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UNITED STATES

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

For the fiscal year ended December 31, 2002

Commission file number: 0-31010

AT&T LATIN AMERICA CORP.

Registrant’s telephone number including area code: (202) 689-6300

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

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

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x     No  o

      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.  x

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes  o     No  x

      As of March 20, 2003, 45,544,017 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 73,081,595 shares of the registrant’s Class B common stock, par value $0.0001 per share, were outstanding. As of March 20, 2003, the aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant based on the $0.05 closing price for the registrant’s Class A common stock on OTCC on March 20, 2003 was approximately $1,823,111. Directors, executive officers and 10% or greater shareholders are considered affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of our Proxy Statement for the 2003 Annual Meeting of Stockholders to be filed within 120 days after December 31, 2002 are incorporated herein by reference in response to Part III, Items 10 through 13, inclusive.

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

      Some of the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this 2002 Annual Report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s beliefs as well as a number of assumptions concerning future events made by, and information currently available to, management. These statements involve known and unknown risks, uncertainties and other factors, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed in or implied by the forward-looking statements.

      Forward-looking statements include but are not limited to statements and references about the following matters:

	•	expectations and estimates as to the amount of cash required to operate as a going concern;
	•	expectations about our ability to restructure successfully the capital structure of the Company, through discussions with our creditors and other interested parties;
	•	expectations as to our ability to obtain additional financing;
	•	expectations about sources of revenues and the percentage breakdown of sources of revenues; and
	•	future financial performance.

      In addition to other matters that are described in this annual report on Form 10-K, the following factors, among others, could cause AT&T Latin America’s actual results to differ materially from those expressed in or implied by any forward-looking statements contained in this annual report on Form 10-K:

	•	whether we are able to agree with our creditors and other interested parties on acceptable terms and conditions for a solution to our current liquidity problems;
	•	the outcome of litigation matters and asserted claims brought or made against us by various creditors;
	•	whether we and/or our affiliates file for protection from creditors or are otherwise included in a case under Chapter 11 of the United States Bankruptcy Code and/or under the applicable mechanisms available to us and our affiliates in one or more of the countries in which we operate;
	•	whether economic and political conditions in the countries in which we operate improve or deteriorate compared to our current expectations;
	•	inaccurate forecasts of customer or market demand;
	•	currency fluctuations;
	•	our assessment of any changes in AT&T Corp.’s approach to customers and to its commercial relationships with us;
	•	changes in communications technology and/or the pricing of competitive products and services;
	•	highly competitive market conditions;
	•	our ability to retain and build relationships with existing customers;
	•	changes in or developments under laws, regulations and licensing requirements in the countries in which we operate;
	•	our ability to obtain and retain rights of ways and permits necessary for the expansion and maintenance of our networks; and
	•	our ability to retain key personnel.

      In particular, our ability to estimate our cash requirements will be affected by several factors, including, but not limited to:

	•	our expectations regarding debt service and principal payments owing on existing financing facilities;
	•	the amount of cash expected to be used in our operations;
	•	our ability to maintain and increase revenue;
	•	our ability to collect accounts receivable as expected and the timing of collection;
	•	the level of competitive pressure on the pricing of our services;
	•	whether interest rates fluctuate materially; and
	•	the impact of fluctuations in currency exchange rates in the countries in which we operate, including the effect on any current or future currency hedging arrangements.

      AT&T Latin America undertakes no obligation to publicly release any updates or revisions to any forward-looking statements, which are made as of the date of this annual report on Form 10-K, to reflect events or circumstances after the date of this annual report on Form 10-K.

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PART I

      AT&T Latin America Corp. was incorporated on October 13, 1999 by AT&T Corp., under the laws of the State of Delaware, and along with its consolidated subsidiaries is referred to collectively in these consolidated financial statements and elsewhere in this annual report on Form 10-K as “we,” “our,” the “Company,” “AT&T Latin America” and “us.” We acquired our Brazilian subsidiary, AT&T do Brasil (formerly known as Netstream), in December 1999 from our controlling shareholder, AT&T Corp. We completed the acquisition of our Argentine subsidiary, AT&T Argentina (formerly known as Keytech LD, S.A.), in June 2000. In August 2000 we completed our merger with FirstCom Corporation, which was a U.S. publicly traded communications company with operations in Chile, Colombia and Peru. AT&T Corp. holds 8,000,000 shares of our Class A common stock and all 73,081,595 outstanding shares of our Class B common stock, representing 95.2% of the voting power and 68.3% of the economic interests of our common stock as of March 20, 2003. AT&T Corp. also holds 2,450,803 warrants to acquire shares of our Class A common stock at an exercise price of $0.01 per share, and 2,450,803 warrants to acquire shares of our Class A common stock at an exercise price of $8.00 per share.

      We provide business communications services to major metropolitan business markets in Argentina, Brazil, Chile, Colombia and Peru. Our local, domestic and international communications services include data, Internet, local and long distance voice, web hosting and managed services. We focus primarily on business customers with growing and diverse communications needs. These customers include multinational corporations, financial services companies, media and content providers, technology companies, manufacturing companies, government entities, Internet service providers and communications carriers, as well as small and medium size businesses. We deliver our services mostly through our own technologically advanced high speed, high capacity networks, which interconnect with other providers’ networks. In addition, we use our installed network infrastructure to offer services to carriers, including inbound domestic and regional voice termination services and last-mile connectivity services. We also serve in selected cases the mass market, offering long distance, calling and prepaid cards and dial-up Internet services. The mass market remains attractive because it provides additional revenue and cash flow while utilizing otherwise idle network capacity.

Restructuring Activities

      From our inception in 1999 until late 2002, we supported our growth plan through a combination of financing facilities from our parent company, AT&T Corp., senior secured financing from our strategic equipment vendors and other financing facilities obtained from suppliers and from local sources in the countries in which we operate. Our business plan during that period was dependent on the availability of such financing to finance growth until we were able to reach positive cash flow.

      In October 2002, we announced that, due to a combination of factors, including the unavailability of certain expected financing sources, the likely acceleration of certain debt service obligations and continued weak economic conditions in the Latin American region, particularly in Brazil and Argentina, we would incur a funding gap under our business plan. Also in late 2002, we did not attain certain covenant targets for minimum revenues and earnings before interest, taxes, depreciation and amortization, or EBITDA, as specified in our secured financing facility, and we were informed by our secured lenders that we would not have access to undrawn amounts under that facility. We also were informed that we could no longer draw upon unused portions of our local financing facilities.

      Based upon these developments, in November 2002 we commenced a comprehensive business and financial restructuring and retained an affiliate of AlixPartners LLC, a recognized adviser in turnaround situations, to assist us in the restructuring process. Although the outcome of our restructuring process is uncertain, we believe it is unlikely that any outcome, whether pursuant to a court-supervised or an out-of-court restructuring or sale of our business, will result in any value being attributed to or consideration payable for our common stock.

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      Our restructuring efforts are focused on positioning AT&T Latin America for longer-term, profitable growth with conservative expectations regarding access to capital and external funding. Specifically, we are positioning the company to be cash flow self-sufficient on an operating basis. We believe that reaching and sustaining positive cash flow is essential to restructuring our debt successfully and funding our future operations, including potential future growth in our operations and revenues.

      At the core of our restructuring efforts is an evolution in our business focus:

	•	From revenue growth as a primary driver, to profit and cash maximization;
	•	From new customer growth, to new customers that meet minimum cash payback and profit criteria;
	•	From continued build-out of our network infrastructure, to maximizing the potential of our existing network by selling to customers that are already on our network or proximate to our network facilities; and
	•	From an overhead cost structure oriented to a high revenue-growth business model, to a significantly reduced structure more in line with a focus on cash preservation and cash flow.

      We expect continued tight capital markets and limited access to funding. In that environment, we believe our change in focus will allow us to continue to exploit our key competitive strengths and existing investments to maximize returns from our network.

      Strategically, our restructuring efforts have centered on five key elements:

	•	Become a low-cost provider of services: Our technologically advanced network allows us to provide high-quality services at variable costs that we believe are competitive with any provider in the region. We can offer incremental services or bandwidth to our customers with minimal additional expense or capital investment. Additionally, as we refocus our business model on more modest, profitable growth, we have reduced significant overhead expenses. These reductions have occurred in every area of our overhead (people, advertising, real estate, etc.). Finally, we are working with our vendor partners to reduce our network operating expenses. We are renegotiating contracts and capacities to more appropriately reflect our volume needs and our financial requirements.
	•	Increase the quality of revenue: Since our inception in 1999, we have generated significant quarter-over-quarter sales growth. However, we believe that maintaining high revenue growth will require working capital that exceeds our current capital and cash sources. Consequently, we are focusing on maximizing our return from current customers, and ensuring that new customer relationships meet rigorous profitability and cash flow benchmarks that are consistent with a self-sufficient growth model.
	•	Reduce capital expenditures: From 1999 through the first half of 2002, we deployed significant capital expenditures to develop our advanced network, covering concentrations of business districts in 17 major cities in Latin America. At this time, although attractive investment opportunities do exist, our lack of access to new capital dictates that we dramatically reduce capital expenditures and maximize the business opportunity within the proximity of our existing network. We estimate that our existing networks provide access to approximately 39,000 business customers located in the 7,500 buildings we have wired, of which approximately 5,100 are customers today.
	•	Maintain High Quality Services and Customer Care: We will continue to invest in our network to maintain service quality and reliability and to continue improvement in customer care. We believe that we have become recognized for service quality and responsiveness to customers.
	•	Focus on Strict Cash Management: We have assumed that we will not have access to external funding sources in the near term and have established more rigorous cash management processes and mechanisms. Our priorities are to continue providing high-quality service to our customers while managing our cash to sustain operations and provide for modest growth.

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      While our restructuring activities have been successful to date in expanding our strategic options and stabilizing our business, we expect we will require additional capital investment to finance additional growth while maintaining a strong cash position. Therefore, since the fourth quarter of 2002, in parallel with our restructuring activities, we have been working to identify strategic or financial investors that may acquire all or a portion of our Company.

      In February 2003 we retained Greenhill & Co. LLC as our financial adviser to assist us in exploring opportunities with strategic and financial investors. We believe that the Company represents a unique telecommunications asset in our region, with a strong and attractive customer base. Moreover, we believe that our integrated regional approach and modern MPLS and ATM/ IP metropolitan networks make us a scalable platform upon which to drive further consolidation in our industry in the South American region. Given continued difficult conditions in the telecom sector, however, we cannot assure that we will succeed in consummating a sale or investment transaction on terms satisfactory to our constituents, if at all.

Liquidity

      As of the date of this annual report, we do not have sufficient cash to meet our requirements in the near term unless we continue to defer and restructure amounts owed to our secured and unsecured creditors, and successfully implement austerity measures now being undertaken, or obtain additional financing. Our restructuring efforts (including an extension of certain payables) and the suspension of certain debt service and principal payment obligations pending the resolution of negotiations with creditors have allowed us to preserve adequate cash to sustain operations and substantially reduced our net use of cash in the near term.

      Since November 2002, we have not made debt service payments on most of our material indebtedness. We are actively engaged in discussions with our various creditor constituencies and other interested parties and their advisors. Our goal is to reach an agreement with these parties to recapitalize the Company’s balance sheet and to reduce significantly our debt. Currently there are no definitive agreements relating to any recapitalization, and there can be no assurance that current negotiations with the various creditors will lead to agreement on terms acceptable to our creditors as a group, or that, failing such an agreement, any alternative transaction or court-supervised reorganization will lead to a viable recapitalization plan.

      As of December 31, 2002 we had foreign currency forward contracts that hedge certain transactions with notional amounts of $147.8 million, maturing in various dates through November 2003. The total $20.8 million fair value of forward currency contract assets, which are included as prepaid expenses and other current assets on our December 31, 2002 balance sheet, represents unrealized gains on our forward currency contracts selling or buying foreign currencies as result of the strengthening or weakening of the dollar compared to the currencies that we hedge. We have certain hedge transactions in Brazil and the United States, certain counterparties of which are also creditors of ours in Brazil. To the extent we do not succeed in restructuring the loans obtained from such creditors, or loans from other creditors that may seek to pursue remedies against us, we may not gain access to some of the hedge settlement proceeds as they come due. Failure to collect on hedge proceeds would materially impair our liquidity outlook.

      On a consolidated basis, as of December 31, 2002 we had cash and cash equivalents of $33.5 million. We presently do not have available unused commitments under any credit facilities. We actively manage liquidity not only in terms of preserving cash but also with a view toward projected cash needs in each of our country operations. Our ability to maintain adequate liquidity for our business as a whole may depend on our ability to move cash between our country operations from time to time. However, due to exchange control regulations and local fiduciary considerations, we may not be able to transfer cash freely within our corporate group, and restrictions on such transfers could have an adverse effect on the liquidity of one or more of our country operations.

      Our cash needs arise from operating losses and other working capital requirements, capital expenditures, debt service and loan commitment fees. We are continuing to conserve cash on hand by not servicing material indebtedness and by continuing to reduce operating expenses and capital expenditures. While in effect, these austerity measures will substantially impede our growth.

      Implementation of our restructuring program will require cash outlays during 2003, including for the renegotiation of financing facilities and other contractual commitments and for the engagement of professional

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      The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The appropriateness of using the going concern basis in the future, however, will be dependent upon our ability to address our liquidity needs as described above. There is no assurance that we will be able to address our liquidity needs through the measures described above on acceptable terms and conditions, or at all, and, accordingly, there is substantial doubt about our ability to continue as a going concern.

Relationship with AT&T Corp.

      We have been informed that our majority shareholder, AT&T Corp., is seeking to disengage from its investment in our Company through sale or other disposition of its equity interest and debt position. As of December 31, 2002, AT&T Corp. owned directly or indirectly approximately 68.3% of the shares of capital stock, representing approximately 95.2% of the voting power, and held approximately $903.7 million of our long-term debt and preferred stock, including accrued interest and preferred dividends. In January 2003, AT&T Corp. announced that it had entered into a non-binding letter of intent to sell for a nominal price all of the Class A and Class B common stock of AT&T Latin America owned by it to Southern Cross LLC, a telecommunications and investment holding company. We also have received expressions of interest from a number of other qualified strategic and financial investors. We will continue to pursue all strategic options for the Company that serve our objective of maximizing value for our constituents.

      If AT&T Corp. were no longer to hold a majority of the equity interest in the Company, we expect that certain brand, commercial and other contractual arrangements we have with AT&T Corp. will likely expire, be terminated or be phased out over time. These arrangements include:

	•	our regional vehicle agreement with AT&T Corp., which agreement establishes the territory in South America and the Caribbean in which we operate, the types of services we are permitted to provide or are restricted from providing, certain restrictions on AT&T Corp.’s ability to compete with us in our designated region and certain rights we have to acquire similar businesses in our region from AT&T Corp., in the event it acquires such businesses;
	•	our non-exclusive service mark license, which allows us to use the AT&T brand and logo in our operations and for our services, subject to certain qualifications as to service quality and requirements as to brand monitoring and management; and
	•	our joint sales initiative, which along with related arrangements provides for the compensation of the AT&T Corp. sales force for sales of our services to AT&T Corp. customers and for joint account planning with respect to such customers.

      We expect that a sale or other disposal by AT&T Corp. of its investment in us, and the termination of these commercial arrangements will generally reduce the volume of customer referrals through AT&T Corp., and, at least in the short term, the number of direct relationships we have with AT&T Corp.’s global customers that we service in South America and internationally using our infrastructure. In addition, AT&T

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Relations with Secured and Unsecured Creditors

      We remain in default under our senior secured financing and are in default under other credit facilities from suppliers and local financing sources. Our senior lenders are presently entitled to accelerate all or a part of the indebtedness we owe to them which could lead to cross-accelerations of credit facilities we have with local banks in the countries in which we operate. At present we have no unused borrowing capacity under any of our credit facilities due to our present liquidity concerns.

      In June 2002 an affiliate of Siemens AG initiated a legal proceeding in New York Supreme Court against us and our subsidiary in Argentina, concerning obligations under certain unsecured promissory notes due in May 2002, having an original face amount of approximately $12.0 million, which we did not pay due to a disagreement over the governing law and the effect of changes in laws in Argentina on the principal amount of such notes. In November 2002, Siemens initiated a second, similar action covering approximately $4.0 million original face amount of notes. We received an adverse judgment in the first proceeding in October 2002 and in the second proceeding in January 2003. We have appealed the first action, and intend to file an appeal in the second action if the judgment is entered. We also have $3.7 million in additional notes to Siemens that are due in March 2003. We are currently in discussions with this creditor to resolve and reschedule these obligations. In June 2002 we also received a complaint in New York Supreme Court from IIG Capital, an investment fund that has informed us it received an assignment of a note of $5.0 million original face amount issued by the Company to an affiliate of Siemens, which we also did not pay when due in May 2002 due to our view of the applicable governing law and effects of changes in law in Argentina. The claims at issue are similar to those raised in the Siemens matter. We are in the process of defending this action.

      In November 2002 Banco Itaú S.A. initiated a legal proceeding in Brazil against our subsidiary, AT&T do Brasil, concerning a loan in the amount of approximately $12.0 million. Banco Itaú S.A. has attempted to accelerate payment of all amounts outstanding under the loan of which approximately $2.2 million at December 31, 2002 was past due. In January 2003 AT&T do Brasil filed a pre-executory exception in this collection action which exception was reversed in March 2003. Also, at the request of Banco Itaú S.A., in the same decision the court decided: (i) to grant to Banco Itaú S.A. rights over certain forward contracts settlements totalling approximately $9.4 million (as of the date March 14, 2003) in favor of the Company, which are payable in April 2003; and (ii) to create a pledge on certain bank accounts of AT&T do Brasil indicated by Banco Itaú S.A. However, on March 24, 2003, AT&T do Brasil obtained a suspension of the pledge order in an interlocutory appeal.

      On November 17, 2002, HSBC initiated a legal proceeding in Brazil against AT&T do Brasil asserting a claim for attachment of assets and rights on a $8.4 million loan. On December 13, 2002, AT&T do Brasil filed a Provisional Remedy to suspend the effects of a cross default and acceleration clause contained in two loan agreements entered into with HSBC. The injunction was granted on December 16, 2002 and the ability of HSBC to accelerate the loan agreements was suspended. On December 27, 2002, HSBC contested the injunction but the court confirmed its decision.

      If one or more material creditors were to accelerate successfully the maturities of our debt or to seek to enforce amounts under judgments against us by proceeding against our assets, we would likely seek protection under U.S. bankruptcy law and, depending on remedies that may be pursued by these creditors, under the laws

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Relations with Customers

      We believe we have maintained good relationships with our customers. We have established a broad communication plan for keeping our key customers apprised of our restructuring efforts and financial situation and plan to continue doing so. Through our restructuring process to date, we have focused particularly on maintaining high quality and reliability of service to customers.

Services

      Our customers demand high quality, reliable and cost effective communications services with simplified interfaces. We believe that larger and more sophisticated customers also expect us to anticipate their communications requirements and provide customized solutions. By offering an integrated package of advanced as well as basic services, we believe we can access a larger market, enhance customer retention, achieve higher margins and reduce the cost of acquiring new customers.

      Our integrated portfolio of services in the countries in which we operate falls into two principal categories, data-Internet and voice services.

      Data-Internet services. Our data-Internet services feature local, national and international reach, high availability and are delivered over our MPLS, or multiple protocol label switching, and our common ATM/ IP, or asynchronous transfer mode/ Internet protocol, multi-service network platform, accessible via single connections (one port per location) to our broadband network:

	•	Data Services. Our data services consist of basic connection services, such as point-to-point dedicated private lines, and private multipoint network services, which include offering and managing communications links among a number of locations, as wide area network services, enabling intranet and extranet connectivity. The basic infrastructure plus supporting services allow us to implement different communications applications to support a wide range of customers’ needs. As part of our data services, we provide secured private IP services, frame relay, ATM and clear channel services.
	•	Internet Services. Our Internet services consist of dial-up access and high-speed dedicated access services offered primarily to businesses, as well as to Internet service providers and content providers. Our integrated package to Internet service providers and portals allows these customers to purchase and/or lease their entire access infrastructure from us.
	•	Managed Services. Our managed service offers include managed data, Internet and web hosting services.

      Voice Services. Our voice services include local telephony and long distance services, pre-paid and calling card services and 800/toll-free and operator assistance services, depending on our competitive situation and on regulatory restrictions in each country. We package these services differently depending on the type of customer we are targeting. Voice services are an important complement to our existing data-Internet product portfolio.

Market Strategy

      We seek to build collaborative, long-term relationships with our customers by offering them a broad portfolio of communications services and business solutions, by continuously monitoring and identifying their changing communications needs and by building one or more of our services into a partnership with the customer in which we seek to become the single or primary source provider of all of the customer’s communications requirements. We believe that, in addition to providing our customers with superior value, our market strategy allows us to integrate our services into bundled solutions, which discourages customers from moving to a new provider and improves gross margins by encouraging customers to use a greater number of, and more advanced, services. Prices charged to customers vary in accordance with the customers’ requirements based on network availability and service level guarantees, the number of locations, types of services, transmission rates and length of service agreements.

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      During 2002 we expanded our market coverage while reducing sales expense. We accomplished this by increasing sales productivity of our direct sales force through focused training and sales management programs as well as through the launch of an indirect sales channel program comprised of partnerships with selected and certified agents and distributors. We will continue to build direct and indirect sales channels in order to up-sell and cross-sell our embedded base, and focus on targeted account plans to support an aggressive customer retention program.

      Our sales philosophy is focused on selling value. We have developed and deployed sales measurement tools that allow us to constantly monitor and manage sales productivity in an effort to better understand and measure sales performance. In conjunction with these tools, we have developed a performance driven sales compensation plan based on, among other things, sales quota attainment, sales of strategic high margin products, long term sales contracts and customer retention. In addition, in order to capitalize on our existing investments in wired buildings, we have structured the plan to reward selling additional services to existing customers as well as new customers in existing buildings connected to our network. We also emphasize training of our sales force in an effort to promote both targeted selling and positioning our sales people as advisors to our customers.

      Our sales force is supported and complemented by experienced engineering personnel who organize the efficient delivery of communications solutions to each customer. The technical staff’s role includes the proper coordination of vendor service components, customer site preparation, and the installation, testing, delivery and maintenance of the communications solution for the customer.

      We target our services mainly to three types of business customers, as well as to carriers and Internet service providers and, to a limited extent, to the consumer segment:

      Multinational Corporations. We refer to those companies who have their headquarters outside our territory with presence in the countries in which we operate as multinational corporations (“MNC”). These customers demand sophisticated integrated communications services, global connectivity and a single point of contact for all of their communications needs. As a response to those requirements, the Company implemented a centralized organization to be able to rapidly respond to customer requirements. We successfully managed these accounts and leveraged our relationship with AT&T to secure new revenues in this segment.

      In the first quarter of 2002, we launched a joint sales initiative with AT&T Corp. The initiative allows the AT&T Corp. sales force to promote and provide referrals to us for some of our international data services to multinational accounts, to interconnect their U.S. corporate customers with their offices located in Latin America. The initiative also incorporates a process for joint account planning that allows our sales force to work with and coordinate sales plans for AT&T Corp.’s global customers in our region. During 2002, we made significant inroads with the MNC customer segment and have been recognized as a key regional player capable of providing complex solutions to these strategic customers.

      We have been informed that AT&T Corp. does not intend to renew the joint sales initiative when it expires in April 2003. As a result of this expiration, we will likely be competing with AT&T Corp. in the provision of international data services to these MNC customers. The revenues derived from these MNC customers today account for less than 10% of 2002 consolidated revenues, of which we believe less than 3% of such revenues under expiring contracts (or approximately $4.3 million) are at risk during 2003 due to customers’ choosing an alternate provider (including AT&T Corp.). We cannot predict the effect on our revenues of any transition of these customers to other carriers, including AT&T Corp. While we expect to encounter increased competition with AT&T to retain certain multinational customers during 2004, we also anticipate expanding our relationship with other carriers to address a larger set of multinational customers in the region.

      Large Regional Accounts. Large regional accounts are typically the top 250-500 regionally based customers by country, based on revenue or telecommunications expenditures. These customers have domestic and/or regional operations with increasingly sophisticated communications needs. We believe that these customers, which often have complex and sophisticated networks, increasingly expect us to provide expertise

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      Small and Medium-sized Enterprises (SMEs). SMEs are small and medium-sized businesses who are particularly interested in a competitive suite of services. We primarily target those SMEs located in our wired buildings. We market bundled solutions to SMEs that include local telephony, long distance, Internet and data services. Our SME customer base also allows us to benefit with our large regional accounts as the SMEs become important targets to access electronic supply chain networks developed by our large customers to establish efficient links with their supplier and distributors. SMEs are strategically important to us in part through establishment of secured electronic supply chain networks by SMEs with supplier and distributors over our network, which creates an important relationship among these different customers that we target. In addition, these customers provide an important source of revenue and help us to maximize our return on investment.

      Carriers/ ISPs. We have supply relationships, often mutual, with other carriers for bandwidth services and wholesale voice minutes, and we provide services to meet the access infrastructure needs for Internet service providers. We believe our relationships with other carriers are strategically important in order to help reduce our costs to connect customers not located on our network and to increase the use of our infrastructure by reselling capacity to them.

      Consumer markets. The Company takes advantage of its network infrastructure, economies of scale, licenses and operational synergies to provide services available to consumer markets. Such services include long distance voice services, prepaid and calling card services as well as dial-up Internet services. We sell to these markets through a combination of distribution channels, agency agreements, and co-branding campaigns.

      The following table sets forth selected unaudited operating statistics by country as of December 31, 2002 (as well as a comparison to 2001 totals).

*	Excludes 39 employees at corporate headquarters as of December 31, 2002 and 58 employees at corporate headquarters as of December 31, 2001. As of March 1, 2003, there were 985 total employees excluding 27 at corporate headquarters.

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Customer Care

      We believe a high quality, efficient customer care organization is a competitive advantage and is important to our long-term success. Our customer care organization is focused on three key areas:

	•	order and contract management, to ensure we secure quality order information to reduce sale-to-bill time frames;
	•	continuous improvement of all processes and procedures experienced by customers; and
	•	customer satisfaction, to assure a consistent customer experience across all services, segments and countries.

      Customer care is available on a 24 hour/365 day basis. Our staff have trilingual capability, providing assistance in Portuguese and English in Brazil and in Spanish and English in the other countries in which we operate. Customers can contact us directly through our customer care organization or through our corporate web site. We closely monitor our customers’ perception of our services in order to understand their preferences and to enhance their overall satisfaction with us. We work with an independent firm to provide on a monthly basis an analysis of how we resolve customer inquiries and how our services are perceived by customers as well as reasons for any customer cancellations.

Networks

      We seek to deploy our network facilities to reach and cover corporate office buildings, office parks, industrial sites and other high concentrations of businesses and potential business customers. We believe our focus on the deployment of metropolitan network and “last-mile” infrastructure, combined with our strategy for low-cost purchase of third party capacity, will enhance our long-term financial performance by increasing the capacity of, and traffic flow over, our networks.

      Our network extends to 17 key cities in Latin America with metropolitan networks: Buenos Aires and Rosario, Argentina, São Paulo, Rio de Janeiro, Belo Horizonte, Brasilia, Campinas, Porto Alegre and Curitiba, Brazil, Santiago, Vina/ Valparaiso, Concepcíon, Temuco, Chile, Bogotá, Cali and Medellin, Colombia, and Lima/ Calláo, Peru. At the end of 2002, we also had points of presence, or POPs, for data and voice services in 26 other cities. Points of presence are nodes that are extensions of our network that permit access to customers in cities where we do not have metropolitan networks. Our networks are generally based on fiber optic cable. In addition, we selectively use local multipoint distribution system, or LMDS, technology, for our expansion into Medellin and also for additional coverage in Buenos Aires. LMDS is a wireless broadband technology that allows for efficient network deployment in areas of lesser density. We have also expanded our network footprint into additional locations in the countries in which we operate through agreements with third party network providers.

      Our networks primarily use the asynchronous transfer mode, or ATM, transport technology, which enables us to accommodate many different types of information traffic systems and permits transmission of a mix of voice, data and video. Our networks also utilize the Internet Protocol, or IP standard. IP protocol is an inter-networking standard that enables communication across the multiple networks, public and private, regardless of the hardware or software used.

      Our broadband communications networks include the following components:

	•	network operations centers, operating on a 24-hour/7-day basis, where we monitor and supervise the network and service performance;
	•	primary, or backbone, rings located in each city, with 48, 72 or 144-strand fiber optic cable connecting concentration nodes (ATM switches) to a central node;
	•	numerous secondary rings of 36, 48 or 72-strand fiber optic cable connecting building premise equipment (BPE) to a concentration node;

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	•	access cables of 2 to 24-strand fiber optic cable (or in some cases, a wireless local loop connection) connecting building premise equipment with different buildings in the network; and
	•	for each customer in a building, a fiber optic, coaxial or copper cable connecting the customer premise equipment with the building premise equipment.

      Because our network is based on fiber optic technology and uses ATM/ IP switching and transmission technology, we are able to offer the following benefits to our customers:

	•	an integrated package of voice, data and video transmission services, from a single provider;
	•	high speed data transmission and the ability to modify bandwidth easily and activate additional private virtual circuits for a customer with low incremental capital investment;
	•	an ability to accommodate flexibly the traffic demand of small, medium and large networks, such as dial-up networks used by Internet service providers and other complex networks used by financial institutions, multinational corporations, universities and government entities;
	•	a high degree of transmission quality, with negligible error rate and lost traffic; and
	•	high availability of the customer’s wide area network (WAN) through features that allow the networks to re-route automatically any transmission over the network that is held up by congestion, faulty equipment or line damage.

      Our network also includes voice switching centers to handle voice traffic and value-added voice platforms to enable the delivery of pre-paid and toll-free services.

      We have obtained ATM equipment, optical transmission equipment, IP-based routers and voice switching equipment mainly from Cisco Systems Inc., Lucent Technologies Inc. and Nortel Networks Ltd. Optical transmission and metropolitan equipment in Brazil and Argentina uses a technology, DWDM, or dense wave division multiplexing, that maximizes the use of the fiber optic capacity. In each country, we use local contractors to install our underground and aerial fiber network.

      We have agreements with third party providers to secure local access and domestic long-haul capacity in Brazil, Argentina, Chile and Colombia, to meet some of our off-net requirements. Pricing under such agreements is periodically renegotiated or adjusted by their terms to secure more competitive prices. We use satellite technology to interconnect Lima to other cities in Peru. We also use very small aperture terminal, or VSAT connectivity in Colombia in order to serve remote connections for specific large customer needs.

      We are a party to a capacity purchase agreement with Global Crossing Bandwidth, Inc. which provides for the acquisition of indefeasible rights of use to high-speed transmission capacity connecting each of the cities of São Paulo, Buenos Aires, Santiago and Lima to points of presence in the United States, effective for fifteen years. Global Crossing, an affiliate of Global Crossing Bandwidth, Inc., filed for protection under Chapter 11 of the U.S. bankruptcy laws protection in January 2002 but continues to provide services under our agreement. We are a party to a contract with Teleglobe Colombia S.A. to connect Bogota to points of presence in the United States. Telegoble Colombia S.A. is undergoing a restructuring process in Colombia under the protection of Law 550 and continues operations under the name of “Teleglobe Colombia S.A. en Restructuración.” We are also a party to a contract with Emergia to connect Santiago with points of presence in the United States, and we are a party to a contract with Telefonica Data for an IP port for access to Internet in the United States.

      We have international capacity alternatives through satellite capacity from Intelsat and with submarine cable consortiums and continue to identify additional opportunities for capacity as appropriate and to accommodate additional demand. Our international facilities connect to AT&T Corp’s Internet, data and voice network, providing us global connectivity. We are currently analyzing further diversification of our suppliers of international capacity.

      In 2001 we improved our fault management capabilities by installing an operation support system software monitoring of our network elements. This software helps reduce time to identify faults and to repair

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      We are currently in the process of renogotiating the maintenance services agreements provided by our primary equipment vendors. These negotiations are designed to result in service level agreements that address our critical equipment maintenance needs at a lower cost. We believe we will have new agreements in place in the near future. However, in the event that for any particular agreement we are unable to renegotiate terms that are both operationally and economically desirable, we have established contingency plans to maintain our network and minimize any risk to our services to customers and our network.

Website Disclosure

      The Company’s website address is www.attla.com. The Company makes its periodic and current reports available, free of charge, on its website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission by means of a hyperlink to a third-party SEC filings database.

Operations By Geographic Areas And Segments

      For financial information about our segments and geographic areas, see Note 8 to our consolidated financial statements, which is included on page 75 of this Annual Report on Form 10-K.

Customers

      Argentina. Our operations in Argentina, which began as a start-up communications company we acquired in June 2000, experienced a rapid increase in customer base during 2001 and 2002. As of December 31, 2002, AT&T Argentina served 482 data-Internet customers and approximately 63,778 long distance customers. Some of our key strategic alliances in Argentina include, Prima S.A. (Grupo Clarin’s online business), Exiros (Grupo Techint’s online transactional platform) and ISP Red Alternativa. Our customer base in Argentina today includes, among others:

	•	Numerous banking institutions, such as Citibank, Deustche Bank, Barclays Bank, Banco Central de la Republica Argentina, Safra-National Bank of New York., B.N.L, Banco Rio-Grupo Santander and Credit Suisse First Boston;
	•	Technology companies such as Compaq, Dell Computer, Lucent Technologies, Gartner Group, EDS, and 3M;
	•	Automotive companies, such as BMW de Argentina, Ford de Argentina and General Motors;
	•	Pharmaceutical companies, such as Pfizer, Productos Roche, and Laboratorios Phoenix;
	•	Financial information services companies, such as Associated Press and Reuters; and
	•	Other global and multinational companies, including Johnson & Johnson, American Express, Assist Card, BASF, Coca-Cola, General Electric, Hilton Hotel, and Procter & Gamble.

      Brazil. As of December 31, 2002, our Brazilian operations had 1,229 data-Internet customers and 1,330 customers in total including voice services. Our business customers in Brazil today include, among others:

	•	Information and consulting businesses, such as Agencia Estado, AOL, Bloomberg, Reuters and Ernst & Young;
	•	Most banks, clearing houses and stock/commodity exchanges in Brazil, including Banco Santander, Bank of America, Bradesco, Deutsche Bank, Bovespa (the stock exchange), Caixa Economica Federal, and Banco do Brasil. (AT&T Latin America in Brazil links a total of 170 financial and related institutions through the Brazilian Payment System project for the Brazilian Federation of Banking Associations and the Brazilian Central Bank.);

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	•	Global and multinational companies such as Kimberly-Clark, General Electric, J.P. Morgan, Siemens, Ericsson, Aon Risk, Carrefour, Olivetti, Nokia, Volkswagen do Brasil, Delphi, Fiat, Pepsico, Ford do Brasil, American Express, Johnson and Johnson and Caterpillar, Maersk, Avon, Microsoft and Pfizer;
	•	Several large national companies, such as iG, Jornal Estado de Minas, Belgo Mineira, Serpro, Minas Brasil Seguradora, Contax, Petrobrás Distribuidora, Ibmec, Clube de Diretores Lojistas de Belo Horizonte; and
	•	High-tech companies, such as Dell Computers, Compaq, IBM, Intel and Olivetti.

      Chile. As of December 31, 2002, our Chilean operations had 1,647 data-Internet customers. We also provide domestic and international long distance services to approximately 11,600 active customers, including approximately 1,380 active business customers and more than 10,200 active residential customers. In addition, we provide carrier code services to an average of approximately 45,000 users.

      Our customers in Chile today include, among others:

	•	Global and multinational companies, including Xerox, Masisa, Compañía Manufacturera de Papeles y Cartones, Farmacias Ahumada, and Hyatt;
	•	Banking institutions, including Banco de Crédito e Inversiones; ;
	•	Several universities;
	•	Information and media groups, such as El Mercurio, Canal 13 TV and VTR;
	•	International logistics services providers, such as P&O Nedlloyd; and
	•	Government entities, such as the Ministerio del Interior (State Department) and Servicio de Impuestos Internos (Internal Revenue Service).

      Colombia. As of December 31, 2002, our Colombian operations had 771 data-Internet customers. Our customers in Colombia today include, among others:

	•	Several banking institutions, such as Grupo Aval (Banco de Bogotá, Banco Popular, AV Villas, Banco de Occidente and others), Banco Granahorrar and others;
	•	Financial Institutions such as Administradora de Fondos de Pensiones y Cesantías Porvenir;
	•	Global and multinational corporations such as Exxon Mobil, Kimberly Clark, Microsoft, Johnson & Johnson, Renault and Procter & Gamble, among others;
	•	Insurance providers such as Delima Marsh;
	•	Financial content providers, including Bloomberg, Visa and Redeban (MasterCard);
	•	Content Providers such as Reuters;
	•	Communications carriers such as Telefonica Data, Global One and Comcel;
	•	Local retail companies; and several five-star hotels.

      Peru. As of December 31, 2002, our Peruvian operations had 992 Data & Internet customers, 175 Hosting & Colocation customers, 205 fixed telephony customers and more than 78,000 long distance customers.

      Our customers in Peru today include, among others:

	•	Numerous banking and financial institutions, including Interbank, Asbanc, Banco Sudamericano, and the Lima Stock Exchange;
	•	More than 75% of Lima’s five-star hotels, including the J.W. Marriott and Stellaris Casino, Hotel Melia Lima, Doubletree El Pardo Hotel, and Swissotel and Country Club Lima Hotel are currently AT&T Peru Customers;

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	•	Global and multinational corporations, such as W.R. Grace, Productos Roche, Kimberly Clarke, Unisys, Nextel and Telecom Italia among others;
	•	Large national accounts such as the Instituto Nacional Penitenciario (INPE) and Q-Net, Backus y Johnston; and
	•	Retailers, supermarket and drugstore chains such as Santa Isabel, S.A., and Boticas FASA.

Strategic and Regional Accounts

      During 2002, we acquired a number of significant pan-regional contracts for global and/or multinational customers for which we provide international services or service in more than one country in Latin America. These include well-known names such as General Electric, American Express and General Motors in Argentina; Ernst & Young, Bovespa Stock Exchange and Olivetti in Brazil; Xerox, Banco de Crédito e Inversiones and El Mercurio in Chile; Visa and Banco Granahorrar in Colombia; and W.R. Grace and Lima Stock Exchange in Peru. Our regional accounts include Pfizer, Credit Suisse First Boston, Hewlett-Packard, General Motors, Avon, Ericsson, Procter & Gamble, Ford, Johnson & Johnson and Kimberly-Clark, among others.

      As of December 31, 2002, we do not have any significant concentration of business transacted with a particular customer that could, if suddenly eliminated, severely impact our consolidated operations. However, on a relative basis, our country operations in Argentina and Colombia generated a higher percentage of revenue in 2002 from a small number of customers, compared to our operations in Brazil, Chile and Peru.

Competition

      The communications industry remains highly competitive in the countries in which we operate due to privatizations and progressive market liberalization, among other factors. In addition, as a result of tight capital markets, general economic conditions and corresponding pressures on new entrants, we have seen additional competitive pressures for basic communications services. In general, competition in communications services is based on:

	•	price and pricing plans;
	•	the types of services offered;
	•	customer service;
	•	brand position;
	•	network coverage and access to customer premises;
	•	communications quality, reliability and availability; and
	•	the ability to provide high quality data communication services and technical support.

      We experienced moderate downward pressure on prices for our services during 2002, compared to the steeper price erosion that characterized 2000 and 2001. For 2003, we anticipate continued moderate downward pressure in the countries in which we operate.

      Argentina. We believe that our principal competitors in Argentina are the data transmission companies Telecom Internet S.A., which is controlled by Telecom Argentina S.A. and is being merged into Telecom Argentina, and Telefonica Data (formerly known as Advance Telecomunicaciones S.A.) which is controlled by Telefónica de Argentina S.A. Telecom Argentina and Telefónica de Argentina are the incumbents in northern and southern Argentina, respectively, although both are permitted to offer services nationally. Telecom Internet and Telefonica Data use the infrastructure of their incumbent owners to deliver services to their customers. We expect competition also to continue from other carriers such as Impsat S.A.

      Brazil. The strongest operators in Brazil’s telecommunications market are the incumbent carriers, which are companies remaining after the break up and privatization of Telebrás, the former state-owned

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