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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended December 31, 2001

OR

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

For the transition period from                                      to                                                   

Commission File Number 333-12977

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.

Alférez Pareja 256 (1107)

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

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

      Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES 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. o

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

      The aggregate market value of voting stock held by non-affiliates of IMPSAT Fiber Networks, Inc. based on the closing price at which stock was sold on the Nasdaq National Market on March 28, 2002, was approximately $7.9 million. As of March 28, 2002, IMPSAT Fiber Networks, Inc. had 91,428,570 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS

Outlook and Uncertainties

      Certain information in this Report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may”, “will”, “expects”, “plans”, “anticipates”, “estimates”, “potential”, or “continue”, or the negative thereof or other comparable terminology. Although IMPSAT Fiber Networks, Inc. believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in these forward-looking statements.

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

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CERTAIN CONSIDERATIONS

      In addition to other information in this Form 10-K, the following risk factors should be carefully considered in evaluating IMPSAT and its business because such factors currently may have a significant impact on IMPSAT’s business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this Form 10-K and the risks discussed in IMPSAT’s other Securities and Exchange Commission (“SEC”) filings, actual results could differ materially from those projected in any forward-looking statements.

We have defaulted on our indebtedness and could face liquidation

      We are in default under the majority of our long-term indebtedness. We have failed to make semi-annual interest payments on

	•	our $125 million 12-1/8% Senior Guaranteed Notes due 2003 (“Notes due 2003”), which was due on January 15, 2002
	•	our $300 million 13-3/4% senior notes due 2005 (“Notes due 2005”), which was due on February 15, 2002, and
	•	our $225 million 12-3/8% senior notes due 2008 (the “Notes due 2008” also, collectively with the preceding, “senior notes”), which was due on December 15, 2001

      We are also in default under our vendor financing agreements with Lucent Technologies Inc. and Nortel Networks Limited for the development of our pan-Latin American broadband fiber optic network (which we call our “Broadband Network”). We have failed to make principal and interest payments on these Broadband Network vendor financing agreements (which we call our “Broadband Network Vendor Financing Agreements”) in an amount totaling $48.4 million. As of March 31, 2002, our indebtedness under the senior notes and the Broadband Network Vendor Financing Agreements had an aggregate outstanding principal balance of $650.0 million, and $261.1 million, respectively. The defaults under our senior notes and Broadband Network Vendor Financing Agreements give holders of certain of our other indebtedness the right to declare us in default and seek the immediate payment of such other indebtedness. As a result of these defaults, in accordance with U.S. GAAP, we have reclassified an aggregate of $865.1 million of such long-term indebtedness as short-term indebtedness.

      We are currently negotiating with the holders of our senior notes and the Broadband Network Vendor Financing Agreements as to a proposed plan to restructure our balance sheet. On March 18, 2002, we announced that we had reached a non-binding agreement in principle with certain of our creditors on this restructuring plan, which contemplates our filing a plan of reorganization implementing the terms of a restructuring of our equity and debt in a case filed under chapter 11 of the U.S. Bankruptcy Code. For a description of the proposed terms of the plan of reorganization, see “Management’s Discussion And Analysis of Financial Condition and Results of Operations — Overview — Financial Restructuring.”

      Currently, we have not filed a chapter 11 plan of reorganization under the U.S. Bankruptcy Code. There can be no assurances that we will be able to complete this filing or, if we do, that any plan of reorganization will be approved by the Bankruptcy Court. If we are unable to timely file for protection under chapter 11 of the Bankruptcy Code or obtain confirmation of a plan of reorganization, our creditors may seek other alternatives for our company, including accepting bids for our company or parts thereof through an auction process or forcing us into a liquidation proceeding.

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

      At December 31, 2001, we had total consolidated indebtedness of $990.6 million. Our high level of indebtedness has important consequences for our business, operating results and financial condition, including:

	•	making it difficult for us to obtain future financing
	•	limiting our ability to react to changes in the marketplace

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	•	requiring our allocation of a substantial portion of our operating cash flows in making principal and interest payments
	•	placing us at a competitive disadvantage in the future because we are more indebted than a number of our competitors

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

      As discussed below in “— We have been engaged in negotiations with representatives of the holders of our senior notes and with vendor financing creditors...”, the proposed restructuring of our financing obligations and balance sheet, if successfully completed, should deleverage our operations and reduce long term debt. If we are unable to restructure our balance sheet, obtain additional financing and achieve and sustain profitability, we will be unable to fund our operating requirements and meet our debt obligations as they come due.

We have been engaged in negotiations with representatives of holders of our senior notes and with vendor financing creditors regarding the terms of a reorganization of our financial obligations

      As previously announced, we have been engaged in negotiations, regarding the terms of a proposed restructuring of our financial obligations and balance sheet, with certain holders of our senior notes and the creditors under our Broadband Network Vendor Financing Agreements. We have retained an investment bank, Houlihan, Lokey, Howard, & Zukin Capital, to assist us in connection with these negotiations. Following the consummation of these negotiations, we anticipate that we will file a “pre-arranged” plan of reorganization under chapter 11 of the United States Bankruptcy Code. For a description of the proposed terms of the plan of reorganization, see “Management’s Discussion And Analysis of Financial Condition and Results of Operations — Overview — Financial Restructuring.”

      There is no assurance that we will be able to successfully restructure our balance sheet on terms acceptable to our creditors, or at all. If we are unable to restructure our balance sheet, we may be forced into liquidation. See “— We have defaulted on our indebtedness and could face liquidation.” In addition to the success of our restructuring efforts, our future capital requirements will depend upon many factors, including:

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

      Even if we successfully restructure our indebtedness or are able to incur additional indebtedness, we may be subject to more restrictive financial covenants, which could adversely affect our ability to fund future operations following any such restructuring.

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

      Substantially all of our revenues are derived from operations in Latin America. During 2000 and 2001, we derived approximately 46.1% and 40.2% of our consolidated net revenues from services provided by IMPSAT Argentina, approximately 21.8% and 20.4% by IMPSAT Colombia and approximately 11.1% and 14.1% by IMPSAT Brazil. We also have established operations in Venezuela, Mexico, the United States and Ecuador, and in 2000 we began operations in Chile and Peru. Other than the United States and Mexico, each country where we have significant operations has experienced political and economic instability in recent years. Moreover, as events in the Latin American region have demonstrated, negative economic or political developments in one country in the region can lead to or exacerbate economic or political crises elsewhere in the region. Furthermore, events in recent years in other developing markets have placed pressures on the stability of the currencies of a number of countries in Latin America, including Argentina, Brazil, Colombia and Venezuela. Continued pressures on the local currencies in the countries in which we operate are likely to

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      According to published reports of preliminary estimates, during 2001, Argentina’s GDP fell by 4.9%, while Brazil experienced a 2.6% growth in GDP. Colombia’s and Venezuela’s GDPs grew by 1.4% and 4.5%, respectively, in 2001. We do not expect fundamental improvements in macroeconomic conditions in Latin America in the short term.

      Argentina faces severe political and financial crisis

      A significant portion of our operations, properties and customers are located in Argentina. Revenues from services from our Argentine operations for each of 2000 and 2001 represented approximately 46.1% and 40.2% of our total net revenues from services during those years. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing from time to time in Argentina. The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth and high and variable levels of inflation. In the fourth quarter of 1998, the Argentine economy entered into a recession that caused the gross domestic product to decrease by 3% in 1999, 0.5% in 2000, and an estimated 4.9% in 2001.

      Beginning in the second half of 2001, Argentina’s recession has worsened significantly, precipitating a severe political and economic crisis. Since December 2001, when the Argentine government introduced a partial freeze on bank deposits, widespread political protests and social disturbances have continued on a near-daily basis, and to date the International Monetary Fund and other multilateral and official sector lenders have indicated an unwillingness to provide financial aid until a sustainable economic program has been presented. It is unclear whether Argentina’s current president, Eduardo Duhalde, will be able to complete his term or, even if he is able to remain in power, whether he will have the necessary support to implement the reforms required to restore economic growth and public confidence. The rapid and radical nature of the recent changes in the Argentine social, political, economic and legal environment, and the absence of a clear political consensus in favor of the new government or any particular set of economic policies, have created an atmosphere of great uncertainty. As a result, virtually all commercial and financial activities have been paralyzed, further aggravating the economic recession that precipitated the current crisis. These conditions have had, and can be expected to continue to have, a material adverse effect on IMPSAT Argentina’s and our company’s overall financial condition and results of operations.

      The political and financial crisis has resulted in the devaluation of the Argentine peso

      In late December 2001, Argentina’s ongoing political and financial crisis deepened and the country defaulted on its massive foreign debt. In early January 2002, the government of President Eduardo Duhalde, who came into office on New Year’s Day, abandoned the decade-old fixed peso-dollar exchange rate and permitted the peso to float freely against the U.S. dollar. The peso free market opened on January 11, 2002 and traded at 1.65 pesos to the U.S. dollar and has been volatile since. As of April 10, 2002, the floating exchange rate was 2.78 pesos to the U.S. dollar. The devaluation of the Argentine peso will generally affect our consolidated financial statements by generating foreign exchange transaction gains or losses on peso-denominated monetary assets and liabilities of IMPSAT Argentina and will generally result in a decrease, in U.S. dollar terms, in our revenues, costs and expenses in Argentina.

      During December 2001, the Argentine government instituted a system for the freezing of the deposits in its financial system. In February 2002, these measures led to, among other things, the “pesification” decree. Generally, this decree mandates that all monetary obligations arising from agreements subject to Argentine law denominated in foreign currency and existing as of January 6, 2002 are mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso. Such obligations generally may be adjusted pursuant to an index called the “coeficiente de estabilización de referencia” (“CER”), to be published by the Argentine central bank, which is based on the Argentine consumer price index. Under the “pesification” decree, after the foreign currency denominated contracts are

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      Since the “pesification” decree, IMPSAT Argentina’s customer contracts and operating cash inflows are now predominantly denominated in pesos. However, IMPSAT Argentina’s debt service payments and a significant portion of its costs (including capital equipment purchases and payments for certain leased satellite and terrestrial capacity) remain denominated and payable in U.S. dollars. Accordingly, our financial condition and results of operations in Argentina are dependent upon IMPSAT Argentina’s ability to generate sufficient pesos (in U.S. dollar terms) to pay its costs, expenses and to satisfy its debt service requirements. Because of the recent nature of these events and the significant uncertainties regarding the extent and duration of the devaluation and the direction of the fiscal policies in Argentina, management cannot presently determine or reasonably estimate the impact a continued economic crisis in that country could possibly have on IMPSAT Argentina’s and our company’s overall cash flows, financial condition, and results of operations.

      Numerous uncertainties exist surrounding the ultimate resolution of Argentina’s economic and political instability and actual results could differ from those estimates and assumptions utilized. The Argentine economic and political situation continues to evolve and the Argentine government may enact future regulations or policies that, when finalized and adopted, may adversely and materially impact, among other items: (i) the realized revenues we receive for services offered in Argentina; (ii) the timing of repatriations of any dividends or other cash flows from IMPSAT Argentina to our holding company in the United States; (iii) our asset valuations; and (iv) our peso-denominated monetary assets and liabilities.

      Brazilian economic and political conditions may have a direct impact on our operations

      We have significant operations in Brazil. Revenues from services from our Brazilian operations for 2000 and 2001 represented approximately 11.1% and 14.1%, respectively, of our total net revenues from services for such periods. Accordingly, our operations in Brazil subject our financial condition and results of operations to various additional economic and political risks.

      The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes drastic changes in policy. The Brazilian government’s actions to control inflation and effect other policies have often involved wage and price controls, currency devaluations, capital controls and limits on imports, among other things. Presidential elections are currently scheduled to take place in October 2002, and a change in the executive branch in Brazil that results in a divergence from the economic and fiscal policies currently being pursued by the administration of Brazil’s incumbent president, Mr. Fernando Henrique Cardoso, could have an adverse effect on the Brazilian economy and our company’s financial condition and results of operation.

      Our business, financial condition and result of operations in Brazil may be adversely affected by changes in policy involving factors outside of the our control, such as:

	•	monetary and fiscal policies;
	•	currency fluctuations;
	•	energy shortages;

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	•	the outcome of Brazil’s presidential election scheduled for October 2002; and
	•	other political, social and economic developments in or affecting Brazil.

      Historically, the Brazilian government has intervened in the economy by devaluing the currency and imposing exchange, wage and price controls. In early 1999, the Brazilian government allowed the real to float freely, resulting in a 38% devaluation against the U.S. dollar from January 14, 1999 through to December 31, 2000. During 2001, Brazil’s currency experienced further significant devaluations against the U.S. dollar. These and prior devaluations have had a negative effect on our real-denominated revenues. In addition, currency devaluations can also create inflationary pressures. Inflation itself, as well as some governmental measures to combat inflation, have had significant negative effects on the Brazilian economy in the past. The recent worsening of the Argentine economic crisis has so far not significantly affected the Brazilian securities market or economy. However, due to the size and nature of Brazil’s trading relationship with Argentina, the possible expectation of corresponding risks in Brazil by foreign investors and the developing nature of the Argentine economic crisis, economic and market conditions for companies with material Brazilian operations, such as our company, could nevertheless be adversely affected by recent events in Argentina.

      IMPSAT Brazil’s results have been affected by the adverse economic situation in Brazil, including the devaluation of the Brazilian real against the U.S.  dollar. At December 31, 2000, the real traded at a rate of R$1.95 = $1.00. The real depreciated during 2001, reaching a low of R$2.78 = $1.00 during the fourth quarter of that year, and closing at R$2.32 = $1.00 at December 31, 2001. The devaluation of the real and the decline in growth in the Brazilian economy have been caused in part by the continued recession in the region, an energy crisis and rationing brought about by a continued period of drought that has affected Brazil’s hydroelectric generating capacity, a general aversion to emerging markets by foreign direct and financial investors and the overall decline in worldwide economic production. These conditions have, and can be expected to continue to have, a material adverse effect on IMPSAT Brazil’s and our company’s overall financial condition and results of operations.

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

      In the first weeks of April 2002, political instability and civil unrest plagued Venezuela after the policies of that country’s head of state, President Hugo Chavez, brought him into conflict with managers at Petroleos de Venezuela SA (or, PdVSA), the state oil monopoly. The million-member Venezuelan Workers Confederation called a general strike during the week of April 8, 2002 to support PdVSA executives in protesting Mr. Chavez’s policies (particularly his appointment of a new PdVSA board of directors) and demanding Mr. Chavez’s removal from office. The general strike was supported by the Venezuelan business association, Fedecamaras. Mr. Chavez was detained by military forces on April 12, 2002, after a massive opposition demonstration ended with gunmen reportedly killing at least a dozen opposition protesters and wounding hundreds others. An interim administration headed by Pedro Carmona, the president of Fedecamaras, was installed on April 12, 2002. However, the interim administration held office for less than two days after tens of thousands of pro-Chavez demonstrators took to the streets of Caracas to demand Mr. Chavez’s reinstatement. Mr. Chavez was restored to power on April 15. Venezuela’s recent political instability has caused the many private businesses throughout the country to close temporarily and has disrupted Venezuela’s petroleum industry, which provides the government with more than half its revenue. There is a risk that a continuation or worsening of these conditions could materially and adversely impact our future business, operations, financial condition and results of operations. Of our total consolidated net revenue from services for the year ended December 31, 2001, we generated approximately 10.3% from our operations in Venezuela.

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

      A significant portion of our costs, including lease payments for certain satellite and fiber optic capacity, purchases of capital equipment, and payments of interest and principal on our indebtedness, is payable in U.S. dollars. Our results of operations and financial conditions are therefore vulnerable to currency devaluations. Following the “pesification” decree, our contracts that were governed by Argentine law, denominated in foreign currency and existing as of January 6, 2002 were mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso, subject to adjustment pursuant to the

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      Except in Argentina (since the “pesification” decree, to the extent discussed above) and Brazil, our contracts with customers generally provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate between the local currency and the U.S. dollar at the time of invoicing. Accordingly, inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our revenues during 2001. However, given that the exchange rate is generally set at the date of invoicing and that we in some cases experience substantial delays in collecting receivables, our operations in those other countries are also exposed to exchange rate risk.

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

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

      We provide trade credit to our customers in the normal course of business. As of December 31, 2001, approximately 32.0% of our gross accounts receivable were past due more than six months. We recorded a provision for doubtful accounts of $16.8 million in 2001 compared to $4.8 million for 2000. At December 31, 2001, our provision for doubtful accounts covered approximately 90.4% of our gross trade accounts receivable past due more than six months. As our business increases with small and medium customers, we may experience an increase in irrecoverable accounts receivable. We anticipate that we could also experience an increase in our uncollectible accounts receivables due to the ongoing political and financial crisis in Argentina and its adverse impact on the creditworthiness and solvency of our Argentine customers and its potential adverse effects on our customers in neighboring countries. In response to the devaluation of the peso following the Argentine government’s adoption of the floating exchange rate system in January 2002, and the depreciation of IMPSAT Argentina’s accounts receivable (in U.S. dollar terms) as a result of the “pesification” decree, we have remeasured IMPSAT Argentina’s financial position and results of operations for 2001 using the first subsequent free-floating rate for the settlement of transactions (which was 1.65 pesos = $1.00). This resulted in a remeasurement loss of approximately $16.5 million, which is included in IMPSAT Argentina’s (and our company’s consolidated) net loss on foreign exchange for 2001. For each quarter during future periods, we will record an additional remeasurement charge if the peso continues to devalue against the U.S. dollar during the quarter. Anticipated difficulties in collecting amounts due from our Argentine customers during coming periods could have a material adverse effect on our business, results of operations and financial condition.

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

      We commenced commercial operations in 1990 and have experienced rapid growth, increasing annual revenues from $8.2 million in 1991 to $128.4 million in 1996, and $326.5 million in 2001. We recorded net losses of $34.0 million in 1998, $131.5 million in 1999, $154.1 million in 2000, and $715.3 million in 2001. Increased competition, adverse economic conditions in our countries of operation and other factors have negatively affected our rates of revenue growth and expansion. As a result, our revenue growth does not produce results capable of funding our operations or repaying our indebtedness as it falls due. We expect our significant net losses to continue. The capital markets are currently not available to us. We need to raise additional financing and/or to restructure our balance sheet. It is unlikely that we will be able to obtain additional financing without effecting such restructuring, and there is no assurance that we will be able to successfully restructure our balance sheet. If we are unable to restructure our balance sheet, obtain additional financing and achieve and sustain profitability, we will be unable to fund our operating requirements and meet our debt obligations as they come due. In light of our continuing losses, working capital deficiency, and our defaults on indebtedness, Note 1 to our consolidated financial statements filed as part of this report includes language indicating that there is a substantial doubt about our ability to continue as a going concern.

Our future success depends upon our ability to implement and manage our resources effectively

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

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

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

      We cannot assure you that we will be successful or timely in developing and marketing service enhancements or new services that respond to technological change, changes in customer requirements and emerging industry standards.

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

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

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

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

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

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

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

	•	requests by our customers for coverage of our Broadband Network outside its existing footprint
	•	changes in our customers’ service requirements
	•	technological advances by our competitors

      We may require additional financial, operational and managerial resources to expand or adapt the Broadband Network. If we are unable to expand or adapt the Broadband Network to respond to these developments on a timely basis and at a commercially reasonable cost, then our business will be materially adversely affected. In light of our current financial condition and the political and economic crises in Argentina, we do not anticipate any ability to make capital expenditures during 2002 to expand or enhance the Broadband Network to any significant extent. Our inability to make such expenditures could have an adverse effect on our customer retention and expansion.

      We are negatively impacted by Global Crossing’s insolvency

	Our Broadband Network relies on IRU capacity over Global Crossing’s network and we are entitled to significant revenues under our agreements with Global Crossing; we may lose our rights to such IRU capacity and revenues

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

      In January 2002, Global Crossing filed for protection under chapter 11 of the U.S. Bankruptcy Code. At March 31, 2002, Global Crossing was in default for a total of $5.6 million that we invoiced to them during the second half of 2001 and the first quarter of 2002. In the second week of April 2002, Global Crossing paid us $2.6 million in respect of these defaulted amounts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Effects of Global Crossing Insolvency.” Although none of the Global Crossing subsidiaries that have amounts outstanding to us are currently included in Global Crossing’s chapter 11 filing, the company believes that these payment defaults are related to the significant cash shortfalls that Global Crossing is currently experiencing. In April 2002, we submitted invoices for a total of $3.0 million for services to be rendered under our agreements with Global Crossing for the second quarter of 2002.

      The difficulties being experienced by Global Crossing, including Global Crossing’s chapter 11 proceeding, could have an adverse effect on our financial condition and operations. If Global Crossing’s bankruptcy proceedings were to expand to include any of the subsidiaries that are parties to our agreements, we likely would not receive payment on outstanding amounts due to us for previously rendered services and sales of equipment, except to the extent of our claims as unsecured creditors. At minimum, such an action could cause additional delays in our receipt of amounts due to us. It is also possible that Global Crossing could seek, in the applicable bankruptcy proceedings, to reject some or all of the contracts. In the latter case, any damages that we might have in respect of the rejected contracts would be treated as general unsecured claims in the applicable bankruptcy proceedings.

	We may need to seek alternative capacity for our Broadband Network

      To link our Broadband Network to other parts of Latin America, the United States and the world, we have secured IRU capacity on Global Crossing’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network. Global Crossing has filed for protection under chapter 11 of the U.S. Bankruptcy Code. If Global Crossing is unable to successfully restructure its balance sheet, it could be forced to liquidate its assets. If Global Crossing were to sell or terminate its South American operations as part of its bankruptcy proceedings, our rights to continue to utilize the IRUs that we have purchased from Global Crossing

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

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

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

We face significant competition in Latin America

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

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

      PTOs have competitive advantages in the marketplace

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

	•	close ties with national regulatory authorities
	•	control over connections to local telephone lines
	•	ability to subsidize competitive services with revenues generated from services they provide on a monopoly or duopoly basis
	•	reluctance of regulators to adopt policies and grant regulatory approvals that will result in increased competition

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

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

      International telecommunications carriers have greater resources than we do

      We also compete with private operators of satellite data transmission networks and terrestrial telecommunications links, and face competition from large international telecommunications carriers, such as AT&T, WorldCom and Sprint, and from other industry participants. While international telecommunications carriers

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

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

      The downturn in the telecommunications industry negatively affects us

      The regional economic recession has had throughout 2001, and continues to have during 2002, a materially negative impact on the telecommunications market in Latin America. The rate at which the industry improves is critical to our ability to improve overall financial performance. The financial difficulties currently experienced by other participants in the telecommunications industry may result in some of our competitors being able to purchase the assets of these troubled companies at depressed prices. This consolidation could result in multiple smaller competitors being absorbed into relatively few large entities (with significantly greater financial and other resources than we have, including greater access to financing), thereby increasing the operating profit margin pressures that we face. As a result of our financial difficulties, potential customers and suppliers may be unwilling to do business with us and may prefer to do business with competitors that have greater financial and other resources.

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

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

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

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PART I

General

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

      We have operations in Argentina, Colombia, Brazil, Venezuela, Ecuador, Mexico, Chile, Peru and the United States and also provide our services in other countries in Latin America. We provide telecommunications and Internet services through our networks, which consist of owned fiber optic and wireless links, teleports, earth stations and leased fiber optic and satellite links. We own and operate 15 metropolitan area networks in some of the largest cities in Latin America, including Buenos Aires, Bogotá, Caracas and São Paulo.

      In the fourth quarter of 2000, we completed the construction of an extensive pan-Latin American broadband fiber optic network (which we call our Broadband Network) connecting major cities across Argentina and Brazil, and the commencement of commercial operation of the full Broadband Network in those locations. During 2001, we developed a terrestrial long-haul link to integrate our Brazilian and Argentine Broadband Network segments into a single seamless network. Our Broadband Network allows us to enhance the services we presently provide and significantly increase our transmission speed and capacity. At December 31, 2001, the Broadband Network comprised twelve metropolitan area fiber optic networks and wireless links, extending over 1,000 route kilometers in the largest cities in Argentina, Brazil, Colombia and Peru, and long-haul fiber optic backbones in Brazil, Argentina, Chile and Colombia extending over 8,880 route kilometers. Our Broadband Network uses advanced transmission technologies, including dense wave division multiplexing, or DWDM, asynchronous transfer mode, or ATM, and Internet protocol, or IP.

      IMPSAT Fiber Networks, Inc. was organized in 1994 as a Delaware holding company to combine the IMPSAT businesses in Argentina, Colombia and Venezuela. Our operations started in Argentina in 1990 under the name IMPSAT S.A. (IMPSAT Argentina). We began operations outside of Argentina with the establishment of IMPSAT Colombia in 1991 and the establishment of IMPSAT Venezuela in 1992. New operating subsidiaries were created in Ecuador (IMPSAT Ecuador) and Mexico (IMPSAT Mexico) in 1994, in the United States (IMPSAT USA) in 1995 and in Brazil (IMPSAT Brazil) in 1998. In January 2000, we changed our company’s name from IMPSAT Corporation to IMPSAT Fiber Networks, Inc. During 2001, we commenced operations in Chile and Peru.

Services

      Our comprehensive telecommunications solutions consist of any combination of our service offerings, including the enhanced and additional services that we are able to offer using our Broadband Network in Argentina and Brazil. We currently classify these service offerings into four categories: data and value added services, Internet services, services to carriers, and telephony services.

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

	•	Connection Services. Our customers can purchase clear channels, frame relay services, ATM services and Internet protocol digital connection services to support their specific transmission requirements. Clear channels are typically purchased by customers that constantly transmit large amounts of voice,

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		data and video traffic. Frame relay and ATM services are typically purchased by customers requiring reliable and rapid transmission of variable amounts of voice, data and video traffic. We typically offer our clear channel connection services from 64 Kbps to 2 Mbps, and we intend to expand this offering to 155 Mbps of capacity. Our frame relay services are typically offered from 64 Kbps to 2 Mbps and we intend to offer our ATM services from 2 Mbps to 155 Mbps. In addition, we offer digital connections using Internet protocol with interfaces of 10 Mbps to 100 Mbps as one of our options for local data network solutions.
	•	Private Network Services. For customers that require significant bandwidth and reliable data transmission between a number of sites, we offer customized private networks that combine fiber optic, fixed wireless and satellite technology. We also provide them with a variety of other services including network management services, trouble shooting reports, quality control and value-added services. Our consultative sales process ensures that each private network is designed to meet the evolving specific business and systems requirements of each customer. We also offer services such as video conferencing and remote learning as part of our private network services.
	•	Other Value-Added Services. We offer information technology solutions and data center services designed to facilitate our customer’s e-business and e-commerce needs and optimize our customers’ business processes.

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

      Internet Services. We have offered Internet access services to corporate and ISP customers since 1996. With the completion of our Broadband Network in Argentina and Brazil, we can link our Latin American Internet backbone, as part of the Broadband Network, to the U.S. Internet through our U.S.-based point of presence using our fiber optic links in addition to our leased satellite links. With the objective of positioning ourselves as the Latin America Internet Backbone, we have deployed a series of data centers within the region.

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

      Services to Carriers. We offer dark fiber capacity, “lit” fiber services and duct capacity to ISPs and telecommunications carriers. Our network will provide customers with reliable broadband connections between and among our metropolitan area networks at high speeds. Customers that choose to purchase “lit” capacity are able to purchase an initial amount of capacity (typically 45 Mbps) and increase that capacity on demand.

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      Telephony Services. Since the completion of our Broadband Network in Argentina and the effectiveness of our license in Argentina to offer telephony services, we are able to provide switched-voice domestic and international long distance telephony services to corporate customers and resellers in Argentina, international long distance service in the United States, where we have our international hub, and international long distance service in Peru. We plan to further expand these offerings to other countries in the region, with the most significant opportunity being the deregulation of the Brazilian telephony market in January 2002. We expect to receive a license to provide switched voice services to or from Brazil during 2002. As components of our telephony services, we currently offer local, national and international long-distance services, Private Branch Exchange (PBX), toll free services and local numbering to our corporate customers as well as wholesale voice services to other carriers and resellers.

      The following table shows our company’s net revenues breakdown by service for the years ended December 31, 1999, 2000 and 2001:

(1)	Increase compared to previous year.
(2)	“Other” includes revenues from our data center services and our information technology solutions services.

The Broadband Network

      We believe that continued deregulation in Latin America will fuel demand for additional broadband capacity. To take advantage of this demand, in the fourth quarter of 2000 we commenced commercial operations of our Broadband Network, which enables us to provide high capacity, high speed telecommunications services across Latin America. Our Broadband Network consists of:

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

      We believe that our Broadband Network enables us to:

	•	cost-effectively offer more bandwidth-intensive services, including intranet and extranet services
	•	reduce our costs for leased satellite capacity and leased telecommunications links as a percentage of our net revenues
	•	create a high capacity, pan-Latin American Internet backbone

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	•	offer Latin American companies more efficient access to the U.S. Internet backbone
	•	continue to provide consistent, high quality service by keeping our customer traffic on our network

      During 2001, we completed a terrestrial long-haul link of the Broadband Network between the cities of Curitiba and Porto Alegre in Brazil and the city of Parana in Argentina. The new link connects with the Broadband Network that was deployed in Argentina, Brazil and Chile and results in the creation of a fully integrated terrestrial fiber optic network connecting Santiago, Chile; Buenos Aires, Argentina; and São Paulo and Rio de Janeiro, Brazil with points in between. The Brazilian portion of this new link was completed pursuant to 25-year IRU capacity swap agreements with Geodex Communications do Brasil Ltda. (formerly Convexx Communications do Brasil Ltda.), pursuant to which we provide optical fiber cable, fiber capacity and related services over 2,600 route kilometers on our Broadband Network in Argentina and Brazil and, in exchange, receive from Geodex twelve pairs of fiber capacity and related services over 1,600 route kilometers linking Curitiba and Uruguaiana, in Brazil. Currently, both our and Geodex’s portions of this new link are composed of “dark” fiber and are not operational. This transaction was accounted for as a non-monetary transaction under U.S. GAAP. Accordingly, our consolidated financial statements do not reflect any revenue or any gain or loss in connection with the transaction. For a further explanation of the accounting treatment of this transaction, please see Note 2 to our consolidated financial statements, “Summary of Significant Accounting Policies — Non-Monetary Transactions.”

Customers

      Overview. We have grown rapidly since the commencement of our operations in 1990. Our customer base has increased from 125 corporate customers in two countries at December 31, 1992 to 2,877 corporate customers in nine countries at December 31, 2001. Larger entities, which often have significant needs for reliable, cost-effective data transmissions and other telecommunications services, were the first to use our customized telecommunications services. As a result, a significant portion of our revenues has been derived from our largest customers. A significant number of our customers, including our largest customers, are in Argentina and Colombia, which, having commenced in 1990 and 1992, respectively, are the locations of our longest-standing operations. Our growth has been significant in Brazil, where we commenced operations in 1998. Our customer base in that country has grown from 48 as of the end of 1998 to 387 as of the end of 2001. As our business further matures and as we extend the operation of the Broadband Network, we expect that the average size of our customers will decline.

      Our customers consist of financial institutions, major governmental agencies, and leading national and multinational corporations and private sector companies, including Repsol YPF, Royal Dutch Shell, Perez Companc, Siemens and Reuters. Our ten largest customers accounted for approximately 22.9% of our revenues in 2001 and approximately 22.0% in 2000.

      Our ten largest customers as of December 31, 2001 were:

	•	subsidiaries of Global Crossing Ltd., a Bermuda-headquartered corporation that constructs, and offers carrier’s carrier services over, worldwide terrestrial and submarine fiber optic networks
	•	Gobierno de la Provincia de Buenos Aires, the local government of the province of Buenos Aires
	•	Confederaçaõ Nacional da Industria, Brazil’s national association of private industrial companies
	•	subsidiaries of America Online, Inc., a Dulles, Virginia, USA-based provider of interactive services, Web brands, Internet technologies and e-commerce services, that is a wholly-owned subsidiary of AOL Time Warner Inc.
	•	Perez Companc S.A., an Argentine energy conglomerate
	•	Corporacion Nacional de Ahorro y Vivienda, or Conavi, one of Colombia’s largest financial institutions
	•	Banco de la Nación Argentina, a state-owned bank and the largest bank in Argentina, with over 500 branches throughout Argentina

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	•	Empresa de Telecomunicaciones de Bogotá S.A., E.S.P., one of Colombia’s largest telecommunications companies
	•	Banco Mercantil SAICA, one of the largest financial institutions in Venezuela
	•	Repsol YPF S.A., a multinational integrated oil company that is one of the largest companies in Argentina and has operations in other Latin American countries

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

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

      The ongoing severe economic downturn in Argentina and recessionary economic conditions in Latin America as a whole, has adversely affected many of our customers and caused a number of them to terminate their contracts with us, fail to renew their contracts, or reduce the amount of services contracted. Significant customer losses during 2001 included the following:

	•	360networks, which accounted for $2.9 million of our 2001 revenues (See “Legal Proceedings”)
	•	CTC Mundo, a customer of IMPSAT USA that generated $2.0 million in revenues during 2001
	•	Fibertel, an ISP customer of IMPSAT Argentina that accounted for $0.9 million in 2001 revenues
	•	Banco de la Republica, the central bank of Colombia, which generated $0.9 million in revenues during 2001
	•	Intermedia Communications Corporation, an ISP that provided $0.6 million in 2001 revenues as a customer of IMPSAT USA
	•	Onda Provedor Ltda., which generated $0.5 million in revenues during 2001 as an ISP customer of IMPSAT Brazil.

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      Except in Brazil (and in certain instances since the recent “pesification” decree, in Argentina), our contracts generally provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate at the time of invoicing between the local currency and the U.S. dollar. The revenues of our customers are generally denominated in local currencies. Although our customers include some of the largest and most financially sound companies and financial institutions in their markets, devaluation of such currencies relative to the U.S. dollar could have a material adverse effect on the ability of our customers to pay us for our services. A currency devaluation could also result in our customers seeking to renegotiate their contracts with us or, alternatively, defaulting on their contracts.

Sales, Marketing and Customer Services

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

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

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

Competition

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

	•	PTOs in each country where we operate
	•	other companies that operate competing satellite and terrestrial data transmission businesses, including newer entrants from more developed telecommunications markets outside of Latin America
	•	large international telecommunications carriers

      In the past, the PTOs and international telecommunications carriers have focused on local and long-distance telephony services. In the future, however, they may be expected to focus on the private telecommunications network systems segment of the telecommunications market. These entities have significantly greater financial and other resources than we do, including greater access to financing. These competitors may also be able to subsidize their private telecommunications network businesses with revenues from their other business lines.

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

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

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

	•	Diveo Broadband Networks, which operates a pan-regional fiber ring network connecting its seven Internet data centers located in Argentina, Brazil, Colombia, Mexico and Florida, United States and provides broadband communications services over fixed wireless and fiber optic broadband networks
	•	MetroRED Telecomunicaciones, owned by Fidelity Investments, a data transmission service operator in Argentina, Brazil and Mexico that offers local network services in the cities of Buenos Aires in Argentina, São Paulo and Rio de Janeiro in Brazil, and Mexico City in Mexico
	•	Pegasus Telecom S.A., a provider of broadband data transmission services throughout 25 cities in Brazil and an affiliate of Brazilian fixed line and wireless operator, Telemar Participacoes S.A.
	•	Engenharia de Redes S.A., a Brazilian infrastructure and data services provider that uses both fiber optic and wireless links
	•	NetUno, a local exchange carrier and provider of broadband local access, Internet and private network services in Venezuela
	•	TechTel (an Argentine telecommunications company jointly owned by Grupo Techint SA, one of Argentina’s largest industrial groups, and Telmex (Telefonos de Mexico S.A. de C.V.), Mexico’s dominant telecommunications carrier), which offers long distance, data transmission and basic telephony services in Argentina and has announced plans to expand its operations into Uruguay
	•	OptiGlobe Communications, Inc., a data center service provider headquartered in Maryland in the United States that operates data centers in Sao Paulo, Rio de Janeiro, Buenos Aires, and Mexico City

      In the third category, major telecommunications carriers have entered or indicated their intention to enter the market as deregulation in Latin America and elsewhere opens new market opportunities. For example, AT&T Latin America Corp., which is controlled by AT&T Corporation, was formed in October 1999. AT&T Latin America has operations in Argentina, Brazil, Chile, Colombia and Peru. Increasing competition may significantly affect our pricing policies. We cannot assure you that competition from this and other alliances will not adversely affect our financial condition or results of operations.

      Furthermore, we cannot assure you that competing technologies will not become available that will negatively affect our position, although we believe that we have the flexibility to act quickly to take advantage of any significant technological development. For example, newer technologies such as DSL can significantly enhance the speed of traditional copper lines. These technologies enable our PTO competitors to offer customers new high-speed services without undergoing the expense of replacing their existing twisted-pair copper networks. This, in turn, could negate our last mile advantage. Our private telecommunications services could also face future competition from entities using or proposing to use new or emerging voice and data

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

      The principal barriers to entry for prospective providers of private telecommunications network services such as ours are the development of the requisite understanding of customer needs and the technological and commercial experience and know-how, infrastructure to provide quality services to meet those needs and working capital.

Regulation

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

      Cross-Border Service. We provide integrated data, voice and video transmission under the Interplus name between and among nineteen Latin American and Caribbean countries and the United States. In November 2000, we were granted a license to provide switched voice services to or from Argentina, and expect to receive authorization to provide these services in Brazil in 2002. International private line services such as Interplus are traditionally provided by local carriers in each country acting as correspondents and establishing dedicated telecommunications links between their facilities. Due to our pan-Latin American presence, we are often able to offer our Interplus service using our own facilities and personnel at both ends of the private line circuit. As a result of this end-to-end control, we maintain customer service and quality assurance at both ends of an Interplus link and realize better margins than when we use a correspondent carrier.

      In countries where we do not maintain customer premises equipment or where we are not authorized to operate in that fashion, our Interplus service uses our facilities in the originating country to connect with a correspondent local carrier in the destination country or vice-versa. To date, we have signed Interplus correspondent agreements with carriers in several Latin American and Caribbean countries. We charge customers a monthly fee for Interplus that is based on the capacity of the circuit provided.

      Deregulation. Various countries in Latin America have taken initial steps towards deregulation in the telecommunications market during the last few years. Several Latin American countries have completely or partially privatized their national carriers, including Argentina, Brazil, Mexico and Venezuela. Furthermore, some countries have scheduled the demonopolization of their dominant telecommunications providers. For example, Argentina and Venezuela completed the demonopolization of public telephone services by their PTOs during 2000. We believe that this trend toward deregulation, while likely to increase competition, will also present significant opportunities for us to expand our private telecommunications network services to, from and within the region, as well as to present opportunities for us in areas of telecommunications currently permitted to be conducted only by the PTOs.

Employees

      As of December 31, 2001, we employed a total of 1,370 persons, of whom 446 were employed by IMPSAT Argentina, 316 were employed by IMPSAT Brazil, and 226 were employed by IMPSAT Colombia. We do not have any long-term employment contracts with any of our employees, including management, and none of our employees are members of any union. We believe that our relations with our employees are good.

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Item 2.     Properties

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

      Fiber Optic Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless long-haul, high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from the Pacific Ocean at Valparaiso, Chile to the Atlantic Ocean, at Los Toninas, Argentina, and from Buenos Aires, Argentina into Curitiba, Rio de Janeiro and São Paulo, Brazil. We also own and operate a long haul fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network to other parts of Latin America and the world, we have purchased indefeasible rights of use (IRU) capacity on Global Crossing Ltd.’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network. Global Crossing’s South American network is an 18,000 km undersea and terrestrial fiber optic network that encircles that continent. This capacity enables our company to transmit telecommunications traffic seamlessly from the United States to major countries in South America using the latest fiber optic technology. For a discussion of certain risks that could adversely affect our rights to IRU capacity on Global Crossing’s network, see “Certain Considerations — We are negatively impacted by Global Crossing’s insolvency.”

      In addition to our IRU capacity on Global Crossing’s undersea fiber optic networks, we are a member of the Americas-1 and Columbus-II undersea fiber optic cable consortia, and have purchased an initial total capacity of 2 Mbps on each system. Americas-1, which commenced commercial operation in December 1994, is a 4,960 mile fiber optic cable system connecting Vero Beach, Florida with the U.S. Virgin Islands, Trinidad, Brazil and Venezuela. Columbus-II links Mexico, the United States, the U.S. Virgin Islands, Spain, Portugal and Italy with about 7,440 miles of fiber optic cable. We also have reserved up to 18 Mbps, 4 Mbps and 24 Mbps of capacity on the Americas-II, Pan American and Arcos I undersea fiber optic cable networks, respectively. The 8,300 km Americas-II fiber optic submarine cable, which commenced service in the last quarter of 2000, connects St. Croix, Puerto Rico, Curacao, Venezuela and Brazil. Pan American began operations in mid-February 1999 and runs between the U.S. Virgin Islands, Aruba, Venezuela, Colombia, Panama, Ecuador, Peru and Chile. Arcos I, an 8,600 km fiber optic cable system, connects the United States with 14 Caribbean and Latin American nations.

      Data Centers. To complement our Broadband Network infrastructure, we have established and operate in major cities in Latin America 14 advanced data center hosting facilities with an aggregate of approximately 500,000 gross square feet. These state-of-the-art facilities, which are capable of supporting the most advanced application hosting services, are located in Buenos Aires, Mendoza, Córdoba and Rosario in Argentina; São Paulo, Rio de Janeiro and Curitiba in Brazil; Santiago, Chile; Fort Lauderdale, United States; Mexico City, Mexico; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; and Lima, Peru.

      Teleports. We own and operate teleports in Buenos Aires, Argentina; São Paulo, Brazil; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; Mexico City, Mexico; Lima, Peru; and Fort Lauderdale, Florida, United States. In addition to the teleport in Fort Lauderdale, Florida, which commenced operations in January 1999, IMPSAT USA operates leased teleport facilities in New Jersey. We also own and operate regional teleports in Mendoza, Córdoba, Rosario, Tucumán, Mar del Plata, La Plata and Neuquén in Argentina; Medellín, Cali and Barranquilla in Colombia; Guayaquil, Ecuador; and Rio de Janeiro and Curitiba, Brazil.

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      Satellite Capacity. Our satellite transmissions use both C-band (4-7 GHz) and Ku-band (10-18 GHz) frequencies. As of December 31, 2001, we had a total available leased capacity of 967 MHz. Our lease payments for satellite capacity totaled approximately $39.1 million in 2001. We will contract for additional leased satellite capacity if business requires. A portion of our satellite capacity is leased by our wholly-owned subsidiary, International Satellite Capacity Holding, Ltd. This subsidiary’s principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our operating subsidiaries. We believe that this method of centralizing our leasing of telecommunications capacity provides us with better terms.

Item 3.     Legal Proceedings

      We are involved in or subject to various litigation and legal proceedings incidental to the normal conduct of our business, including with respect to regulatory matters. Except as described below, we were not during 2001, and currently are not, involved in any material legal proceedings.

      IPO Allocations Class Action. On November 1, 2001, a lawsuit was filed in the United States District Court for the Southern District of New York against our company, certain of our company’s current officers and directors, and the underwriters to the our initial public offering (IPO). This lawsuit alleges on behalf of a proposed class of all shareholders that our company and its underwriters violated various provisions of the securities laws in connection with the IPO in February 2000. The plaintiff has proposed a putative class from the date of the IPO to December 6, 2000. In August 2001, the court ordered that this suit be coordinated for all pre-trial purposes in a proceeding styled In re Initial Public Offering Securities Litigation, 21 MC 92, an intra-district proceeding involving approximately 900 lawsuits concerning the initial public offerings of approximately 310 companies and 48 underwriters. The complaint does not seek a specified amount of damages. It is our present understanding that the plaintiffs intend to file an amended complaint shortly. We believe that we have meritorious defenses to the allegations in the complaints and intend to defend the litigation vigorously. However, because this action is in its early stages, our company cannot make any prediction as to its outcome. We have certain insurance policies with respect to such claims and have filed a claim with our carriers regarding this matter.

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

      Our IRU dark fiber, capacity services and construction contracts with 360networks contemplated total payments of approximately $98.8 million in advance upon delivery of the IRU dark fiber, capacity services and conduit construction to 360networks and additional recurring payments, totaling approximately $45.0 million over the term of the contracts, for maintenance services. As of the termination of the contracts, 360networks had paid us a total of $25.8 million and was in default on additional payments totaling $32.0 million. In addition, 360networks is in default on payments for collocation services totaling $0.8 million.

      We have commenced arbitration and litigation proceedings against 360networks for damages under the terminated contracts for the provision of IRU dark fiber and capacity services, as contemplated by the relevant agreements. 360americas and the other subsidiaries with which we had contracted were not included in the series of bankruptcy and insolvency filings made in the United States and Canada by their parent, 360networks, Inc. and certain of its other affiliates. 360networks, Inc. has announced that it intends to seek a buyer of its South American undersea fiber optic cable system. We intend to aggressively pursue our remedies

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      During the pendency of the arbitration and litigation proceedings, we will continue to include as Deferred Revenues on our balance sheet the amount received from 360networks as downpayments under the terminated contracts, after deducting amounts that were due and payable at the time of the termination of the 360networks contracts. As of December 31, 2001, the balance of such Deferred Revenues was $22.6 million.

Item 4.     Submission of Matters to a Vote of Security-Holders

      There were no matters submitted during the fourth quarter of 2001 to a vote of security holders, through the solicitation of proxies or otherwise.

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PART II

Item 5.     Market for Registrants’ Common Equity and Related Stockholder Matters

      Our common stock has been traded on the Nasdaq National Market under the symbol “IMPT” since the effective date of our initial public offering on February 1, 2000. Prior to that time, including during periods covered by this Report, there was no public market for our common stock. On March 28, 2002 the last reported price of our common stock on the Nasdaq National Market was $0.05 per share. Based upon information supplied to us by the registrar and transfer agent for our common stock, the number of common stockholders of record on March 28, 2002 was 61, not including beneficial owners in nominee or street name. We believe that a significant number of shares of our common stock are held in nominee name for beneficial owners.

      As we have previously announced (see “Reports on Form 8-K” under Item 14(b) of this Report), we have received a notice from the Nasdaq National Market warning that our stock may be delisted because our common stock has failed to maintain the minimum bid price and the market value of public float required by Nasdaq’s Marketplace Rules. In accordance with Nasdaq’s Marketplace Rules, we have 90 calendar days, or until May 15, 2002, to regain compliance. If we are unable to demonstrate compliance on or before May 15, 2002, Nasdaq staff will provide us with written notification that our common stock will be delisted. In such an event, we would seek to have our common stock traded on the Nasdaq Over-The-Counter Bulletin Board.

      The following table shows the high and low sales price of our common stock for each fiscal quarter during the year ended December 31, 2001, as reported on the Nasdaq National Market System.

      Our board of directors has not declared any dividends on our common stock since our inception.

Item 6.     Selected Financial Data

      The following selected financial data are for our company on a consolidated basis and separately for IMPSAT Argentina, in each case in accordance with U.S. GAAP. The following financial data have been derived from our company’s audited consolidated financial statements and IMPSAT Argentina’s audited financial statements for the respective years. The selected financial data set forth below should be read in

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OUR COMPANY

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(1)

“EBITDA” is defined as operating income plus depreciation and amortization expense and the asset impairment charge. We are presenting EBITDA because some investors use it as a measure of a company’s ability to service its debt and as a measure of operating performance. However, EBITDA is not determined using generally accepted accounting principles, and therefore our EBITDA is not necessarily comparable to EBITDA of other companies. Investors should not view EBITDA as an alternative to cash flows calculated under generally accepted accounting principles, which we have also presented. EBITDA is not “free cash flow,” because it will be used to pay interest expense and remaining amounts after we pay our interest expense will be used to pay taxes and make capital expenditures.

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IMPSAT ARGENTINA