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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

For the fiscal year ended December 31, 2006

OR

For the transition period from              to             

Commission File Number 000-29085

IMPSAT Fiber Networks, Inc.

(Exact name of registrant as specified in its charter)

Elvira Rawson de Dellepiane 150

Piso 8, C1107BCA

Buenos Aires, Argentina

(5411) 5170-0000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES  ¨    NO  x

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    ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is large accredited filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    YES  x    NO  ¨

The aggregate market value of our common stock held by non-affiliates was approximately $61.2 million as of June 30, 2006, the last business day of our most recently completed second fiscal quarter (based upon the closing price for the common stock as reported on such date by the Nasdaq Over-the-Counter Bulletin Board).

There were 10,153,231 shares of common stock outstanding on March 31, 2007.

In this Report, “Company,” “IMPSAT,” “we,” “us” and “our” refer to IMPSAT Fiber Networks, Inc. and its subsidiaries.

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PART I

General

We are a provider of private network telecommunications, Internet and information technology services to over 4,700 corporate and government clients in Latin America. We offer integrated data transmission, data center and value added services, Internet solutions and voice solutions, with an emphasis on broadband transmission, for national and multinational companies, financial institutions, governmental entities and other business customers. We have operations in Argentina, Colombia, Venezuela, Ecuador, Brazil, Chile, Peru and the United States. Through these operations, we provide our customers with services throughout Latin America and the Caribbean. We provide our services through our networks, which consist of owned fiber optic and wireless links, teleports, data centers and earth stations and leased fiber optic and satellite links.

We have an extensive pan-Latin American infrastructure, comprised of our Broadband Network (as defined below) and data center facilities. At December 31, 2006, our Broadband Network (“Broadband Network”) consisted of 15 metropolitan area fiber optic networks and wireless links extending over 1,000 route kilometers in some of the largest cities in Latin America, long-haul fiber optic backbones in Brazil, Argentina, Chile and Colombia extending over 8,880 route kilometers and capacity on undersea cable systems. Our Broadband Network enables connections between and among major Latin American countries, combined with satellite capabilities, global telecommunications connections and Internet access connecting major cities to other locations in Latin America, the Caribbean and the United States. Our extensive infrastructure also includes 15 data centers (“Data Centers”) owned and operated by us, located in the largest cities in Argentina, Brazil, Colombia, Peru, Ecuador, Chile and Venezuela, which complement the Broadband Network.

Our comprehensive solutions consist of any combination of our service offerings, including the enhanced and additional services that we are able to offer using our Broadband Network and Data Center facilities. Our Broadband Network supports a variety of advanced transmission technologies including Dense Wave Division Multiplexing, or DWDM, Asynchronous Transfer Mode, or ATM, Multi-protocol Label Switching, or MPLS and Internet Protocol, or IP. Through our Data Centers, we are able to manage mission critical applications and co-location services to carriers, including the rental of secure space, equipment provisioning and operation maintenance services and interconnections in meet-me-room facilities.

History

Our operations began in Argentina in 1990 under the name IMPSAT S.A. (“IMPSAT Argentina”). We began expanding our operations outside of Argentina with the establishment of operations in Colombia, IMPSAT S.A. (“IMPSAT Colombia”) in 1991, and Venezuela, Telecomunicaciones Impsat S.A. (“IMPSAT Venezuela”) in 1992. In 1994, IMPSAT Corporation was organized as a Delaware holding company to combine the then-current Impsat businesses in Argentina, Colombia and Venezuela and its future businesses. Thereafter, new operating subsidiaries were created in Ecuador, Impsatel del Ecuador S.A. (“IMPSAT Ecuador”) in 1994, the United States, IMPSAT USA, Inc. (“Impsat USA”) in 1995, and Brazil, Impsat Comunicacoes Ltda. (“IMPSAT Brazil”) in 1998. In January 2000, we changed our Company’s name from IMPSAT Corporation to IMPSAT Fiber Networks, Inc. During 2001, we commenced operations in Chile, Impsat Chile S.A. (“IMPSAT Chile”), and Peru, Impsat Peru S.A. (“IMPSAT Peru”).

On June 11, 2002, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the bankruptcy court. On September 4, 2002, we filed our plan of reorganization, which we refer to as the Plan, with the bankruptcy court. During our bankruptcy proceedings, we operated our business and managed our assets in the ordinary course as a debtor-in-possession. By order dated December 16, 2002, the bankruptcy court confirmed the Plan. In accordance with the terms of the Plan, we formally emerged from bankruptcy on March 25, 2003, which we refer to as the Effective Date. As a result of our Chapter 11 reorganization we reduced our indebtedness by more than $700 million.

Proposed Acquisition of the Company by Global Crossing

The Merger

On October 26, 2006, we entered into a definitive agreement with Global Crossing Limited, a Bermuda corporation (“Global Crossing”) and GC Crystal Acquisition, Inc., a Delaware corporation (“MergerCo.”), a wholly owned subsidiary of Global Crossing (the “Merger Agreement”) to be acquired in a merger transaction (the “Merger”). Under the terms of the Merger Agreement, our stockholders will receive $9.32 in cash, without interest, for each share of our common stock they hold (the “Merger Consideration”). Each outstanding option or warrant to purchase our common stock of a per share

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exercise price lower than the Merger Consideration will be converted into the right to receive a cash amount equal to the Merger Consideration less the exercise price for such option or warrant, as the case may be, net of any applicable taxes. In addition, Global Crossing will refinance, purchase, defease, repay or assume the Company’s outstanding indebtedness as of the effective time of the Merger. As a result of the Merger, the Company will become a wholly-owned subsidiary of Global Crossing and will cease to be a public company.

We expect the Merger to be completed before May 25, 2007 after the satisfaction or waiver of the conditions precedent set forth in the Merger Agreement, including the receipt of the remaining regulatory approval in Venezuela. On February 22, 2007, the parties amended the Merger Agreement, among other things, to extend the date by which either party may terminate the Merger Agreement, from March 26, 2007 to April 16, 2007, to allow for more time to satisfy the conditions precedent (the “Final Termination Date”). On March 15, 2007, the parties further amended the Merger Agreement to additionally extend the Final Termination Date to May 25, 2007, coincident with the date on which an affiliate of Global Crossing is required to redeem certain notes if the Merger Agreement has not theretofore closed.

Upon the closing of the Merger, shares of our common stock will be held by Global Crossing and will no longer be traded on the Nasdaq OTC Bulletin Board. See “Recent Developments” and “Forward Looking Statements” for additional information. The Merger Agreement contains certain termination rights for both us and Global Crossing. The Merger Agreement provides that in certain circumstances, upon termination, we would be required to pay Global Crossing a termination fee of $5,000,000. A more detailed description of the Merger Agreement is available in the Current Report on Form 8-K that we filed with the SEC on October 30, 2006.

In connection with the Merger Agreement, Morgan Stanley & Co., Incorporated (“Morgan Stanley”), W.R. Huff Asset Management Co., LLC (“WR Huff”), as well as several of our officers and a director (in their capacities as either a stockholder and/or beneficial owner of our common stock and/or a noteholder), entered into support agreements with Global Crossing. Pursuant to the support agreements, the parties agreed to support and vote in favor of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement and WR Huff and Morgan Stanley agreed to tender all of their Series A 6% Senior Guaranteed Senior Notes due 2011 (the “Series A Notes”) and Series B 6% Senior Guaranteed Senior Notes due 2011 (the “Series B Notes”) in the offer to purchase the Series A Notes and the Series B Notes as contemplated in the Merger Agreement. The support agreements will terminate upon the earlier of the consummation of the Merger or the termination of the Merger Agreement. The Merger Agreement and the forms of the support agreements are attached as an exhibit to a Current Report on Form 8-K filed by us with the SEC on October 30, 2006.

Stockholder Merger Approval

A special meeting of the Company’s stockholders was held on January 17, 2007, and the shareholders voted in favor of the adoption of the Merger Agreement. The results of the stockholder meeting were reported in a Current Report on Form 8-K filed by us with the SEC on January 17, 2007.

Tender Offer

Pursuant to the terms of the Merger Agreement, we commenced an offer to purchase all of the outstanding Series A Notes and Series B Notes at 101% of the outstanding principal amount thereof, plus accrued interest thereon (if any) to the payment date. The closing of the offer to purchase is contingent upon the occurrence of the closing of the Merger.

Consent Solicitation

In addition, we commenced a separate consent solicitation with respect to each of the indentures for the Series A Notes and Series B Notes, which sought certain amendments to the indentures that will only become effective upon consummation of the Merger. Because we received the requisite consents from the holders of the Series A Notes and the holders of the Series B Notes, the Company executed and delivered supplemental indentures, which set forth the amendments to the indentures governing the Notes. The results of the consent solicitation along with the supplemental indentures were filed on a Current Report on Form 8-K filed by us with the SEC on November 17, 2007.

Our Organizational Structure

Our organizational structure currently consists of four operational units, as follows:

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The objective of these units is to provide consistent delivery of services to our customers across the Company. These units have served, and are expected to continue to serve, as the foundation for our success and sustained growth. Our current structure enables us to focus on our customers’ needs and clearly define accountability within our organization. Furthermore, it assists us in controlling our expenses and investments and attaining operational efficiency. We believe this structure has played an important role in the Company’s achievements, which we expect will continue into 2007.

Our Services

Our comprehensive solutions consist of any combination of our service offerings, including the enhanced and additional services that we are able to offer using our Broadband Network and Data Center facilities. These service offerings are currently classified into four categories, specifically, broadband and satellite data transmission services, value added services, Internet services, and telephony services, which are more fully described below.

Data Transmission Services. We offer our customers a broad range of end-to-end network service combinations for their point-to-point and point-to-multipoint telecommunications needs, ranging from simple connections to customized private network solutions. We offer our network services over our proprietary and leased networks, which are comprised of metropolitan area fiber optic rings and wireless networks, fiber optic and satellite links.

Value Added Services. We offer value added services, including managed security and applications hosting services through our advanced data center facilities. We also offer information technology solutions and data center services designed to facilitate our customers’ needs and optimize our customers’ business processes.

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Internet Services. We have offered Internet access services to corporate and ISP customers since 1996. Our Broadband Network links our Latin American Internet backbone, which is managed as a single autonomous system, to the U.S. Internet through our U.S.-based point of presence using our fiber optic and leased satellite links.

Telephony Services. We provide switched telephony services as permitted by the licenses granted in the countries in which we operate. In Argentina, Brazil and Peru we offer basic local and long distance services as well as a complete portfolio of value added services, including toll-free numbers, calling cards, VoIP services, public telephony and wholesale long distance services to carriers. In Chile and the United States, we only offer wholesale international long-distance, and we are interconnected with major international carriers. The switching platform that supports the telephony operations includes both traditional circuit and new packet switching technologies. Through this platform, we offer managed services, such as virtual and hosted PBX, web conferencing and broadband telephony.

The following table shows our Company’s net revenues breakdown by service for the years ended December 31, 2004, 2005 and 2006:

Our Infrastructure

Our infrastructure is comprised of a fully integrated terrestrial fiber optic network, long-haul, high capacity fiber optic backbones and capacity on undersea cable systems, all enabling connections between and among major Latin American countries, combined with satellite capabilities, global telecommunications connections and Internet access connecting major cities to other locations in Latin America, the Caribbean and the United States, and fifteen advanced data center facilities throughout major cities in Latin America. We also maintain Network, Data Center and Security Operations Centers to monitor and manage service performance, and offer additional value added services. Our extensive infrastructure, which is adaptable to new technologies, allows us to offer customers an array of interconnection and service solutions, high quality services and the support of a reputable and reliable telecommunications provider. Our infrastructure also reduces our costs for leased satellite capacity and leased telecommunications links as a percentage of our net revenues, creates a high capacity, pan-Latin American IP backbone and allows us to cost-effectively develop new solutions to meet the changing needs of, and offer more bandwidth intensive services to, our customers.

The Broadband Network

Metropolitan Area Networks. We operate 15 metropolitan area networks, composed of a combination of fiber optic and microwave links, covering a total of more than 1,000 route kilometers. Our first metropolitan area network was established in Buenos Aires, Argentina in 1990. In addition, we currently provide services over our metropolitan area networks in

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Córdoba, Mendoza and Rosario, Argentina; Bogotá, Medellín and Cali, Colombia; Rio de Janeiro, Curitiba, São Paulo and Belo Horizonte, Brazil; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru.

Fiber Optic Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless long-haul, high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from Santiago, Chile to Buenos Aires, Argentina, passing through Mendoza, Córdoba and Rosario; in Brazil, it covers Curitiba, Belo Horizonte, Rio de Janeiro and São Paulo. It also includes a fiber optic connection between Paraná, Argentina and Curitiba, Brazil, which is currently unlit. We also own and operate a long haul fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network to other parts of Latin America and the world, we have purchased IRU capacity on Global Crossing’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network, as well as leased capacity from other undersea fiber optic cable operators. This capacity enables us to transmit telecommunications traffic seamlessly from the United States to major countries in South America using the latest fiber optic technology.

Teleports. We own or lease, and operate, teleports in Buenos Aires, Argentina; São Paulo, Brazil; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; Lima, Peru; and Fort Lauderdale, Florida, United States. We also own and operate regional teleports in Mendoza, Córdoba, Rosario, Argentina; Medellín, Cali Colombia; Guayaquil, Ecuador; and Rio de Janeiro and Curitiba, Brazil, as well as operate over 150 other small network nodes.

Satellite Services. Our satellite systems use both C-band (4-6 GHz) and Ku-band (11-14 GHz) frequencies. As of December 31, 2006, we had a total available leased capacity of approximately 633 MHz. We will contract additional leased satellite capacity if business requires. A portion of our satellite capacity is leased by our wholly-owned subsidiary, International Satellite Capacity Holding, Ltd. This subsidiary’s principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our operating subsidiaries. We believe that this method of centralizing our leasing of telecommunications capacity provides us with better terms. We are currently in the process of upgrading the technologies used to provide satellite services, which we believe will allow us to optimize our satellite capacity.

The Data Centers

To complement our Broadband Network, we operate 15 advanced data center hosting facilities with an aggregate of approximately 500,000 gross square feet, including functional facilities, building shell, space for new modules, and corresponding office space, in major cities in Latin America. These facilities, which are capable of supporting advanced application hosting services, are located in Buenos Aires, Mendoza, Córdoba and Rosario, Argentina; São Paulo, Rio de Janeiro and Curitiba, Brazil; Santiago, Chile; Fort Lauderdale, Florida, United States; Bogotá and Cali, Colombia; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru.

Data center services are managed through our Data Center Operations Centers (“DOCs”), which currently are responsible for the delivery, service, support and operations processes of every data center in the region and the management of service level agreements for data center services, seven days a week, 24 hours a day. Following the consummation of the Merger, however, our U.S. data center will only be managed through a DOC that is located in the United States, pursuant to an amendment to Global Crossing’s existing Network Security Agreement (defined below). See “Business—Regulation.” Our processes and procedures are based on the Information Technology Infrastructure Library (“ITIL”), the international standards for IT operations, and overseen by highly-skilled personnel. The DOCs enable customers to delegate IT operations and support to a specialized company to provide services in world-class data centers, and focus on their core business.

In addition, we maintain a Security Operation Center (“SOC”), operating seven days a week, 24 hours a day, which offers monitoring and management of systems to detect viruses, worms and illegal access and real time intrusion detection and vulnerability management to prevent attacks before they can be executed and cause costly damage. The SOC provides analysis, implementation and maintenance of security polices, on-line follow up, auditing of security policies, executive and technical reports, incident response and crisis management. The SOC offers the customer the ability to outsource its monitoring and administration requirements and to maintain a single point of contact for security administration.

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Network Operation Centers

To monitor our network and the provision of services to our customers, we have local Network Operations Centers (“NOCs”) in each country in which we operate. The NOCs support local network operations by offering customer service and technical support 24 hours a day, 7 days a week. We also maintain a global network operations center (“GNOC”) in Argentina. The GNOC proactively monitors the backbone throughout the region and works in conjunction with the local NOCs to resolve issues detected.

Customers

Overview. We have grown rapidly since the commencement of our operations in 1990. Our customer base has increased from 125 corporate customers in two countries at December 31, 1992 to 4,718 corporate customers in eight countries at December 31, 2006. Larger entities, which often have significant needs for reliable, cost- effective data transmissions and other telecommunications services, were the first to use our customized telecommunications services. As a result, a significant portion of our revenues has been derived from our largest customers. A significant number of our customers, including a number of our largest customers, are in Argentina and Colombia, which, having commenced in 1990 and 1992, respectively, are the locations of our longest-standing operations. Our customer base in Brazil has grown from 48 at the end of 1998 to 533 at the end of 2006. As our business further matures and as we extend the operation of the Broadband Network, we expect that the average size of our customers will decline.

Our customers consist of leading national and multinational corporations and private sector companies, financial institutions, major governmental agencies, and carriers, including Global Crossing Ltd., Instituto Nacional de Hipodromos, British Telecom, Petrobras and HSBC. These customers typically have complex telecommunications and IT needs that require customized solutions and high level of customer satisfaction. Our ten largest customers accounted for approximately 21.4% of our revenues in 2006 and approximately 19.7% in 2005.

Our ten largest customers as of December 31, 2006 were:

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The following table shows our customer concentration by country as of the dates indicated.

Customer Contracts. Our contracts with our customers have in the past typically ranged in duration from six months to five years and have generally been three-year contracts. Our top 30 customers have had contracts with us for an average length of approximately 7 years.

Except in Argentina and Brazil, the majority of our contracts with customers provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate between the local currency and the U.S. dollar at the time of invoicing. The revenues of our customers are generally denominated in local currencies. Although our customers include some of the largest and most financially sound companies and financial institutions in their markets, devaluation of local currencies relative to the U.S. dollar and foreign exchange controls restricting the exchange or convertibility of such currencies could have a material adverse effect on the ability of our customers to pay us for our services. Currency devaluations and foreign exchange controls could also result in our customers seeking to renegotiate their contracts with us or, alternatively, defaulting on their contracts.

Sales, Marketing and Customer Services

We view our relationship with our customers as a long-term partnership in which customer satisfaction is of paramount importance. For this reason, we have organized our sales and marketing efforts to focus on our target customer groups, developed a tiered approach to customer service, and integrated our sales, marketing and customer service functions. We emphasize the highest quality in our sales, marketing and customer services and an enduring commitment to providing fast and flexible responses to customer demands.

Sales & Marketing

We have 563 employees in our sales and marketing group (including a sales force of 173), who are focused on three types of customers: (i) multi-national corporations, large established national companies (segregated by industry sector) and government agencies; (ii) carriers and wholesale customers; and (iii) small and medium-sized companies in specific sectors.

The sales team assigned to multi-national corporations, large established national companies and government agencies is further subdivided and assigned to specific industries, including Financial Services, Oil & Gas, Retail, Utilities, Technology and Government. Its approach is consultative, offering customized and integrated solutions, and focuses on establishing a long-term partnership with these customers, enabling both up-selling and cross-selling opportunities. The sales teams assigned to carriers and wholesale customers focus on developing strategic partnerships to meet large volume requirements on a commoditized basis for incorporation into their product offerings. The sales team assigned to small and medium-sized companies in specific sectors focuses on identifying new customer opportunities, offering customers customized solutions utilizing standard products and bundling of services. We also use the services of third-party sales representatives to assist in generating sales and to manage the contractual process with potential customers.

In addition to their sales responsibilities, our sales teams are deeply involved in the post-sale customer service function.

Customer Service

In order to efficiently meet the customer service needs of our customers, we adapt and tailor our customer service function to match the scale and complexity of the solutions we provide, as specified below.

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Competition

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

The PTOs have extended their focus beyond local and long-distance telephony services, dedicating resources towards the private telecommunications network systems segment, our primary target segment. PTOs generally have significant competitive advantages, including (i) close ties with national regulatory authorities, (ii) control over connections to local telephone lines, (iii) the ability to subsidize competitive services with revenues generated from other services they provide on a monopoly or duopoly basis and (iv) a reluctance of regulators to adopt policies and grant regulatory approvals that will result in increased competition.

Additionally, other major telecommunications carriers, including PTOs, have entered, or indicated their intention to enter, the Latin American telecommunications market as deregulation in Latin America and elsewhere opens new market opportunities. In particular, PTOs, including Telmex in Mexico and Telefonica in Spain have expanded their regional presence through acquisitions of competitors in specific countries.

We believe that by maintaining our position as a reliable, high quality provider of telecommunications services, while strengthening the quality of our network and the breadth of service offerings through our Broadband Network, we will be able to maintain our current customers and successfully attract new customers, even with competition from the PTOs and other international carriers entering our market.

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

By delivering end-to-end solutions through our data center and broadband infrastructure, we compete with large international IT vendors and local integrators by capitalizing on the convergence of telecommunications and IT services.

Our principal competitors include:

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Competing technologies may not become available that could negatively affect our position. For example, technologies such as DSL can significantly enhance the speed of traditional copper lines. These technologies enable our PTO competitors to offer customers high-speed services without undergoing the expense of replacing their existing twisted-pair copper networks. Our private telecommunications services could also face future competition from entities using or proposing to use new or emerging voice and data transmission services or technologies that are not widely available in Latin America, such as wireless-based systems dedicated to data distribution services.

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

The principal barriers to entry for prospective providers of private telecommunications network and IT services such as ours are the infrastructure to provide quality services, the development of the requisite understanding of customer needs, technological, commercial experience and the comprehension of, and experience with, the complex regulatory environments in Latin America and the Caribbean. See “Risk Factors — We face significant competition in Latin America,” “—PTOs have competitive advantages in the marketplace” and “—International telecommunications carriers have greater resources than we do.”

Regulation

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

Cross-Border Service. We provide integrated data, voice and video transmission services between and among forty Latin American and Caribbean countries and the United States. International private line services are traditionally provided by local carriers in each country, acting as correspondents and establishing dedicated telecommunications links between their facilities. Due to our pan-Latin American presence, however, we are often able to provide our services using our own facilities and personnel at both ends of the private line circuit. As a result of this end-to-end control, we maintain customer service and quality assurance at both ends of the circuit and realize better profit margins.

In countries where we do not maintain equipment on customer premises or where we are not authorized to operate in such a fashion, we use our facilities in the originating country to connect with a correspondent local carrier in the destination country, or vice-versa. To date, we have signed correspondent agreements with carriers in several Latin American and Caribbean countries.

Employees

As of December 31, 2006, we employed a total of 1,251 persons, of whom 445 were employed by IMPSAT Argentina, 225 by IMPSAT Brazil, and 250 by IMPSAT Colombia. Except with respect to our chief executive officer and our chief financial officer, whose employment contracts recently automatically renewed for an additional one-year term, we do not have any long-term employment contracts with any of our employees, including management. None of our employees are members of any union, however, IMPSAT Brazil is required by law, to negotiate certain labor terms and conditions, such as salaries and wages, with industry-specific unions, and obtain approval of its employees. We believe that our relations with our employees are good.

OTHER INFORMATION

General information about us can be found at www.impsat.com. The information contained on or connected to our web site is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the Securities and Exchange Commission (SEC). Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our web site as soon as reasonably practicable after we file them with, or furnish them to, the SEC. These

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reports may also be obtained at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, DC 20549. The SEC also maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Impsat.

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

Risks Related to Our Business

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

We have yet to establish any history of profitable operations. We recorded net losses of $14.2 million in 2004, $36.2 million in 2005 and $35.6 million in 2006. Increased competition, adverse economic conditions in our countries of operation and other factors have negatively affected our financial condition and business operations. Our revenues may not be capable of funding our operations and, therefore, we may need to obtain additional financing to achieve and sustain profitability, and to fund our operating requirements. There can be no assurance that such additional financing will be available on favorable terms, on a timely basis or at all. If additional funding is not available or is available on terms that are not acceptable to us, our ability to fund our operations will be significantly impaired.

We are vulnerable to currency fluctuations, devaluations and restrictions on our ability to expatriate local earnings or convert local currencies into U.S. dollars. These factors may increase our losses, cause fluctuations in our operating results and adversely affect our ability to pay our indebtedness.

A significant portion of our costs, including lease payments for certain satellite and fiber optic capacity, purchases of capital equipment, and payments of interest and principal on our indebtedness, is payable in U.S. dollars. Our results of operations and financial conditions are therefore vulnerable to currency devaluations. Following the “pesification” decree, our contracts that were governed by Argentine law, denominated in foreign currency and existing as of January 6, 2002 were mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso, subject to adjustment pursuant to the Argentine CER consumer price index. Currently, we have two contracts subject to CER adjustment. In Brazil, our customer contracts with Brazilian counterparties cannot be denominated in U.S. dollars or linked to the exchange rate between the Brazilian real and the U.S. dollar, although we are permitted to amend the pricing of our services for our long-term telecommunications service contracts with our customers annually based on changes in the consumer price index in Brazil for the prior year. The inflation adjustment provisions in these laws do not eliminate completely the currency exchange risk facing our operations in Argentina and Brazil. For example, contracts entered into between Argentine parties after the “pesification” decree’s enactment that are initially denominated in pesos may not thereafter be adjusted according to the CER or any other consumer price index. Also, changes in the consumer price indices in Argentina and Brazil may lag or be lower than changes in the exchange rate between the Argentine and Brazil local currency and the U.S. dollar and therefore may not fully allow us to address the impact of a devaluation of those currencies against the U.S. dollar. Our operations in Argentina and Brazil represented a significant portion of our consolidated net revenues in 2006. Accordingly, our operations in Argentina and Brazil have exposed us, and will increase our exposure, to exchange rate risks.

Except in Brazil and Argentina, our and our subsidiaries’ contracts with customers generally provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate between the local currency and the U.S. dollar at the time of invoicing. Accordingly, inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our net revenues during 2006. However, given that the exchange rate is generally set at the date of invoicing and that we in some cases experience substantial delays in collecting receivables, our operations in those other countries are also exposed to exchange rate risk.

Substantial or continued devaluations in local currencies relative to the U.S. dollar could have a material adverse effect on the ability of our customers to absorb the costs of a devaluation. This could result in our customers seeking to renegotiate their contracts with us or, failing satisfactory renegotiation, defaulting on or canceling their contracts. Our competitors and

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potential future competitors, including PTOs and large, multinational telecommunications companies, may be less exposed to currency risk or may be better able to hedge their currency risk and could thereby gain a relative competitive advantage in the event of a currency devaluation.

Latin American economies have experienced shortages in foreign currency reserves and restrictions on the ability to expatriate local earnings and convert local currencies into U.S. dollars. Any such restrictions may limit or impede our ability to transfer or to convert such currencies into U.S. dollars and to expatriate such funds for the purpose of making timely payments of interest and principal on our indebtedness. It could also limit the ability to make payments to suppliers of leased capacity or telecommunication equipment. Currency devaluations in one country may have adverse effects in another country. For example, in 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of companies to make payments abroad. While these restrictions have been substantially eased, Argentina may tighten exchange controls or transfer restrictions in the future to prevent capital flight, counter a significant depreciation of the peso or address other unforeseen circumstances. In addition, in Venezuela, the conversion of bolivares into U.S. dollars at the official exchange rate established by the Venezuelan Central Bank and the Venezuelan Ministry of Finance is generally limited to the current exchange control regime. Accordingly, the acquisition of foreign currency by Venezuelan companies to honor foreign debt or to pay dividends (or to make payments to vendors overseas) is subject to registration and subject to a process of application and approval by the Comisión de Administración de Divisas (“CADIVI”) and to the availability of foreign currency within the guidelines set forth by the National Executive Power for the allocation of foreign currency.

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

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

Our operation of the Broadband Network (defined in “Business—The Broadband Network”), which may include the expansion into new services for our business customers, could involve any one or more of the following:

Our ability to obtain new capital that we might require in the future to remain technologically competitive may be negatively affected by many factors beyond our control.

Our future capital requirements will depend upon many factors, including:

Further development of the Broadband Network will require additional resources that we may not have.

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

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We may require additional financial, operational and managerial resources to expand or adapt the Broadband Network to accommodate new services and technologies. If we are unable to expand or adapt the Broadband Network to respond to these developments on a timely basis, and at a commercially reasonable cost, our business may be materially adversely affected.

We may need to expand the footprint of our metropolitan area networks.

We operate over 15 metropolitan area networks in Argentina, Colombia, Brazil, Venezuela, Ecuador and Peru. See “Business—The Broadband Network.” In those countries, the coverage footprints of our metropolitan area networks are generally smaller than those of the dominant PTO or incumbent carriers. Accordingly, in order to maintain or improve our competitive position in those markets, we might be required to incur capital expenditures to expand the footprints of our metropolitan area networks in future periods. There can be no assurance that we will have the capital resources necessary to make an investment in any such expansion of our metropolitan area networks.

We face significant competition in Latin America.

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

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

PTOs have competitive advantages in the marketplace.

As mentioned above, in most of our markets, our principal competitor is the local PTO or an affiliate of the local PTO, who generally has significant competitive advantages. For example, Telecom Argentina and Telefonica are the PTOs in Argentina. In Brazil, our principal competitors are Embratel (Telmex), Brasil Telecom, Telefonica, and Telemar.

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

International telecommunications carriers have greater resources than we do.

We also compete with operators of satellite data transmission networks and terrestrial telecommunications links and face actual or potential competition from large international telecommunications carriers and from other industry participants. International telecommunications carriers, whose principal focus has traditionally been long distance telephony services, may increasingly focus on the private telecommunications network systems segment of the telecommunications market as deregulation continues. Many of these potential competitors have substantially greater financial and other resources than we do. In addition, consolidation of telecommunications companies and the formation of strategic alliances within the telecommunications industry could give rise to significant new competitors.

Downturn and further consolidation in the telecommunications industry could negatively affect our operations.

Regional economic difficulties, which occurred during the last several years, have had a materially negative impact on the telecommunications market in Latin America. The rate at which the industry improves is critical to our ability to improve overall financial performance. The financial difficulties experienced by other participants in the telecommunications industry resulted in some of our competitors purchasing the assets of these troubled companies. This consolidation, in some cases, has resulted in multiple smaller competitors being absorbed into relatively few large entities (with significantly greater financial and other resources than we have, including greater access to financing), thereby increasing the operating profit margin

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pressures that we face. In particular, Spain’s Telefónica S.A. and Telmex (Teléfonos de México S.A. de C.V.) have significantly expanded their presence and acquisitions in recent years in the Latin American region. As a result of this industry consolidation, potential customers and suppliers may prefer to do business with competitors that have greater financial and other resources.

Our failure to acquire, integrate and operate new technologies and the intellectual property and proprietary rights of others could harm our competitive position and prevent us from using necessary technology.

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

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

Additionally, while we do not believe that there exists any technology patented by others, or other intellectual property owned by others, that is necessary for us to provide our services and that is not now subject to a license allowing us to use it, there can be no assurances in this regard. If such intellectual property is owned by others and not licensed by us, we would have to negotiate a license for the use of that property. We may not be able to negotiate such a license at a price that is acceptable or at all. This could force us to cease offering products and services incorporating such property, thereby adversely affecting operating results.

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

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

We may be subject to significant liabilities due to a tax on antennas imposed by the City of Buenos Aires and other municipalities.

In September 2003, the City of Buenos Aires notified several telecommunication companies, including us, that it will start collecting a tax on all antennas within the city, as provided by the City Fiscal Code. Through December 31, 2006, we have received invoices totaling approximately $34.8 million, but have not accrued amounts relating to this matter. We have formally objected to the legality of the tax and to certain factual assumptions used in calculating the tax, and have rejected each of the notices in an administrative proceeding filed with the tax authorities of the City of Buenos Aires. If required to pay this tax at the current rate and based on invoices received from the City of Buenos Aires through December 31, 2006, we estimate that we would be subject to an additional tax of approximately $8.6 million per year. In December 2006, we filed an objection with respect to the tax on antennas assessed for the final quarter of 2006. In our objection, we reaffirmed our position that such a tax is both illegal and based on false assumptions. Our objection is pending resolution before the City’s

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tax authorities. In addition, we have received claims of a similar nature from the Municipality of Quilmes in Argentina in the amount of approximately $12.5 million, plus defaulted interest. We cannot assure you that we will not be forced to pay the City of Buenos Aires, or the Municipality of Quilmes, an amount representing the full (or a portion of the) invoiced amount of the tax, or that we will not receive similar invoices from other municipalities in Argentina. Additionally, we cannot assure you that any of our assets will not be attached in connection with either of these claims or that we will not be required to post a bond representing the full (or a portion of the) invoiced amount during any legal proceeding challenging these claims. These events could have a material adverse effect on our financial condition and on our ability to meet our obligations.

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

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

In addition, we may not be able to maintain our existing franchises, permits and rights-of-way that we need for our business. We may also be unable to obtain and maintain the other franchises, permits and rights-of-way that we require. In particular, we are involved in several legal proceedings that, among other things, challenge amounts payable by us, and additional such proceedings could be instituted. Such proceedings may increase our costs and adversely affect our profitability. Moreover, a sustained and material failure to obtain or maintain required rights could materially adversely affect our performance in the affected area and our operating results.

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

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

As of December 31, 2006, our gross trade accounts receivable were $52.2 million compared to $46.1 million as of December 31, 2005. We recorded a provision for doubtful accounts of $1.3 million in 2006 compared to a net reversal of a provision of $1.1 million in 2005. At December 31, 2006, our allowance for doubtful accounts covered approximately 104.2% of our gross trade accounts receivable past due more than six months, compared to 96.4% as of December 31, 2005. As our business increases with small and medium customers and in relation to any economic contractions in our principal countries of operation, we may experience an increase in uncollectable accounts receivable. Difficulties in collecting amounts due from our customers could have a material adverse effect on our business, results of operations and financial condition.

Our historical financial information is not comparable to our current financial condition and results of operations.

As a result of our emergence from bankruptcy during March 2003, we have been operating our business with a new capital structure since April 1, 2003. We were also subject to fresh-start reporting prescribed by GAAP. As a result of its fresh-start reporting, on April 1, 2003, the carrying value of our fixed assets and the related depreciation expense and interest expense due to changes in our debt structure, among other things, changed considerably from that reflected in our historical consolidated financial statements. Accordingly, our financial condition and results of operation for the periods prior to April 1, 2003 are not comparable to results of operations reflected in our historical financial statements, making it difficult to assess our future prospects based on historical performance.

In our 2005 and 2006 audits, our independent registered public accounting firm issued a “going concern” opinion expressing doubt as to our continuing financial viability.

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As a result of our current liquidity position, amount of debt obligations and operating results, our independent registered public accounting firm, Deloitte & Touche LLP, issued a “going concern” opinion in connection with their audit of our consolidated financial statements for the year ended December 31, 2006. Deloitte also issued a “going concern” opinion in connection with their audit of our consolidated financial statements for the year ended December 31, 2005. These opinions expressed substantial doubt as to our ability to continue as a going concern. The going concern opinions could have an adverse impact on our ability to execute our business plan, result in the reluctance on the part of certain potential business partners to do business with us, result in the inability to obtain new business due to potential customers’ concern about our ability to deliver services, or adversely affect our ability to raise additional capital.

Based on the principal and/or amortization payments due under our indebtedness beginning in 2007, we may need to raise additional capital to fund such payments or further refinance a significant portion of our indebtedness if the proposed Merger with an indirect wholly-owned subsidiary of Global Crossing does not occur.

On June 11, 2002, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. On September 4, 2002, we filed the Plan with the bankruptcy court. By order dated December 16, 2002, the bankruptcy court confirmed the Plan. In accordance to the terms of the Plan, we formally emerged from bankruptcy on March 25, 2003.

Beginning in March 2005, we were required to commence repayment, in installments, of the principal amount of our restructured senior debt owed by our subsidiaries to certain of their vendor financiers who elected to participate in the Plan. In addition, interest on the guaranteed senior notes issued under the Plan, which we refer to as the Senior Notes, that was payable in kind between the Effective Date and March 28, 2005, was required to be paid in cash commencing in the third quarter of 2005. On July 29, 2005, we entered into amended and restated financing agreements to restructure $125.6 million of our vendor indebtedness (the “Amendments”), which we refer to as Senior Secured Notes, which was issued by IMPSAT Argentina pursuant to the Second Amended and Restated Financing Agreement, dated as of July 29, 2005 (the “Argentina Financing Agreement”), and IMPSAT Brazil pursuant to the Second Amended and Restated Financing Agreement, dated as of July 29, 2005 (the “Brazil Financing Agreement” and together with the Argentina Financing Agreement, the “Financing Agreements”), each of which are guaranteed by the Company, and which are held by affiliates of certain members of our Board of Directors. Pursuant to the Amendments, we made an initial principal repayment of $18.3 million and modified the terms of the Financing Agreements such that the remaining outstanding principal amounts ($38.9 million owed by IMPSAT Argentina and $68.4 million owed by IMPSAT Brazil) would be repaid in the aggregate amounts of $5 million in 2006, $20 million in 2007, $25 million in 2008 and $57.3 million in March 2009. The amended indebtedness bears interest at a rate of 12% per annum, payable semi-annually in arrears, as compared to 10% per annum for the period prior to the effectiveness of the amendments. The parties also agreed to amendments to the financial covenants in the agreements to reflect current financial and operating conditions. The amended indebtedness was subject to optional prepayment at a cost of 101% until July 29, 2006 and at par thereafter. Each of IMPSAT Argentina and IMPSAT Brazil (with respect to the Amendment to which it is a party), on the one hand, and the lenders of the amended indebtedness, on the other hand, have an option to further amend the agreements governing such indebtedness to provide that the Company will be the primary borrower, and IMPSAT Argentina and IMPSAT Brazil the respective guarantors of the portions of the indebtedness currently owed by them, subject to certain terms and conditions. The terms and conditions of the amendments were negotiated by a special committee of the Company’s Board of Directors that was formed to explore recapitalization alternatives.

On March 15, 2007, the Company and its subsidiaries in Argentina and Brazil entered into amendments to the Argentina Financing Agreement and the Brazil Financing Agreement, which provided for the extension of the interest payment date under the Argentina Financing Agreement and the interest and principal payment dates under the Brazil Financing Agreement from March 25, 2007 to May 25, 2007, and the waiver through the first quarter of 2008 of the Debt Service Coverage Ratio, as defined in the Brazil Financing Agreement.

In the event that the Merger does not close, we may need to raise additional capital or refinance our existing debt. In that event, we may be unable to secure such additional capital or enter into a refinancing favorable to the Company.

Additionally, our subsidiaries have financial obligations for an aggregate principal amount of $41.5 million that do not carry our guaranty. This amount comprises bonds issued by IMPSAT Colombia in local currency with a current book value of $20.1 million, several bank and leasing lines in Colombia for an aggregate of $11.2 million; a defaulted obligation of IMPSAT Argentina totaling approximately $7.6 million in outstanding principal; and a number of bank lines in Brazil ($0.9 million), Peru ($1.0 million), Argentina ($0.2 million) and Chile ($0.5 million).

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We continue to be leveraged and our debt service requirements make us more vulnerable to economic downturns in the markets we service or in the economy in general.

At December 31, 2006, our total consolidated debt was $241.1 million. Because of our substantial indebtedness, we are highly leveraged. This means that our payments on our borrowings are significant in relation to our revenue and cash flow. This leverage exposes us to significant risk in the event of downturns in our business, in our industry or in the economy generally, because, in the event of such downturns, our cash flows would decrease, however, our required payments in respect of our indebtedness will not.

Our current indebtedness restricts our ability to obtain additional financing and, because we may be more leveraged than some of our competitors, may place us at a competitive disadvantage. Also, the indentures and other financing agreements that we entered into contain covenants that impose operating and financial restrictions on us. These covenants could adversely affect our ability to finance future operations, potential acquisitions or capital needs or to engage in other business activities that may be in our interest. For example, during the third and fourth quarter of 2006, IMPSAT Brazil failed to comply with the Capital Expenditure Ratio and the Debt Service Coverage Ratio, as defined in the Brazil Financing Agreement, on its approximately $63.4 million of Senior Secured Notes. On October 5, 2006, the Company obtained a waiver from the holder of these notes of the Capital Expenditure Ratio and Debt Service Coverage Ratio covenants for the applicable period and through September 2007. In addition, on March 15, 2007, the Company and IMPSAT Brazil entered into an amendment to the Brazil Financing Agreement, which provided for the waiver through the first quarter of 2008 of the Debt Service Coverage Ratio. As of December 31, 2006, the Company was in compliance with all of its other debt covenants. There can be no assurance that we will be able to avoid non-compliance and obtain waivers in the future.

As a result of the implementation of our plan of reorganization, we have a significant concentration of holders of our shares of our common stock.

As part of the Plan, a small number of holders of claims received distributions of a significant number of shares of our common stock or of securities convertible into or exercisable for such common stock. If those holders were to act as a group, they would be in a position to control the outcome of actions requiring stockholder approval, including and the approval of mergers or other business combinations, regardless of the approval of other stockholders. The concentration of ownership could also facilitate or hinder a negotiated change of control of the Company and, consequently, affect the value of the common stock.

As a result of the implementation of the Plan, our initial directors were nominated by certain initial holders of our securities. As long as these initial holders continue to hold a certain percentage of our common stock or securities convertible into our common stock, common stockholders will not have the right to elect individuals to our Board of Directors and, as a result, they will have little or no participation in our business affairs.

Further, the possibility that one or more of the holders of significant numbers of shares of the common stock may determine to sell all or a large portion of their shares of common stock in a short period of time may adversely affect the market price of the common stock.

There is a limited trading market for our common stock.

There is currently a limited trading market for our common stock, which began trading on the Nasdaq OTC Bulletin Board under the symbol “IMFN” on June 13, 2003. Prior to June 13, 2003, there was no established market for our common stock since the date of our emergence from bankruptcy. There can be no assurance that an active trading market for our common stock will develop or be sustained. In addition, as a result of the Merger, the Company will become a wholly-owned subsidiary of Global Crossing and will cease to be a public company.

We are restricted in our ability to pay dividends.

We do not anticipate paying any dividends on our common stock in the foreseeable future. In addition, the covenants under the indentures governing our Senior Notes and under other financing agreements we have entered into limit the ability of our Company to pay dividends. Certain institutional investors may only invest in dividend paying securities or may operate under other restrictions that may prohibit or limit their ability to invest in our common stock.

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The operation, administration, maintenance and repair of our systems are subject to risks that could lead to disruptions in our services and the failure of our systems to operate as intended for their full design life.

Each of our systems is subject to the risks inherent in large-scale, complex fiber-optic telecommunications systems. The operation, administration, maintenance and repair of our systems require the coordination and integration of sophisticated and highly specialized hardware and software technologies and equipment located throughout Latin America. Our systems may not continue to function as expected in a cost-effective manner. The failure of the hardware or software to function as required could render a system unable to perform at design specifications.

Interruptions in service or performance problems, for whatever reason, could undermine confidence in our services and cause us to lose customers or make it more difficult to attract new ones. In addition, because many of our services are critical to our customers’ businesses, a significant interruption in service could result in lost profits or other loss to customers. We often provide customers with guaranteed service level commitments. If we are unable to meet these guaranteed service level commitments for whatever reason, we may be obligated to provide our customers with credits, generally in the form of free service for a short period of time, which could negatively affect our operating results.

The Merger Agreement imposes limitations on our ability to operate our business.

Until the closing of the Merger, we may not take certain actions with respect to the operation of our business without Global Crossing’s consent. In addition, the pending Merger creates business uncertainty and diverts management’s attention from ongoing business concerns. These limitations, uncertainty and diversion of attention may impair our results of operations. As a result of these restrictions, our operations may be adversely effected.

Risks Related to Latin America

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

Substantially all of our revenues are derived from operations in Latin America. During 2005 and 2006, approximately 30.8% and 26.6% of our consolidated net revenues were provided by IMPSAT Argentina, and approximately 24.4% and 23.4% were provided by IMPSAT Colombia. Our Company also has operations in Venezuela, Brazil, the United States, Ecuador, Chile and Peru. Of these, Argentina, Brazil, Venezuela, Ecuador and Peru, where we have significant operations, have experienced political and economic instability in recent years. Moreover, as events in the Latin American region have demonstrated, negative economic or political developments in one country in the region can lead to or exacerbate economic or political crises elsewhere in the region. Furthermore, events in recent years in other developing markets have placed pressures on the stability of the currencies of a number of countries in Latin America, including Argentina, Brazil, Colombia and Venezuela. While certain areas in the Latin American region have experienced economic growth, this recovery remains fragile. Pressures on the local currencies in the countries in which we operate are likely to have an adverse effect on many of our customers, which, in turn, could adversely affect us. Volatility in regional currencies and capital markets has also had an adverse effect on our ability and that of our customers to gain access to international capital markets for necessary financing and refinancing. A lack of international capital sources for emerging market borrowers could have a material adverse effect on us and many of our customers.

While Argentina’s economy appears to be recovering, it still faces political and financial instability.

A significant portion of our operations, properties and customers are located in Argentina. Net revenues from our Argentine operations, acting through IMPSAT Argentina, for each of 2005 and 2006 represented approximately 30.8% and 26.6% of our consolidated net revenues during those years. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing from time to time in Argentina.

The Argentine economy has experienced significant volatility in recent decades, including numerous periods of low or negative growth and high and variable levels of inflation and devaluation. Since the peak of the most recent economic crisis during the first half of 2002, Argentina’s economy has experienced positive growth. The GDP increased during 2004 by 8.8%, and although the value of Argentina’s currency showed volatility compared to the U.S. dollar, it stabilized in 2005. During 2006, Argentina’s gross domestic product (“GDP”) grew by 8.0%. With growing wage pressures and some monetary accommodations on account of unsterilized foreign exchange interventions, we expect an annual inflation rate of approximately 11.4% in 2007. However, there can be no assurance that the Argentine economy will continue to grow at

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current rates, or at all, in the future. If Argentina’s economic growth slows, stops or contracts, there could result a material adverse effect on IMPSAT Argentina’s and our consolidated cash flows, financial condition and results of operations.

The severe economic crisis in 2001 and 2002 resulted in the withdrawal of a significant amount of deposits from the Argentine financial system in a short period of time. This precipitated a liquidity crisis, which prompted the Argentine government to impose exchange controls and transfer restrictions and to require the conversion of dollar deposits and loans into pesos at asymmetric rates for depositors and financial institutions. Ultimately, many financial institutions became insolvent. As a result, the Argentine Central Bank was forced to provide substantial financial aid to many banks. Many Argentine financial institutions remain weakened by the effects of the economic crisis and the Argentine government’s response to it, and depositors’ confidence in the financial system remains fragile. In addition, during this economic crisis, political and economic uncertainty and the Argentine government’s emergency economic measures lead to the virtual paralysis of private sector activity. Since that time many companies have ceased operations or filed some form of bankruptcy or reorganization proceeding. The recovery of the private sector is predicated in part on economic growth and in part on the ability of many private sector companies to restructure their own defaulted debt obligations with domestic and international creditors and gain access to financing. If the private sector fails to recover fully, Argentina’s economic growth could be adversely affected, which would have a material adverse effect on us and many of our customers.

In December 2001, Argentina’s government declared a “freeze” on further payments on its outstanding sovereign debt, among other measures. Since that time, the Argentine government has explored alternatives to refinance that debt. On September 11, 2003, Argentina was able to reach an agreement with the International Monetary Fund (the “IMF”) to refinance $31 billion of indebtedness with the IMF, staged over a three-year period. In return, Argentina agreed to implement economic reform and to negotiate with private creditors of over $80 billion of sovereign indebtedness upon which Argentina had defaulted. Since then, Argentina has at times engaged in lengthy negotiations with the IMF and other multilateral institutions and has faced various suspensions of scheduled disbursements and incurred payment delays. In August 2004, the IMF announced a delay of its quarterly review of Argentina’s compliance with the conditions of the September 2003 stand-by agreement in order to further assess the country’s compliance with required structural reforms and its progress in the renegotiation of utility contracts and in the debt restructuring process. The Argentine government subsequently announced that it would postpone further negotiations with the IMF through December 31, 2004 (and, consequently, forego additional IMF disbursements totaling $1.8 billion prior to that date), in order to concentrate on the restructuring of its defaulted debt.

On June 1, 2004, the Argentine government announced a proposal for the restructuring of Argentina’s defaulted external indebtedness. On December 9, 2004, President Kirchner signed two decrees officially authorizing a global debt exchange offer to restructure external indebtedness owed to external private creditors. In the months following the launch of the Argentine government’s external debt restructuring proposals, the plan was vigorously rejected by a host of different informal creditor groups, which lobbied with institutional and individual investors and international financial agencies for substantial amendments and sought support from the IMF, among others, for curtailing further aid to Argentina until desired amendments were made to the Argentine government’s proposal. Despite this opposition, in February 2005, a large majority of these creditors agreed to exchange their defaulted debt for new bonds worth approximately 35 cents on the dollar. As a consequence of its default on its sovereign debt, Argentina presently lacks access to financing from private international capital markets and other private sources. This lack of access to private financing is expected to continue.

In January 2006 Argentina prepaid its entire outstanding obligations to the IMF, totaling $9.9 billion. This repayment was made with International Reserves and the Central Bank was compensated with 10-year, dollar-denominated, non-transferable notes.

Argentina is therefore likely to depend on the IMF and other multilateral lending as its main source of foreign capital in the near- to medium-term. Argentina’s limited access to foreign capital could be curtailed, which could have a material adverse effect on Argentina’s economic prospects. These circumstances could have a material adverse effect on IMPSAT Argentina’s and our consolidated cash flows, financial condition and results of operations.

Although the Argentine peso has appreciated, continued political and financial instability in Argentina could adversely affect its valuation.

Following the collapse of Argentina’s dollar-peso parity regime and the implementation of a floating exchange rate system in early 2002, the peso has fluctuated significantly. After trading as low as 3.87 pesos to the U.S. dollar in June 2002, and generally appreciating against the U.S. dollar since early 2003, it recently depreciated. At December 31, 2005, the

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exchange rate was 3.03 pesos to the U.S. dollar and at December 31, 2006, the exchange rate had depreciated to 3.07 pesos to the U.S. dollar. This depreciation in 2006 was a consequence of Central Bank interventions directed towards an International Reserves level recomposition.

A devaluation of the Argentine peso would affect our consolidated financial statements by generating foreign exchange transaction gains or losses on dollar-denominated monetary assets and liabilities of IMPSAT Argentina and generally would result in a decrease, in U.S. dollar terms, in our revenues, costs and expenses in Argentina.

In February 2002, the Argentine government instituted the “pesification” decree. Generally, this decree mandates that all monetary obligations arising from agreements subject to Argentine law denominated in foreign currency and existing as of January 6, 2002 are mandatorily converted into monetary obligations denominated in pesos at an exchange rate of one U.S. dollar to one peso. Contracts denominated in pesos before the decree continued to be denominated in pesos, unaffected by the decree. Currently, a significant number of IMPSAT Argentina’s customer contracts and a large percentage of its operating cash inflows are now denominated in pesos. However, IMPSAT Argentina’s debt service payments and a significant portion of its costs (including capital equipment purchases and payments for certain leased satellite and terrestrial capacity) remain denominated and payable in U.S. dollars. Accordingly, our financial condition and results of operations in Argentina are dependent upon IMPSAT Argentina’s ability to generate sufficient pesos (in U.S. dollar terms) to pay its costs, expenses and to satisfy our debt service requirements. New developments which result in devaluation of the peso against the U.S. dollar could have a material adverse effect on our consolidated cash flows, financial condition, and results of operations.

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

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

Brazil, as the largest country and economy in Latin America, represents a significant existing and potential market for us. Our Company, acting through IMPSAT Brazil, has expanded its operations in Brazil since that subsidiary’s inception in 1998. Revenues from services from our Brazilian operations for 2005 and 2006 represented approximately 18.9% and 23.6%, respectively, of our consolidated net revenues for such periods. For 2006, our operations in Brazil represented the second largest source of revenues among the eight countries in which we operate. Accordingly, our operations in Brazil subject our financial condition and results of operations to various additional economic and political risks.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. Our business, financial condition and result of operations in Brazil may be adversely affected by such changes in policy and regulations involving factors outside of our control, such as monetary and fiscal policies, currency fluctuations, energy shortages, and, other political, social and economic developments in or affecting Brazil.

In early 1999, the Brazilian government allowed the real to float freely, resulting in a 38% devaluation against the U.S. dollar from January 14, 1999 through December 31, 2000. From 2000 through 2002, Brazil’s currency experienced further significant devaluations against the U.S. dollar. These had a negative effect on our real-denominated revenues. In addition, currency devaluations can also create inflationary pressures. Inflation itself, as well as some governmental measures to combat inflation, had significant negative effects on the Brazilian economy in the past. However, at December 31, 2005 and 2006, Brazil’s currency had appreciated against the U.S. dollar by 13.4% and 9.48%, respectively.

At December 31, 2005, the real traded at a rate of R$2.34 = $1.00. During 2006, the real appreciated further, trading at a rate of R$2.14=$1.00 at December 31, 2006. At March 15, 2007, the real traded at a rate of R$2.10 = $1.00. Brazil’s GDP increased by around 2.6% during 2005, its best performance since 1994, but increased by 3.6% in 2006. Despite appreciation of the real against the U.S. dollar during 2004, the stabilization of inflation, and expansion in the economy, growth slowed in the fourth quarter of 2005, raising cautions about the economic rebound’s sustainability. Failure to successfully implement necessary economic reforms and measures to preserve social and political stability and achieve economic growth in Brazil could prompt adverse responses from the international capital markets and investor community and halt or reverse any economic recovery in that country. The political and economic volatility in Brazil have had, and can

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be expected to continue to have, a material adverse effect on IMPSAT Brazil’s and our overall financial condition and results of operations. In addition, a significant depreciation of the real against the U.S. dollar would adversely affect our future results.

Political and economic conditions in Venezuela may have an adverse impact on our operations.

Continuation or worsening of the political and economic conditions in Venezuela could materially and adversely impact our future business, operations, financial condition and results of operations. After over four years of civil unrest in Venezuela, removal and reinstatement of that country’s head of state, President Hugo Chávez, and a failed recall referendum calling for removal of Mr. Chávez from office in August 2004, Mr. Chávez won re-election on December 3, 2006, for an additional six-year term. In his re-election inaugural speech, Mr. Chavez asked for “deep and integral” changes in the 1999 Constitution, including the possibility of unlimited re-elections. On January 31, 2007, further to President Chavez’s request, the Venezuelan National Assembly passed the Ley Habilitante, or the Enabling Law, which grants the President the power to rule by decree for the next eighteen (18) months, and allows him to carry out the nationalization of certain businesses in the electricity, energy and telephony sectors. In furtherance of his January 2007 announcement to nationalize Venezuela’s largest telecommunications company, Compañía Anónima Nacional Teléfonos de Venezuela (“CANTV”), and private businesses in the energy and electrical sectors and other strategic sectors, in early February Venezuela announced it had agreed with U.S.-based Verizon to buy its stake in CANTV, and plans to launch a public offer by April 2007 to increase its share. The Venezuelan minister of telecommunications and current director of the Comisión Nacional de Telecomunicaciones (“CONATEL”), the country’s telecommunications regulatory authority, has indicated that the nationalization of CANTV does not imply the nationalization of the telecommunications sector as a whole.

It is very difficult to predict the economic and regulatory impact of President Chávez’s statement, or to predict whether the Venezuelan government will, in fact, effectuate such a plan of nationalization. While the President’s remarks only identified CANTV by name, there is no assurance that such a plan of nationalization, if realized, would not also extend to other businesses in the telecommunications sector, including our business. The government has also announced plans to modify the nation’s constitution and telecommunications law, and we cannot predict the impact of such amendments to our business.

Since 2004, and despite continued civil unrest, the Venezuelan economy has been able to sustain growth. The growth appears to be stimulated by the Venezuelan government’s emphasis on servicing specific areas, such as health and education, and nourishing subsidies, and private sector expansion motivated by construction, commerce and financial sectors.

Recent approval of modifications in the laws of the Central Bank of Venezuela, known as Ley del Banco Central de Venezuela, and the creation of a fund to promote the growth of the nation, known as Fondo de Desarrollo Nacional (“FONDEN”), have changed the structure and the manner in which the public sector finances are managed. These modifications provide the executive power with greater access to national resources, with limited supervision by the legislative power. It suggests the government may use certain of its international reserves for investment in social welfare. It is estimated FONDEN will commence with $6.0 million in funding.

In addition, the Venezuelan government imposed foreign exchange and price controls, which commenced in February 2003, making it difficult for our customers in Venezuela to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. These foreign exchange controls also limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. The Venezuelan Government, through an agency called CADIVI, controls the flow of currency out of Venezuela. Requests for payments abroad for imports, services, financial debt or capital repatriations must be submitted to CADIVI, which approves the applications on a case-by-case basis, depending on the circumstances and the availability of foreign currency, causing long delays in the payments. In particular, CADIVI has been reluctant and cautious to authorize payments for services such as satellite capacity and software licensing, which, if this continues, could limit our ability to obtain the supplies required by our operation because of inability to make payment in a timely manner. Moreover, after a number of devaluations, the bolivar is set at a fixed exchange rate against the U.S. dollars of Bs. 2,150 = $1.00. This exchange rate has been in effect since March 2, 2005. We cannot assure you that this rate of exchange will be in place for any period of time.

Continuation or worsening of the political and economic conditions in Venezuela could materially and adversely impact our future business, operations, financial condition and results of operations

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None.

Metropolitan Area Networks. We operate 15 metropolitan area networks, composed of a combination of fiber optic and microwave links, covering a total of 1,000 route kilometers. Our first metropolitan area network was established in Buenos Aires, Argentina in 1990. In addition, we currently provide services over our metropolitan area networks in Córdoba, Mendoza and Rosario, Argentina; Bogotá, Medellín and Cali, Colombia; Rio de Janeiro, Curitiba, São Paulo and Belo Horizonte, Brazil; Caracas, Venezuela; Quito and Guayaquil, Ecuador; and Lima, Peru.

From 1995 to 2005, we managed and operated a fiber optic network covering 352 route kilometers in Bogotá, Colombia, pursuant to a joint venture with Empresa de Telecomunicaciones de Santafe de Bogotá, the Colombian PTO that provides local telephone service in the Bogotá region. We constructed our own metropolitan fiber optic network in Bogotá, Colombia during 2006. This network covers only a portion of the area served by our prior network and therefore requires us to lease links from third parties in areas that are not covered by our new dedicated network.

Fiber Optic Long-Haul Capacity. The long-haul segment of our Broadband Network, which comprises a seamless long-haul, high capacity fiber optic backbone extending over 8,880 route kilometers, stretches from Santiago, Chile to Buenos Aires, Argentina, passing through Mendoza, Córdoba and Rosario; in Brazil, it covers Curitiba, Belo Horizonte, Rio de Janeiro and São Paulo. It also includes a fiber optic connection between Paraná, Argentina and Curitiba, Brazil, which is currently unlit. We also own and operate a long haul fiber optic network connecting the cities of Cali, Medellín and Bogotá in Colombia. To link the Broadband Network to other parts of Latin America and the world, we have purchased IRU capacity on Global Crossing Ltd.’s undersea digital fiber optic cable systems (and associated terrestrial capacity) between the United States and Latin America, including Global Crossing’s South American network, as well as leased capacity from other undersea fiber optic cable operators. This capacity enables our Company to transmit telecommunications traffic seamlessly from the United States to major countries in South America using the latest fiber optic technology.

Data Centers. To compliment our Broadband Network infrastructure, we operate 15 advanced data center hosting facilities with an aggregate of approximately 500,000 gross square feet, including functional facilities, building shell, space for new modules, and corresponding office space in each, in major cities in Latin America. These facilities, which are capable of supporting advanced application hosting services, are located in Buenos Aires, Mendoza, Córdoba and Rosario, Argentina; São Paulo, Rio de Janeiro and Curitiba, Brazil; Santiago, Chile; Fort Lauderdale, Florida, United States; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; and Lima, Peru.

Teleports. We own and operate teleports in Buenos Aires, Argentina; São Paulo, Brazil; Bogotá, Colombia; Caracas, Venezuela; Quito, Ecuador; Lima, Peru; and Fort Lauderdale, Florida, United States. We also own and operate regional teleports in Mendoza, Córdoba, Rosario, Argentina; Medellín, Cali Colombia; Guayaquil, Ecuador; and Rio de Janeiro and Curitiba, Brazil, as well as operate over 150 other small network nodes.

Satellite Services. Our satellite transmissions use both C-band (4-6 GHz) and Ku-band (11-14 GHz) frequencies. As of December 31, 2006, we had a total available leased capacity of approximately 633 MHz. Our lease payments for satellite capacity totaled approximately $19.1 million in 2006. We will contract for additional leased satellite capacity if business requires. A portion of our satellite capacity is leased by our wholly-owned subsidiary, International Satellite Capacity Holding, Ltd. This subsidiary’s principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our operating subsidiaries. We believe that this method of centralizing our leasing of telecommunications capacity provides us with better terms. We are currently in the process of upgrading the technologies used to provide satellite services. We believe this will allow us in the mid term to optimize our satellite capacity, although it might require additional investment.

In addition, our corporate headquarters are located in Buenos Aires, Argentina at buildings and property that are owned by us. Our administrative and sales offices are primarily located within our operations facilities, located in each of the countries in which we operate. We also own commercial real property at various locations in Argentina, Colombia, Brazil and Venezuela. As of December 31, 2006, we leased several properties in the various countries in which we operate. For more information regarding properties used to operate our business, see “—Our Infrastructure.”

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IPO Allocations Class Action. On November 1, 2001, a lawsuit was filed in the United States District Court for the Southern District of New York (the “Court”) against our Company (the “IPO Class Action”), certain individuals who were then officers and directors of our Company and the underwriters to our initial public offering. This lawsuit alleged on behalf of a proposed class of all shareholders that our Company and its underwriters violated various provisions of the securities laws in connection with an initial public offering in February 2000. Pursuant to the Plan, the plaintiffs in the IPO Class Action received in connection with their claims the assignment of any insurance proceeds that we receive in connection with the litigation, but otherwise the claims of the plaintiffs against us or any of our other assets have been discharged as part of the Plan. In February 2005, the Court granted preliminary approval for a proposed settlement of the IPO Class Action. The settlement is subject to certain final determinations by the Court, which has been considering the settlement since preliminary approval.

Employee Severance Litigation. On December 26, 2003, a lawsuit was filed in an Argentine court against IMPSAT Argentina by the former chairman of our Board of Directors, Mr. Enrique Pescarmona. This lawsuit alleged that IMPSAT Argentina failed to pay Mr. Pescarmona severance compensation in the amount of $2.9 million which the plaintiff believes is required by Argentine labor law in connection with his termination from us upon the effectiveness of the Plan. Discovery is currently ongoing. We believe that we have meritorious defenses to the allegations in the complaints and we are defending the litigation vigorously.

Brazilian Tax Claims. In October 2004 the Brazilian tax authorities issued two tax infraction notices against IMPSAT Brazil for the collection of the Import Duty and the Tax on Manufactured Products, plus fines and interests. The notice informed IMPSAT Brazil that the taxes were levied because a specific document (Declaração de Necessidade—“Statement of Necessity”) was not provided by IMPSAT Brazil at the time of importation, in breach of MERCOSUR rules. The total amount of the tax assessment was approximately $4.3 million at December 31, 2006. Oppositions were filed on behalf of IMPSAT Brazil arguing that the Argentine exporter (Corning Cable Systems Argentina S.A.) complied with the MERCOSUR rules and a favorable first instance decision was granted. However, due to the amount involved, the case was remitted to the official compulsory review by the Federal Taxpayers Council. The administrative final decision is still pending.

In addition, in December 2004, the tax authorities of the State of São Paulo, in Brazil, issued an infraction notice for collection of Tax on Distribution of Goods and Services (“ICMS”) supposedly due on the lease of movable properties by comparing such activity to communications services, on which the ICMS state tax is actually levied. The total amount of this tax assessment was approximately $5.2 million at December 31, 2006, including interest and fines. A defense was filed on behalf of IMPSAT Brazil, arguing that the lease of assets could not be treated as a communication service subject to ICMS. The defense was rejected in the first administrative level, and an appeal to State Administrative Court was then filed, which is pending judgment. We believe there are good grounds to have the tax assessment cancelled. However, if the tax assessment is not cancelled in the administrative level for any reason, judicial measures may be adopted to remove such tax assessment.

Argentina Tax Claims. On December 31, 2006, the tax authorities of the City of Buenos Aires, Argentina, sent us a tax assessment for the fourth quarterly installment of 2006 relating to a purported tax for the use of the air space in and around the City in respect of the our antennas and supporting structures in the amount of approximately $1.7 million. Included in the notice was a statement of additional assessments covering earlier years (2003 through 2005) and the first three quarters of 2006. The total amount for these earlier periods was approximately $33.1 million. Through December 31, 2006, we have received invoices totaling approximately $34.8 million, but have not accrued amounts relating to this matter. If required to pay this tax at the current rate and based on the assumptions used by the City of Buenos Aires, we estimate that we will be subject to an additional tax of approximately $8.6 million per year. This estimate is based on invoices received from the City of Buenos Aires through December 31, 2006 and the City’s recently enacted 2007 Fiscal Code. We had previously received notices from the City for these types of taxes, one of which related to the fiscal year 2003. The notices followed a request from the City in 2003 for information regarding the ownership of antennas for purposes of imposition of the tax. We have formally objected to the legality and certain factual assumptions used in calculating the tax and have rejected each of the notices in an administrative proceeding filed before the City of Buenos Aires. We learned in July 2005 that the City had rejected our objection to the legality of the tax through a “Providencia” which we have rejected by us and is also the subject of the administrative proceeding. In December 2006, we filed an objection of the notice and antenna tax assessment for the last quarter of 2006. In our objection, we reaffirmed our objection to the legality of the tax. Our objection is pending resolution before the City’s tax authorities. We believe, based on our analysis of the issue and the advice of our legal counsel, that no tax is owed and we intend to vigorously defend against any requirement that we pay the tax. See “Risk Factors—We

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may be subject to significant liabilities due to a tax on antennas imposed by the City of Buenos Aires and other municipalities.”

In addition, in late December 2006, the tax authorities of the Municipality of Quilmes in Argentina sent us a notice of provisional tax assessment with respect to the installation and inspection of antennas for the years 2001 through 2006 in the amount of approximately $12.5 million, plus defaulted interest. We believe, based on our analysis and the advice of our legal counsel, that either no tax is owed or the amount of such tax is significantly less than the amount asserted in the notice. We intend to vigorously defend against this provisional tax assessment. See “Risk Factors—We may be subject to significant liabilities due to a tax on antennas imposed by the City of Buenos Aires and other municipalities.”

We are also involved in or subject to various litigation and legal proceedings incidental to the normal conduct of our business, including with respect to regulatory and foreign tax assessment matters.

On December 15, 2006, a proxy statement was mailed to all security holders regarding the Merger. A special meeting of the Company’s stockholders was held on January 17, 2007, and the shareholders voted in favor of the adoption of the Merger Agreement. The results of the stockholder meeting were reported in a Current Report on Form 8-K filed by us with the SEC on January 17, 2007.

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PART II

In accordance with the Plan, all pre-existing equity interests of IMPSAT Fiber Networks, Inc. were cancelled on the Effective Date. Our common stock, issued pursuant to the Plan, began to trade on the Nasdaq Over-the-Counter Bulletin Board June 30, 2003 under the new symbol “IMFN.” As of March 15, 2007, there were nine holders of record of our common stock, not including beneficial owners in nominee or street name. We have not paid any cash dividends on our common stock in the past three years, and do not anticipate paying any in the foreseeable future. In addition, the terms of our Senior Notes and other financing agreements we have entered into restrict our ability to pay dividends on our common stock.

The following tables show the high and low sales price of the common stock for quarters during the last two fiscal years, as reported on the Nasdaq Over-the-Counter Bulletin Board.

The information required concerning compensation plans under which equity securities of our Company are authorized for issuance is referenced in Item 12 of this Report.

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Prepared by CSRP (www.crsp.uchicago.edu), Center for Research in Security Prices, Graduate School of Business, The University of Chicago. Used with permission. All right reserved.

^©Copyright 2007

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The following selected financial data are for our Company on a consolidated basis in accordance with U.S. GAAP. The following financial data have been derived from our Company’s audited consolidated financial statements for the respective years. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes included at the back of this Report.

Upon our emergence from bankruptcy on the Effective Date, we have adopted “fresh start” reporting as required by the American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” which we refer to as SOP 90-7. As a result of the implementation of SOP 90-7 fresh start reporting, the consolidated financial statements of our Company from and after its emergence from bankruptcy, which we refer to as the Successor Company, will not be comparable to the consolidated financial statements of our Company in prior periods, which we refer to as the Predecessor Company.

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Overview

We are a provider of private telecommunications network and Internet services. We offer integrated data, voice, data center and Internet solutions, with an emphasis on broadband transmission, for national and multinational companies, financial institutions, governmental agencies and other business customers. We have operations in Argentina, Colombia, Brazil, Venezuela, Ecuador, Chile, Peru and the United States and also provide our services in other countries in Latin America and the Caribbean. We provide telecommunications, data center and Internet services through our networks, which consist of owned fiber optic and wireless links, teleports, data centers, earth stations and leased fiber optic and satellite links.

Reorganization

As previously disclosed in our filings with the SEC, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York on June 11, 2002 (the “Bankruptcy Case”). We subsequently filed the Plan in the Bankruptcy Case, which Plan was confirmed in the Bankruptcy Case and became effective on the Effective Date, March 25, 2003, at which time we emerged from bankruptcy. Pursuant to the Plan, we substantially reduced our outstanding debt and annual interest expense and increased our liquidity. At December 31, 2002, prior to the effectiveness of the Plan, our long-term debt, including current maturities and estimated liabilities subject to the Chapter 11 proceeding, aggregated approximately $1.09 billion. Also at December 31, 2002, our total indebtedness (including unpaid accrued interest through the petition date related to the Plan) aggregated $1.04 billion

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and our cash, cash equivalents and trading investments totaled $55.6 million. As of March 31, 2003, upon the effectiveness of the Plan, our total indebtedness was reduced to approximately $267.5 million, and our cash, cash equivalents and trading investments totaled approximately $61.9 million.

Upon our emergence from bankruptcy on March 25, 2003, we adopted “fresh start” reporting as required by SOP 90-7. Under SOP 90-7 fresh start reporting, a new reporting entity is considered to be created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values at the date fresh start reporting is applied. Among other things, this required us to allocate the reorganization value of our reorganized Company to its specific tangible and identifiable assets and liabilities. As a result of the implementation of SOP 90-7 fresh start reporting, the consolidated financial statements of our Company from and after its emergence from bankruptcy are not comparable to the consolidated financial statements in prior periods.

Revenues

The majority of our revenues are generated through contracts for the provision of services over a set duration of time. The customer generally pays an installation charge at the beginning of the contract and a monthly fee based on the quantity and type of equipment installed. Except in Argentina and Brazil, the fees stipulated in the majority of our contracts with customers are denominated in U.S. dollar or U.S. dollar equivalents. Services (other than installation fees) are billed on a monthly, predetermined basis, which coincides with the rendering of the services. We report our revenues net of deductions for sales taxes. Our contracts with our customers have in the past typically ranged in duration from six months to five years and have generally been three-year contracts. Under the Argentine “pesification” decree described below under “Currency Risks,” if a contract denominated in pesos is entered into after the decree’s enactment, payments under that contract are not entitled to be adjusted by any price or related index. Accordingly, in order to mitigate our inflation risk, our peso-denominated contracts in Argentina are typically for shorter terms ranging from three to six months. The customer generally pays an installation charge at the beginning of the contract and a monthly fee based on the quantity and type of equipment installed. Except in Argentina and Brazil, the fees stipulated in the majority of our contracts with customers are denominated in U.S. dollar or U.S dollar equivalents. Services (other than installation fees) are billed on a monthly, predetermined basis, which coincide with the rendering of the services. We report our revenues net of deductions for sales taxes.

We have experienced, and anticipate that we will continue to experience, downward pressure on our prices as we expand our customer base, confront growing competition for private telecommunications network services and endure the effects of periodic economic downturns in our countries of operation. When we have renewed and/or expanded our contracts with existing customers, the prices we charge have generally declined. Sales of additional services to our existing clients, however, have offset this negative impact to our revenues.

Although we believe that our geographic diversification provides some protection against economic downturns in any particular country, our results of operations and business prospects depend upon the overall financial and economic conditions in Latin America. Most of the countries in which we operate are undergoing, or have experienced in recent years, political and economic volatility. These conditions have had, and may continue to have, material adverse effects on our business, results of operations and financial condition.

Costs and Expenses

Our costs and expenses principally include:

Our direct costs include payments for leased satellite transponder, fiber optic and other terrestrial capacity. Other principal items composing direct costs are contracted services costs and allowance for doubtful accounts. Contracted services costs include costs of maintenance and installation (and de-installation) services provided by outside contractors. Installation and de-installation costs are the costs we incur when we install or remove earth stations, micro-stations and other equipment from customer premises. Direct costs also include licenses and other fees, node expenses and sales commissions paid to third-party sales representatives and to our salaried sales force.

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Our selling, general and administrative expenses consist principally of:

Currency Risks

Except in Argentina and Brazil, the majority of our contracts with customers provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate between the local currency and the U.S. dollar at the time of invoicing. Accordingly, inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our revenues during 2006. Nevertheless, given that the exchange rate is generally set at the date of invoicing and that we in some cases experience substantial delays in collecting receivables, we are exposed to exchange rate risk, even in countries other than Argentina and Brazil.

Under applicable law, our contracts with customers in Brazil cannot, and, under certain circumstances, our contracts with customers in Argentina may not, be linked to the exchange rate between the local currency and the U.S. dollar. Accordingly, operations in Argentina and Brazil increase our exposure to exchange rate risks. Any devaluation of the Argentine peso or the Brazilian real against the U.S. dollar will generally affect our consolidated financial statements by generating foreign exchange gains or losses on dollar-denominated monetary liabilities and assets and will generally result in a decrease, in U.S. dollar terms, in our revenues, costs and expenses. Because the majority of our debt service payments and a significant portion of our costs (including capital equipment purchases and payments for certain leased telecommunications capacity) remain denominated and payable in U.S. dollars, our financial condition and results of operations are dependent upon our subsidiaries’ (including IMPSAT Argentina and IMPSAT Brazil) ability to generate sufficient local currency (in U.S. dollar terms) to pay their costs and expenses and to satisfy our debt service requirements.

In U.S. dollar terms, our revenues in Argentina and Brazil, which are denominated in local currencies and represent a significant proportion of our consolidated net revenues, generally increase when the currencies in those countries appreciate against the U.S. dollar, and decrease when those currencies depreciate. The following table shows U.S. dollar exchange rates for the currencies of these countries at the dates indicated:

In addition, as a result of foreign currency exchange and transfer controls established by the Venezuelan government in February 2003, our contracts with customers in Venezuela are currently being paid in local currency at the fixed exchange rate established by the Venezuelan government between the local currency and the U.S. dollar. As the exchange control regulations do not permit us to exchange our cash and cash equivalents in local currency into U.S. dollars without specific governmental authorizations, the Venezuelan exchange control regulations have adversely affected our exchange rate risks for all dollar-denominated liabilities owing by our Venezuelan operating subsidiary and our ability to receive dividends or other distributions from that subsidiary. We cannot predict the duration or other adverse effects that Venezuelan exchange controls may have on our operating results and financial condition.

Argentina

In early January 2002, the Argentine government abandoned the decade-old fixed peso-dollar exchange rate and permitted the peso to float freely against the U.S. dollar. The peso free market opened on January 11, 2002 and traded at 1.65 pesos to the U.S. dollar and traded as low as 3.87 pesos to the U.S. dollar on June 26, 2002. At both December 31, 2003 and 2004, the exchange rate was 2.95 pesos to the U.S. Dollar. At December 31, 2005, the exchange rate was 3.03 pesos to the U.S. Dollar and December 31, 2006, the exchange rate was 3.07 pesos to the U.S. Dollar. Currently, IMPSAT Argentina’s customer contracts and operating cash inflows are now predominantly denominated in pesos.

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Brazil

At December 31, 2005, the real traded at a rate of R$2.34 = $1.00, and it appreciated to R$2.14 = $1.00 at December 31, 2006. The daily average exchange rate for the real during 2006 was R$2.17= $1.00, as compared to R$2.41 = $1.00 during 2005.

Venezuela

In February 2003, the Venezuelan government imposed foreign exchange and price controls in response to adverse economic conditions resulting from a nation-wide strike that commenced in December 2002, setting a rate of Bs.1,600 = U.S.$1.00. The exchange controls make it difficult for our customers in that country to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis and also severely limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela in a timely manner without substantial cost. At December 31, 2004, the exchange rate for the bolivar was set at a rate of Bs.1,920 = $1.00, and on March 30, 2005, the Venezuelan government devalued the bolivar to a rate of Bs. 2,150 = $1.00, where it remains to date. We cannot predict the extent to which we may be affected by future changes in exchange rates and exchange controls in Venezuela. Future devaluations of the Venezuelan bolivar and/or the implementation of more stringent exchange control restrictions in that country could have a material adverse effect on our financial condition and results of operations in Venezuela.

Termination of Mexican Operations

During the first quarter of 2003, we determined to close our operations in Mexico, which we initially established in 1994. The sale of our operations closed during 2003. Accordingly, our results for the year ended December 31, 2003 include revenues and expenses related to the operations and the sale of our Mexican operations, and the results for the years ended December 31, 2004 and thereafter do not include such revenues or expenses. Our operations in Mexico were not significant.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company. We have no arrangements of the types described in any of these four categories that we believe may have a material current or future effect on our financial condition, liquidity or results of operations.

Critical Accounting Policies

In the ordinary course of business, the Company makes a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its financial statements in conformity with GAAP. We use our best judgment based on our knowledge of existing facts and circumstances and actions that we may undertake in the future, as well as the advice of external experts in determining the estimates that affect our consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our most critical accounting policies are:

Revenue Recognition

We record revenues from data, value-added, telephony, and Internet services monthly as the services are provided. Equipment sales are recorded upon delivery to and acceptance by the customer. Our revenues from installation fees are less than our direct expenses for installations. Therefore, installation fees generally are recognized upon (i) the completion of the installation of customer premise equipment, and (ii) the invoicing of such fees to the customer. If the installation charges are greater than the direct expenses, the amounts are deferred and recognized over the estimated life of the customer.

We have entered into, or may enter into in the future, agreements with carriers granting indefeasible rights of use (“IRUs”) and access to portions of our Broadband Network capacity and infrastructure. Pursuant to some of these agreements, we received fixed advance payments for the IRUs, which would be recognized as revenue over the life of the IRU. Amounts received in advance would be recorded as deferred revenue.

We record our revenues net of deductions for sales taxes. These taxes are assessed by the governmental taxing authorities in a number of countries in which we operate based on a percentage of gross revenues and totaled approximately $10.8 million, $14.1 million and $18.2 million for the years ended December 31, 2004, 2005 and 2006, respectively.

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Non-Monetary Transactions

We may exchange capacity on our Broadband Network for capacity from other carriers through the exchange of IRUs. We account for these transactions in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 (“SFAS No. 153”). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The amendment also eliminates the narrow exception for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance.

Property, Plant and Equipment

Our business is capital intensive. We record at cost our telecommunications network assets and other improvements that, in management’s opinion, extend the useful lives of the underlying assets, and depreciate such assets and improvements over their estimated useful lives. Our telecommunications network is highly complex and, due to innovation and enhancements, certain components of the network may lose their utility faster than anticipated. We periodically reassess the economic lives of these components and make adjustments to their expected lives after considering historical experience and capacity requirements, consulting with the vendors, and assessing new product and market demands and other factors. When these factors indicate that network components may not be useful for as long as anticipated, we depreciate their remaining book values over their residual useful lives. The timing and deployment of new technologies could affect the estimated remaining useful lives of our telecommunications network assets, which could have a significant impact on our results of operations in the future.

Impairment of Long-Lived Assets

We periodically review the carrying amounts of our property, plant, and equipment to determine whether current events or circumstances warrant adjustments to the carrying amounts. As part of this review, we analyze the projected undiscounted cash flows associated with our property, plant, and equipment. Considerable management judgment is required in establishing the assumptions necessary to complete this analysis. Although we believe these estimates to be reasonable, they could vary significantly from actual results and our estimates could change based on market conditions. Variances in results or estimates could cause changes to the carrying value of our assets including, but not limited to, recording additional impairment charges for some of these assets in future periods.

Basis for Translation

We maintain our consolidated accounts in U.S. dollars. The accounts of our subsidiaries are maintained in the currencies of the respective countries. A subsidiary’s functional currency is defined as the currency of the primary environment in which a subsidiary operates and is determined based on management’s judgment. When a subsidiary’s accounts are not maintained in the functional currency, the financial statements must be remeasured into the functional currency. This involves remeasuring monetary assets and liabilities using current exchange rates and non-monetary assets and liabilities using historical exchange rates. The adjustments generated by re-measurement are included in our consolidated statements of operations.

When the local currency of a subsidiary is determined to be the functional currency, the statements are translated into U.S. dollars using the current exchange rate method. The adjustments generated by translation using the current exchange rate method are accumulated in an equity account entitled “Accumulated other comprehensive income (loss)” within our consolidated balance sheets.

Tax and Legal Contingencies

We are involved in foreign tax and legal proceedings, claims and litigation arising in the ordinary course of business. We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we have recorded reserves in our consolidated financial statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, we are unable to make a reasonable estimate of any liability. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

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In addition, we may be audited by foreign and state (as it relates to our U.S. operations) tax authorities. We provide reserves for potential exposures when we consider it probable that a taxing authority may take a sustainable position on a matter contrary to our position. We evaluate these reserves, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events that may impact our ultimate payment for such exposures.

Changes in Policies

These policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often are a result of the need to make estimates about the effect of matters that are inherently uncertain. We have not made any changes in any of these critical accounting policies during 2006, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies during 2006.

New Accounting Pronouncements

Prior to January 1, 2006, the Company accounted for stock option awards granted under the Company’s share-based payment in accordance with the recognition and measurement provision of Accounting Principles Board Opinion No. 25. Accounting for Stock Issues to Employees (“APB 25”) and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. Share-based employee compensation expense was not recognized in the Company’s consolidated statement of operations prior to January 1, 2006, as all stock options awards granted under the plans had an exercise price equal to or greater than the market value of the common stock on the date of the grant. Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”) using the modified-prospective-transition method. Under this transition method, compensation expense recognized during the year ended December 31, 2006 included compensation expense for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. In accordance with the modified-prospective-transition method, results for prior periods have not been restated. As a result of adopting SFAS 123R, the charge to operations for the year ended December 31, 2006 was $332. The impact of adopting SFAS 123R on both basic and diluted earnings per share for the year ended December 31, 2006 was $0.03 per share.

In June 2006, the FASB issued Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The accounting provision of FIN 48 will be effective for the Company beginning January 1, 2007. The Company has not yet completed its evaluation of the impact of adoption on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measures (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently reviewing the provisions of SFAS No. 157 to determine the impact of adoption on our financial position or results of operations.

In June 2006, the Emerging Issues Task Force (“EITF”) issued EITF Issue 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation). A consensus was reached that entities may adopt a policy of presenting sales taxes in the statement of operations on either a gross or net basis. If taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes. The guidance is effective for periods beginning after December 15, 2006. Since the Company presents its revenues sales net of sales taxes, the adoption of EITF Issue 06-03 will have no impact on the presentation of sales tax in its consolidated statements of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities-Including an amendment of FASB Statement No. 115) . SFAS No. 159 permits entities to choose to measure certain financial assets and liabilities at fair value (the “fair value option”). Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are required to adopt SFAS No. 159 in the first quarter of 2008. We are currently assessing the impact of SFAS No. 159 on its consolidated financial statements.

Results of Operations

The following table sets forth our consolidated statements of operations data in dollar amounts and as a percentage of our sales for the periods indicated:

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Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Revenues. Our total net revenues for 2005 and 2006 equaled $254.0 million and $285.0 million, respectively. Net revenues are composed of net revenues from services and sales of equipment.

Our net revenues from services for 2006 totaled $283.8 million, an increase of $30.5 million (or 12.0%) compared to 2005. Our net revenues from services during 2006 included net revenues from:

The following table shows our revenues from services by business lines for the periods indicated: