AT&T Latin America Falters

A more pessimistic view of economic conditions in South America, particularly Brazil, for the remainder of 2002 and into 2003.

The Company had anticipated entering into a tax sharing agreement with its majority shareholder, AT&T Corp., that it expected would provide at least $17 million in liquidity, commencing in the fourth quarter of 2002 and running through 2003. AT&T Corp. advised the Company on October 8, 2002 that such an arrangement will not be forthcoming.

Following a request from the Company for additional financing assistance, AT&T Corp. advised on October 10, 2002 that it will not provide additional financing or credit support to the Company.

AT&T Corp. has advised the Company that as it implements its global strategy, it intends to approach certain global multinational clients directly on a global basis, concentrating services through its own international facilities. The Company understands that, as to multinational customers with operations in Latin America, that strategy will involve a change in the Company's relationship with such customers from that of a full-service provider using its own international facilities to one of providing essentially last mile connections on a non-preferred basis over its local networks. The change is expected to result in a reduction in the growth of revenues and cash flow of the Company.

The Company is in litigation over obligations owed to one of its vendors, an affiliate of Siemens AG. As a result of an adverse decision, it now has assumed for purposes of its outlook that it will pay its obligations at earlier dates than originally anticipated. The Company is currently in settlement negotiations with this vendor.

The Company believes that it may have greater difficulty drawing on unused, and renewing, local lines of credit in Latin America as a result of the above.