AT&T LATIN AMERICA CORP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

Commission file number: 0-31010

AT&T LATIN AMERICA CORP.
(Exact name of Registrant as Specified in its Charter)

22-3687745
DELAWARE (I.R.S. Employer
(State or Other Jurisdiction of Incorporation) Identification No.)

2020 K STREET, WASHINGTON, D.C. 20006
(Address of principal executive offices) (Zip code)

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

220 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA, 33134
(Former name, former address and former fiscal year,
if changed since last report.)

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 [ ]

As of August 14, 2002, 45,659,017 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.

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INDEX

PAGE
----

Part I -- Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets as of June 30, 2002 (Unaudited) and
December 31, 2001 ................................................................. 3

Unaudited Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2002 and 2001 ....................................... 4

Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the Six months Ended June 30, 2002 ..................................... 5

Unaudited Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2002 and 2001 ............................................... 6

Notes to Consolidated Financial Statements (Unaudited) .............................. 7

Management's Discussion and Analysis ................................................ 19

Quantitative and Qualitative Disclosure about Market Risk ........................... 30

Legal Proceedings ................................................................... 31

Submission of Matters to a Vote of Security Holders ................................. 31

Exhibits and Reports on Form 8-K .................................................... 32

Signatures .......................................................................... 33

2

Part I -- Financial Information
Item 1. Financial Statements

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31,
2002 2001
----------- -----------

(UNAUDITED)
ASSETS (IN THOUSANDS)

Current Assets:
Cash and cash equivalents ......................................................... $ 69,138 $ 28,186
Accounts receivable, net of $9,372 and $8,250 of allowance for bad debts
at June 30, 2002 and December 31, 2001, respectively ............................ 36,346 41,973
Recoverable taxes ................................................................. 14,857 15,219
Prepaid expenses and other current assets ......................................... 20,131 26,816
----------- -----------

Total current assets ....................................................... 140,472 112,194

Property and equipment, net ......................................................... 440,168 493,568
Goodwill, net of accumulated amortization $66,383 at December 31, 2001 .............. 721,922 759,067
Other intangible assets, net of accumulated amortization of $13,934 and
$10,598 at June 30, 2002 and December 31, 2001, respectively .................... 20,910 24,130
Recoverable taxes ................................................................... 14,775 24,841
Other assets ........................................................................ 38,610 31,511
----------- -----------
Total assets ............................................................... $ 1,376,857 $ 1,445,311
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of debt ........................................................ $ 64,826 $ 87,051
Accounts payable and accrued expenses (including $4,274 and $2,209 due to
AT&T Corp. or affiliates at June 30, 2002 and December 31, 2001,
respectively) ................................................................... 64,676 80,595
Other current liabilities ......................................................... 29,456 51,956
----------- -----------
Total current liabilities .................................................. 158,958 219,602

Long-term debt (including $603,937 and $475,757 due to AT&T Corp. or
affiliates at June 30, 2002 and December 31, 2001, respectively) ................ 778,050 575,091
Deferred interest (including $5,993 and $30,172 due to AT&T Corp. or
affiliates at June 30, 2002 and December 31, 2001, respectively) ................ 5,993 31,010
Other liabilities ................................................................... 2,743 6,289
Mandatorily Redeemable 15% Series B Preferred Stock (held by a wholly-owned
subsidiary of AT&T Corp.) ....................................................... 231,236 215,232
----------- -----------
Total liabilities .......................................................... 1,176,980 1,047,224
----------- -----------
Commitments and contingencies (Note 7) .............................................. -- --
----------- -----------
Stockholders' equity:
Common stock (including 68.3% economic interest owned by AT&T Corp.,
representing 95.2% voting power at June 30, 2002) ............................... 11 11
Additional paid in capital ........................................................ 925,021 918,337
Unearned restricted stock ......................................................... (2,802) (2,627)
Accumulated deficit ............................................................... (627,257) (446,429)
Accumulated other comprehensive (loss) income ..................................... (84,962) (61,323)
Stockholder loan .................................................................. (10,134) (9,882)
----------- -----------
Total stockholders' equity ................................................. 199,877 398,087
----------- -----------
Total liabilities and stockholders' equity ................................. $ 1,376,857 $ 1,445,311
=========== ===========

The accompanying footnotes are an integral part of these
consolidated financial statements.

3

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue:
Data-Internet services ................................... $ 27,152 $ 20,497 $ 53,640 $ 38,956
Voice services ........................................... 14,822 13,150 32,495 26,361
--------- --------- --------- ---------
Total revenue ..................................... 41,974 33,647 86,135 65,317
Cost of revenue ............................................ 26,473 28,392 54,959 54,304
Selling, general and administrative expenses ............... 28,714 33,957 57,885 66,573
Depreciation and amortization .............................. 25,178 24,756 42,370 49,455
--------- --------- --------- ---------
Loss from operations .............................. (38,391) (53,458) (69,079) (105,015)
Interest expense ........................................... 32,442 18,865 54,244 34,716
Interest income ............................................ 212 493 410 763
Other (expense) income, net ................................ (34,543) (1,375) (53,616) (7,320)
--------- --------- --------- ---------
Loss before provision for income taxes,
minority interest income and extraordinary item ..... (105,164) (73,205) (176,529) (146,288)
Provision for income taxes ................................. -- -- -- --
Minority interest income ................................... 87 154 180 269
--------- --------- --------- ---------
Loss before extraordinary item ........................ (105,077) (73,051) (176,349) (146,019)
Extraordinary gain (loss) on debt restructuring ............ 1,785 -- (4,479) --
--------- --------- --------- ---------
Net loss ................................................... $(103,292) $ (73,051) $(180,828) $(146,019)
========= ========= ========= =========

Basic and diluted net loss per common share before
extraordinary gain (loss) on debt restructuring .......... $ (0.89) $ (0.63) $ (1.49) $ (1.26)
Extraordinary gain (loss) per common share on debt
restructuring ............................................ 0.02 -- (0.04) --
--------- --------- --------- ---------
Basic and diluted net loss per common share ................ $ (0.87) $ (0.63) $ (1.53) $ (1.26)
========= ========= ========= =========
Weighted average common shares outstanding ................. 118,641 116,296 118,521 116,296
========= ========= ========= =========

The accompanying footnotes are an integral part of these
consolidated financial statements.

4

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)

ACCUMULATED
OTHER
COMMON STOCK ADDITIONAL UNEARNED COMPREHENSIVE TOTAL
--------------------- PAID IN RESTRICTED ACCUMULATED INCOME STOCKHOLDER STOCKHOLDERS'
STOCK AMOUNT CAPITAL STOCK DEFICIT (LOSS) LOAN EQUITY
--------- --------- ---------- --------- ----------- -------------- ----------- ------------

Balance December 31, 2001.. 118,305 $ 11 $ 918,337 $ (2,627) $(446,429) $ (61,323) $ (9,882) $ 398,087

Interest accretion on
stockholder loan ........ -- -- -- -- -- -- (252) (252)

Stock issued to employees 435 -- 420 (420) -- -- -- --

Warrants issued to parent
company ................. -- -- 6,264 -- -- -- -- 6,264

Accretion of unearned
restricted stock ........ -- -- -- 245 -- -- -- 245

Net loss .................. -- -- -- -- (180,828) -- -- (180,828)

Foreign currency
translation adjustments.. -- -- -- -- -- (14,555) -- (14,555)

Net unrealized loss on
derivative instruments... -- -- -- -- -- (9,084) -- (9,084)
--------- --------- --------- --------- --------- --------- --------- ---------

Balance June 30, 2002.... 118,740 $ 11 $ 925,021 $ (2,802) $(627,257) $ (84,962) $ (10,134) $ 199,877
========= ========= ========= ========= ========= ========= ========= =========

The accompanying footnotes are an integral part of these
consolidated financial statements.

5

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
(UNAUDITED)

SIX MONTHS ENDED
JUNE 30,
------------------------
2002 2001
--------- ---------
(IN THOUSANDS)

Cash flows from operating activities:
Net loss ........................................................................... ($180,828) ($146,019)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................................... 42,370 49,455
Bad debt expense ............................................................ 2,185 4,263
Unrealized foreign exchange loss (gain) ..................................... 46,890 (17,670)
Minority interest income .................................................... (195) (269)
Preferred stock accretion ................................................... 16,004 13,902
Loss on debt restructuring .................................................. 4,479
Stockholder loan accretion .................................................. (252) --
Unearned restricted stock accretion ......................................... 244 --
Accrued interest characterized as debt ...................................... 26,593 --
Changes in assets and liabilities net of effect of acquisitions:
Accounts receivable ...................................................... 4,504 (19,476)
Recoverable taxes ........................................................ 10,428 (5,735)
Prepaid and other assets ................................................. 6,685 7,049
Other assets ............................................................. (4,346) (22,546)
Accounts payable and accrued expenses .................................... (15,850) 11,759
Other current liabilities ................................................ (22,500) 16,490
Deferred interest ........................................................ 5,154
Other liabilities ........................................................ (3,350) --
--------- ---------
Net cash used in operating activities ................................................ (61,785) (108,797)
--------- ---------

Cash flows from investing activities:
Purchase of property and equipment ............................................. (20,129) (81,247)
Cash paid for acquisitions of licenses ......................................... (116) --
--------- ---------
Net cash used in investing activities ................................................ (20,245) (81,247)
--------- ---------

Cash flows from financing activities:
(Repayments) proceeds of debt, net ............................................. (9,505) 18,508
Proceeds from parent company credit facilities ................................. 72,244 177,691
Proceeds from secured vendor financing ......................................... 150,649 --
Payments of interim notes payable for equipment ................................ (73,803) (5,898)
Payments of notes payable to other vendors ..................................... (13,899) --
Loans to stockholder ........................................................... -- (8,914)
--------- ---------
Net cash provided by financing activities ............................................ 125,686 181,387
--------- ---------

Net increase in cash and cash equivalents ............................................ 43,656 (8,657)
Net effect of translation on cash .................................................... (2,704) --
Cash and cash equivalents, beginning of period ....................................... 28,186 14,905
--------- ---------
Cash and cash equivalents, end of period ............................................. 69,138 6,248
========= =========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

In connection with the restructuring of our facilities with AT&T Corp., we
have characterized deferred interest at December 31, 2001 of $30.2 million plus
the amount accrued from January 1, 2002 through June 30, 2002 of $25.8 million
as part of the debt.

During the six months ended June 30, 2002 we issued in non-cash
transactions 435,000 restricted shares of class A common stock to employees in
exchange for future services. The issuance of stock was accounted for as
additional paid in capital with the corresponding unvested portion as unearned
restricted stock in the stockholders' equity.

During the six months ended June 30, 2001, we acquired property and
equipment amounting to approximately $43.6 million through vendor financing
arrangements.

The accompanying footnotes are an integral part of these
consolidated financial statements.

6

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- NATURE OF THE BUSINESS

AT&T Latin America Corp. was incorporated on October 13, 1999, 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 quarterly report on Form 10-Q as "we," "our," the "Company,"
"AT&T Latin America," "ATTLA" and "us." We provide communications services under
the "AT&T" brand name to major metropolitan business markets in Argentina,
Brazil, Chile, Colombia and Peru. We deliver our services mainly through our own
technologically advanced networks, which interconnect with third party networks.
Our communication services include, among others, data-Internet, local and long
distance voice, web hosting and managed network services.

AT&T Corp. holds directly or indirectly 8,000,000 shares of our Class A
common stock and all 73,081,595 outstanding shares of our Class B common stock,
representing approximately 95.2% of the voting power and approximately 68.3% of
the economic interests of our common stock as of June 30, 2002.

The accompanying unaudited consolidated financial statements included in
this quarterly report have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They do not include
all information and notes required by generally accepted accounting principles
for complete financial statements and should be read together with the audited
financial statements and notes thereto included in our annual report on Form
10-K for the year ended December 31, 2001. The balance sheet data as of December
31, 2001 was derived from our audited financial statements but does not include
all disclosures required by generally accepted accounting principles. Certain
reclassifications have been made to conform to the 2002 presentation. The
financial information furnished reflects all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for the quarterly periods presented. The results of operations for
the periods presented are not necessarily indicative of our future results of
operations for the entire year.

Our cumulative comprehensive loss was $712.2 million and $507.8 million as
of June 30, 2002 and December 31, 2001, respectively. Comprehensive income was
as follows (in thousands):

NOTE 2 -- LIQUIDITY

The unaudited consolidated financial statements have been prepared on a
basis that contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. We have incurred
net losses of approximately $627.3 million from the period from inception
(October 13, 1999) through June 30, 2002. As of June 30, 2002 we had a working
capital deficit of $18.5 million.

Our primary liquidity needs are for working capital, capital expenditures
and debt service. Currently, our primary sources of liquidity are cash on hand,
revenue, available funds under our senior secured vendor financing and unsecured
bank facilities in local Latin American credit markets.

Our business is capital intensive and, as such, has required substantial
initial capital investment to date. We have been building a high capacity
network in the countries in which we operate and are primarily focused on
data-Internet and voice services. As of the end of 2001, we had completed a
substantial portion of our planned capital deployment relating to core network
infrastructure. We expect our capital expenditures in 2002 to range between
$60.0 million and $70.0 million. We also expect our aggregate capital
expenditures in 2002 and future periods will be reduced significantly from 2001
levels as we continue to increase the utilization of our existing networks.
Moreover, we expect that our capital expenditures in 2002 and future periods
will become more correlated to increases in revenue.

We expect to continue incurring operating losses and to generate negative
cash flows from operations for the next two years and to continue to generate
net losses for the next several years.

7

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

We believe that our cash on hand together with our available borrowing
capacity under the senior secured vendor financing and local bank credit
facilities in Latin American markets will be sufficient to support our working
capital needs, capital expenditures and debt service for the next several years.
However, in the event that our future working capital is less than expected, as
a result of lower than expected revenue, higher expenses or greater capital
investment needs, or in the event that we are unable to renew or refinance
existing local credit facilities when they become due, we may have cash needs
greater than expected. Our inability to obtain additional financing to fund such
cash needs would result in a material adverse effect on our business plan, our
financial condition and results of operations. There is no assurance that we
will be able to obtain additional cash we may need on acceptable terms and
conditions or at all. Moreover, if in the future we were not able to meet
certain operating and financial targets specified under financing agreements and
were not able to obtain requisite waivers, including with respect to our senior
secured vendor financing facility, our access to unused financing commitments
could be restricted, or our creditors could choose to exercise remedies
available to them under such financing agreements.

NOTE 3 -- PROPERTY AND EQUIPMENT, NET

Property and equipment, net is comprised of the following as of June 30,
2002 and December 31, 2001, respectively (in thousands):

ESTIMATED
USEFUL
JUNE 30, DECEMBER 31, LIVES
2002 2001 (IN YEARS)
-------------- ------------ ----------
(UNAUDITED)

Switching equipment.............................. $ 128,014 $ 118,542 5
Transmission equipment........................... 145,192 125,936 7
Cables........................................... 47,069 40,323 10
Underground installation......................... 145,106 108,719 25
Construction in progress......................... 32,631 87,754 --
Office equipment, furniture, vehicles and other.. 110,223 109,149 3 to 10
Cumulative translation adjustment................ (66,744) (27,823)
-------------- ------------
541,491 562,600

Less: Accumulated depreciation................... (101,323) (69,032)
-------------- ------------
$ 440,168 $ 493,568
============== ============

Depreciation expense related to property and equipment was $37.5 million
and $24.6 million for the six months ended June 30, 2002 and June 30, 2001,
respectively. Depreciation expense related to property and equipment was $22.8
million and $12.7 million for the three months ended June 30, 2002 and June 30,
2001.

8

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

NOTE 4 -- DEBT

Debt is comprised of the following (in thousands):

JUNE 30, DECEMBER 31,
2002 2001
--------- -----------
(UNAUDITED)

Senior secured vendor financing ................................. $ 150,649 $ --
Subordinated credit facilities with parent company .............. 603,937 --
Revolving credit facility, at LIBOR plus 3.75% (5.6% to 6.4%
at December 31, 2001) ......................................... -- 100,000
Subordinated credit facility, at LIBOR plus 6.00% (8.1% at
December 31, 2001) ............................................ -- 200,000
Demand notes, at 15% fixed rate ................................. -- 175,757
Interim notes payable to vendors, at varying rates .............. -- 73,803
Notes payable to other vendors .................................. 35,931 50,718
Other bank facilities ........................................... 52,359 61,864
--------- ---------

Total debt ...................................................... 842,876 662,142

Less current maturities ......................................... (64,826) (87,051)
--------- ---------

Long-term debt .................................................. $ 778,050 $ 575,091
========= =========

SENIOR SECURED VENDOR FINANCING

In December 2001 we entered into senior secured credit facilities, governed
by common terms, with our strategic equipment vendors, in an aggregate principal
amount of $298.5 million. These facilities became effective on March 27, 2002.

The facilities are divided into two portions comprised of a first tranche
of up to $199.2 million to be used to finance the purchase of equipment and
related software and services from the three vendors, and a second tranche of up
to $99.3 million to finance duties, taxes and interest on the facility during
the availability period. At closing, approximately $143.3 million was drawn
under the facilities, of which $73.8 million was used to pay outstanding interim
notes. Draws under this facility are available through June 2004. After that
time principal of the facilities amortizes on a scheduled quarterly basis until
final maturity in June 2008. We have available $147.9 million under this
facility as of June 30, 2002.

Interest on loans under the facilities accrues at LIBOR plus 5.625% or, at
our election, on a prime rate basis and is payable quarterly. We have paid an up
front facility fee and are obligated to pay commitment fees quarterly based on
the unused portion of the facility.

Under the terms of the facilities, a portion of the net proceeds of any
future equity and debt offerings by us must be directed to prepay outstanding
amounts under the facilities.

The facilities are guaranteed by AT&T Latin America Corp. and our operating
subsidiaries, and are also collateralized by a pledge of the shares of our
operating subsidiaries and of substantially all of our and our subsidiaries'
material assets other than our rights to the AT&T brand and under certain other
agreements with AT&T Corp.

The facilities contain customary covenants restricting our ability to engage
in certain activities, including limitations on debt, liens, investments
(including acquisitions), restricted payments, transactions with affiliates,
asset dispositions and changes in corporate existence. We are also required to
meet certain financial tests over the term of the facilities, relating to
minimum revenue, minimum EBITDA (earnings before interest, taxes, depreciation
and amortization as defined in the governing agreements), maximum capital
expenditures, minimum liquid assets and

9

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

available undrawn credit, ratios of debt to equity and to EBITDA and minimum
on-network ports.

The facilities provide for events of default in the event of non-payment,
failure to comply with covenants, occurrence of a material adverse effect,
inability, at any time on or after June 30, 2003, to make loan repayments from
Argentina without the need to obtain further governmental approvals or
declaration of a debt moratorium in any of the principal countries in which we
operate, and other, customary events, except that in the case of Argentina, the
certain events occurring before the effective date will not constitute a
moratorium.

SUBORDINATED CREDIT FACILITIES (RELATED PARTIES)

During the first quarter of 2002, we signed an agreement with AT&T Corp.
for the restructuring of the financing provided under the $100.0 million and
$200.0 million credit facilities as well as $98.0 million provided under demand
notes. The restructuring provided additional borrowings of $150.0 million, which
included the refinancing of $87.0 million available via demand notes as of
December 31, 2001 (of which $77.8 million was outstanding) and additional
financing of up to $63.0 million. The restructuring and additional financing
became effective concurrently with the senior secured vendor financing on March
27, 2002. While the senior secured vendor financing is outstanding, we are
entitled to defer payment of all accrued and future interest through the
maturity date of the loans of October 2008 and we are also entitled to defer
payment of accrued and future dividends on the Mandatorily Redeemable 15% Series
B Preferred Stock through that date. A portion of $100.0 million, plus
capitalized interest, (Tranche "A") of the loans bear interest at LIBOR plus
3.75% until August of 2002, and 14.0% thereafter. The $200.0 million and $98.0
million portions, plus capitalized interest (Tranches "B" and "C") are fixed at
15.0% interest rate. The remaining $150.0 million portion pays a fixed interest
of 15.3%. The weighted average interest rate as of June 30, 2002 was 13.4%. In
connection with the restructuring of our facilities with AT&T Corp., we have
included deferred interest at December 31, 2001 of $30.2 million plus the amount
accrued from January 1, 2002 through June 30, 2002 of $25.8 million as part of
the debt. As of June 30, 2002 we have borrowed the full available amounts under
these AT&T Corp. facilities.

As part of the restructuring, we issued to AT&T Corp. warrants to acquire
approximately 4.9 million shares of our Class A common stock. Half of these
warrants are exercisable at a price of $8.00 per share and the other half are
exercisable at a price of $0.01 per share. The warrants have been valued using
the Black-Scholes pricing model with the following assumptions: 6 years expected
life; a volatility factor of 132.0%; and a risk-free interest rate of 5.2%. The
fair value of the warrants was included as part of our loss on debt
restructuring. The warrants are exercisable immediately and the total amount of
the warrants was included as part of the determination of the loss on debt
restructuring. The debt restructuring resulted in an extraordinary loss of $6.3
million.

The debt facilities with AT&T Corp. include customary covenants that are
based on certain of the covenant provisions contained in our senior secured
vendor financing.

NOTES PAYABLE TO OTHER VENDORS

In November 1998 a subsidiary of FirstCom (which we acquired in the
FirstCom merger) entered into a vendor financing agreement with one of its
equipment vendors. This vendor financing agreement, as amended, provided for a
maximum financing amount of $29.5 million, an interest rate of LIBOR plus 5.5%
and is repayable in 20 consecutive quarterly payments of principal and interest
from the date of the related borrowings. The financed equipment collateralizes
this vendor financing. As of June 30, 2002, there was approximately $6.9 million
outstanding under this vendor financing bearing interest at a weighted average
annual rate of 8.1%. The availability period for drawings under this financing
agreement expired on December 31, 2000.

In July, August and September 2001, we entered into several vendor
financing agreements with an equipment vendor maturing at various dates through
April 2004 bearing interest at LIBOR plus 7.0%, or 10.9 % as of June 30, 2002.
In June 2002, we signed an agreement with the vendor for the restructuring of
the financing provided under these vendor financing agreements. Under the
restructuring agreement it was agreed to reduce the principal outstanding from
$9.5 million to $8.6 million as well as a reduction of interest rate from LIBOR
plus 7.0% to

10

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

LIBOR plus 0.0%. The restructuring also provided for quarterly payment of
interest commencing in August 2002 with a maturity of the principal in April
2004. After payment of $1.0 million the outstanding amount as of June 30, 2002
was $7.6 million. The debt restructuring resulted in an extraordinary gain of
$1.8 million, resulting from the reduction of principal and accrued interest.

We entered into several short-term vendor financing agreements maturing in
various dates through March 2003 for the development of our networks in
Argentina. Borrowings under this agreement bear interest at fixed rates ranging
from 11.9% to 17.5% per annum and variable rates based on LIBOR plus 8.0%. At
June 30, 2002, there was an aggregate of $21.4 million outstanding under these
facilities.

OTHER BANK FACILITIES

AT&T do Brasil is party to several local bank facilities providing for
borrowings of an aggregate amount of $37.4 million maturing through February
2004. At June 30, 2002, there was an aggregate of $31.4 million outstanding
under these facilities. Borrowings under these facilities bear interest at fixed
rates ranging from 2.2% to 13.0% per annum and variable rates based upon LIBOR
plus a margin ranging from 1.2% to 1.9%.

AT&T Colombia is party to several local bank facilities providing for
borrowings of an aggregate amount of $14.9 million maturing through May 2006. At
June 30, 2002, there was an aggregate of $12.6 million outstanding under these
facilities. Borrowings under these facilities bear interest at fixed rates
ranging from 12.5% to 13.0% per annum and variable rates based upon Deposito
Tasa Fijo (DTF) plus a margin ranging from 4.5% to 7.0%. The average rate for
Colombian peso interest rate or DTF for the six months ended June 30, 2002 was
9.6%.

AT&T Peru is party to several local bank facilities providing for
borrowings of an aggregate amount of $19.8 million, maturing on various dates
through June 2011. At June 30, 2002, there was an aggregate of $7.4 million
outstanding under these facilities. Borrowings under these facilities bear
interest at fixed and variable rates ranging from 6.0% to 12.5% per annum.

AT&T Argentina and AT&T Chile are each party to several local bank
facilities providing for borrowings (including certain capital leases) of an
aggregate amount of $6.0 million, maturing on various dates through October
2010. At June 30, 2002 there was an aggregate of $0.9 million outstanding under
these facilities bearing interest at fixed interest rates ranging from 9.0% to
17.5%.

As of June 30, 2002 we have approximately $52.4 million outstanding under
these bank facilities. We have an additional availability under these bank
facilities of approximately $24.0 million. Although we expect to be able to
renew or refinance most of the existing amounts outstanding as they become due,
and to maintain most of the existing additional availability to use as needed,
there is no assurance that we will be able to renew or refinance these
outstanding amounts or maintain the additional availability on acceptable terms
or at all.

NOTE 5 -- REDEEMABLE PREFERRED AND CAPITAL STOCK

On August 28, 2000, we issued to Global Card Holdings, Inc., a wholly-owned
subsidiary of AT&T Corp., 100,000 shares of our non-voting, non-convertible and
non-participating Mandatorily Redeemable 15% Series B Preferred Stock having an
aggregate liquidation value as of June 30, 2002 and December 31, 2001 of $231.2
million and $215.2 million, respectively. The shares of Mandatorily Redeemable
15% Series B Preferred Stock entitle Global Card Holdings to receive dividends
at an annual rate of 15%, payable semi-annually. In March 2002 Global Card
Holdings agreed to certain amendments to the terms of the redeemable preferred
stock. The amendments provided that the first date of redemption at the option
of any holder would be deferred until October 2008 and that dividends would not
be payable in cash unless permitted under the Subordination Agreement related to
our senior secured vendor financing, in each case subject to certain exceptions
as permitted under the vendor financing agreements. The accompanying statements
of operations for the six months ended June 30, 2002 and 2001 include $16.0
million and $13.8 million, respectively, recorded as interest expense related to
the dividend on our Mandatorily Redeemable 15% Series B Preferred Stock. The
amount recorded as interest expense for the three months ended June 30, 2002 and
2001 was $8.1 million and $7.0 million, respectively.

11

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

We are authorized to issue 460,000,000 shares of capital stock, consisting
of 300,000,000 shares of Class A common stock, par value $0.0001 per share,
150,000,000 shares of Class B common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $.0001 per share. At June 30,
2002 and December 31, 2001, 45,659,017 and 45,224,017 shares, respectively, of
Class A common stock were issued and outstanding. At June 30, 2002 and December
31, 2001, we had 73,081,595 shares of Class B common stock issued and
outstanding.

Holders of AT&T Latin America's Class A common stock have one vote per
share, and holders of Class B common stock have ten votes per share, on all
matters to be voted on by stockholders, including the election of directors.
Class B shares are convertible into Class A shares on a share-for-share basis at
the option of the holder at any time, or automatically upon transfer to a person
or entity which is not a permitted transferee. Permitted transferees include
AT&T Corp. and any person or entity in which it owns directly or indirectly 50%
or more of the equity securities.

NOTE 6 -- OPERATIONS BY GEOGRAPHIC AREAS AND SEGMENTS

We measure our operations by country and present revenue segmented by
data-Internet and voice services. We currently derive a substantial portion of
our revenue from data-Internet services. For the three months ended June 30,
2002 and 2001 approximately 64.7% and 60.9%, respectively, were generated from
data-Internet services. For the six months ended June 30, 2002 and 2001
approximately 62.3% and 59.6%, respectively, were generated from data-Internet
services. No single customer or group of customers accounted for more than 10%
of total revenue for the periods presented.

Our chief operating decision makers measure our operating results by
country and use EBITDA as an important measure of our country operating results
and performance. We calculate EBITDA as gain or loss from operations plus
depreciation and amortization expense. Management believes EBITDA is meaningful
to investors because it enables them to evaluate operating results using the
same measure used by our chief operating decision makers. In addition, we
believe that EBITDA allows investors a means to evaluate the financial results
of each country operation in relation to our total operations. Our calculation
of EBITDA may or may not be consistent with the calculation of this measure by
other public companies. EBITDA should not be viewed by investors as an
alternative to generally accepted accounting principles (GAAP) measures of
income, as an indicator of performance, or cash flows from operating activities
as an indicator of liquidity. In addition EBITDA does not take into account
changes in certain assets and liabilities as well as interest and income taxes,
which can affect cash flows.

DATA-INTERNET SERVICES. Our data-Internet services feature local, national
and international reach, high availability and high security, with varying
degrees of managed features, using our common ATM/IP, or asynchronous transfer
mode/Internet protocol multi-service network platform. These services are
accessible via single connections (one port per location) to our broadband
network. 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.

Our Internet services consist of dial-up 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 and access to the Internet from us. Our managed
service offerings include managed data, Internet and web hosting services.

VOICE SERVICES. Our portfolio of voice services includes local telephony
and long distance services, pre-paid and calling card services and 800 and
operator assistance services, depending on our competitive situation and
regulatory restrictions in each country. We package these services differently
depending on the customer we are targeting. Voice services are an important
complement to our existing data-Internet product portfolio. Voice services are
also an important point of entry for other services, particularly with small and
medium sized enterprises for business customers. To the

12

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

consumer mass-market, we offer primarily through distribution channels a more
selective set of services, which require little or no customization, and minimum
employee resources, which enables us to use available network capacity,
particularly during non-business hours.

The following tables set forth, for the three and six months ended June 30,
2002 and 2001, certain information about segment results of operations and
segment assets (in thousands):

THREE MONTHS ENDED
JUNE 30, 2002 ARGENTINA BRAZIL CHILE COLOMBIA PERU OTHER(1) TOTAL
- ------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)

REVENUE:
Data-Internet services... $ 1,506 $ 12,032 $ 3,317 $ 5,933 $ 4,364 $ -- $ 27,152

Voice services........... 2,827 1,920 4,734 131 6,455 (1,245) 14,822
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL REVENUE............ 4,333 13,952 8,051 6,064 10,819 (1,245) 41,974

Cost of revenue.......... 4,319 9,063 5,637 3,160 5,539 (1,245) 26,473
Selling, general and
administrative......... 1,803 8,086 2,734 2,894 4,307 8,890 28,714
----------- ----------- ----------- ----------- ----------- ----------- -----------
EBITDA(2)................ (1,789) (3,197) (320) 10 973 (8,890) (13,213)
Depreciation and
amortization........... 8,534 6,458 2,278 3,339 3,415 1,154 25,178
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from operations..... $ (10,323) $ (9,655) $ (2,598) $ (3,329) $ (2,442) $ (10,044) $ (38,391)
=========== =========== =========== =========== =========== =========== ===========

Total assets............. $ 212,291 $ 355,358 $ 271,085 $ 141,129 $ 348,943 $ 48,051 $ 1,376,857
Capital expenditures(3).. $ 588 $ 6,015 $ 1,535 $ 1,336 $ 1,992 $ 1,329 $ 12,795

THREE MONTHS ENDED
JUNE 30, 2001 ARGENTINA BRAZIL CHILE COLOMBIA PERU OTHER(1) TOTAL
- --------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)

REVENUE:
Data-Internet services.. $ 1,400 $ 9,734 $ 2,903 $ 3,288 $ 3,172 $ -- $ 20,497
Voice services.......... 1,278 1,388 6,193 31 4,565 (305) 13,150
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL REVENUE
2,678 11,122 9,096 3,319 7,737 (305) 33,647
Cost of revenue........... 3,940 12,620 6,928 1,490 3,680 (266) 28,392
Selling, general and
administrative.......... 6,014 8,597 3,488 2,673 4,062 9,123 33,957
----------- ----------- ----------- ----------- ----------- ----------- -----------
EBITDA(2)................. (7,276) (10,095) (1,320) (844) (5) (9,162) (28,702)
Depreciation and
amortization............ 2,843 7,072 1,554 1,264 3,187 8,836 24,756
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from operations...... $ (10,119) $ (17,167) $ (2,874) $ (2,108) $ (3,192) $ (17,998) $ (53,458)
=========== =========== =========== =========== =========== =========== ===========

Total assets.............. $ 172,717 $ 398,919 $ 60,816 $ 58,449 $ 98,311 $ 585,296 $ 1,374,508
Capital expenditures(3)... $ 18,511 $ 13,375 $ 4,049 $ 9,171 $ 10,470 $ 176 $ 55,752

13

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

SIX MONTHS ENDED
JUNE 30, 2002 ARGENTINA BRAZIL CHILE COLOMBIA PERU OTHER(1) TOTAL
- ------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)

REVENUE:
Data-Internet services .. $ 2,944 $ 24,762 $ 6,267 $ 11,431 $ 8,236 $ -- $ 53,640

Voice services .......... 6,306 3,666 10,824 234 12,988 (1,523) 32,495
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL REVENUE ........... 9,250 28,428 17,091 11,665 21,224 (1,523) 86,135
Cost of revenue ......... 8,486 18,689 11,816 6,773 10,718 (1,523) 54,959
Selling, general and
administrative ........ 5,326 17,106 5,770 5,126 8,077 16,480 57,885
----------- ----------- ----------- ----------- ----------- ----------- -----------
EBITDA(2) ............... (4,562) (7,367) (495) (234) 2,429 (16,480) (26,709)
Depreciation and
amortization .......... 11,958 11,307 3,882 5,733 5,934 3,556 42,370
----------- ----------- ----------- ----------- ----------- ----------- -----------

Loss from operations .... $ (16,520) $ (18,674) $ (4,377) $ (5,967) $ (3,505) $ (20,036) (69,079)
=========== =========== =========== =========== =========== =========== ===========

Total assets ............ $ 212,291 $ 355,358 $ 271,085 $ 141,129 $ 348,943 $ 48,051 $ 1,376,857
Capital expenditures(3) . $ 1,936 $ 6,750 $ 4,187 $ 1,941 $ 5,145 $ 170 $ 20,129

SIX MONTHS ENDED
JUNE 30, 2001 ARGENTINA BRAZIL CHILE COLOMBIA PERU OTHER(1) TOTAL
- -------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)

REVENUE:
Data-Internet services.. $ 1,678 $ 19,423 $ 5,798 $ 6,203 $ 5,854 $ -- $ 38,956
Voice services.......... 1,992 2,939 12,836 31 9,237 (674) 26,361
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL REVENUE
3,670 22,362 18,634 6,234 15,091 (674) 65,317
Cost of revenue........... 6,045 24,572 14,230 2,732 7,360 (635) 54,304
Selling, general and
administrative.......... 13,180 17,960 6,909 5,376 8,166 14,982 66,573
----------- ----------- ----------- ----------- ----------- ----------- -----------
EBITDA(2)................. (15,555) (20,170) (2,505) (1,874) (435) (15,021) (55,560)
Depreciation and
amortization............ 5,233 14,843 2,979 2,517 6,270 17,613 49,455
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from operations...... $ (20,788) $ (35,013) $ (5,484) $ (4,391) $ (6,705) $ (32,634) $ (105,015)
=========== =========== =========== =========== =========== =========== ===========

Total assets.............. $ 172,717 $ 398,919 $ 60,816 $ 58,449 $ 98,311 $ 585,296 $ 1,374,508
Capital expenditures(3)... $ 63,776 $ 43,116 $ 7,975 $ 11,627 $ 16,699 $ 5,106 $ 148,299

(1) Consists primarily of corporate operations, inter-company eliminations and
the results of operations and related assets of the executive management
Rabbi trust. All material inter-company accounts and transactions have been
eliminated.
(2) EBITDA is an important measure used by our chief operating decision makers
to measure our country operating results and performance.
(3) We calculate CAPEX, or capital expenditures, as gross property and
equipment purchased, net of any cash proceeds from the sale of property and
equipment, but excluding translation adjustments resulting from our
countries that use local currencies as functional currencies. CAPEX
includes property and equipment acquired through vendor financing
arrangements of approximately $43.6 million in 2001.

There are no significant transfers between geographic areas or
segments. Revenue among our country operations amounted to $0.8 million and
$0.9 million in Chile, $0.5 million and $0.5 million in Argentina, and $0.0
million and $0.2 million in Peru for the three to six months ended June 30,
2002, respectively. Revenue for the three and six months ended June 30, 2001
among our country operations amounted to $0.2 million and $0.4 million in Peru
and $0.1 million and $0.3 million in Chile. Revenue by country as presented in
the tables above includes revenue generated among our country operations; but
excluded and eliminated under the "Other" column on our reported consolidated
revenue amount.

Loss from operations consists of revenue less operating expenses and does
not include interest expense, interest income and other income (expense),
minority interest and income taxes. Total assets are those assets used in our
operations in each geographic area. Corporate assets, which are included under
the "Other" column, include cash and cash equivalents, property and equipment
and other assets.

14

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

We have operating lease agreements for our premises and equipment that
expire on various dates through 2010. Amounts due under the operating agreements
are subject to increases in accordance with their terms.

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 consolidated financial position or annual
results of operations.

Our current and future operations and investments in certain foreign
countries are generally subject to the risks of political, economic or social
instability, including the possibility of expropriation, confiscatory taxation,
hyper-inflation or other adverse regulatory or legislative developments, or
limitations on the repatriation of investment income, capital and other assets.
We cannot predict whether any of such factors will occur in the future or the
extent to which such factors would have a material adverse effect on our
international operations.

NOTE 8 -- NEW ACCOUNTING PRONOUNCEMENTS

Effective July 1, 2001, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations." SFAS No. 141 requires
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method. SFAS No. 141 also further clarifies the criteria for
recognition of intangible assets separately from goodwill. Our adoption of this
standard did not have any effect on our accounting for prior business
combinations.

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 are currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting unit's goodwill
carrying and fair values we expect an impairment of our goodwill in connection
with the initial transitional impairment test. Although we are not yet able to
reasonably determine our actual goodwill impairment amount we expect a goodwill
impairment to be in the range of $200.0 million to $300.0 million. We have
completed the identification and the determination of carrying value and fair
value of each of our reporting units, which indicates that the fair value is
lower than our carrying value. We are now completing the process of comparing
the implied fair value of our reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of its assets and liabilities
in a manner similar to a purchase price allocation in accordance with SFAS No.
141, to its carrying amount, both of which would be measured as of the date of
adoption. We expect to complete the final determination during the third quarter
and the transitional impairment loss will be recognized as cumulative effect of
a change in accounting principle on our consolidated statement of operations
effective for the first quarter in 2002.

There has been no change to our goodwill carrying amount since December 31,
2001, other than the change which resulted from using a different foreign
currency translation rate at June 30, 2002 compared to December 31, 2001. If
goodwill amortization had not been recorded in our second quarter of 2001, our
second quarter of 2001 adjusted net loss and basic and diluted adjusted loss per
share would have been $62.2 million and $0.53 per share, respectively, instead
of $73.0 million and $0.63 per share, respectively. For the six months ended
June 30, 2002 and 2001, the adjusted net loss and basic and diluted adjusted
loss per share would have been $124.3 million and $1.07 per share, respectively,
instead of $146.0 million and $1.26 per share, respectively.

15

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

Our intangibles subject to amortization amount to $20.9 million and $24.1
million (net of accumulated amortization of $13.9 million and $10.6 million), as
of June 30, 2002 and December 31, 2001 respectively. Our intangibles do not have
residual value and the weighted average amortization period is 5.6 years. Our
intangible assets are divided as follows:

JUNE 30, DECEMBER 31, LIFE IN
2002 2001 YEARS
-------- ----------- ---------
(UNAUDITED)

Customer contracts ................. $ 30,900 $ 30,900 3 to 5
Accumulated amortization ........... (13,305) (10,200)
-------- --------
Subtotal, Net customers contracts 17,595 20,700

Other intangibles .................. 3,944 3,828 7
Accumulated amortization ........... (629) (398)
-------- --------
Subtotal, Net other intangibles . 3,315 3,430
-------- --------

Total intangibles .................. $ 20,910 $ 24,130
======== ========

The aggregate amortization expense related to customers contracts for the
three and six months ended June 30, 2002 amounted to $1.4 million and $3.1
million, respectively. The aggregate amortization expense related to other
intangibles for the three and six months ended June 30, 2002 amounted to $0.1
million and $0.2 million, respectively. The estimated aggregate amortization
expense of intangibles for the next five years is estimated to be as follows:

AMOUNT
----------

2003...................... $ 5,641
2004...................... 5,641
2005...................... 3,907
2006...................... 441
2007 and thereafter ...... 1,644

Effective January 1, 2002 we also adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." SFAS No. 144 applies to all long-lived assets, including
discontinued operations and consequently amends APB Opinion No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." Based on SFAS No. 121, SFAS No. 144 develops one accounting model
for long-lived assets that are to be disposed of by sale, as well as addresses
the principal implementation issues. SFAS No. 144 requires that long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair value less cost to sell. Additionally, SFAS No. 144 expands the scope of
discontinued operations to include all components of an entity with operations
that (1) can be distinguished from the rest of the entity and (2) will be
eliminated from the ongoing operations of the entity in a disposal transaction.
The adoption of SFAS No. 144 did not have any effect on our accounting for
long-lived assets on the adoption date.

In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections", which provides for the rescission
of several previously issued accounting standards, new accounting guidance for
the accounting of certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. We will adopt
SFAS No. 145 on January 1, 2003. We are currently assessing the impact of SFAS
No. 145 on our financial position and results of operations.

NOTE 9 - EXTRAORDINARY GAIN (LOSS) ON DEBT RESTRUCTURING

As part of the restructuring of our financing with AT&T Corp., we issued to
AT&T Corp. warrants to acquire approximately 4.9 million shares of our Class A
common stock. Half of these warrants are exercisable at a price of $8.00 per
share and the other half are exercisable at a price of $0.01 per share. The
warrants have been valued using the Black-Scholes pricing model. The

16

AT&T LATIN AMERICA CORP.
(A MAJORITY OWNED SUBSIDIARY OF AT&T CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

warrants are exercisable immediately and the total amount of the warrants was
included as part of the determination of the loss on debt restructuring. The
debt restructuring resulted in an extraordinary loss of $6.3 million for the
period ended March 31, 2002.

In June 2002, we signed an agreement with one of our vendors for the
restructuring of the financing provided under certain vendor financing
agreements with the vendor. Under the restructuring agreement it was agreed to
reduce the principal outstanding from $9.5 million to $8.6 million as well as a
reduction of interest rate from LIBOR plus 7.0% to LIBOR plus 0.0%. The
restructuring also provided for quarterly payment of interest commencing in
August 2002 with a maturity of the principal in April 2004. The debt
restructuring resulted in an extraordinary gain of $1.8 million, resulting from
the reduction of principal and accrued interest.

NOTE 10 - OTHER EXPENSE (INCOME), NET

We use derivative instruments, currently forward contracts, to reduce our
exposure to fluctuations in foreign currency exchange rates. We do not use
derivatives instruments for speculative purposes. Our most significant contracts
to buy United States ("U.S.") dollars are forward contracts entered into to fix
the cost in foreign currency or in U.S. dollars of our U.S. dollars denominated
debt obligations in Brazil.

As of June 30, 2002, we had foreign currency forward contracts that hedge
certain transactions with notional amounts of $535.0 million, maturing in
various dates through November 2003. The total $3.8 million fair value of
forward currency contract assets, which are included as prepaid expenses and
other current assets on our June 30, 2002 balance sheet, represents unrealized
gains on certain of our forward currency contracts selling foreign currencies as
result of the strengthening of the dollar compared to the currencies that we
hedge. In addition, the total $1.0 million of fair value of forward contract
liabilities which are included in other current liabilities on our June 30, 2002
balance sheet represents unrealized losses on certain of our forward currency in
our various countries in which we operate, which are mainly used to fix the cost
of our commitments.

Derivative gains and losses included in accumulated other comprehensive
income ("AOCI") are reclassified into earnings at the same time the underlying
hedged transaction is recorded in earnings.

During the six months ended 2002, net changes in the fair value of our cash
flow hedges amounted to unrealized losses of $9.1 million. During the six months
ended June 30, 2002 we discontinued cash flows hedge accounting for certain
forward contracts and concurrently designated the respective underlying loans as
a long-term investment. The forward contracts that were accounted for as cash
flows hedges are now being accounted for as undesignated forward contracts and
the change in the fair value of these contracts is accounted for as other
expenses in the statement of operations. With the designation of the underlying
loans as long-term investment the amount of $12.6 million previously deferred in
other comprehensive income (loss) was reclassified to other expense in the
accompanying statement of operations during the six months ended June 30, 2002.
We also discontinued hedge accounting and settled certain other cash flows
hedges resulting in a charge to other expense of $3.9 million. The remaining
components of other expense were foreign currency transaction losses, fair value
changes on our undesignated forward contracts and amortization of forward points
on forward contracts accounted for as cash flows hedges.

17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Some of the statements under "Management's Discussion & Analysis of
Financial Condition and Results of Operations" and elsewhere in this quarterly
report on Form 10-Q are 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 on 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:

o expectations and estimates of completion dates, construction costs,
subsequent maintenance expenses and network expansion;

o expectations and estimates as to the amount of cash requirements to
implement our growth strategy and as to our ability to obtain
financing;

o expectations about the sources of revenues and the percentage
breakdown of sources of revenues; and

o future financial performance, including growth in sales and income.

In addition to matters that are described in this quarterly report on Form
10-Q and our 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
quarterly report on Form 10-Q or its exhibits:

o inaccurate forecasts of customer or market demand;

o the rate of expansion of our networks and customer base;

o changes in communications technology and/or the pricing of competitive
products and services;

o highly competitive market conditions;

o access to financing on acceptable terms and conditions;

o our ability to implement our planned consolidation of key functions of
our operations in the manner we currently expect and in the
time-frames we contemplate;

o loss of one or more important customers;

o acquisitions by us and our ability to integrate successfully any
acquired businesses or technologies into our operations;

o changes in or developments under laws, regulations and licensing
requirements in the countries in which we operate;

o our ability to obtain and retain rights of ways and permits necessary
for the expansion and maintenance of our networks;

o volatility of our stock price;

o currency fluctuations; and

o changes in economic and political conditions in the countries in which
we operate.

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 quarterly report on Form 10-Q, to reflect events or circumstances after the
date of this quarterly report on Form 10-Q.

18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND OUR ANNUAL REPORT ON FORM
10-K.

CRITICAL ACCOUNTING POLICIES AND JUDGMENTS

Our critical accounting policies are those which we believe require our most
subjective or complex judgments; often as a result of the need to make estimates
about the effect of matters that are inherently uncertain and may ultimately
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. A
discussion of our critical accounting policies, the underlying judgments and
uncertainties are included in our Annual Report on Form 10-K.

OVERVIEW

We provide communications services under the "AT&T" brand to major
metropolitan business 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 third party 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.

BASIS OF PRESENTATION. Our unaudited financial statements reflect operations
for the three and six months ended June 30, 2002 and 2001 in accordance with
generally accepted accounting principles in the United States of America.

AT&T LATIN AMERICA. 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. include the countries in
South America and the Caribbean plus Panama, but excluding Cuba and Venezuela.

RECENT EVENTS

We intend to centralize key functions in order to coordinate and
consolidate systems and processes currently employed individually in each
country operation. The centralization is expected to be completed through the
creation of a Regional Commercial Organization based in Washington, D.C., which
will be designed to allow us to coordinate better with AT&T Corp. product
offerings and to enhance our service to multinational customers. In addition, we
are creating a Regional Service Center in Santiago, Chile that is intended to
provide consistent services to the operating entities through the consolidation
of key functions such as engineering, operations, customer care, information
technology and human resources.

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In July 2002 we obtained licenses from Anatel (AGENCIA NACIONAL DE
TELECOMUNICACOES), Brazil's telecom regulatory agency, to provide local Switched
Fixed Telephony Service (STFC) and domestic and international Multimedia
Communications Services (SCM). The STFC license for local service includes the
seven largest business centers in Brazil, (where the company already own
metropolitan networks): Sao Paulo, Campinas, Rio de Janeiro, Brasilia, Belo
Horizonte, Curitiba and Porto Alegre.

We also recently filed with Anatel an application to obtain a license to
provide domestic and international long distance telephony services. The license
application is for the entire state of Sao Paulo and the largest business
centers outside of the region, including Rio de Janeiro, Brasilia, Belo
Horizonte, Curitiba and Porto Alegre. With the long distance telephony license,
we expect to receive our own carrier selection code designation for the
provision of services in these cities, which the company will use to compete in
the domestic and international long distance market in Brazil.

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 are currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting unit's goodwill
carrying and fair values we expect an impairment of our goodwill in connection
with the initial transitional impairment test. Although we are not yet able to
reasonably determine our actual goodwill impairment amount we expect a goodwill
impairment to be in the range of $200.0 million to $300.0 million. We have
completed the identification and the determination of carrying value and fair
value of each of our reporting units, which indicates that the fair value is
lower than our carrying value. We are now completing the process of comparing
the implied fair value of our reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of its assets and liabilities
in a manner similar to a purchase price allocation in accordance with SFAS No.
141, to its carrying amount, both of which would be measured as of the date of
adoption. We expect to complete the final determination during the third quarter
and the transitional impairment loss will be recognized as cumulative effect of
a change in accounting principle on our consolidated statement of operations
effective for the first quarter in 2002.

There has been no change to our goodwill carrying amount since December 31,
2001, other than the change which resulted from using a different foreign
currency translation rate at June 30, 2002 compared to December 31, 2001. If
goodwill amortization had not been recorded in our second quarter of 2001, our
second quarter of 2001 adjusted net loss and basic and diluted adjusted loss per
share would have been $62.2 million and $0.53 per share, respectively, instead
of $73.0 million and $0.63 per share, respectively. For the six months ended
June 30, 2002 and 2001, the adjusted net loss and basic and diluted adjusted
loss per share would have been $124.3 million and $1.07 per share, respectively,
instead of $146.0 million and $1.26 per share, respectively.

20

RESULTS OF OPERATIONS

The following table includes a summary of our consolidated statements of
operations for the periods indicated below.

AT&T LATIN AMERICA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

Revenue:
Data-Internet services ................................... $ 27,152 $ 20,497 $ 53,640 $ 38,956
Voice services ........................................... 14,822 13,150 32,495 26,361
--------- --------- --------- ---------
Total revenue ..................................... 41,974 33,647 86,135 65,317
Cost of revenue ............................................ 26,473 28,392 54,959 54,304
Selling, general and administrative expenses ............... 28,714 33,957 57,885 66,573
Depreciation and amortization .............................. 25,178 24,756 42,370 49,455
--------- --------- --------- ---------
Loss from operations .............................. (38,391) (53,458) (69,079) (105,015)
Interest expense ........................................... 32,442 18,865 54,244 34,716
Interest income ............................................ 212 493 410 763
Other (expense) income, net ................................ (34,543) (1,375) (53,616) (7,320)
--------- --------- --------- ---------
Loss before provision for income taxes, ............... (105,164) (73,205) (176,529) (146,288)
minority interest income and extraordinary item .....
Provision for income taxes ................................. -- -- -- --
Minority interest income ................................... 87 154 180 269
--------- --------- --------- ---------
Loss before extraordinary item ........................ (105,077) (73,051) (176,349) (146,019)
Extraordinary gain (loss) on debt restructuring ............ 1,785 -- (4,479) --
--------- --------- --------- ---------
Net loss ................................................... $(103,292) $ (73,051) $(180,828) $(146,019)
========= ========= ========= =========

Basic and diluted net loss per common share before
extraordinary gain (loss) on debt restructuring .......... $ (0.89) $ (0.63) $ (1.49) $ (1.26)
Extraordinary gain (loss) per common share on debt
restructuring ............................................ 0.02 -- (0.04) --
--------- --------- --------- ---------
Basic and diluted net loss per common share ................ $ (0.87) $ (0.63) $ (1.53) $ (1.26)
========= ========= ========= =========
Weighted average common shares outstanding ................. 118,641 116,296 118,521 116,296
========= ========= ========= =========

The following table includes revenue by country and consolidated operating
loss in dollars and as a percentage of revenue for the three and six months
ended June 30, 2002 and 2001:

THREE MONTHS ENDED
JUNE 30,
------------------------------------------------------
2002 % 2001 %
-------- -------- -------- --------
($'S IN THOUSANDS)
(UNAUDITED)

Revenue:
Argentina ................................ $ 4,333 10.3% $ 2,678 8.0%
Brazil ................................... 13,952 33.2% 11,122 33.1%
Chile .................................... 8,051 19.2% 9,096 27.0%
Colombia ................................. 6,064 14.4% 3,319 9.9%
Peru ..................................... 10,819 25.8% 7,737 23.0%
Other .................................... (1,245) (2.9%) (305) (1.0%)
-------- -------- -------- --------
Total revenue .................. 41,974 100.0% 33,647 100.0%
Cost of revenue ............................ 26,473 63.1% 28,392 84.4%
Selling, general and administrative expenses 28,714 68.4% 33,957 100.9%
Depreciation and amortization .............. 25,178 60.0% 24,756 73.6%
-------- -------- -------- --------

Loss from operations ........... $(38,391) (91.5%) $(53,458) (158.9%)
======== ======== ======== ========

21

SIX MONTHS ENDED
JUNE 30,
----------------------------------------------------------
2002 % 2001 %
--------- --------- --------- ---------
($'S IN THOUSANDS)
(UNAUDITED)

Revenue:
Argentina ..................................... $ 9,250 10.7% $ 3,670 5.6%
Brazil ........................................ 28,428 33.0% 22,362 34.2%
Chile ......................................... 17,091 19.8% 18,634 28.5%
Colombia ...................................... 11,665 13.5% 6,234 9.5%
Peru .......................................... 21,224 24.6% 15,091 23.1%
Other ......................................... (1,523) (1.6%) (674) (0.9%)
--------- --------- --------- ---------
Total revenue ....................... 86,135 100.0% 65,317 100.0%
Cost of revenue ................................. 54,959 63.8% 54,304 83.1%
Selling, general and administrative expenses .... 57,885 67.2% 66,573 101.9%
Depreciation and amortization ................... 42,370 49.2% 49,455 75.7%
--------- --------- --------- ---------

Loss from operations ................ $ (69,079) (80.2%) $(105,015) (160.7%)
========= ========= ========= =========

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

THREE MONTHS ENDED
JUNE 30, CHANGE
-------------------- --------------------
2002 2001 $ %
------- ------- ------- -------
($'S IN THOUSANDS)
(UNAUDITED)

REVENUE:
Data-Internet services ............................................ $27,152 $20,497 $ 6,655 32.5%
Voice services .................................................... 14,822 13,150 1,672 12.7%
------- ------- -------
Total revenue .............................................. $41,974 $33,647 $ 8,327 24.7%
======= ======= =======

REVENUE. Revenue for the three months ended June 30, 2002 was $42.0
million, compared to revenue of $33.6 million for the same period in 2001,
representing an increase of $8.3 million or 24.7%. We experienced revenue
increases in all our country operations, except for Chile where revenue
decreased mainly due to a reduction of voice-wholesale revenue for the period.
The increase in revenue resulted from increases in customers and ports in
service, which reflected increased selling of services to both existing
customers and new customers. The increase in revenue was partially offset by the
translation effect of the weakening of foreign currency exchange rates versus
the U.S. dollar in Argentina and Brazil.

Our data-Internet services revenue grew from $20.5 million during the three
months ended June 30, 2001, to $27.2 million for the same period in 2002,
representing an increase of $6.7 million or 32.5%. The increase in our
data-Internet services was mainly due to increased demand for our services from
our existing business customers and to an increase in our customer base.
Data-Internet services accounted for 64.7% of our revenue during the three
months ended June 30, 2002. We anticipate that over the long-term, data-Internet
services revenue will continue to represent a majority of total revenue.

Revenue from voice services grew from $13.2 million during the three months
ended June 30, 2001 to $14.8 million for the same period in 2002, representing
an increase of $1.7 million or 12.7%. The increase in our voice-related revenue
was mainly due to the increase in total minutes sold. Revenue growth from voice
services was negatively affected by the decrease in wholesale revenue in Chile
described above, as well as to a lesser extent the entrance of multi-carrier
services competition in Peru during the three months ended June 30, 2002.

COST OF REVENUE. Cost of revenue was $26.5 million for the three months
ended June 30, 2002, compared to $28.4 million for the same period in 2001,
representing a decrease of $1.9 million or 6.8%. Cost of revenue consists of
leased line costs, interconnection costs, maintenance costs, and network and
operating system costs, including certain labor and other direct costs. The
decrease in cost of revenue was driven by lower connection costs in Brazil

22

as a result of newly agreed contracts, as well as lower reported cost of revenue
in U.S. dollar terms in Argentina and Brazil due to the translation effect of
the weakening of their local currencies compared to the U.S. dollar. We expect
to continue to increase the amount and percentage of our services revenue that
is delivered over our existing network capacity as well as to continue to
benefit from better pricing recently obtained from third party network
providers, resulting in continued gross margin improvement.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $28.7 million during the three months ended June
30, 2002, compared to $34.0 million for the same period in 2001, representing a
decrease of $5.2 million or 15.4%. The decrease in selling, general and
administrative expenses resulted primarily from the translation effect of the
weakening of the Argentina peso and the Brazilian real compared to the U.S.
dollar in the first part of 2002, and lower headcount when compared to the same
period in 2001. We expect lower selling, general and administrative expenses for
the remainder of 2002 and for these expenses to increase thereafter in absolute
terms to the extent that we continue to experience growth and to expand our
service offerings. We believe that the peso devaluation in Argentina will
continue to have a positive impact on our selling, general and administrative
expenses. We also anticipate selling, general and administrative expenses, as a
percentage of revenue, will decrease in future periods. Selling, general and
administrative expenses are comprised primarily of compensation, professional
fees, travel expenses, marketing, office space and indirect labor expenses.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $25.2
million during the three months ended June 30, 2002, compared to $24.8 million
for the same period in 2001, representing an increase of $0.4 million.
Depreciation and amortization was reduced as a result of the adoption of SFAS
142 during 2002, under which we no longer amortize goodwill but instead review
it annually (or more frequently if impairment indicators arise) for impairment.
This reduction was offset by depreciation expense on our increased deployed
network infrastructure and one-time incremental depreciation expense on certain
non-core assets that were fully depreciated during this quarter. If goodwill
amortization would not have been recorded in our second quarter of 2001, then
our second quarter of 2001 adjusted depreciation and amortization would have
been $13.9 million, compared to $25.2 million in second quarter of 2002. We
expect that depreciation expense will continue to increase on a quarterly basis
as we continue to invest to support our business.

INTEREST EXPENSE. Interest expense, net of $0.2 million of interest income,
was $32.2 during the three months ended June 30, 2002, compared to $18.4 million
during the same period in 2001, representing an increase of $13.9 million or
75.4%. This increase in interest expense was due mainly to higher debt
outstanding during the period and higher interest rate on the restructured AT&T
Corp. loans, partially offset by lower interest rates on the senior secured
vendor financing. Interest expense is mainly comprised of dividends related to
our Mandatorily Redeemable 15% Series B Preferred Stock and interest expense
related to our subordinated credit facility with AT&T Corp., our senior secured
vendor financing, notes payable to other vendors and other bank facilities.

OTHER (EXPENSE) INCOME, NET. Other (expense) income, net was $34.5 million
of expense for the three months ended June 30, 2002, compared to $1.4 million of
expense for the same period in 2001, representing an increase of $33.2 million.
During the three months ended June 30, 2002 we discontinued cash flows hedge
accounting for certain forward contracts and concurrently designated the
respective underlying loans as a long-term investment. The forward contracts
that were accounted for as cash flow hedges are now being accounted for as
undesignated forward contracts and the change in the fair value of these
contracts is accounted for as other expenses in the statement of operations.
With the designation of the underlying loans as long-term investment the amount
of $12.6 million previously deferred in other comprehensive income (loss) was
reclassified to other expense in the accompanying statement of operations during
the three months ended June 30, 2002. We also discontinued hedge accounting and
settled certain other cash flows hedges resulting in a charge to other expense
of $3.8 million. All other expense was mainly due to foreign currency
transaction losses, fair value changes on our undesignated forward contracts and
amortization of forward points on forward contracts accounted for as cash flow
hedges.

EXTRAORDINARY GAIN ON DEBT RESTRUCTURING. We recognized a non-cash
extraordinary gain of $1.8 million during the three months ended June 30, 2002
in connection with a restructuring of certain notes payable to other vendors.

NET LOSS. Net loss was $103.3 million for the three months ended June 30,
2002, compared to net loss of $73.1 million for the same period in 2001,
representing an increase of $30.2 million or 41.4%. The increase in net loss was

23

mainly due to increases in interest expense and other (expense) income, net. We
expect to continue to incur net losses in the next several years.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

SIX MONTHS ENDED
JUNE 30, CHANGE
-------------------- --------------------
2002 2001 $ %
------- ------- ------- -------
($'S IN THOUSANDS)
(UNAUDITED)

REVENUE:
Data-Internet services.. $53,640 $38,956 $14,684 37.7%
Voice services.......... 32,495 26,361 6,134 23.3%
------- ------- -------
Total revenue.... $86,135 $65,317 $20,818 31.9%
======= ======= =======

REVENUE. Revenue for the six months ended June 30, 2002 was $86.1 million,
compared to revenue of $65.3 million for the same period in 2001, representing
an increase of $20.8 million or 31.9%. This increase in revenue was mainly
generated in Argentina, Brazil, Colombia and Peru, which combined accounted for
$23.2 million revenue increase, offset by a decrease in Chile's revenue of $1.5
million. The increase in revenue resulted from increases in customers, ports in
service and buildings connected which in turn reflected both up-selling of
services to existing customers and additions of new customers.

Our data-Internet services revenue grew from $39.0 million during the six
months ended June 30, 2001, to $53.6 million for the same period in 2002,
representing an increase of $14.7 million or 37.7%. The increase in our
data-Internet services was mainly due to increased demand for bandwidth from our
existing business customers and to an increase in our customer base.
Data-Internet services accounted for 62.3% of our revenue in 2002.

Revenue from voice services grew from $26.4 million during the six months
ended June 30, 2001, to $32.5 million for the same period in 2002, representing
an increase of $6.1 million or 23.3%. The increase in our voice-related revenue
was mainly due to the increase in our customer base as well as an increase in
total minutes sold, offset by a decrease in wholesale revenue in Chile.

COST OF REVENUE. Cost of revenue was $55.0 million for the six months ended
June 30, 2002, compared to cost of revenue of $54.3 million for the same period
in 2001, representing an increase of $0.7 million or 1.2%. Cost of revenue
consists of leased line costs, interconnection costs, maintenance costs, and
network and operating system costs, including labor and other direct costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $57.9 million during the six months ended June 30,
2002, compared to selling, general and administrative expenses of $66.6 million
for the same period in 2001, representing an decrease of $8.7 million or 13.1%.
The decrease in selling, general and administrative expenses resulted primarily
from a decrease in headcount and from the translation effect of the weakening of
the Argentina peso and the Brazilian real compared to the U.S. dollar in the
first part of 2002 when compared to the same period in 2001.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $42.4
million during the six months ended June 30, 2002, compared to depreciation and
amortization of $49.5 million for the same period in 2001, representing a
decrease of $7.1 million or 14.3%. The decrease in depreciation and amortization
was due mainly to the adoption of SFAS 142, under which we no longer amortize
goodwill but instead review it annually (or more frequently if impairment
indicators arise) for impairment, offset by depreciation expense on our
increased deployed network infrastructure. If goodwill amortization would not
have been recorded in the six months ended June 30, 2001, then our six months
ended June 30, 2001 adjusted depreciation would have been $27.8 million,
compared to $42.4 million for the six months ended June 30, 2002.

24

INTEREST EXPENSE. Interest expense, net of $0.4 million of interest income,
was $53.8 million during the six months ended June 30, 2002, compared to
interest expense of $34.0 million during the same period in 2001, representing
an increase of $19.9 million or 58.6%. This increase in interest expense was due
mainly to the increase in interest bearing debt over the period. Interest
expense is mainly comprised of dividends relating to our Mandatorily Redeemable
15% Series B Preferred Stock and interest expense related to our credit
facilities provided by AT&T Corp., our senior secured vendor financing, notes
payable to other vendors and other bank facilities.

OTHER (EXPENSE) INCOME, NET. Other (expense) income, net was $53.6 million
during the six months ended June 30, 2002. Other (expense) income, net was
mainly due to foreign currency transaction losses, changes in fair value of
certain hedges and amortization of forward points on hedge contracts, including
the discontinuance of hedge accounting for certain forward contracts resulting
in aggregate charges to other expenses of approximately $16.5 million.

EXTRAORDINARY LOSS ON DEBT RESTRUCTURING. During the six months ended June
30, 2002, we have recorded a net extraordinary loss on debt restructuring of
$4.5 million related to debt restructuring with our parent company and certain
vendors.

NET LOSS. Net loss was $180.8 million during the six months ended June 30,
2002, compared to net loss of $146.0 million for the same period in 2001,
representing an increase of $34.8 million or 23.8%. The increase in net loss was
mainly due to increases in interest expense and other (expense) income, net. We
expect to continue to incur net losses for the next several years. Although we
are not yet able to reasonably determine our actual goodwill impairment amount
we expect a goodwill transitional impairment in the range of $200.0 million to
$300.0 million, which we expect to recognize during third quarter as cumulative
effect of a change in accounting principle on our consolidated statement of
operations effective for the first quarter in 2002.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are for working capital, capital expenditures
and debt service. Currently, our primary sources of liquidity are cash on hand,
revenue, available funds under our senior secured vendor financing and unsecured
bank facilities in local Latin American credit markets.

Our business is capital intensive and, as such, has required substantial
initial capital investment to date. We have been building a high capacity
network in the countries in which we operate and are primarily focused on
data-Internet services. As of the end of 2001, we had completed a substantial
portion of our planned capital deployment relating to core network
infrastructure. We expect our capital expenditures in 2002 to range between
$60.0 million and $70.0 million. We also expect our aggregate capital
expenditures in 2002 and future periods will be reduced significantly from 2001
levels as we continue to increase the utilization of our existing networks.
Moreover, we expect that our capital expenditures in 2002 and future periods
will become more correlated to increases in revenue.

We expect to continue incurring operating losses and to generate negative
cash flows from operations for the next two years and to continue to generate
net losses for the next several years. We currently expect to show positive cash
flow from operations starting in 2004 and thereafter.

We believe that our cash on hand together with our available borrowing
capacity under the senior secured vendor financing and local bank credit
facilities in Latin American markets will be sufficient to support our working
capital needs, capital expenditures and debt service for the next several years.
However, in the event that our future working capital is less than expected, as
a result of lower than expected revenue, higher expenses or greater capital
investment needs, or in the event that we are unable to renew or refinance
existing local credit facilities when they become due, we may have cash needs
greater than expected. Our inability to obtain additional financing to fund such
cash needs would result in a material adverse effect on our business plan, our
financial condition and results of operations. There is no assurance that we
will be able to obtain additional cash we may need on acceptable terms and
conditions or at all. Moreover, if in the future we were not able to meet
certain operating and financial targets specified under financing agreements and
were not able to obtain requisite waivers, including with respect to our senior
secured vendor financing facility, our access to unused financing commitments
could be restricted, or our creditors could choose to exercise remedies
available to them under such financing agreements.

25

FUTURE COMMITMENTS AND FUNDING SOURCES

At June 30, 2002, our contractual cash obligations, with initial or
remaining terms in excess of one year, were as follows (in thousands)(a):

CONTRACTUAL CASH SIX MONTHS
OBLIGATIONS ENDING PAYMENTS DUE IN YEAR ENDING
DECEMBER -------------------------------------------------------------------------
TOTAL 2002 2003 2004 2005 2006 2007 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------

Long-term debt, including
current maturities (a) ... $842,876 $ 50,593 $ 21,772 $ 10,193 $ 1,446 $ 1,021 $ 759 $757,092
Operating leases ............ 41,543 4,766 7,183 6,228 5,491 4,445 4,365 9,065
Capacity agreements
(IRU's) .................... 17,363 627 1,215 1,177 1,212 1,249 1,286 10,597
Forward contracts (b) ....... 1,032 1,032 -- -- -- -- -- --
Purchase commitments for
capital expenditures (c) .. 479 -- 200 279 -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total Contractual Cash
obligations (d) ........... $903,293 $ 57,018 $ 30,370 $ 17,877 $ 8,149 $ 6,715 $ 6,410 $776,754
======== ======== ======== ======== ======== ======== ======== ========

(a) See Note 4 to the consolidated financial statements for additional
information regarding our debt.
(b) The fair value of our forward contracts payable are reflected for
informational purposes only. The fair value of our net forward contract
payables is subject market rates changes and the ultimate liability at
settlement may materially differ from the amount herein presented.
(c) Reflects only contractual commitments at June 30, 2002. We expect capital
expenditures to range from $60.0 million to $70.0 million in 2002, and to
make capital expenditures in later years.
(d) Reflects only commitments for the specific categories listed and does not
reflect such items as trade payable obligations, payroll-related
liabilities or contributions to employee-related benefit, savings or
deferred compensation plans, employment contracts, or short-term lease
obligations.

CAPITAL USES

During the six months ended June 30, 2002, our net cash increased by $43.7
million. The increase in cash reflected cash provided by financing activities of
$125.7 million, offset by cash used in operating and investing activities of
$82.0 million. Our uses of cash in operations were mainly as a result of our net
loss of $180.8 million during the six months ended June 30, 2002, a net decrease
in the changes of assets and liabilities of approximately $19.3 million, offset
by non-cash activities of approximately $138.3 million.

We expect to continue to make capital expenditures during the reminder of
2002 and thereafter relating to our existing and planned network development and
operations. During 2002, we expect capital expenditures to be significantly
lower than 2001 and to range from $60.0 million to $70.0 million. During the six
months ended June 30, 2002 we invested approximately $20.1 million in the
development of our networks and infrastructure.

We also expect to use capital resources to fund our losses from operations
and working capital needs. In addition, we expect non-cash interest expense to
increase in the near term as a result of increased debt amounts. As a result of
our debt restructuring with AT&T Corp., while the senior secured vendor
financing is outstanding, payment of dividends on our Mandatorily Redeemable 15%
Series B Preferred Stock and interest on the loans to us from AT&T Corp. will be
deferred to the maturity date of these loans and the redemption date of the
preferred stock, which will be October 2008.

26

CAPITAL RESOURCES

SENIOR SECURED VENDOR FINANCING

In December 2001 we entered into senior secured credit facilities, governed
by common terms, with our strategic equipment vendors, in an aggregate principal
amount of $298.5 million. These facilities became effective on March 27, 2002.

The facilities are divided into two portions comprised of a first tranche
of up $199.2 million to be used to finance the purchase of equipment and related
software and services from the three vendors, and a second tranche of up to
$99.3 million to finance duties, taxes and interest on the facility during the
availability period. At closing, approximately $143.3 million was drawn under
the facilities, of which $73.8 million was used to pay outstanding interim
notes. Draws under this facility are available through June 2004. After that
time principal of the facilities amortizes on a scheduled quarterly basis until
final maturity in June 2008. We have available $147.9 million under this
facility as of June 30, 2002.

Interest on loans under the facilities accrues at LIBOR plus 5.625% or, at
our election, on a prime rate basis and is payable quarterly. We have paid an up
front facility fee and are obligated to pay commitment fees quarterly based on
the unused portion of the facility.

Under the terms of the facilities, a portion of the net proceeds of any
future equity and debt offerings by us must be directed to prepay outstanding
amounts under the facilities.

The facilities are guaranteed by AT&T Latin America Corp. and our operating
subsidiaries, and are also collateralized by a pledge of the shares of our
operating subsidiaries and of substantially all of our and our subsidiaries'
material assets other than our rights to the AT&T brand and under certain other
agreements with AT&T Corp.

The facilities contain customary covenants restricting our ability to engage
in certain activities, including limitations on debt, liens, investments
(including acquisitions), restricted payments, transactions with affiliates,
asset dispositions and changes in corporate existence. We are also required to
meet certain financial tests over the term of the facilities, relating to
minimum revenue, minimum EBITDA (earnings before interest, taxes, depreciation
and amortization as defined in the governing agreements), maximum capital
expenditures, minimum liquid assets and available undrawn credit, ratios of debt
to equity and to EBITDA and minimum on-network ports.

The facilities provide for events of default in the event of non-payment,
failure to comply with covenants, occurrence of a material adverse effect,
inability, at any time on or after June 30, 2003, to make loan repayments from
Argentina without the need to obtain further governmental approvals or
declaration of a debt moratorium in any of the principal countries in which we
operate, and other, customary events, except that in the case of Argentina,
certain events occurring before the effective date will not constitute a
moratorium.

OTHER BANK FACILITIES

AT&T do Brasil is party to several local bank facilities providing for
borrowings of an aggregate amount of $37.4 million maturing through February
2004. At June 30, 2002, there was an aggregate of $31.4 million outstanding
under these facilities. Borrowings under these facilities bear interest at fixed
rates ranging from 2.2% to 13.0% per annum and variable rates based upon LIBOR
plus a margin ranging from 1.2% to 1.9%.

AT&T Colombia is party to several local bank facilities providing for
borrowings of an aggregate amount of $14.9 million maturing through May 2006. At
June 30, 2002, there was an aggregate of $12.6 million outstanding under these
facilities. Borrowings under these facilities bear interest at fixed rates
ranging from 12.5% to 13.0% per annum and variable rates based upon Deposito
Tasa Fijo (DTF) plus a margin ranging from 4.5% to 7.0%. The average rate for
Colombian peso interest rate or DTF for the six months ended June 30, 2002 was
9.6%.

27

AT&T Peru is party to several local bank facilities providing for
borrowings of an aggregate amount of $19.8 million, maturing on various dates
through June 2011. At June 30, 2002, there was an aggregate of $7.4 million
outstanding under these facilities. Borrowings under these facilities bear
interest at fixed and variable rates ranging from 6.0% to 12.5% per annum.

AT&T Argentina and AT&T Chile are each party to several local bank
facilities providing for borrowings (including certain capital leases) of an
aggregate amount of $6.0 million, maturing on various dates through October
2010. At June 30, 2002 there was an aggregate of $0.9 million outstanding under
these facilities bearing interest at fixed interest rates ranging from 9.0% to
17.5%.

As of June 30, 2002 we have approximately $52.4 million outstanding under
these bank facilities. We have an additional availability under these bank
facilities of approximately $24.0 million. Although we expect to be able to
renew or refinance most of the existing amounts outstanding as they become due,
and to maintain most of the existing additional availability to use as needed,
there is no assurance that we will be able to renew or refinance these
outstanding amounts or maintain the additional availability on acceptable terms
or at all.

LIQUIDITY ASSESSMENT

We expect to have additional capital requirements in the next several years
related to funding our working capital needs, operating losses and debt service
obligations and our development and expansion of our communications services and
networks.

Our cash needs in the next several years will be affected by several
factors, including, but not limited to:

o the amount of cash expected to be used in our operations;

o our ability to increase revenue;

o our ability to collect accounts receivable as expected and the
timing of collection;

o the level of competitive pressure on the pricing of our services;

o our ability to manage and contain costs associated with our
expected growth;

o whether we change our plans for building and expanding our
networks;

o whether interest rates fluctuate materially and the resulting
increase in interest obligations under our floating rate
facilities;

o the impact of fluctuations in currency exchange rates in the
countries in which we operate on our operations, including the
effect on any current or future hedging instruments; and

o whether we use cash, issue common stock or increase our debt to
complete acquisitions and ventures.

As of June 30, 2002 we had cash and cash equivalents of $69.1 million,
$147.9 million available under the secured vendor financing and $25.8 million
available under our local bank facilities.

We believe that our cash on hand together with our available borrowing
capacity under the senior secured vendor financing and local bank credit
facilities in Latin American markets will be sufficient to support our working
capital needs, capital expenditures and debt service for the next several years.
However, in the event that our future working capital is less than expected, as
a result of lower than expected revenue, higher expenses or greater capital
investment needs, or in the event that we are unable to renew or refinance
existing local credit facilities when they become due, we may have cash needs
greater than expected. Our inability to obtain additional financing to fund such
cash needs would result in a material adverse effect on our business plan, our
financial condition and results of operations. There is no assurance that we
will be able to obtain additional cash we may need on acceptable terms and
conditions or at all. Moreover, if in the future we were not able to meet
certain operating and financial targets

28

specified under financing agreements and were not able to obtain requisite
waivers, including with respect to our senior secured vendor financing facility,
our access to unused financing commitments could be restricted, or our creditors
could choose to exercise remedies available to them under such financing
agreements.

SEASONALITY

To date we have not experienced significant seasonality in our services
offerings; however, some reduced demand for our voice services was noted in the
first quarter of 2002, or summer months, in the countries in which we operate.

IMPACT OF INFLATION

Inflation in the countries in which we operate may affect our business
through increased labor costs and increases in the cost of third-party
communications capacity and other third-party services. To date we have not
experienced significant increases in these costs due to inflation. In addition
to the effect of inflation, competition for qualified personnel could increase
labor costs for us in the future. Our international operations may, at times in
the future, expose our business to high inflation in certain foreign countries.

We generate all of our revenue from international operations that are
susceptible to currency fluctuations. The likelihood and extent of future
currency fluctuations in the countries in which we operate in Latin America,
future deteriorating economic conditions in those Latin American countries and
the resulting impact on our results of operations, financial position and cash
flows cannot now be determined.

Our customer contracts as well as certain direct costs in Brazil provide
for payment in local currency and are generally indexed to various inflation
indicators specific to Brazil. Our customer contracts as well as certain direct
costs in Argentina have been subject to local regulatory changes due to the
recent political and economic crisis. The impact of the recent Argentina
political and economic crisis resulted in a devaluation of the Argentina Peso
during the six months ended June 30, 2002. It is uncertain the total impact of
the devaluation in Argentina for the rest of the year; however, it is expected
that our revenue growth in U.S. dollar terms in Argentina during the reminder of
2002 will continue to be significantly lower than anticipated prior to the
devaluation.

EFFECTS OF NEW ACCOUNTING STANDARDS

Effective July 1, 2001, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations." SFAS No. 141 requires
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method. SFAS No. 141 also further clarifies the criteria for
recognition of intangible assets separately from goodwill. Our adoption of this
standard did not have any effect on our accounting for prior business
combinations.

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 are currently assessing the impact of the adoption of this standard
and based on our preliminary identification of our reporting unit's goodwill
carrying and fair values we expect an impairment of our goodwill in connection
with the initial transitional impairment test. Although we are not yet able to
reasonably determine our actual goodwill impairment amount we expect a goodwill
impairment to be in the range of $200.0 million to $300.0 million. We have
completed the identification and the determination of carrying value and fair
value of each of our reporting units, which indicates that the fair value is
lower than our carrying value. We are now completing the process of comparing
the implied fair value of our reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of its assets and liabilities
in a manner similar to a purchase price allocation in accordance with SFAS No.
141, to its carrying amount, both of which would be measured as of the date of
adoption. We expect to complete the final determination during the third quarter
and the transitional impairment loss will be recognized as cumulative effect of
a change in accounting principle on our consolidated statement of operations
effective for the first quarter in 2002.

29

There has been no change to our goodwill carrying amount since December 31,
2001, other than the change which resulted from using a different foreign
currency translation rate at June 30, 2002 compared to December 31, 2001. If
goodwill amortization had not been recorded in our second quarter of 2001, our
second quarter of 2001 adjusted net loss and basic and diluted adjusted loss per
share would have been $62.2 million and $0.53 per share, respectively, instead
of $73.0 million and $0.63 per share, respectively. For the six months ended
June 30, 2002 and 2001, the adjusted net loss and basic and diluted adjusted
loss per share would have been $124.3 million and $1.07 per share, respectively,
instead of $146.0 million and $1.26 per share, respectively.

Effective January 1, 2002 we also adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." SFAS No. 144 applies to all long-lived assets, including
discontinued operations and consequently amends APB Opinion No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." Based on SFAS No. 121, SFAS No. 144 develops one accounting model
for long-lived assets that are to be disposed of by sale, as well as addresses
the principal implementation issues. SFAS No. 144 requires that long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair value less cost to sell. Additionally, SFAS No. 144 expands the scope of
discontinued operations to include all components of an entity with operations
that (1) can be distinguished from the rest of the entity and (2) will be
eliminated from the ongoing operations of the entity in a disposal transaction.
The adoption of SFAS No. 144 did not have any effect on our accounting for
long-lived assets on the adoption date.

In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections", which provides for the rescission
of several previously issued accounting standards, new accounting guidance for
the accounting of certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. We will adopt
SFAS No. 145 on January 1, 2003. We are currently assessing the impact of SFAS
No. 145 on our financial position and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our operations are exposed to market risks principally from fluctuations in
foreign currency exchange rates and interest rates. We seek to minimize these
risks through our regular operating and financing activities and when
appropriate, through the use of derivative financial instruments. Our risk
management policy is a transaction oriented policy and is not designed to use
financial instruments for trading or other speculative purposes.

EXPOSURE TO FOREIGN CURRENCY EXCHANGE RATES. Our primary foreign currency
exchange risk relates to our operations in Latin America, where we conduct
business with more than one currency. Management continues to monitor foreign
currency risk to determine if any actions, such as the issuance of additional
foreign currency denominated debt or other financial instruments, would be
warranted to reduce such risk.

At June 30, 2002, we had foreign currency forward contracts that hedge
certain activities with notional amounts of $535.0 million, maturing in various
dates through November 2003. Based upon a 10% strengthening or weakening of the
U.S. dollar compared to the currencies that we currently hedge, the estimated
fair value of undesignated forward contracts would have resulted in additional
unrealized losses of $0.2 million or unrealized losses of $0.3 million,
respectively, for the six months ended June 30, 2002. The effect upon a 10%
strengthening or weakening of the U.S. dollar compared to the currencies that we
currently hedge on our cash flows forward contracts, would have also resulted in
additional other comprehensive gains of $8.0 million or additional unrealized
other comprehensive losses of $8.3 million, respectively.

Management considers its operations in foreign subsidiaries and affiliates
to be long-term in nature. Accordingly, we do not hedge foreign currency
exchange rate risk related to long-term transactions.

EXPOSURE TO INTEREST RATES. Approximately 35.4% of our debt portfolio bears
interest at variable rates. Any changes in the market interest rate will affect
the amount of our interest expense and the ultimate cash paid to those lenders.
To date we have not used interest rate swaps to fix the interest costs on these
loans. Assuming a

30

hypothetical 10% interest rate increase or decrease from interest rates as of
June 30, 2002, interest expense would have increased $0.8 million or decreased
$0.8 million, respectively, for the six months ended June 30, 2002.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 difficult to predict. Consequently, we are unable to ascertain the
ultimate aggregate amount of monetary liability or financial impact with respect
to these matters at June 30, 2002. However, while these matters could adversely
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 consolidated financial
position or annual results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our annual stockholders meeting was held on May 30, 2002. Holders of
our Class A and Class B common stock voted on the following proposals which were
set forth in our proxy statement dated May 8, 2002:

(i) The following table sets forth the names of the nine persons
nominated to serve as our directors until our next annual stockholders meeting
or until their respective successors are elected and qualified or until death,
resignation or removal along with the number of votes cast for or withheld with
respect to each person:

DIRECTORS FOR WITHHELD
- --------- --- --------

A. Gary Ames 768,319,408 158,589
Edward M. Dwyer 768,210,829 267,168
R. Reed Harrison, III 768,207,414 279,583
David C. Kleinman 768,316,358 161,639
Jorge P. Montoya 767,093,155 1,384,842
Patricio E. Northland 768,207,709 270,288
John C. Petrillo 767,085,090 1,392,907
Geoffrey S. Webster 768,211,679 266,318
Gary R. Weis 768,207,414 270,583

(ii) Ratification of the appointment of PricewaterhouseCoopers LLP as our
auditors for the year 2002:

For: 768,221,667
Against: 225,505
Abstain: 30,825

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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Amended and Restated Promissory Note, dated as of November 27,
2001, superceding Promissory Note dated as of January 26, 2001,
in each case by Patricio E. Northland as borrower.

10.2 Amended and Restated Security Agreement, dated as of November 27,
2001, between Patricio E. Northland and AT&T Latin America Corp.

10.3 Letter relating to retention bonus, dated as of November 27,
2001, between AT&T Latin America Corp. and Patricio E. Northland

10.4 Restricted Stock Agreement, dated as of November 27, 2001,
between AT&T Latin America Corp. and Patricio E. Northland

10.5 Sample Stock Option Agreement under the AT&T Latin America Corp.
2000 Long-Term Incentive Plan.

(b) Reports on Form 8-K

None.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized on August 14, 2002.

AT&T Latin America Corp.

By: /s/ Nelson A. Murphy
----------------------------------------
Name: Nelson A. Murphy
Title: Chief Financial Officer
(Principal Financial Officer)

By: /s/ Lourdes Z. Meneses
----------------------------------------
Name: Lourdes Z. Meneses
Title: Corporate Controller
(Principal Accounting Officer)

33