~~from ~~held~~entities byusing ~~Nortel~~ or ~~any~~proposing ~~of its affiliates, and (y) the aggregate number of shares of New Common Stock issued~~ to ~~and~~use ~~held~~new ~~by Nortel~~ or ~~such~~emerging ~~affiliate~~voice ~~upon conversion of such Series B Notes~~ and ~~Warrants,~~data ~~continues~~transmission toservices ~~represent in the aggregate 4.5%~~ or ~~more~~technologies of the New Common Stock on a Fully Diluted Basis; and (4) three individuals (the “Category 4 Directors”) elected by the initial 2005/2008 Holders who received New Common Stock under the Plan (the “Initial 2005/2008 Common Stock”), for so long as the holders of the Initial 2005/2008 Common Stock or any of their respective affiliates continue to beneficially own Initial 2005/2008 Common Stock equal, in the aggregate, to 15% or more of the New Common Stock on a Fully Diluted Basis; provided that~~, for~~ ~~so long as the Initial Series A Noteholders have the right to elect the Category 2 Directors, no more than two of the Category 4 Directors may be persons who~~ are ~~affiliates~~not ofwidely ~~Morgan Stanley~~available ~~& Co. Incorporated. The initial term of the Category 2 Directors and the Category 4 Directors will end on the date of the annual meeting to be held~~ in ~~2004.~~Latin ~~Thereafter~~America, ~~the Category~~ 2such ~~and~~as ~~Category~~wireless-based 4systems ~~Directors~~dedicated ~~will be elected each year for a term ending on the date of the annual meeting of stockholders in the following year. Subject~~ to ~~the~~data ~~rights~~distribution ~~of certain parties, a director may be removed with or without cause in accordance with the procedures set forth in the Certificate of Incorporation~~services.

Rates are not regulated in our countries of operation, and the ~~Our~~prices ~~Services~~for our services are strongly influenced by market forces. We believe that increasing competition will result in increased pricing pressures. We have faced and expect to continue to face declining prices and may experience margin pressure as the PTOs in the countries where we have operations modernize their facilities, adapt to a competitive marketplace and place greater emphasis on data telecommunications and as other companies enter the Latin American telecommunications market. These price and margin declines have also accelerated, and will likely continue to do so, as new competitors enter our markets.

The principal ~~Our~~barriers ~~comprehensive~~to ~~telecommunications~~entry ~~solutions consist~~for prospective providers of ~~any~~private ~~combination~~telecommunications ofnetwork ~~our~~and ~~service~~IT ~~offerings,~~services ~~including~~ such as ours are the ~~enhanced~~infrastructure ~~and~~to ~~additional~~provide quality services, ~~that~~the wedevelopment ~~are~~of ~~able~~the torequisite ~~offer~~understanding of customer needs, technological, ~~using~~commercial ~~our~~experience ~~Broadband~~and ~~Network~~the comprehension of, and experience with, the complex regulatory environments in ~~Argentina~~Latin America and ~~Brazil~~the Caribbean. See “Risk Factors — We ~~currently~~ ~~classify~~face ~~these~~significant ~~service~~competition ~~offerings~~in ~~into~~Latin ~~four~~America,” ~~categories:~~“—PTOs have ~~data~~competitive ~~and~~advantages ~~value~~in ~~added~~the ~~services,~~marketplace” ~~Internet~~and ~~services,~~“—International ~~services~~telecommunications to carriers, ~~and~~have ~~telephony~~greater ~~services~~resources than we do. ”

~~Data~~Regulation Transmission and Value Added Services. We offer our customers a broad range of end-to-end network service combinations for their point-to-point and point-to-multipoint telecommunications needs, ranging from simple connections to customized private network solutions. We offer our network services over our proprietary and leased networks, which are comprised of metropolitan area fiber optic rings and wireless networks, fiber optic and satellite links. We also offer value-added services, including secure web and applications hosting services through our advanced data center facilities.

•Domestic ~~Connection Services~~Service. ~~Our~~We ~~customers~~are ~~can~~subject ~~purchase clear channels, frame relay services, ATM services and Internet protocol digital connection services~~ to ~~support~~regulation ~~their specific transmission requirements. Clear channels are typically purchased~~ by ~~customers~~the ~~that~~national ~~constantly~~telecommunications ~~transmit~~authorities ~~large amounts~~ of ~~voice,~~the various ~~data~~countries ~~and~~in ~~video~~which ~~traffic~~we operate. ~~Frame~~As ~~relay~~a ~~and~~result, ~~ATM~~our ~~services~~operations ~~are~~require ~~typically~~us ~~purchased~~to byprocure ~~customers~~permits ~~requiring~~and ~~reliable~~licenses ~~and~~from ~~rapid~~these ~~transmission~~authorities. ofWhile ~~variable~~we ~~amounts~~believe ofthat ~~voice,~~we ~~data~~have ~~and~~received ~~video~~all ~~traffic.~~required Weauthorizations ~~typically~~to offer our ~~clear channel connection~~ services ~~from~~in 64the ~~Kbps~~countries toin 2which we ~~Mbps~~operate, ~~and~~the weconditions ~~intend~~governing toour ~~expand~~service ~~this~~offerings ~~offering~~remain subject to ~~155~~future ~~Mbps~~legislation ofor ~~capacity.~~regulation ~~Our~~that ~~frame~~could ~~relay~~materially ~~services~~affect ~~are~~our ~~typically~~business ~~offered from 64 Kbps to 2 Mbps~~ and ~~we intend to offer our ATM services from 2 Mbps to 155 Mbps~~operations. ~~In addition, we offer digital connections~~

17Cross-Border Service. We provide integrated data, voice and video transmission services between and among forty Latin American and Caribbean countries and the United States. International private line services are traditionally provided by local carriers in each country, acting as correspondents and establishing dedicated telecommunications links between their facilities. Due to our pan-Latin American presence, however, we are often able to provide our services using our own facilities and personnel at both ends of the private line circuit. As a result of this end-to-end control, we maintain customer service and quality assurance at both ends of the circuit and realize better profit margins.

		using Internet protocol with interfaces of 10 Mbps to 100 Mbps as one of our options for local data network solutions.
	•	Private Network Services. For customers that require significant bandwidth and reliable data transmission between a number of sites, we offer customized private networks that combine fiber optic, fixed wireless and satellite technology. We also provide them with a variety of other services including network management services, trouble shooting reports, quality control and value-added services. Our consultative sales process ensures that each private network is designed to meet the evolving specific business and systems requirements of each customer. We also offer services such as video conferencing and remote learning as part of our private network services.
	•	Other Value-Added Services. We offer information technology solutions and data center services designed to facilitate our customer’s e-business and e-commerce needs and optimize our customers’ business processes.

In countries where we do not maintain equipment on customer premises or where we are not authorized to operate in such a fashion, we use our facilities in the originating country to connect with a correspondent local carrier in the destination country, or vice-versa. To date, we have signed correspondent agreements with carriers in several Latin American and Caribbean countries.

	•	Data Center Services. We have established 14 data center facilities that offer hosting services by integrating our broadband services with advanced value-added solutions in the region. We offer our clients a complete set of data center services ranging from housing, shared and dedicated hosting to more complex managed hosting solutions, including disaster recovery and applications management and outsourcing services. We also offer co-location services to carriers, including the rental of secure space, equipment provisioning and operation and maintenance services.
	•	Information Technology Solutions. As part of our end-to-end solutions, we also offer a variety of information technology services, including the design, installation and integration of intranets, extranets and virtual private data networks, through which our customers can conduct business in a secure environment as well as integrate these new systems with their legacy telecommunications systems. In addition, we offer an outsourcing solution for customers that do not have the technical personnel or choose not to operate, manage and maintain their telecommunications systems and networks.

Employees

~~Internet~~As ~~Services.~~of December 31, We2006, ~~have~~we ~~offered~~employed ~~Internet~~a ~~access services~~total toof ~~corporate~~1,251 ~~and~~persons, ~~ISP~~of ~~customers~~whom ~~since~~445 ~~1996.~~were ~~Our Broadband~~employed ~~Network~~by inIMPSAT Argentina, ~~and~~225 by IMPSAT Brazil, ~~links~~and ~~our~~250 ~~Latin American~~by ~~Internet~~IMPSAT ~~backbone,~~Colombia. asExcept ~~part~~with ofrespect ~~the~~to ~~Broadband~~our ~~Network~~chief executive officer and our chief financial officer, towhose employment ~~the~~contracts ~~U.S.~~recently ~~Internet~~automatically ~~through~~renewed ~~our~~for ~~U.S.~~an additional one-~~based~~year ~~point~~term, ofwe ~~presence~~do ~~using our~~not ~~fiber~~have ~~optic~~any ~~links~~long-term inemployment ~~addition~~contracts towith any of our ~~leased~~employees, ~~satellite~~including ~~links~~management. ~~With~~ ~~the~~None ~~objective~~of our employees are members of ~~positioning~~any ~~ourselves~~union, ashowever, ~~the~~IMPSAT ~~Latin~~Brazil ~~America~~is ~~Internet~~required ~~Backbone~~by law, weto ~~have~~negotiate ~~deployed~~certain alabor ~~series~~terms and conditions, such as salaries and wages, with industry-specific unions, and obtain approval of ~~data~~its ~~centers within~~employees. ~~the~~We ~~region~~believe that our relations with our employees are good.

•OTHER ~~Corporate~~INFORMATION Internet Services. As part of providing our customers with a total telecommunications solution, we currently offer our corporate customers Internet access services including line provisioning, equipment provisioning and installation, primary and secondary domain registration and maintenance and technical support. • Wholesale Internet Services. We provide a complete Internet service for ISPs, including managed line provisioning for domestic and international backbone connections between points of presence, access to our co-location sites and server services (e-mail and hosting services), managed modem and roaming services, as well as the use of our network operation and help desk services.

~~Services~~General toinformation about us can ~~Carriers~~be found at www.impsat.com. WeThe ~~offer~~information ~~dark~~contained ~~fiber capacity,~~on ~~“lit”~~or ~~fiber~~connected ~~services~~to our web site is not incorporated by reference into this Annual Report on Form 10-K and ~~duct~~should ~~capacity~~not tobe considered part of this or any other report filed with the ~~ISPs~~Securities and ~~telecommunications~~Exchange ~~carriers~~Commission (SEC). Our ~~network~~Annual ~~provides customers~~Report ~~with~~on ~~reliable~~Form ~~broadband~~10-K, ~~connections~~Quarterly ~~between~~Reports on Form 10-Q and ~~among our~~Current ~~metropolitan~~Reports ~~area~~on ~~networks~~Form at8-K, ~~high~~as ~~speeds.~~well ~~Customers~~as ~~that choose~~any amendments to ~~purchase~~those ~~“lit”~~reports, ~~capacity~~ are ~~able~~available tofree ~~purchase~~of charge through our web site as soon as anreasonably ~~initial~~practicable ~~amount~~after ofwe ~~capacity~~file ~~(typically~~them 45with, ~~Mbps)~~or ~~and~~furnish ~~increase that~~them ~~capacity~~to, onthe ~~demand~~SEC. These

~~Telephony~~11 Services. We provide switched-voice domestic and international long distance telephony services to corporate customers and resellers in Argentina, international long distance service in the United States, where we have our international hub, and international long distance service in Peru. We plan to further expand these offerings to other countries in the region, of which Brazil is expected to provide the most significant market opportunities. In November 2002, we received a license to provide switched voice services to or from Brazil. As components of our telephony services, we currently offer local, national and international

18 Table of Contents

~~long-distance~~reports ~~services,~~may ~~Private~~also ~~Branch~~be ~~Exchange (PBX),~~obtained ~~toll~~at ~~free~~the ~~services~~SEC’s ~~and~~public ~~local~~reference ~~numbering~~room toat ~~our~~450 ~~corporate customers~~Fifth asStreet, ~~well~~N.W., asWashington, ~~wholesale~~DC ~~voice~~20549. ~~services~~The toSEC ~~other~~also ~~carriers~~maintains a web site at www.sec.gov that contains reports, proxy statements and ~~resellers~~other information regarding SEC registrants, including Impsat.

~~The~~Item ~~following~~1A. ~~table~~RISK ~~shows our company’s net revenues breakdown by service for the years ended December 31, 2000, 2001 and 2002:~~ FACTORS

			December 31,
			2000		2001		% change(1)			2002		% change(1)
			(dollar amounts in thousands)
Data and value added services:
	Broadband		$	51,260	$	85,579		67.0	%	$	77,733		(9.2	)%
	Satellite			159,265		137,053		(13.9	)		88,547		(35.4	)
	Value added services(2)			3,743		17,184		359.1			14,191		(17.4	)
		Total		214,268		239,816		11.9			180,471		(24.7	)
Telephony				235		11,762		4,905.1			14,327		21.8
Internet				35,996		45,403		26.1			27,243		(40.0	)
Services to carriers				885		7,360		731.6			6,985		(5.1	)
Total net revenues from services			$	251,384	$	304,341		21.1	%	$	229,026		(24.7	)%

In addition to other information in this Report, the following risk factors should be carefully considered in evaluating IMPSAT and its business because such factors either currently or potentially may have a significant impact on our business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this Report and the risks discussed in IMPSAT’s other SEC filings, actual results could differ materially from those projected in any forward-looking statements.

(1)	Increase (decrease) compared to previous year.
(2)	“Value added services” includes revenues from our data center services, systems integration and other information technology solutions services.

Risks Related to Our Business

~~The~~We ~~Broadband~~have ~~Network~~ a history of incurring losses that may make it difficult to fund our future operations.

We have yet to ~~Our~~establish ~~Broadband~~any ~~Network~~history of profitable operations. We recorded net losses of $14.2 million in 2004, ~~enables~~$36.2 usmillion toin ~~provide~~2005 ~~high capacity~~and $35.6 million in 2006. Increased competition, ~~high~~adverse ~~speed~~economic ~~telecommunications~~conditions ~~services~~in ~~across~~our ~~Latin~~countries of operation and other factors ~~America~~have negatively affected our financial condition and business operations. Our ~~Broadband~~revenues ~~Network~~may ~~consists~~not be capable of: funding our operations and, therefore, we may need to obtain additional financing to achieve and sustain profitability, and to fund our operating requirements. There can be no assurance that such additional financing will be available on favorable terms, on a timely basis or at all. If additional funding is not available or is available on terms that are not acceptable to us, our ability to fund our operations will be significantly impaired.

•We ~~fiber~~are ~~optic~~vulnerable ~~local~~to ~~rings~~currency ~~and wireless access points within major cities in Latin America~~fluctuations, ~~including~~devaluations ~~Buenos Aires, São Paulo~~ and restrictions ~~Rio~~on deour ~~Janeiro~~ability •to ~~long-haul,~~expatriate ~~high~~local ~~capacity~~earnings ~~fiber~~or ~~optic~~convert ~~backbones~~local ~~linking~~currencies ~~major~~into ~~cities~~U.S. indollars. ~~Latin~~These ~~America~~factors •may ~~capacity~~increase onour ~~undersea cable systems to provide connections between and among major Latin American countries~~losses, ascause ~~well~~fluctuations asin ~~global~~our ~~telecommunications~~operating ~~connections~~results and ~~Internet~~adversely ~~access~~affect •our ~~data~~ability ~~center~~to ~~facilities~~pay inour ~~major cities in Latin America~~indebtedness.

A significant portion of our costs, including lease payments for certain satellite and fiber optic capacity, purchases of capital Weequipment, ~~believe~~and payments of interest and principal on our indebtedness, is payable in U.S. dollars. Our results of operations and financial conditions are therefore vulnerable to currency devaluations. Following the “pesification” decree, our contracts that were governed by Argentine law, denominated in foreign currency and existing as of January 6, 2002 were mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso, subject to adjustment pursuant to the Argentine CER consumer price index. Currently, we have two contracts subject to CER adjustment. In Brazil, our ~~Broadband~~customer ~~Network~~contracts ~~enables~~with usBrazilian counterparties cannot be denominated in U.S. dollars or linked to: the exchange rate between the Brazilian real and the U.S. dollar, although we are permitted to amend the pricing of our services for our long-term telecommunications service contracts with our customers annually based on changes in the consumer price index in Brazil for the prior year. The inflation adjustment provisions in these laws do not eliminate completely the currency exchange risk facing our operations in Argentina and Brazil. For example, contracts entered into between Argentine parties after the “pesification” decree’s enactment that are initially denominated in pesos may not thereafter be adjusted according to the CER or any other consumer price index. Also, changes in the consumer price indices in Argentina and Brazil may lag or be lower than changes in the exchange rate between the Argentine and Brazil local currency and the U.S. dollar and therefore may not fully allow us to address the impact of a devaluation of those currencies against the U.S. dollar. Our operations in Argentina and Brazil represented a significant portion of our consolidated net revenues in 2006. Accordingly, our operations in Argentina and Brazil have exposed us, and will increase our exposure, to exchange rate risks.

•Except ~~cost-effectively~~in ~~offer~~Brazil ~~more~~and ~~bandwidth-intensive services~~Argentina, ~~including~~our ~~intranet~~ and ~~extranet~~our ~~services~~subsidiaries’ •contracts ~~reduce~~with ~~our~~customers generally ~~costs~~provide for ~~leased~~payment ~~satellite~~in ~~capacity~~U.S. dollars or for payment in local currency linked to the exchange rate between the local currency and ~~leased~~the ~~telecommunications~~U.S. ~~links~~dollar asat athe ~~percentage~~time of invoicing. Accordingly, inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our net revenues •during ~~create~~2006. aHowever, ~~high~~given ~~capacity,~~that ~~pan-Latin~~the ~~American~~exchange ~~Internet~~rate ~~backbone~~is •generally ~~offer~~set ~~Latin~~at ~~American~~the ~~companies~~date ~~more~~of ~~efficient~~invoicing ~~access~~and tothat ~~the~~we ~~U.S.~~in ~~Internet~~some ~~backbone~~cases •experience ~~continue~~substantial todelays ~~provide~~in ~~consistent~~collecting receivables, ~~high~~our ~~quality~~operations ~~service~~in bythose ~~keeping~~other ~~our~~countries ~~customer~~are ~~traffic~~also onexposed ~~our~~to ~~network~~exchange rate risk.

Substantial or continued devaluations in ~~Our~~local ~~Broadband~~currencies ~~Network~~relative isto the U.S. dollar could have a ~~fully~~material ~~integrated terrestrial~~adverse ~~fiber~~effect ~~optic~~on ~~network~~the ~~connecting~~ability ~~Santiago,~~of ~~Chile; Buenos~~our ~~Aires,~~customers ~~Argentina;~~to ~~and~~absorb ~~São~~the ~~Paulo~~costs ~~and~~of ~~Rio~~a dedevaluation. ~~Janeiro~~This could result in our customers seeking to renegotiate their contracts with us or, failing ~~Brazil~~satisfactory ~~with~~renegotiation, ~~points~~defaulting inon ~~between~~or canceling their contracts. Our competitors and

19 12

Customers Table of Contents

~~Overview.~~potential Wefuture ~~have grown rapidly since the commencement of our operations in 1990. Our customer base has increased from 125 corporate customers in two countries at December 31~~competitors, ~~1992~~including toPTOs ~~2,649 corporate customers in nine countries at December 31, 2002. Larger entities, which often have significant needs for reliable, cost-effective data transmissions~~ and ~~other telecommunications services~~large, ~~were~~multinational ~~the first to use our customized~~ telecommunications ~~services. As a result~~companies, amay ~~significant~~be ~~portion of~~less ~~our~~exposed ~~revenues~~to ~~has~~currency ~~been~~risk ~~derived~~or ~~from~~may ~~our~~be ~~largest customers. A~~better ~~significant~~able ~~number~~to ofhedge ~~our~~their ~~customers,~~currency ~~including~~risk ~~our largest customers, are in Argentina~~ and ~~Colombia,~~could ~~which,~~thereby ~~having commenced~~gain ina ~~1990~~relative ~~and~~competitive ~~1992,~~advantage ~~respectively, are the locations of our longest-standing operations. Our customer base~~ in ~~Brazil has grown from 48 at~~ the ~~end~~event of ~~1998~~a tocurrency ~~366 at the end of 2002~~devaluation. ~~As our business further matures and as we extend the operation of the Broadband Network, we expect that the average size of our customers will decline.~~

Latin ~~Our~~American ~~customers~~economies ~~consist~~have ofexperienced ~~financial~~shortages ~~institutions, major~~in ~~governmental~~foreign ~~agencies,~~currency reserves and ~~leading~~restrictions ~~national~~on ~~and multinational~~the ~~corporations~~ability ~~and~~to ~~private~~expatriate ~~sector~~local ~~companies, including~~earnings ~~Repsol~~and ~~YPF,~~convert ~~Petroleo~~local ~~Brasileiro~~currencies into U.S.A dollars. — Any such restrictions may limit or impede our ability to transfer ~~Petrobras,~~or ~~Siemens~~to ~~and~~convert ~~Reuters~~such currencies into U.S. ~~Our~~dollars ~~ten~~and ~~largest~~to ~~customers accounted~~expatriate such funds for ~~approximately~~the ~~20.8%~~purpose of making timely payments of interest and principal on our ~~revenues~~indebtedness. It could also limit the ability to make payments to suppliers of leased capacity or telecommunication equipment. Currency devaluations in one country may have adverse effects in another country. For example, in 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of ~~approximately~~companies 22to make payments abroad.9% While these restrictions have been substantially eased, Argentina may tighten exchange controls or transfer restrictions in ~~2001~~the future to prevent capital flight, counter a significant depreciation of the peso or address other unforeseen circumstances. In addition, in Venezuela, the conversion of bolivares into U.S. dollars at the official exchange rate established by the Venezuelan Central Bank and the Venezuelan Ministry of Finance is generally limited to the current exchange control regime. Accordingly, the acquisition of foreign currency by Venezuelan companies to honor foreign debt or to pay dividends (or to make payments to vendors overseas) is subject to registration and subject to a process of application and approval by the Comisión de Administración de Divisas (“CADIVI”) and to the availability of foreign currency within the guidelines set forth by the National Executive Power for the allocation of foreign currency.

~~Our~~We ~~ten~~face ~~largest~~numerous ~~customers~~risks asthat ofcould ~~December 31, 2002~~adversely ~~were:~~ affect our Broadband Network.

•Operating ~~subsidiaries~~the ofBroadband ~~Global~~Network ~~Crossing~~may ~~Ltd.,~~have a ~~Bermuda-headquartered~~negative ~~corporation~~impact ~~that~~on ~~constructs,~~our ~~and~~results offers carrier’s carrier services over, worldwide terrestrial and submarine fiber optic networks • Instituto Nacional de Hipodromos (INH), a Venezuelan horse racing track • Confederaçaõ Nacional da Industria, Brazil’s national association of ~~private industrial companies • Corporacion Nacional de Ahorro y Vivienda, or Conavi, one of Colombia’s largest financial institutions • Citicorp Global Technology, Inc~~operations. • OpenTech S.A., a communications equipment and software distributor based in Venezuela. • Empresa de Telecomunicaciones de Bogotá S.A., E.S.P., one of Colombia’s largest telecommunications companies • HSBC Bank Brasil S.A., the third-largest privately-owned bank in Brazil • Perez Companc S.A., an Argentine energy conglomerate • Gobierno de la Provincia de Buenos Aires, the local government of the province of Buenos Aires

~~The~~Our ~~following~~operation ~~table~~of ~~shows~~the ~~our~~Broadband ~~customer concentration~~Network by(defined ~~country~~in as“Business—The ofBroadband ~~the~~Network”), ~~dates~~which ~~indicated.~~may ~~Totals presented~~include dothe ~~not~~expansion ~~include~~into ~~customers~~new ~~from~~services for our ~~fax~~business customers, ~~store~~could ~~and forward~~involve ~~service.~~ any one or more of the following:

Country		As of December 31,
				2000				2001				2002
		(number of customers and percentage of total)
Argentina			1,146		43.1	%	1,100		38.2	%	953		36.0	%
Colombia			672		25.3		699		24.3		678		25.6
Brazil			238		9.0		387		13.5		366		13.8
Venezuela			251		9.5		245		8.5		215		8.1
Ecuador			210		7.9		236		8.2		216		8.2
Mexico			51		1.9		47		1.6		24		0.9
USA			64		2.4		73		2.5		67		2.5
Peru			15		0.6		33		1.2		70		2.6
Chile			9		0.3		57		2.0		60		2.3
	Total		2,656		100.0	%	2,877		100.0	%	2,649		100.0	%

•

regulatory risks, including obtaining the appropriate licenses;

20 • capital expenditures; and

~~Customer~~• ~~Contracts. Our~~competition ~~contracts with our customers have in the past typically ranged in duration~~ from ~~six months to five years and contracts with our private telecommunications network customers have generally been three-year contracts. Under the Argentine “pesification” decree~~large, if a contract denominated in pesos is entered into after the decree’s enactment, payments under that contract are not entitled to be adjusted according to the CER or any other consumer price index. Accordingly, in order to mitigate our inflation risk, our new pesowell-~~denominated~~financed ~~contracts~~international ~~in Argentina are typically for shorter terms ranging from three to six months. Contracts generally may be terminated by the customer without penalty. The private~~ telecommunications ~~network customers generally pay a one-time installation fee and a fixed, monthly fee~~carriers. ~~We believe that as we further commercialize our Broadband Network, we may develop a more flexible pricing structure, using both a usage-based billing and fixed fee-based billing model.~~

~~The~~Our ~~ongoing~~ability ~~severe~~to ~~economic~~obtain ~~downturn~~new incapital ~~Argentina and~~that ~~recessionary~~we ~~economic~~might ~~conditions~~require in ~~Latin~~the ~~America~~future asto ~~a whole,~~remain ~~has~~technologically ~~adversely~~competitive ~~affected~~may ~~many~~be ofnegatively ~~our~~affected ~~customers~~by ~~and~~many ~~caused a~~factors ~~number~~beyond ofour ~~them to terminate their contracts with us, fail to renew their contracts, or reduce the amount of services contracted~~control.

~~Except~~Our infuture ~~Brazil~~capital ~~(and~~requirements inwill ~~certain~~depend ~~instances~~upon ~~since the~~many ~~“pesification” decree~~factors, inincluding: Argentina), our contracts generally provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate at the time of invoicing between the local currency and the U.S. dollar. The revenues of our customers are generally denominated in local currencies. Although our customers include some of the largest and most financially sound companies and financial institutions in their markets, devaluation of local currencies relative to the U.S. dollar and foreign exchange controls restricting the exchange or convertibility of such currencies could have a material adverse effect on the ability of our customers to pay us for our services. Such currency devaluations and foreign exchange controls could also result in our customers seeking to renegotiate their contracts with us or, alternatively, defaulting on their contracts.

~~Sales~~• the cost, ~~Marketing~~timing and ~~Customer Services~~ extent of upgrading or maintaining our networks and services;

We• ~~view~~ our ~~relationship~~enhancement ~~with~~and ~~our~~development ~~customers as a long-term partnership in which customer satisfaction is~~ of ~~paramount~~ ~~importance. For this reason, we apply an integrated approach to our sales, marketing and customer service functions. We emphasize the highest quality in our sales, marketing and customer~~ services ~~and an enduring commitment to providing fast and flexible responses to customer demands. In order to efficiently meet these challenges~~, wedirectly ~~adapt~~or ~~and~~through ~~tailor~~ our ~~customer~~ ~~service function to match the scale and complexity of the solutions we provide.~~ subsidiaries;

~~Customers~~• ~~who~~our ~~require~~ability ~~or are better-suited~~ to ~~standardized~~ orreact bundled solutions are serviced by dedicated sales teams with shared centralized support, along with available assistance from our 24 hours a day, 365 days a year call centers. Customers that utilize complex, customized solutions composed of a variety of different services are assigned to ~~designated~~developments ~~multi-task customer service teams that develop and maintain long-term, cooperative relationships with these customers. These relationships provide us with an~~ in~~-depth understanding~~ of the ~~customer’s evolving telecommunications service requirements and levels of service satisfaction. The customer service team oversees all phases of initial customer contact~~industry, ~~service~~including ~~planning,~~regulatory installation and ongoing service. After we establish initial contact with a potential customer, the customer service team conducts a thorough evaluation of the customer’s telecommunications needs. As a result of this team-oriented approach, we believe that we have achieved high levels of customer satisfaction while being able to identify new revenue generating opportunities, customer telecommunications solution enhancements and product or service improvements previously overlooked or not adequately addressed by the client. changes;

To• market our new and enhanced services, such as telephony and data centers, we have developed several sales and marketing teams, each focusing on a particular type of service. In addition to salaried sales and marketing personnel, we often use the ~~services~~need ~~of third-party sales representatives~~ to ~~assist in~~enter ~~generating~~into ~~sales~~market ~~and~~segments ~~managing the contract process between us and our potential customers. We typically pay these third parties a commission and royalties equal to a percentage of the revenues we collect from any contract~~ with ~~those~~higher ~~customers obtained~~volumes asbut alower ~~result of the efforts of the third-party sales representative.~~ margins;

21 • the status of competing services; and

~~Competition~~ • our results of operations.

WeFurther ~~compete~~development onof the ~~basis~~Broadband ofNetwork ~~our~~will ~~experience, network~~require ~~quality,~~additional ~~customer~~resources ~~service,~~that ~~range~~we ofmay ~~services~~not ~~offered and price~~have. ~~Our competitors fall into three broad categories:~~

•We ~~PTOs~~may inneed ~~each~~to ~~country~~adapt the ~~where~~Broadband weNetwork ~~operate~~to •respond ~~other~~to: companies that operate competing satellite and terrestrial data transmission businesses, including newer entrants from more developed telecommunications markets outside of Latin America • large international telecommunications carriers

In• ~~the~~requests ~~past,~~by ~~the~~our ~~PTOs~~customers ~~and~~for ~~international telecommunications~~coverage ~~carriers have focused on local and long-distance telephony services. More recently, however, they have focused a degree~~ of ~~attention~~our ~~and~~Broadband ~~resources~~Network ~~towards~~beyond ~~the private~~its ~~telecommunications~~existing network systems segment of the telecommunications market, and may be expected to increasingly do so in the future. Several of these entities have significantly greater financial and other resources than we do, including greater access to financing. These competitors may also be able to subsidize their private telecommunications network businesses with revenues from their other business lines. footprint;

~~With~~13 the first group of competitors, our further expansion into the telecommunications services market along with continued deregulation of the telecommunications industry in Latin America, has brought us into more direct competition with the PTOs. Many of the PTOs in the countries where we operate have established and marketed “large customer” or “grand user” business teams in an attempt to provide dedicated services to the type of customer that represents our most important target market.

WeTable believe that by maintaining our position as a reliable, high quality provider of telecommunications services, while strengthening the quality of our network and the breadth of service offerings through our Broadband Network, we will be able to maintain our current customers and successfully attract new customers. We might consider strategic alliances and other cooperative ventures with the PTOs to take advantage of each partner’s relative strengths. Contents

In• ~~the~~changes ~~second category, our competitors include data transmission providers. We believe that we are able to compete successfully~~ in data transmission services because we offer a broad array of services, provide high quality, custom-designed services that are tailored to meet the specific needs of each customer and have a greater geographical footprint for our ~~Broadband~~customers’ ~~Network~~service ~~than~~requirements; ~~our current competitors among these providers. Among our competitors in this category are:~~ and

• ~~MetroRED~~technological ~~Telecomunicaciones,~~advances ~~owned~~ by ~~Fidelity~~our Investments, a data transmission service operator in Argentina, Brazil and Mexico that offers local network services in the cities of Buenos Aires in Argentina, São Paulo and Rio de Janeiro in Brazil, and Mexico City in Mexico • Pegasus Telecom Scompetitors.A., a provider of broadband data transmission services throughout 25 cities in Brazil and an affiliate of Brazilian fixed line and wireless operator, Telemar Participacoes S.A. • Engenharia de Redes S.A., a Brazilian infrastructure and data services provider that uses both fiber optic and wireless links • NetUno, a local exchange carrier and provider of broadband local access, Internet and private network services in Venezuela • TechTel (an Argentine telecommunications company jointly owned by Grupo Techint SA, one of Argentina’s largest industrial groups, and Telmex (Telefonos de Mexico S.A. de C.V.), Mexico’s dominant telecommunications carrier), which offers long distance, data transmission and basic telephony services in Argentina and has announced plans to expand its operations into Uruguay

InWe ~~the~~may ~~third~~require ~~category~~additional financial, ~~major~~operational ~~telecommunications carriers~~and ~~have~~managerial ~~entered~~resources orto ~~indicated~~expand ~~their~~or ~~intention~~adapt ~~to enter~~ the ~~market~~ asBroadband ~~deregulation~~Network into ~~Latin~~accommodate ~~America~~new services and ~~elsewhere~~technologies. ~~opens~~If ~~new market~~we ~~opportunities.~~are ~~Increasing~~unable ~~competition~~to ~~may~~expand ~~significantly affect~~or ~~our~~adapt ~~pricing~~the ~~policies.~~Broadband WeNetwork ~~cannot~~to ~~assure~~respond ~~you~~to ~~that any~~these ~~future~~developments ~~competition~~on ~~arising~~a ~~from~~timely ~~major~~basis, ~~telecommunications carriers~~and ~~will~~at ~~not~~a ~~adversely~~commercially ~~affect~~reasonable cost, our ~~financial~~business ~~condition~~may ~~or results~~be ofmaterially ~~operations~~adversely affected.

22We may need to expand the footprint of our metropolitan area networks.

~~Furthermore,~~We weoperate ~~cannot~~over ~~assure~~15 ~~you~~metropolitan ~~that~~area ~~competing~~networks in Argentina, ~~technologies~~Colombia, ~~will~~Brazil, ~~not~~Venezuela, ~~become~~Ecuador ~~available~~and ~~that~~Peru. ~~will~~See ~~negatively affect~~“Business—The ~~our~~Broadband ~~position~~Network.” ~~For~~In ~~example~~those countries, ~~technologies~~the ~~such~~coverage asfootprints ~~DSL~~of ~~can significantly~~our ~~enhance~~metropolitan ~~the~~area ~~speed~~networks ofare ~~traditional~~generally ~~copper~~smaller ~~lines. These~~than ~~technologies~~those ~~enable~~of ~~our~~the dominant PTO ~~competitors~~or ~~to offer customers~~incumbent ~~high-speed~~carriers. ~~services~~Accordingly, ~~without~~in ~~undergoing~~order ~~the~~to ~~expense~~maintain ofor ~~replacing their~~improve ~~existing~~our ~~twisted-pair~~competitive ~~copper~~position ~~networks. This,~~ in ~~turn~~those markets, ~~could~~ ~~negate~~we ~~our~~might ~~last~~be ~~mile~~required ~~advantage.~~to ~~Our~~incur ~~private telecommunications~~capital ~~services~~expenditures ~~could~~to ~~also~~expand ~~face~~the ~~future~~footprints ~~competition from~~of ~~entities~~our ~~using~~metropolitan orarea ~~proposing~~networks toin ~~use~~future ~~new~~periods. orThere ~~emerging~~can ~~voice~~be no ~~and~~assurance ~~data~~that ~~transmission~~we ~~services~~will orhave ~~technologies~~the ~~that~~capital ~~are~~resources ~~not widely~~necessary ~~available~~to inmake ~~Latin~~an ~~America,~~investment ~~such~~in asany ~~space~~such ~~based~~expansion ~~systems dedicated~~of toour ~~data~~metropolitan ~~distribution~~area ~~services~~networks.

~~Rates are not regulated in our countries of operation, and the prices for our services are strongly influenced by market forces.~~ We ~~believe~~face ~~that~~significant ~~increasing~~ competition ~~will result~~ in increased pricing pressures. We have faced and expect to continue to face declining prices and may experience margin pressure as the PTOs in the countries where we have operations modernize their facilities, adapt to a competitive marketplace and place greater emphasis on data telecommunications and as other companies enter the Latin ~~American~~ ~~telecommunications market~~America. ~~These price and margin declines have also accelerated, and will likely continue to do so, as new competitors enter our markets.~~

The ~~principal~~telecommunications ~~barriers~~industry toin ~~entry~~Latin ~~for~~America ~~prospective~~is highly ~~providers~~competitive. ofWe ~~private~~expect ~~telecommunications~~that ~~network~~competition ~~services~~in ~~such as ours are~~ the ~~development~~industry ofwill ~~the~~maintain ~~requisite~~its ~~understanding~~intensity. ~~of customer~~We ~~needs~~compete ~~and~~on the ~~technological~~basis ~~and~~of ~~commercial~~our experience ~~and~~, ~~know-how~~quality, ~~infrastructure~~customer toservice, ~~provide~~range ~~quality~~of services tooffered ~~meet those needs~~ and ~~working capital~~price.

We have experienced pricing pressure for some of our services, and we expect to continue to face pricing pressure. We may further experience declining ~~Regulation~~ operating profit margins as the PTOs in the countries in which we operate become more competitive and place greater emphasis on data telecommunications.

~~Domestic~~PTOs Service. We are subject to regulation by the national telecommunications authorities of the countries where we operate, and our operations require us to procure permits and licenses from these authorities. While we believe that we have ~~received~~competitive ~~all~~advantages ~~required authorizations from regulatory authorities for us to offer our services~~ in the ~~countries in which we operate, the conditions governing our service offerings may be altered by future legislation or regulation that could affect our business and operations~~marketplace.

~~Cross-Border~~As ~~Service. We~~mentioned ~~provide~~above, ~~integrated~~in ~~data,~~most ~~voice~~of ~~and~~our ~~video~~markets, ~~transmission~~our ~~under~~principal ~~the~~competitor ~~Interplus~~is ~~name~~the ~~between~~local ~~and~~PTO ~~among nineteen~~or ~~Latin~~an ~~American~~affiliate ~~and~~of ~~Caribbean countries and~~ the ~~United States.~~local ~~In November 2000~~PTO, wewho ~~were~~generally ~~granted~~has asignificant ~~license~~competitive toadvantages. ~~provide switched~~For ~~voice~~example, ~~services~~Telecom ~~to or from~~ Argentina, and inTelefonica ~~November 2002 we received authorization to provide these services in Brazil. International private line services such as Interplus~~ are ~~traditionally~~the ~~provided~~PTOs ~~by local carriers~~ in ~~each country acting as correspondents and establishing dedicated telecommunications links between their facilities~~Argentina. ~~Due~~In ~~to our pan-Latin American presence~~Brazil, ~~we are often able to offer~~ our ~~Interplus~~ ~~service~~principal ~~using our own facilities and personnel at both~~competitors ~~ends~~are ofEmbratel ~~the~~(Telmex), ~~private~~Brasil ~~line~~Telecom, ~~circuit. As a result of this end-to-end control~~Telefonica, ~~we maintain customer service~~ and ~~quality assurance at both ends of an Interplus link and realize better margins than when we use a correspondent carrier~~Telemar.

In ~~countries~~the ~~where~~future, wethe doPTOs ~~not~~may ~~maintain~~devote ~~customer premises~~substantially ~~equipment~~more orresources ~~where we are not authorized~~ to ~~operate in~~the ~~that fashion~~sale, ~~our~~marketing ~~Interplus~~and ~~service~~provision ~~uses~~of ~~our~~services ~~facilities~~that incompete ~~the originating~~with ~~country~~us, towhich ~~connect~~could ~~with~~have a ~~correspondent~~material ~~local carrier~~adverse ineffect ~~the~~on ~~destination~~our ~~country or vice-versa. To date~~business, ~~we have~~results ~~signed~~of ~~Interplus~~operations ~~correspondent agreements with carriers in several Latin American~~ and ~~Caribbean~~financial ~~countries~~condition. ~~We charge customers a monthly fee for Interplus that is based on the capacity of the circuit provided.~~

~~Deregulation. Various~~International ~~countries in Latin America have taken steps towards deregulation in the~~ telecommunications ~~market~~ ~~during the last few years. Several Latin American countries have completely or partially privatized their national~~ carriers, ~~including Argentina, Brazil, Mexico and Venezuela. Furthermore, some countries~~ have ~~demonopolized~~greater ~~their~~resources ~~dominant telecommunications~~than ~~providers.~~we ~~For example, Argentina and Venezuela completed the demonopolization of public telephone services by their PTOs during 2000~~do. We believe that these events of deregulation, while serving to increase competition, have presented and will continue to present significant opportunities for us to expand our private telecommunications network services to, from and within the region, as well as to present opportunities for us in areas of telecommunications currently permitted to be conducted only by the PTOs.

23We also compete with operators of satellite data transmission networks and terrestrial telecommunications links and face actual or potential competition from large international telecommunications carriers and from other industry participants. International telecommunications carriers, whose principal focus has traditionally been long distance telephony services, may increasingly focus on the private telecommunications network systems segment of the telecommunications market as deregulation continues. Many of these potential competitors have substantially greater financial and other resources than we do. In addition, consolidation of telecommunications companies and the formation of strategic alliances within the telecommunications industry could give rise to significant new competitors.

Downturn and further consolidation in the telecommunications industry could negatively ~~Employees~~ affect our operations.

AsRegional ofeconomic ~~December 31~~difficulties, ~~2002~~which occurred during the last several years, wehave ~~employed~~had a ~~total~~materially ofnegative ~~1,271~~impact ~~persons,~~on ofthe ~~whom~~telecommunications ~~453~~market ~~were~~in ~~employed~~Latin byAmerica. ~~IMPSAT~~The ~~Argentina, 225~~rate byat ~~IMPSAT~~which ~~Brazil,~~the ~~and~~industry ~~229~~improves byis ~~IMPSAT~~critical ~~Colombia.~~to ~~Except~~our ~~with respect~~ability to ~~our~~improve ~~Chief~~overall ~~Executive~~financial ~~Officer~~performance. ~~and~~The ~~our~~financial ~~Chief~~difficulties ~~Financial Officer,~~experienced weby doother ~~not~~participants ~~have~~in ~~any~~the telecommunications ~~long-term~~industry ~~employment~~resulted ~~contracts~~in ~~with any~~some of our ~~employees~~competitors purchasing the assets of these troubled companies. This consolidation, ~~including~~in ~~management~~some cases, ~~and~~has ~~none~~resulted ofin ~~our employees~~multiple ~~are~~smaller ~~members~~competitors ofbeing ~~any~~absorbed ~~union.~~into Werelatively ~~believe~~few ~~that~~large ~~our~~entities ~~relations~~ (with ~~our~~significantly ~~employees~~greater ~~are~~financial ~~good.~~and other resources than we have, including greater access to financing), thereby increasing the operating profit margin

~~Item~~14 ~~2. Properties~~

MetropolitanTable Area Networks. We operate 15 metropolitan area networks, composed of a combination of owned and leased fiber optic and microwave links covering a total of 1,000 route kilometers. Our first metropolitan area network was established in Buenos Aires, Argentina in 1990. In addition, we currently provide services over our metropolitan area networks in Córdoba, Mendoza and Rosario, in Argentina; Bogotá, Medellín and Cali, Colombia; Rio de Janeiro, Curitiba, São Paulo and Belo Horizonte in Brazil; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru. We also manage and operate data transmission services offered over a fiber optic network covering 352 route kilometers in Bogotá, Colombia, pursuant to a joint venture with Empresa de Telecomunicaciones de Santafe de Bogotá, the Colombian PTO that provides local telephone service in the Bogotá region. In addition, we own and control several microwave links in smaller cities in Latin America. Contents

~~Fiber~~pressures ~~Optic~~that Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless long-haul, high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from the Pacific Ocean at Valparaiso, Chile to the Atlantic coast in Buenos Aires, Argentina, and from there into Curitiba, Rio de Janeiro and São Paulo, Brazil. We also own and operate a long haul fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network to other parts of Latin America and the world, we ~~have purchased IRU capacity on Global Crossing Ltd~~face.’s ~~undersea~~In ~~digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America~~particular, ~~including Global Crossing~~Spain’s ~~South American~~Telefónica ~~network,~~S.A. ~~as well as leased capacity from other undersea fiber optic cable operations, including on the submarine system between Latin America~~ and ~~the~~Telmex ~~United~~(Teléfonos ~~States~~de ofMéxico ~~Latin American Nautilus~~ S.A., ande ~~affiliate of the Telecom Italia Group~~C.V.) ~~This capacity~~have ~~enables our company to transmit telecommunications~~significantly ~~traffic~~expanded ~~seamlessly~~their ~~from~~presence ~~the~~and ~~United~~acquisitions ~~States~~in torecent ~~major~~years ~~countries~~ in ~~South~~ ~~America using~~ the ~~latest~~Latin ~~fiber~~American ~~optic technology~~region. ~~For~~As a ~~discussion~~ result of ~~certain~~this ~~risks~~industry ~~that~~consolidation, ~~could~~potential ~~adversely~~customers ~~affect~~and ~~our rights~~suppliers tomay ~~IRU~~prefer ~~capacity~~to ondo ~~Global~~business ~~Crossing’s~~with ~~network,~~competitors ~~see “Certain~~that ~~Considerations —~~have Wegreater ~~are~~financial ~~negatively impacted~~and ~~by Global Crossing’s insolvency.”~~other resources.

InOur ~~addition~~failure to ~~our IRU capacity on Global Crossing’s undersea fiber optic networks~~acquire, weintegrate ~~are a member of the Americas-1~~ and ~~Columbus-II~~operate ~~undersea~~new ~~fiber~~technologies ~~optic cable consortia,~~ and have purchased an initial total capacity of 2 Mbps on each system. Americas-1, which commenced commercial operation in December 1994, is a 4,960 mile fiber optic cable system connecting Vero Beach, Florida with the ~~U.S.~~intellectual ~~Virgin Islands,~~property ~~Trinidad, Brazil~~ and ~~Venezuela.~~proprietary ~~Columbus-II~~rights ~~links Mexico, the United States, the U.S. Virgin Islands, Spain, Portugal and Italy with about 7,440 miles~~ of ~~fiber optic cable.~~ Weothers ~~also~~could ~~have~~harm ~~reserved~~our upcompetitive toposition ~~18 Mbps, 4 Mbps~~ and 24prevent ~~Mbps~~us ~~of capacity~~from onusing ~~the~~necessary ~~Americas-II, Pan American and Arcos I undersea fiber optic cable networks, respectively~~technology. The 8,300 km Americas-II fiber optic submarine cable connects St. Croix, Puerto Rico, Curacao, Venezuela and Brazil. Pan American runs between the U.S. Virgin Islands, Aruba, Venezuela, Colombia, Panama, Ecuador, Peru and Chile. Arcos I, an 8,600 km fiber optic cable system, connects the United States with 14 Caribbean and Latin American nations.

~~Data~~The ~~Centers.~~telecommunications Toindustry is ~~complement~~characterized ~~our~~by ~~Broadband~~rapid ~~Network~~and ~~infrastructure,~~significant wetechnological ~~operate~~advancements ~~in major~~and ~~cities~~the inintroduction ~~Latin~~of ~~America~~new 14products ~~advanced~~and ~~data~~services. ~~center~~We ~~hosting facilities~~do ~~with~~not anpossess ~~aggregate~~significant ofintellectual ~~approximately~~property ~~500,000~~rights ~~gross square~~with ~~feet.~~respect ~~These~~to ~~state-of-~~the~~-art~~ ~~facilities,~~technologies ~~which~~we use and are ~~capable~~ ofdependent ~~supporting~~on third patties for the ~~most~~development ~~advanced~~of ~~application~~and ~~hosting services,~~access ~~are~~to ~~located~~new intechnology. ~~Buenos~~In ~~Aires~~addition, ~~Mendoza,~~we ~~Córdoba~~generally ~~and Rosario~~own inthe ~~Argentina;~~customer ~~São~~premises ~~Paulo,~~equipment ~~Rio~~used deto ~~Janeiro~~provide our services and ~~Curitiba~~ inwe ~~Brazil;~~own ~~Santiago,~~the ~~Chile;~~fiber ~~Fort~~optic ~~Lauderdale~~networks, ~~United States;~~including ~~Mexico~~switching ~~City,~~equipment ~~Mexico;~~that ~~Bogotá,~~constitutes ~~Colombia;~~the ~~Caracas,~~Broadband ~~Venezuela;~~Network. ~~Quito~~Therefore, ~~Ecuador;~~technological changes that render our equipment and ~~Lima~~the Broadband Network out of date, ~~Peru.~~less efficient or more expensive to operate than newer equipment could require us to incur substantial increases in capital expenditures to upgrade or replace such equipment.

24We cannot predict the effect of technological changes, such as changes relating to emerging wireline and wireless transmission technologies and the use of the Internet for traditional voice, data or other broadband services, on our business. In addition, it is impossible for us to predict with any certainty which emergent technology relevant to our business will prove to be the most economic, efficient or capable of attracting new customers. A reduction in the demand for data transmission services or a failure by us to obtain and adapt to new technology in our markets could have a material adverse effect on our ability to compete successfully.

~~Teleports.~~Additionally, Wewhile ~~own and~~we ~~operate~~do ~~teleports~~not inbelieve ~~Buenos~~that ~~Aires,~~there ~~Argentina;~~exists ~~São~~any technology patented by ~~Paulo~~others, ~~Brazil;~~or ~~Bogotá,~~other ~~Colombia;~~intellectual ~~Caracas,~~property ~~Venezuela;~~owned ~~Quito~~by others, ~~Ecuador;~~ ~~Mexico~~that ~~City,~~is ~~Mexico;~~necessary ~~Lima,~~for ~~Peru;~~us ~~and~~to ~~Fort~~provide ~~Lauderdale, Florida,~~our ~~United~~services ~~States.~~and Inthat ~~addition~~is not now subject to ~~the~~a ~~teleport~~license inallowing ~~Fort Lauderdale,~~us ~~Florida~~to use it, ~~IMPSAT~~there ~~USA~~can ~~operates~~be ~~leased~~no ~~teleport facilities~~assurances in ~~New~~this ~~Jersey~~regard. WeIf ~~also~~such ~~own~~intellectual property is owned by others and ~~operate~~not ~~regional teleports~~licensed inby ~~Mendoza~~us, ~~Córdoba,~~we ~~Rosario,~~would ~~Tucumán,~~have ~~Mar del~~to ~~Plata,~~negotiate Laa ~~Plata~~license ~~and~~for ~~Neuquén~~the inuse ~~Argentina; Medellín,~~of ~~Cali~~that ~~and~~property. ~~Barranquilla~~We inmay ~~Colombia;~~not ~~Guayaquil, Ecuador;~~be ~~and~~able ~~Rio~~to denegotiate ~~Janeiro~~such a license at a price that is acceptable or at all. This could force us to cease offering products and services ~~Curitiba~~incorporating such property, ~~Brazil~~thereby adversely affecting operating results.

~~Satellite Capacity.~~ Our ~~satellite~~competitors ~~transmissions~~could ~~use~~take ~~both C-band~~advantage ~~(4-7 GHz) and Ku-band (10-18 GHz) frequencies. As~~ of ~~December 31,~~ ~~2002,~~new ~~we had a total available leased capacity~~or ofcompeting ~~143.0~~technologies MHz. Our lease payments for satellite capacity totaled approximately $32.1 million in 2002. We will contract for additional leased satellite capacity if business requires. A portion of our satellite capacity is leased by our wholly-owned subsidiary, International Satellite Capacity Holding, Ltd. This subsidiary’s principal function is to ~~lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to~~ our ~~operating subsidiaries~~detriment. ~~We believe that this method of centralizing our leasing of telecommunications capacity provides us with better terms.~~

~~Item~~Although 3we believe we have the flexibility to act quickly to take advantage of any significant technological development, new competing technologies may negatively affect our business. ~~Legal~~For ~~Proceedings~~example, technologies such as digital subscriber line, or DSL, significantly enhances the speed of traditional copper lines. DSL or other technologies enable our PTO competitors to offer high-speed services without undergoing the expense of replacing their existing copper networks. Widespread use of DSL in our markets could materially improve the “last mile” advantage held by our competitors. Our telecommunications network services also may face competition from entities that use new or emerging voice and data transmission services or technologies that currently are not widely available in Latin America. Furthermore, competing technologies may gain market and commercial acceptance. We are limited by our existing cash resources and our anticipated constraints on availability of financing from making any significant capital expenditures to acquire any new technologies. If these developing or new technologies are successful, they may provide significant long-term competition that could have a material adverse effect on our business, results of operations and financial condition.

AsWe ~~more~~may ~~fully~~be ~~described~~subject ~~in Item 1 —~~to ~~“Business”~~significant ~~and Item 7 —~~liabilities ~~“Management’s~~due ~~Discussion~~to ~~and Analysis~~a oftax ~~Financial Condition and Results of Operations” we sought protection under Chapter 11 of the United States Bankruptcy Code~~ on ~~June 11,~~antennas ~~2002.~~imposed ~~We developed a Plan that was approved~~ by the ~~Bankruptcy~~City ~~Court~~of onBuenos ~~December 16,~~Aires ~~2002. On March 25, 2003, the Plan became effective~~ and weother ~~emerged from the proceedings under Chapter 11 of the United States Bankruptcy Code pursuant to the terms of the Plan~~municipalities.

In September 2003, the City of Buenos Aires notified several telecommunication companies, including us, that it will start Wecollecting ~~are~~a ~~also~~tax ~~involved~~on inall orantennas ~~subject~~within the city, as provided by the City Fiscal Code. Through December 31, 2006, we have received invoices totaling approximately $34.8 million, but have not accrued amounts relating to ~~various~~this matter. We have ~~litigation~~formally ~~and~~objected ~~legal~~to ~~proceedings~~the ~~incidental~~legality of the tax and to certain factual assumptions used in calculating the ~~normal~~tax, and have rejected each of the notices in an administrative proceeding filed with the tax authorities of the City of Buenos Aires. If ~~conduct~~required to pay this tax at the current rate and based on invoices received from the City of ~~our~~Buenos ~~business~~Aires through December 31, ~~including~~2006, we estimate that we would be subject to an additional tax of approximately $8.6 million per year. In December 2006, we filed an objection with respect to ~~regulatory matters~~the tax on antennas assessed for the final quarter of 2006. In our objection, we reaffirmed our position that such a tax is both illegal and based on false assumptions. Our objection is pending resolution before the City’s

~~IPO~~15 Allocations Class Action. As previously reported, on November 1, 2001, a lawsuit (the “IPO Class Action”) was filed in the United States District Court for the Southern District of New York against our company, certain individuals who were then officers and directors of our company, and the underwriters to our initial public offering (IPO). This lawsuit alleged on behalf of a proposed class of all shareholders that our company and its underwriters violated various provisions of the securities laws in connection with the IPO in February 2000. Pursuant to the Plan, the plaintiffs in the IPO Class Action received in connection with their claims the assignment of any insurance proceeds that we receive in connection with the litigation, but otherwise the claims of the plaintiffs against us or any of our other assets have been discharged as part of our Chapter 11 proceedings.

360networks,Table Inc. During June 2001, we terminated a series of contracts that we had signed in the first quarter of 2001 with 360americas network (Bermuda) Ltd., a subsidiary of 360networks, Inc., and certain other subsidiaries of 360networks, Inc. (collectively, “360networks”), to construct and provide IRU dark fiber, capacity services and conduit to 360networks over the Broadband Network in Argentina and Brazil, including the new Argentina-Brazil link, as a result of the breach by 360networks of its payment obligations under those contracts. Between March and May 2001, we made segments of the IRU dark fiber and capacity services available to 360networks for acceptance, but 360networks failed to make certain payments as required by our contracts with them. 360networks also failed to make certain payments for collocation space in our telehouses in Sao Paulo and Rio de Janeiro, Brazil and Buenos Aires, Argentina, and we terminated those contracts as well. We also terminated a contract with 360networks for collocation space in Caracas, Venezuela, also for payment default by 360networks. Contents

~~Our~~tax ~~IRU~~authorities. ~~dark~~In ~~fiber~~addition, ~~capacity~~we ~~services~~have ~~and construction~~received ~~contracts~~claims ~~with~~of ~~360networks~~a ~~contemplated~~similar ~~total payments~~nature from the Municipality of Quilmes in Argentina in the amount of approximately $9812.8 5 million, inplus ~~advance~~defaulted ~~upon delivery~~interest. ofWe ~~the~~cannot ~~IRU~~assure ~~dark~~you ~~fiber,~~that ~~capacity~~we ~~services~~will ~~and~~not ~~conduit construction~~be forced to ~~360networks~~pay ~~and~~the ~~additional~~City ~~recurring~~of ~~payments~~Buenos Aires, ~~totaling~~ ~~approximately~~or ~~$45.0 million over~~ the ~~term~~Municipality of ~~the contracts~~Quilmes, ~~for~~an ~~maintenance~~amount ~~services.~~representing Asthe full (or a portion of the) ~~termination~~invoiced amount of the ~~contracts~~tax, ~~360networks~~or ~~had~~that ~~paid~~we uswill anot receive ~~total~~similar ~~of $25~~invoices from other municipalities in Argentina.~~8 million~~ ~~and~~Additionally, ~~was~~we cannot assure you that any of our assets will not be attached in ~~default~~connection onwith ~~additional~~either ~~payments~~of these claims or that we will not be required to post a bond representing the ~~totaling~~full ~~$32.0~~(or ~~million~~a portion of the) invoiced amount during any legal proceeding challenging these claims. InThese ~~addition,~~events ~~360networks~~could ~~was~~have ina ~~default~~ material adverse effect on ~~payments~~our ~~for~~financial ~~collocation~~condition ~~services~~and ~~totaling~~on $0our ability to meet our obligations.~~8 million.~~

25 We face regulatory risks and uncertainty with respect to local laws and regulations.

WeOur ~~commenced~~business ~~arbitration~~is dependent upon the procurement and ~~litigation proceedings~~maintenance ~~against~~of ~~360networks~~licenses ~~for~~to ~~damages~~provide ~~under~~various telecommunications network services in the ~~terminated~~countries in ~~contracts~~which we operate. We believe that we have all licenses required for the ~~provision~~conduct of ~~IRU~~our ~~dark~~current ~~fiber~~operations. ~~and~~We ~~capacity services,~~expect asthat ~~contemplated~~those bylicenses ~~the~~that ~~relevant~~are ~~agreements.~~subject ~~During November~~to ~~2002,~~expiration wewill ~~reached~~be anrenewed ~~agreement~~in ~~(the~~due ~~“Settlement Agreement”)~~course ~~with~~upon ~~360networks~~our ~~pursuant~~application to ~~which~~the weappropriate authorities. ~~agreed~~Due to ~~dismiss~~ ~~our~~the ~~arbitration~~political and ~~litigation~~economic ~~proceedings~~risks ~~against 360networks~~associated ~~and,~~with the countries in ~~return,~~which we ~~became~~operate, ~~entitled~~we tocannot ~~certain~~assure ~~funds totaling~~you ~~$22.6 million~~ that ~~360networks~~we ~~had~~will ~~advanced~~be able to ~~us in~~maintain ~~connection~~our ~~with~~licenses ~~the~~or ~~contracts~~that ~~between~~they uswill ~~and~~be ~~360networks~~renewed upon their expiration. The loss, or substantial ~~These~~limitation ~~funds~~upon ~~had~~the ~~been~~terms, ~~recorded~~of byour uslicenses ascould ~~deferred~~have ~~revenues~~a ~~during the~~material ~~pendency~~adverse ofeffect ~~the~~on ~~litigation~~our ~~and~~results ~~arbitration~~of ~~proceedings~~operations. ~~In addition,~~We ~~under~~cannot ~~the~~assure ~~Settlement~~you ~~Agreement,~~that we ~~received~~will ~~from 360networks~~succeed ~~assets~~in ~~with~~obtaining aall ~~fair~~requisite ~~value~~regulatory ofapprovals ~~approximately~~to ~~$1.6 million.~~operate ~~The~~in ~~Settlement~~those ~~Agreement~~countries ~~became~~in ~~effective~~which onwe may ~~December 20,~~desire ~~2002~~to do business.

~~Global~~In ~~Crossing Ltd. Global Crossing Ltd. filed for protection under Chapter 11 of the Bankruptcy Code in January 2002~~addition, ~~and~~we ~~the~~may ~~Global~~not ~~Crossing~~be ~~subsidiaries~~able to ~~whom~~maintain our ~~company~~ ~~provides~~existing ~~services and infrastructure~~franchises, aspermits ~~described below,~~and ~~were~~rights-of-way ~~included~~that inwe ~~Global~~need ~~Crossing’s~~for ~~Chapter 11~~our ~~proceedings during August 2002~~business. We ~~are~~may ~~party~~also tobe aunable ~~series~~to ~~of agreements~~obtain ~~with~~and ~~Global~~maintain ~~Crossing for~~ the ~~provision~~other ~~of telecommunications services. Pursuant to those agreements~~franchises, ~~our company~~permits ~~constructed~~and ~~a terrestrial portion~~ rights-of-way ~~Global Crossing’s~~that ~~South~~we ~~American~~require. ~~network~~In ~~between~~particular, ~~landing~~we ~~points~~are ~~on the~~involved ~~Atlantic Ocean~~ in ~~Argentina~~several ~~and~~legal ~~the~~proceedings ~~Pacific~~that, ~~Ocean~~among inother ~~Chile~~things, ~~granted~~ ~~Global~~challenge ~~Crossing~~amounts apayable ~~series~~by ~~of indefeasible rights of use (IRU) over ducts and dark fiber on its broadband telecommunication network in Argentina~~us, ~~Brazil~~ and ~~Peru,~~ ~~provided~~additional ~~Global~~such ~~Crossing~~proceedings ~~with~~could ~~collocation~~be ~~space~~instituted. ~~and~~Such ~~related services~~proceedings inmay ~~its~~increase ~~telehouses~~our incosts ~~Argentina, Brazil, Chile, Venezuela~~ and ~~Peru~~adversely ~~and~~affect ~~provided~~our ~~Global Crossing with maintenance services for their telecommunications assets in Latin America~~profitability. In ~~addition~~Moreover, wea ~~acquired~~sustained ~~IRU~~ and ~~leased~~material ~~capacity~~failure onto ~~Global Crossing’s~~obtain ~~South~~or ~~American~~maintain ~~undersea~~required ~~fiber~~rights ~~optic~~could ~~cable~~materially ~~system in~~adversely ~~order~~affect ~~to connect~~ our performance ~~Broadband~~in ~~Network~~the ~~with~~affected ~~other~~area ~~parts of Latin America~~ and ~~the~~our ~~world~~operating results.

~~Commencing~~Local inlaws and regulations differ significantly among the ~~first~~jurisdictions ~~quarter~~in which ofwe ~~2002~~operate and ~~subsequent~~ toin which we may operate in the ~~filing~~future. The interpretation and enforcement of ~~Global~~these ~~Crossing’s~~laws ~~petition under~~and ~~Chapter 11,~~regulations ~~Global~~vary ~~Crossing~~and ~~has~~are ~~disputed~~often abased ~~number~~on ~~of invoices~~the ~~that~~informal weviews ~~have~~of ~~delivered~~the tolocal itministries which, in ~~connection~~some ~~with~~cases, ~~the~~might be subject to influence ~~services~~by ~~which~~the wePTOs. ~~are~~The ~~rendering~~conditions togoverning ~~Global~~our ~~Crossing~~service ~~and~~offerings ~~has failed~~may tobe ~~make~~altered ~~full~~by ~~payment~~future inlegislation ~~accordance~~or ~~with~~regulation. ~~the~~In ~~terms~~some of our ~~invoices.~~ ~~The~~ principal ~~disputed~~existing ~~matters~~and ~~include~~target ~~the~~markets, ~~following:~~laws and regulations prohibit or limit our provision of certain telecommunications services.

~~Beginning~~Our inearnings ~~the~~will ~~first~~deteriorate ~~quarter~~if of 2002, Global Crossing disputed certain of our invoices sent to its Argentine and Brazilian subsidiaries for collocation and related services in our telehouses in those countries. On January 15, 2003, we ~~filed~~cannot acollect motion in the Global Crossing Chapter 11 proceeding seeking an order that Global Crossing either irrevocably reject or assume the telehouse agreements and that Global Crossing make payment of all shortfalls under the telehouse agreements after the respective petition dates of the Global Crossing debtors through December 31, 2002, in the aggregate amount of $1,069,051.57, plus interest on ~~the past due amounts, as administrative expense claims. On February 19, 2003, Global Crossing responded to~~ our ~~motion.~~customer In its response, Global Crossing stated its intention to assume the Brazil and Argentina telehouse agreements, along with three other telehouse agreements covering collocation space in Santiago, Chile, Lima, Peru and Caracas, Venezuela, although it also stated its right under its plan of reorganization to reconsider its assumption of such agreements at any time prior to the effective date of the Global Crossing plan of reorganizationaccounts. Global Crossing denied that it owed any unpaid amounts with respect to the Argentine or Brazilian telehouse agreements. We and Global Crossing are currently seeking to agree to a schedule for evidence, briefing and adjudication of the disputes regarding the Argentine and Brazilian telehouse agreements.

InAs ~~October~~of ~~2002~~December 31, ~~Global~~2006, ~~Crossing~~our ~~failed~~gross totrade ~~make payment~~accounts ofreceivable ~~the~~were ~~full~~$52.2 ~~amount~~million ofcompared ~~recurring~~to ~~service~~$46.1 ~~charges~~million ~~for operation~~as ~~and maintenance~~ of ~~the~~December 31, ~~IRUs~~2005. ~~that~~We ~~Global Crossing~~recorded ~~acquired~~a ~~under~~provision ~~the~~for ~~TAC~~doubtful ~~Turnkey~~accounts ~~Construction~~of ~~and~~$1.3 ~~IRU~~million ~~Agreement dated~~in ~~September 22,~~2006 ~~1999~~compared ~~(the~~to ~~“TAC~~a ~~Agreement”). During~~net ~~the~~reversal ~~first quarter~~ of ~~2003,~~a ~~Global~~provision ~~Crossing~~of ~~also~~$1.1 ~~paid recurring~~million ~~service~~in ~~charges~~2005. ~~under~~At ~~the~~December 31, ~~TAC~~2006, ~~Agreement~~our ~~and~~allowance ~~the~~for ~~other backhaul~~doubtful ~~agreements~~accounts incovered ~~amounts~~approximately ~~less~~104.2% ~~than~~of weour ~~assert~~gross totrade beaccounts ~~contractually~~receivable ~~required.~~past Asdue ~~part~~more ofthan ~~our~~six ~~January 15~~months, ~~2003 motion~~compared into ~~Global~~96.4% ~~Crossing’s~~as ~~bankruptcy~~of ~~proceeding~~December 31, ~~we requested~~2005. ~~that~~As ~~the~~our ~~bankruptcy~~business ~~court~~increases ~~find~~with ~~that~~small ~~Global~~and ~~Crossing has~~medium ~~failed~~customers toand ~~make~~in ~~the~~relation ~~full~~to ~~recurring~~any ~~service~~economic ~~charges~~contractions ~~required by~~in ~~the~~our ~~TAC~~principal ~~Agreement~~countries ~~and order Global Crossing to make payment~~ of ~~such~~operation, ~~amounts~~we ~~as administrative expenses through~~may ~~December 31,~~experience ~~2002,~~an increase in ~~the~~uncollectable ~~amount~~accounts ~~of $614,470~~receivable.~~50,~~ ~~plus interest~~Difficulties onin ~~the~~collecting ~~past~~amounts due ~~amounts~~from asour ~~set~~customers ~~forth~~could inhave ~~the~~a ~~TAC Agreement.~~material Inadverse ~~its~~effect ~~response~~on to our ~~motion~~business, ~~Global~~results ~~Crossing requested~~of ~~that~~operations ~~the~~and ~~bankruptcy~~financial ~~court~~condition. ~~defer determination of our~~

26 Our historical financial information is not comparable to our current financial condition and results of operations.

As a result of our emergence from bankruptcy during March 2003, we have been operating our business with a new capital structure since April 1, ~~entitlement~~2003. We were also subject to ~~the~~fresh-start ~~recurring~~reporting ~~service~~prescribed ~~charges until~~by ~~such~~GAAP. ~~time~~As asa ~~Global~~result ~~Crossing~~of ~~has~~its ~~decided~~fresh-start toreporting, ~~assume~~on ~~or reject~~April 1, 2003, the ~~TAC~~carrying ~~Agreement~~value of our fixed assets and the related depreciation expense and interest expense due to changes in our debt structure, among other ~~backhaul~~things, ~~agreements~~changed considerably from that reflected in our historical consolidated financial statements. Accordingly, our financial condition and results of operation for the periods prior to April 1, 2003 are not comparable to results of operations reflected in our historical financial statements, making it difficult to assess our future prospects based on historical performance.

OnIn ~~March 26,~~our ~~2003,~~2005 ~~Global Crossing filed an adversary proceeding with the bankruptcy court overseeing its Chapter 11 case asserting a proprietary interest in the IRUs granted to them under the TAC Agreement~~ and ~~other~~2006 ~~backhaul agreements entered into between the two companies. Our response to Global Crossing’s complaint is due on April 25~~audits, ~~2003.~~ ~~Our~~our ~~company~~independent ~~and~~registered ~~Global~~public ~~Crossing~~accounting ~~are~~firm ~~currently~~issued ~~seeking to agree to~~ a ~~schedule~~“going ~~for~~concern” ~~evidence,~~opinion ~~briefing~~expressing ~~and~~doubt ~~adjudication~~as ofto ~~Global~~our ~~Crossing’s~~continuing ~~asserted~~financial ~~proprietary interest in the IRUs arising under the TAC Agreement and other backhaul agreements~~viability.

On16 March 26, 2003, Global Crossing Bandwidth, Inc., one of the debtors in Global Crossing’s Chapter 11 proceeding, filed an adversary proceeding in the Global Crossing Chapter 11 case claiming IMPSAT USA had failed to pay Global Crossing Bandwidth, Inc. a total of $466,820 for IP transit services pursuant to a Carrier Service Agreement dated January 19, 2001 between IMPSAT USA and Global Crossing Bandwidth, Inc. We intend to dispute Global Crossing Bandwidth’s complaint on the basis that IMPSAT USA has paid in full all amounts owed by it under the Carrier Services Agreement. Our answer to the complaint in this matter is due on April 25, 2003.

SeeTable “Certainof Considerations — We are negatively impacted by Global Crossing’s insolvency” for more information concerning our commercial relationships and current disputes with Global Crossing. Contents

~~Item~~As 4a result of our current liquidity position, amount of debt obligations and operating results, our independent registered public accounting firm, Deloitte & Touche LLP, issued a “going concern” opinion in connection with their audit of our consolidated financial statements for the year ended December 31, 2006. ~~Submission~~Deloitte also issued a “going concern” opinion in connection with their audit of ~~Matters~~our consolidated financial statements for the year ended December 31, 2005. These opinions expressed substantial doubt as to our ability to continue as a ~~Vote~~going concern. The going concern opinions could have an adverse impact on our ability to execute our business plan, result in the reluctance on the part of ~~Security-Holders~~certain potential business partners to do business with us, result in the inability to obtain new business due to potential customers’ concern about our ability to deliver services, or adversely affect our ability to raise additional capital.

OnBased oron ~~around November 1, 2002, ballots respecting~~ the ~~Plan~~principal and/or ~~the~~amortization ~~related~~payments ~~disclosure~~due ~~statement~~under ~~dated as~~our ofindebtedness ~~October 23,~~beginning ~~2002~~in ~~were~~2007, ~~circulated~~we tomay ~~our~~need ~~security holders and other persons entitled~~ to ~~vote~~raise onadditional ~~the~~capital ~~Plan. Notice of the Plan was also mailed~~ to ~~our~~fund ~~equity~~such ~~holders.~~payments ~~The~~or ~~majority of~~further ~~holders~~refinance ofa ~~the~~significant ~~Class 2~~portion ~~and Class 3 claims voted in favor~~ of ~~the restructuring set forth in the Plan, which was~~our ~~confirmed~~indebtedness byif the ~~Bankruptcy~~proposed ~~Court~~Merger onwith ~~December 16,~~an ~~2002.~~indirect ~~No vote~~wholly-owned ~~was~~subsidiary ~~taken~~ of ~~the~~Global ~~equity~~Crossing ~~holders~~does ~~as they were~~ not ~~entitled to vote in accordance with the United States Bankruptcy Code~~occur.

27On June 11, 2002, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. On September 4, 2002, we filed the Plan with the bankruptcy court. By order dated December 16, 2002, the bankruptcy court confirmed the Plan. In accordance to the terms of the Plan, we formally emerged from bankruptcy on March 25, 2003.

Beginning in March 2005, we were required to commence repayment, in installments, of the principal amount of our restructured senior debt owed by our ~~PART~~subsidiaries IIto certain of their vendor financiers who elected to participate in the Plan. In addition, interest on the guaranteed senior notes issued under the Plan, which we refer to as the Senior Notes, that was payable in kind between the Effective Date and March 28, 2005, was required to be paid in cash commencing in the third quarter of 2005. On July 29, 2005, we entered into amended and restated financing agreements to restructure $125.6 million of our vendor indebtedness (the “Amendments”), which we refer to as Senior Secured Notes, which was issued by IMPSAT Argentina pursuant to the Second Amended and Restated Financing Agreement, dated as of July 29, 2005 (the “Argentina Financing Agreement”), and IMPSAT Brazil pursuant to the Second Amended and Restated Financing Agreement, dated as of July 29, 2005 (the “Brazil Financing Agreement” and together with the Argentina Financing Agreement, the “Financing Agreements”), each of which are guaranteed by the Company, and which are held by affiliates of certain members of our Board of Directors. Pursuant to the Amendments, we made an initial principal repayment of $18.3 million and modified the terms of the Financing Agreements such that the remaining outstanding principal amounts ($38.9 million owed by IMPSAT Argentina and $68.4 million owed by IMPSAT Brazil) would be repaid in the aggregate amounts of $5 million in 2006, $20 million in 2007, $25 million in 2008 and $57.3 million in March 2009. The amended indebtedness bears interest at a rate of 12% per annum, payable semi-annually in arrears, as compared to 10% per annum for the period prior to the effectiveness of the amendments. The parties also agreed to amendments to the financial covenants in the agreements to reflect current financial and operating conditions. The amended indebtedness was subject to optional prepayment at a cost of 101% until July 29, 2006 and at par thereafter. Each of IMPSAT Argentina and IMPSAT Brazil (with respect to the Amendment to which it is a party), on the one hand, and the lenders of the amended indebtedness, on the other hand, have an option to further amend the agreements governing such indebtedness to provide that the Company will be the primary borrower, and IMPSAT Argentina and IMPSAT Brazil the respective guarantors of the portions of the indebtedness currently owed by them, subject to certain terms and conditions. The terms and conditions of the amendments were negotiated by a special committee of the Company’s Board of Directors that was formed to explore recapitalization alternatives.

~~Item~~On 5.March 15, ~~Market~~2007, the Company and its subsidiaries in Argentina and Brazil entered into amendments to the Argentina Financing Agreement and the Brazil Financing Agreement, which provided for ~~Registrant’s~~the ~~Common~~extension ~~Equity~~of the interest payment date under the Argentina Financing Agreement and ~~Related~~the ~~Stockholder~~interest ~~Matters~~and principal payment dates under the Brazil Financing Agreement from March 25, 2007 to May 25, 2007, and the waiver through the first quarter of 2008 of the Debt Service Coverage Ratio, as defined in the Brazil Financing Agreement.

~~Our~~In ~~Old~~the ~~Common~~event ~~Stock~~that ~~had~~the ~~been~~Merger ~~traded~~does onnot ~~the Nasdaq~~close, ~~National~~we ~~Market~~may ~~under~~need ~~the~~to ~~symbol~~raise ~~“IMPT”~~additional ~~since the~~capital ~~effective~~or ~~date~~refinance of our ~~initial~~existing ~~public offering on February 4, 2000~~debt. OnIn ~~May 15,~~that ~~2002~~event, ~~the~~we ~~Old~~may ~~Common Stock~~be ~~was~~unable ~~delisted~~to ~~from~~secure ~~the~~such ~~Nasdaq~~additional ~~National~~capital ~~Market~~or ~~because~~enter ~~the Old~~into ~~Common Stock failed to maintain~~ a ~~minimum market value of $3~~refinancing ~~over~~favorable ~~30 consecutive trading days and failed~~ to ~~maintain a minimum market value of public float of $15,000,000. Since May 15, 2002,~~ the ~~Old Common Stock was traded on the Nasdaq Over-The-Counter Bulletin Board under the symbol “IMPTQ~~Company.”

~~The~~Additionally, ~~following~~our ~~tables~~subsidiaries ~~shows~~have ~~the~~financial ~~high~~obligations ~~and~~for ~~low~~an ~~sales price~~aggregate principal amount of ~~the~~$41.5 ~~Old~~million that ~~Common~~do ~~Stock~~not ~~for~~carry ~~each~~our ~~fiscal~~guaranty. ~~quarter~~This ~~between January~~ amount comprises bonds issued by IMPSAT Colombia in local currency with a current book value of $20.1 million, ~~2001~~several ~~through~~bank ~~May 15,~~and ~~2002~~leasing aslines ~~reported~~in onColombia for an aggregate of $11.2 million; a defaulted obligation ~~Nasdaq~~of ~~National~~IMPSAT ~~Market~~Argentina ~~System~~totaling approximately $7.6 million in outstanding principal; and, ~~after~~a ~~May 15,~~number ~~2002 through~~of ~~December 31~~bank lines in Brazil ($0.9 million), ~~2002~~Peru ($1.0 million), onArgentina ~~the~~($0.2 ~~Nasdaq~~million) ~~Over-The-Counter Bulletin~~and ~~Board~~Chile ($0. 5 million).

	2002
Quarter	High		Low
First	$	0.20	$	0.05
Second		0.15		0.01
Third		0.04		0.01
Fourth		0.02		0.01

	2001
Quarter	High		Low
First	$	4.44	$	3.70
Second		2.19		2.00
Third		0.32		0.18
Fourth		0.22		0.20

~~In accordance with the Plan, all pre-existing equity interests of IMPSAT Fiber Networks, Inc. were cancelled on the Effective Date.~~ We ~~anticipate~~continue ~~the New Common Stock~~ to ~~trade~~ onbe ~~the~~leveraged ~~Nasdaq Over-The-Counter Bulletin Board some time during the second quarter of 2003. As of March 31, 2003 there was no market for our New Common Stock~~ and ~~there were approximately nine holders of record of~~ our ~~New~~debt ~~Common~~service ~~Stock, not~~requirements ~~including~~make ~~beneficial~~us ~~owners~~more invulnerable ~~nominee~~to ~~or street name. Our~~economic ~~board~~downturns ~~of directors has not declared any dividends on our Old Common Stock~~ in ~~past,~~the ~~and~~markets we doservice ~~not~~or ~~anticipate~~in ~~paying any cash dividends on~~ the ~~New~~economy ~~Common Stock~~ in ~~the foreseeable future~~general. ~~In addition, the terms of our Series A Notes and Series B Notes restrict our ability to pay dividends on the New Common Stock.~~

~~The~~At ~~information~~December 31, ~~required~~2006, ~~concerning~~our ~~compensation plans~~total ~~under~~consolidated ~~which~~debt ~~equity~~was $241.1 ~~securities~~million. Because of our ~~company~~substantial indebtedness, we are ~~authorized~~ ~~for~~highly ~~issuance~~leveraged. isThis ~~set~~means ~~forth~~that our payments on our borrowings are significant in ~~Item 12~~relation ofto ~~this~~our revenue and cash flow. This leverage exposes us to significant risk in the event of ~~Report~~downturns ~~under~~in our business, in our industry or in the ~~caption~~economy ~~“Equity~~generally, ~~Compensation~~because, ~~Plan Information~~in the event of such downturns, our cash flows would decrease, however, our required payments in respect of our indebtedness will not.”

~~Item~~Our 6current indebtedness restricts our ability to obtain additional financing and, because we may be more leveraged than some of our competitors, may place us at a competitive disadvantage. ~~Selected~~Also, ~~Financial~~the ~~Data~~indentures and other financing agreements that we entered into contain covenants that impose operating and financial restrictions on us. These covenants could adversely affect our ability to finance future operations, potential acquisitions or capital needs or to engage in other business activities that may be in our interest. For example, during the third and fourth quarter of 2006, IMPSAT Brazil failed to comply with the Capital Expenditure Ratio and the Debt Service Coverage Ratio, as defined in the Brazil Financing Agreement, on its approximately $63.4 million of Senior Secured Notes. On October 5, 2006, the Company obtained a waiver from the holder of these notes of the Capital Expenditure Ratio and Debt Service Coverage Ratio covenants for the applicable period and through September 2007. In addition, on March 15, 2007, the Company and IMPSAT Brazil entered into an amendment to the Brazil Financing Agreement, which provided for the waiver through the first quarter of 2008 of the Debt Service Coverage Ratio. As of December 31, 2006, the Company was in compliance with all of its other debt covenants. There can be no assurance that we will be able to avoid non-compliance and obtain waivers in the future.

~~The~~As ~~following~~a ~~selected~~result ~~financial~~of ~~data~~the ~~are~~implementation ~~for~~of our ~~company~~ onplan aof ~~consolidated~~reorganization, ~~basis~~we ~~in accordance with U.S. GAAP. The following financial data~~ have ~~been derived from our~~a ~~company’s~~significant ~~audited~~concentration ~~consolidated financial statements for the respective years. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis~~ of ~~Financial~~holders ~~Condition and Results~~ of ~~Operations”~~ ~~and~~ our ~~financial~~shares ~~statements and notes included at the back~~ of ~~this~~our ~~Report~~common stock.

28As part of the Plan, a small number of holders of claims received distributions of a significant number of shares of our common stock or of securities convertible into or exercisable for such common stock. If those holders were to act as a group, they would be in a position to control the outcome of actions requiring stockholder approval, including and the approval of mergers or other business combinations, regardless of the approval of other stockholders. The concentration of ownership could also facilitate or hinder a negotiated change of control of the Company and, consequently, affect the value of the common stock.

					Year Ended December 31,
					1998			1999			2000			2001			2002
					(in thousands, except per share amounts)
Statement of operations data:
Net revenues from services:
	Data and value added services				$	183,213		$	195,110		$	214,268		$	239,816		$	180,471
	Internet					20,207			26,044			35,996			45,403			27,243
	Telephony					—			—			235			11,762			14,327
	Services to carriers					—			—			885			7,360			6,985
		Total net revenues from services				203,420			221,154			251,384			304,341			229,026
Sales of equipment						4,669			7,297			13,083			14,952			1,168
Broadband Network development revenues						—			—			57,676			7,197			—
			Total net revenues			208,089			228,451			322,143			326,490			230,194
Costs and expenses:
	Direct costs:
		Contracted services				17,897			21,853			29,573			40,629			19,199
		Other direct costs				16,096			31,055			21,349			35,416			25,935
		Leased capacity				31,228			49,666			74,188			87,057			74,679
		Broadband network cost				—			—			34,729			3,335			—
		Cost of equipment sold				3,665			5,187			12,308			10,472			576
				Total Direct Costs		68,886			107,761			172,147			176,909			120,389
	Salaries and wages					38,198			46,174			68,922			82,095			47,894
	Selling, general and administrative					37,189			40,631			58,471			52,964			28,204
	Asset impairment charge					—			—			—			381,888			—
	Gain on early extinguishment of debt					—			—			—			—			(16,367	)
	Depreciation and amortization					36,946			130,071			84,488			123,678			82,766
				Total costs and expenses		181,219			324,637			384,028			817,534			262,886
Operating income (loss)						26,870			(96,186	)		(61,885	)		(491,044	)		(32,692	)
Other income (expenses):
	Interest income and investment gains					4,686			7,418			27,394			10,687			1,907
	Interest expense					(49,384	)		(62,979	)		(112,894	)		(143,521	)		(75,815	)
	Net gain (loss) on foreign exchange					675			(8,042	)		(10,614	)		(41,182	)		(91,884	)
	Recognition of other-than-temporary decline in value of investments					—			—			—			(20,650	)		(794	)
	Reorganization items																	(23,297	)
	Legal Settlement																	26,229
	Other (loss) income, net					760			15,305			704			(2,125	)		(5,896	)
				Total other expenses		(43,263	)		(48,298	)		(95,410	)		(196,791	)		(169,550	)
Loss before income taxes						(16,393	)		(144,484	)		(157,295	)		(687,835	)		(202,242	)
Benefit from (provision for) foreign income taxes						(3,805	)		20,733			4,547			(27,420	)		(2,273	)
Loss before dividends on redeemable preferred stock						(20,198	)		(123,751	)		(152,748	)		(715,255	)		(204,515	)
Cumulative effect of a change in accounting principle, net of tax						(1,269	)		—			—			—			—
(Income) loss attributable to minority interest						(2,502	)		6,225			—			—			—
Dividends on redeemable preferred stock						(10,018	)		(14,017	)		(1,393	)		—			—
Net loss					$	(33,987	)	$	(131,543	)	$	(154,141	)	$	(715,255	)		(204,515	)
Net loss per common share: Basic and diluted					$	(0.71	)	$	(2.42	)	$	(1.74	)	$	(7.82	)	$	(2.24	)
Weighted average number of common shares: Basic and diluted						47,983			54,447			88,534			91,429			91,429

As a result of the implementation of the Plan, our initial directors were nominated by certain initial holders of our securities. As long as these initial holders continue to hold a certain percentage of our common stock or securities convertible into our common stock, common stockholders will not have the right to elect individuals to our Board of Directors and, as a result, they will have little or no participation in our business affairs.

29Further, the possibility that one or more of the holders of significant numbers of shares of the common stock may determine to sell all or a large portion of their shares of common stock in a short period of time may adversely affect the market price of the common stock.

	As of December 31,
	1998			1999		2000		2001			2002
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	90,021		$	97,507	$	67,737	$	35,606		$	32,563
Trading investments		—			—		240,892		29,319			23,021
Total current assets		159,099			179,026		458,873		165,768			106,016
Broadband Network, net		—			71,868		364,221		310,598			228,471
Property, plant and equipment, net		330,726			310,330		381,674		214,459			175,477
Investments in common stock		10,708			235,925		15,091		3,307			86
Total assets		527,218			828,332		1,374,750		718,574			520,683
Total current liabilities		97,910			196,931		220,305		1,133,635			402,986
Total short-term debt and current portion of long-term debt		40,400			38,677		52,980		967,399			281,680
Total long-term debt, net		379,292			445,634		915,263		23,189			27,592
Liabilities subject to compromise		—			—		—		—			727,522
Minority interest		13,071			—		—		—			—
Redeemable preferred stock		135,018			149,035		—		—			—
Stockholders’ (deficiency) equity		(101,519	)		15,341		158,585		(552,642	)		(722,615	)

There is a limited trading market for our common stock.

		Year Ended December 31,
		1998			1999			2000			2001			2002
		(in thousands)
Other Financial Data:
Cash flow provided by (used in):
	Operating activities		16,740			3,849			(87	)		(71,077	)		26,392
	Investing activities		(128,155	)		(133,975	)		(511,481	)		51,885			(11,635	)
	Financing activities		191,523			139,336			485,695			(5,961	)		(17,246	)
Capital expenditures			109,934			155,440			447,471			226,825			20,483

There is currently a limited trading market for our common stock, which began trading on the Nasdaq OTC Bulletin Board under the symbol “IMFN” on June 13, 2003. Prior to June 13, 2003, there was no established market for our common stock since the date of our emergence from bankruptcy. There can be no assurance that an active trading market for our common stock will develop or be sustained. In addition, as a result of the Merger, the Company will become a wholly-owned subsidiary of Global Crossing and will cease to be a public company.

~~Item~~We 7.are ~~Management’s~~restricted ~~Discussion~~in ~~and~~our ~~Analysis~~ability ofto ~~Financial~~pay ~~Condition~~dividends. ~~and Results of Operations~~

We do not anticipate paying any dividends ~~Overview~~on our common stock in the foreseeable future. In addition, the covenants under the indentures governing our Senior Notes and under other financing agreements we have entered into limit the ability of our Company to pay dividends. Certain institutional investors may only invest in dividend paying securities or may operate under other restrictions that may prohibit or limit their ability to invest in our common stock.

~~Reorganization.~~18 As discussed above under “Business — Chapter 11 Filing and Emergence,” the Bankruptcy Court confirmed the Plan on December 16, 2002. In accordance to the terms of the Plan, we formally emerged from bankruptcy on the Effective Date, March 25, 2003. Pursuant to the Plan, on the Effective Date, all of the shares of our Old Common Stock, options granted under our stock option plans and any other equity interests were cancelled, retired and eliminated with no consideration paid thereon. We also adopted a new 2003 Stock Incentive Plan and terminated our 1998 Stock Option Plan and our 1999 Stock Option Plan. Also under the Plan, we restructured our obligations with certain holders of our Original Vendor Financing Agreements and the holders of our former Senior Notes. On the Effective Date, in full satisfaction of the claims of the 2005/2008 Holders, we issued 9.8 million shares of New Common Stock (as decreased by the number of shares necessary to allow for the allocation of the Common Stock Reserve Pool to Post-Effective Date Contingencies and other general unsecured claims (see “Business — Chapter 11 Filing and Emergence”)) in accordance with the Plan. Each holder of our Notes Due 2003 has received, in full satisfaction of its claims, including the outstanding principal and all accrued and unpaid interest thereon, its ratable portion of our $67,531,000 aggregate principal amount of Series A Notes. In full satisfaction of their claims, the holders of the Original Vendor Financing Agreements and other creditors of our operating subsidiaries holding guarantees by our parent holding company of such indebtedness who voted to accept the Plan have received, inter alia, $23.9 million in aggregate principal amount of our new Series B Notes and restructured senior debt of one or more of our operating subsidiaries in the amounts provided for in the Plan, and an aggregate of 3,155,244 New Warrants. We also issued, pursuant to the Plan 200,000 shares of New Common Stock to certain of our officers in accordance with our 2003 Stock Incentive Plan.

PursuantTable toof our reorganization, we have substantially reduced our outstanding debt and annual interest expense and increased our liquidity. At December 31, 2002, prior to the reorganization, our long-term debt, Contents

30The operation, administration, maintenance and repair of our systems are subject to risks that could lead to disruptions in our services and the failure of our systems to operate as intended for their full design life.

Each ~~including~~of ~~current~~our ~~maturities~~systems ~~and~~is ~~estimated liabilities~~ subject to ~~Chapter 11~~the ~~proceedings,~~risks ~~aggregated approximately~~inherent ~~$1.09 billion.~~in ~~Such liabilities at December 31~~large-scale, ~~2002,~~complex ~~adjusted~~fiber-optic totelecommunications ~~give~~systems. ~~pro~~The ~~forma~~operation, ~~effect to the consummation of the reorganization~~administration, ~~aggregate approximately~~maintenance ~~$267.0 million.~~and ~~Also~~repair atof ~~December 31, 2002,~~ our ~~total~~systems ~~indebtedness~~require ~~aggregated~~the ~~$1.04 billion~~coordination and ~~our~~ ~~cash~~integration ~~and cash equivalents totaled $32.6 million. As~~ of ~~the~~ ~~Effective~~sophisticated ~~Date,~~and ~~our total indebtedness was approximately~~highly ~~$264.9 million~~specialized hardware and ~~our~~software ~~cash~~technologies and ~~cash~~equipment ~~equivalents~~located ~~totaled approximately~~throughout ~~$61~~Latin America.~~1 million.~~ Our ~~reported~~systems ~~net~~may ~~interest expense for 2002 totaled $73.9 million (~~not ~~including $52.2 million~~continue ofto ~~contractually~~function ~~accrued~~as ~~interest~~expected onin ~~our unsecured,~~a ~~pre~~cost-~~petition~~effective ~~obligations,~~manner. ~~which,~~The ~~pursuant~~failure ~~to the provisions~~ of the ~~Bankruptcy~~hardware ~~Code,~~or ~~ceased~~software to ~~accrue~~function atas ~~and~~required ~~after~~could ~~June 11,~~render ~~2002, the date of our Chapter 11 filing). As~~ a ~~consequence~~system ofunable ~~our~~to ~~Chapter 11~~perform ~~reorganization,~~at wedesign ~~estimate that our net cash interest expense will be reduced to approximately $18~~specifications.~~7 million~~ ~~during 2003.~~

~~Upon~~Interruptions ~~our~~in ~~emergence~~service ~~from~~or ~~bankruptcy~~performance ~~on March 25~~problems, ~~2003,~~for wewhatever ~~have~~reason, ~~adopted “fresh start”~~could ~~reporting~~undermine asconfidence ~~required~~in byour ~~“American~~services ~~Institute~~and ofcause ~~Certified Public~~us ~~Accountants~~to ~~Statement~~lose ofcustomers ~~Position~~or ~~90-7,~~make ~~Financial Reporting~~it bymore ~~Entities~~difficult into ~~Reorganization~~attract ~~under~~new ~~the Bankruptcy Code” (“SOP 90-7”)~~ones. ~~Under~~In ~~SOP 90-7 fresh start reporting~~addition, abecause ~~new~~many ~~reporting entity is considered to be created and the recorded amounts~~ of ~~assets~~our ~~and~~services ~~liabilities~~ are ~~adjusted~~ critical to ~~reflect~~our ~~their~~customers’ ~~estimated~~businesses, ~~fair~~a ~~values~~significant atinterruption ~~the~~in ~~date~~service ~~fresh start~~could ~~reporting~~result isin ~~applied.~~lost ~~Among~~profits or other ~~things,~~loss ~~this requires us~~ to ~~allocate~~ ~~the~~customers. ~~reorganization~~We ~~value~~often ofprovide ~~our~~customers ~~reorganized~~with ~~company~~guaranteed ~~to its~~service ~~specific~~level ~~tangible and identifiable assets and liabilities~~commitments. ~~The~~ ~~effect~~If ofwe ~~the~~are ~~reorganization~~unable ~~and~~to ~~the~~meet ~~implementation~~these ofguaranteed ~~SOP 90-7~~service ~~fresh~~level ~~start~~commitments ~~reporting~~for onwhatever ~~our~~reason, ~~consolidated financial statements as if~~ we ~~had~~may ~~formally~~be ~~emerged~~obligated ~~from~~to ~~bankruptcy~~provide onour ~~December 31,~~customers ~~2002~~with iscredits, ~~discussed~~generally in ~~detail~~the inform ~~Note~~of ~~17 (unaudited) to~~free ~~our~~service ~~audited~~for ~~consolidated financial statements included elsewhere in this Report. As~~ a ~~result~~short ofperiod ~~the implementation~~ of ~~SOP 90-7 fresh start reporting~~time, ~~the consolidated~~which ~~financial~~could ~~statements~~negatively ofaffect our ~~company~~operating ~~from and after its emergence from bankruptcy will not be comparable to the consolidated financial statements of prior periods~~results.

Revenues. Our contracts with our customers have in the past typically ranged in duration from six months to five years and contracts with our private telecommunications network customers have generally been three-year contracts. Under the Argentine “pesification” decree, if a contract denominated in pesosis entered into after the decree’s enactment, payments under that contract are not entitled to be adjusted according to the CER or any other consumer price index. Accordingly, in order to mitigate our inflation risk, our new peso-denominated contracts in Argentina will typically be for shorter terms ranging from three to six months. The ~~customer generally pays an installation~~ ~~charge~~Merger atAgreement ~~the~~imposes ~~beginning~~limitations ~~of the contract and a monthly fee based~~ on ~~the~~our ~~quantity~~ability and type of equipment installed. Except in Brazil and, since the “pesification” decree, in Argentina, the fees stipulated in the contracts are generally denominated in U.S. dollar equivalents. See “Certain Considerations — We are vulnerable to ~~currency fluctuations . . .”~~operate ~~and “— Currency Risks.” Services (other than installation fees) are billed on a monthly, predetermined basis, which coincide with the rendering of the services. We report~~ our ~~revenues~~ ~~net of deductions for sales taxes~~business.

WeUntil ~~have~~the ~~experienced,~~closing ~~and~~of ~~anticipate~~the ~~that~~Merger, we ~~will~~may not take ~~continue~~certain toactions ~~experience,~~with ~~downward~~respect ~~pressure~~to onthe operation of our ~~prices~~business aswithout ~~we expand~~Global ~~our~~Crossing’s ~~customer~~consent. In ~~base~~addition, ~~confront~~the ~~growing~~pending ~~competition~~Merger ~~for private~~creates ~~telecommunications~~business ~~network~~uncertainty ~~services,~~ and ~~endure~~diverts ~~the~~management’s attention from ongoing business concerns. These ~~effects~~limitations, uncertainty and diversion of ~~economic~~attention ~~downturns~~may inimpair our ~~countries~~results of ~~operation~~operations. ~~When~~ weAs ~~have~~a ~~renewed~~result ~~and/or~~of ~~expanded~~these ~~our contracts with existing customers~~restrictions, ~~the~~our ~~prices~~operations wemay ~~charge~~be ~~have~~adversely ~~generally declined~~effected.

~~Although~~Risks weRelated believe that our geographic diversification provides some protection against economic downturns in any particular country, our results of operations and business prospects depend upon the overall financial and economic conditions in Latin America. Most of the countries in which we operate are undergoing, or have experienced in recent years, political and economic volatility. With the exception of the United States, each of the countries in which we operate have suffered in recent years and, in some cases, continue to ~~experience,~~ economic recession. In particular, Argentina (our largest market in terms of revenues generated) and Venezuela are experiencing severe economic and political crises. See “Certain Considerations — Economic and political conditions in Latin America ~~pose numerous risks to our operations.” These conditions may have material adverse effects on our business, results of operation and financial condition.~~

31Economic and political conditions in Latin America pose numerous risks to our operations.

Substantially all of our revenues are derived from operations in Latin America. During 2005 and ~~Costs~~2006, approximately 30.8% and ~~Expenses~~26. 6% of our consolidated net revenues were provided by IMPSAT Argentina, and approximately 24.4% and 23.4% were provided by IMPSAT Colombia. Our ~~costs~~Company also has operations in Venezuela, Brazil, the United States, Ecuador, Chile and ~~expenses~~Peru. ~~principally~~Of these, Argentina, Brazil, Venezuela, Ecuador and Peru, where we have significant operations, have experienced political and economic instability in recent years. Moreover, as events in the Latin American region have ~~include:~~demonstrated, negative economic or political developments in one country in the region can lead to or exacerbate economic or political crises elsewhere in the region. Furthermore, events in recent years in other developing markets have placed pressures on the stability of the currencies of a number of countries in Latin America, including Argentina, Brazil, Colombia and Venezuela. While certain areas in the Latin American region have experienced economic growth, this recovery remains fragile. Pressures on the local currencies in the countries in which we operate are likely to have an adverse effect on many of our customers, which, in turn, could adversely affect us. Volatility in regional currencies and capital markets has also had an adverse effect on our ability and that of our customers to gain access to international capital markets for necessary financing and refinancing. A lack of international capital sources for emerging market borrowers could have a material adverse effect on us and many of our customers.

•While ~~direct~~Argentina’s ~~costs~~economy •appears ~~salaries~~to ~~and~~be ~~wages~~recovering, •it ~~selling,~~still ~~general~~faces political and ~~administrative~~financial ~~expenses~~instability. ~~• depreciation and amortization~~

~~Our~~A ~~direct~~significant ~~costs~~portion ~~include~~of ~~payments~~our ~~for~~operations, ~~leased satellite~~properties ~~transponder~~ and ~~fiber~~customers ~~optic~~are ~~capacity.~~located ~~The~~in ~~completion of~~Argentina. ~~the Broadband Network has decreased our payments for leased~~Net ~~capacity~~revenues ~~as we have shifted transmission~~ from ~~leased satellite facilities to~~ our ~~Broadband~~Argentine ~~Network~~operations, ~~after~~acting ~~satellite~~through ~~contracts expire.~~IMPSAT ~~The~~Argentina, ~~other~~for ~~principal~~each ~~items~~of ~~composing~~2005 ~~direct~~and ~~costs~~2006 ~~are contracted~~represented ~~services~~approximately ~~costs,~~30.8% and ~~other direct costs~~26.6% ~~Contracted services costs include costs~~ of ~~maintenance~~our ~~and~~consolidated ~~installation (and~~net ~~de-installation)~~revenues ~~services~~during ~~provided~~those ~~by outside contractors~~years. ~~Installation~~ ~~and~~Accordingly, ~~de-installation~~our ~~costs~~financial ~~are~~condition ~~the~~and ~~costs~~results ~~we incur~~of ~~when~~operations wedepend ~~install~~to ora ~~remove~~significant ~~earth~~extent ~~stations,~~on ~~microstations~~macroeconomic and ~~other~~ ~~equipment~~political conditions prevailing from ~~customer~~time ~~premises.~~to ~~Other~~time ~~direct~~in ~~costs include:~~ Argentina.

•The Argentine ~~licenses~~economy has experienced significant volatility in recent decades, including numerous periods of low or negative growth and ~~other~~high ~~fees~~and •variable ~~sales~~levels ~~commissions~~of ~~paid~~inflation and devaluation. Since the peak of the most recent economic crisis during the first half of 2002, Argentina’s economy has experienced positive growth. The GDP increased during 2004 by 8.8%, and although the value of Argentina’s currency showed volatility compared to ~~third-party~~the ~~sales~~U.S. ~~representatives~~dollar, •it ~~allowance~~stabilized ~~for~~in ~~doubtful~~2005. ~~accounts~~During 2006, Argentina’s gross domestic product (“GDP”) grew by 8.0%. With growing wage pressures and some monetary accommodations on account of unsterilized foreign exchange interventions, we expect an annual inflation rate of approximately 11.4% in 2007. However, there can be no assurance that the Argentine economy will continue to grow at

~~Our~~19 ~~selling, general and administrative expenses consist principally of:~~

•Table publicityof and promotion costs • fees and other remuneration • travel and entertainment • rent • plant services, insurance and corporate telecommunication and energy expensesContents

~~Currency~~current ~~Risks. Except in Argentina (since the “pesification” decree~~rates, ~~to the extent discussed below) and Brazil, our contracts with customers generally provide for payment in U.S. dollars~~ or ~~for~~ ~~payment in local currency linked to the exchange rate between the local currency and the U.S. dollar~~ at ~~the time of invoicing. Accordingly~~all, ~~inflationary pressures on local economies~~ in the ~~other countries in which we operate did not have a material effect on our revenues during 2002~~future. ~~Nevertheless,~~ ~~given~~If that the exchange rate is generally set at the date of invoicing and that we in some cases experience substantial delays in collecting receivables, we are exposed to exchange rate risk, even in countries other than Argentina ~~and Brazil. Furthermore, under Brazilian law and to the extent discussed above, under Argentina~~’s ~~“pesification”~~ ~~decree,~~economic ~~our~~growth ~~contracts with customers in Brazil cannot and~~slows, ~~under~~stops ~~certain~~or ~~circumstances, our~~ contracts ~~with customers in Argentina may not~~, bethere ~~linked~~could toresult ~~the exchange~~a ~~rate~~material ~~between~~adverse ~~the~~effect ~~local currency and the U.S. dollar.~~on ~~Accordingly,~~IMPSAT ~~operations in~~ Argentina’s and ~~Brazil increase~~ our ~~exposure~~ toconsolidated ~~exchange~~cash ~~rate risks. In addition~~flows, ~~the~~financial ~~foreign currency~~condition ~~exchange~~ and ~~transfer~~results ~~controls established by the Venezuelan government in February 2003 are likely to adversely affect the collectibility~~ of ~~our dollar-denominated contracts in Venezuela~~operations.

InThe ~~early~~severe ~~January~~economic crisis in 2001 and 2002, resulted in the ~~government~~withdrawal of ~~President~~ ~~Eduardo~~a ~~Duhalde~~significant amount of deposits from the Argentine financial system in a short period of time. This precipitated a liquidity crisis, ~~who~~which ~~abandoned~~prompted the ~~decade-old~~Argentine ~~fixed peso-dollar~~government to impose exchange ~~rate~~controls and transfer ~~permitted~~restrictions and to require the ~~pesoto float~~conversion ~~freely~~of ~~against~~dollar ~~the~~deposits Uand loans into pesos at asymmetric rates for depositors and financial institutions.S. ~~dollar~~Ultimately, many financial institutions became insolvent. ~~The~~As ~~peso~~a ~~free~~result, the Argentine ~~market~~Central ~~opened~~Bank onwas ~~January~~forced ~~11,~~to ~~2002~~provide ~~and~~substantial ~~traded~~financial ataid 1to many banks.65 ~~pesos~~Many to Argentine financial institutions remain weakened by the ~~U.S.~~effects ~~dollar~~of ~~and~~the ~~has~~economic ~~traded~~crisis asand ~~low~~the asArgentine ~~3.87~~government’s ~~pesos~~response to it, and depositors’ confidence in the ~~U.S.~~financial ~~dollar~~system onremains ~~June 26~~fragile. In addition, ~~2002.~~during Asthis ofeconomic ~~March 31~~crisis, ~~2003,~~ political and economic uncertainty and the ~~floating~~Argentine ~~exchange~~government’s ~~rate~~emergency ~~was~~economic ~~2.88~~measures ~~pesos~~lead to the virtual paralysis of private sector Uactivity.S. ~~dollar~~Since that time many companies have ceased operations or filed some form of bankruptcy or reorganization proceeding. The ~~devaluation~~recovery of the ~~Argentine~~private ~~peso~~sector ~~will generally~~is ~~affect~~predicated ~~our~~in ~~consolidated~~part ~~financial~~on ~~statements~~economic ~~by generating~~growth ~~foreign~~and ~~exchange~~in ~~gains~~part oron ~~losses~~the onability of many private ~~dollar-denominated~~sector ~~monetary~~companies ~~liabilities~~to ~~and~~restructure ~~assets~~their ofown ~~IMPSAT Argentina~~defaulted ~~and~~debt ~~will~~obligations ~~generally~~with ~~result~~domestic inand ainternational ~~decrease,~~creditors inand Ugain access to financing.~~S. dollar~~ ~~terms~~If the private sector fails to recover fully, inArgentina’s ~~our~~economic ~~revenues~~growth could be adversely affected, which ~~costs~~would have a material adverse effect on us and ~~expenses~~many inof ~~Argentina~~our customers.

In December 2001, Argentina’s government declared a “freeze” on further payments on its outstanding sovereign debt, among other measures. Since that time, the Argentine government has explored alternatives to refinance that debt. On September 11, 2003, Argentina was able to reach an agreement with the International Monetary Fund (the “~~pesification~~IMF”) ~~decree~~to refinance $31 billion of indebtedness with the IMF, ~~IMPSAT~~ staged over a three-year period. In return, Argentina’s ~~customer~~agreed ~~contracts~~to implement economic reform and ~~operating~~to ~~cash~~negotiate with private ~~inflows~~creditors ~~are~~of ~~now~~over ~~predominantly~~$80 ~~denominated~~billion inof ~~pesos~~sovereign indebtedness upon which Argentina had defaulted. Since then, Argentina has at times engaged in lengthy negotiations with the IMF and other multilateral institutions and has faced various suspensions of ~~However~~scheduled disbursements and incurred payment delays. In August 2004, ~~IMPSAT~~the IMF announced a delay of its quarterly review of Argentina’s ~~debt~~compliance ~~service~~with ~~payments~~the conditions of the September 2003 stand-by agreement in order to further assess the country’s compliance with required structural reforms and aits progress in the renegotiation of utility contracts and in the debt restructuring process. The Argentine government subsequently announced that it would postpone further negotiations with the IMF through December 31, 2004 (and, consequently, forego additional IMF disbursements totaling $1.8 billion prior to that date), in order to concentrate on the restructuring of its defaulted debt.

32On June 1, 2004, the Argentine government announced a proposal for the restructuring of Argentina’s defaulted external indebtedness. On December 9, 2004, President Kirchner signed two decrees officially authorizing a global debt exchange offer to restructure external indebtedness owed to external private creditors. In the months following the launch of the Argentine government’s external debt restructuring proposals, the plan was vigorously rejected by a host of different informal creditor groups, which lobbied with institutional and individual investors and international financial agencies for substantial amendments and sought support from the IMF, among others, for curtailing further aid to Argentina until desired amendments were made to the Argentine government’s proposal. Despite this opposition, in February 2005, a large majority of these creditors agreed to exchange their defaulted debt for new bonds worth approximately 35 cents on the dollar. As a consequence of its default on its sovereign debt, Argentina presently lacks access to financing from private international capital markets and other private sources. This lack of access to private financing is expected to continue.

~~significant~~In ~~portion~~January of2006 ~~its~~Argentina ~~costs~~prepaid ~~(including~~its ~~capital~~entire ~~equipment~~outstanding ~~purchases~~obligations ~~and~~to ~~payments~~the ~~for certain leased telecommunications capacity) remain denominated and payable in U.S. dollars. Accordingly~~IMF, ~~our~~totaling ~~financial condition and results of operations in Argentina are dependent upon IMPSAT Argentina’s ability to generate sufficient pesos (in U~~$9.S.9 ~~dollar terms) to pay its costs and expenses and to satisfy its debt service requirements~~billion. ~~Because~~This ofrepayment ~~the~~was ~~recent~~made ~~nature~~with ~~of these~~International ~~events~~Reserves and the ~~significant~~Central ~~uncertainties~~Bank ~~regarding~~was ~~the extent~~compensated ~~and~~with ~~duration of the devaluation and the direction of the fiscal policies in Argentina~~10-year, ~~management cannot presently determine or reasonably estimate the impact a continued economic crisis in that country could possibly have on IMPSAT Argentina’s and our consolidated cash flows~~dollar-denominated, ~~financial condition,~~non-transferable ~~and results of operations~~notes.

~~Our~~Argentina ~~operations~~is intherefore ~~Brazil~~likely ~~have also been affected by currency devaluation during 2002. Investors became increasingly uneasy about Brazil due~~ to, ~~among~~depend ~~other~~on ~~factors, an increasingly uncertain political environment leading up to~~ the ~~election~~ atIMF ~~the~~and ~~end~~other ofmultilateral ~~October~~lending ~~2002 of Luiz Inacio Lula da Silva. The markets are awaiting further clarification~~ as toits ~~the policies~~main ~~that~~source ~~will~~of beforeign ~~implemented~~capital byin ~~his administration and~~ the ~~effect~~ ofnear- ~~these policies, although there has been a positive market reaction~~ to Mrmedium-term. ~~da Silva’s actions and appointments~~ ~~thus far. The election was preceded by the rapid decline in the value of Brazil~~Argentina’s ~~currency~~limited ~~compared~~access to ~~the~~foreign ~~U.S.~~capital ~~dollar~~could ~~and speculation~~be ~~about the ability of Brazil to service its approximately $239 billion of public debt~~curtailed, ~~much of~~ which ~~must~~ becould ~~refinanced~~have ina ~~the~~material ~~next~~adverse ~~several~~effect ~~years.~~on ~~At December 31,~~Argentina’s ~~2001,~~economic ~~the real traded at a rate of R$2~~prospects.41 =These ~~$1.00.~~circumstances ~~The~~could ~~real~~have ~~depreciated during 2002, reaching~~ a ~~low~~material ofadverse ~~R$4.03~~effect =on $IMPSAT ~~1.00~~Argentina’s ~~during the third~~ and ~~fourth~~our ~~quarters~~consolidated ofcash ~~that year~~flows, ~~and~~financial ~~closing~~condition atand ~~R$3.53~~results ~~= $1.00 at December 31, 2002. At March 31, 2003, the real traded at a rate~~ of ~~R$3~~operations.46 ~~= $1.00.~~

~~Widespread~~Although ~~discontent with~~ the ~~policies~~Argentine ofpeso ~~the current~~has Venezuelan government produced a country-wide strike in the beginning of December 2002 that lasted two months and seriously disrupted economic activity in Venezuela and severely curtailed the production and export of oilappreciated, ~~the major source of~~continued ~~Venezuela’s~~political ~~foreign exchange. In response, on February 5, 2003, the Venezuelan government imposed foreign exchange~~ and ~~price~~financial ~~controls,~~instability ~~making it difficult for our customers~~ in ~~that~~Argentina ~~country to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. These foreign exchange controls~~ could ~~also~~adversely ~~limit~~affect ~~our~~its ~~ability to convert local currency into U~~valuation.S. dollars and transfer funds out of Venezuela. At December 31, 2001, the bolivartraded at a rate of Bs.769.00 = $1.00, at December 31, 2002, it traded at a rate of Bs.1,392.00 = $1.00, and at February 5, 2003, it traded at the rate of Bs.1,924 = $1.00. On February 6, 2003, the Venezuelan government set a single fixed exchange rate for the bolivar against the U.S. dollar of approximately Bs.1,600 = $1.00 as part of the new currency controls.

~~Global~~Following ~~Crossing Insolvency. We are party to a series of agreements with several subsidiaries of Global Crossing Ltd. for~~ the ~~provision~~ ofcollapse ~~telecommunications services. Pursuant to those agreements, which were initially signed in 1999, we constructed a terrestrial portion~~ of ~~Global Crossing~~Argentina’s ~~South American~~ ~~network~~dollar-peso ~~between~~parity ~~landing~~regime ~~points on the Atlantic Ocean in Argentina~~ and the ~~Pacific~~implementation ~~Ocean~~of ~~in Chile, granted Global Crossing~~ a ~~series~~floating ofexchange ~~indefeasible~~rate ~~rights~~system ~~of use (IRU) over ducts and dark fiber on our Broadband Network~~ in ~~Argentina, Brazil~~early ~~and Peru~~2002, ~~provided~~the ~~Global~~peso ~~Crossing~~has ~~with~~fluctuated ~~collocation~~significantly. ~~space and~~After ~~related~~trading ~~services~~as inlow ~~our~~as ~~data~~3.87 ~~centers~~pesos into ~~Argentina,~~the ~~Brazil, Chile,~~U.S. ~~Venezuela~~dollar ~~and Peru and provided Global Crossing with maintenance services for their telecommunications assets~~ in ~~Latin~~ ~~America.~~June ~~In addition~~2002, ~~we acquired IRU~~ and ~~leased capacity~~generally onappreciating ~~Global~~against ~~Crossing’s~~the ~~South~~U.S. ~~American~~dollar ~~undersea~~since ~~fiber~~early ~~optic cable~~2003, ~~system~~it inrecently ~~order~~depreciated. toAt ~~connect~~December 31, ~~our~~2005, ~~Broadband Network with other parts of Latin America and~~ the ~~world.~~

~~During~~20 2002, we recognized revenues totaling $14.8 million from Global Crossing for the services provided under our agreements with Global Crossing. Of this amount, $10.6 million represented services that were billed on a quarterly basis, and $4.2 million represented the recognition of revenue that had been deferred under the IRUs that we granted to Global Crossing. In 2002, Global Crossing invoiced us a total of $2.0 million, principally for maintenance services on the IRUs that we have acquired from Global Crossing. In general, invoices under our agreements with Global Crossing are submitted quarterly in advance and are payable 30 days after receipt.

InTable January 2002, Global Crossing Ltd. filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Although the Global Crossing subsidiaries to whom we provide services and infrastructure were not originally included in Global Crossing Ltd.’s Chapter 11 filing, during August 2002 Global Crossing Ltd. Contents

33 exchange rate was 3.03 pesos to the U.S. dollar and at December 31, 2006, the exchange rate had depreciated to 3.07 pesos to the U.S. dollar. This depreciation in 2006 was a consequence of Central Bank interventions directed towards an International Reserves level recomposition.

~~amended~~A ~~its~~devaluation ~~Chapter 11~~of ~~proceeding~~the toArgentine ~~include its~~peso ~~subsidiaries~~would ~~that~~affect ~~are~~our ~~counterparties~~consolidated tofinancial ~~the~~statements ~~agreements~~by ~~with~~generating foreign exchange transaction gains or losses on dollar-denominated monetary assets and liabilities of IMPSAT Argentina and generally uswould result in a decrease, in U. S. dollar terms, in our revenues, costs and expenses in Argentina.

AsIn ofFebruary ~~December 31,~~ 2002, ~~Global~~the ~~Crossing~~Argentine ~~owed~~government usinstituted $3the “pesification” decree.~~3 million~~ Generally, this decree mandates that weall ~~invoiced~~monetary obligations arising from agreements subject to ~~them~~Argentine ~~during~~law denominated in foreign currency and existing as of January 6, 2002. Weare ~~have~~mandatorily ~~recorded~~converted ainto ~~provision~~monetary ~~for~~obligations ~~doubtful~~denominated ~~accounts~~in pesos at an exchange rate of $2 one U.~~1 million~~S. ~~against~~dollar ~~these~~to ~~receivables~~one peso. AsContracts ofdenominated ~~March 7~~in pesos before the decree continued to be denominated in pesos, unaffected by ~~2003,~~the ~~Global~~decree. ~~Crossing~~Currently, ~~owed~~a ussignificant ~~$4.8 million~~number ~~that~~of weIMPSAT ~~invoiced them~~Argentina’s ~~during~~customer ~~2002~~contracts and ~~the~~a ~~first~~large ~~quarter~~percentage of ~~2003~~its operating cash inflows are now denominated in pesos. WeHowever, ~~have~~IMPSAT ~~recorded~~ Argentina’s debt service payments and a significant ~~provision~~portion of its costs (including capital equipment purchases and payments for ~~doubtful~~certain ~~accounts~~leased ofsatellite $2and terrestrial capacity) remain denominated and payable in U.~~8 million~~S. ~~against~~dollars. Accordingly, our financial condition and results of ~~these~~operations ~~receivables~~in Argentina are dependent upon IMPSAT Argentina’s ability to generate sufficient pesos (in U.S. dollar terms) to pay its costs, expenses and to satisfy our debt service requirements. New developments which result in devaluation of the peso against the U.S. dollar could have a material adverse effect on our consolidated cash flows, financial condition, and results of operations.

WeUncertainties ~~have~~exist ~~disputed~~surrounding athe ~~total~~ultimate resolution of ~~$[0.1]~~Argentina’s ~~million~~economic ~~that Global~~and ~~Crossing~~political ~~has~~instability, ~~invoiced~~and usactual ~~for~~results ~~services~~could ~~through~~differ ~~the~~from ~~end~~those ~~of 2002~~estimates and assumptions utilized. The ~~amounts~~Argentine ~~that~~economic weand political ~~owe~~situation ~~Global~~continues ~~Crossing~~to ~~are~~evolve ~~principally owed~~and tothe ~~Global~~Argentine ~~Crossing~~government ~~Bandwidth,~~may ~~Inc.,~~enact afuture ~~subsidiary~~regulations ofor ~~Global Crossing~~policies that, iswhen finalized and adopted, may adversely and materially impact, among other items: (i) the ~~Global~~realized ~~Crossing~~revenues ~~parties~~we ~~that~~receive ~~have~~for ~~filed~~services ~~for~~offered ~~relief~~in ~~under~~Argentina; ~~Chapter~~(ii) 11the timing of repatriations of any dividends or other cash flows from IMPSAT Argentina to us; (iii) our asset valuations; and (iv) our peso-denominated monetary assets and liabilities.

~~Global~~Brazilian ~~Crossing’s~~economic ~~reorganization plan was approved in December 2002. Global Crossing is awaiting receipt of certain regulatory approvals~~ and ~~satisfaction~~political ~~of other~~ conditions tomay the effectiveness of its plan of reorganization, and there is no guaranty as to when or whether it will emerge from bankruptcy. The difficulties being experienced by Global Crossing, including Global Crossing’s Chapter 11 proceeding, have ~~had~~a andirect ~~adverse~~impact ~~effect~~ on our ~~financial condition and~~ operations. At a minimum, Global Crossing’s bankruptcy proceedings have caused delays in our efforts to enforce our contracts with Global Crossing. In the event of a rejection of any of the contracts by Global Crossing, any pre-petition damages that we might have in respect of such rejected contracts would be treated as claims in the applicable Global Crossing bankruptcy proceedings, which claims may not realize any meaningful recovery to us. In this regard, in connection with Global Crossing’s filing at the end of August 2002 to include certain of its subsidiaries in its Chapter 11 proceedings, Global Crossing rejected one of its agreements with us, pursuant to which agreement IMPSAT Colombia had agreed to lease space in its telehouse in Bogota, Colombia to Global Crossing. More recently, Global Crossing has indicated in its filings related to its Chapter 11 proceeding that it might reject some or all of the other agreements that it has with us.

WeBrazil, ~~are~~as ~~monitoring~~ the ~~Global~~largest ~~Crossing~~country ~~commercial relationship~~ and ~~the~~economy ~~outcome~~in ofLatin ~~its~~America, ~~bankruptcy~~represents ~~proceedings carefully.~~a Wesignificant ~~have~~existing ~~filed~~and ~~motions~~potential inmarket ~~Global~~for ~~Crossing’s bankruptcy~~us. ~~proceeding~~Our ~~seeking~~Company, anacting ~~order~~through IMPSAT ~~that~~Brazil, ~~Global~~has ~~Crossing~~expanded ~~make payment~~its tooperations usin ofBrazil ~~the~~since ~~amounts~~that ~~claimed~~subsidiary’s byinception usin ~~and~~1998. ~~that~~Revenues ~~Global Crossing~~from ~~either~~services ~~accept~~from orour ~~reject~~Brazilian ~~its~~operations ~~contracts~~for ~~with~~2005 ~~us.~~and ~~Global Crossing~~2006 ~~has~~represented ~~disputed~~approximately ~~that~~18.9% itand ~~owes~~23.6%, usrespectively, ~~any~~of ~~amounts~~our ~~under the~~consolidated ~~contracts~~net atrevenues ~~issue~~for ~~and~~such ~~has~~periods. ~~filed~~For a2006, ~~proceeding~~our ~~seeking~~operations ~~that~~in ~~the bankruptcy~~Brazil ~~court~~represented ~~grant~~the ~~Global~~second ~~Crossing~~largest asource ~~property~~of ~~right~~revenues inamong the ~~IRUs~~ ~~that~~eight itcountries ~~acquired~~in ~~from~~which uswe operate. ~~See~~Accordingly, ~~“Certain Considerations —~~our Weoperations ~~are~~in ~~negatively~~Brazil ~~impacted~~subject byour ~~Global Crossing’s~~financial ~~insolvency”~~condition and ~~“Legal~~results of ~~Proceedings —~~operations ~~Global~~to ~~Crossing~~various additional economic and political risks.”

The Brazilian government frequently intervenes in the Brazilian economy and ~~Critical~~occasionally ~~Accounting~~makes ~~Policies~~significant changes in policy and regulations. Our business, financial condition and result of operations in Brazil may be adversely affected by such changes in policy and regulations involving factors outside of our control, such as monetary and fiscal policies, currency fluctuations, energy shortages, and, other political, social and economic developments in or affecting Brazil.

In ~~the~~early ~~ordinary~~1999, ~~course~~the ofBrazilian ~~business,~~government ~~our~~allowed ~~company has~~the ~~made~~real ato ~~number~~float offreely, ~~estimates~~resulting ~~and~~in ~~assumptions~~a ~~relating~~38% todevaluation against the ~~reporting~~ ofU.S. ~~results~~dollar offrom ~~operations~~January 14, ~~and~~1999 ~~financial~~through ~~position~~December 31, in2000. ~~the~~From 2000 through ~~preparation~~2002, ofBrazil’s ~~its~~currency ~~financial~~experienced ~~statements~~further insignificant ~~conformity~~devaluations ~~with~~against the U.S. ~~generally~~ ~~accepted accounting principles (“GAAP”)~~dollar. ~~We use~~These ~~our~~had ~~best~~a ~~judgment~~negative ~~based~~effect on our ~~knowledge~~real-denominated ofrevenues. ~~existing~~In ~~facts and~~addition, ~~circumstances~~currency ~~and~~devaluations ~~actions~~can ~~that~~also wecreate ~~may~~inflationary ~~undertake in the~~pressures. ~~future~~Inflation itself, as well as ~~the~~some ~~advice~~governmental ofmeasures ~~external~~to ~~experts~~combat ininflation, ~~determining the~~had ~~estimates~~significant ~~that~~negative ~~affect~~effects ~~our~~on ~~consolidated~~the ~~financial~~Brazilian ~~statements~~economy in the past. ~~Actual~~ ~~results~~However, ~~could~~at ~~differ~~December 31, ~~significantly~~2005 ~~from~~and ~~those~~2006, ~~estimates under~~Brazil’s ~~different~~currency ~~assumptions~~had ~~and~~appreciated ~~conditions~~against the U.S. dollar ~~Our~~by ~~most~~13.4% ~~critical accounting~~and ~~policies~~9.48%, ~~are:~~ respectively.

~~Revenue~~At ~~Recognition~~December 31, 2005, the real traded at a rate of R$2.34 = $1.00. During We2006, ~~record~~the ~~revenues~~real ~~from~~appreciated ~~data~~further, trading at a rate of R$2.14=$1.00 at December 31, 2006. At March 15, 2007, the real traded at a rate of R$2.10 = $1.00. Brazil’s GDP increased by around 2.6% during 2005, its ~~value-added~~best ~~telephony~~performance since 1994, ITbut ~~solutions~~increased by 3.6% in 2006. Despite appreciation of the real against the U.S. dollar during 2004, the stabilization of inflation, and ~~Internet~~expansion ~~services~~in the economy, growth slowed in the fourth quarter of 2005, ~~monthly~~raising ascautions about the ~~services~~economic ~~are~~rebound’s ~~provided~~sustainability. ~~Equipment~~Failure ~~sales~~to ~~are recorded~~successfully ~~upon~~implement ~~delivery~~necessary economic reforms and measures to preserve social and ~~acceptance~~political bystability and achieve economic growth in Brazil could prompt adverse responses from the ~~customer~~international capital markets and investor community and halt or reverse any economic recovery in that country. The political and economic volatility in Brazil have had, and can

We21 have entered into agreements with carriers granting indefeasible rights of use (“IRUs”) and access to portions of our Broadband Network capacity and infrastructure. Pursuant to these agreements, we receive fixed advance payments for the IRUs and recognize the revenue from the IRUs ratably over the life of the IRUs. Amounts received in advance are recorded as deferred revenue.

34 Table of Contents

~~Non-Monetary~~be ~~Transactions. We~~expected ~~may~~to ~~exchange~~continue ~~capacity~~to onhave, ~~our Broadband~~a ~~Network~~material ~~for~~adverse ~~capacity~~effect ~~from~~on ~~other~~IMPSAT ~~carriers~~Brazil’s ~~through~~and ~~the exchange~~our ofoverall ~~IRUs.~~financial Wecondition ~~account~~and ~~for~~results ~~these~~of ~~transactions~~operations. ~~as an~~In ~~exchange~~addition, a significant depreciation of ~~similar~~the ~~IRUs~~real atagainst ~~historical~~the ~~carryover~~U.S. ~~basis~~dollar ~~with~~would ~~no revenue,~~adversely ~~gain~~affect orour ~~loss~~future ~~recognized~~results.

Political ~~Broadband Network~~ and ~~Property,~~economic ~~Plant~~conditions ~~and Equipment. Our business is capital intensive. We record at cost our telecommunications network assets and other improvements that,~~ in ~~management’s opinion,~~Venezuela extend the useful lives of the underlying assets, and depreciate such assets and improvements over their estimated useful lives. Our telecommunications network is highly complex and, due to innovation and enhancements, certain components of the network may lose their utility faster than anticipated. We periodically reassess the economic lives of these components and make adjustments to their expected lives after considering historical experience and capacity requirements, consulting with the vendors, and assessing new product and market demands and other factors. When these factors indicate that network components may not be useful for as long as anticipated, we depreciate their remaining book values over their residual useful lives. The timing and deployment of new technologies could affect the estimated remaining useful lives of our telecommunications network assets, which could have ~~a significant~~an adverse impact on our ~~results of~~ operations ~~in the future~~.

~~Impairment~~Continuation or worsening of ~~Long-Lived~~the ~~Assets.~~political and Weeconomic ~~periodically~~conditions ~~review~~in ~~the~~Venezuela ~~carrying amounts~~could ofmaterially ~~our~~and ~~Broadband~~adversely ~~Network~~impact ~~and~~our ~~property~~future business, ~~plant~~operations, financial condition and ~~equipment~~ toresults ~~determine~~of ~~whether~~operations. ~~current~~After ~~events~~over orfour ~~circumstances warrant~~years ~~adjustments~~of tocivil ~~the~~unrest ~~carrying~~in ~~amounts.~~Venezuela, Asremoval ~~part~~and reinstatement of ~~this~~that ~~review~~country’s head of state, wePresident ~~analyze~~Hugo ~~the~~Chávez, ~~projected~~and ~~undiscounted~~a ~~cash~~failed ~~flows associated~~recall ~~with~~referendum ~~our~~calling ~~Broadband~~for ~~Network~~removal ~~and~~of ~~property,~~Mr. Chávez ~~plant~~from office in August 2004, ~~and equipment~~Mr. Chávez ~~Considerable~~won ~~management~~re-election ~~judgment~~on isDecember 3, ~~required~~2006, infor an additional ~~establishing~~six-year ~~the~~term. ~~assumptions~~In ~~necessary~~his tore-election ~~complete~~inaugural ~~this analysis~~speech, Mr. Chavez ~~Although~~asked wefor ~~believe~~“deep ~~these~~and ~~estimates~~integral” tochanges bein ~~reasonable~~the 1999 Constitution, ~~they~~ ~~could~~including ~~vary~~the ~~significantly~~possibility ~~from~~of ~~actual~~unlimited ~~results~~re-elections. ~~and~~On ~~our~~January 31, 2007, further to President ~~estimates~~Chavez’s ~~could~~request, ~~change~~the ~~based~~Venezuelan onNational ~~market~~Assembly ~~conditions.~~passed ~~Variances~~the ~~in results~~Ley Habilitante, or ~~estimates~~the ~~could~~Enabling ~~cause~~Law, ~~changes~~which grants the President the power to rule by decree for the ~~carrying~~next ~~value~~eighteen (18) months, and allows him to carry out the nationalization of ~~our~~certain ~~assets~~businesses ~~including~~in the electricity, ~~but~~energy ~~not~~and ~~limited~~telephony sectors. In furtherance of his January 2007 announcement to nationalize Venezuela’s largest telecommunications company, ~~recording~~Compañía Anónima Nacional ~~additional~~Teléfonos ~~impairment~~de ~~charges~~Venezuela ~~for~~(“CANTV”), ~~some~~and ofprivate ~~these~~businesses ~~assets~~in the energy and electrical sectors and other strategic sectors, in ~~future periods~~early February Venezuela announced it had agreed with U.S.-based ~~During~~Verizon ~~the~~to ~~year~~buy ~~ended~~its ~~December 31,~~stake ~~2001~~in CANTV, weand ~~recorded~~plans to launch a ~~$381~~public offer by April 2007 to increase its share.~~9 million~~ ~~impairment~~The ~~charge~~Venezuelan ~~primarily~~minister of telecommunications and current director of the Comisión Nacional de Telecomunicaciones (“CONATEL”), the country’s telecommunications ~~related~~regulatory toauthority, ~~our~~has indicated that the nationalization of CANTV does not imply the nationalization of the telecommunications ~~network~~sector as a whole.

~~Basis~~It ~~for~~is ~~Translation. IMPSAT~~very ~~maintains~~difficult ~~its~~to ~~accounts~~predict inthe ~~U.S. dollars.~~economic ~~The~~and ~~accounts~~regulatory impact of ~~our~~President ~~subsidiaries~~Chávez’s ~~are~~statement, ~~maintained~~or into ~~the currencies~~predict ofwhether the ~~respective~~Venezuelan ~~countries.~~government Inwill, ~~accordance~~in ~~with Statement of Financial Accounting Standards No. 52~~fact, ~~“Foreign~~ ~~Currency~~effectuate ~~Translation,”~~such ~~the~~a ~~accounts~~plan of ~~our subsidiaries are translated from local currency amounts to U~~nationalization.S. ~~dollars.~~While ~~The method of translation is determined by~~ the ~~functional~~ ~~currency of our subsidiaries. A subsidiary~~President’s ~~functional~~ ~~currency~~remarks isonly ~~defined~~identified asCANTV ~~the~~by ~~currency~~name, ofthere ~~the~~is ~~primary environment~~no inassurance ~~which~~that such a ~~subsidiary~~plan ~~operates~~of ~~and~~nationalization, isif ~~determined based~~realized, onwould ~~management’s~~not ~~judgment.~~also ~~When~~extend ato ~~subsidiary’s accounts~~other ~~are~~businesses ~~not maintained~~ in the ~~functional~~telecommunications ~~currency~~sector, ~~the financial~~including ~~statements~~our ~~must~~business. beThe government ~~remeasured~~has ~~into~~also ~~the~~announced ~~functional currency.~~plans ~~This~~to ~~involves~~modify ~~remeasuring~~the ~~monetary~~nation’s ~~assets~~constitution and ~~liabilities~~ ~~using~~telecommunications ~~current~~law, ~~exchange rates~~ and ~~non-monetary~~we ~~assets and~~cannot ~~liabilities~~predict ~~using~~the ~~historical~~impact ~~exchange~~of ~~rates.~~such ~~The~~amendments ~~adjustments generated~~to ~~by remeasurement are included in~~ our ~~consolidated statement of operations~~business.

~~When~~Since ~~the~~2004, ~~local~~and ~~currency~~despite ofcontinued acivil ~~subsidiary~~unrest, ~~is determined~~the toVenezuelan beeconomy ~~the~~has ~~functional~~been ~~currency,~~able ~~the~~to ~~statements~~sustain ~~are translated~~growth. ~~into~~The ~~U.S.~~growth ~~dollars~~appears ~~using~~to be stimulated by the Venezuelan ~~current~~government’s ~~rate~~emphasis ~~method.~~on ~~The adjustments~~servicing ~~generated~~specific byareas, ~~translation~~such ~~using~~as ~~the~~health ~~current~~and ~~rate method~~education, ~~are~~and ~~accumulated~~nourishing insubsidies, anand ~~equity~~private ~~account~~sector ~~entitled “Accumulated~~expansion ~~other~~motivated ~~comprehensive~~by ~~loss”~~construction, ~~within~~commerce ~~our consolidated~~and ~~balance~~financial ~~sheets~~sectors.

~~Financial~~Recent ~~Reporting~~approval byof ~~Entities~~modifications in ~~Reorganization~~ ~~under~~ the ~~Bankruptcy~~laws ~~Code. Our~~of ~~consolidated~~the ~~financial~~Central ~~statements have~~Bank ~~been~~of ~~prepared~~Venezuela, inknown ~~accordance~~as ~~with~~Ley ~~AICPA~~del ~~Statement~~Banco ~~of Position~~Central ~~(“SOP”)~~de ~~90-7~~Venezuela, ~~“Financial~~and ~~Reporting~~the ~~by Entities~~creation inof ~~Reorganization~~a ~~under~~fund ~~the Bankruptcy Code.”~~to ~~Pursuant~~promote tothe ~~SOP~~growth ~~90-7, an objective~~ of ~~financial~~the ~~statements issued~~nation, byknown anas ~~entity~~Fondo inde ~~Chapter 11~~Desarrollo isNacional to(“FONDEN”), ~~reflect~~have ~~its financial~~changed ~~evolution~~the ~~during~~structure and the ~~proceeding.~~manner ~~For~~in ~~that~~which ~~purpose,~~ the ~~consolidated~~ ~~financial~~public ~~statements~~sector ~~for~~finances ~~periods~~are ~~including~~managed. ~~and subsequent~~These tomodifications ~~filing~~provide ofthe ~~our~~executive ~~Chapter 11~~power ~~petition~~with ~~should~~greater ~~distinguish~~access ~~transactions~~to ~~and~~national ~~events~~resources, ~~that~~with ~~are~~limited ~~directly~~supervision ~~associated with~~by the ~~reorganization~~legislative ~~from~~power. ~~the~~It ~~ongoing~~suggests ~~operations~~the ofgovernment ~~our business.~~may ~~Expenses~~use ~~and~~certain ~~other~~of ~~items~~its ~~not~~international ~~directly~~reserves ~~related~~for ~~to ongoing~~investment ~~operations~~in ~~are~~social ~~reflected~~welfare. ~~separately~~It inis ~~the~~estimated ~~consolidated statement~~FONDEN ofwill ~~operations~~commence aswith ~~reorganization items~~$6.0 million in funding.

~~Upon~~In ~~consummation~~addition, of the ~~Plan~~Venezuelan government imposed foreign exchange and price controls, wewhich ~~will~~commenced ~~apply~~in February 2003, making it ~~“Fresh-Start”~~difficult ~~reporting~~for our customers in ~~accordance~~Venezuela ~~with~~to ~~GAAP~~obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. These foreign exchange controls also limit our ability to convert local currency into U.S. dollars and transfer ~~the~~funds ~~requirements~~out of ~~SOP 90-7~~Venezuela. ~~Under~~The ~~Fresh~~Venezuelan ~~Start~~Government, ~~reporting~~through an agency called CADIVI, controls the ~~reorganization~~ ~~value~~flow of ~~our~~currency ~~company,~~out ~~which~~of ~~generally~~Venezuela. ~~represents its~~Requests ~~going~~for ~~concern~~payments ~~value~~abroad for imports, isservices, ~~ultimately~~financial ~~determined~~debt ~~pursuant~~or capital repatriations must be submitted to ~~the~~CADIVI, ~~approval~~which ofapproves the ~~Plan~~applications on a case-by-case ~~its~~basis, ~~creditors~~depending on the circumstances and ~~confirmation~~the availability of foreign currency, causing long delays in the payments. In particular, CADIVI has been reluctant and cautious to authorize payments for services such as satellite capacity and software licensing, which, if this continues, could limit our ability to obtain the ~~Plan~~supplies required by ~~the~~our ~~Bankruptcy~~operation ~~Court~~because of inability to make payment in a timely manner. ~~Upon~~Moreover, ~~the~~after ~~Effective~~a number ~~Date~~of devaluations, the bolivar is set at a ~~new~~fixed exchange rate against the U.S. dollars of Bs. 2,150 = $1.00. This exchange rate has been in effect since March 2, 2005. We cannot assure you that this rate of exchange will be in ~~capital~~ place for any period of time.

35Continuation or worsening of the political and economic conditions in Venezuela could materially and adversely impact our future business, operations, financial condition and results of operations

~~structure~~22 will be established and assets and liabilities, other than deferred taxes, will be stated at their relative fair values. Deferred taxes are determined in conformity with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 109.

TheseTable policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often are a result of the need to make estimates about the effect of matters that are inherently uncertain. We have not made any changes in any of these critical accounting policies during 2002, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies during 2002. Contents

~~Results~~Item of1B. ~~Operations~~ UNRESOLVED STAFF COMMENTS.

~~The~~None. ~~following table summarizes our results of operations:~~

				Year Ended December 31,
					2000				2001				2002
				(in thousands and as a percentage of consolidated)
				revenues
Net revenues :
	Net revenues from services :
		Data and value added services		$	214,268	66.5	%	$	239,816	73.5	%	$	180,471	78.4	%
		Internet			35,996	11.2			45,403	13.9			27,243	11.8
		Telephony			235	0.1			11,762	3.6			14,327	6.2
		Services to carriers			885	0.3			7,360	2.2			6,985	3.0
			Total net revenues from services		251,384	78.0			304,341	93.2			229,026	99.5
	Sale of equipment				13,083	4.1			14,952	4.6			1,168	0.5
	Broadband network development revenues				57,676	17.9			7,197	2.2			—	—
			Total net revenues		322,143	100.0			326,490	100.0			230,194	100.0
Direct costs :
	Contracted services				29,573	9.2			40,629	12.4			19,199	8.3
	Other direct costs				21,349	6.6			35,416	10.8			25,935	11.3
	Leased capacity				74,188	23.0			87,057	26.7			74,679	32.4
	Broadband network cost				34,729	10.8			3,335	1.0			—	—
	Cost of equipment sold				12,308	3.8			10,472	3.2			576	0.3
			Total direct costs		172,147	53.4			176,909	54.2			120,389	52.3

Item 2.

PROPERTIES

36Metropolitan Area Networks. We operate 15 metropolitan area networks, composed of a combination of fiber optic and microwave links, covering a total of 1,000 route kilometers. Our first metropolitan area network was established in Buenos Aires, Argentina in 1990. In addition, we currently provide services over our metropolitan area networks in Córdoba, Mendoza and Rosario, Argentina; Bogotá, Medellín and Cali, Colombia; Rio de Janeiro, Curitiba, São Paulo and Belo Horizonte, Brazil; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru.

	Year Ended December 31,
				2000					2001						2002
	(in thousands and as a percentage of consolidated)
	revenues
Salaries and wages		68,922			21.4			82,095		25.1			47,894			20.8
Selling, general and administrative expenses		58,471			18.2			52,964		16.2			28,204			12.3
Asset impairment charge		—			—			381,888		117.0			—			—
Gain on early extinguishment of debt		—			—			—		—			(16,367	)		(7.1	)
Depreciation and amortization		84,488			26.2			123,678		37.9			82,766			36.0
Interest expense, net		85,500			26.5			132,834		40.7			73,908			32.1
Net loss on foreign exchange		10,614			3.3			41,182		12.6			91,884			39.9
Recognition of other-than-temporary decline in value of investments		—			—			20,650		6.3			794			0.3
Reorganization items		—			—			—		—			23,297			10.1
Legal settlement		—			—			—		—			(26,229	)		(11.4	)
Other (income) loss, net		(704	)		(0.2	)		2,125		0.7			5,896			2.5
(Benefit from) provision for foreign income taxes		(4,547	)		(1.4	)		27,420		8.4			2,273			1.0
Net loss	$	154,141			47.8	%	$	715,255		219.1	%	$	204,515			88.7	%

From 1995 to 2005, we managed and operated a fiber optic network covering 352 route kilometers in Bogotá, Colombia, pursuant to a joint venture with Empresa de Telecomunicaciones de Santafe de Bogotá, the Colombian PTO that provides local telephone service in the Bogotá region. We constructed our own metropolitan fiber optic network in Bogotá, Colombia during 2006. This network covers only a portion of the area served by our prior network and therefore requires us to lease links from third parties in areas that are not covered by our new dedicated network.

Fiber Optic Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless ~~2002~~long-haul, ~~Compared~~high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from Santiago, Chile to ~~2001~~Buenos Aires, Argentina, passing through Mendoza, Córdoba and Rosario; in Brazil, it covers Curitiba, Belo Horizonte, Rio de Janeiro and São Paulo. It also includes a fiber optic connection between Paraná, Argentina and Curitiba, Brazil, which is currently unlit. We also own and operate a long haul fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network to other parts of Latin America and the world, we have purchased IRU capacity on Global Crossing Ltd.’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network, as well as leased capacity from other undersea fiber optic cable operators. This capacity enables our Company to transmit telecommunications traffic seamlessly from the United States to major countries in South America using the latest fiber optic technology.

~~Revenues~~Data Centers. ~~Our~~To ~~total net~~compliment ~~revenues~~our ~~for~~Broadband ~~2001~~Network ~~and~~infrastructure, ~~2002~~we ~~equaled~~operate ~~$326.5 million~~15 ~~and $230.2 million.~~advanced ~~Net~~data ~~revenues~~center ~~were~~hosting ~~composed~~facilities with an aggregate of ~~net~~approximately ~~revenues from~~500,000 ~~services~~gross square feet, ~~sales~~including offunctional ~~equipment~~facilities, building shell, space for new modules, and ~~Broadband~~corresponding ~~Network development~~office ~~revenues.~~space ~~The~~in ~~decrease~~each, in ~~our~~major ~~net~~cities ~~revenues~~in ~~was principally~~Latin ~~due~~America. toThese ~~the~~facilities, ~~continuing~~which ~~adverse~~are ~~economic~~capable ~~conditions being~~of ~~experienced~~supporting ~~throughout~~advanced ~~Latin~~application ~~America~~hosting services, ~~including~~are ~~the~~located in Buenos Aires, Mendoza, Córdoba and ~~significant~~Rosario, ~~devaluations~~Argentina; ofSão ~~the~~Paulo, ~~Argentine~~Rio ~~peso~~de Janeiro and ~~the Brazilian~~Curitiba, ~~real~~Brazil; ~~during~~Santiago, ~~2002~~Chile; Fort Lauderdale, Florida, United States; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; and Lima, Peru.

~~Our~~Teleports. ~~net~~We ~~revenues~~own ~~from~~and ~~services~~operate ~~for~~teleports ~~2002~~in ~~totaled $229.0 million~~Buenos Aires, aArgentina; ~~decrease~~São ofPaulo, ~~$75.3 million~~Brazil; ~~(or~~Bogotá, ~~24.7%)~~Colombia; Caracas, Venezuela; Quito, ~~compared~~Ecuador; toLima, ~~2001~~Peru; and Fort Lauderdale, Florida, United States. ~~Our~~We ~~net~~also ~~revenues~~own ~~from~~and ~~services~~operate ~~during~~regional ~~2002 included~~teleports ~~net~~in ~~revenues~~Mendoza, ~~from:~~Córdoba, Rosario, Argentina; Medellín, Cali Colombia; Guayaquil, Ecuador; and Rio de Janeiro and Curitiba, Brazil, as well as operate over 150 other small network nodes.

•Satellite ~~data~~Services. Our satellite transmissions use both C-band (4-6 GHz) and ~~value~~Ku-band ~~added~~(11-14 ~~services~~GHz) frequencies. As of December 31, ~~which~~2006, ~~include~~we had a total available leased capacity of approximately 633 MHz. Our lease payments for satellite ~~and~~capacity ~~broadband~~totaled ~~data~~approximately ~~transmission~~$19.1 million ~~services,~~in ~~data~~2006. ~~center~~We ~~services,~~will ~~and~~contract for ~~other~~additional ~~value-added~~leased ~~services~~satellite •capacity ~~Internet,~~if ~~which~~business isrequires. ~~composed~~A portion of our ~~Internet~~satellite ~~backbone~~capacity ~~access~~is ~~and~~leased ~~managed~~by ~~modem~~our ~~services~~wholly-owned ~~• telephony~~subsidiary, ~~including~~International ~~local,~~Satellite ~~national~~Capacity ~~and~~Holding, ~~international~~Ltd. ~~long-distance~~This ~~services,~~subsidiary’s ~~and~~principal •function ~~services~~is to lease private telecommunications capacity from telecommunications carriers, ~~which~~and ~~consist~~then ofsublease ~~our~~this ~~wholesale~~capacity ~~services~~at market rates to ~~other~~our ~~telecommunications~~operating ~~carriers~~subsidiaries. ~~(including~~We ~~revenue~~believe ~~recognition~~that ~~from~~this ~~the~~method ~~sale~~of centralizing our leasing of ~~IRU~~telecommunications capacity onprovides ~~our~~us ~~Broadband~~with better ~~Network~~terms. ~~to,~~We ~~and~~are ~~our~~currently ~~provision~~in the process of ~~switching~~upgrading ~~and~~the ~~transportation~~technologies ofused ~~telecommunications~~to ~~traffic~~provide satellite services. ~~for,~~We ~~such~~believe ~~carriers),~~this ~~and~~will ~~related~~allow ~~maintenance~~us ~~services~~in the mid term to ~~those~~optimize ~~carriers~~our satellite capacity, although it might require additional investment.

~~The~~In ~~following~~addition, ~~table~~our ~~shows~~corporate ~~our~~headquarters ~~revenues~~are ~~from services~~located in Buenos Aires, Argentina at buildings and property that are owned by ~~business~~us. ~~lines~~Our administrative ~~(after~~and ~~elimination~~sales offices are primarily located within our operations facilities, located in each of ~~intercompany~~the countries in which we operate. We also own commercial real property at various locations in Argentina, Colombia, Brazil and Venezuela. As ~~transactions)~~of ~~for~~December 31, 2006, we leased several properties in the ~~periods~~various ~~indicated:~~ countries in which we operate. For more information regarding properties used to operate our business, see “—Our Infrastructure.”

37 23

			December 31,
			2000		2001		% change(1)			2002		% change(1)
			(dollar amounts in thousands)
Data and value added services:
	Satellite		$	159,265	$	137,053		(13.9	)%	$	88,547		(35.4	)%
	Broadband			51,260		85,579		67.0			77,733		(9.2	)
	Other value added services(2)			3,743		17,184		359.1			14,191		(17.4	)
		Total		214,268		239,816		11.9			180,471		(24.7	)
Internet				35,996		45,403		26.1			27,243		(40.0	)
Telephony				235		11,762		4,905.1			14,327		21.8
Services to carriers				885		7,360		731.6			6,985		(5.1	)
Total net revenues from services			$	251,384	$	304,341		21.1		$	229,026		(24.8	)

(1)	Increase (decrease) compared to previous year.
(2)	Includes our data center services, systems integration and other information technology solutions services.

Item 3.

LEGAL PROCEEDINGS

IPO Allocations Class ~~The~~Action. ~~decrease~~On November 1, 2001, a lawsuit was filed in the United States District Court for the Southern District of New York (the “Court”) against our ~~net~~Company ~~revenues~~(the ~~from~~“IPO ~~services~~Class Action”), certain individuals who were then ~~during~~officers ~~2002~~and asdirectors ~~compared~~of our Company and the underwriters to ~~2001~~our ~~primarily~~initial ~~resulted~~public ~~from~~offering. ~~lower revenues~~This ~~from~~lawsuit ~~data~~alleged ~~and~~on ~~value~~behalf ~~added~~of ~~services~~a proposed class of all shareholders that our Company and ~~Internet services~~its ~~(offset~~underwriters violated various provisions of the securities laws in ~~part~~connection bywith an ~~increase~~initial public offering in ~~our~~February ~~revenues~~2000. ~~from telephony~~Pursuant ~~services~~to ~~during~~the ~~2002).~~Plan, ~~Changes~~the plaintiffs in ~~our~~the ~~revenues~~IPO ~~during~~Class Action received in connection with their claims the assignment of any insurance proceeds that we receive in connection with ~~2002~~the litigation, but otherwise the claims of the plaintiffs against us or any of our other assets have been discharged as ~~compared~~part toof ~~2001~~the ~~include~~Plan. In February 2005, the ~~following:~~Court granted preliminary approval for a proposed settlement of the IPO Class Action. The settlement is subject to certain final determinations by the Court, which has been considering the settlement since preliminary approval.

•Employee ~~Our~~Severance ~~revenues~~Litigation. ~~from~~On ~~satellite services during 2002 declined in comparison to 2001 due to (i) the effect of devaluations of the Argentine peso and the Brazilian real~~December 26, ~~(ii) lower satellite-based services volume (as we transferred telecommunications services to our Broadband Network)~~2003, ~~(iii) downward pressure on our prices because of competition and adverse economic conditions, and (iv)~~ a ~~number~~lawsuit ofwas ~~customer~~filed ~~cancellations or non-renewals. • Our revenues from broadband services decreased during 2002 as compared to 2001 due to the negative effect on these revenues (~~in ~~U.S.~~an ~~dollar terms) primarily attributable to the devaluation of the~~ Argentine ~~peso~~court ~~and~~against ~~the~~IMPSAT ~~Brazilian~~Argentina ~~real.~~by ~~• The decline in our revenues from Internet services during 2002 over~~ the ~~prior~~former ~~year~~chairman ~~is attributable to (i) pricing pressure (because~~ of ~~competition~~our ~~and~~Board ~~adverse economic conditions), (ii) the effect~~ of ~~devaluations of the Argentine peso and the Brazilian real~~Directors, ~~and (iii) our sale during 2002 of our retail Internet service provider business in Ecuador~~Mr. Enrique ~~• Our telephony services revenues increased during 2002 as compared to 2001~~Pescarmona. ~~Our~~This ~~telephony~~lawsuit ~~services~~alleged inthat IMPSAT Argentina, ~~which~~failed weto ~~introduced~~pay asMr. Pescarmona aseverance ~~new~~compensation ~~service~~ in ~~2001,~~the ~~are~~amount ~~utilized~~of ~~by third-party resellers~~$2.9 ~~The~~million ~~overall~~which ~~increase~~the inplaintiff ~~our~~believes ~~telephony~~is ~~services~~required ~~revenues~~by ~~for~~Argentine ~~2002~~labor ~~over~~law ~~2001 was generated~~ in connection with ~~our~~his ~~increased~~termination ~~delivery~~from ~~during~~us ~~that~~upon ~~period~~the effectiveness of ~~switched voice services to corporate customers in Argentina and international call terminations to end-user customers in Peru and~~ the ~~United States~~Plan. Discovery •is ~~Our~~currently ~~revenues from services to carriers decreased during 2002 compared to 2001~~ongoing. ~~Our~~We ~~revenues~~believe ~~from~~that ~~services~~we ~~to carriers during 2002~~ have ~~been~~meritorious ~~impacted~~defenses byto the ~~cancellation~~allegations ~~of our contracts with 360networks~~ in ~~June~~the ~~2001~~complaints and awe ~~general~~are ~~decline~~defending inthe ~~demand~~litigation ~~by telecommunications companies for “dark” and “lit” fiber capacity~~vigorously.

Brazilian Tax Claims. In October 2004 the Brazilian tax authorities issued two tax infraction notices against IMPSAT Brazil for the collection of the Import Duty and the Tax on Manufactured Products, plus fines Weand ~~had~~interests. 2The notice informed IMPSAT Brazil that the taxes were levied because a specific document (Declaração de Necessidade—“Statement of Necessity”) was not provided by IMPSAT Brazil at the time of importation,~~649~~ in ~~customers~~breach of MERCOSUR rules. The total amount of the tax assessment was approximately $4.3 million at December 31, ~~2002,~~2006. Oppositions were filed on behalf of IMPSAT Brazil arguing that the Argentine exporter (Corning Cable Systems Argentina ~~compared~~S.A.) tocomplied 2with the MERCOSUR rules and a favorable first instance decision was granted. However,~~877~~ ~~customers~~due atto ~~December 31~~the amount involved, ~~2001~~the case was remitted to the official compulsory review by the Federal Taxpayers Council. The administrative final decision is still pending.

38In addition, in December 2004, the tax authorities of the State of São Paulo, in Brazil, issued an infraction notice for collection of Tax on Distribution of Goods and Services (“ICMS”) supposedly due on the lease of movable properties by comparing such activity to communications services, on which the ICMS state tax is actually levied. The total amount of this tax assessment was approximately $5.2 million at December 31, 2006, including interest and fines. A defense was filed on behalf of IMPSAT Brazil, arguing that the lease of assets could not be treated as a communication service subject to ICMS. The defense was rejected in the first administrative level, and an appeal to State Administrative Court was then filed, which is pending judgment. We believe there are good grounds to have the tax assessment cancelled. However, if the tax assessment is not cancelled in the administrative level for any reason, judicial measures may be adopted to remove such tax assessment.

Argentina Tax Claims. On December 31, 2006, the tax authorities of the City of Buenos Aires, Argentina, sent us a tax assessment for the fourth quarterly installment of 2006 relating to a purported tax for the use of the air space in and around the City in respect of the our antennas and supporting structures in the amount of approximately $1.7 million. Included in the notice was a statement of additional assessments covering earlier years (2003 through 2005) and the first three quarters of 2006. The ~~following~~total ~~table~~amount ~~shows~~for these earlier periods was approximately $33.1 million. Through December 31, 2006, we have received invoices totaling approximately $34.8 million, but have not accrued amounts relating to this matter. If required to pay this tax at the ~~evolution~~current rate and based on the assumptions used by the City of Buenos Aires, we estimate that we will be subject to an additional tax of approximately $8.6 million per year. This estimate is based on invoices received from the City of Buenos Aires through December 31, 2006 and the City’s recently enacted 2007 Fiscal Code. We had previously received notices from the City for these types of taxes, one of which related to the fiscal year 2003. The notices followed a request from the City in 2003 for information regarding the ownership of antennas for purposes of imposition of the tax. We have formally objected to the legality and certain factual assumptions used in calculating the tax and have rejected each of the notices in an administrative proceeding filed before the City of Buenos Aires. We learned in July 2005 that the City had rejected our objection to the legality of the tax through ~~customer~~a ~~base~~“Providencia” which we have rejected by us and is also the subject of the administrative proceeding. In December 2006, we filed an objection of the notice and antenna tax assessment for the ~~periods~~last ~~indicated:~~quarter of 2006. In our objection, we reaffirmed our objection to the legality of the tax. Our objection is pending resolution before the City’s tax authorities. We believe, based on our analysis of the issue and the advice of our legal counsel, that no tax is owed and we intend to vigorously defend against any requirement that we pay the tax. See “Risk Factors—We

		December		December
		31, 2001		31, 2002
		Number of Customers				% Change(1)
IMPSAT Argentina			1,100		953		(13.4	)
IMPSAT Colombia			699		678		(3.0	)
IMPSAT Brazil			387		366		(5.4	)
IMPSAT Venezuela			245		215		(12.2	)
IMPSAT Ecuador			236		216		(8.5	)
IMPSAT Mexico			47		24		(48.9	)
IMPSAT Chile			57		60		5.3
IMPSAT Peru			33		70		112.1
IMPSAT USA			73		67		(8.2	)
	Total		2,877		2,649		(7.9	)

(1)Table Increase (decrease) as of December 31, 2002 compared to as of December 31, 2001.Contents

~~During~~may ~~2002,~~be wesubject ~~lost~~to asignificant ~~net~~liabilities ~~total~~due ofto ~~228 customers,~~ a ~~decrease~~tax ofon ~~7.9%~~antennas ~~compared~~imposed toby the ~~prior~~City ~~year. Due to adverse economic conditions in Argentina, we lost a net total~~ of ~~147~~ ~~customers~~Buenos inAires ~~that country during 2002. In addition to poor economic conditions in Argentina~~ and ~~Brazil,~~other ~~negative or sluggish economic growth persisted throughout most of the Latin American region during 2002~~municipalities.” ~~During 2002, we have not experienced any significant customer losses to our competitors.~~

In addition, toin ~~net~~late ~~revenues~~December ~~from services~~2006, ~~our total~~the ~~net~~tax ~~revenues~~authorities ~~for~~of ~~2002~~the ~~included~~Municipality ~~revenues~~of ~~from~~Quilmes ~~sales~~in Argentina sent us a notice of provisional tax assessment with ~~equipment.~~respect ~~Revenues~~to ~~from~~the ~~equipment~~installation ~~sales~~and inspection of antennas for ~~2002~~the ~~totaled $1.2 million,~~years a2001 through 2006 in the amount of approximately $1312.8 5 million, ~~(or~~plus ~~92.2%)~~defaulted ~~decrease over 2001~~interest. We ~~did~~believe, ~~not~~based ~~record~~on ~~any~~our ~~Broadband~~analysis ~~Network~~and ~~development revenues~~the ~~during~~advice ~~2002.~~of ~~Our~~our ~~Broadband~~legal ~~Network~~counsel, ~~development~~that ~~revenues for~~either ~~2001~~no ~~totaled~~tax is ~~$7.2 million.~~owed ~~Because~~or ~~equipment~~the ~~sales~~amount ~~are ancillary~~of tosuch ~~our~~tax ~~core~~is ~~business~~significantly ~~and~~less ~~are~~than ~~generally~~the ~~engaged~~amount asserted in ~~by our~~the ~~company~~notice. ~~only~~We onintend anto ~~opportunistic~~vigorously ~~basis,~~defend weagainst ~~are~~this ~~currently unable~~provisional totax ~~predict~~assessment. ~~more~~See ~~than~~“Risk ~~minimal~~Factors—We ~~sales~~may ofbe ~~equipment~~subject ~~during~~to significant liabilities due to a ~~2003.~~tax Weon doantennas ~~not~~imposed ~~anticipate~~by ~~any~~the ~~Broadband~~City ~~Network~~of ~~development revenues~~Buenos ~~during~~Aires ~~2003~~and other municipalities. ”

~~The~~We ~~following~~are ~~table~~also ~~shows~~involved byin ~~operating~~or ~~subsidiary~~subject to various ~~our~~litigation ~~revenues~~and ~~from~~legal ~~services~~proceedings ~~and~~incidental ~~total~~to ~~revenues~~the ~~(in~~normal ~~each~~conduct ~~case~~of our business, including ~~intercompany~~with ~~transactions)~~respect ~~for~~to ~~the~~regulatory ~~periods~~and ~~indicated:~~ foreign tax assessment matters.

		Year Ended December 31,
		2000		2001		2002
		(in thousands)
IMPSAT Argentina
	Services	$	116,004	$	122,284	$	56,009
	Sale of equipment		12,221		7,962		538
	Broadband network development		32,272		—		—
	Total		160,497		130,246		56,547
IMPSAT Colombia
	Services		54,819		62,087		58,300
	Sale of equipment		—		493		14
	Total		54,819		62,580		58,314

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

39On December 15, 2006, a proxy statement was mailed to all security holders regarding the Merger. A special meeting of the Company’s stockholders was held on January 17, 2007, and the shareholders voted in favor of the adoption of the Merger Agreement. The results of the stockholder meeting were reported in a Current Report on Form 8-K filed by us with the SEC on January 17, 2007.

		Year Ended December 31,
		2000		2001		2002
		(in thousands)
IMPSAT Brazil
	Services		27,947		42,816		35,804
	Sale of equipment		308		2,627		9
	Broadband network development		9,336		2,552		—
	Total		37,591		47,995		35,813
IMPSAT Venezuela
	Services		28,038		31,411		31,285
	Sale of equipment		89		1,235		349
	Total		28,127		32,646		31,364
IMPSAT Ecuador
	Services		14,263		15,756		16,633
	Sale of equipment		379		79		87
	Total		14,642		15,835		16,720
IMPSAT Chile
	Services		278		7,431		9,494
	Sale of equipment		—		1,415		—
	Broadband network development		16,068		4,645		—
	Total		16,346		13,491		9,494
IMPSAT Peru
	Services		568		6,020		11,015
	Sale of equipment		904		1,021		152
	Total		1,472		7,041		11,167
IMPSAT USA
	Services		27,653		37,051		33,315
	Sale of equipment		47		118		14
	Total		27,700		37,169		33,329
International Satellite Capacity Holding, Ltd.(1)
	Services		8,992		14,941		16,616
	Total		8,992		14,941		16,616
Other
	Services		3,525		4,394		3,599
	Sale of equipment		27		2		5
	Total		3,552		4,396		3,604

(1)Table Thisof subsidiary’s principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our operating subsidiaries.Contents

~~The~~PART ~~growth~~II in our net revenues from services has been adversely impacted during the past three years by the continued adverse economic conditions in our most important markets in Argentina, Brazil and Colombia, as well as in Venezuela. See “Certain Considerations — Economic and political conditions in Latin America pose numerous risks to our operations.”

40 Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~Argentina,~~In ~~which~~accordance ~~has~~with ~~been mired in economic recession for~~ the ~~past four years~~Plan, isall ~~our~~pre-existing ~~largest~~equity ~~market~~interests ~~in terms~~ of ~~number~~IMPSAT ofFiber ~~customers and~~Networks, ~~until~~Inc. ~~the~~were ~~devaluation~~cancelled ofon the ~~peso~~ inEffective ~~2002, in revenues~~Date. InOur ~~the~~common ~~first~~stock, issued ~~weeks~~pursuant ofto ~~January 2002~~the Plan, ~~Argentina~~began ~~defaulted~~to trade on ~~its~~the ~~external~~Nasdaq ~~debt~~Over-the-Counter ~~payments~~Bulletin ~~and devalued~~Board ~~its currency~~June 30, ~~exacerbating~~2003 ~~declining~~under ~~commercial confidence~~the ~~and~~new ~~activity~~symbol ~~and~~“IMFN.” ~~further~~As ~~inflating exorbitant costs~~ of ~~financing~~March 15, ~~for~~2007, ~~Argentine~~there ~~companies.~~were ~~Argentina~~nine ~~continues~~holders ~~to experience~~of ~~adverse~~record ~~economic~~of ~~conditions~~our ~~and~~common astock, ~~lack~~not ~~of access to~~including ~~international~~beneficial ~~capital~~owners ~~markets~~in ~~and~~nominee ~~has~~or ~~faced~~street ~~during 2002 internal disruption and social unrest~~name. ~~For~~We ~~2003,~~have ~~we do~~ not ~~expect~~paid ~~that the~~any ~~conditions~~cash ~~affecting~~dividends ~~the~~on ~~Argentine~~our ~~economy~~common ~~will~~stock ~~subside or that future economic developments~~ in ~~Argentina~~the ~~will~~past ~~improve~~three ~~in any significant respect~~years, and itdo isnot ~~possible~~anticipate ~~that~~paying ~~the~~any ~~Argentine economic~~in ~~and~~the ~~political~~foreseeable ~~environment could deteriorate even further~~future. ~~The~~In ~~political and economic crises in Argentina~~addition, ~~our largest~~the ~~country~~terms of ~~operation, will continue to have a materially adverse impact on~~ our ~~financial~~Senior ~~condition~~Notes and ~~results~~other offinancing ~~operations.~~agreements ~~See~~we ~~“Certain~~have ~~Considerations — Economic~~entered ~~and~~into ~~political~~restrict ~~conditions~~our inability ~~Latin~~to ~~America~~pay ~~pose~~dividends ~~numerous risks~~on to our ~~operations”~~common ~~for a description of the economic and political crises in Argentina~~stock.

~~During~~The ~~2002,~~following ~~IMPSAT~~tables ~~Argentina’s~~show ~~financial condition~~the ~~and~~high ~~results of operations were severely~~ and ~~negatively~~low ~~affected~~sales byprice currency fluctuations, inflation, interest rates, taxation and other political, social and economic developments in and affecting Argentina. The ongoing severe economic downturn in Argentina has adversely affected many of ~~our~~the ~~customers~~common ~~in that~~stock ~~country~~for ~~and~~quarters during ~~caused~~the alast ~~number~~two offiscal ~~them to terminate their contracts with us~~years, ~~fail~~as toreported ~~renew~~on ~~their contracts, or reduce~~ the ~~amount~~ ofNasdaq ~~services contracted. See “Business – Customers.” During~~ Over-the-Counter ~~remainder~~Bulletin ~~of 2003, we expect these negative conditions to continue to adversely impair our business, financial condition and results of operations~~Board.

Our total net revenues at IMPSAT Argentina for 2002 totaled $56.6 million, a decrease of $73.7 million (or 56.6%) compared to 2001. This decrease was primarily caused by the devaluation of the Argentine peso following the implementation of the “pesification” decree and general recessionary conditions in that country.


Quarter	2005
Quarter	High		Low
First	$	6.50	$	5.30
Second	$	6.50	$	5.28
Third	$	7.45	$	5.80
Fourth	$	7.50	$	5.82

Quarter	2006
Quarter	High		Low
First	$	7.50	$	6.50
Second	$	9.30	$	8.00
Third	$	8.50	$	6.97
Fourth	$	9.25	$	8.00

~~Our~~The ~~results~~information inrequired ~~Brazil~~concerning ~~also~~compensation ~~were~~plans ~~adversely affected~~under ~~during~~which ~~2002~~equity assecurities ~~compared to 2001 by the devaluation~~ of ~~the~~ Brazilian real against the U.S. dollar. At December 31, 2001, the real traded at a rate of R$2.41 = $1.00, and at December 31, 2002 it had depreciated 46.5% to R$3.53 = $1.00. As of March 31, 2003, the real traded at a rate of R$3.46 = $1.00. These and prior devaluations have had a negative effect on our ~~real-denominated~~Company ~~revenues.~~are ~~The~~authorized ~~devaluation~~for ofissuance ~~the~~is ~~real and~~referenced ~~the decline~~ in ~~growth~~Item 12 in the Brazilian economy have been caused in part by the continued recession in the region, a general aversion to emerging markets by foreign direct and financial investors and the overall decline in worldwide economic production. In addition, there remains some concern among the international investor community that Mr. da Silva, who was elected president of ~~Brazil~~this ~~on October 27, 2002, will cause Brazil to alter its policies in a manner that would adversely affect its economy~~Report. ~~These conditions have had, and can be expected to continue to have, an adverse effect on IMPSAT Brazil’s and our company’s overall financial condition and results of operations.~~

~~IMPSAT~~26 Brazil’s revenues from services for 2002 totaled $35.8 million, a decrease of $7.0 million (or 16.4%) compared to the same periods in 2001. This decrease in revenues relates primarily to the effect of the devaluation of the real. In local currency terms, IMPSAT Brazil’s revenues for 2002 decreased by 3.8% as compared to 2001.

IMPSATTable Colombia recorded revenues from services of $58.3 million during 2002, compared to $62.1 million for 2001. Our net revenues from services in Colombia have been negatively impacted by sustained adverse economic conditions in that country and increased competition. Colombia’s economy continues to suffer as a result of devaluations of the Colombian peso and an enduring civil war. Contents

LOGO

~~Revenues~~Prepared ~~from~~by ~~services~~CSRP ~~at IMPSAT Venezuela equaled $31~~(www.~~3 million for 2002~~crsp.uchicago.edu), ~~compared~~Center ~~to $31.4 million~~ for ~~2001.~~Research Onin ~~February 12,~~Security ~~2002~~Prices, ~~Venezuela’s~~ ~~government~~Graduate ~~floated~~School ~~its~~of ~~currency~~Business, ~~ending~~The ~~a five-year-old~~University ~~regime that permitted the bolivar to trade~~of ~~only within a fixed-band against the U~~Chicago.S. ~~dollar.~~Used Aswith ~~a result, devaluation of the bolivar occurred~~permission. ~~Venezuela~~All ~~has experienced~~right and continues to experience political and economic uncertainty following the attempted military coup staged against that country’s President Hugo Chavez during the first weeks of April 2002 and the labor strikes that commenced in December 2002 and ended two months laterreserved. ~~In response to this political and economic turmoil affecting Venezuela, that country’s government imposed foreign exchange and price controls during February 2003, making it difficult for our~~

~~customers~~27 in that country to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. These foreign exchange controls could also limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. See “Certain Considerations — Economic and political conditions in Latin America pose numerous risks to our operations.” The continuation or worsening of this crisis in Venezuela could have a material adverse effect on IMPSAT Venezuela’s results of operations and financial condition. See “Certain Considerations — Economic and political conditions in Latin America pose numerous risks to our operations.”

DirectTable Costs. Our direct costs for 2002 totaled $120.4 million, a decrease of $56.5 million (or 31.9%), compared to 2001. As compared to 2001, this reduction during 2002 was caused principally by (i) the devaluation of local currencies in Argentina, Brazil, Colombia and Venezuela during 2002, which had the effect of decreasing our direct costs in those countries in U.S. dollar terms, and (ii) our incurring significantly lower total costs of equipment sold and no Broadband Network development costs during 2002. Of our total direct costs for 2002, $42.8 million related to the operations of IMPSAT Argentina, compared to $86.7 million at IMPSAT Argentina for 2001. Direct costs for IMPSAT Brazil totaled $21.9 million for 2002, compared to $32.3 million for 2001. Direct costs of our subsidiaries are described prior to the elimination of intercompany transactions. Contents

~~(1)~~Item ~~Contracted Services~~6. ~~Contracted~~SELECTED ~~services~~FINANCIAL costs include costs of maintenance and installation (and de-installation) services provided by outside contractors. During 2002, our contracted services costs totaled $19.2 million, a decrease of $21.4 million (or 52.7%) compared to 2001. Of this amount, maintenance costs for our telecommunications network infrastructure, including the Broadband Network, totaled $14.4 million for 2002 compared to $27.4 million during 2001. The decrease in our maintenance costs and installation costs is partially attributable to the effect of the devaluation of the peso on such costs in Argentina and the favorable renegotiation of certain of our agreements for maintenance services with third-party contractors in that country. Also, our installation costs decreased because we had fewer new customers during 2002 compared to during 2001. Of our total contracted services costs for 2002, $5.9 million related to the operations of IMPSAT Argentina, compared to $17.5 million at IMPSAT Argentina for 2001. (2) Other Direct Costs. Other direct costs principally include licenses and other fees; sales commissions paid to third-party sales representatives; and our provision for doubtful accounts. Sales commissions paid to third-party sales representatives for 2002 totaled $5.2 million compared to $8.2 million in 2001. The year over year decline in these commissions is primarily attributable to the effect of the devaluation of the peso on such costs in Argentina, which resulted in lower amounts of such commissions in U.S. dollar terms. We recorded a provision for doubtful accounts of $13.1 million for 2002, compared to a provision of 16.8 million for the previous year. At December 31, 2002, approximately 37.0% of our gross trade accounts receivable were past due more than six months compared to 32.0% at the end of 2001. At the same date in 2002, our allowance for doubtful accounts covered approximately 116.0% of our gross trade accounts receivable past due more than six months. The average days in quarterly gross trade accounts receivable decreased from 89 days at December 31, 2001 to 83 days at December 31, 2002. The recession in Argentina has adversely affected the quality of our accounts receivable from our customers in that country. IMPSAT Argentina’s allowance for doubtful accounts at year-end 2002 covered approximately 102.0% of its gross trade accounts receivable past due more than six months. In addition, as a consequence of the economic and political turmoil in Venezuela, we increased our allowance for doubtful accounts in that country by $1.2 million for 2002. (3) Leased Capacity. Our leased capacity costs for 2002 totaled $74.7 million, which represented a decrease of $12.4 million (or 14.2%) compared to 2001. This decrease occurred notwithstanding an increase in costs for interconnection and telephony termination costs (which are components of our leased capacity costs), as described below. The decrease in our leased capacity costs is attributable to our favorable renegotiation of the terms of certain of the underlying capacity leases and, to a lesser extent, the effects of currency devaluations in our countries of operation during 2002. As a percentage of our totalDATA

42The following selected financial data are for our Company on a consolidated basis in accordance with U.S. GAAP. The following financial data have been derived from our Company’s audited consolidated financial statements for the respective years. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes included at the back of this Report.

~~revenues,~~Upon our ~~leased~~emergence ~~capacity~~from ~~costs~~bankruptcy ~~increased,~~on ~~principally~~the ~~because~~Effective ~~such costs are incurred in U.S. dollars~~Date, ~~while~~we ~~our~~have ~~revenues~~adopted in“fresh ~~Argentina~~start” ~~and~~reporting Brazil are principally denominated and generated in local currency. Our leased capacity costs for satellite capacity for 2002 totaled $32.1 million, a decrease of $7.0 million (or 17.8%) compared to 2001. In Argentina, our leased satellite capacity costs totaled $8.1 million for 2002, as ~~compared~~required toby $10.5 million for 2001. Our leased satellite capacity costs for IMPSAT Brazil totaled $4.1 million for 2002, as compared to $5.9 million for 2001. Our satellite capacity costs decreased in Argentina and Brazil, in part because of (i) our favorable renegotiation of certain of our agreements satellite capacity providers, (ii) our transitioning customers from satellite-based solutions onto the ~~Broadband~~American Institute ~~Network, and (iii) the effect on such costs~~ of ~~the~~Certified ~~devaluations~~Public ofAccountants ~~the~~Statement ~~peso and the real. We had approximately 873 MHz~~ of ~~leased~~Position ~~satellite capacity at December 31, 2002 and 967 MHz at December 31, 2001. Our costs for dedicated leased capacity on third~~90-~~party fiber optic networks totaled $25.~~7 ~~million for 2002~~, a“Financial ~~decrease~~Reporting of $9.9 million (or 27.8%) compared to 2001. These costs were incurred principally in Argentina, Brazil, Colombia and the United States. Prior to the implementation of our Broadband Network, we had incurred these higher costs of leased fiber optic capacity in Argentina and Brazil due to the continued demand by ~~our~~Entities ~~customers~~ in ~~those~~Reorganization ~~countries~~under ~~for greater bandwidth and, in~~ the ~~United~~Bankruptcy ~~States~~Code,” ~~due~~which ~~to the expansion of our Internet service offerings where~~ we ~~provide~~refer ~~a link between Latin America and the U.S. Internet backbone. Although we have transferred substantial amounts of our telecommunications traffic~~ to ~~the Broadband Network~~ as weSOP migrated our customers to our Broadband Network, we will continue to require leased capacity to provide telecommunications services to clients with facilities outside of the footprint of our Broadband Network in order to provide end90-~~to-end telecommunications services~~7. ~~The~~As decrease in these costs was also due, in part, to the effect on such costs of the currency devaluations experienced during 2002 in certain of our countries of operation. In connection with certain new services that we are offering as a result of the implementation of ~~our~~SOP Broadband Network and the effectiveness of our license in Argentina to provide domestic and international long distance services, we also incur costs for interconnection and telephony termination (“I&T”) and frequency rights. Our I&T and frequency rights costs totaled $14.9 million during 2002 (which includes $11.90-7 ~~million~~fresh ~~of I&T costs). This compares to $12.4 million of I&T and frequency rights costs for 2001 (which includes $8.0 million of I&T costs). Our I&T costs~~start reporting, ~~which are principally denominated in local currencies, have increased in connection with~~ the ~~growth~~consolidated offinancial ~~our~~statements ~~telephony revenues (as discussed above under “— Revenues”), notwithstanding the effects~~ of ~~currency devaluations in~~ our ~~countries~~Company offrom ~~operation during 2002. Our I&T~~ and ~~frequency~~after ~~rights~~its ~~costs~~emergence infrom ~~Argentina~~bankruptcy, ~~totaled $7.7 million during 2002 (~~which ~~includes~~we ~~$7.0~~refer ~~million of I&T costs). This compares~~ to ~~$6.7~~as ~~million~~the ofSuccessor ~~I&T and frequency rights costs for 2001 (which includes $4.3 million of I&T costs). (4) Costs of Equipment Sold and Broadband Network Development. In 2002~~Company, wewill ~~incurred~~not ~~costs~~be ofcomparable ~~equipment sold of $0.6 million, compared~~ to ~~costs~~the ofconsolidated ~~equipment~~financial ~~sold~~statements of ~~$10.5~~our ~~million~~Company ~~for~~in ~~2001. During 2002~~prior periods, which we ~~incurred~~refer ~~no Broadband Network development costs, compared~~ to ~~$3.3~~as ~~million~~the ofPredecessor ~~such costs in 2001~~Company.

Salaries and Wages. Salaries and wages for 2002 totaled $47.9 million, a decrease of $34.2 million (or 41.7%) compared to 2001. As a result of the adverse economic conditions experienced in Argentina, Brazil and elsewhere in Latin America and as part of cost-control measures implemented by management commencing at the end of the first quarter of 2001, our aggregate number of employees fell from 1,711 at December 31, 2000 to 1,271 at December 31, 2002. Management expects to continue to monitor the size of its total workforce and to make appropriate adjustments as required by financial and competitive circumstances. The decrease in these costs was also due, in part, to the effect on such costs of the currency devaluations experienced during 2002 in certain of our countries of operation.


	Year Ended December 31, 2002			Three Months Ended March 31, 2003			Nine Months Ended December 31, 2003			Year Ended December 31,
	Predecessor Company 2002			Predecessor Company 2003			Successor Company 2003			Successor Company 2004			Successor Company 2005			Successor Company 2006
Statement of operations data:
Net revenues:
Broadband and satellite	$	173,265		$	41,382		$	120,855		$	161,964		$	172,852		$	184,668
Internet		27,243			5,733			18,308			26,125			30,591			36,063
Value added services		14,191			4,781			10,557			16,674			24,874			35,755
Telephony		14,327			4,106			13,568			21,673			24,967			27,293

Total net revenues from services		229,026			56,002			163,288			226,436			253,284			283,779
Sales of equipment		1,168			74			926			1,279			690			1,190

Total net revenues		230,194			56,076			164,214			227,715			253,974			284,969

Costs and expenses:
Direct costs:
Contracted services		19,199			4,125			13,376			21,285			24,379			25,935
Other direct costs		25,935			4,696			18,353			20,647			28,909			35,573
Leased capacity		74,679			17,407			49,516			67,632			74,990			75,724
Cost of equipment sold		576			48			803			963			631			371

Total direct costs		120,389			26,276			82,048			110,527			128,909			137,603
Salaries and wages		47,894			10,727			35,639			46,339			50,597			60,828
Selling, general and administrative		28,204			5,553			19,824			23,581			22,335			25,394
Gain on extinguishment		(16,367	)		—			(14,253	)		(115	)
Depreciation and amortization		82,766			19,358			29,535			44,797			55,324			60,309

Total costs and expenses		262,886			61,914			152,793			225,129			257,165			284,134

Operating (loss) income		(32,692	)		(5,838	)		11,421			2,586			(3,191	)		835

Other income (expenses):
Interest income		1,907			200			1,068			1,136			1,433			943
Interest expense(1)		(75,815	)		(1,909	)		(14,435	)		(21,106	)		(32,394	)		(31,975	)
Net (loss) gain on foreign exchange		(91,884	)		9,969			17,566			5,804			10,131			7,049
Recognition of other-than-temporary decline in value of investments		(794	)		—			—			—			—			—
Reorganization items		(23,297	)		726,127			—			—			—			—
Legal settlement		26,229			—			—			—			—			—
Other (loss) income, net		(5,896	)		2,923			(4,689	)		840			(7,735	)		(8,238	)

Total other (expenses) income		(169,550	)		737,310			(490	)		(13,326	)		(28,565	)		(32,221	)

(Loss) income before income taxes		(202,242	)		731,472			10,931			(10,740	)		(31,756	)		(31,386	)
Provision for foreign income taxes		(2,273	)		(406	)		(1,454	)		(3,479	)		(4,492	)		(4,257	)

Net (loss) income	$	(204,515	)	$	731,066		$	9,477		$	(14,219	)	$	(36,248	)	$	(35,643	)

Net (loss) income per common share: Basic	$	(2.24	)	$	8.00		$	0.96		$	(1.42	)	$	(3.61	)	$	(3.52	)

Diluted	$	(2.24	)	$	8.00		$	0.72		$	(1.42	)	$	(3.61	)	$	(3.52	)

~~IMPSAT~~28 Argentina incurred salaries and wages for 2002 totaling $9.2 million, a decrease of $26.0 million (or 73.9%) over 2001. This decrease was due to the devaluation of the peso, which decreased the dollar

43 Table of Contents

value of our salaries and wages expenses incurred in Argentina during 2002. IMPSAT Argentina had 453 employees as of December 31, 2002 as compared to 446 employees as of December 31, 2001.


Weighted average number of common shares: Basic	91,429	91,429	9,917	9,994	10,054	10,121

Diluted	91,429	91,429	16,057	9,994	10,054	10,121

~~IMPSAT~~(1) ~~Brazil~~Contractual ~~incurred~~interest ~~salaries~~expense ~~and wages for 2002~~ of $11128.~~2 million,~~0 ~~a decrease of $4.8~~ million ~~(or 30.1%)~~for ~~compared~~the toyear ~~2001.~~ended ~~IMPSAT Brazil decreased its number of employees to 225 persons at~~ December 31, 2002, ~~compared~~and ~~to 316 persons at December 31, 2001~~$21.8 Inmillion ~~addition~~for ~~to our reduced employee headcount in that country,~~ the ~~decrease~~three ~~in salaries~~months ~~and~~ended ~~wages~~March ~~at IMPSAT Brazil during 2002 is related to the devaluation of the real against the U.S. dollar~~31, ~~which~~ ~~resulted~~2003 in(Predecessor ~~a decrease in U~~Company).~~S. dollar terms of our salaries and wages expense in Brazil.~~

Selling, General and Administrative Expenses. Our SG&A expenses consist principally of:


	As of December 31,
	Predecessor Company					Successor Company
	2002			2003		2004		2005		2006
Balance Sheet Data:
Cash and cash equivalents	$	32,563		$	61,498	$	63,655	$	24,070	$	21,315
Trading investments		23,021			2,474		—		—		—
Total current assets		106,016			109,064		108,891		73,490		77,957
Property, plant and equipment, net		403,948			315,817		317,310		309,892		294,748
Investments in common stock		86			1,873		—		—		—
Total assets		520,683			440,629		443,907		399,543		387,541
Total current liabilities		402,986			82,086		115,450		111,172		153,050
Total short-term debt and current portion of long-term debt		281,680			11,851		47,748		19,772		36,355
Total long-term debt, net		27,592			249,394		233,335		228,331		204,714
Other long-term liabilities		15,280			11,904		16,109		16,295		12,203
Liabilities subject to compromise		727,522			—		—		—		—
Stockholders’ (deficiency) equity		(722,615	)		97,245		79,013		43,745		10,405

• publicity and promotion costs • professional fees and other remuneration • travel and entertainment • rent • plant services, insurance, telephone and energy expenses


	Year Ended December 31,			Three Months Ended March 31			Nine Months Ended December 31,			Years Ended December 31,
	Predecessor Company						Successor Company			Successor Company			Successor Company			Successor Company
	2002			2003			2003			2004			2005			2006
Other Financial Data:
Cash flow provided by (used in):
Operating activities	$	27,533		$	11,503		$	19,219		$	35,518		$	32,449		$	40,867
Investing activities		(12,776	)		(6,229	)		12,619			(34,327	)		(34,305	)		(35,330	)
Financing activities		(17,246	)		(1,857	)		(6,482	)		2,737			(37,611	)		(7,689	)
Capital expenditures		21,652			3,266			18,213			39,379			34,305			35,613

WeItem ~~incurred SG&A expenses of $28.2 million for 2002, representing a decrease of $24.8 million (or 46.~~7~~%) compared to 2001~~. ~~Our~~MANAGEMENT’S ~~SG&A expenses~~DISCUSSION ~~for~~AND ~~2002~~ANALYSIS ~~declined~~OF ~~due~~FINANCIAL ~~principally~~CONDITION toAND aRESULTS ~~decrease~~OF in our publicity and promotion costs, the effects of currency devaluations in our countries of operation during 2002 (which decreased the dollar value of our SG&A expenses in those countries), and overall cost control measures undertaken by management. SG&A expenses at IMPSAT Argentina for 2002 totaled $7.6 million, a decrease of $11.2 million (or 59.8%) compared to 2001. Management intends to take efforts in the coming periods to further control or reduce SG&A expenses. OPERATIONS

~~Asset~~Overview Impairment Charge. During 2001, in connection with our ongoing review of our business plan, cash flow and liquidity position, and the economic environment in Latin America, we determined that our long-lived assets primarily related to our telecommunication infrastructure were likely impaired. We calculated the present value of expected cash flows of our operating subsidiaries to determine the fair value of our telecommunication infrastructure. Accordingly, our company recorded a non-cash impairment charge of $381.9 million for 2001. This total charge included approximately $245.6 million for IMPSAT Argentina, $24.7 million for IMPSAT Brazil and $28.9 million for all other countries. In addition, the total charge also included approximately $82.7 million for a write-down of the value of goodwill generated by the acquisition of certain minority interests in the operating subsidiaries. Our company recorded this impairment charge based on internal estimates of fair value and other indicators, and not independent valuations of its telecommunication infrastructure. We did not record any similar charges in 2002.

~~Gain~~We onare ~~Early~~a ~~Extinguishment~~provider of ~~Debt.~~ Weprivate ~~recorded~~telecommunications anetwork ~~gain~~and ~~of $16~~Internet services.~~4 million~~ ~~during~~We ~~2002~~offer integrated data, ~~which~~voice, ~~was~~data ~~attributable~~center toand ~~the repurchase~~Internet atsolutions, awith ~~discount~~an ofemphasis ~~indebtedness~~on broadband transmission, ~~plus~~for ~~accrued~~national ~~interest~~and multinational companies, ~~owed~~ tofinancial aninstitutions, ~~unrelated~~governmental ~~third~~agencies ~~party~~and byother ~~IMPSAT~~business customers. We have operations in Argentina, ~~through~~Colombia, Brazil, Venezuela, Ecuador, Chile, Peru and the United States and also provide our ~~subsidiary~~ ~~International~~services ~~Satellite~~in ~~Communication~~other ~~Holding~~countries ~~Ltd~~in Latin America and the Caribbean. ~~(a wholly-owned~~We ~~Liechtenstein~~provide ~~non-operating~~telecommunications, ~~subsidiary~~data ofcenter and Internet services through our ~~company~~networks, ~~whose~~which ~~principal~~consist ~~function~~of isowned tofiber ~~lease~~optic ~~telecommunications capacity~~and ~~from~~wireless ~~carriers~~links, ~~and~~teleports, ~~then~~data ~~sublease~~centers, ~~this~~earth ~~capacity~~stations atand ~~market rates~~leased tofiber ~~our~~optic ~~operating~~and ~~subsidiaries)~~satellite links.

~~Depreciation~~Reorganization and Amortization. Our depreciation and amortization expenses for 2002 totaled $82.8 million, a decrease of $40.9 million (or 33.1%) compared to depreciation and amortization for 2001. Depreciation and amortization expenses for IMPSAT Argentina for 2002, totaled $24.9 million. This represents a decrease of $30.5 million (or 55.0%) compared to IMPSAT Argentina’s depreciation and amortization expenses for 2001. The decrease in depreciation and amortization primarily is the result of the asset impairment charge of $381.9 million recorded in 2001, which reduced the dollar value of our depreciable fixed asset base.

~~Interest~~As ~~Expense~~previously disclosed in our filings with the SEC, ~~Net. Our~~we ~~net~~filed ~~interest~~a ~~expense~~voluntary petition for ~~2002~~relief under Chapter ~~totaled~~11 ~~$73.9~~of ~~million,~~the ~~consisting~~United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of ~~interest~~New ~~expense~~York on June 11, 2002 (~~including~~the “Bankruptcy Case”). We subsequently filed the Plan in the Bankruptcy Case, which Plan was ~~financing~~confirmed ~~costs~~in the Bankruptcy Case and ~~taxes)~~became ofeffective ~~$97.9~~on the Effective Date, March ~~million~~25, a2003, ~~gain~~at ~~for~~which ~~a waiver~~time ofwe ~~interest~~emerged offrom ~~$22~~bankruptcy.~~1 million~~ Pursuant to the Plan, we substantially reduced our outstanding debt and annual interest ~~income~~expense ofand increased our liquidity. At December 31, 2002, prior to the effectiveness of the Plan, our long-term debt, including current maturities and estimated liabilities subject to the Chapter 11 proceeding, aggregated approximately $1.~~9 million~~09 billion. ~~The~~Also ~~waived~~at December 31, 2002, our total indebtedness (including unpaid accrued interest ~~was~~through ~~due~~the ~~and~~petition ~~payable~~date related to ~~one~~ ofthe ~~IMPSAT~~Plan) ~~Brazil’s~~aggregated $1.04 billion

44 29

vendors.Table Ourof net interest expense for 2002 decreased $58.9 million (or 44.4%) compared to net interest expense for 2001. Contents

~~Pursuant~~and toour ~~the~~cash, ~~provisions~~cash ofequivalents ~~the~~and ~~Bankruptcy Code,~~trading asinvestments oftotaled ~~June 11,~~$55.6 ~~2002,~~million. ~~the~~As ~~date~~ of ~~our Chapter~~March ~~11 filing~~31, ~~contractual interest on our unsecured~~2003, ~~pre-petition obligations,~~upon ~~which~~the ~~were~~effectiveness ~~entirely~~of ~~constituted~~the byPlan, our ~~former~~total ~~12 1/8%~~indebtedness ~~Senior~~was ~~Guaranteed~~reduced ~~Notes~~to ~~due~~approximately ~~2003,~~$267.5 ~~13 3/4% Senior Notes due 2005~~million, and ~~12 3/8%~~our ~~Senior Notes due 2008 (collectively~~cash, ~~the~~cash ~~“Senior~~equivalents ~~Notes”) ceased to accrue at~~ and ~~after~~trading ~~such~~investments ~~date. Such post-petition contractual interest, which is excluded in our reported interest expense for 2002,~~ totaled approximately $5261.2 9 million.

~~Prior~~Upon to our emergence from bankruptcy on March 25, 2003, we ~~were also~~adopted in“fresh ~~default~~start” onreporting ~~certain~~as required by SOP 90-7. Under SOP 90-7 fresh start reporting, a new reporting entity is considered to be created and the recorded amounts of ~~accrued~~assets and ~~unpaid interest~~liabilities ~~under~~are ~~our~~adjusted ~~Original~~to ~~Vendor~~reflect ~~Financing~~their ~~Agreements~~estimated ~~and certain~~fair ~~other~~values ~~subsidiary~~at ~~indebtedness~~the date fresh start reporting is applied. ~~Such~~Among ~~defaulted~~other ~~interest components~~things, ~~which~~this ~~aggregated~~required ~~$49~~us to allocate the reorganization value of our reorganized Company to its specific tangible and identifiable assets and liabilities. As a result of the implementation of SOP 90-7 ~~million~~ ~~for~~fresh ~~2002~~start reporting, ~~are included~~the inconsolidated financial statements of our ~~net~~Company ~~interest~~from ~~expense~~and ~~for~~after ~~2002~~its asemergence ~~discussed~~from inbankruptcy are not comparable to the ~~preceding~~consolidated ~~paragraph~~financial statements in prior periods.

InRevenues accordance with GAAP, the filing of our Chapter 11 petition on June 11, 2002 resulted in the classification as of such date of our primary obligations under the Senior Notes and certain other accounts payables (which, including accrued interest, totaled $727.5 million) as “liabilities subject to compromise” on our consolidated balance sheet. (See Notes 1 and 11 to our consolidated financial statements, included elsewhere in this Report.) Also in accordance with GAAP, our contingent liabilities as guarantor under the Original Vendor Financing Agreements and certain other indebtedness of our subsidiaries, which aggregated $281.7 million as of December 31, 2002, have been classified as current portion of long-term indebtedness.

~~Net~~The ~~Loss~~majority onof ~~Foreign~~our ~~Exchange~~revenues are generated through contracts for the provision of services over a set duration of time. The customer generally pays an Weinstallation ~~recorded~~charge ~~net~~at ~~losses~~the beginning of the contract and a monthly fee based on ~~foreign exchange~~the ~~for~~quantity ~~2002~~and type of ~~$91~~equipment installed.~~9 million~~ Except in Argentina and Brazil, ~~compared~~the tofees ~~net~~stipulated ~~losses~~in the majority of our contracts with customers are denominated in U.S. dollar or U.S. dollar equivalents. Services (other than installation fees) are billed on a monthly, predetermined basis, which coincides with the rendering of ~~$41~~the services.~~2 million~~ We report our revenues net of deductions for ~~2001~~sales taxes. AsOur ~~discussed~~contracts with our customers have in ~~greater~~the ~~detail~~ past typically ranged in duration from six months to five years and have generally been three-year contracts. Under the Argentine “pesification” decree described below under “Currency Risks,” if a contract denominated in pesos is entered into after the ~~increase~~decree’s enactment, payments under that contract are not entitled to be adjusted by any price or related index. Accordingly, in ~~our~~order ~~losses~~to onmitigate ~~foreign~~our ~~exchange~~inflation ~~was~~risk, our ~~primarily~~peso-denominated ~~due~~contracts in Argentina are typically for shorter terms ranging from three to six months. The customer generally pays an installation charge at the ~~devaluation~~beginning of the ~~Argentine~~contract ~~peso~~and a monthly fee based on the quantity and type of equipment installed. Except in Argentina and Brazil, the ~~Brazilian~~fees ~~real~~stipulated ~~against~~in the majority of our contracts with customers are denominated in U.S. dollar ~~during 2002~~or U.S dollar equivalents. Services (other than installation fees) are billed on a monthly, predetermined basis, which coincide with the rendering of the services. We report our revenues net of deductions for sales taxes.

We have ~~IMPSAT~~experienced, ~~Brazil~~and ~~recorded~~anticipate ~~net~~that ~~losses~~we onwill ~~foreign exchange~~continue ~~for~~to ~~2002~~experience, ~~totaling~~downward ~~$79.5 million,~~pressure ~~compared~~on toour ~~net losses~~prices ofas ~~$25.1 million~~we ~~for~~expand ~~2001.~~our ~~This~~customer ~~net~~base, ~~loss~~confront ongrowing ~~foreign exchange~~competition ~~reflects~~for ~~the~~private ~~effect~~telecommunications ofnetwork ~~the~~services ~~devaluation~~and ofendure the ~~real against~~effects ~~the~~of ~~U.S.~~periodic ~~dollar~~economic downturns in ~~2002~~our oncountries ~~the book value~~ of ~~the dollar-denominated~~operation. ~~debt~~When ofwe ~~IMPSAT~~have ~~Brazil~~renewed ~~under~~and/or ~~the~~expanded ~~Original Vendor~~our ~~Financing~~contracts ~~Agreements.~~with Atexisting ~~December 31~~customers, ~~2002,~~ the ~~real~~ ~~traded~~prices atwe acharge ~~rate~~have ofgenerally ~~R$3~~declined.53 =Sales ~~$1.00.~~of ~~At December 31,~~additional ~~2001,~~services ~~the~~to ~~real~~our ~~traded~~existing atclients, ahowever, ~~rate~~have ofoffset this ~~R$2.41~~negative =impact $1to our revenues.~~00.~~

~~Decreases~~Although inwe ~~U.S.~~believe ~~dollar~~that ~~terms~~our ofgeographic ~~IMPSAT Argentina’s~~diversification ~~peso-denominated~~provides ~~assets~~some ~~during~~protection ~~2002~~against economic ~~caused~~downturns byin ~~the~~any ~~devaluation~~particular ~~were~~country, ~~partially~~our ~~offset~~results byof operations and business prospects depend upon the ~~effects of~~overall ~~decreases~~financial inand ~~U.S.~~economic ~~dollar~~conditions ~~terms~~in ofLatin ~~peso-denominated liabilities~~America. ~~during~~Most of the ~~same~~countries ~~period.~~in ~~IMPSAT~~which ~~Argentina~~we ~~recorded net~~operate ~~losses~~are onundergoing, ~~foreign~~or ~~exchange~~have ~~for~~experienced ~~2002~~in ~~totaling~~recent ~~$13~~years, political and economic volatility.~~9 million.~~ InThese ~~comparison~~conditions have had, ~~IMPSAT~~and ~~Argentina~~may ~~recorded~~continue ~~net losses~~to have, material adverse effects on ~~foreign~~our ~~exchange~~business, results of ~~$17.9 million~~operations ~~during~~and ~~2001~~financial condition.

~~IMPSAT~~Costs ~~Colombia~~and ~~recorded~~Expenses ~~net income on foreign exchange for 2002 totaling $3.8 million. This compares to net income on foreign exchange of $1.2 million for 2001.~~

~~Recognition~~Our ofcosts ~~Other-Than-Temporary Decline in Value. We recorded non-cash charges of $0.8 million~~ and ~~$20.7 million~~expenses ~~during~~principally ~~2002~~include: and 2001 relating to the decline in value of our shares of common stock of Claxson Interactive Group Inc., an integrated media company with operations in Latin America (the “Claxson Shares”). This loss relating to our write down of our investment in the Claxson Shares was recorded because we had determined that, in accordance with the requirements under Statement of Financial Accounting Standards No. 115, the Claxson Shares had experienced an other than temporary decline in value.

~~Reorganization Items.~~• Wedirect ~~recorded reorganization items for 2002 of $23.3 million. The majority of these~~ costs represent professional service fees that were incurred in connection with the negotiation and formation of our Plan and Chapter 11 filing. These amounts also include the remaining deferred financing costs on our Senior Notes and other subsidiary indebtedness that were expensed during 2002. ;

~~Legal~~• ~~Settlement. During~~salaries ~~2002, we recorded a legal settlement gain of $26.2 million. During November 2002, we entered into the Settlement Agreement with 360networks pursuant to which we agreed to dismiss our arbitration~~ and ~~litigation proceedings against 360networks and, in return, we became entitled to certain funds totaling $22.6 million that 360networks had advanced to us in connection with the contracts between us~~ wages;

45 • selling, general and administrative expenses; and

~~and~~• ~~360networks~~depreciation ~~(described above under “Legal Proceedings — 360networks, inc.”). These funds had been recorded by us as deferred revenues during the pendency of the litigation~~ and ~~arbitration proceedings~~amortization. ~~In addition, under the Settlement Agreement, we received from 360networks assets with a fair vale of approximately $1.6 million.~~

Our ~~Other~~direct ~~Losses~~costs include payments for leased satellite transponder, ~~Net. We~~fiber ~~recorded~~optic and other ~~losses,~~terrestrial ~~net,~~capacity. Other principal items composing direct costs are contracted services costs and allowance for doubtful accounts. Contracted services costs ~~2002~~include costs of $5maintenance and installation (and de-installation) services provided by outside contractors.9 ~~million,~~Installation asand ~~compared~~de-installation tocosts ~~other~~are ~~losses,~~the ~~net~~costs we incur when we install or remove earth stations, ofmicro-stations and other equipment $2from customer premises.~~1 million~~ ~~for~~Direct ~~2001~~costs also include licenses and other fees, node expenses and sales commissions paid to third-party sales representatives and to our salaried sales force.

~~Benefit~~30 From (Provision for) Foreign Income Taxes. For 2002, we recorded a provision for foreign income taxes of $2.3 million, compared to a provision for foreign income taxes of $27.4 million for 2001. The smaller provision for foreign income taxes in 2002 compared to 2001 was principally caused by a one-time valuation allowance made in the second quarter of 2001 totaling approximately $25.5 million, which was required to be recorded because we could not conclude that utilization of tax benefits resulting from operating losses and other temporary differences was “more likely than not” to be realized under GAAP.

NetTable Loss. For 2002, we incurred a net loss of $204.5 million, a decrease of $510.7 million (or 71.4%) compared to 2001. Contents

~~2001~~Our ~~Compared~~selling, togeneral ~~2000~~ and administrative expenses consist principally of:

~~Revenues.~~• ~~Our~~publicity ~~total net revenues for 2000~~ and ~~2001~~promotion ~~equaled $322.1 million and $326.5 million. Net revenues were composed of net revenues from services, sales of equipment and Broadband Network development revenues.~~ costs;

~~Our~~• ~~net~~fees ~~revenues~~and ~~from~~other ~~services for 2001 totaled $304.3 million, an increase of $53 million (or 21.1%) from 2000. Our net revenues from services during 2001 included net revenues from:~~ remuneration;

• ~~data~~travel and ~~value added services • Internet • telephony, including local, national and international long-distance services, and • services to carriers~~entertainment;

~~Growth~~• inrent; ~~our net revenues from services resulted primarily from data~~ and ~~other value added services, Internet and telephony services and from services to carriers.~~

• ~~With~~plant ~~respect to revenues from data and other value added~~ services, ~~revenues~~insurance ~~from our broadband services increased compared to 2000 in concert with the migration during 2001 of new~~ and existing customer traffic to the Broadband Network, the construction of which was completed in the last quarter of 2000. Data service center services also contributed to our revenues in this category. Our revenues from satellite services during 2001 declined in comparison to 2000 due to: (i) lower satellite-based services volume (as we transferred telecommunications services to our Broadband Network), (ii) downward pressure on our prices (because of competition and adverse economic conditions), and (iii) a number of customer cancellations or non-renewals. • The increase in Internet services resulted in part from the expansion during 2001 of our Internet access services in Argentina to AOL Argentina S.R.L., an affiliate of America Online, Inc., which services commenced upon AOL Argentina’s launch in August 2000. The total increase in our Internet revenues was partially offset by lower revenues caused by renegotiated or terminated contracts with Internet service providers in Argentina and Brazil. • Our telephony services revenues grew during 2001 following the introduction of switched voice service in Argentina during the fourth quarter of 2000. In particular, during the second half of 2001, switched voice services to corporate ~~customers~~telecommunication ~~in Argentina~~ and ~~international~~energy ~~call terminations provided to end-users in Peru and the United States were principal sources of this revenue growth~~expenses.

46 Currency Risks

•Except ~~Our~~in ~~revenues~~Argentina ~~from~~and ~~services~~Brazil, tothe ~~carriers~~majority ~~increased~~of our contracts with customers provide for payment in ~~2001~~U.S. ~~compared~~dollars or for payment in local currency linked to ~~2000~~the asexchange arate ~~result~~between ofthe ~~our~~local ~~completion~~currency and the U.S. dollar at the time of invoicing. Accordingly, inflationary pressures on local economies in the ~~Broadband~~other ~~Network~~countries in which we operate did not have a material effect on our revenues during 2006. Nevertheless, given that the ~~fourth~~exchange ~~quarter~~rate is generally set at the date of ~~2000,~~invoicing ~~which~~and ~~enabled~~that uswe in some cases experience substantial delays in collecting receivables, we are exposed to ~~more~~exchange ~~fully~~rate ~~implement~~risk, ~~this~~even ~~service~~in ~~line~~countries other than Argentina and Brazil.

~~Overall~~Under applicable law, ~~growth~~our contracts with customers in Brazil cannot, and, under certain circumstances, our ~~revenues~~contracts ~~from~~with ~~services~~customers ~~for 2001~~in asArgentina ~~compared~~may not, be linked to the ~~prior~~exchange ~~year~~rate ~~reflected~~between athe ~~net~~local ~~increase~~currency in and the ~~number~~U.S. ofdollar. ~~customers~~Accordingly, operations in Argentina and ~~scope~~Brazil increase our exposure to exchange rate risks. Any devaluation of ~~services~~the weArgentine ~~provided, offset~~peso inor ~~part~~the byBrazilian ~~decreasing~~real ~~prices~~against the U.S. Wedollar ~~had~~will ~~2,877~~generally ~~customers~~affect atour consolidated financial statements by generating foreign exchange gains or losses on ~~December 31~~dollar-denominated monetary liabilities and assets and will generally result in a decrease, ~~2001~~in U.S. dollar terms, ~~compared~~in toour 2revenues,~~656~~ ~~customers~~costs atand expenses. Because the majority of our debt service payments and a significant portion of our costs ~~December 31,~~(including ~~2000~~capital equipment purchases and payments for certain leased telecommunications capacity) remain denominated and payable in U.S. dollars, our financial condition and results of operations are dependent upon our subsidiaries’ (including IMPSAT Argentina and IMPSAT Brazil) ability to generate sufficient local currency (in U.S. dollar terms) to pay their costs and expenses and to satisfy our debt service requirements.

~~During~~In ~~2001~~U.S. dollar terms, weour ~~gained~~revenues in Argentina and Brazil, which are denominated in local currencies and represent a ~~net~~significant ~~total~~proportion of ~~221~~our ~~customers~~consolidated net revenues, angenerally increase ofwhen ~~8.3%~~the ~~compared~~currencies toin ~~the~~those ~~prior~~countries ~~year~~appreciate against the U.S. ~~Due to~~dollar, ~~adverse~~and ~~economic~~decrease ~~conditions~~when inthose ~~Argentina,~~currencies wedepreciate. ~~lost~~The afollowing ~~net~~table ~~total of~~shows 46U.S. ~~customers~~dollar inexchange ~~that~~rates ~~country~~for ~~during~~the ~~2001.~~currencies of these countries at the dates indicated:

In addition to net revenues from services, our total net revenues for 2001 included revenues from sales of equipment and Broadband Network development revenues. Revenues from equipment sales for 2001 totaled $15.0 million, a $1.9 million (or 14.3%) increase over 2000. Broadband Network development revenues for 2001 totaled $7.2 million compared to $57.7 million of such revenues for 2000.


Currency	December 31, 2004	December 31, 2005	December 31, 2006
Currency	(exchange rate per U.S.$1.00)
Argentina peso	2.95	3.03	3.07
Brazil real	2.65	2.34	2.14

~~Our~~In ~~Broadband~~addition, ~~Network~~as ~~development~~a ~~revenues~~result ~~for 2000~~of ~~related~~foreign tocurrency ~~our~~exchange ~~construction,~~and ontransfer ~~behalf~~controls ofestablished ~~affiliates~~by ofthe ~~Global~~Venezuelan ~~Crossing~~government ~~Ltd.~~in February 2003, ofour ~~certain~~contracts ~~terrestrial~~with ~~segments~~customers ~~connecting that~~in ~~company’s~~Venezuela ~~fiber~~are ~~optic~~currently ~~cable~~being ~~system~~paid in local currency at the fixed exchange rate established by the Venezuelan government between ~~South America~~the ~~with~~local ~~North~~currency ~~America.~~and ~~Our~~the ~~Broadband~~U.S. ~~Network~~dollar. ~~development~~As the ~~revenues~~exchange ~~for~~control ~~2001~~regulations ~~related~~do not permit us to exchange our ~~construction~~cash ofand ~~additional backhaul~~cash ~~segments~~equivalents ~~for~~in ~~Global~~local ~~Crossing’s~~currency ~~fiber~~into ~~optic~~U.S. ~~cable system~~dollars ~~and~~without ~~for~~specific agovernmental ~~similar~~authorizations, ~~fiber~~the ~~optic~~Venezuelan ~~cable~~exchange ~~system~~control ~~that~~regulations ~~was~~have ~~being~~adversely affected our ~~developed~~exchange rate risks for all dollar-denominated liabilities owing by ~~360networks,~~our ~~Inc.~~Venezuelan ~~These~~operating ~~revenues~~subsidiary ~~were~~and ~~predominantly recorded~~our ~~during~~ability ~~the~~to ~~first~~receive ~~quarter~~dividends ofor ~~2001~~other ~~upon~~distributions ~~our~~from ~~delivery~~that of subsidiary. We cannot predict the ~~constructed~~duration ~~segments~~or toother ~~Global~~adverse ~~Crossing~~effects that Venezuelan exchange controls may have on our operating results and ~~360networks~~financial condition.

~~Our total net revenues at IMPSAT~~ Argentina for 2001 totaled $130.2 million, a decrease of $30.3 million (or 18.8%) compared to 2000. This decrease in revenues related principally to our recognition in the third quarter of 2000 of $32.3 million in Broadband Network development revenues upon delivery of telecommunications infrastructure to Global Crossing. Excluding Broadband Network development revenues and other equipment sales revenues, IMPSAT Argentina’s net revenues from services for 2001 totaled $122.3 million, an increase of $6.3 million (or 5.4%) compared to 2000.

~~Brazil,~~In ~~where~~early weJanuary ~~commenced operations in 1998~~2002, ~~experienced~~ athe ~~significant~~Argentine ~~devaluation~~government ofabandoned ~~its currency against~~ the ~~U.S.~~decade-old fixed peso-dollar ~~during~~exchange ~~2001.~~rate Asand ofpermitted ~~December 31, 2001,~~ the ~~real~~ ~~had~~peso ~~devalued~~to float freely against the U.S. dollar ~~by 18~~.~~7% compared~~ toThe ~~the~~peso ~~exchange~~free ~~rate~~market asopened ofon ~~December~~January 3111, ~~2000. Despite~~2002 ~~the~~and ~~devaluation~~traded ofat ~~the~~1.65 ~~Brazilian~~pesos ~~real~~to ~~against~~ the U.S. dollar, ~~IMPSAT~~and ~~Brazil’s~~traded ~~revenues~~as ~~for~~low ~~2001~~as ~~totaled $48~~3.~~0 million,~~87 anpesos ~~increase~~to ofthe ~~$10~~U.~~4 million over 2000~~S. ~~Revenues~~ ~~from~~dollar ~~services~~on ~~for 2001 were $42.8~~June ~~million~~26, ~~a 53~~2002.~~4% increase~~ ~~from~~At ~~2000.~~both ~~In local currency terms~~December 31, ~~IMPSAT~~ ~~Brazil’s~~2003 ~~2001~~and ~~revenues~~2004, ~~from~~the ~~services~~exchange ~~increased~~rate bywas 952.3%95 ~~as compared~~pesos to ~~2000~~the U.S. Dollar. At December 31, ~~2000~~2005, the ~~real traded~~exchange ~~at a~~ rate ofwas ~~R$1~~3.9503 =pesos $1to the U.00S. Dollar ~~The~~and ~~real depreciated~~December 31, ~~during 2001~~2006, ~~reaching~~the aexchange ~~low~~rate ofwas ~~R$2~~3.7807 =pesos ~~$1.00 during~~to the ~~fourth~~U.S. Dollar. ~~quarter~~Currently, ofIMPSAT ~~that~~Argentina’s ~~year,~~customer contracts and ~~closing~~operating atcash ~~R$2.32~~inflows ~~= $1.00~~are atnow ~~December 31,~~predominantly ~~2001~~denominated in pesos.

In31 ~~Colombia, after a period of declining revenues throughout 2000 due to the general deterioration in the Colombian economy, we recorded an increase in revenues during 2001 of 14.2% over 2000.~~

RevenuesTable at IMPSAT Venezuela equaled $32.6 million for 2001, an increase of $4.5 million (or 16.1%) over 2000. IMPSAT Ecuador’s revenues grew during 2001 to a total of $15.8 million, an increase of $1.2 million (or 8.2%) over 2000. In 2001, our operations in the United States also showed improved results. IMPSAT USA’s revenues totaled $37.2 million in 2001, an increase of $9.5 million (or 34.2%) as compared to 2000. This was primarily the result of increased network services and Internet backbone access services to multinational corporations with operations in Latin America. Contents

~~Direct~~Brazil ~~Costs. Our direct costs for 2001 totaled $176.9 million, an increase of $4.8 million (or 2.8%), compared to 2000.~~

OfAt ~~our~~December 31, ~~total~~2005, ~~direct~~the ~~costs~~real ~~for~~traded ~~2001, $86.7 million~~at ~~related~~a torate ~~the~~of ~~operations~~R$2.34 of= ~~IMPSAT Argentina~~$1.00, ~~compared~~and it appreciated to R$~~86.~~2 ~~million~~.14 at= ~~IMPSAT~~$1.00 ~~Argentina for~~at ~~2000~~December 31, 2006. ~~Direct~~The ~~costs~~daily ~~for~~average ~~IMPSAT~~exchange ~~Brazil~~rate ~~totaled $32.3 million~~ for ~~2001,~~the ~~compared~~real toduring 2006 was R$302.~~7 million~~17= ~~for 2000~~$1.00, ~~Direct~~as ~~costs~~compared ~~of our subsidiaries are described prior~~ to ~~the~~ ~~elimination~~R$2.41 of= ~~intercompany~~$1.00 ~~transactions~~during 2005.

47 Venezuela

~~(1)~~In ~~Contracted~~February ~~Services.~~2003, ~~Contracted~~the ~~services~~Venezuelan ~~costs~~government ~~include~~imposed ~~costs~~foreign ofexchange ~~maintenance~~ and ~~installation~~price ~~(and~~controls ~~de-installation)~~in ~~services~~response ~~provided~~to byadverse ~~outside~~economic ~~contractors.~~conditions ~~During~~resulting ~~2001,~~from ~~our~~a nation-wide ~~contracted~~strike ~~services~~that ~~costs~~commenced ~~totaled~~in ~~$40.6~~December ~~million~~2002, ansetting ~~increase~~a rate of ~~$11~~Bs.1,600 ~~million~~= ~~(or 37~~U.~~4%) compared to 2000~~S. ~~Of this amount, maintenance costs for our telecommunications network infrastructure, including the Broadband Network, totaled~~ $271.~~4 million for 2001 compared to $17~~00.0 ~~million~~The ~~during~~exchange ~~2000.~~controls ~~Our~~make ~~maintenance~~it ~~costs~~difficult ~~increased~~for ~~because~~our wecustomers ~~had~~in ~~more~~that ~~infrastructure,~~country ~~including~~to obtain the ~~Broadband Network~~U. ~~Installation costs totaled $13~~S.2 ~~million~~dollars ~~for~~needed ~~2001 compared~~ to ~~$12.6~~make ~~million~~payments ~~during~~due ~~2000.~~to ~~(2)~~us ~~Other~~in ~~Direct Costs~~U.S. ~~Other~~dollars ~~direct~~on ~~costs~~a timely ~~principally~~basis ~~include licenses~~ and ~~other~~also ~~fees;~~severely ~~sales~~limit ~~commissions paid to third-party sales representatives; and~~ our ~~provision~~ability ~~for doubtful accounts. Sales commissions paid~~ to ~~third-party~~convert ~~sales~~local ~~representatives~~currency ~~for~~into ~~2001 totaled $8~~U.~~2 million compared to $8~~S.1 ~~million~~dollars inand ~~2000.~~transfer ~~The~~funds ~~majority~~out of ~~these~~Venezuela ~~commissions~~in ~~related to customers of IMPSAT Argentina. We recorded~~ a ~~provision~~timely ~~for~~manner ~~doubtful~~without ~~accounts~~substantial ~~of $16~~cost.8 ~~million for 2001, compared to a provision of $4.8 million for the previous year.~~ At December 31, ~~2001~~2004, ~~approximately 32.0% of our gross trade accounts receivable were past due more than six months compared to 26.4% at~~ the ~~end~~exchange ofrate ~~2000. At December 31, 2001, our allowance~~ for ~~doubtful~~the ~~accounts~~bolivar ~~covered~~was ~~approximately 90.4% of our gross trade accounts receivable past due more than six months. The average days in quarterly gross trade accounts receivable increased from 71 days~~ set at ~~December~~a ~~31,~~rate ~~2000 to 89 days at December 31, 2001. IMPSAT Argentina’s allowance for doubtful accounts at year-end 2001 covered approximately 86.4%~~ of ~~its gross trade accounts receivable past due more than six months~~Bs. ~~(3) Leased Capacity. Our leased capacity costs for 2001 totaled $87.~~1 ~~million~~,920 ~~which~~= ~~represented an increase of~~ $121.900, ~~million (or 17.4%) compared to 2000. This increase was primarily due to an increase in costs for interconnection~~ and ~~telephony~~on ~~termination costs and frequency rights~~March 30, ~~as further discussed below. Our leased capacity costs for satellite capacity for 2001 totaled $39.1 million~~2005, a decrease of $0.2 million (or 0.5%) compared to 2000. Leased satellite capacity costs declined in Argentina during 2001 as compared to 2000, in part due to our transitioning customers from satellite-based solutions onto the ~~Broadband~~Venezuelan ~~Network.~~government ~~Our~~devalued ~~satellite capacity costs increased principally in Venezuela and~~ the ~~United~~bolivar ~~States, where we increased our satellite capacity~~ to ~~satisfy~~a ~~customer~~rate ~~needs. We had approximately 967 MHz~~ of ~~leased~~Bs. ~~satellite capacity at December 31~~2,150 ~~2001~~= ~~and~~ $1~~,203 MHz at December 31, 2000~~. ~~Our costs for dedicated leased capacity on third-party fiber optic networks totaled $35.6 million for 2001~~00, anwhere ~~increase~~it ofremains ~~$3.3 million (or 10.3%) compared~~ to ~~2000~~date. ~~These~~We ~~costs~~cannot ~~were~~predict ~~incurred principally in Argentina, Brazil and~~ the ~~United~~extent ~~States. Prior~~ to ~~the~~which ~~implementation of our Broadband Network,~~ we ~~had~~may ~~incurred~~be ~~these~~affected ~~higher~~by ~~costs~~future ofchanges ~~leased fiber optic capacity~~ in exchange ~~Argentina~~rates and ~~Brazil~~exchange ~~due~~controls ~~to the continued demand by our customers~~ in ~~those countries for greater bandwidth and, in the United States, due to the expansion of our Internet service offerings where we provide a link between Latin America and the U~~Venezuela.S. ~~Internet~~Future ~~backbone.~~devaluations ~~In connection with certain services that we offered during 2001 as a result~~ of the ~~implementation~~Venezuelan ofbolivar ~~our Broadband Network~~ and/or the ~~effectiveness~~implementation of ~~our~~more ~~license~~stringent inexchange ~~Argentina~~control torestrictions provide domestic and international long distance services, we incurred costs for interconnection and telephony termination costs and frequency rights. These costs totaled $12.4 million during 2001 (which includes $8.0 million for interconnection and telephony termination costs and $4.4 million for frequency rights) as compared to $2.7 million for 2000 (entirely composed of costs for frequency rights). Our interconnection and telephony termination costs in ~~Argentina~~that ~~totaled~~country ~~$6.7~~could ~~million~~have during 2001 (which includes $4.3 million for interconnection and telephony termination costs and $2.4 million for frequency rights) as compared to $1.2 million for 2000 (entirely composed of costs for frequency rights). Our interconnection and telephony termination costs increased during 2001 primarily as a ~~result~~material ofadverse ~~the~~effect ~~completion~~on of our ~~Broadband~~financial condition ~~Network in Argentina~~ and ~~the~~results ~~effectiveness~~ of ~~our~~operations ~~license~~ in ~~Argentina to offer telephony services~~Venezuela. ~~These events enabled us to provide the switched-voice domestic and international long distance telephony services that generated these costs in Argentina during 2001.~~

48 Termination of Mexican Operations

~~(4)~~During ~~Costs~~the first quarter of ~~Equipment~~2003, ~~Sold~~we ~~and~~determined ~~Broadband~~to ~~Network~~close ~~Development.~~our Inoperations ~~2001~~in Mexico, which we ~~incurred~~initially ~~costs~~established ofin ~~equipment~~1994. ~~sold~~The sale of ~~$10~~our operations closed during 2003.5 ~~million~~Accordingly, ~~compared~~our results for the year ended December 31, 2003 include revenues and expenses related to ~~costs~~the ofoperations ~~equipment~~and ~~sold~~the sale of ~~$12.3~~our ~~million~~Mexican operations, and the results for ~~2000.~~the ~~During~~years ~~2001~~ended December 31, we2004 ~~incurred~~and thereafter ~~Broadband~~do ~~Network~~not ~~development~~include ~~costs~~such ofrevenues $3or expenses.3 ~~million,~~Our ~~compared~~operations toin ~~$34.7~~Mexico ~~million~~were innot ~~2000~~significant.

~~Salaries~~Off-Balance ~~and~~Sheet ~~Wages. Salaries~~Arrangements ~~and wages for 2001 totaled $82.1 million, an increase of $13.2 million (or 19.1%) compared to 2000.~~

AsAn aoff-balance ~~result~~sheet ofarrangement ~~the~~is ~~adverse~~any ~~economic~~transaction, ~~conditions~~agreement or other contractual arrangement involving an unconsolidated entity under which a company ~~experienced~~has in(1) made ~~Argentina~~guarantees, ~~Brazil~~(2) a ~~and~~retained ~~elsewhere~~or ina ~~Latin~~contingent ~~America and~~interest asin ~~part~~transferred ofassets, ~~cost-control~~(3) an ~~measures~~obligation ~~implemented~~under byderivative ~~management following~~instruments ~~the~~classified ~~end~~as ofequity, ~~the~~or ~~first~~(4) any ~~quarter~~obligation arising out of ~~2001,~~a ~~our~~material ~~aggregate~~variable interest in an ~~number~~unconsolidated ofentity ~~employees~~that ~~fell~~provides ~~from~~financing, 1liquidity,~~711~~ atmarket ~~December 31,~~risk ~~2000~~or credit risk support to ~~1,370~~ atthe ~~December 31~~company, ~~2001.~~or Inthat ~~connection~~engages ~~with~~in ~~this reduction~~leasing, ~~our~~hedging ~~salaries~~or research and ~~wages~~development ~~for~~arrangements ~~2001~~with ~~included~~the ~~one-time severance~~company. ~~payments~~We ~~totaling~~have ~~approximately~~no ~~$4.4~~arrangements ~~million,~~ of ~~which~~the types ~~severance~~described ~~payments~~in ~~totaled~~any ~~$2.5 million~~of atthese ~~IMPSAT~~four ~~Argentina and~~categories ~~$0.4 million~~that atwe ~~IMPSAT~~believe ~~Brazil~~may have a material current or future effect on our financial condition, liquidity or results of operations.

~~IMPSAT~~Critical ~~Argentina~~Accounting ~~incurred~~Policies salaries and wages for 2001 totaling $35.2 million, an increase of $5.5 million (or 18.5%) over 2000. IMPSAT Argentina had 446 employees as of December 31, 2001 as compared to 587 employees as of December 31, 2000.

~~IMPSAT~~In ~~Brazil~~the ~~incurred~~ordinary ~~salaries~~course ~~and~~of ~~wages~~business, ~~for~~the Company makes a number of ~~2001~~estimates and assumptions relating to the reporting of ~~$16.0 million,~~results anof ~~increase~~operations and financial position in the preparation of ~~$3.0 million~~its ~~(or 23.1%)~~financial ~~compared~~statements toin ~~2000~~conformity with GAAP. ~~IMPSAT~~We ~~Brazil~~use ~~decreased~~our ~~its~~best ~~number~~judgment based on our knowledge of existing facts and ~~employees~~circumstances toand ~~316~~actions ~~persons~~that atwe ~~December 31,~~may ~~2001~~undertake in the future, ~~compared~~as ~~to 438~~well ~~persons~~as atthe ~~December 31,~~advice ~~2000~~of external experts in determining the estimates that affect our consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our most critical accounting policies are:

~~Selling,~~Revenue ~~General~~Recognition and Administrative Expenses. We incurred SG&A expenses of $53.0 million for 2001. These SG&A expenses represented a decrease of $5.5 million (or 9.4%) compared to 2000. Our SG&A expenses for 2001 declined due, in part, to a decrease in our publicity and promotion costs and to the positive effects of the devaluation of the real against the U.S. dollar, which decreased the dollar value of our SG&A expenses incurred in Brazil. SG&A expenses at IMPSAT Argentina for 2001 totaled $18.8 million, a decrease of $7.7 million (or 29.1%) compared to 2000.

~~Asset~~We ~~Impairment~~record ~~Charge~~revenues from data, value-added, telephony, and Internet services monthly as the services are provided. As ~~discussed~~Equipment ~~above~~sales ~~under~~are “—recorded upon ~~2002~~delivery ~~Compared~~ to ~~2001 —~~and ~~Asset~~acceptance ~~Impairment~~by ~~Charge~~the customer. Our revenues from installation fees are less than our direct expenses for installations. Therefore,~~” during~~ ~~2001~~installation wefees ~~recorded~~generally anare ~~asset~~recognized ~~impairment~~upon ~~charge~~(i) the ~~based~~completion ~~on internal~~of ~~estimates~~the installation of ~~fair~~customer premise ~~value~~equipment, and ~~other~~(ii) the ~~indicators~~invoicing of such fees to the customer. If the installation charges are greater than the direct expenses, the amounts are deferred and ~~not independent~~recognized ~~valuations~~over ofthe ~~our~~estimated ~~telecommunication~~life ~~infrastructure~~of the customer.

~~Depreciation~~We ~~and~~have ~~Amortization. Our~~entered ~~depreciation~~into, ~~and~~or ~~amortization expenses~~may ~~for~~enter ~~2001~~into ~~totaled~~in ~~$123.7 million~~the future, anagreements ~~increase~~with ~~of $39.2 million~~carriers ~~(or~~granting ~~46.4%)~~indefeasible ~~compared~~rights toof ~~our~~use ~~depreciation~~(“IRUs”) and ~~amortization~~ ~~for~~access ~~2000.~~to portions ~~The~~of ~~increase~~our inBroadband ~~our~~Network ~~depreciation~~capacity and ~~amortization~~ ~~expense~~infrastructure. ~~reflected~~Pursuant ~~the~~to ~~continued~~some ~~growth~~of inthese ~~our~~agreements, ~~asset base.~~we ~~Depreciation~~received ~~and~~fixed ~~amortization~~advance payments for ~~IMPSAT~~the ~~Argentina~~IRUs, ~~for 2001~~which ~~totaled~~would ~~$55.4 million.~~be ~~This~~recognized ~~represented~~as anrevenue ~~increase~~over the life of ~~$17.2 million~~ ~~(or~~the 45IRU.~~1%)~~ ~~compared~~Amounts toreceived ~~IMPSAT Argentina’s~~in ~~depreciation~~advance ~~and~~would ~~amortization~~be recorded ~~for~~as ~~2000~~deferred revenue.

~~Interest~~We ~~Expense,~~record ~~Net. Our~~our revenues net ~~interest~~of ~~expense~~deductions for ~~2001 totaled~~sales ~~$132~~taxes.8 ~~million,~~These ~~consisting~~taxes ofare ~~interest~~assessed ~~expense (including~~by ~~financing~~the ~~costs~~governmental taxing ~~and~~authorities ~~taxes)~~in ofa ~~$143.5 million~~number ~~and interest income~~ of ~~$10.7 million.~~countries ~~Our~~in ~~net~~which ~~interest~~we ~~expense for~~operate ~~2001~~based ~~increased~~on ~~$47.3 million~~a ~~(or~~percentage ~~55.4%)~~of ~~over~~gross ~~net interest~~revenues ~~expense~~and ~~for~~totaled ~~2000~~approximately $10.8 ~~At December 31~~million, ~~2001,~~$14.1 wemillion ~~had cash, cash equivalents~~ and ~~other short-term trading investments of~~ $6418.9 2 million ~~compared~~for tothe ~~$308.6 million~~years at ended December 31, ~~2000.~~2004, ~~Our~~2005 ~~interest income has declined as we utilized our cash~~ and ~~trading~~2006, ~~investments in connection with capital expenditures and general corporate purposes~~respectively.

~~Our~~32 total indebtedness as of December 31, 2001 was $990.6 million as compared to $968.2 million as of December 31, 2000. As of December 31, 2001, total outstanding indebtedness at IMPSAT Argentina totaled $168.0 million ($165.6 million after eliminating intercompany items), compared to $159.4 million ($151.9 million after eliminating intercompany items) as of December 31, 2000. For 2001, the average interest rate on our indebtedness was 12.0%, compared to an average interest rate of 12.5% for 2000.

NetTable Loss on Foreign Exchange. We recorded net losses on foreign exchange for 2001 of $41.2 million, compared to net losses of $10.6 million for 2000. As discussed in greater detail below, the increase in our losses on foreign exchange was primarily due to the devaluation of the Argentine peso and the Brazilian real against the U.S. dollar. IMPSAT Argentina recorded net losses on foreign exchange for 2001 totaling Contents

49 Non-Monetary Transactions

~~$17.9 million,~~We ~~compared~~may toexchange acapacity ~~net~~on ~~gain~~our ~~of $0.2 million~~Broadband ~~for~~Network ~~2000. The explanation~~ for ~~this~~capacity ~~increase in IMPSAT Argentina’s net losses~~ from ~~foreign~~other ~~exchange~~carriers isthrough ~~as follows. In response to~~ the ~~devaluation~~exchange of ~~the~~IRUs. ~~peso following~~We ~~the~~account ~~Argentine~~for ~~government’s~~these ~~adoption~~transactions ~~of the floating exchange rate system~~ in ~~January~~accordance ~~2002,~~with ~~and~~Financial ~~the depreciation~~Accounting ofStandards ~~our accounts receivable (in U.S. dollar terms)~~Board ~~as a result of the~~ (“~~pesification~~FASB”) ~~decree,~~Statement ~~we remeasured IMPSAT Argentina’s financial position and results~~ of ~~operations~~Financial ~~for~~Accounting ~~2001~~Standards ~~using the first subsequent free-floating rate for the settlement of transactions~~ (~~which was 1.65 pesos = $1.00~~“SFAS”). ~~This resulted in a remeasurement loss of approximately $16~~No.5 ~~million~~153, ~~which~~Exchanges ~~was~~of ~~included~~Nonmonetary ~~in IMPSAT~~Assets, ~~Argentina’s~~an ~~(and~~amendment ~~our~~of ~~company’s~~APB ~~consolidated) net~~Opinion ~~loss on foreign exchange for 2001~~No. 29 ~~IMPSAT~~(“SFAS ~~Brazil recorded net losses on foreign exchange for 2001 totaling $25~~No.1 ~~million,~~153”). ~~compared~~The toamendments amade ~~net~~by ~~losses~~SFAS ~~of $10~~No.6 ~~million~~153 are ~~for~~based ~~2000. The net losses~~ on ~~foreign exchange reflect~~ the ~~effect~~principle ofthat ~~the~~exchanges ~~devaluation~~ of ~~the~~nonmonetary ~~real~~assets ~~against the~~should ~~U.S.~~be ~~dollar~~measured based on the ~~book~~fair value of ~~our~~the ~~monetary~~ assets ~~and liabilities~~exchanged. inThe ~~Brazil,~~amendment ~~including~~also eliminates the ~~primarily dollar-denominated~~narrow ~~debt~~exception offor ~~IMPSAT~~nonmonetary ~~Brazil~~exchanges ~~under~~of ~~the~~similar ~~Nortel Networks~~productive ~~vendor~~assets ~~financing agreement. At December 31, 2000,~~and ~~the~~replaces ~~realtraded~~it atwith a ~~rate~~broader ofexception ~~R$1.95~~for =exchanges ~~$1.00.~~of ~~At December 31,~~nonmonetary ~~2001,~~assets ~~the~~that ~~real~~do ~~traded~~not athave acommercial ~~rate of R$2~~substance.32 ~~= $1.00.~~

~~Recognition of Other-Than-Temporary Decline in Value. As discussed above under “— 2002 Compared to 2001 — Recognition of Other-Than-Temporary Decline in Value~~Property,” wePlant ~~recorded~~and ~~a loss~~Equipment of $20.6 million during 2001 relating to the decline in value of our Claxson Shares. Our Claxson Shares, which had a market value of $0.9 million at December 31, 2001, were initially acquired in the fourth quarter of 1999 for a cost of $21.5 million.

~~Benefit~~Our ~~From~~business ~~(Provision~~is ~~for)~~capital ~~Foreign Income Taxes~~intensive. ~~For~~We ~~2001,~~record weat ~~recorded~~cost aour telecommunications network assets and other improvements that, in ~~provision~~management’s ~~for~~opinion, ~~foreign~~extend ~~income~~the ~~taxes~~useful lives of ~~$27.4 million~~the underlying assets, ~~compared~~ toand adepreciate ~~benefit~~such ~~for~~assets ~~foreign~~and ~~income~~improvements ~~taxes~~over ~~of $4.5 million~~their ~~for~~estimated ~~2000~~useful lives. ~~The~~Our ~~provision~~telecommunications ~~for~~network ~~foreign~~is ~~income~~highly complex and, due to innovation and enhancements, ~~taxes~~certain incomponents ~~2001~~of ~~was~~the ~~principally~~network ~~caused~~may bylose atheir ~~valuation~~utility ~~allowance made~~faster inthan anticipated. We periodically reassess the ~~second~~economic ~~quarter~~lives of ~~2001~~these ~~totaling~~components ~~approximately $25.5 million.~~and ~~This~~make ~~valuation~~adjustments ~~allowance~~to ~~was~~their ~~required~~expected tolives ~~be recorded~~after ~~because~~considering ithistorical ~~was~~experience ~~not~~and ~~clear~~capacity requirements, ~~that~~consulting ~~utilization~~with ofthe ~~tax benefits~~vendors, ~~resulting~~and ~~from~~assessing ~~operating~~new ~~losses~~product and market demands and other ~~temporary differences~~factors. ~~are~~When ~~“more~~these ~~likely~~factors ~~than~~indicate ~~not”~~that tonetwork components may not be ~~realized~~useful for as long as anticipated, we depreciate their remaining book values asover ~~stipulated~~their byresidual ~~Statement~~useful lives. The timing and deployment of ~~Financial~~new ~~Accounting~~technologies ~~Standards~~could ~~109.~~affect the estimated remaining useful lives of our telecommunications network assets, which could have a significant impact on our results of operations in the future.

~~Net~~Impairment ~~Loss Attributable to Common Stockholders. For 2001, we incurred a net loss attributable to common stockholders~~ of $715.3 million, an increase of $561.1 million (or 364.0%) compared to 2000. The increase in our net loss attributable to common stockholders was principally due to our recording in the third and fourth quarters of 2001 of the nonLong-~~cash~~Lived ~~impairment~~Assets ~~charges discussed above.~~

We periodically review the carrying amounts of our property, plant, and equipment to determine whether current events or circumstances warrant adjustments to the carrying amounts. As part of this review, we analyze the projected ~~Liquidity~~undiscounted cash flows associated with our property, plant, and ~~Capital~~equipment. ~~Resources~~Considerable management judgment is required in establishing the assumptions necessary to complete this analysis. Although we believe these estimates to be reasonable, they could vary significantly from actual results and our estimates could change based on market conditions. Variances in results or estimates could cause changes to the carrying value of our assets including, but not limited to, recording additional impairment charges for some of these assets in future periods.

AtBasis December 31, 2002, we had total cash, cash equivalents and trading investments of $55.6 million (as compared to $64.9 million as of December 31, 2001). At December 31, 2002, our total indebtedness was $1.04 billion (as compared to $990.6 million as of December 31, 2001), of which $281.7 million represented current portion of long-term debt, $27.6 million represented long-term debt, and $727.5 million represented principal and accrued interest of indebtedness subject to compromise. Following our emergence from bankruptcy and before the end of the second quarter of 2003, in accordance with the Plan, we expect to pay approximately $6.1 million (including amounts paid to date) in satisfaction of all allowed general unsecured convenience class claims as well as certain fees and expenses relating to our Chapter 11 proceedings and reorganization. As a result of the financial reorganization of our Senior Notes and the Original Vendor Financing Agreements that accompanied our emergence from Chapter 11 protection, our capital requirements for ~~2003~~Translation are projected to be less than our available capital resources. Our capital expenditures budget for 2003 contemplates that we will need approximately $21.0 million (including amounts spent to date) through the end of 2003 for capital expenditures.

AsWe ~~set~~maintain ~~forth~~our consolidated accounts in ~~our~~U.S. ~~consolidated~~dollars. ~~statement~~The accounts of ~~cash~~ ~~flows,~~ our ~~operating~~subsidiaries ~~activities~~are ~~provided~~maintained ~~$26.4 million~~ in ~~net~~the ~~cash~~currencies ~~flow~~of ~~for~~the ~~2002,~~respective ~~compared to $71~~countries.1 ~~million~~A subsidiary’s ~~used~~functional ~~by operating~~currency ~~activities~~is ~~during~~defined ~~2001.~~as Inthe ~~addition~~currency toof the ~~decrease~~primary environment in ~~our~~ ~~operating~~which ~~losses~~a ~~discussed~~subsidiary ~~above,~~operates ~~the~~and ~~increase~~is indetermined ~~cash~~based ~~flow from~~on ~~operating~~management’s ~~activities~~judgment. inWhen ~~2002~~a ~~was~~subsidiary’s ~~primarily~~accounts ~~due~~are tonot ~~an increase~~maintained in ~~accrued~~the ~~and~~functional currency, ~~other~~the ~~liabilities~~financial ofstatements ~~$67.9 million (as~~must ~~compared~~be toremeasured aninto ~~increase~~the offunctional ~~$25~~currency.~~4 million~~ inThis ~~2001). Also,~~involves ~~during~~remeasuring ~~2002,~~monetary aassets ~~decrease~~and inliabilities ~~our~~using ~~trade~~current ~~accounts~~exchange ~~receivable of~~rates ~~$30.7 million~~and ~~(compared~~non-monetary toassets aand ~~decrease~~liabilities ~~of $8~~using historical exchange rates.~~2 million~~ ~~for~~The adjustments ~~2001)~~generated ~~and~~by anre-measurement ~~increase~~are included in ~~trade~~our ~~accounts payable~~consolidated statements of $9operations.~~2 million~~

50When the local currency of a subsidiary is determined to be the functional currency, the statements are translated into U.S. dollars using the current exchange rate method. The adjustments generated by translation using the current exchange rate method are accumulated in an equity account entitled “Accumulated other comprehensive income (loss)” within our consolidated balance sheets.

~~(as~~Tax ~~compared to a decrease of $26.5 million in 2001), contributed to the increase in net cash flow from operating activities during the period. These changes to our accounts receivable~~ and ~~payable~~Legal ~~during~~Contingencies 2002 reflect actual operating cash flows, as well as changes in the value of those accounts (in U.S. dollar terms) caused by the devaluation of the Brazilian real and the Argentine peso during that period.

~~For~~We ~~2002~~are involved in foreign tax and legal proceedings, weclaims ~~used~~and ~~$11.6 million~~litigation arising in ~~net~~the ~~cash flow~~ordinary ~~from~~course ~~investing~~of ~~activities,~~business. ~~compared~~We toperiodically ~~$51.9 million~~assess our ofliabilities ~~net~~and ~~cash~~contingencies ~~flow~~in ~~generated~~connection bywith ~~investing~~these ~~activities~~matters ~~during~~based ~~2002~~upon the latest information available. ~~The~~ ~~decreased~~For ~~net~~those ~~cash~~matters ~~flow~~where ~~from~~it ~~investing~~is ~~activities~~probable ~~was principally~~that ~~due~~we tohave incurred a ~~decrease~~loss inand ~~our~~the ~~trading~~loss ~~investments~~or range of ~~$6.3 million~~ ~~during~~loss ~~2002~~can be reasonably estimated, ~~compared~~we tohave recorded ~~decrease~~reserves in our ~~trading~~ ~~investments~~consolidated offinancial ~~$211~~statements.~~6 million~~ ~~during~~In ~~2001.~~other ~~During 2002~~instances, webecause ~~used~~of ~~$17.2 million~~the inuncertainties ~~net~~related ~~cash~~to ~~flows~~both ~~from financing~~the ~~activities.~~probable ~~This~~outcome ~~compares~~and amount or range of loss, we are unable to ~~$6.0 million~~make ina ~~net~~reasonable estimate of any liability. As ~~cash~~additional ~~flows~~information ~~used~~becomes inavailable, ~~financing~~we ~~activities~~adjust ~~during~~our ~~2001~~assessment and estimates of such liabilities accordingly.

At33 December 31, 2002, we had leased satellite capacity with annual rental commitments of approximately $21.9 million through the year 2007. In addition, at December 31, 2002, we had commitments to purchase telecommunications equipment amounting to approximately $1.8 million. Our commitments in respect of IRU purchases under contracts with 360networks and Global Crossing have been terminated under the Settlement Agreement (in the case of 360networks) and in connection with the Plan (in the case of Global Crossing). Furthermore, we had leased from third parties a series of terrestrial links for the provision of data, Internet and telephony services to our clients in the different countries in which we operate. We have committed to long term contracts for the purchase of terrestrial links from third parties in Argentina, Colombia, and the United States for approximately $2.5 million per year through 2007. The remainder of the leases are typically under one-year contracts, the early cancellation of which is subject to a fee.

TheTable following table sets forth due dates of our contractual obligations: Contents

Type of Obligations	2003		2004		2005		2006		2007		Thereafter		Total
	(in thousands)
Long-term debt(1)	$	129,246	$	57,250	$	57,361	$	53,024	$	926			$	297,807
Liabilities subject to compromise(2)		727,522												727,522
Capital lease obligations		1,751		2,124		2,799		4,791						11,465
Operating leases		266		22										288
Other long-term obligations		3,772		1,132		1,665		606		5,364	$	2,741		15,280
Total contractual cash obligations	$	862,557	$	60,528	$	61,825	$	58,421	$	6,290	$	2,741	$	1,052,362

In addition, we may be audited by foreign and state (as it relates to our U.S. operations) tax authorities. We provide reserves for potential exposures when we consider it probable that a taxing authority may take a sustainable position on a matter contrary to our position. We evaluate these reserves, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events that may impact our ultimate payment for such exposures.

(1)	As discussed above, our contingent liability as guarantor under the Original Vendor Financing Agreements is included in our current portion of long-term indebtedness, which reclassified amounts are not included in this line item as being due in 2002, but instead are set forth based on their originally scheduled contractual due dates.
(2)	As discussed elsewhere in this Report, as a result of our default under our Senior Notes and the Chapter 11 filing, our “liabilities subject to compromise” are constituted by IMPSAT Fiber Network Inc.’s primary obligations under the Senior Notes and certain other accounts payables.

Changes in Policies

~~The~~These ~~following~~policies, ~~table~~which ~~illustrates~~are ~~expirations~~those that are most important to the portrayal of our ~~commercial~~financial ~~commitments~~condition asand ~~provided~~results of operations and require management’s most difficult, subjective and complex judgments, often are a result of the need to make estimates about the effect of matters that are inherently uncertain. We have not made any changes in ~~corresponding~~any of these critical ~~contracts:~~ accounting policies during 2006, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies during 2006.

Type of Commitments(1)	2003		2004		2005		2006		2007		Thereafter		Total
	(in thousands)
Lines of credit		—		—		—		—		—		—		—
Standby letters of credit		—		—		—		—		—		—		—
Guarantees		—		—		—		—		—		—		—
Standby repurchase obligations		—		—		—		—		—		—		—
Other commercial commitments(2)	$	33,952	$	29,761	$	24,158	$	20,485	$	15,129	$	19,334	$	142,819
Total commercial commitments	$	33,952	$	29,761	$	24,158	$	20,485	$	15,129	$	19,334	$	142,819

New Accounting Pronouncements

51Prior to January 1, 2006, the Company accounted for stock option awards granted under the Company’s share-based payment in accordance with the recognition and measurement provision of Accounting Principles Board Opinion No. 25. Accounting for Stock Issues to Employees (“APB 25”) and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. Share-based employee compensation expense was not recognized in the Company’s consolidated statement of operations prior to January 1, 2006, as all stock options awards granted under the plans had an exercise price equal to or greater than the market value of the common stock on the date of the grant. Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”) using the modified-prospective-transition method. Under this transition method, compensation expense recognized during the year ended December 31, 2006 included compensation expense for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. In accordance with the modified-prospective-transition method, results for prior periods have not been restated. As a result of adopting SFAS 123R, the charge to operations for the year ended December 31, 2006 was $332. The impact of adopting SFAS 123R on both basic and diluted earnings per share for the year ended December 31, 2006 was $0.03 per share.

(1)	Commitments are contractual obligations (other than indebtedness) that could potentially require our performance in the event of demands by third-parties or contingent events.
(2)	This includes commitments to purchase communications and data center equipment and long-term contracts for the purchase of satellite capacity and terrestrial links.

In June 2006, the FASB issued Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The accounting provision of FIN 48 will be effective for the Company beginning January 1, 2007. The Company has not yet completed its evaluation of the impact of adoption on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measures (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances ~~Forward~~disclosures ~~Looking~~about ~~Statements~~fair value measures required under other accounting pronouncements but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently reviewing the provisions of SFAS No. 157 to determine the impact of adoption on our financial position or results of operations.

~~Forward~~In ~~Looking~~June 2006, the Emerging Issues Task Force (“EITF”) issued EITF Issue 06-03, How Taxes Collected from Customers and Remitted to ~~Statements.~~Governmental ~~Some~~Authorities ofShould ~~the~~Be ~~statements~~Presented in ~~this~~ ~~Management’s~~the ~~Discussion~~Income ~~and~~Statement ~~Analysis~~(That Is, Gross Versus Net Presentation). A consensus was reached that entities may adopt a policy of ~~Financial Condition~~presenting ~~and~~sales ~~Results~~taxes in the statement of ~~Operations~~operations ~~are~~on ~~forward-looking~~either a gross or ~~statements~~net basis. ~~These~~If ~~statements~~taxes ~~involve~~are ~~known~~significant, ~~and~~an ~~unknown~~entity ~~risks, uncertainties~~should disclose its policy of presenting taxes and ~~other~~the ~~factors~~amount ~~which~~of ~~may~~taxes. ~~cause~~The ~~our~~guidance ~~actual results~~is effective for periods beginning after December 15, ~~performance~~2006. orSince ~~achievements~~the toCompany bepresents ~~materially~~its ~~different from~~revenues ~~any~~sales ~~future~~net ~~results~~of sales taxes, ~~performance~~the oradoption ~~achievements~~of ~~expressed or~~EITF ~~implied~~Issue by06-03 will have no impact on the ~~forward-looking~~presentation ~~statements.~~of ~~Forward-looking statements~~sales ~~include~~tax ~~but~~in ~~are~~its ~~not~~consolidated ~~limited~~statements ~~to:~~ of operations.

•In ~~our~~February ~~expectations~~2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and ~~estimates~~Liabilities-Including asan amendment of FASB Statement No. 115) . SFAS No. 159 permits entities to ~~maintenance~~choose to measure certain financial assets and ~~growth~~liabilities ofat ~~our~~fair ~~Broadband~~value ~~Network,~~(the “fair value option”). Unrealized gains and •losses, ~~future~~arising ~~financial~~subsequent ~~performance~~to adoption, ~~including~~are ~~growth~~reported in ~~sales~~earnings. ~~and~~SFAS ~~income~~No. 159 is effective for fiscal years beginning after November 15, 2007. We are required to adopt SFAS No. 159 in the first quarter of 2008. We are currently assessing the impact of SFAS No. 159 on its consolidated financial statements.

~~Factors~~Results ~~that could cause our actual results to differ materially from those expressed in any forward-looking statements we make include those in the “Certain Considerations” section~~ of ~~this~~Operations ~~Report, and the following factors, among others:~~

•The ~~factors~~following ~~affecting~~table ~~our~~sets ~~performance and financial conditions • the availability and terms of additional capital to fund~~ forth our ~~continuing~~consolidated ~~efforts~~statements ~~• adequacy~~ of ~~cash from~~ operations ~~for~~data ~~our~~in ~~future~~dollar ~~liquidity~~amounts and ~~working~~as ~~capital~~a ~~needs~~percentage •of ~~inaccuracies in~~ our ~~forecasts~~sales offor customer or market demand • loss of a customer that provides us with significant revenues • highly competitive market conditions • changes in or developments under laws, regulations and licensing requirements • changes in telecommunications technology • currency fluctuations, and • changes in economic conditions in the ~~Latin~~periods ~~American~~indicated: ~~countries where we operate.~~

~~These~~34 ~~factors should not be construed as exhaustive. We will not update or revise any forward-looking statements.~~

ItemTable 7A.of Quantitative and Qualitative Disclosure About Market RiskContents

The sections below highlight our exposure to interest rate and foreign exchange rate risks and changes in the market values of our investment in equity securities. The analyses presented below are illustrative and should not be viewed as predictive of our future financial performance. Additionally, we cannot assure you that our actual results in any particular year will not differ from the amounts indicated below. However, we believe that these results are reasonable based on our financial instrument portfolio at December 31, 2002 and assuming that the hypothetical interest rate and foreign exchange rate changes used in the analyses occurred during year 2002. We do not hold or issue any market risk sensitive instruments for trading purposes.


	Year Ended December 31,
	2004					2005					2006
	(in thousands and as a percentage of consolidated revenues)
Net revenues :
Net revenues from services :
Broadband and satellite	$	161,964		71.1	%	$	172,852		68.1	%	$	184,668		64.8	%
Internet		26,125		11.5			30,591		12.0			36,063		12.7
Value added services		16,674		7.3			24,874		9.8			35,755		12.5
Telephony		21,673		9.5			24,967		9.8			27,293		9.6

Total net revenues from services		226,436		99.4			253,284		99.7			283,779		99.6
Sale of equipment		1,279		0.6			690		0.3			1,190		0.4

Total net revenues		227,715		100.0			253,974		100.0			284,969		100.0

Direct costs :
Contracted services		21,285		9.3			24,379		9.6			25,935		9.1
Other direct costs		20,647		9.1			28,909		11.4			35,573		12.5
Leased capacity		67,632		29.7			74,990		29.5			75,724		26.6
Cost of equipment sold		963		0.4			631		0.2			371		0.1

Total direct costs		110,527		48.5			128,909		50.8			137,603		48.3
Salaries and wages		46,339		20.3			50,597		19.9			60,828		21.3
Selling, general and administrative expenses		23,581		10.4			22,335		8.8			25,394		8.9
Gain on extinguishment		(115	)	(0.1	)		—		—			—
Depreciation and amortization		44,797		19.7			55,324		21.8			60,309		21.2
Interest expense, net		19,970		8.8			30,961		12.1			31,032		10.9
Net gain on foreign exchange		5,804		2.5			10,131		4.0			7,049		2.5
Other income (expense), net		840		0.4			(7,735	)	(3.0	)		(8,236	)	(2.9	)
Provision for foreign income taxes		(3,479	)	(1.5	)		(4,492	)	(1.8	)		(4,257	)	(1.5	)

Net loss	$	(14,219	)	(6.2	)%	$	(36,248	)	(14.3	)%	$	(35,643	)	(12.5	)%

~~Interest~~Year ~~Rate~~Ended ~~Risk. Our cash, cash equivalents and trading investments consist of highly liquid investments with a maturity of less than 360~~December ~~days. As a result of the short-term nature of these instruments~~31, we2006 doCompared ~~not believe that a hypothetical 10% change in interest rates would have a material impact on our future earnings and cash flows related~~ to ~~these instruments. A hypothetical 10% change in interest rates would also have an immaterial impact on~~ the ~~fair~~Year ~~values~~Ended ofDecember 31, ~~these instruments.~~2005

52Revenues. Our total net revenues for 2005 and 2006 equaled $254.0 million and $285.0 million, respectively. Net revenues are composed of net revenues from services and sales of equipment.

WeOur ~~are~~net ~~exposed~~revenues tofrom ~~interest~~services ~~rate~~for ~~risk~~2006 ontotaled ~~our~~$283.8 ~~floating rate indebtedness~~million, ~~which~~an ~~affects~~increase ~~our cost~~ of financing. Prior to our Chapter 11 filing, our floating rate indebtedness had increased as we drew down commitments under our vendor financing agreements to cover capital expenditures, including the Broadband Network. Following our emergence from bankruptcy, our floating rate debt and, therefore, our exposure to interest rate risk, has decreased. At December 31, 2002, our total floating rate indebtedness aggregated $~~284~~30.5 million. ~~As of the Effective Date, our total floating rate indebtedness was approximately $27.9 million. Our actual interest rate is not quantifiable~~ (or ~~predictable because of the variability of future interest rates and business requirements~~12.0%) Wecompared ~~do not believe such risk is material and we do not customarily use derivative instruments~~ to ~~adjust interest rate risk~~2005. AsOur ofnet ~~December 31,~~revenues ~~2002~~from ~~and~~services asduring of2006 ~~the~~included ~~Effective Date,~~net arevenues ~~hypothetical~~from: 100 basis point increase in the London Interbank Offered Rate (LIBOR) would adversely affect our annual interest cost related to our floating rate indebtedness by approximately $2.8 million and $0.2 million, respectively.

	Expected Maturity Date
																				Fair
Year Ended December 31,	2003			2004			2005			2006			2007			Thereafter	Total			Value
Senior Notes (fixed rate)	$	650,000															$	650,000			—
Avg. interest rate		12.96	%															12.96	%
Term Notes (fixed rate)	$	21,783		$	5,287		$	8,691		$	12,688		$	926			$	49,375		$	49,375
Avg. interest rate		14.31	%		14.31	%		14.31	%		14.31	%		14.31	%			14.31	%
Vendor Financing (variable rate)	$	259,897															$	259,897			259,897
Avg. interest rate		14.14	%															14.14	%

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