Liquidity and Capital Resources

Cash Flow from Operations

        The Successor generated positive cash flow from operating activities for the seven months ended December 31, 2003 of $20.6 million. This cash flow includes one-time cash outflows totaling $12.1 million to settle final pre-petition obligations that were assumed by the Successor pursuant to acquired contracts; however, the net cash flow for the period also benefitted significantly by returning to normal payment terms with suppliers after the transfer of the business to the Successor.

Investing Activities

        The ongoing investing activities of the Successor since May 30, 2003 have primarily consisted of capital expenditures of approximately $8.2 million for voice switching equipment, network infrastructure upgrades and additional pre-petition commitments for IRUs, of which approximately $6.2 million is fully committed as of January 1, 2004. We currently estimate that our capital expenditures will be approximately $30.0 million in fiscal 2004 on a stand-alone basis.

        In addition, the year ended December 31, 2003 includes the net impact of the initial investment in the Successor net of $60.3 million of cash purchased from the Predecessor.

Financing Activities

        Financing activities since May 30, 2003 consisted primarily of an inflow of cash from the issuance of common and preferred shares to TLGB and the proceeds of a loan from TLGB as well as the repayment of a $25.0 million loan from TLGB. The loan was made to finance a portion of the purchase price of the Acquired Businesses and had an annual interest rate of 15.0%. The loan was scheduled to mature on May 30, 2004, but it was repaid in full, with interest, on June 27, 2003. TLGB still holds $95.0 million of Teleglobe Preferred Shares, which has a dividend rate of 10.0%, compounded annually. We intend to repurchase the Teleglobe Preferred Shares pursuant to the Exchange.

Liquidity

        We believe that our current liquidity and anticipated future cash flows from operations will be sufficient to fund our operations. As of December 31, 2003, we had cash, cash equivalents and marketable securities of approximately $35.3 million and on a proforma basis as of such date, the

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combined company would have had cash, cash equivalents and marketable securities of $76.9 million. Our expenditures in 2004 will be primarily attributable to operating expenses, capital expenditures, integration costs associated with the ITXC acquisition and interest payments. See "Non-GAAP Financial Data (unaudited)—Estimated Merger Expenditures and Benefits." Our cash outpayments tend to be higher in the first quarter because of bonus and tax payments. We cannot assure you, however, that additional cash will not be required, particularly if we make significant acquisitions or other investments.

        We have entered into a note purchase agreement with affiliates of Cerberus whereby such affiliates will purchase $100 million of senior notes, the proceeds of which together with our existing cash resources will be used to complete the Refinancing. See "Risk Factors—The debt level we anticipate for the combined company could limit our flexibility and adversely affect our financial health" on page 27. The notes sold pursuant to the note purchase agreement are senior unsecured obligations. The notes will bear interest at a rate of 10.0% per annum, payable quarterly in arrears, subject to increase to 16.0% per annum if an "Event of Default" exists. The Notes mature on May 31, 2008.

        The note purchase agreement provides for New Teleglobe to make a mandatory prepayment of:

•

$25.0 million, no later than the second anniversary of the note purchase agreement's closing date; and



•

$25.0 million, no later than the third anniversary of the note purchase agreement's closing date.

        In addition to the mandatory prepayment schedule described above, holders of the notes may require New Teleglobe to make an offer to purchase the notes at a purchase price in cash of 101% of the then outstanding aggregate principal amount of the notes (together with accrued and unpaid interest) upon certain changes of control. New Teleglobe is also required to make an offer to purchase notes upon certain asset sales from the net cash proceeds of such asset sales and upon certain sales of debt or equity securities from the net cash proceeds of such sales of securities.

        New Teleglobe will be required to pay anniversary fees of 1.0% and 2.0% of the aggregate principal amount of the notes then outstanding, payable on the first and second anniversary of the note purchase agreement's closing date, respectively.

        Current economic conditions of the telecommunications and information services industry, combined with our financial position and liquidity, have created potential opportunities for our company to acquire companies or portions of companies at attractive prices. In addition to the ITXC merger, we continuously evaluate these opportunities and could make additional acquisitions in 2004.