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UNITED STATES

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

For the fiscal year ended December 31, 2002

Commission file number: 0-31010

AT&T LATIN AMERICA CORP.

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

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

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

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE

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

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

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

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PART I

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

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

Restructuring Activities

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

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

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

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

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

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

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

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

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

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

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

Liquidity

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

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

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

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

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

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

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

Relationship with AT&T Corp.

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

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

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

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

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Relations with Secured and Unsecured Creditors

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

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

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

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

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

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Relations with Customers

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

Services

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

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

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

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

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

Market Strategy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Customer Care

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

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

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

Networks

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

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

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

      Our broadband communications networks include the following components:

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

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

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

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

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

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

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

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

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

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

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

Website Disclosure

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

Operations By Geographic Areas And Segments

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

Customers

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

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

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

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

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

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

      Our customers in Chile today include, among others:

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

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

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

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

      Our customers in Peru today include, among others:

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

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

Strategic and Regional Accounts

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

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

Competition

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

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

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

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

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

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      Chile. Chile opened its fixed local and long distance markets to competition in 1994, and its communications market continues to be very competitive. There are more than nine fixed local service providers (although not all of them offer services nationwide) and more than fifteen carriers or operators in the long distance segment. Currently, five providers offer both local and long distance services. Four of them also offer data services; these are Telefónica Empresas, Entel, Teleductos S.A and Manquehue Net. We believe that in Chile our main competitors in the data transmissions market are Telefónica Empresas, Entel and Teleductos. In recent months Chilesat Empresas (formerly known as Télex Chile) has developed a very aggressive campaign in order to position itself in the Corporate Market. Chilesat has focused its business on the Corporate Market offering data transmission, Internet access, value added services (prepaid tickets) and long distance services. Chilesat changed its brand and corporate image after being acquired by the investment fund Southern Cross and GE Capital. In the fixed voice market, the strongest players are the former incumbents Telefónica CTC and Entel Chile.

      Colombia. Colombia’s communications market has historically been dominated by the incumbent long distance operator, Telecom (Empresa Nacional de Telecomunicaciones). There are several companies that provide value-added services to corporate customers with end to end fiber optic solutions for the seven largest cities in Colombia. The rest are serviced mainly through satellite and radio-based networks owned by third parties. In the metropolitan areas, specifically in Bogotá, there are a limited number of high-speed communication service providers. We believe that our main competitors in data and Internet services are Impsat, Telecom and Emtelco. Telecom owns approximately 2.2% of the equity interest of our subsidiary, AT&T Colombia S.A.

      Peru. Telefónica del Perú, a subsidiary of Telefónica de España, is the predominant operator in Peru’s communications market. Telefónica del Perú was formed by the merger in 1994 of the former incumbents, Compañía Peruana de Teléfonos and ENTEL. BellSouth, another carrier which focuses primarily on cellular and public pay phone services in Lima and other Peruvian cities, also provides limited frame relay services over its own small fiber optic loop. During 2002 Americatel has become a strong competitor, primarily in the long distance market, in particular in the call per call segment. The call per call system was implemented in Peru during 2002 and the competition between the carriers has focused on price. Our subsidiary, AT&T Peru, is second to Telefónica del Perú in market share for voice and data transmission services excluding wireless communications. AT&T Peru’s operations cover the fifteen most important provinces in the country, positioning it as one of the main competitors of Telefonica del Peru in national carrier services, mainly in the

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Employees

      As of December 31, 2002, we had a total of 1,063 employees.

      We ended 2002 with approximately 695 fewer employees than we had at the end of 2001 primarily as a result of headcount reductions that took place during the third and fourth quarters as part of our austerity plan. That austerity plan involved not only reductions in headcount but also significant reductions in other areas of our overhead such as advertising, real estate and travel expenses. We are continuing to conserve cash on hand by not servicing material indebtedness and by continuing to reduce operating expenses and capital expenditures. We believe that our future success, and the success of our restructuring efforts, depend in large part on our ability to retain highly skilled and qualified personnel. We believe that we offer prospective employees competitive compensation and benefits. We also are implementing a retention program under which retention payments will be payable following completion of key milestones in the restructuring process, subject to the continued employment of employees covered by the plan; however, there can be no assurance that the retention plan will be effective in retaining all employees covered by the plan. In addition to permanent employees, we also use the services of contract technicians for the installation and maintenance of our network and other contract employees for specific functions. As of March 1, 2003, there were 985 total employees excluding 27 at corporate headquarters.

Regional Vehicle Agreement with AT&T Corp.

      We entered into a “regional vehicle agreement” with AT&T Corp. at the time of the FirstCom merger. This section describes the material terms of the regional vehicle agreement and related provisions of our certificate of incorporation. Some of the terms of the regional vehicle agreement relate to our relationship with Concert, AT&T Corp.’s global joint venture with British Telecom. In October 2001, AT&T announced that Concert would be unwound and that transaction was completed in February 2002.

      If AT&T disengages from its equity interest in us, we believe that the regional vehicle agreement will be terminated.

      The parties defined the overall scope and nature of our operations in the regional vehicle agreement as well as in our certificate of incorporation.

      The regional vehicle agreement and the certificate of incorporation define:

	•	where we may operate;
	•	what communications services we may provide and, in some cases, to whom those services may be provided; and
	•	the conditions under which AT&T Corp. and its affiliates may compete with us.

      The regional vehicle agreement has an indefinite term and in general will terminate only by mutual agreement of AT&T Corp. and us. However, AT&T Corp. may terminate the regional vehicle agreement at any time after the termination of our service mark license agreement with AT&T Corp., which license agreement governs our use of the AT&T service mark and logo in our business. We have been informed by AT&T Corp. that it intends to terminate the regional vehicle agreement if the service mark license is terminated.

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Our Region

      Our certificate of incorporation permits us to operate only in the countries in South America and the Caribbean, plus Panama but excluding Cuba. In addition, the regional vehicle agreement restricts us from operating in Venezuela.

Our Services

      Our certificate of incorporation limits our business generally to the provision of telecommunications services. Following is a description of the services that we are permitted to provide under the regional vehicle agreement, as well as limitations on our services:

      Permitted Services. We may provide the following services:

	•	long distance;
	•	1-800/toll-free;
	•	local voice delivered through fixed lines;
	•	Internet access;
	•	e-commerce or electronic commerce;
	•	fixed wireless for network connections;
	•	video conferencing;
	•	web hosting, which involves providing or managing equipment to operate an Internet web site;
	•	voice over Internet Protocol, which involves the transmission of voice over an inter-networking standard that enables communication across the Internet regardless of the hardware or software used;
	•	AT&T calling card services, and AT&T Direct® services, which allow callers to access AT&T networks from points throughout the world;
	•	dedicated line services, which involve the leasing of network lines expressly for connecting two or more users. These dedicated lines establish a permanent circuit dedicated solely to the use of the particular customer;
	•	switched digital services, which allow users to establish end-to-end digital connections over shared facilities on an as-needed basis, similar in concept to making a telephone call; and
	•	virtual network services, which involve a connection of customer networks to an operator’s network to create an overall capability for voice and data services that acts functionally like a network owned or operated exclusively by that customer.

      We may also provide data services using the following protocols for transmitting data over a communications network:

	•	packet X.25, an older protocol designed for transmitting data files in pieces or “packets” over analog communications networks that were originally designed for voice traffic;
	•	frame relay, a newer protocol designed for transmission of data over digital networks in packets of varying length; and
	•	ATM, or asynchronous transfer mode, an even newer protocol, designed for transmitting data in fixed-size packets or “cells” to enable networks to accommodate many different transmission systems and permit transmission of a mix of voice, data and video.

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      Prohibited Services. The regional vehicle agreement limits our ability to provide some services. We may not provide:

	•	mobile wireless/personal communications services;
	•	cable telephone or cable services, which include telephone, data and video services, as well as Internet access, delivered through networks typically used to deliver cable television; or
	•	cross-border transport services between two or more countries to international carriers and select services involving the arrangement, management and delivery of termination of international communications traffic.

      In addition, we may not provide solutions services, such as outsourcing professional services and systems integration. Outsourcing professional services include:

	•	providing professional services relating to network architecture validation, implementation, operations and life cycle management, which include confirming that a network’s design works efficiently, installing and testing network equipment and managing the need for change to the network;
	•	business process consulting and migration planning and implementation, which include planning to ensure that a customer’s network properly supports the customer’s objectives and planning for and implementing changes to that network; and
	•	ownership and acquisition of assets from and on behalf of customers related to providing outsourcing professional services.

      Systems integration involves:

	•	advising clients how best to use information technology to achieve their ends and to reengineer business processes to make organizations work more effectively;
	•	specifying, designing or building integrated business systems for or on behalf of clients;
	•	managing the change to those systems for or on behalf of clients;
	•	supporting, maintaining, enhancing, operating or further developing those systems for or on behalf of clients, providing program or project management and integration of customer-defined individual customer solutions; and
	•	providing other related services required or requested by clients in connection with the services listed above.

      Systems integration services do not include the underlying capability to provide services.

      Managed Network Services. Although we may not provide solutions services, we may provide managed network services to companies other than multinational corporations reserved for the Concert global venture between AT&T Corp. and British Telecom. Managed network services include providing:

	•	services to a customer that consist solely of providing and maintaining the elements of a customer’s wide area communications network, which is a network connecting two or more customer sites, each of which may operate an internal local area network;
	•	services to the extent relating to a customer’s wide area communications network, directly related planning, design, installation, maintenance and ongoing support functions; and
	•	equipment on the customers’ premises at the interface between a wide area communications network and the remainder of the customer’s networking environment insofar as that equipment facilitates:

	•	the maintenance of the customer’s wide area communication services;
	•	the recording of performance data with respect to the customer’s wide area communications services;

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	•	the provisioning of new wide area communications services to the customer or changes in the parameters of these services; or
	•	the integration of multiple wide area communications services, excluding in the case of the first two items listed in this paragraph any such service or equipment that materially extends services beyond the interface described above further into the customer’s non-wide area communications network.

      We do not believe that this restriction on our providing managed network services to multinational customers reserved for Concert will materially affect our ability to implement our growth strategy, especially in light of Concert’s dissolution.

      To the extent we provide services under the AT&T Latin America brand or other AT&T Corp. brands, there are service limitations in the service mark license agreement with AT&T Corp., which are described below.

Competition by AT&T Corp.

      The regional vehicle agreement limits the ability of AT&T Corp. and its subsidiaries to compete with us. It also places obligations on AT&T Corp. if it acquires our competitors with specific characteristics, as described below.

      The limitations on competition and the obligations of AT&T Corp. relating to the acquisitions of competitors discussed below do not apply to Concert or companies related to the AT&T Global Network Services companies, AT&T Corp.’s Liberty Media group, now spun-off, or AT&T Corp.’s acquisition of MediaOne, now part of AT&T Broadband, or to any person in which any of those companies has an equity interest.

      In addition, restrictions relating to competition with us do not apply to:

	•	services using assets owned or controlled by the AT&T Global Network Services companies; or
	•	services provided by AT&T Corp. or its subsidiaries in connection with providing managed network services or outsourcing professional services.

      Outsourcing professional services include the provision of professional services relating to network architecture validation, implementation, operations and life cycle management. These services include business process consulting, migration planning and implementation, but not managed network services. Outsourcing professional services also include the ownership and acquisition of assets from and on behalf of customers related to the provision of outsourcing professional services.

      In 2002, AT&T Corp. informed us that it would deploy the South American portion of its global network through its existing AT&T Global Network Services companies. This deployment will enable AT&T Corp. to compete with us in providing international services to primarily MNC customers.

      Competitive Services. Except as described above, AT&T Corp. and its existing subsidiaries may not offer customers a number of services in our region unless they are obtained from us. These services include:

	•	long distance;
	•	1-800/toll-free;
	•	local voice delivered through fixed lines;
	•	Internet access;
	•	dedicated line services, which involve the leasing of network lines expressly for connecting two or more users. These dedicated lines establish a permanent circuit dedicated solely to the use of the particular customer;

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	•	switched digital services, which allow users to establish end-to-end digital connections over shared facilities on an as-needed basis, similar in concept to making a telephone call; and
	•	virtual network services, which involve a connection of customer networks to an operator’s network to create an overall capability for voice and data services that acts functionally like a network owned or operated exclusively by that customer.

      These services also include data services using the following protocols for transmitting data over a communications network:

	•	packet X.25, an older protocol designed for transmitting data files in pieces or “packets” over analog communications networks that were originally designed for voice traffic;
	•	frame relay, a newer protocol designed for transmission of data over digital in packets of varying length; and
	•	ATM, or asynchronous transfer mode, an even newer protocol designed for transmission of data in fixed-size packets or “cells” that enable networks to accommodate many different transmission systems and permit transmission of a mix of voice, data and video.

      Regional Acquisitions. AT&T Corp. and its subsidiaries may acquire our competitors. However, except as described below, if that competitor earned more than half of its revenues in the previous fiscal year in our region of operations from the services described under the above heading “Competitive Services”, AT&T Corp. or its relevant subsidiary would be required either to:

	•	cause that competitor to cease offering those services; or
	•	offer to sell to us for cash at fair market value the portion of the competitor’s business that primarily relates to those services in our region of operations.

Service Mark License Agreement with AT&T Corp.

      AT&T Corp. has entered into a service mark license agreement with us that became effective when the FirstCom merger was completed.

      Service Mark License Agreement with AT&T Corp. Our service mark license agreement with AT&T Corp. provides for AT&T Corp. to license service marks, including “AT&T” and the AT&T with a fanciful globe design mark, to us for our use. We may also use the “AT&T” mark as part of our trade and corporate names so long as at least half of the licensed services meet service specifications provided by AT&T Corp. We may not use any mark other than a mark licensed by AT&T Corp. for the services described under the heading “Services” above without AT&T Corp.’s consent.

      During the term of the service mark license agreement, we are obligated to pay a fee to AT&T Corp. every six months equal to the greater of $2.5 million and a designated percentage of our gross revenues, currently 3.25%. The fee is creditable against certain specified brand management and service marketing expenses we incur in our local operations. For the years ended December 31, 2002, 2001 and 2000, we expensed approximately $5.6 million, $6.1 million and $1.7 million, respectively, related to this service mark license agreement fee.

      The initial term of the license ends on August 28, 2005. The agreement will automatically renew for an additional five years if we are not in material default under or breach of the license agreement. AT&T Corp. may terminate the license prior to the end of its scheduled term in the event of non-payment by us, if AT&T Corp. no longer owns shares having voting control of our Company or if we misuse the marks or otherwise materially breach our obligations under the service mark license agreement and are not able to correct the breach in a timely fashion.

      If AT&T Corp. were no longer to hold a majority of the equity interest in the Company, we expect that the service mark license would be terminated or phased out over time.

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Regulations and Licenses

      Argentina. The Argentine government’s liberalization of the telecommunications sector began in 1989 with the restructuring and privatization of ENTEL (Empresa Nacional de Telecomunicaciones), the state-owned monopoly telecommunications operator, into two regional telecommunications service providers. Two consortia purchased these regional incumbent providers: Telecom Argentina (Telecom Italia and France Telecom) which operates in the northern region of Argentina and Telefónica de Argentina (Telefónica de España and financial partners) which operates in the southern region of the country. The exclusivity in basic telephone services enjoyed by the incumbents ended in 1999 when two consortia led by Movicom (Compañía de Radio Comunicaciones Moviles, a BellSouth affiliate) and CTI (Compañía de Teléfonos del Interior, a GTE Mobile Communication International affiliate) respectively, were authorized to offer nationwide local and long distance services.

      The national data and valued added services were not included in the exclusivity granted to the incumbents. Consequently, any telecommunications provider could apply for licenses to provide such services. At least eight main companies, including Telefónica de Argentina and Telecom Argentina (through their affiliates), Keytech LD (now AT&T Argentina) and Impsat, initiated such operations using terrestrial and satellite-based access platforms.

      In March 1998, the Argentine government set up a plan to liberalize the market by November 2000. In September 2000, Decree No. 764 enacted new rules on interconnection, licensing, universal service, and spectrum administration. As all market segments were opened, AT&T Argentina, among other companies like Impsat, MetroRed, Techtel and Diveo, were authorized to offer not only data and value added services, but also local and long distance telephony.

      Under the new interconnection regime, AT&T Argentina was able to enter into interconnection agreements with the incumbents Telecom Argentina and Telefonica de Argentina and with other network operators including cellular providers. As a result of new economic regulations issued in early 2002, relating to the conversion of pricing of contracts denominated in US$ into local currency, AT&T Argentina negotiated with the other telecommunications companies in order to adjust the interconnection charges.

      At the end of 2001, the regulator issued a resolution which implemented the multi-carrier system (a system that allows end-users to select a long distance carrier of their choice on a call-by-call or contractual basis). This resolution faces significant opposition by most providers, including AT&T Argentina, due to mandatory obligations to provide services which restricts competition, and the short timetables designated for providing the services , as well as insufficient definition of, among other things, uncollectibles and billing. On February 4, 2003, the Secretariat of Communications issued Resolution No. 75 by which amended the prior rule and directed the providers of local telephony to have their systems ready by June 2003. AT&T Argentina is currently analyzing the terms and scope of the new resolution and its impact on its business plans.

      Brazil. Brazil’s telecommunications laws were significantly revised in September 1997 when the Brazilian Congress enacted the General Telecommunications Law and authorized the creation of ANATEL, the sector’s regulatory agency. In 1998, the Telebrás operating companies were privatized and its fixed-line communications business was divided into three incumbent local carriers, Telefónica (formerly Telesp), Brasil Telecom (formerly Tele Centro Sul), Telemar (formerly Tele Norte Leste), each of which serves a different geographic area, and Embratel, the long distance carrier.

      The Brazilian government then sought to create a regulated duopoly structure by selling at auction “mirror” licenses allowing one competitor to provide communications services over public switched networks in each of the three areas, and one competitor to provide long distance services (a public switched network is a network available to all users and not dedicated to a particular user). These “mirror companies” are Vesper (mirror in two regions, for Telefónica and Telemar), Global Village Telecom (mirror in one region, for Brasil Telecom) and Intelig (mirror for Embratel, in long distance services).

      Under the new regulatory framework, Brazil’s telecommunications services were classified as restricted services or collective interest services. Further, services are offered under either the public regime or the private regime. Services offered under the public regime are highly regulated and subject to universal service

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      As currently defined, collective interest services are those that must be provided by the service provider to any interested party, under non-discriminatory conditions. A restricted interest service is intended for the sole use of the service provider or of certain user groups selected by the service provider. Collective interest service providers have the right to use network infrastructure that is either owned or controlled by other collective interest service providers. Collective service providers are required to interconnect with other collective service providers. The rules and regulations applicable to this relationship are defined in the General Interconnection Rules and provide for non-discriminatory access and technical transparency. Under the Telecommunications Services Regulations, the interconnection between restricted interest service providers and other restricted or collective interest service providers (such as the public fixed network, among others) is not allowed. It is expected that ANATEL will issue further regulations regarding the interconnection between holders of specialized limited licenses (“SLE”) or multimedia communication service licenses (“SCM”), and other licensees as well as numbering plan and interconnection charges.

      In 2001 ANATEL finalized the rules for new services – “SCM Serviço de Comunicação Multimídia.” The SCM license replaced the SLE license. The primary differences between SLE and SCM licenses are:

	•	SCM licensees will be able to provide data transmission, video and voice services to corporate customers and natural persons (SLE licensees are limited to corporate customers);
	•	SCM licenses clearly define numbering plans and interconnection fees;
	•	SCM licensees may connect directly to customers, regardless of whether the customers are part of the same group of common interest; and
	•	SCM licensees may provide videoconference and other video services.

      AT&T do Brasil has replaced its SLE license with a SCM license. This SCM license allows AT&T do Brasil to develop a nation-wide telecommunications network through its own infrastructure or leased lines and to offer fixed point-to-point and point-to-multipoint services as well as private network services to a company or group of legal (i.e., corporate voice, data and video communications services). This license is international and national in scope and is for an indeterminate period of time. As with SLE licensees, however, SCM licensees may not provide phone calls simultaneously originated and terminated in a public switched telephone network, or PSTN.

      In February of 2002 ANATEL provided rules for new telephony licenses, local and long distance, which are expected to increase competition in telephony. Local telephony licenses are not subject to built out commitments. Long distance national and international telephony licenses include expansion obligations, including minimum numbers of local telephony lines based on the population of the applicable city. AT&T do Brasil obtained the following licenses: i) for telephony services in 5 cities (Rio de Janeiro, Belo Horizonte, Curitiba, Porto Alegre and Brasília) in September 3rd 2002, ii) for local services in Region III (São Paulo State) in December, 10th 2002, and iii) for national and international long distance services in Region III (São Paulo State) and numbering regions of Rio de Janeiro, Belo Horizonte, Curitiba, Porto Alegre and Brasília in December, 10th 2002.

      During 2001, AT&T do Brasil entered into interconnection agreements with Vesper São Paulo (Class III — voice), CTBC Telecom, Telemar and GVT (class V — data). AT&T do Brasil has executed several contracts for the use of third parties’ infrastructure, including contracts with Atrium, Brasil Telecom, Canbrás, COPEL, CRT, CTBC, Diveo, Eletronet, Eletropaulo, Embratel, Engeredes, Global Crossing, GVT, Infovias, Light Telecom, NQT, Pegasus, Telefónica, Telemar and Vésper.

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      During 2002 AT&T do Brasil entered into interconnection agreements with GVT and TCO and won two injunctions before ANATEL to interconnect its networks with the local incumbents (Telefonica, Brasil Telecom and Telemar). AT&T do Brasil is currently negotiating interconnection agreements with the following companies: Intelig, Vesper, BCP, Telesp Celular, Telefônica Celular, Embratel.

      Chile. Chile’s telecommunications industry is regulated by the Undersecretariat of Telecommunications (SUBTEL), a unit of the Ministry of Transportation and Telecommunications (MTT). Chile began liberalizing the industry in the early 1980s. The General Telecommunications Law No. 18.168, enacted in 1982, established policies to introduce competition and eliminate restrictions on foreign investment. Telefónica CTC, currently the incumbent telecommunications operator, and ENTEL Chile, the incumbent international long distance operator, were privatized in the late 1980s. By 1990 the government had relinquished its controlling stake in all state-owned telecommunications companies.

      In 1994, Chile introduced a multi-carrier system that initiated open competition in the long distance and wireless markets. New rules related to this carrier-selection mechanism also required that local telephone companies create a separate legal corporate entity in order to enter the long distance market.

      The MTT also approved a tariff decree for Telefónica CTC’s local service that became effective in May 1999 and will last until 2004. Given Telefónica CTC’s dominance in local telephony, the tariff decree prevents predatory pricing. Tariffs for non-dominant carriers in local telephony are completely unregulated. In addition, the decree set interconnection rates for the same period of time. Interconnection rates are cost-based and calculated using a Long Run Incremental Cost (LRIC) model. However, in 2001 Telefónica CTC filed a petition to overturn this decree based on the increased number of competitors entering the local market, including mobile providers, claiming there is enough competition to warrant less regulation. This petition was rejected by the judiciary and administrative authorities and Telefonica filed a claim against the government for damages. In December 2002, Telefónica CTC Chile filed another petition before the antitrust commission to overturn the decree.

      SUBTEL classifies licenses and authorizations according to the type of service. AT&T Chile (which refers to several of our subsidiaries in Chile) holds licenses for local, domestic long distance and international long distance service, a license to install and operate a fiber optic network, and authorizations for data and voice transmission services and value added services over private line networks. Our subsidiary AT&T Chile Long Distance entered into interconnection agreements with Manquehue Telefónica, Telefónica del Sur, Telesat, CMET, Entel Phone, Telefónica CTC Chile, Compañía Telefónica Rural, VTR Telefónica, Compañía de Telecomunicaciones de Coyhaique, Chilesat and Entel Chile and our subsidiary AT&T Chile Networks S.A entered into interconnection agreements with Telefónica CTC Chile and CMET. The contracts with Entel Chile and Chilesat allow AT&T Chile Long Distance and AT&T Chile Networks S.A. to transport domestic long distance traffic nationwide.

      The existing set of policies and regulations have made Chile one of the more open and competitive telecommunications markets in Latin America. We expect that SUBTEL will continue to focus its regulatory activity on fine-tuning the existing regime; issuing licenses for the deployment of new service offerings and new technologies, increasing consumer information and protection; and ensuring that the market remains fully competitive.

      Colombia. In 1997, the Colombian government allowed new entrants into the local market and liberalized the long distance segment. Currently, the Telecommunications Statute (Decree 1900 of 1990) embodies the general principles and rules applicable to the telecommunications industry in Colombia although its applicability is subject to special laws and regulations for specific services.

      The Ministry of Communications regulates the assignment of spectrum frequencies and the infrastructure. The Commission for the Regulation of Telecommunications, or CRT, performs most regulatory duties. The Superintendence of Public Services is considered an enforcement agency.

      In Colombia, licenses and authorizations are classified and granted depending of the type of service. Our subsidiary AT&T Colombia holds nationwide value added service and carrier licenses as well as a license to use LMDS fixed wireless technology in the cities of Medellín and Bucaramanga. AT&T Colombia can offer

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      In July of 2001, Congress approved Law 671, which will open Colombia’s telecommunications market for international carrier services to competition. The Ministry of Communications has been in charge of determining the specifics conditions to apply for this license. AT&T Colombia has been evaluating the possibility of applying for the license, which would allow it to transport, but not terminate, international traffic to Colombia.

      By Resolution 469 of 2002, the CRT issued an enhanced Interconnection Rule. Interconnection among certain networks is mandatory in Colombia. The current interconnection regime establishes a series of obligations for operators and certain interconnection rates. AT&T Colombia has not entered into interconnection agreements, but has executed carrier agreements with, among others, Telecom (national connection), Teleglobe (Internet connection), ISA (national connection), IMPSAT (local and national connection), ETB (national connection), INTERNEXA (national connection), Ductel (local connection in the city of Cartagena) and Emtelco (local connection services in ten cities).

      The Colombian Ministry of Communications is currently promoting a new Telecommunications Framework Act. This bill, and other related laws, aims at comprehensively addressing the telecommunications sector, including sensitive issues such as dominant position in the market, rules of competition, convergence of services and networks under a single global license, and new technologies. The final draft of this bill will be presented to Congress during March 2003.

      Peru. The Peruvian Telecommunications Act, approved by supreme decree No. 013-93-TCC (1993), provides the general framework for the provision and regulation of telecommunications services in Peru. The provision of telecommunications services is regulated and overseen by the Ministry of Transportation, Communications, Housing and Construction and by OSIPTEL, the regulatory agency in charge of the supervision of private investment in the telecommunications sector. The Telecommunications Act, the General Regulations (approved by supreme decree 06-94-TCC), the General Policy Guidelines for Market Liberalization (approved by Supreme Decree 020-98-MTC), the decrees issued by the Ministry and the regulations and decisions made by OSIPTEL, constitute the legal and regulatory framework for the provision of telecommunications services in Peru.

      In May 1994, the Peruvian government granted concessions to provide basic local and long distance telecommunications services to Compañia Peruana de Teléfonos S.A. (CPT S.A.) and Empresa Nacional de Telecomunicaciones del Perú S.A. (ENTEL PERU S.A.), the former local fixed telephony and long distance telephone service incumbents, under a limited competition regime for a five-year period. After the privatization process, that same year, Telefónica del Perú was formed by the merger of CPT S.A. and ENTEL PERU S.A. Under the limited competition regime, Telefónica del Perú S.A. enjoyed an exclusivity period in the provision of local fixed telephony and long distance carrier services. Other services such as local carrier services, mobile services and value added services were open to competition.

      The Peruvian telecommunications market was fully liberalized in 1998, one year before the expiration of the limited competition environment. This deregulation was the result of the agreement between the Peruvian government and Telefónica to modify its concession agreement and Supreme Decree No. 020-98-MTC. Prior to the deregulation, AT&T Peru was able to provide value-added services, including internet access. Under the new competitive landscape, AT&T Peru was also authorized to provide local telephony and local as well as domestic and international long distance carrier services.

      Currently, the Peruvian government is reexamining existing rules and regulations and considering the introduction of changes aiming at the consolidation of open and free competition. New policy decisions are expected to further develop the interconnection regime, establish effective rights regarding essential facilities and unbundled network elements and implement number portability in the local segment.

      AT&T Peru has entered into the following interconnection agreements: (i) for interconnection of long distance carrier services provided by AT&T Peru with fixed local telephony services provided by Telefónica del Perú (OSIPTEL Interconnection Resolution No. 001-99), (ii) for interconnection of long distance carrier

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      AT&T Peru S.A. also has entered into interconnection agreements with the following operators: (i) with Bell South Mobile for all services through direct interconnection links (agreement signed in late March; submitted for OSIPTEL’s review and approval), (ii) with Bell South, for interconnection of fixed local telephony provided by AT&T Peru and mobile services provided by BellSouth Mobile, using transit services of Telefónica del Perú, (iii) with Teleandina (interconnection contract executed September 1, 2000, submitted for OSIPTEL’S review and approval), (iv) with TIM S.A.C. (Telecom Italia Mobile) for PSC services (Interconnection 002-2001 dated January 11, 2001), (v) with Nextel del Peru for fixed local telephony provided by AT&T Peru and mobile services provided by Nextel del Peru using transit services of Telefónica del Peru (Interconnection Resolution No. 001-2001 dated January 8, 2001) and (vi) with Nextel for all services through direct interconnection links (agreement signed in late March; submitted for OSIPTEL’s review and approval).

      In addition, during 2002, AT&T Peru S.A. has entered into interconnection agreements with other operators such as: (i) IDT (Long Distance with Long Distance, approved by Resolution N 362-2002), (ii) Compañia Telefónica Andina (Fixed and Long distance with fixed and long distance, approved by Resolution N 353-20020, (iii) Nortek (Long Distance with Fixed, using transit traffic of Telefónica del Perú), (iv) Telefónica del Perú (Agreement for use of toll free service 0-800, approved by Resolution N 224-2002), (v) IDT (Fixed with long distance, approved by Resolution N 149-2002), (vi) Bellsouth (Fixed and long distance with mobile services, approved by Resolution N 142-20020, (vii) TIM (complementary interconnection agreement for use the transit traffic of Telefonica del Peru, approved by Resolution N 099-2002), (viii) CONVERGIA (using the local transit of Telefónica del Peru and also between the long distance network of CONVERGIA and the local fixed telephony of AT&T Peru, approved by Resolution No. 436-GG/ OSIPTEL on September 11, 2002), and (ix) Americatel (for long distance networks; this agreement is currently pending OSIPTEL approval).

      In addition, in March 2003, AT&T Peru obtained a registration as a reseller of the following services: local fixed telephony, national and international long distance, mobile services, PCS, trunking, fixed services and public telephony, local carrier, long distance carrier and value-added for packet-switched data.

Executive Officers of AT&T Latin America

      The following is biographical information for our executive officers:

      Patricio E. Northland has been our Chairman of the board of directors and Chief Executive Officer since August 28, 2000, the date of the FirstCom merger. Mr. Northland has over seventeen years of experience as

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      Lawrence E. Young has been Executive Vice President and Chief Financial Officer of AT&T Latin America Corp. since December 2002. Mr. Young has over 15 years of experience in crisis management and business reorganization. Mr. Young has been a Senior Associate at AlixPartners, LLC since July 1999 where he has worked extensively on financial restructurings, most recently as the Chief Restructuring Officer and Chief Financial Officer of Sunterra Corporation, a publicly held company with assets over $1.0 billion. Prior to joining AlixPartners, LLC, Mr. Young was a Principal at Carpediem Capital, Inc. from 1997 to 1999 were he managed several acquisition opportunities and served as the principal financial advisor to companies seeking acquisition candidates. Mr. Young also has been a Senior Manager at Deloitte & Touche Consulting where he specialized in turnarounds of financially troubled companies. Mr. Young is a Certified Reorganization Accountant.

      Marco A. Northland has held several management functions, his most recent as Executive Vice President of Business Services since the FirstCom merger. Prior to the FirstCom merger, since June 1999 he was Vice President of Product Marketing and Business Development of FirstCom. He previously was Vice President of Internet Services and Business Development and acting Chief Executive Officer of FirstCom’s Colombian operations. In 1997 Mr. Northland founded @Phone, S.A., a start up telecommunications/ Internet company based in Lima, Peru. Prior to founding @Phone Mr. Northland, co-founder of AmericaTel, was its Vice President of Marketing, Sales and Business Development from 1991. Mr. Northland has also held executive positions with Panamsat and Hughes Network Systems. Mr. Marco A. Northland is the brother of Mr. Patricio E. Northland.

      Thomas C. Canfield has been our General Counsel and Secretary since the FirstCom merger. Mr. Canfield became General Counsel of FirstCom in May 2000. Prior to joining FirstCom, Mr. Canfield was counsel in the New York office of Debevoise & Plimpton where for nine years he practiced in the area of international business transactions.

      Jose Bravo has been General Manager of AT&T Argentina since January 15, 2003. Prior to joining AT&T Argentina, Mr. Bravo worked for CTI, a cellular carrier with nationwide coverage in Argentina from 1994 to 2002, where Mr. Bravo held a number of positions including Director of Strategy and Regulatory Affairs, Director of Marketing, Director of New Businesses and Director of Sales. Prior to CTI, Mr. Bravo was Commercial Director of Telintar, an international telecommunications carrier jointly owned by Telefónica de Argentina and Telecom Argentina from 1991 to 1994.

      Joao A. Elek has been General Manager of AT&T do Brasil since November 2002. Prior to his position as General Manager, Mr. Elek was Chief Financial Officer of AT&T do Brasil beginning in May 2000. During 2001, Mr. Elek also served as acting Chief Financial Officer of AT&T Latin America Corp. before moving into a regional financial planning role for the Company. Before that, Mr. Elek was the CFO for the Consumer business of Citibank in Brazil where he worked for 20 years in various Finance, Controllership, Compliance, Corporate Finance and Treasury positions.

      Carlos Fernández C. has been General Manager of AT&T Chile since the FirstCom merger other than during the period between October 2002 and February 2003 when he assumed the responsibilities of Regional Vice President of the proposed regional service center. Prior to the merger, he was Chief Executive Officer of FirstCom Chile S.A. since March 1998. Prior to joining FirstCom Mr. Fernández had over seventeen years of experience as an international communications executive with IBM Chile. From 1981 to 1997 Mr. Fernández held various positions including director of IBM Chile, Corporate and Business Affairs Manager and Commercial Manager.

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      Sergio Uribe has been General Manager of AT&T Colombia since April 2002. Prior to joining AT&T Latin America, between 1998 and 2001, Mr. Uribe was President of AV Villas, a mortgage bank which is the seventh largest financial institution in Colombia. From 1996 to 1998 Mr. Uribe was President of Corporacion Financiera Colombiana, a merchant and investment bank. Mr. Uribe has over 25 years of management experience in which he has been President of Cemento Samper, Director of Corredores Asociados and Vice-President of Banco del Estado. Since 1987 he has been a member of the Board of Directors of Banco de Bogota.

      José Gandullia C. has been General Manager of AT&T Peru since the FirstCom merger. Prior to the merger, he was Chief Executive Officer of FirstCom Peru since April 1999 and was Chief Financial Officer from October 1998 to April 1999. Prior to joining FirstCom, Mr. Gandullia served as General Manager of Los Portales Consorcio Hotelero, S.A. From 1991 to 1997 he served as Executive Director of Kong Corporate Group in Guatemala. Mr. Gandullia has 20 years of experience in international communications, having held management positions in the United States, Venezuela, Mexico, Peru and Central America.

      Our principal physical properties are our high-speed communications networks, which include switching equipment, transmission equipment and fiber-optic cable. See the description of our network contained under heading “Networks” on pages 11–13 and Note 2 to the consolidated financial statements.

      We lease our office space and most of our network equipment locations. We also own a number of small properties where we locate equipment. Our corporate leased facilities include approximately 19,000 square feet of office space. We believe that suitable alternative locations are available in all areas where we currently conduct business. Our corporate headquarters are currently located at 2020 K. Street, N.W., Washington D.C.

      We have been named as a nominal defendant in an action entitled Confin International Investments, Inc., Pltf. v. AT&T Corp., et al, filed in the Delaware Court of Chancery in New Castle County on October 29, 2002 in which AT&T Corp. and each of our directors have been named as defendants. The complaint in the action contains two counts, the first styled as a derivative claim on our behalf alleging breach of the duty of loyalty by AT&T Corp. and the members of our board of our directors. The second count alleges a class action by our shareholders (other than AT&T Corp. and our directors) for unspecified damages purportedly caused by the actions alleged in the first count. The complaint seeks recovery of the plaintiff’s attorney’s fees and costs, and alleges plaintiff has been a shareholder of the Company for a relevant period.

      We expect that AT&T Corp. will defend this lawsuit vigorously, and we anticipate that each of our directors, to the extent they are not dismissed from this action, will similarly launch a vigorous defense. While we are unable to predict the outcome of this case, we do not believe it will have a material impact on our financial condition, results of operation, or cash flows.

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

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

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

      In addition to the proceedings described above, in the normal course of business, we are subject to proceedings, lawsuits and other claims. These matters are subject to many uncertainties and outcomes that are not predictable with assurance. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters. While these matters could affect operating results of any one quarter when resolved in future periods, it is management’s opinion that after final disposition, any monetary liability or financial impact to us would not be material to our annual consolidated financial position or results of operations.

      None.

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PART II

AT&T Latin America Corp. Class A Common Stock

      Market Information. Our Class A common stock is traded on the OTC Bulletin Board under the symbol ATTL.OB, where it has traded since January 17, 2003 following its delisting from the Nasdaq Small Cap Market. During 2002 our Class A common stock was listed on the Nasdaq National Market (and Nasdaq Small Cap Market) under the symbol “ATTL.” Our Class B common stock is not publicly listed or traded.

      The following table sets forth, for the quarters indicated, the high and low trading prices of our Class A common stock as reported by the Nasdaq National Market (or Nasdaq Small Cap Market as applicable).

      Holders. As of March 20, 2003, there were approximately 12,237 beneficial owners of the 45,544,017 shares of our Class A common stock outstanding. AT&T Corp. holds 8,000,000 shares of our Class A common stock and all 73,081,595 outstanding shares of our Class B common stock, representing 95.2% of the voting power and 68.3% of the economic interests of our common stock as of March 20, 2003.

      Dividends. We have not declared cash dividends to holders of shares of Class A or Class B common stock since our inception, and we do not anticipate paying any cash dividends in the foreseeable future, but instead intend to retain future earnings, if any, for reinvestment in our business.

      Any future determination as to the payment of cash dividends to Class A and Class B common stockholders will be made at the discretion of our board of directors and will be dependent upon our operating results, financial condition, capital requirements, general business conditions and such other factors as the board of directors deems relevant. We are prohibited from paying dividends under the Common Agreement governing our senior secured vendor financing while this vendor financing is outstanding. In addition, the certificate of designation for our Series B preferred stock, all of which is owned by Global Card Holdings, a wholly-owned subsidiary of AT&T Corp., prohibits us from paying dividends on any common stock so long as shares of Series B preferred stock are outstanding. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

      The following tables set forth selected summary consolidated financial data for the years ended December 31, 2002, 2001 and 2000 and for the period from October 13, 1999 (Inception) through December 31, 1999 and has been derived from our audited consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K and our previously filed Annual Reports on Form 10-K. Refer to the financial information included in this Annual Report on Form 10-K, our financial statements and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information.

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AT&T Latin America Corp.

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(1)	We calculate EBITDA as loss from operations plus depreciation and amortization plus impairment loss on goodwill plus allowance for stockholder loan. Management believes EBITDA is meaningful to investors because they provide analyses of operating results using the same measures used by our chief operating decision makers. Our calculations of EBITDA may or may not be consistent with the calculation of these measures by other public companies. EBITDA should not be viewed by investors as an alternative to generally accepted accounting principles (GAAP) measures of income as a measure of performance or to cash flows from operating, investing and financing activities as a measure of liquidity. In addition, EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows.
(2)	Includes property and equipment acquired through vendor financing arrangements of approximately $107.9 million during the year ended December 31, 2001. We calculate CAPEX, or capital expenditures, as gross property and equipment purchased, net of deletions, but excluding translation adjustments resulting from our countries that use local currencies as functional currencies. Management believes that CAPEX is a meaningful measure used by our chief operating decision makers to measure our countries operational performance.

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Summary of Selected Operating Information

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

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

      Network route kilometers. Network route kilometers are the total number of kilometers of fiber-optic cable installed in our network. Network route kilometers include cable laid as a backbone for the network, cable from the backbone to a building and cable within a building to reach our customers’ hardware at its premises. A measurement in route kilometers does not take into account the number of strands of fiber in the various fiber optic cables that make up our network or the type of installation (e.g., underground or aerial).

      Total fiber kilometers. Total fiber kilometers are network route kilometers multiplied by the number of strands of fiber in each of the cables that make up the network. By counting strands of fiber, a measurement in fiber kilometers indicates the maximum capacity of our cable. For example, one route kilometer of 144-strand fiber optic backbone cable would count as 144 fiber kilometers, while one route kilometer of 12-strand building access cable would count as only 12 fiber kilometers.

      Buildings connected. The number of buildings connected represents the number of enclosed fixed constructions of any type, which are connected to our network using a customer access circuit or a network access circuit.

      Ports in service. A port in service represents a physical point of interconnection between a customer’s network and our network, regardless of the ownership of the customer access circuit and the type of service provided using the customer port. Typically, this interconnection is provided via a router or other network-terminating device connecting to a customer’s local area network and/or private branch exchange.

      Number of permanent virtual circuits (PVCs) active. A permanent virtual circuit represents a data connection, typically between two locations such as a customer’s headquarters and an off-site branch or other entity. We connect our customers to their networks by deploying a port connection within, or near, the customer’s premises. Each port can accommodate several permanent virtual circuits. As a customer increases its usage of services, the customer will obtain additional available transmission capacity on the same installed port. The number of PVCs active represents the number of permanent virtual circuits that have been installed and are provided directly or indirectly by us to a customer pursuant to an executed service contract in full force and effect, which connects two extremes where customer traffic originates and/or terminates. The demarcation of the circuit excludes customer premise equipment.

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      Number of dedicated data and Internet customers. The number of dedicated data-Internet customers represents legal entities identified by a unique tax-identification number with which we have an effective contract with us for the provision of data and/or Internet services.

      Employees. The number of employees excludes third-party contractor employees and agents.

      The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis may contain forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of factors described under the heading “Forward-Looking Statements” as well as other factors described in this Annual Report on Form 10-K.

Critical Accounting Policies

      Our critical accounting policies are those that we believe require significant judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. A discussion of our critical accounting policies, the underlying judgments and uncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditions or using different assumptions, is as follows:

      Our networks represent 68.3% and 34.1% as of December 31, 2002 and 2001, respectively, of our total assets. We use several critical accounting policies dealing with our network accounting. First, we compute our network’s depreciation expense, which requires us to estimate the average useful lives of each of our network components, as well as their salvage values. Secondly, we account for network improvement costs including salary of employees dedicated to the network construction and improvement by capitalizing those costs which we believe will add value to our networks and depreciate those improvements over their estimated useful lives. Finally, we recognize the resulting gain or loss on dispositions of our network components in operations.

      We determine the average useful lives of our network based primarily on our estimates of the average useful lives of the networks’ major components, such as transmission and switching equipment, operating systems, cables and underground construction. In addition, we consider, among other things, the impact of anticipated technological changes.

      Given the complex nature of our networks, all the accounting estimates described above require considerable judgment and are inherently uncertain. We do not have cost segregation studies performed to specifically segregate our networks into various components; therefore, our overall estimates of the relative costs of these components are based principally on general and technical information known about major network components lives and our knowledge of the telecom industry. In addition, we do not identify or track the depreciation of specific components, but instead utilize estimates when determining the net cost basis of assets being replaced or refurbished. If materially different conditions existed, or if we materially changed our assumptions of network lives and salvage values, our depreciation expense, gain or loss on replacement or refurbishment of network assets and net book value of our networks could be materially different. In addition, if we change our assumptions in making our determination as to whether improvements to our networks add value, the amounts we expense each year as repair and maintenance costs could increase, partially offset by a decrease in depreciation expense, as fewer costs would have been initially capitalized to our networks. Finally, if we ceased to operate as a going concern or underwent a material change in our operations, the realizable value of our network assets could differ significantly from the net book value set out in our financial statements.

      We believe that the estimates we made for network accounting purposes are reasonable, our methods are consistently applied and the resulting depreciation expense is based on a rational and systematic method to

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      Our review of our long-lived assets, principally goodwill and other intangibles, requires us to initially estimate the undiscounted future cash flow of our business segments whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. If such analysis indicates that a possible impairment may exist, we are required to then estimate the fair value of the asset, principally determined either by third party appraisals, sales price negotiations or estimated discounted future cash flows, which includes making estimates of the timing of the future cash flows and discount rates and reflecting varying degrees of perceived risk. During 2002 after applying the foregoing procedure, we concluded that an impairment existed. Accordingly, we recognized an impairment charge of $716.3 million, reducing goodwill to zero.

      The determination of fair value includes numerous uncertainties. Significant judgments are made concerning future revenue, operating, selling, general and administrative costs per business segment. In addition, third party appraisers are sometimes used to determine fair values and some of their valuation methodologies are also subject to similar types of uncertainties. We believe that we have made reasonable estimates and judgments in determining whether our goodwill has been impaired; however, a material change in the assumptions used in our determination of fair values or a material change in the conditions or circumstances influencing fair value, may require us to recognize a different impairment charge.

      From time to time in the normal course of business, we are subject to proceedings, lawsuits and other claims. We periodically assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of these actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made.

      Given the inherent uncertainty related to the eventual outcome of litigation, it is possible that all or some of these matters may be resolved for amounts materially different from any provisions that we may have made with respect to their resolution.

      We recognize data-internet services revenue when the services are provided in accordance with contract terms. We recognize long distance and local voice and data services revenue based upon minutes of traffic processed or contracted fee schedules. This includes amounts collected in advance for sales of prepaid calling cards. We recognize other products revenue when the products are delivered and accepted by customers.

      In the past we have entered into derivative contracts from time to time to mitigate market risk from changes in foreign currency exchange rates. Generally, fair value calculations of derivative contracts such as foreign exchange forwards require judgment and are valued based on market interest rates and foreign exchange rates.

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Overview

      We provide communications services under the “AT&T” brand to major metropolitan business centers in Argentina, Brazil, Chile, Colombia and Peru. Our local, domestic and international communications services include, among others, data-Internet, local and long distance voice, web hosting and managed services. We focus primarily on business customers with growing and diverse communications needs. These customers include multinational corporations, financial services companies, media and content providers, technology companies, government entities, Internet service providers and communications carriers, as well as small and medium size businesses. We deliver our services mainly through our own technologically advanced networks, which interconnect with other providers’ networks. In addition, we use our installed network infrastructure to offer services to carriers, including inbound domestic and regional voice termination services and connectivity services. We also serve in the mass market through various distribution channels, offering domestic and international long distance, calling and prepaid cards and dial-up Internet services. These opportunities remain attractive because they provide additional revenues and margin as well as utilization of our existing network capacity.

      We were incorporated in October 1999 by AT&T Corp. The countries in which we may operate under our certificate of incorporation and the terms of our Regional Vehicle Agreement with AT&T Corp., dated as of August 28, 2000 (filed with our Annual Report on Form 10-K dated April 2, 2001) include the countries in South America and the Caribbean plus Panama, but excluding Cuba and Venezuela. Our operations are conducted through subsidiaries organized under the laws of the applicable country in which the operations take place.

      Basis of Presentation. Our consolidated financial statements reflect operations for the years ended December 31, 2002, 2001 and 2000, in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The appropriateness of using the going concern basis in the future, however, will be dependent upon our ability to address our anticipated liquidity needs as described below in “Recent Events.” There is no assurance that we will be able to address our liquidity needs through the measures described below on acceptable terms and conditions, or at all, and, accordingly, there is substantial doubt about our ability to continue as a going concern.

Recent Events — Restructuring Activities

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

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

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

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

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

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

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

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

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

      While our restructuring activities have been successful to date in expanding our strategic options and stabilizing our business, we expect we will require additional capital investment to finance additional growth

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      In January 2003, AT&T Corp. announced that it had entered into a non-binding letter of intent to sell its interest in us for a nominal price to a telecommunications holding company. We also have received expressions of interest from a number of other qualified strategic and financial investors. We will continue to pursue all strategic options for the Company that serve our objective of maximizing value for our constituents.

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

Goodwill Impairment

      Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 stops the amortization of our goodwill, which is allocated through our country operations, and requires an annual, or when events or circumstances dictate a more frequent, impairment review of our goodwill. Accordingly, as of January 1, 2002, we no longer amortize our goodwill. We have recorded a transitional impairment loss of $267.8 million as of January 1, 2002. We have also recorded additional impairments of $413.5 million and $35.0 million during the third and fourth quarters of 2002, respectively, reducing goodwill to zero. See Note 10 in the Notes to Consolidated Financial Statements.

Results of Operations

      The following table includes a summary of actual results of operations for the periods indicated below. Unaudited pro forma results for the year 2000 have been presented to show our results of operations giving effect to the FirstCom merger and the Keytech acquisitions as if the transactions had been completed as of the beginning of 2000. The unaudited pro forma results of operations herein presented include certain adjustments as follows: FirstCom’s tender offer and consent solicitation for its 14% senior notes, resulting in a reduction of interest expense of $14.5 million in 2000; the issuance to Global Card Holdings, Inc. (a wholly-owned subsidiary of AT&T Corp.) of 100,000 shares of Mandatorily Redeemable 15% Series B Preferred Stock (in connection with the financing of the tender offer), resulting in an increase of interest expense of $17.5 million in 2000; additional goodwill amortization expense of $22.4 million in 2000; and additional selling, general and administrative expenses of $0.7 million in 2000, related to employment arrangements with our Chief Executive Officer. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the future results of operations or financial position of AT&T Latin

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AT&T Latin America Corp.