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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended December 31, 2000

OR

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

For the transition period from                                      to                                                    

Commission File Number 333-12977

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.

Alférez Pareja 256 (1107)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: common stock, par value $0.01 per share

      Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  YES       NO 

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

      State the aggregate market value of the voting stock held by non-affiliates of the registrants.

      The aggregate market value of voting stock held by non-affiliates of the IMPSAT Fiber Networks, Inc. based on the closing price at which stock was sold on the Nasdaq National Market on March 15, 2001, was approximately $75.8 million. As of March 15, 2001, IMPSAT Fiber Networks, Inc. had 91,428,570 shares of common stock, $0.01 par value, outstanding.

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Outlook and Uncertainties

      Certain information in this Report contains “forward-looking statements” within the meaning of Section 21E of the 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 of management for 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 by the use of terminology such as “may”, “will”, “expects”, “plans”, “anticipates”, “estimates”, “potential”, or “continue”, or the negative thereof or other comparable terminology. Although IMPSAT Fiber Networks, Inc. believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in these forward-looking statements.

      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,” “IMPSAT,” “we,” “us” and “our” refer to IMPSAT Fiber Networks, Inc. and its subsidiaries.

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CERTAIN CONSIDERATIONS

      In addition to other information in this Form 10-K, 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 Form 10-K and the risks discussed in IMPSAT’s other Securities and Exchange Commission filings, actual results could differ materially from those projected in any forward-looking statements.

We have substantial debt and we may lack financial resources to meet our obligations or support our business and operations

      At December 31, 2000, we had total consolidated indebtedness of $968.2 million. Our high level of indebtedness could have important consequences for our business, operating results and financial condition, including:

	•	making it difficult for us to obtain future financing
	•	limiting our ability to react to changes in the marketplace
	•	a substantial portion of our operating income must be allocated to making principal and interest payments
	•	we are more indebted than a number of our competitors and this may place us at a competitive disadvantage in the future

      Our significant indebtedness could have a material adverse effect on our business, results of operations and financial condition.

We may be unable to raise the additional capital necessary to continue growing our business

      We may require significant amounts of additional capital to fund:

	•	future expansions of our telecommunications networks, including the operation of our Broadband Network
	•	the refinancing of debt as it becomes due
	•	net losses

      If we fail to obtain financing, we may have to delay or abandon some or all of our operational plans, which could have a material adverse effect on us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for an estimate of our capital expenditure requirements.

      The exact amount and timing of our future capital requirements will depend upon many factors, including:

	•	the cost, timing and extent of upgrading or expanding our networks and services
	•	the development of new services
	•	our ability to penetrate new markets
	•	regulatory changes
	•	the status of competing services
	•	potential acquisitions, investments and strategic alliances
	•	our results of operations

      We and our subsidiaries may obtain new capital through subsequent public and private equity and debt financings. If we incur additional indebtedness, we may be subject to more restrictive financial covenants. We

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We have a history of incurring losses which may make it difficult to fund our future operations

      We have a limited operating history compared to a number of our larger competitors. We commenced commercial operations in 1990 and have experienced rapid growth, increasing annual revenues from $8.2 million in 1991 to $128.4 million in 1996 and $322.1 million in 2000. We recorded net losses of $34.0 million in 1998, $131.5 million in 1999, and $154.1 million in 2000. While the annual rate of growth in our telecommunications revenue increased in 2000 at a higher rate than any year since 1994, increased competition, adverse economic conditions in our countries of operation and other factors could negatively affect our rates of revenue growth and expansion. If we do not achieve and sustain profitability, our ability to respond effectively to market conditions, to make capital expenditures and to take advantage of business opportunities could be negatively affected.

Continued growth of our business depends upon our ability to manage expansion and development effectively

      Our ability to manage our expansion effectively will require us to continue to implement and improve our operating, financial and accounting systems and to hire, train and manage new employees. Among other things, the continued expansion and development of our business will also depend upon our ability to:

	•	successfully implement our Broadband Network and related strategies
	•	design and develop integrated private telecommunications networks
	•	secure financing
	•	install telecommunications infrastructure
	•	obtain any required government authorizations or licenses as the telecommunications sector continues to deregulate
	•	evaluate and penetrate potential new markets
	•	hire enough qualified employees

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

      Our expansion may involve acquiring other companies or assets. These acquisitions could divert our resources and management attention and require integration with our existing operations. We cannot assure you that these acquisitions will be successful. We further cannot assure you that we will be successful or timely in developing and marketing service enhancements or new services that respond to technological change, changes in customer requirements and emerging industry standards.

We face numerous risks that could adversely affect our Broadband Network strategy

      Operating the Broadband Network may have a negative impact on our results of operations

      Operation of the Broadband Network, which includes the expansion into new services for our business customers, will involve:

	•	regulatory risks, including obtaining the appropriate licenses
	•	interconnection difficulties
	•	large amounts of capital expenditures
	•	competition from large, well-financed international telecommunications carriers (such as WorldCom, Inc., Telecom Italia, and Spain’s Telefonica  S.A., among others)

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	•	substantial start-up and marketing costs

      Our operation of the Broadband Network may have a negative impact on our results of operations, at least over the short term.

      Expansion of the Broadband Network will require substantial additional resources that we may not have

      We may need to grow and adapt the Broadband Network to respond to:

	•	higher than expected growth in the number of our customers
	•	requests by our customers for coverage of our Broadband Network outside its existing footprint
	•	changes in our customers’ service requirements
	•	technological advances by our competitors

      We may require substantial additional financial, operational and managerial resources to expand or adapt the Broadband Network. If we are unable to expand or adapt the Broadband Network to respond to these developments on a timely basis and at a commercially reasonable cost, then our business will be materially adversely affected.

Our failure to acquire, integrate and operate new technologies could harm our competitive position

      The telecommunications industry is characterized by rapid and significant technological advancements and the introduction of new products and services. We do not possess significant intellectual property rights with respect to the technologies we use and we are dependent on third parties for the development of and access to new technology. In addition, we generally own the customer premises equipment we use 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 cause us to incur substantial increases in capital expenditures to upgrade or replace such equipment.

      We cannot predict the effect on our business 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. In addition, it is impossible for us to predict with any certainty which technology 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.

We face significant competition in Latin America

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

      We have experienced pricing pressure for some of our services in our more mature markets, and we expect to continue to face pricing pressure. We may further experience declining operating profit margins as the monopoly public telephony operators, or PTOs, in the countries in which we operate become more competitive and place greater emphasis on data telecommunications. In addition, we expect new competitors to enter our markets.

      PTOs have competitive advantages in the marketplace

      In most of our markets, our principal competitor is the local PTO or an affiliate of the local PTO. The PTOs generally have significant competitive advantages. These advantages generally include:

	•	close ties with national regulatory authorities
	•	control over connections to local telephone lines

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	•	ability to subsidize competitive services with revenues generated from services they provide on a monopoly or duopoly basis
	•	reluctance of regulators to adopt policies and grant regulatory approvals that will result in increased competition

      For example, our principal competitors in Argentina are Telecom Soluciones S.A. and Advance Telecomunicaciones S.A., which are data transmission companies controlled by Telecom Argentina STET-France Telecom S.A. and Telefonica de Argentina S.A., respectively. Telecom Argentina and Telefonica are the PTOs in northern and southern Argentina, respectively. In Brazil, our principal competitors are Embratel and Telemar.

      In the future, the PTOs may devote substantially more resources to the sale, marketing and provision of services that compete with us, which could have a material adverse effect on our business, results of operations and financial condition.

      International telecommunications carriers have greater resources than we do

      We compete with private operators of satellite data transmission networks and terrestrial telecommunications links. We also expect to face competition from large international telecommunications carriers, such as AT&T, WorldCom and Sprint, and from other industry participants. While international telecommunications carriers have focused on long distance telephony services, they may focus on the private telecommunications network systems segment of the telecommunications market as deregulation continues. For example, with the introduction of full competition in Argentina’s long distance telephony in November 2000, these large telecommunications carriers may enter the Argentine telephony market and provide data transmission services as well. 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. For example, AT&T has formed AT&T Latin America by acquiring and merging the operations of FirstCom Corp., which has operations in Chile, Colombia and Peru, Brazil-based Netstream, and Keytech LD, a local exchange carrier that is licensed to offer wireless, high-speed internet and other telecommunications services in Argentina. AT&T Latin America has operations in Argentina, Brazil, Chile, Colombia and Peru.

      In addition, we face competition from emerging private telecommunications providers such as MetroRED Telecomunicaciones S.A., Engeredes S.A., TechTel and Diveo Broadband Networks. These companies are data transmission service providers with expanding operations in Argentina and Brazil. If any of our competitors or potential competitors devote significant additional resources to the provision of private telecommunications network services to our customers, there could be a material adverse effect on our business, results of operations and financial condition.

      Our competitors could take advantage of new or competing technologies to our detriment

      Although we believe we have the flexibility to act quickly to take advantage of any significant technological development, new competing technologies may negatively affect our business. For example, new technologies such as digital subscriber line, or DSL, can significantly enhance the speed of traditional copper lines. DSL or other technologies could enable our PTO competitors to offer new 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 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. If these 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.

Our earnings will deteriorate if we cannot collect on our customer accounts

      We provide trade credit to our customers in the normal course of business. As of December 31, 2000, approximately 26.4% of our gross accounts receivable were past due more than six months. We recorded a

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Economic 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 1999 and 2000, we derived approximately 48.2% and 48.6% of our consolidated net revenues from services provided by IMPSAT Argentina, approximately 26.7% and 20.8% by IMPSAT Colombia and approximately 3.8% and 10.4% by IMPSAT Brazil. We also have established operations in Venezuela, Mexico, the United States and Ecuador, and in 2000 we began operations in Chile and Peru. Other than the United States and Mexico, each country where we have significant operations has experienced political and economic instability in recent years. Moreover, as events in the Latin American region have 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, Ecuador and Venezuela. Continued 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 could in turn 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.

      According to published reports of preliminary estimates, during 2000, Argentina’s GDP fell 0.5%, while Brazil experienced a 4.2% growth in GDP in 2000, its strongest in half a decade. Colombia’s and Venezuela’s GDPs grew by 2.81% and 3.2%, respectively, in 2000. We do not expect fundamental improvements in macroeconomic conditions in Latin America in the short term. We cannot assure you that there will not be a continuation of economic difficulties in Latin America, including volatility in regional currencies and capital markets, which would have a material adverse effect on our business, results of operations and financial condition.

We are vulnerable to currency fluctuations, devaluations and restrictions that may increase our losses and cause fluctuations in our operating results

      A substantial portion of our costs, including lease payments for satellite and fiber optic capacity, purchases of capital equipment, and payments of interest and principal on our indebtedness, is payable in U.S. dollars. To date, we have not entered into hedging or swap contracts to address currency risks because our contracts with our 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. These contractual provisions are structured to reduce our risk if currency exchange rates fluctuate. However, given that the exchange rate is generally set at the date of invoicing and that in some cases we experience substantial delays in collecting receivables, we are exposed to exchange rate risk. Pursuant to Brazilian law, our contracts with customers in Brazil cannot be denominated in dollars or linked to the exchange rate between the Brazilian real and the U.S. dollar. Our expansion in Brazil, including our development of the Broadband Network in Brazil, will increase our exposure to exchange rate risks.

      We are negatively affected by currency devaluations as our customers’ revenues are generally denominated in local currencies. 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 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

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

      Our business is dependent upon the procurement and maintenance of licenses to provide various telecommunications network services 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 will be renewed in due course upon our application to the appropriate authorities. Due to the political and economic risks associated with the countries in which we operate, we cannot assure you that we will be able to maintain our licenses in force or that they will be renewed upon their expiration. The loss, or substantial limitation upon the terms, of our licenses could have a material adverse effect on our results of operations. We cannot assure you that we will succeed in obtaining all requisite regulatory approvals to operate in those countries in which we may desire to do business.

      Local laws and regulations differ significantly among the jurisdictions 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 based on the informal views of the local ministries which, in some cases, are subject to influence by the PTOs. The conditions governing our service offerings may be altered by future legislation or regulation. In some of our principal existing and target markets, laws and regulations prohibit or limit our provision of certain telecommunications services.

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PART I

Item 1.  Business

General

      We are a leading provider of private telecommunications network and Internet services in Latin America. We offer integrated data, voice and Internet solutions, with an emphasis on broadband transmission, for national and multinational companies, financial institutions, governmental agencies and other business customers. We also offer dedicated Internet services to Internet service and content providers.

      We have operations in Argentina, Colombia, Venezuela, Ecuador, Mexico, Brazil, 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 fourth 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 locations. Our Broadband Network allows us to enhance the services we presently provide and significantly increase our transmission speed and capacity. The Broadband Network is comprised of eight metropolitan area fiber optic networks and wireless links, which extends over 830 route kilometers in the largest cities in Argentina and Brazil, and long-haul fiber optic backbones in Brazil, Argentina, Chile and Colombia extending over 6,400 route kilometers. It stretches from the Pacific Ocean at Valparaiso, Chile to the Atlantic Ocean, at Las Toninas, Argentina and between Curitiba, Rio de Janeiro and São Paulo, Brazil. Our new network uses advanced transmission technologies, including dense wave division multiplexing, or DWDM, asynchronous transfer mode, or ATM, and Internet protocol, or IP.

      IMPSAT Fiber Networks, Inc. was organized in 1994 as a Delaware holding company to combine the IMPSAT businesses in Argentina, Colombia and Venezuela. Our operations started in Argentina in 1990 under the name IMPSAT S.A. (IMPSAT Argentina). We began operations outside of Argentina with the establishment of IMPSAT Colombia in 1991 and the establishment of IMPSAT Venezuela in 1992. New operating subsidiaries were created in Ecuador (IMPSAT Ecuador) and Mexico (IMPSAT Mexico) in 1994, in the United States (IMPSAT USA) in 1995 and in Brazil (IMPSAT Brazil) in 1998. In January 2000, we changed our company’s name from IMPSAT Corporation to IMPSAT Fiber Networks, Inc.

      In February 2000, we completed the initial public offering of 11,500,000 shares of our common stock, representing approximately 12.6% of our current total outstanding common stock, for total proceeds after expenses and commissions of approximately $180.8 million. In addition, we raised approximately $48.0 million after expenses through the simultaneous sale, through a private placement, of 2,850,000 shares of common stock to British Telecommunications plc, one of our existing stockholders. We refer to this transaction as the British Telecommunications private placement. We also exchanged shares of our common stock for the minority interests in some of our subsidiaries, and the holders of our preferred stock converted the preferred stock into shares of our common stock. On February 11, 2000, we completed the private placement of our $300,000,000 12 3/4% Senior Notes due 2005 (the “Notes due 2005”), pursuant to Rule 144A under the U.S. Securities Act of 1933. On July 26, 2000, we completed our exchange offer pursuant to which all outstanding Notes due 2005 were exchanged for identical notes that are registered under the Securities Act of 1933.

Services

      Our comprehensive telecommunications 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 in Argentina and Brazil. We currently classify these service offerings into four categories: data and value added services, Internet services, carrier’s carrier services, and telephony services.

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      Data 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 existing and planned 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 located in São Paulo, Brazil; Buenos Aires, Argentina; Santiago, Chile; Mexico City, Mexico; and Fort Lauderdale, Florida.

	•	Connection Services. Our customers can purchase leased lines, frame relay services, ATM services and Internet protocol digital connection services to support their specific transmission requirements. Leased lines are typically purchased by customers that constantly transmit large amounts of voice, data and video traffic. Frame relay and ATM services are typically purchased by customers requiring reliable and rapid transmission of variable amounts of voice, data and video traffic. We typically offer our leased line connection service from 64 Kbps to 2 Mbps, and we intend to expand this offering to 155 Mbps of capacity. Our frame relay services are typically offered from 64 Kbps to 2 Mbps and we intend to offer our ATM services from 2 Mbps to 155 Mbps. In addition, we offer digital connections 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 Services. We offer information technology solutions and transactional services designed to facilitate our customer’s e-business and e-commerce needs and optimize our customers’ business processes.

	•	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.
	•	Transactional Services. Our transactional services are designed to facilitate the e-commerce and e-business initiatives of our customers. For example, we provide our ConeXia service to customers in the healthcare sector for HMO membership verification, and we intend to expand our service to interconnect healthcare service providers (such as doctors, pharmacies, hospitals) to allow online prescription authorization for patients. We intend to provide additional business-to-business e-commerce solutions, primarily to retail businesses and financial institutions that conduct high volumes of transactions with their suppliers and business customers that increasingly want to establish on-line transaction capabilities.

      Internet Services. We have offered Internet access services to corporate and ISP customers since 1996. These services are offered through our U.S.-based point of presence that link us to the U.S. Internet backbone. We are leader in the region in Internet services, as demonstrated by our being among the first Internet2 carriers in Latin America and a founding member of NAP of the Americas, which is one of only five Tier-1 Internet network access points (NAPs) in the world. With the completion of our Broadband Network in Argentina and Brazil, we can link our Latin American Internet backbone, as part of the Broadband Network, to the U.S. Internet through our fiber optic links in addition to our leased satellite links. With the objective of positioning ourselves as the Latin America Internet Backbone, we have deployed a series of data

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	•	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.
	•	Corporate Internet Services. As part of providing our investors 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.
	•	Data Center Services. 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.

      Services to Carriers. Having put the Broadband Network into operation across Argentina and Brazil, we intend to grow our offerings of dark fiber capacity, “lit fiber” services and duct capacity to ISPs and telecommunications carriers. Our fiber optic cable will provide customers with reliable, broadband connections between and among our metropolitan area networks at high speeds. Customers that choose to purchase “lit” capacity will be able to purchase an initial amount of capacity (typically 45 Mbps) and increase that capacity on demand. We also offer co-location services including the rental of secure space, equipment provisioning and operation and maintenance services.

      In the third quarter of 2000 we entered into an agreement with 360networks, Inc., a Canadian fiber optic network provider, which contemplated our sale to 360networks of IRUs on the Broadband Network in Argentina and Brazil, and definitive contracts regarding the IRU capacity were signed in the first quarter of 2001. The sale of capacity on an IRU basis to 360networks should generate cash receipts of $96.0 million in 2001. Earlier in 2000, the Company entered into similar agreements with Global Crossing for our sale of IRU capacity on the Broadband Network in Argentina, Brazil and Peru for a total of $23.3 million, and in February 2001 the Company announced the signing of an agreement with Nextel for the sale of IRU capacity in Argentina for approximately $10 million.

      Telephony Services. Following the completion of our Broadband Network in Argentina and the effectiveness of our license in Argentina to offer telephony 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 expand these offerings to other countries in the region, with the most significant opportunity being the deregulation of the Brazilian telephony market in January 2002. As components of our telephony services, we currently offer local, national and international long-distance services, Private Branch Exchange (PBX), toll free services and local numbering to our corporate customers as well as wholesale voice services to other carriers and resellers.

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      The following table shows our company’s net revenues breakdown by service for the years ended December 31, 1998, 1999 and 2000:

The Broadband Network

      The Latin American markets in which we operate are expected to experience compounded annual telecommunications and data services revenue growth of approximately 14% and 30%, respectively, from 1998 through 2004. We believe that this forecasted growth, coupled with continued deregulation in Latin America, will fuel demand for additional broadband capacity. To take advantage of this demand, in the fourth quarter of 1999 we commenced the construction of our Broadband Network, which enables us to provide high capacity, high speed telecommunications services across Latin America. Our Broadband Network, which went into full commercial operation in Argentina and Brazil at the end of 2000, consists of:

	•	fiber optic local rings and wireless access points within major cities in Latin America, including Buenos Aires, São Paulo and Rio de Janeiro
	•	long-haul, high capacity fiber optic backbones linking major cities in Latin America
	•	capacity on undersea cable systems to provide connections among major Latin American cities, as well as global telecommunications connections and Internet access

      We believe that our Broadband Network will enable us to:

	•	cost-effectively offer more bandwidth-intensive services, including intranet and extranet services
	•	substantially reduce our costs for leased satellite capacity and leased telecommunications links as a percentage of our net revenues
	•	create a high capacity, pan-Latin American Internet backbone
	•	offer Latin American companies more efficient access to the U.S. Internet backbone
	•	continue to provide consistent, high quality service by keeping our customer traffic on our network

      Our Broadband Network has the capacity to transmit up to 5.7 terabits, or 5.7 trillion bits, of data per second.

      Capacity Agreements. We have signed an agreement with Global Crossing Development Co. for the purchase of at least $46 million in indefeasible rights of use of capacity on Global Crossing’s South American fiber optic network and on other segments of its networks. These rights enable us to interconnect our networks

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Customers

      Overview. We 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, 1992 to 2,656 corporate customers in nine countries at December 31, 2000. Larger entities, which often have significant needs for reliable, cost-effective data transmissions and other telecommunications services, were the first to use our customized telecommunications services. As a result, a significant portion of our revenues has been derived from our largest customers. In addition, because of our relatively short operating history outside of Argentina and Colombia, a significant number of our customers, including our largest customers, are located in those two countries. 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.

      Our customers consist of major governmental agencies, financial institutions and leading national and multinational corporations and private sector companies, including YPF/ Repsol, Royal Dutch Shell, Banco de Galicia y Buenos Aires, Siemens and Reuters. Our ten largest customers accounted for approximately 22% of our revenues in 2000 and approximately 17.1% in 1999.

      Our ten largest customers as of December 31, 2000 were:

	•	The Government of the Province of Cordoba, Argentina
	•	The Government of the Province of Buenos Aires, Argentina
	•	CNI (Confederação Nacional de Industrias), Brazil’s national association of private industrial companies
	•	Banco de la Nación Argentina, or BNA, a state-owned bank and the largest bank in Argentina, with over 500 branches throughout Argentina
	•	Corporacion Nacional de Ahorro y Vivienda, or Conavi, one of Colombia’s largest financial institutions
	•	YPF/ Repsol, a multinational integrated oil company that is one of the largest companies in Argentina and has operations in other Latin American countries
	•	Banco Mercantil SAICA, one of the largest financial institutions in Venezuela
	•	O Site Entretenimentos Ltda., an Internet service provider subsidiary of El Sitio, Inc.
	•	Perez Companc S.A., an Argentine energy conglomerate
	•	Citicorp Global Technology, Inc.

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      The following table shows our customer concentration by country as of the dates indicated. Totals presented do not include customers from our fax, store and forward service.

      Customer Contracts. Our contracts with our customers typically range in duration from six months to five years and contracts with our private telecommunications network customers are generally for three years. 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. We believe that as we further commercialize our Broadband Network, we will develop a more flexible pricing structure, using both a usage- based billing and fixed fee-based billing model.

      Except in Brazil, 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 such currencies relative to the U.S. dollar could have a material adverse effect on the ability of our customers to pay us for our services. A currency devaluation could also result in our customers seeking to renegotiate their contracts with us or, alternatively, defaulting on their contracts.

Sales, Marketing and Customer Services

      We view our relationship with our 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 provide customer service 24 hours a day, 365 days a year. We use customer service teams to develop and maintain long-term, cooperative relationships with our customers. These relationships provide us with an in-depth understanding of our customers’ evolving telecommunications service requirements and levels of service satisfaction. As a result of this approach, we achieve 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.

      Within each segment of our market, the respective service team is responsible both for sales to new customers as well as for service to existing customers. In addition, each customer is assigned an account manager, who has overall responsibility for relations with that customer. An important function of the account manager is to identify new or enhanced services for existing customers. We will use this team-oriented approach to service our private network, Internet and other customer groups.

      For our private network customers, we designate a customer service team to oversee all phases of initial customer contact, service planning, installation and ongoing service. After we establish initial contact with a potential customer, the service team conducts a thorough evaluation of the customer’s telecommunications needs. Following the completion of this evaluation, we create a plan for these customers which describes our proposed tailor-made solution using the appropriate components of our private telecommunications network

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      To market our new and enhanced services, we are developing several service teams, each focusing on a particular type of services. For example, our telephony services will be marketed to resellers by a team focused only on telephony service.

      In addition to salaried sales and marketing personnel, we often use the services of third-party sales representatives to assist in generating sales and managing the contract process between ourselves 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 customers obtained as a result of the efforts of the third-party sales representative.

      We observe and measure the satisfaction of our customers through our service teams’ frequent customer interaction and, more formally, through a comprehensive annual survey conducted by an outside consultant hired by us. We use the results of these surveys to evaluate the performance of our service teams, to formulate annual customer service plans and to implement improvements to meet and exceed customer expectations.

Competition

      We compete on the basis of our experience, network quality, customer service, range of services offered and price. Our competitors fall into three broad categories:

	•	PTOs in each country where we operate
	•	other 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 past, the PTOs and international telecommunications carriers have focused on local and long-distance telephony services. In the future, however, they may focus on the private telecommunications network systems segment of the telecommunications market. 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 public telephony.

      With 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.

      We 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 the 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.

      In the second category, our competitors include international satellite telecommunications providers and local 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 Network than all of our current competitors among these providers. Among our competitors in this category are a number of new market entrants, including:

	•	Diveo Broadband Networks, a fixed wireless broadband services provider that is building a network in metropolitan Buenos Aires and has announced plans to enter the Brazilian telecommunications market

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	•	MetroRED Telecomunicaciones, owned by Fidelity 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
	•	Engeredes S.A., an infrastructure and data services provider that will use both fiber optic and wireless links to connect the cities of Belo Horizonte, Rio de Janeiro and São Paulo in Brazil
	•	NetUno, a local exchange carrier and provider of broadband local access, Internet and private network services in Ve