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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number: 000-29391

VIA NET.WORKS, INC.
(Exact name of registrant as specified in its charter)

St. Giles House 25 Kings Road
Reading, RG1 3AR
United Kingdom
(Address of principal executive offices)

Registrant's telephone number, including area code: +44 (118) 955-2361

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 $.001 per share

        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 periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    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. o

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

        As of March 1, 2003, non-affiliates of VIA NET.WORKS, Inc. held an aggregate of 58,072,880 shares of common stock. (For this computation, we have excluded all outstanding shares of our common stock reported as beneficially owned by executive officers and directors of VIA and certain other stockholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of VIA.) These shares were worth $48,200,490 on June 28, 2002, based on the closing sale price ($0.83) of our common stock as reported on the Nasdaq SmallCap Market on that date, and were worth $41,812,474 on March 1, 2003, based on the closing sale price ($0.72) of our common stock on that date. As of March 20, 2003, there were outstanding 60,844,900 shares of our common stock, which is comprised of 55,794,900 shares of voting and 5,050,000 shares of non-voting common stock.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of our proxy statement to be filed with the Securities and Exchange Commission on or before April 30, 2003 are incorporated by reference into Part III of this annual report.

PREFACE

        SOME OF THE INFORMATION CONTAINED IN THIS FORM 10-K, INCLUDING UNDER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UNDER PART II, ITEM 7 OF THIS FORM 10-K, CONTAINS FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS RELATE TO FUTURE EVENTS OR OUR FUTURE PERFORMANCE. THESE STATEMENTS INCLUDE BUT ARE NOT LIMITED TO THOSE RELATING GENERALLY TO THE COMPANY'S STRATEGIC PLAN, AND PROJECTIONS REGARDING FINANCIAL IMPACTS OF PLANNED ORGANIZATIONAL RE-ALIGNMENT, OUTSOURCING PROJECTS, NEW PRODUCT ROLL-OUT AND COST REDUCTIONS IN GENERAL. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THESE PROJECTIONS. INFORMATION REGARDING THE RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THE RESULTS IN THESE FORWARD-LOOKING STATEMENTS ARE DISCUSSED UNDER "RISK FACTORS" BEGINNING ON PAGE 17 OF THIS FORM 10-K. PLEASE CAREFULLY CONSIDER THESE FACTORS, AS WELL AS OTHER INFORMATION CONTAINED IN THIS FORM 10-K AND IN OUR OTHER PERIODIC REPORTS AND DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

        Unless the context otherwise requires, as used in this Form 10-K, the terms "VIA," "our," "the Company" or "we" refer to VIA NET.WORKS, Inc. and its subsidiaries.

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VIA NET.WORKS, INC.

TABLE OF CONTENTS

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PART I

Item 1.    Business

        VIA NET.WORKS, Inc. is a single source provider of managed Internet services to small and medium-sized businesses, or SMEs, in Europe and the United States. Our goal is to be recognized as an expert provider of business communications solutions. While we believe that goal is within our reach, achieving it will require that we overcome a number of challenges.

Historical Perspective

        Beginning with its founding in 1997, VIA has experienced four phases in its business development:

•

We first focused on raising substantial capital, acquiring European and North and South American Internet services providers and building-out infrastructure



•

We then sought to integrate our 26 acquired operations and their various systems into country operations and regions



•

After the downturn in the economy, and the poor execution of certain of our country integration efforts, we initiated a turnaround plan to significantly cut costs, reduce cash use and improve the operating performance and financial health of the Company



•

We are now building on the actions of the turnaround plan and implementing a new Strategic Plan focused on improving our operational performance and growing our revenues profitably.

1997-2000: Laying the Foundations

        We were founded in 1997 by leading venture capital firms in the telecommunications industry, including Centennial Ventures, Telecom Partners, Norwest Venture Partners and Harbourvest International and by U.S. Internet service provider Verio, Inc. Our mission was to quickly establish through acquisitions and organic growth an international Internet services provider with a footprint in the European and Latin American markets.

        From 1997 through our initial public offering in February 2000, we focused on raising capital to fund our acquisition strategy. We raised approximately $540 million in equity capital, in the aggregate, providing finance for the acquisition of 26 separate Internet service providers in 14 countries by the end of 2000. Following our initial public offering, while we continued to build-out our targeted geographic footprint through acquisitions, we also began the integration of our separate country operations and pursued the development and deployment of a scaleable infrastructure to support the anticipated growth potential of the Internet market.

2000-2002: Economic Downturn

        In the midst of our rapid build-out and integration efforts, the market conditions for Internet services providers deteriorated significantly. As a result, our sector has seen many market participants enter bankruptcy, cease or sell their operations over the past two years. The impact of this economic downturn on our business was compounded by internal issues we were experiencing. The pace at which we built-out our international operations and operational infrastructure, in order to meet the anticipated growth of the industry, led to poor execution of the integration of two of our largest country operations. This in turn caused and exposed material weaknesses in our legacy systems and internal controls. At the same time, our efforts to build-out our organization and improve our ability to scale our operations to handle the earlier anticipated growth resulted in a cost structure that was much higher than our revenue base could support. These factors prompted several of our senior management team to resign in early 2002. In response to these circumstances, our board of directors engaged an experienced turnaround executive in January 2002 to develop and implement a plan focused on

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significantly reducing VIA's cash utilization and operating losses and improving our internal controls and processes.

2002: Rationalization and Turnaround

        During the first quarter of 2002, the board of directors approved a turnaround plan that included four elements:

1.

Reduction of VIA's negative cash flow and a drive toward profitability



2.

Stabilization of billing systems and business process issues in VIA's operations



3.

Focus on Europe as VIA's core operating region



4.

Enhancement of VIA's board of directors, senior management and country management teams

        During the year, VIA engaged in significant actions with respect to each of these elements. First, we significantly scaled back our under-performing and non-strategic operations throughout the year. During 2002, we sold operations in Brazil, Argentina, Mexico, Ireland and Austria and closed our office in Belgium. We also suspended the development and deployment of an enterprise-wide integrated provisioning, billing and customer service platform, established tighter budgetary and capital expenditure controls and continued headcount reductions throughout the organization. These and other actions led to significant reductions in our cash used and improvements in our operating results.

        By the fourth quarter of 2002, we had reduced our quarterly cash flow used in operating and investing activities to $2.2 million from fourth quarter 2001 of $22.3 million. From 2001 to 2002 our aggregate net cash flow used in operating activities and net cash used in investing activities was reduced from $92.8 million to $33.9 million. Our adjusted EBITDA loss from continuing operations improved to ($33.1) million for the year 2002 as compared to ($56.9) million for the year 2001. See Item 7, "Management's Discussion and Analysis of Operations and Financial Condition" for discussion on and reconciliation of adjusted EBITDA.

        Second, in our United Kingdom and German operations, we engaged in system remediation and data validation projects, made a series of significant organizational changes, and ceased providing service in Germany to our low-margin, service intensive customer base. This enabled us to reduce substantially our employee headcount in that country. We also expanded our monthly and quarterly financial reporting close and analytical procedures to improve our internal controls in both countries.

        Third, as a part of our focus on Europe as our core operating region and in addition to the disposition of our Latin American operations, we decided to relocate certain corporate executive and key headquarters positions from our Reston Virginia headquarters to the European region. By the end of the year, we substantially completed the transition of our headquarters positions to Europe.

        Finally, during 2002 VIA engaged in substantial steps to enhance our board of directors, senior management and country management teams. VIA has both reduced the size of our board from ten to seven, to enable more efficient decision-making, and transformed the board towards a more operationally and Europe-oriented group of directors. At the country operations level, we made a number of senior staff changes and new hires at senior levels, including directors of finance, sales, human resources and customer care functions. At corporate, the management team was substantially enhanced through the hiring of a number of European-based functional heads for operations and technology, finance and human resources, among others.

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The Present

        In November 2002, our board of directors appointed Rhett Williams as our new Chief Executive Officer to lead the next phase of VIA's turnaround and intensify the focus on improving our operational stability and generating profitable revenue growth. Under the first five months of his leadership, VIA has achieved the following:

•

Appointed an experienced Chief Financial Officer, Fraser Park



•

Hired a number of senior executives and staff to strengthen the leadership of our finance, sales, marketing and product leadership



•

Initiated the reorganization of the Company from a geographical to functional structure



•

Introduced a new performance bonus plan for employees and leveraged compensation plan for our sales force



•

Introduced professional sales management processes across our nine country footprint



•

Deployed a real-time web-based sales performance tracking system



•

Identified the most profitable vertical segments for our product portfolio



•

Started a voice resale trial in the United Kingdom



•

Assessed opportunities for outsourcing certain financial and administrative systems to improve processes and save costs



•

Started discussions with vendors on outsourcing certain network operation and management and certain back-office systems

Our Market

        While there is no doubt that the industry has experienced difficult market conditions during the last few years, we continue to believe that the Internet presents a compelling opportunity for businesses. Internet technologies enable businesses to reduce operating costs, increase productivity, access valuable information and reach new markets. Internet access services make it possible to use email, access information, communicate with employees, customers and suppliers and conduct transactions with third parties. Businesses establish web sites to improve internal and external communications. Web sites also provide companies with an identity and an interactive presence on the Internet, allowing them to post company information and automate business processes such as sales, order entry and customer service. Increasingly, businesses worldwide are using the Internet and Internet protocol, or IP, technology to enable critical applications, such as purchasing and project management, customer service and on-line sales and marketing.

        Businesses clearly recognize the benefits of being able to access the Internet and establish an Internet presence. However, they often do not have the resources to keep up with rapidly changing technologies, create and update content and communicate electronically and securely. Our customers seek to avoid the distraction and cost of doing this themselves, which is why they turn to companies like VIA, who can provide a simple and cost-effective solution to these challenges. In addition, businesses are increasingly outsourcing certain IT functions such as network security, virtual private networking, collaborative and customer relationship applications, as well as sophisticated enterprise-wide applications including intranets, extranets, network management systems and enterprise resource planning systems.

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Our Competition

        In 2001 and 2002, we saw dramatic changes in the circumstances of many of our direct competitors. For telecommunications and Internet services providers, the slowing of the global economy and specifically the slowing of business investment in technology and telecommunications projects created a liquidity problem for over-extended competitors. As a result of numerous business closures, in many of our markets the number of competitors has generally declined. However, due to the consolidation of existing players, the size of the average competitor has increased.

Telecommunications Service providers

        Most of the major international and national incumbent telecommunications providers offer Internet services in one or more of our markets, either directly or through subsidiaries or alliances. Generally, these telecommunications providers focus on consumer dial-up Internet access and large corporate accounts, customer bases that generate high volume data traffic to carry on their networks. Many of these competitors have also moved to address the needs of small businesses, specifically with their Digital Subscriber Line, or DSL, offerings. In contrast, we focus upon the industry specific needs of SMEs and believe our local market expertise, quality, flexibility and responsiveness to customer demand will enable us to compete effectively for these customers. Additionally, we believe that our focus on managed Internet services rather than Internet access alone provides an opportunity to develop sales partnerships with telecommunications providers seeking less expensive sales channels or value added services for their customers.

Internet Service Providers

        Many of the large Internet services providers were either acquired by telecommunications providers or retreated from our markets for financial reasons. The remaining few large standalone providers in our markets have either shifted their focus to access services and wholesale distribution or are attempting to sell more managed service offerings covering access, hosting and security needs. The small Internet services providers in our markets have a limited range of services and geographic reach and have historically focused on consumer dial-up Internet access. By combining local market expertise and service with an international network and a wide range of services designed for SME customers, we believe we are able to compete effectively with both large and small Internet services providers for these customers.

Hosting Service Providers

        A number of competitor hosting services providers were either acquired by telecommunications providers or retreated from our markets for financial reasons. We believe we can compete effectively with the remaining hosting services providers by leveraging our ability to bundle security, connectivity and networking services and focusing on small and mid-sized business customers.

Security Service Providers

        In 2002 we saw the continued emergence of specialized security services companies, particularly in our larger markets. Providing security solutions and managed security offerings, these companies tapped into the need for businesses to protect their networks and information. Security services providers have focused primarily upon the larger business customer. We seek to compete with these providers by leveraging our ability to bundle security services with a broad portfolio of connectivity, networking and hosting services. Further, our sales channels are focused on SME customers. In some instances, we may partner, rather than directly compete with security services providers with whom we can augment our security portfolio.

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Information Technology Service Providers

        In our markets, information technology, or IT, services providers focus primarily on the delivery of complete ebusiness solutions and local area networking solutions for businesses. In 2002 we saw some of the large providers begin to expand their offerings to include the ongoing management of Internet infrastructure to deliver these solutions, primarily hosting and security services. Large IT services providers have historically focused on larger business customers. The small IT services providers primarily derive their business from small and mid-size business customers. As the majority of small IT services providers do not provide managed Internet infrastructures services such as access, security and hosting, we view them as potential partners in the sale of our services. We currently have channel partnerships with local IT services providers in many of our markets.

Cable Television Companies

        Cable operators in some of our markets now offer Internet access services integrated with television programming and telephone services offerings. Their existing customers are primarily residential and their physical networks are largely limited to residential areas. While these companies are expanding into the SME markets, we do not believe they represent a serious threat to VIA as they cannot offer the same range or quality of services as VIA given their historical focus on the residential market.

Our Strategy

        Given this market and competitive context and our own history, we are now building on the actions of the 2002 turnaround plan and implementing a new strategic plan for 2003-2005, or Strategic Plan, focused on improving our operational performance and growing our revenues profitably.

        We have already begun a number of initiatives to improve our operational performance under the Strategic Plan. These include:

•

Establishing an experienced professional management team who, together with our country managers and functional experts, have developed the Strategic Plan and are actively executing it;



•

Implementing a reorganization of our operations along functional lines with a view towards optimizing the talent and best practices we have across VIA, realizing synergies, improving our operational efficiency and establishing a common focus and culture; and



•

Initiating negotiations with vendors for the outsourcing of certain systems and processes related to certain network management, finance and administration and back-office functions in order to save costs and improve the flow of information.

        We are also actively developing programs to position VIA for profitable revenue growth. These include:

•

Improving the overall quality of our sales force by recruiting new sales professionals, establishing robust sales management and highly leveraged compensation plans and instituting talent development and training programs;



•

Implementing a customer churn reduction program;



•

Focusing our direct sales force on core profitable industry segments;



•

Shifting the sale of 'commoditized' products such as Internet access and shared web hosting to our indirect sales channel; and



•

Rationalizing the existing product portfolio and introducing new products where there is demand among our targeted vertical markets.

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        Our operations and growth initiatives are described in more detail in the sections that follow below. We recognize that our ability to execute successfully on our Strategic Plan to improve operational performance and generate meaningful and profitable revenue growth is subject to a number of risks and dependencies, which are not insignificant. These risks and dependencies are described in detail under the section below entitled Risk Factors in this Item I.

Improve Operational Performance

        We believe the key components associated with improving operational performance are implementing significant organizational change within VIA and enhancing or outsourcing non-core functions, systems and processes.

        In the past, each of our nine local operations was staffed with a local managing director, finance, sales, technical, marketing, legal, HR and customer care personnel. This met local needs, but was duplicated in every country, leading to inefficiencies and redundant functions and a lack of common platforms, processes and focus across the country operations, an unsustainable model for an international company. During 2003, we are seeking to restructure our workforce from a collection of locally focused operations to a single international functional-based organization. Our local country managers will continue to be responsible for direct and indirect sales, revenue and certain related activities. These managers will continue to have oversight over support functions, but will no longer be responsible for day-to-day management of all aspects of the country operation allowing them to focus on increasing sales and margin profitability.

        We will continue to serve our customers in their own language and their own currency. We will also retain management and staff who understand the regulations and business practices in the markets in which we operate. However, we will now do so under a structure that promotes a uniform customer experience and communications, common platforms and systems and standardized best practices. Centralized functional groups responsible for technology and operations, marketing, human resources, communications, finance and legal will support our local country managers.

        In a bid to reduce costs and improve processes, we are assessing the feasibility of outsourcing certain systems and processes. These include systems supporting our network operations center, billing, provisioning and other back-office platforms. This would entail transferring certain support processes for finance and administration from our local operations to a single third party shared service center in a one low-cost location. The shared service center would manage general ledger accounting, accounts payable and accounts receivable, billing administration, credit and collections, and human resources administration. We anticipate that the combination of the functional realignment of our workforce and the outsourcing of certain systems and functions will allow us to make substantial headcount reductions. We believe outsourcing certain systems and processes associated with our network operations management, back office platforms and finance and administration functions could significantly reduce costs, improve the delivery and accuracy of information flows to management and enhance our ability to establish consistent processes and controls throughout the organization. We anticipate a decision on this initiative during the first half of 2003.

        We believe these initiatives are the right initiatives to improve our operational stability. We also believe that we have we have the right management in place to carry them out effectively. However, there can be no assurances that we will be successful in these efforts and our failure to execute successfully on any one or more of these initiatives may have a significant negative impact on our operating results and financial condition, as well as our ability to deliver future profitable growth for the Company.

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Grow Revenue Profitably

        It is our objective to be recognized as an expert provider of business communications solutions by our customers in select target markets. We have generally sought to achieve this by:

•

leveraging the agility and responsiveness of local customer-focused operations to deliver efficient professional service and technical support

        Businesses will generally seek a provider with locally based personnel with whom they can establish a long-term relationship. Our local operations have personnel who are available to provide rapid, practical responses on technical issues and who can assist in developing and implementing effective Internet solutions. We continue to develop sales, technical and customer care teams in order to provide responsive and prompt customer service.

•

providing business communication solutions that give businesses more productive, cost effective ways to communicate information

        Companies continue to use the Internet as a business tool. We deliver solutions that allow our customers to take advantage of maturing and cost-effective IP based technologies and integrate those services into their existing business processes, increasing productivity and reducing costs.

•

providing managed Internet solutions to our customers

        We deliver pre-packaged solutions that provide all the essential elements for businesses to quickly and effectively establish and strengthen their business communication needs based on connectivity, networking, security and hosting capabilities. Additionally, we can tailor solutions for customers requiring more sophisticated business-critical Internet capabilities. In both cases, we can offer a single-source solution to increase customer satisfaction and better leverage our network infrastructure and sales and marketing resources.

•

harnessing the reliability and quality of our own international network

        Our high capacity pan-European and trans-Atlantic networks, coupled with our network operations center and our security operations center, enable our operations to compete on a global scale.

        We believe the key to success in the markets we serve is to follow a strategy of in-depth customer understanding and segmentation based on both customer needs and the industry sector. As business technologies mature and communication and application standards are widely deployed and accepted, the scope of interoperability among and between applications and the industry-specific use of these technologies in individual sectors increases. Although this trend began among large corporations, it is now becoming more common among the medium and larger size companies in the SME market.

        As a part of the Strategic Plan and recognizing the growing and frequently under-served needs of the SME market, we have chosen to focus our efforts specifically on five vertical sectors in the markets where we operate. Those sectors are: communications, IT, manufacturing, retail and business services. These sectors may vary slightly depending on demand and viability in our local markets. However, companies in these vertical sectors have a definable need for both our existing services and the new products and solutions that we are bringing to market. Our combination of technical expertise and in-depth industry understanding as well as our concentration on these vertical markets makes VIA an attractive partner for these customers.

Our Sales Channels

        We are focusing our efforts on the medium to high end of the SME market in the selected vertical sectors, offering a higher-value portfolio of bundled services. We will distribute these products through both direct and indirect sales channels.

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Direct Channels

        As in the past, each of our local operating companies will continue to have a direct sales force. We are already reorganizing our direct sales force into two groups: those who will actively pursue new business opportunities and those who will support existing customer relationships including up-selling and enhancing services based upon customer needs. We are in the process of adjusting the incentive plans for these two groups to reflect their new customer focus. The new sales model is designed to assess the skill level of our sales force and accurately categorize sales professionals according to their skill set. We believe this model will allow us to drive new business aggressively, while improving the loyalty of our existing customer base through better relationship management and customer service. As noted above, we have also begun to realign our direct sales channel to focus on the five selected vertical industry sectors, (communications, IT, business services, manufacturing and retail.) We anticipate that this new concentrated focus will permit our sales focus to form a deeper understanding of our selected customer needs enabling us to more efficiently drive profitable revenue growth.

Indirect Channels

        In 2003, we are implementing a plan to establish a stronger and more structured indirect sales channel in each of the countries in which we operate. Under this plan, we intend to focus on three main channels for indirect sales:

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Resellers—who will distribute our more commoditized products, including access and shared web-hosting services;



•

Lead Referrers—who will be rewarded for referring new business leads to VIA; and



•

Value-added partners—who are a source of quality leads and higher value products for distribution through our direct sales force.

        The profile of these channels may vary country-by-country depending on the maturity of a market, product and service portfolio the country operation offers, the available partners within a country, some of whom will be national as well as international and the scope and size of the operation.

        We are seeking to increase the level of resources we employ in our indirect sales channel, as we believe that this will enable us to expedite the profitable growth of our revenues.

        We are implementing leveraged compensation plans for each of these channels to generate a results-driven sales culture and improve our prospects for profitable revenue growth. Furthermore, we are implementing programs targeted at increasing customer retention, a key element of our goal of growing our revenues and margins.

Our Products and Services

        We currently offer a portfolio of managed IP services created for the business customer that we sell on either an integrated or a stand-alone basis. These services are designed, constructed and delivered to give businesses more productive, cost effective ways to communicate and share critical information. As businesses increase the use of the Internet as a business tool and integrate web-based products and services into their business processes, our service offerings contribute to their ability to enhance profits and reduce risk.

        We package our managed IP services to address the needs that businesses have for a web presence or for specific Internet capabilities. Our services are also packaged to address more sophisticated Internet requirements. Today, we do not currently offer all of our services in each of our markets. The specific products offered are determined by the needs of the market, competition and local regulations.

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Current Portfolio

        While we pursue the development and rollout of a new service portfolio and enhancements, we will continue to offer our current service portfolio, which is categorized into five different groups:

Connectivity Services

        We provide Internet access through dial-up, dedicated line and other technologies, including integrated services digital network, or ISDN, and digital subscriber line, or DSL. We can tailor the connectivity services for each customer to meet their specific requirements and bundle them with other VIA products. Currently connectivity services represent the majority of our revenues.

Networking Services

        We provide network solutions to businesses of all sizes delivering secure information over an IP VPN infrastructure. Internet-based VPNs can significantly reduce the cost of existing wide area networks by enabling the secure and encrypted transmission of private traffic through the public Internet. Our experts can design, provision and manage these solutions for customers, eliminating or reducing the costs of internal network and technical security staff.

Hosting Services

        Web site hosting offers business customers a presence on the Internet, providing them with enhanced marketing and customer service capabilities, as well as opportunities to increase productivity and eliminate costs from their business processes. Our web hosting services are complemented by web site authoring, development and management services. We offer our customers web site hosting services through our Internet data centers located regionally or in our local operations. Additionally, our advanced hosting services offer more sophisticated applications such as intranets, extranets and business productivity capabilities, along with mirroring, caching, and clustering services. We also provide domain registration services.

Network and Content Security Services

        As customers make Internet services a part of their external and internal business processes, particularly to transmit or electronically share confidential or proprietary business information, maintaining data security becomes critical. Our security solutions provide customers with the ability to protect their data and intellectual and commercial assets by limiting unauthorized users from accessing their internal network, authenticating users seeking access to proprietary or confidential information, identifying and resolving network vulnerabilities, increasing security for company data transmitted through the Internet and filtering viruses, unsolicited bulk-email and other selected items from business communications.

Professional Services

        Many of our customers do not have the internal resources or personnel to design or maintain Internet functions. As businesses increasingly rely on the Internet for mission-critical business applications, they are choosing more often to outsource their IT management. Our professional services include network and system design, web design, web site development and maintenance, VPN and Internet security design and implementation and other Internet-related services.

Extended Portfolio

        We are continuously reviewing our product portfolio to ensure that our products fit within our core competencies, demonstrate a high demand from our target business customer base and can be

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offered in a cost-effective and profitable manner. As a part of this ongoing review, we assess potential strategic alliances, acquisitions and other business combinations and relationships with IP managed solutions providers and others to enhance our product portfolio. We are planning to introduce several new products to our portfolio in a bid to satisfy customer demand in the vertical markets we have selected and make our offerings consistent across all our markets. The successful launch of certain of these new products will require that we improve the competencies of our sales professionals and substantially complete the organizational realignment as described above. Other dependencies and risks relating to new product development are identified under the section below entitled Risk Factors in this Item I. The key areas of new product development and bundling are:

Voice

        As a provider of business communications solutions to the SME market, we recognize that the appeal to our SME customers of having a single supplier to deliver both their data and their voice services. We are currently testing a voice product that we could resell in our key markets as part of an integrated business communications bundle.

IP VPN

        We currently offer a VPN service using customer premises equipment, or CPE. We are currently planning to offer a highly reliable and cost-efficient network-based VPN that can prioritize the way traffic travels over the network, using multiprotocol label switching, or MPLS, technology. We have designed both our current and our planned IP VPN services to be easily bundled with remote access, hosting services, managed firewalls and other elements of VIA's portfolio.

Managed Firewall

        We currently offer a managed firewall service. This service is managed on a twenty-four hour seven days a week basis by the VIA security network operations center. We are seeking to expand our service offering by partnering with a number of other technology vendors to meet the needs of our larger customers and by bundling it with other solutions such as security auditing, intrusion detection, intrusion prevention and high availability firewall configurations.

Applications

        Software providers are adapting their enterprise software for SMEs. As VIA has enough scale throughout Europe to make these applications available over secure networks and connections, we are pursuing relationships with providers of applications that facilitate business processes or customer interaction to jointly provide these bundled services to our customer base and that of our software partner in specific vertical sectors.

Our Network

        Our pan-European and trans-Atlantic network provides our European operations with high capacity and resilient transport, as well as redundant Internet protocol peering and transit arrangements. Our network is connected to the Internet by multiple peering arrangements at major commercial Internet exchanges and through transit agreements from multiple major carriers. Our network dynamically routes traffic over the network of the provider best able to deliver the data in the most efficient manner using these diverse connections. Direct connections to multiple major carriers and Internet exchanges assure reliable service levels, protecting against traffic congestion and network outages. In the past six months, we have terminated agreements and operations of the U.S. based network following the sale of our operations in Latin America and an assessment that the level of

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network traffic generated from our U.S. based operation does not justify the cost of a dedicated network.

        The backbone of our network is made up of two STM-1 fiber optic cable rings, each providing 155 Mbps of redundant capacity. The first ring provides trans-Atlantic capacity and connects our New York City and London network nodes. We have a 25-year Indefeasible Right of Use, or IRU, from Global Crossing and its wholly owned affiliates that expires June 2024. In January 2002, Global Crossing and certain other affiliated subsidiaries filed for U.S. bankruptcy protection. In December 2002 the restructuring plan was confirmed by the bankruptcy court and the Global Crossing expects to emerge from bankruptcy protection as a reorganized company in the first half of 2003. Global Crossing has continued to maintain service on the trans-Atlantic ring on which we have acquired IRU capacity and we have not experienced degradation of service or performance since the bankruptcy announcement. If service on our trans-Atlantic IRU is interrupted or terminated because of the current or future financial difficulties of Global Crossing, peering and transit relationships we have in place from our pan-European backbone network will provide contingency and quality backup capabilities for our Internet traffic to reach U.S. destinations. However, if we are required to rely on these peering and transit relationship for all our trans-Atlantic traffic, we may incur additional costs and experience a lesser quality of service in reaching non-European destinations. There can be no assurances that Global Crossing will continue to provide service on the cable on which we acquired trans-Atlantic capacity. If this service becomes unavailable to us, and if we do not successfully acquire alternative service of materially similar capacity and quality, our ability to provide quality levels of IP service will be adversely impacted.

        The second ring of our backbone provides pan-European capacity with network nodes in seven European cities. We currently have network nodes in London, Frankfurt, Amsterdam, Paris, Geneva, Milan and Madrid. The pan-European ring is provided under a 20-year IRU from Crisscross Communications Limited that expires in July 2019. This ring was originally acquired from iaxis Ltd. in 1999. In September 2000, iaxis filed for insolvency in the United Kingdom. In September 2001, we entered into a replacement agreement with a European subsidiary of Dynegy Inc. at no further cost to VIA after Dynegy acquired the business of iaxis out of the insolvency proceedings. In January 2003, Dynegy announced the sale of their European network and operations to an affiliate of Klesch & Company, a London-based private equity firm specializing in European restructurings. The affiliate, Crisscross Communications (Cayman Islands) Ltd, now owns the shares of Crisscross Communications Limited of the United Kingdom. Crisscross Communications Limited, formerly known as Dynegy United Kingdom Communications Limited, continues to provide the services pursuant to the September 2001 agreement entered into with Dynegy. We have experienced no degradation in service levels or performance since this announcement. There can be no assurances that Crisscross Communications Ltd. will continue to provide service on the cable on which we acquired European capacity. If this service becomes unavailable to us, and if we do not successfully acquire alternative service of materially similar capacity and quality, our ability to provide quality levels of IP service will be adversely impacted.

        The local networks of our European operations are connected to our international network via redundant traditional local area and wide area networks or high-capacity fiber and co-location of routers. Where co-location is not an option, our local operations access our international network through high-speed data communications facilities. Our network operations centers provide network monitoring 24 hours per day, 365 days per year and our technical and customer support staff provide individualized support for our customers' business-critical Internet solutions.

        VIA's network connects to Tier 1 Internet transit providers and major public peering locations in New York, London, Frankfurt, Amsterdam, Milan and Madrid, where we have co-located routers. A substantial number of our operating companies have established peering relationships with other local or regional Internet services providers. In peering relationships, Internet services providers agree to

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carry each other's traffic on their networks to improve performance and reduce congestion and costs. We establish on an ongoing basis additional peering relationships with international Internet services providers. Peering relationships can take the form of either public peering or private peering. Public peering takes place at a physical location, usually a network access point, designed for the exchange of Internet traffic between private Internet services providers. Private peering involves an agreement between two Internet service providers allowing traffic to pass between each other's networks at private connection points without having to traverse the public Internet and public peering points. We supplement the peering arrangements with transit services for which we pay compensation to certain providers.

Our Operations

        During 2002, we sold our operations in Argentina, Austria, Brazil, Ireland and Mexico. The operations in Argentina, Austria and Ireland are accounted for as discontinued operations and have been excluded from the revenues from continuing operations. (See Note 2 to the consolidated financial statements for further information.) Due to the structure of the sales agreements for Brazil and Mexico, these operations have not met the requirements to be accounted for as a discontinued operation. Therefore, the results of operations for Brazil and Mexico are included in the continuing operations of VIA. (See Note 3 to the consolidated financial statements for further information.) The following table summarizes our continuing operations in Europe and the Americas by country and revenue contribution from continuing operations. As of December 31, 2002 we owned 100% of all our operations.

VIA Operations

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        Additional financial information about our market segments appears in the table labeled "Reportable Segment Financial Information" in Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition" and is incorporated herein by reference. Our headquarters is currently located in the greater London area of the United Kingdom.

Our Employees

        At March 1, 2003, we employed 559 people on a full-time equivalent basis. 52 employees were on our headquarters staff and 507 were located in our local operations. Of our total employees, 146 were involved in sales and marketing, 105 were employed in customer care, 161 were involved in technical and engineering functions and the remaining 147 were devoted to finance, legal, strategic planning and other administrative functions. Some of our operating companies are parties to collective bargaining agreements. We believe that we have satisfactory relations with our employees and continue to work to better such relations.

Legal and Regulatory Issues

General

Intellectual Property and Proprietary Rights

        We rely on trademark and copyright law, laws restricting unfair trade practices, laws relating to trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. The applicability and enforceability of legal principles concerning intellectual property rights in an Internet context continues to evolve as the courts and legislatures in each country continue to address the issues. All of the countries in which we operate are signatories to international treaties relating to the protection of intellectual property. Nonetheless, in many of these countries, the courts have not had the opportunity to address the legal issues within the Internet context to the same degree as United States courts. It is therefore uncertain whether the intellectual property of our non-U.S. operations will be subject to a lesser or different degree of protection than generally afforded in the United States.

        In Europe and in the United States, we pursue the registration of trademarks for marks that we believe are particularly unique and that will be used in our business over a long period of time. In the United States, we have applied for registration of the mark consisting of our logo and the name "VIA NET.WORKS" and variations of this mark. The mark has been approved by the U.S. Patent and Trademark Office and a notice of allowance has been issued. We are currently establishing that the mark has been used in commerce so that the registration can be finalized. In the European Union, we have applied for community trademark registration for our logo as a mark together with the name "VIA NET.WORKS." In Portugal, we have applied for registration of some marks because registration is required as a condition to obtaining the right to use specified domain names. We hold trademarks and registrations for other marks in some other countries as well.

        Except as noted above, to date we have not pursued the registration of the trademark VIA NET.WORKS, or variations of this mark. Consequently, a competitor with senior rights in a mark similar to ours may be able to argue successfully that we should be barred from continuing to use our mark, or our competitors may adopt product or service names similar to ours, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Defending trademark infringement litigation and policing unauthorized use of our marks is also difficult and expensive. For more information regarding difficulties we may have in protecting our brand names, please see "Risk Factors" later in Item 1 of this Form 10-K.

        We actively seek to protect our marks against similar and confusing marks of third parties by using our local law firms and management teams to identify applications to register trademarks, filing

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oppositions to third parties' applications for trademarks and if necessary, bringing lawsuits against infringing parties. We also continue to assess the strength of our marks and brands as a part of our overall marketing strategy.

Regulatory Matters

        No uniform body of law specific to the regulation of Internet services or Internet services providers exists in Europe or the United States. However, many local laws, which are not specific to Internet services and uses of the Internet, apply to the provision of our services generally. The enforcement of these laws may fall within the powers and duties of a number of regulatory bodies. As a new and important medium for communication and business transactions, the Internet is undergoing considerable legal and regulatory scrutiny worldwide. New laws and regulations regarding the Internet have been proposed or are currently being considered in many countries in which we operate, covering issues such as user privacy and information security, wire tapping, obscenity and child protection, defamation, taxation, and intellectual property rights. At the same time, the application of existing laws to communications and the transaction of business through the Internet are being clarified and refined. We cannot predict what impact future judicial, legislative or regulatory changes will have on the industry in general or our operating results specifically, or whether local regulatory bodies will question our compliance with applicable regulations.

        For example, due to the global nature of the Internet, it is possible that, although the equipment and software used to provide our services is based in Europe and the United States and the transmission of content through the Internet by us and our users would originate primarily in these regions, the governments of countries in other regions might attempt to regulate the content contained in or transmitted using our services or prosecute us for violations of their laws. As content produced by our users or us is available over the Internet in countries all around the world, these countries may also claim that we are required to qualify to do business in their jurisdictions. Any application of existing laws and regulations from jurisdictions in which we currently do not conduct business, or the application of existing laws and regulations to the Internet and other on-line services, could have a material adverse effect on our business, results of operations and financial condition.

        Further, future regulatory developments might impede the growth of the Internet, impose taxes or other costly technical requirements, create uncertainty in the market or in some other manner have a material adverse effect on our business, financial conditions or results of operations.

        The regulatory framework in each of the two major markets in which we provide services is described further below.

European Union

Overview

        All of our European operations, except our Swiss operations, are located in member countries of the European Union. Within the European Union, the European Commission, in co-ordination with the Council of Ministers and the European Parliament, can enact legislation by way of "decisions" or "regulations" that are enforceable directly in each of the member states. More commonly, it adopts "directives" that require member states to enact laws within their own countries by implementing the principles and rules established in the directive. Although the directives' legal mandates are binding on member states, member states have discretion as to the method of implementation. As a result, the European regulatory environment is characterized by differing and sometimes conflicting rules and regulations at the local level regarding licensing, electronic commerce, data protection and other areas. The European Union and its member states are, however, working on reaching greater harmonization of these rules across the member states. These proposals led to the adoption of a new package of five telecommunications directives on February 14, 2002, or the Telecom Directives. This was a major

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overhaul of the regulatory framework for communications networks services and replaced existing communications regulatory framework with less detailed rules aligned more closely to general competition law. All E.U. states are required to implement the Telecom Directives by July 25, 2003. It is unlikely to have an immediate impact on our business, but, in the long run, should lead to a reduction in the regulatory rules that affect us and more generally should lead to greater competition in the market. Therefore, we expect that the new package should reduce our costs of regulatory compliance.

Data Protection

        In October 1995, the European Union adopted the "directive on the protection of individuals with regard to the processing of personal data and the free movement of such data." This directive imposes restrictions on the collection, use and processing of personal data. Under the directive, European Union citizens are guaranteed rights, including the right to access their personal data, the right to know the origin of the data, the right to have incorrect data corrected, the right to recourse in the event of unlawful processing and the right to withhold permission to use their data for direct marketing. Member states of the European Union were required to implement the directive into national laws by October 24, 1998. All countries in which we operate within the European Union have enacted the directive other than France, which has draft implementing legislation before its legislature. However, France has existing laws that deal with the protection of personal information.

        The data protection directive affects companies like us that collect information from individuals in European Union member states. In particular, companies with facilities located in member states or that have equipment in member states for the purpose of processing data will not be allowed to send personal information to countries outside of the European Union that do not maintain adequate standards of privacy and data protection. The directive does not define what standards of privacy are "adequate." Historically, the United States government and the European Commission have engaged in discussions as to whether the U.S. self-regulatory approach provides adequate protection. Based on negotiations concluded in 2000, the European Commission determined that the self-regulatory arrangement established by the U.S. Department of Commerce known as the "safe-harbor principles" provided "adequate protection," but only for data transferred to those companies that voluntarily agree to adhere to those principles. The Commission has made similar adequacy decisions regarding transfers to Switzerland.

        U.S. companies have been able to register for this safe harbor since November 2000. By the end of 2002, approximately 300 U.S. organizations (14 telecommunication service providers) had registered for adherence to the safe harbor principles. VIA has not yet adopted the safe harbor principles. However, like many other U.S. based organizations, VIA has chosen to provide adequate safeguards in various other manners, including the use of contractual relationships in which consent to use data is obtained. We will continue to review our data protection obligations, specifically with respect to our plan to outsource certain network, IT, finance and administration functions outside of the European Union. The data protection directive was supplemented by a further and sector specific "Telecommunications Data Protection Directive." This directive sets out the rules governing the protection of confidentiality of electronic communications and requires national authorities to set up a framework of rules governing lawful interception of such communications. All member states were required to implement this directive into national law by October 24, 2000. However, the "Telecommunications Data Protection Directive" is to be replaced later this year by the newly enacted "Privacy and Electronic Communications Directive" concerning the processing of personal data and the protection of privacy in the electronic communications sector. This Directive, due to be implemented by member states by October 31, 2003, contains provisions concerning security and confidentiality of electronic communications, use of traffic data and location data, unsolicited commercial communications (including spam), itemized billing, calling and connected line identification, call forwarding and

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directories of subscribers. In particular, providers of publicly available electronic communications services will be required to take at their own cost appropriate technical and organizational measures to safeguard security of their services ensuring a level of security appropriate to the risk presented, having regard to the state of the art and the cost of their implementation (including appropriate and immediate measures to remedy any new, unforeseen security risks and restore the normal security level of the service), and inform the subscribers of a particular risk of a breach of the network security, if any, and, where the risk lies outside the scope of the measures to be taken by the service provider, of any possible remedies (e.g., firewall, encryption), including an indication of the likely costs involved. We will continue to closely monitor the member states' enactment of the Directive.

Content Regulation and Liability

        On June 8, 2000, the European Parliament and Council adopted the Electronic Commerce Directive. Member states were required to implement the directive by January 17, 2002. The Commission has recently made clear its concerns that most member states have yet to implement this directive properly. This has led to legislative schemes in the U.K., Germany and elsewhere. The Directive provides that an Internet services provider will not be liable for information it hosts unless the provider has actual knowledge that the information or activity is illegal, or is aware of facts or circumstances from which the illegal information or activity is apparent, so long as the Internet services provider acts promptly to remove or disable access to the information upon becoming aware that it is illegal. In addition, an Internet services provider providing access to communication networks or transmitting over communication networks information that is provided by its customers will not be liable for that information provided that the Internet services provider does not initiate the transmission, select the recipient of the transmission or select or modify the transmitted information. According to the Directive, subject to certain conditions, Internet service providers will also not be held liable for the automatic, intermediate and temporary storage of that information, also known as caching, performed for the sole purpose of making the transmission of the information to other service recipients more efficient. The Directive provides that member states shall not impose a general obligation on the above-mentioned providers to (a) monitor the information that they transmit or store or (b) seek facts or circumstances indicating illegal activity. However, member states may establish monitoring obligations in certain specific cases as well as require that hosting providers apply duties of care, which can reasonably be expected from them in order to detect and prevent certain types of illegal activities. Because this area of law is still developing and because implementation in member states has to date been sporadic, there is uncertainty in some of our operating markets about the potential liability of providers for content carried on their networks. We expect this uncertainty to diminish as the directive is fully implemented in member states and the operation of the new rules at national level is clarified.

Access to Content

        Germany has enacted legislation that would require Internet services providers to establish technical means to permit German authorities to intercept data traffic of identified customers. The ordinance became effective in January of 2002, but compliance is subject to certain transition periods. A technical directive is anticipated to deal with the technical application and execution of the ordinance.

        In the United Kingdom, the Regulation of Investigatory Powers Act, or RIPA, came into force in October 2000. RIPA extended existing interception law to encompass all communications service providers (including Internet service providers). The law permits the United Kingdom Secretary of State to require a communication service provider to maintain a reasonable intercept capability. There was an extensive dialogue between the Government and industry representatives over its implementation and over the question of who should bear the costs of implementing and maintaining

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the equipment needed for such interception capability. The government then set aside £20 million for the first three years to provide a "fair contribution to these costs." However, the government has been reluctant to provide further assistance for ongoing maintenance costs.

        In France, pursuant to Law n° 2001-1062 and Law n° 86-1067, telecommunications operators, Internet access providers and hosting service providers have an obligation to retain certain technical information for the purpose of communication of such data to judicial authorities, at the request of the latter, in connection with the investigation and prosecution of criminal offences. The exact categories of retained technical data and duration of its retention will be specified in a future decree.

Licensing Requirements

        In the United Kingdom, the Telecommunications Act 1984 provides that it is a criminal offense to run a telecommunications system without a license. Licenses take two forms—Class and Individual licenses. Internet services providers are permitted to provide services within the United Kingdom and acquire international capacity from other carriers under Telecommunications Services Class Licenses and are generally not required to hold individual licenses under the Telecommunications Act. However, we own and operate our own network facilities in the United Kingdom connecting our trans-Atlantic backbone to connection points in the city of London. Accordingly, we have acquired an individual public telecommunications operator license issued under the Telecommunications Act 1984 which permits us to carry international traffic across international network facilities that we own. In connection with this license, we were placed on Annex 2 of the Interconnection Directive by the United Kingdom regulator, OFTEL, which permits us to negotiate for direct interconnection with British Telecom and other licensed network operators in the United Kingdom. Our license also imposes conditions on us, including the obligation to provide, at our cost, the technical means for authorized government agencies to intercept communications traffic on our network within the United Kingdom. These obligations will cease in their present form with the implementation of the Telecom Directives on July 25, 2003. There will likely be an interim period during which regulations will implement the Telecom Directives in the United Kingdom under the currently proposed by the Communications Bill. Licensing requirements will be replaced in the United Kingdom and in the E.U. with the new Authorization Directive (which forms part of the new package of directives.) These will, broadly, require us (and all other industry players) to comply with a set of authorization rules, amplified by guidelines. There will be no need to obtain a license, although some reporting will be required, for example on revenue and other figures. Payments for a license will be replaced by an administrative charge related to turnover, the specific details of the authorization rules are yet to be agreed.

        The Communications Bill proposes a uniform regulatory system for all communications markets in the United Kingdom. The system will be administered by a newly established United Kingdom Office of Communications (OFCOM), which is expected to begin operation in the autumn of 2003. It will also take over responsibility for competition investigations in the communications sector. Interception and related issues will remain under direct government control through the United Kingdom Home Office. The rules established under the Regulation of Investigatory Powers Act and the Anti-terrorism Crime and Security Act will continue to apply. If we were to fail to continue to satisfy in any material respect the conditions on which we hold our license before July 25, 2003 or, after that date, the requirements of any authorization, we would not be permitted to operate our trans-Atlantic 155 Mbps network within the United Kingdom, which would have a materially adverse effect on our operations.

United States

Content Regulation and Liability

        In the United States, certain legislation has been adopted to address specific areas of liability of Internet services providers. In 1998, Congress enacted the Digital Millennium Copyright Act, or

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DMCA, which limits the liability of on-line service providers, such as us, who store, display or transmit information that may infringe the rights of authors in copyrighted materials, provided that certain requirements are met. The law provides service providers with a defense against claims of copyright violations if the provider follows the prescribed procedures when a claim of copyright infringement is made against materials posted on the providers' web site or one under its control. We have posted the required notice of compliance on our United States web sites and have established internal procedures to ensure compliance with the law to take full advantage of the defense against liability made available under the law and otherwise minimize our exposure to liability. The extent to which service providers receive immunity from contributory infringement claims under the DMCA provisions is being interpreted through developing case law.

Data Protection and Privacy

        The United States, unlike the European Union, has not enacted comprehensive legislation protecting the transfer and processing of personal information of individuals. Congress has taken a piecemeal approach by adopting sector-specific legislation, for example, in the protection of personal medical and health information and banking and financial information. With respect to other personal information, United States governmental authorities have generally encouraged industry self-regulation, although the public's rising focus on data privacy in the United States has led some in Congress to indicate their intent to pursue legislative action to regulate the collection of personal information over the Internet. The Federal Trade Commission is no longer recommending legislative action contrary to its previous position. Numerous states' legislatures currently are considering bills relating to the rights of consumers to the privacy of their personal information. The enactment of any such laws could increase the cost of providing the type of services we offer in the United States and impede the growth of such services and others that we may seek to offer in the future. However, because we currently generate only a small percentage of our revenues from activities in the United States, we do not anticipate the enactment of any privacy legislation or other legislation enacted in the United States would have a material adverse effect on our operations.

Restrictions on the Import and Export of Encrypted Material or Encryption Software

        None of the countries in which we do business other than France imposes any material restrictions on the import of cryptography. In France, the import of cryptography devices is subject to prior declaration requirements by the importer and, depending on the strength of the encryption, prior authorization by the French government. However, all of the other countries in which we operate do maintain export controls to some degree on encryption software and devices. The United States, Switzerland and the European Union member countries restrict the export of technology that could be used for both commercial and military purposes. These restrictions extend to encryption hardware and software, including World Wide Web browsers, email applications and ecommerce servers. However, the United States and the European Union have both recently adopted regulations permitting the export of most encryption products under licensing exceptions.

        Our operating companies generally offer customers, among other services, encryption services, providing the customer with the ability to transmit company data over the Internet in a secure fashion. However, in most cases, our operating companies do not design, develop, manufacture, or distribute their own encryption software, but instead, rely upon third-party vendors and manufacturers. We are not aware that our operating companies have experienced any difficulty in obtaining from commercial vendors security software or devices containing the level of encryption technology required by our customers.

        Many of the most widely used cryptography devices are developed by companies based in the United States. To the extent that U.S. export laws would impede or prevent the use by our customers of any U.S. vendor's software, we believe that we would be able to substitute other available encryption

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software, of other than U.S. origin, for our customers' requirements and therefore would not experience any material adverse impact as a result.

Risk Factors

        Statements in this Form 10-K that are not historical facts are "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements include, but by way of example only, statements regarding the Company's Strategic Plan, and projections regarding financial impacts of planned organizational re-alignment, outsourcing projects, new product roll-out and cost reductions in general. These statements, when made, are intended to reflect VIA management's then current views with respect to future events and expectations and are subject to a number of risks, assumptions and uncertainties, including those discussed below, which could cause our actual results to differ materially from those projected in such statements.

WE HAVE A HISTORY OF NEGATIVE CASH FLOW AND WE MAY NEVER ACHIEVE POSITIVE CASH FLOW.

        For the year ended December 31, 2002, we had a net loss from continuing operations of $43.2 million. In order to provide continuing global support to our operations, enable them to deliver quality customer service, and in order to develop an adequate financial reporting infrastructure, we will continue to make significant ongoing expenditures for systems and staff. If we are unable to increase our revenue or scale down our costs and investment expenditures, we will continue to experience negative cash flow.

WE ARE IMPLEMENTING A NEW BUSINESS PLAN, WHICH MAY NOT BE SUCCESSFUL.

        We have begun several significant and new business initiatives in 2003 as a part of our Strategic Plan to improve operational effectiveness, reduce costs and promote growth. This plan may not be successful and may cause the Company to incur additional costs. Our Strategic Plan builds on the progress we made in 2002 during which we focused heavily on reducing costs, rationalizing our operations and generally stabilizing the financial condition of the Company. Hence, in 2002 we significantly reduced headcount, implemented strong spending controls, sold our operations in Mexico, Argentina, Brazil, Austria and Ireland and closed our office in Belgium. Our Strategic Plan continues the focus of 2002 to returning to a path towards profitability but now calls for organizational-wide change. The planned changes, objectives and the risks associated with those objectives are noted below:

•

We are reorganizing our operations along functional lines away from the previous country orientation and focus. We believe that this functional re-alignment will in the long term enable VIA to permit the more efficient sharing of best practices and the use of common platforms throughout the enterprise as well as reduce our overall operating costs. The reorganization will also permit VIA to take better advantage of cross-border sales and marketing opportunities in our selected markets. However, this reorganization of our operations to a functional matrix organization may increase costs in the near term. We may incur additional costs as functional teams across all the countries may require increased travel to coordinate their efforts and share core values. We will also incur significant one-time severance payments as we pursue our plan to streamline the organization. We plan to engage in further significant headcount reductions in 2003, which may result in employment-related litigation claims and related increased costs. These additional costs may materially affect our operating results. In addition, the reorganization efforts may create significant distraction for our executive team, which may negatively affect our operating results.



•

We are assessing the outsourcing of certain network, IT, finance and administration systems and processes. While our goal in these actions would be to reduce costs, create organizational

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efficiencies, enhance the standardization of processes and improve internal controls, we may experience differing outcomes. We cannot be assured that the outsourcing provider will be able to deliver the desired results. Our outsourcing providers' systems may not prove to provide the level of service and functionality that we anticipated and may have unanticipated and substantial technological or operational weaknesses. Our use of outsource providers for certain key operational functions will require us to rely on the contractual relationships we maintain with the third party providers and we will not be able to control directly the quality of service or level of cooperation we receive in connection with these functions. As a result, we may lose a certain degree of day-to-day control over these functions and we will be dependant on the continued adherence to contractual service descriptions and service level agreements. We may experience disputes with outsourcing providers to secure our rights or address service issues. Any one or more of these issues may affect negatively our ability to deliver quality service to our customers or deliver accurate financial reporting on our operations and may increase our costs, which will negatively affect our results of operations.

•

Our product development plans call for the introduction of more sophisticated products and services such as IP VPN service as well as products that will add to our ability of providing a single-source communications solution to our customers, such as voice service. We intend to rollout these new products and services by partnering with technology vendors and other third party providers. The development and rollout of these new products and services will depend on our ability to identify vendors and providers who can provide a quality and dependable service and successfully negotiate agreements with these vendors and providers that enable VIA to deliver the products and services profitability to our customers. Our new product development plan will also depend on our ability to integrate the sale, provisioning and billing of the new products and services into our sales force training and into our systems and processes.



•

We are pursuing a strategy of channeling our base products such as access and shared web-hosting to our indirect channels, enabling our sales force to focus on selling the more sophisticated, higher margin, value-added services we offer and plan to offer. In order to address this strategy, we must upgrade our direct sales force through the hiring of new sales professionals, talent development and training programs and the resetting of compensation plans. The termination of sales staff, efforts to recruit new sales professionals and the training of our sales force may distract us from generating or impair our ability to generate new revenues. As a result, our operating results may suffer. As we reorganize our sales force to meet the requirements of the new sales model, we may experience higher turnover and the loss of more key salespersons than anticipated. If this occurs, our operating results will suffer.



•

While our management is focused on implementing our new business plan, technological evolution will continue. If we do not keep pace with these changes, we may fail to attract and retain customers, which would reduce our revenues. The Internet services market has been characterized by changing customer needs, frequent new service and product introductions, evolving industry standards and rapidly changing technology. Our success will depend, in part, on our ability to recognize and respond to these changes in a timely and cost-effective manner.

THE RESTRUCTURING OF OUR ORGANIZATION MAY RESULT IN AN INABILITY TO RETAIN KEY PERSONNEL.

        As a part of our Strategic Plan, we plan to shift from our current geographical focused organization to a functional matrix organization. The implementation of our plan may result in greater organizational uncertainty, low morale and a resulting higher than anticipated turnover of staff. The announcement of this re-orientation of the organization has led and may continue to lead to the departure of key employees. The loss of key employees may result in the loss of institutional knowledge and experience that could be difficult to replace. If we are unable to find suitable replacements for any

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one or more of these key employees, our ability to execute on our Strategic Plan may be negatively impacted.

WE MAY NOT REALIZE THE ANTICIPATED FINANCIAL OR COMMERCIAL BENEFITS AND MAY SUFFER MATERIAL LOSS AS A RESULT OF OUR DECISION TO OUTSOURCE CERTAIN SYSTEMS AND PROCESSES RELATED TO FINANCE AND ADMINISTRATION FUNCTIONS.

        We have experienced operational difficulties in the past in our efforts to upgrade or deploy new back office systems. Our decision to outsource certain finance and administration systems and processes may result in unanticipated difficulties. We have experienced customer and billing data integrity issues in the past; we have developed both automated and manual additional processes and controls to address these issues and reduce the possibility of future data integrity problems. However, the process of transitioning our control over these functions may result in the loss of data or new data integrity issues associated with transferring data to third-party providers systems. Establishing proper systems and system interfaces to enable a successful transition to the shared service center may prove time consuming and require additional costs. We believe we have taken into consideration all costs associated with outsourcing; however, we cannot be assured that we have accounted for all hidden costs, transition costs and management costs; this may all lead to increased costs of services rather than a reduction in the costs of services.

        Our outsourcing providers will provide their own personnel to manage our services. This will result in a reduction of our own organizational competencies, specifically certain IT expertise and finance functions. Our ability to maintain an alignment between the outsourced IT and finance functions with our strategy as that may change from time to time might also be reduced. If this occurs, we will be less able to successfully serve our customers and compete effectively in our market space.

        Unanticipated degradation of service quality and increased overall service costs are two major issues relating to outsourcing. We may experience a degradation of service levels such as poor response time, poor turnaround time or a failure to maintain software and system upgrades. We may discover that vendor applications do not meet our requirements and vendor personnel may fail to provide quality service due to low compensation schemes and a lack of a direct interest in our success. As a consequence of service degradation, our overall service costs may rise. Any such degradation of service may lead to a deterioration of our relationship with the vendor, which could distract our senior management, increase our costs and impact our operations.

        In the event we experience service degradation we may wish to repatriate the outsourced services or terminate our relationship with the provider and procure a different provider. As the number of providers is limited, it may be difficult or even impossible to transfer to another provider. Further, because our outsourcing plans call for a significant reduction in staff we may lack the ability in the short term to repatriate the services. This may create a situation where we are in essence locked-into an ailing relationship with the outsourcing provider. Contractual difficulties may also impede our ability to terminate the outsourcing relationship. This may lead to disputes and litigation, which will be costly and will distract our management team.

OUTSOURCING AND OTHER COST CUTTING MEASURES MAY IMPACT OUR ABILITY TO ATTRACT AND RETAIN EMPLOYEES AND CUSTOMERS.

        We have and will continue to take steps to reduce our costs, including the outsourcing of certain network, IT and finance and administration functions. We reduced our combined employee count to 584 by December 31, 2002 and will further reduce staff as a result of outsourcing and the functional re-alignment of our organization. These measures may impair our ability to attract and retain key employees. As a result of staff reduction, we may lose valuable institutional knowledge and thereby have internal and outsourced staff that are less experienced and attuned to our business. As we

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continue these cost cutting measures, we may also impair our ability to provide quality service, attract new customers and implement integrated operating, administrative and financial controls.

IF DEMAND FOR INTERNET SERVICES IN OUR MARKETS DOES NOT GROW AS WE EXPECT, OUR ABILITY TO GROW OUR REVENUES WILL BE NEGATIVELY AFFECTED.

        Compared to the U.S., Internet use in our markets is relatively low. Moreover, we are focusing our sales and marketing efforts on the more sophisticated value-added services. If the market for our current and planned Internet services fails to develop, or develops more slowly than expected, we may not be able to increase our revenues at the rate we have projected. Obstacles to the development of Internet services in our markets include:

•

concern by customers of economic viability of service providers and the Internet industry in general,



•

failure of regulators to take adequate steps to prevent incumbent telecommunications providers from abusing their economic power,



•

low rates of personal computer ownership and usage,



•

lack of developed infrastructure to support Internet access and applications,



•

limited access to Internet services.

        In particular, we depend on increasing demand for Internet services by small to mid-sized businesses in our markets. Demand for Internet services by these businesses will depend partly on the degree to which these businesses' customers and suppliers adopt the Internet as a means of doing business, and partly to the extent by which these businesses adopt Internet technologies to deal with internal business processes, such as internal communications. Demand will also depend on whether there is a continuing economic downturn in these markets, which may result in a cutback of expenditures for the services we offer. Furthermore, as competitive pressures drive down customer prices for Internet access in many of our markets, we depend increasingly in such markets on our ability to sell to our customers higher margin, value added services such as security services, web hosting, and ecommerce solutions. Due to an increasing number of business failures in the Internet services industry in our core markets, an increase in customer reluctance to rely on third party service providers in the Internet services industry for critical business functions may also reduce our revenue growth and increase our cost of sales by lengthening sales cycles.

COMPETITION FOR CUSTOMERS IN OUR MARKETS MAY CAUSE US TO REDUCE OUR PRICES OR INCREASE SPENDING, WHICH MAY NEGATIVELY AFFECT OUR REVENUES AND OPERATING RESULTS.

        There are competitors in our markets with more significant market presence and brand recognition and greater financial, technical and personnel resources than we have. Although the competitors we face vary depending on the market and the country, these competitors may include local and regional Internet services providers, telecommunication companies and cable companies. Some of our competitors, especially the telecommunications companies, have large networks in place as well as a significant existing customer base. As a result of this competition, we may face significant pressure to reduce our prices, particularly with respect to Internet access services, and to improve the products and services we offer.

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SOME COMPANIES WITH WHICH WE DO BUSINESS MAY HAVE FINANCIAL DIFFICULTIES THAT WOULD PREVENT THEM FROM PROVIDING THE SERVICES THEY HAVE AGREED TO PROVIDE US.

        In January 2002, Global Crossing and certain other affiliated subsidiaries filed for U.S. bankruptcy protection and in August, Singapore Technologies Telemedia Pte. Ltd. and Hutchison Whampoa Ltd. entered into an agreement to have a controlling interest of Global Crossing, a transaction that is currently undergoing U.S. regulatory review. In December 2002, the Global Crossing restructuring plan was confirmed by the bankruptcy court and the company expects to emerge from bankruptcy protection as a reorganized Company in the first half of 2003. Global Crossing has continued to maintain service on the trans-Atlantic rings on which we have acquired IRU capacity and we have not experienced degradation of service or performance since the ban