VERSATEL TELECOM INTERNATIONAL N V, F-1/A, 1999-07-23

VERSATEL TELECOM INTERNATIONAL N V
F-1/A, 1999-07-23
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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1999

REGISTRATION STATEMENT NO. 333-81329
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3 TO FORM F-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

VERSATEL TELECOM INTERNATIONAL N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
THE NETHERLANDS 4813 NONE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

------------------------

<TABLE>
<S> <C>
PAALBERGWEG 36 CT CORPORATION SYSTEM
1105 BV AMSTERDAM-ZUIDOOST 1633 BROADWAY
THE NETHERLANDS NEW YORK, NY 10019
(31-20) 430 4300 (212) 664-1666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

---------------

WITH COPIES TO

<TABLE>
<S> <C>
JOHN D. MORRISON JR. WILLIAM R. DOUGHERTY
SHEARMAN & STERLING SIMPSON THACHER & BARTLETT
599 LEXINGTON AVENUE 99 BISHOPSGATE
NEW YORK, NY 10022 LONDON, ENGLAND EC2M 3YH
(212) 848-4000 (44-171) 422-4000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C>
11 7/8% Senior Dollar Notes due 2009..... $180,000,000 $50,040(3)
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11 7/8% Senior Euro Notes due 2009(4).... $126,000,000 $35,028(3)
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</TABLE>

(1) Includes Senior Dollar Notes and Senior Euro Notes that (i) are to be
offered and sold by the Registrant in the United States and (ii) are to
be offered outside the United States but that may be resold from time to
time in the United States during the distribution.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.

(3) A registration fee of $15,012 has been paid with the filing of this
registration statement. A registration fee of $70,056 has been
previously paid.

(4) Calculated based on the euro noon buying rate on July 22, 1999 of $1.05
per E1.00.

THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

PROSPECTUS

[VERSATEL TELECOM LOGO]

VERSATEL TELECOM INTERNATIONAL N.V.

$180,000,000 11 7/8% SENIOR DOLLAR NOTES DUE 2009

E120,000,000 11 7/8% SENIOR EURO NOTES DUE 2009

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THIS IS AN OFFERING BY VERSATEL TELECOM INTERNATIONAL N.V. OF $180,000,000 OF
ITS 11 7/8% SENIOR DOLLAR NOTES DUE 2009 AND E120,000,000 OF ITS 11 7/8% SENIOR
EURO NOTES DUE 2009. INTEREST ON EACH SERIES OF NOTES IS PAYABLE ON JANUARY 15
AND JULY 15 OF EACH YEAR, BEGINNING JANUARY 15, 2000.

WE MAY REDEEM ALL OR PART OF EITHER SERIES OF NOTES ON OR AFTER JULY 15, 2004.
PRIOR TO JULY 15, 2002, WE MAY REDEEM UP TO 35% OF EITHER SERIES OF NOTES FROM
THE PROCEEDS OF CERTAIN EQUITY OFFERINGS. WE MAY ALSO REDEEM ALL OF EITHER
SERIES OF NOTES PRIOR TO THEIR MATURITY IN THE EVENT OF CERTAIN CHANGES
AFFECTING WITHHOLDING TAXES IN THE NETHERLANDS. THE APPLICABLE REDEMPTION PRICES
ARE SPECIFIED IN THIS PROSPECTUS UNDER "DESCRIPTION OF THE NOTES."

THE NOTES WILL BE OUR SENIOR UNSECURED OBLIGATIONS AND WILL NOT BE GUARANTEED BY
ANY OF OUR SUBSIDIARIES.

THIS OFFERING IS BEING MADE CONCURRENTLY WITH AN OFFERING BY VERSATEL AND A
NUMBER OF SELLING SHAREHOLDERS OF ORDINARY SHARES IN THE FORM OF SHARES OR
AMERICAN DEPOSITARY SHARES. THE CLOSING OF THIS OFFERING IS CONDITIONED UPON THE
CLOSING OF THE EQUITY OFFERING.

INVESTING IN THE NOTES INVOLVES RISKS. "RISK FACTORS" BEGINS ON PAGE 13.

<TABLE>
<CAPTION>
PER NOTE TOTAL(1)
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<S> <C> <C> <C>
Offering Price........................................ 99.273% $178,691,400 E119,127,600
Discounts and Commissions............................. 2.521%(2) $ 4,537,800 E 3,025,200
------ ------------ ------------
Proceeds to VersaTel.................................. 96.752%(2) $174,153,800 E116,102,400
</TABLE>

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(1) Plus accrued interest, if any, from the date of issuance to the date of
delivery.

(2) Rounded to nearest thousandth of a percentage.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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LEHMAN BROTHERS ING BARINGS

JULY 23, 1999

<PAGE> 3

[The inside front cover contains a graph that sets forth VersaTel's local
access and overlay network, a graph of the local access infrastructure, a
summary of VersaTel's product packages as well as a graph that shows the
population density in Western Europe]
<PAGE> 4

TABLE OF CONTENTS

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<S> <C>
Summary............................ 1
Risk Factors....................... 13
Disclosure Regarding
Forward-Looking Statements....... 25
Use of Proceeds.................... 26
Capitalization..................... 27
Exchange Rate Information.......... 29
Unaudited Pro Forma Consolidated
Financial Information............ 32
Selected Financial Data for
VersaTel......................... 39
Selected Financial Data for
Svianed.......................... 41
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 43
Business........................... 59
Svianed.......................... 72
Management......................... 82
Principal Shareholders............. 89
Material Relationships and Related
Transactions..................... 90
Description of Material
Indebtedness..................... 92
Description of the Notes........... 95
Book-Entry, Delivery and Form...... 127
Tax Considerations................. 131
Underwriting....................... 138
Legal Matters...................... 141
Experts............................ 141
Where You Can Find More
Information...................... 141
Index to Financial Statements --
VersaTel......................... F-1
Index to Financial Statements --
Svianed.......................... F-23
Glossary........................... A-1
</TABLE>

In making a decision about buying these securities, you must rely on your
own examination of the terms of this offering, including the merits and risks
involved, and you should rely only on the information contained in this
prospectus. We have not authorized anyone to provide prospective investors with
information that is different from the information contained in this prospectus.
This prospectus is intended to offer no securities other than the Notes. This
prospectus is not an offer to sell nor is it seeking an offer to buy any
security in any jurisdiction where such an offer or sale would be illegal. The
information in this prospectus is true as of the date on the front cover,
regardless of the time of delivery of this prospectus or any sale of these
securities.

Until September 1, 1999, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

The underwriters expect to deliver the Notes on or about July 28, 1999. The
Notes will be accepted for delivery through the facilities of The Depository
Trust Company, Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System and Cedel Bank, against payment in immediately
available funds.

You must comply with all applicable laws and regulations in force in any
jurisdiction in which you purchase, offer or sell the Notes or possess or
distribute this prospectus, and must obtain any required consent, approval or
permission for your purchase, offer or sale of the Notes under the laws and
regulations in force in any jurisdiction to which you are subject or in which
you make such purchases, offers or sales.

We have made all reasonable inquiries, and we confirm that this document
contains all information with respect to us and the Notes which is material in
the context of the issue and offering of the Notes, that the information
contained herein is true and accurate in all material respects and is not
misleading in any material respect, that the opinions and intentions expressed
herein are honestly held and have been reached after considering all relevant
circumstances and are based on reasonable assumptions, that there

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<PAGE> 5

are no other facts, the omission of which would, in the context of the issue and
offering of the Notes, make this document as a whole or any such information or
the expression of any such opinions or intentions misleading in any material
respect, and that all reasonable inquiries have been made by us to verify the
accuracy of such information. We accept responsibility for the information
contained in this document accordingly.

The Notes may not be offered, sold, transferred or delivered as part of
their initial distribution or at any time thereafter, directly or indirectly,
other than to (investment) banks, pension funds, insurance companies, securities
firms, investment institutions and other comparable entities, including
treasuries and finance companies of large enterprises, who or which are active
on a regular and professional basis in the financial markets for their own
account. This selling restriction will be included in all offers,
advertisements, publications and other documents in which an offer of the Notes
is made or a forthcoming offer is announced.
-------------------------

We publish our financial statements in Dutch guilders. In this prospectus,
references to "U.S. dollars" or "$" are references to the currency of the United
States, references to "Dutch guilders" or "NLG" are references to the currency
of The Netherlands and references to "Belgian francs" or "BEF" are references to
the currency of Belgium. The exchange rate of the Luxembourg franc to the U.S.
dollar is the same as that of the Belgian franc to the U.S. dollar. Solely for
the convenience of the reader, this prospectus contains translations of certain
Dutch guilder amounts into U.S. dollars at specified rates. These translations
should not be construed as representations that the Dutch guilder amounts
actually represent such U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated or at any other rate. Both The Netherlands and
Belgium have adopted the euro as of January 1, 1999. On July 22, 1999, the Noon
Buying Rate was $1.05 per E1.00. To obtain a current formulation of the value of
Dutch guilders or Belgian francs in U.S. dollars, investors are required first
to convert such currencies into euro at the fixed conversion rates of NLG
2.20371 per E1.00 and BEF 40.3399 per E1.00 established in connection with the
implementation of the third stage of European Monetary Union, and converting the
resulting euro amounts into U.S. dollars at the Noon Buying Rate for euro.
Unless otherwise indicated, the translations of Dutch guilders into U.S. dollars
have been made at NLG 2.04 per $1.00, based on the noon buying rate in the City
of New York for cable transfers in euro as certified for customs purposes by the
Federal Reserve Bank of New York ("Noon Buying Rate") on March 31, 1999. See
"Exchange Rate Information" for historical information regarding the Noon Buying
Rate. On July 22, 1999, the exchange rate of Dutch guilders to U.S. dollars
(based on the Noon Buying Rate for euro) was NLG 2.10 per $1.00. This prospectus
contains translations of certain Belgian franc amounts into U.S. dollars at
specified rates. These translations should not be construed as representations
that the Belgian franc amounts actually represent such U.S. dollar amounts or
could be converted into U.S. dollars at the rate indicated or at any other rate.
Unless otherwise indicated, the translation of Belgian francs into U.S. dollars
has been made at BEF 37.32 per $1.00, based on the Noon Buying Rate in the City
of New York for cable transfers in euro as certified for customs purposes by the
Federal Reserve Bank of New York on March 31, 1999. On July 22, 1999 the
exchange rate of Belgian francs to U.S. dollars (based on the Noon Buying Rate
for euro) was BEF 38.39 per $1.00. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of the effects
of exchange rate fluctuations on VersaTel. For more information regarding recent
rates of exchange between Dutch guilders, Belgian francs and euros versus U.S.
dollars, see "Exchange Rate Information."

-------------------------

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-------------------------

SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of The Netherlands and substantially all
of our assets are located outside the United States. In addition, most of our
management board, supervisory board and executive officers are not residents of
the United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or to enforce
against such persons or VersaTel judgments of U.S. courts based upon civil
liabilities under the U.S. federal securities laws. The United States and The
Netherlands do not have a treaty providing for the reciprocal recognition and
enforcement of judgments, so U.S. judgments are not directly enforceable in The
Netherlands. However, a final judgment for the payment of money obtained in a
U.S. court, which is not subject to appeal or any other means of contestation
and is enforceable in the United States, would in principle be upheld by a
Netherlands court of competent jurisdiction when asked to render a judgment in
accordance with such final judgment by a U.S. court, without substantive
re-examination or re-litigation on the merits of the subject matter thereof;
provided that such judgment has been rendered by a court of competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in proceedings of a penal or revenue nature, that its content and
possible enforcement are not contrary to public policy or public order of The
Netherlands, and that such judgment does not concern the recognition of punitive
damages which have no bearing on the amount of damages incurred. Notwithstanding
the foregoing, there can be no assurance that U.S. investors will be able to
enforce against VersaTel, or executive officers or members of the management or
supervisory boards, or certain experts named herein who are residents of The
Netherlands or other countries outside the United States, any judgments in civil
and commercial matters, including judgments under the federal securities laws.
VersaTel has been advised by its Netherlands counsel, Stibbe Simont Monahan
Duhot, that there is doubt as to whether a Netherlands court would impose civil
liability on VersaTel, or on its executive officers or the members of the
management or supervisory boards, in an original action based solely upon the
federal securities laws of the United States brought in a court of competent
jurisdiction in The Netherlands against VersaTel or such members.
-------------------------

Persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes offered hereby at
levels which might not otherwise prevail in the open market. Such stabilization,
if it commences, may be discontinued at any time. You should read the
"Underwriting" section for a description of these activities.

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<PAGE> 7

SUMMARY

This summary may not contain all the information that may be important to
you. You should read this entire prospectus, including the financial data and
related notes, before making an investment decision. You should also carefully
consider the information set forth under the heading "Risk Factors." This
prospectus has been prepared assuming the consummation of the reclassification
of our ordinary share capital into a single class of ordinary shares, which is
to occur before the closing of this offering. See "Description of Capital
Stock." Financial and other information contained in this document (i) has been
adjusted to reflect a 2-for-1 stock split of our ordinary shares, which was
effected on April 13, 1999 and (ii) unless otherwise specified, assumes no
exercise of the underwriters' over-allotment option in our concurrent offering
of ordinary shares. This prospectus includes forward-looking statements which
are subject to risks and uncertainties. See "Disclosure Regarding
Forward-Looking Statements." Technical terms used in our business are explained
in the "Glossary" at the end of this prospectus. Unless the context otherwise
requires, the terms "we", "us", "our" and similar terms used in this prospectus
refer to VersaTel Telecom International N.V. and its subsidiaries.

VERSATEL

VersaTel is a rapidly growing, competitive network operator focused
primarily on the Benelux, which consists of The Netherlands, Belgium and
Luxembourg. Our objective is to become the leading fully integrated provider of
local access, facilities-based broadband services, including voice, data and
Internet services to our customers in this region. We currently provide
high-quality, competitively priced, telecommunications, data and Internet
services in The Netherlands and Belgium primarily to 4 targeted market segments:

- business services -- small- and medium-sized businesses located
throughout the Benelux,

- local access services -- high bandwidth users within the Benelux which
are near and directly connected to our network,

- data services -- high bandwidth data customers with multiple sites
throughout the Benelux, and

- carrier services -- telecommunications, data and Internet service
providers.

With over 13,500 business customers and over 375 employees, we are a
leading alternative to KPN Telecom N.V. and Belgacom S.A., the former monopoly
telecommunications carriers in The Netherlands and Belgium, respectively. Our
revenues grew from NLG 18.9 million for the year ended December 31, 1997 to NLG
39.6 million for the year ended December 31, 1998 and our revenues for the 3
months ended March 31, 1999 were NLG 15.5 million.

On June 11, 1999, we acquired Svianed B.V., the third largest provider of
data services in The Netherlands. Svianed complements VersaTel's strategy by
providing data services to approximately 50 customers, primarily in the
financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
These customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Svianed had revenues of NLG 56.7 million and EBITDA of
NLG 17.9 million for the year ended December 31, 1998. For the 3 months ended
March 31, 1999, Svianed had revenues of NLG 15.6 million and EBITDA of NLG 5.2
million. The revenues for VersaTel and Svianed on a combined basis would have
been NLG 96.2 million for the year ended December 31, 1998 and NLG 31.1 million
for the 3 months ended March 31, 1999.

in the Benelux and to connect city centers, business parks and buildings along
its route. Our network design consists of 3 fully integrated elements:

- Benelux network -- multiple, integrated fiber optic rings connecting all
major population and business centers in the Benelux,

- local access infrastructure -- high bandwidth fiber optic and radio
connectivity to customers along our Benelux network route including city
centers, business parks and buildings, and

- international network -- fiber optic rings initially connecting London,
Dusseldorf, Frankfurt, Paris and the Benelux network.

As of May 31, 1999, we have constructed over 850 kilometers of our network
in the Benelux which we intend to have in service in the third quarter of 1999.
We intend to build an additional 650 kilometers of our network, including local
access infrastructure, by the end of 1999. As of May 31, 1999, our construction
passed 12 city centers, 6 business parks and 5,200 buildings along the route of
our network. We intend to complete our international rings connecting the
Benelux network, London and Paris and connecting the Benelux network, Frankfurt,
Dusseldorf and Paris by December 1999. We have completed our international
connection from the Benelux network to London and to Frankfurt. We intend to
directly connect Svianed's customers to, and transition Svianed's traffic onto,
our network in order to reduce our reliance on leased lines. We believe this
will significantly enhance the quality of our service offering to Svianed's
customers and reduce our costs.

During the past year, we have substantially expanded our product offering
from our initial offering of long distance voice services. We currently offer a
full portfolio of voice, data and Internet services to our business customers
and a broad range of connectivity, termination, co-location and hosting services
to other telecommunications, data and Internet service providers. Through our
acquisition of Svianed we will be able to significantly accelerate the
deployment of our broadband data services product offering by combining our
market presence with Svianed's data and network management expertise.

In addition to Svianed, we have recently extended our product and service
offerings and expanded our customer base through the following strategic
acquisitions:

- VuurWerk Internet B.V. -- a leading provider of web hosting, co-location,
access and e-commerce services in The Netherlands and Belgium. VuurWerk
is one of the largest providers of web hosting services in The
Netherlands, with more than 10,000 domain name registrations and 6,000
customers.

- SpeedPort N.V. -- a provider of Internet co-location and connectivity
solutions for high bandwidth and mission critical Internet and e-commerce
applications. SpeedPort will use VersaTel's international fiber
connectivity to build its IP-based network to serve its customers.

- CS Net B.V. -- enables Internet-based trade communities to conduct
business-to-business transactions in specific industries. It currently
provides these services to 6 trade communities with 10,000 end users.

- ITinera Services N.V. -- a Belgium-based Internet service provider with
over 950 business customers.

Over time, we intend to market most products and services of these
companies under the VersaTel brand. SpeedPort, however, will continue to market
its Internet solutions under its current brands.
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THE BENELUX MARKET OPPORTUNITY

VersaTel was founded in 1995 to capitalize on the opportunities created by
the liberalization of the telecommunications market in the Benelux. We believe
that the Benelux provides an excellent opportunity for competitive
communications service providers for several reasons, including its:

- HIGH POPULATION DENSITY. With approximately 26.2 million people in a
relatively small geographical area, the Benelux market is characterized
by one of the world's highest population densities, approximately 351
persons per square kilometer, compared to approximately 107 persons per
square kilometer in western Europe as a whole.

- HIGH GROWTH POTENTIAL. Data and telecommunications revenues as a
percentage of gross domestic product of 5.3% in 1997 were still
relatively low compared to 6.3% in the United Kingdom and 7.0% in the
United States, each with a more developed communications market.

- RAPIDLY EXPANDING DATA AND INTERNET MARKETS. The market for data and
Internet services is growing rapidly in the Benelux. According to
International Data Corporation, the estimated annual growth of the market
for Internet access services will be 30.4% and 45.2% in The Netherlands
and Belgium, respectively, from 1997 to 2001.

- HIGH INTENSITY OF COMMUNICATIONS TRAFFIC. The Benelux is a major
transportation and trade gateway which generates a relatively high level
of communications traffic. According to EITO (the European Information
Technology Observatory), the total Benelux telecommunication services
market amounted to $14.2 billion in 1997. If ranked as a single country,
the Benelux would have been the fifth largest telecommunications market
in western Europe behind Germany, France, the United Kingdom and Italy.

- TRADITIONALLY UNDERSERVED MARKET. At present, the Benelux communications
market is dominated by the former monopoly carriers, KPN Telecom,
Belgacom and P&T Luxembourg in The Netherlands, Belgium and Luxembourg,
respectively. We believe these carriers have not traditionally focused on
providing high quality customer service to our targeted customers.

- DEMAND FOR END-TO-END, BROADBAND SERVICES. We believe that business
customers will increasingly demand high bandwidth end-to-end
communications services, as they rapidly adopt Internet-based
applications as essential business and communications tools, such as
electronic commerce.

BUSINESS STRATEGY

VersaTel's objective is to become the leading local access,
facilities-based operator for broadband voice, data and Internet services in the
Benelux. The principal elements of our strategy are:

- DEPLOY OUR BROADBAND NETWORK. We are deploying a fully integrated
broadband network that will use the latest network technologies to
provide voice, data and Internet services and will support all major
protocols.

- FOCUS ON TARGETED CUSTOMER SEGMENTS WITH SPECIALIZED TEAMS. We use our
sales force, customer care and billing systems to meet the specific needs
of broadband local access customers, small- and medium-sized businesses,
broadband data services customers and other telecommunications, data and
Internet service providers.

- PROVIDE INNOVATIVE PRODUCTS AND SERVICES. We intend to continue to use
our network to allow us to become market leaders in providing our
customers with advanced product and service offerings and we plan to
provide customized solutions to fit local market needs.
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<PAGE> 10

- EXPAND CARRIER SERVICES. We plan to use our network to generate
substantial revenue and additional traffic on our network through sales
to telecommunications, data and Internet service providers lacking a
network infrastructure.

- FOCUS ON SUPERIOR CUSTOMER SERVICE. We strive to maintain a competitive
advantage over competitors in our target markets by providing superior
customer service in terms of responsiveness, accuracy and quality.

REGULATORY AND COMPETITIVE ENVIRONMENT

The European telecommunications market has historically been dominated by
monopoly telecommunications services providers, which are commonly known as
PTTs. With a series of directives, the European Commission has been instrumental
in opening the telecommunications market to competition. As part of the
liberalization of the telecommunications market, PTTs must now offer cost-
oriented interconnection agreements to alternative service providers. In
addition, the European Commission has mandated carrier selection, carrier
pre-selection and number portability. We have and will continue to maintain a
proactive approach to regulatory issues on both a national and European level.
We believe that this approach will help ensure compliance by the PTTs with
European Commission directives, allow us to take advantage of regulatory
opportunities and help us influence a regulatory framework that fosters a
competitive environment. Liberalization has resulted in increased competition
from new market entrants, reduced long distance tariffs and increased traffic
volumes, as well as the emergence of new service offerings and enhanced product
and price awareness. In March 1999, the Netherlands telecommunications
regulatory authority, OPTA, issued a ruling requiring KPN Telecom to offer
unbundled local access at KPN Telecom's central exchange offices to other
service providers. Unbundled local access, combined with new technologies now
available, may enable us to offer a high bandwidth service offering to those
customers that are not directly connected to our network.

CORPORATE STRUCTURE

VersaTel was incorporated under the laws of The Netherlands on October 10,
1995, as a private company with limited liability, referred to as a besloten
vennootschap met beperkte aansprakelijkheid or a B.V. VersaTel converted its
legal structure from a B.V. to a public company with limited liability, referred
to as a naamloze vennootschap or an N.V., on October 15, 1998. On December 31,
1998, VersaTel Telecom International N.V. transferred substantially all of its
assets and liabilities, excluding the notes issued in May 1998 and December
1998, to its subsidiaries. As a result of the transfer, VersaTel Telecom
International N.V. is now a holding company with no material assets, other than
the stock of its subsidiaries: VersaTel Telecom Europe B.V., VersaTel Telecom
Netherlands B.V., VersaTel Telecom Belgium N.V., Bizztel Telematica B.V., CS Net
B.V., CS Engineering B.V., Amstel Alpha B.V. (the parent of SpeedPort N.V.),
7-Klapper Beheer B.V. (the parent of VuurWerk Internet B.V.), ITinera Services
N.V. and Svianed B.V.

Our address is: VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam-Zuidoost
The Netherlands.

Our telephone number is: +31-20-430-4300.
4
<PAGE> 11

RECENT DEVELOPMENTS

On July 20, 1999, we entered into, along with our shareholders and certain
other parties, a Settlement Agreement with one of our major shareholders,
Cromwilld Limited, in order to resolve disputes arising out of our shareholders'
agreement and other matters. The major terms of the Settlement Agreement provide
for:

- the transfer of 146,988 of our ordinary shares held by Telecom Founders
B.V. to Cromwilld;

- the issuance of 200,000 of our shares on July 20, 1999 to Cromwilld at a
price of NLG 7.50 per ordinary share;

- the ability for Cromwilld to include 1,800,000 of its ordinary shares in
this offering;

- certain piggyback registration rights in favor of Cromwilld that will
take effect 180 days from the date hereof;

- the payment by us of $300,000 for Cromwilld's fees and expenses related
to the Settlement Agreement and certain other matters;

- the acknowledgement by all parties to our shareholders' agreement that
the shareholders' agreement will be terminated concurrently with the
closing of this offering;

- the withdrawal by Cromwilld of its pending legal proceedings against us
and our shareholders;

- Cromwilld's full cooperation with this offering; and

- the obligation of our shareholders, including Cromwilld, to procure the
resignation or dismissal of Cromwilld's nominee, Denis O'Brien, from our
Supervisory Board, after the closing of this offering.

Our revenues for the second quarter of 1999 were NLG 21.7 million, which
represents revenue growth of 40.0% from the first quarter of 1999. These
revenues include revenues from Svianed from June 11, 1999 as a result of its
acquisition as of that date.

On July 23, 1999 our shareholders are expected to approve the appointment
of an additional Supervisory Board member, Sander van Brummelen. Mr. van
Brummelen is currently a member of the board of directors of Gak Groep N.V. (the
former parent of Svianed). His appointment will be effective July 23, 1999.
5
<PAGE> 12

THE OFFERING

Issuer........................ VersaTel Telecom International N.V.

Notes Offered................. $180,000,000 in aggregate principal amount of
11 7/8% Senior Dollar Notes due 2009 and
E120,000,000 in aggregate principal amount of
11 7/8% Senior Euro Notes due 2009.

Use of Proceeds............... The net proceeds of this offering of Senior
Dollar Notes and Senior Euro Notes (after
deducting of underwriting discounts and
estimated expenses) are estimated to be $294.2
million. We intend to use a portion of the net
proceeds from this offering to repay $150.0
million in aggregate principal amount of
interim loans made by Lehman Commercial Paper
Inc. and ING (U.S.) Capital, LLC, affiliates of
the underwriters, which loans were incurred in
connection with the acquisition of Svianed. The
remaining net proceeds of this offering will be
used to fund capital expenditures for the
expansion of our network and for acquisitions,
in each case as permitted by the indentures
governing our existing notes.

We also expect to receive estimated net
proceeds of $185.1 million from the concurrent
offering by us and a number of selling
shareholders of ordinary shares in the form of
Shares and ADSs. We will use the net proceeds
of the equity offering to fund capital
expenditures for the expansion of our network,
and for acquisitions, working capital and other
general corporate purposes, including operating
deficits. See "Use of Proceeds."

Closing Condition............. The closing of this offering is conditioned on,
among other things, the simultaneous closing of
our concurrent offering of Shares and ADSs.

Maturity Date................. July 15, 2009.

Interest Payment Dates........ January 15 and July 15, commencing January 15,
2000.

Ranking....................... The Notes will be our general unsecured
obligations and will rank senior in right of
payment to any of our future indebtedness that
is, by its terms or by the terms of the
agreement or instrument governing such
indebtedness, expressly subordinated in right
of payment to the Notes and equal in right of
payment to all of our existing and future
senior indebtedness, including our existing
notes. At March 31, 1999, after giving effect
to the issuance of the Notes offered hereby,
the incurrence and repayment of the interim
loans and the acquisition of Svianed as if each
had occurred on such date, we would have had
approximately $677.0 million of consolidated
indebtedness.

Substantially all of VersaTel Telecom
International N.V.'s assets and liabilities
(other than the existing notes) are owned by
its restricted subsidiaries. VersaTel Telecom
International N.V. is a holding company with
limited assets and operates its business
through its restricted subsidiaries. Any right
of
6
<PAGE> 13

VersaTel Telecom International N.V. and its
creditors, including holders of the Notes, to
participate in the assets of any of VersaTel
Telecom International N.V.'s subsidiaries upon
any liquidation or administration of such
subsidiary will be subject to the prior claims
of the creditors of such subsidiary. The claims
of creditors of VersaTel Telecom International
N.V. are subordinated to all existing and
future third-party indebtedness and
liabilities, including trade payables, of our
subsidiaries. At March 31, 1999, after giving
effect to issuance of the Notes offered hereby,
the incurrence and repayment of the interim
loans and the acquisition of Svianed as if each
had occurred on such date, VersaTel Telecom
International N.V.'s subsidiaries would have
had total liabilities of NLG 85.0 million
reflected on its consolidated balance sheet.

Optional Redemption........... VersaTel may redeem each series of Notes, in
whole or in part, at any time on or after July
15, 2004, at the redemption prices set forth in
this prospectus, plus accrued and unpaid
interest, liquidated damages, and additional
amounts, if any, to the date of redemption.

Before July 15, 2002, VersaTel may redeem up to
35% of each series of Notes with the net
proceeds of one or more public equity offerings
received by, or invested in, VersaTel at
111 7/8% of the principal amount thereof, plus
accrued and unpaid interest, and additional
amounts, if any, to the redemption date;
provided that at least 65% of the aggregate
original principal amount of each series of
Notes remains outstanding thereafter. You
should read "Description of the
Notes -- Optional Redemption" for further
information on VersaTel's right to redeem the
Notes.

Each series of Notes may also be redeemed at
the option of VersaTel, in whole but not in
part, at any time at a redemption price equal
to the aggregate principal amount thereof,
together with accrued and unpaid interest, and
additional amounts, if any, to the redemption
date and all additional amounts then due and
which would become due as a result of the
redemption or otherwise, in the event of
changes affecting Netherlands withholding
taxes. You should read "Description of the
Notes -- Redemption for Taxation Reasons" for
further discussion of VersaTel's options in
this regard.

Change of Control............. Upon a change of control, holders of each
series of Notes will have the right to require
us to purchase their Notes in whole or in part
at a price in cash equal to 101% of the
principal amount thereof plus accrued and
unpaid interest thereon to the date of
repurchase, plus additional amounts, if any, to
the date of repurchase. See "Description of the
Notes -- Repurchase of Notes upon a Change of
Control."
7
<PAGE> 14

Certain Covenants............. Each indenture will contain covenants that,
among other things, limit our ability to:

- incur additional indebtedness,

- pay dividends on, redeem or repurchase our
capital stock,

- make investments,

- issue or sell capital stock of restricted
subsidiaries,

- create certain liens,

- sell assets,

- in the case of restricted subsidiaries,
guarantee indebtedness,

- engage in certain lines of business,

- engage in transactions with affiliates, and

- consolidate, merge or transfer all our assets
on a consolidated basis.

These covenants are subject to a number of
important exceptions and qualifications. See
"Description of the Notes -- Certain
Covenants."

Withholding Taxes; Additional
Amounts..................... Unless required by law, all payments by
VersaTel in respect of each series of Notes
will be made without withholding or deduction
for or on account of any taxes imposed by or
within any relevant taxing jurisdiction.
Subject to certain exceptions and limitations,
VersaTel will be required to pay any additional
amounts as may be necessary in order that the
net amounts received by the holders after any
withholding or deduction in respect of any such
taxes required by law shall equal the
respective amounts of principal and interest
that would have been received in respect of the
Notes in the absence of such withholding or
deduction. See "Description of the Notes --
Withholding Taxes."

Trustee....................... United States Trust Company of New York.

Listing....................... We expect to list the Notes on the Luxembourg
Stock Exchange; however, we can provide no
assurance that such listing will be obtained.

For additional information concerning the Notes, see "Description of the
Notes."
8
<PAGE> 15

SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA

The following unaudited pro forma financial information of VersaTel has
been prepared in accordance with U.S. GAAP and is derived from, and should be
read in conjunction with, the historical audited financial statements of
VersaTel and Svianed included elsewhere in this prospectus. The unaudited pro
forma statement of operations data for the year ended December 31, 1998 give
effect to the acquisition of Svianed, the incurrence and repayment of the
interim loans incurred in connection with such acquisition, the concurrent
offering by VersaTel and a number of selling shareholders of ordinary shares in
the form of Shares and ADSs, and this offering (the "Transactions") as if they
had occurred on January 1, 1998. The unaudited pro forma statement of operations
data for the 3 months ended March 31, 1999 give effect to the Transactions as if
they had occurred on January 1, 1999. The unaudited pro forma balance sheet data
as of March 31, 1999 give effect to the Transactions as if they had occurred on
such date. The unaudited pro forma financial information is presented for
illustrative purposes only and is not necessarily an indication of the results
that would have been achieved had such transactions been consummated as of the
dates indicated or that may be achieved in the future. You should read the data
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Unaudited Pro Forma Consolidated
Financial Information" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
---------------------- ------------------------
NLG $(1) NLG $(1)
--------- --------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... 96,244 47,178 31,080 15,235
Operating expenses:
Cost of revenue excluding depreciation and
amortization............................ 58,699 28,774 19,113 9,369
Selling, general and administrative........ 59,623 29,227 23,913 11,722
Depreciation and amortization.............. 50,343 24,678 14,317 7,018
--------- --------- ---------- ----------
Total operating expenses................... 168,665 82,679 57,343 28,109
--------- --------- ---------- ----------
Loss from operations......................... (72,421) (35,501) (26,263) (12,874)
Net interest expense......................... 104,594 51,271 37,572 18,418
Currency loss (gain)......................... (5,146) (2,522) 40,283 19,747
--------- --------- ---------- ----------
Net result before income taxes............... (171,869) (84,250) (104,118) (51,039)
Provision for income taxes................... 7 3 -- --
--------- --------- ---------- ----------
Net result................................... (171,876) (84,253) (104,118) (51,039)
========= ========= ========== ==========
Net result per share (basic and
diluted)(2)................................ (3.19) (1.56) (1.73) (0.85)
Weighted average number of shares
outstanding(2)............................. 53,872,194 53,872,194 60,234,810 60,234,810

FINANCIAL DATA:
EBITDA(3).................................... (22,078) (10,823) (11,946) (5,856)
Capital expenditures......................... 90,511 44,368 55,972 27,437
Ratio of earnings to fixed charges(4)........ -- -- -- --
Deficiency of earnings plus fixed charges to
cover fixed charges(5)..................... (67,275) (32,979) (66,546) (32,621)
</TABLE>

9
<PAGE> 16

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
NLG $(1)
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash.................................... 1,169,169 573,122
Working capital (excluding cash and restricted cash)........ (93,832) (45,996)
Capitalized finance cost.................................... 63,156 30,959
Property, plant and equipment, net.......................... 62,193 30,487
Construction in progress.................................... 92,205 45,199
Goodwill.................................................... 353,100 173,088
Total assets................................................ 1,787,003 875,981
Total long-term obligations (including current portion)..... 1,381,112 677,016
Total shareholders' equity.................................. 267,607 131,179
</TABLE>

- -------------------------

(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.

(3) EBITDA consists of earnings (loss) before interest expense, income taxes,
depreciation, amortization and foreign exchange gain (loss). EBITDA is
included because management believes it is a useful indicator of a company's
ability to incur and service debt. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other statements
of operations or cash flow data computed in accordance with U.S. GAAP or as
a measure of the Company's results of operations or liquidity. Funds
depicted by this measure may not be available for management's discretionary
use (due to covenant restrictions, debt service payments, the expansion of
our network, and other commitments). Because all companies do not calculate
EBITDA identically, the presentation of EBITDA contained herein may not be
comparable to other similarly entitled measures of other companies.

(4) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense. Earnings plus
fixed charges were insufficient to cover fixed charges by NLG 67.2 million
in 1998 and by NLG 66.5 million for the 3 months ended March 31, 1999.

(5) The deficiency of earnings plus fixed charges to cover fixed charges is
calculated by adding (i) income (loss) from continuing operations before
income taxes plus (ii) fixed charges. Fixed charges consist of interest
expense.
10
<PAGE> 17

SUMMARY FINANCIAL DATA OF VERSATEL

The following summary financial data of VersaTel as of and for the years
ended December 31, 1996, 1997 and 1998 have been prepared in accordance with
U.S. GAAP and have been derived from the historical financial statements of
VersaTel, which have been audited by Arthur Andersen, independent public
accountants. The summary financial data of VersaTel as of and for the 3 month
periods ended March 31, 1998 and 1999 are unaudited, but in the opinion of the
management contain all adjustments, consisting only of normal recurring
accruals, which are necessary for a fair presentation of results for interim
periods. You should read the information set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the historical financial statements of
VersaTel included elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------- -----------------------------
1996 1997 1998 1998 1999
------- ------- ------------------ ------- ------------------
NLG NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue.............. 6,428 18,896 39,561 19,393 6,402 15,501 7,599
Operating expenses:
Cost of revenue,
excluding
depreciation and
amortization.... 4,954 17,405 31,821 15,598 5,460 12,485 6,120
Selling, general
and
administrative... 5,485 17,527 47,733 23,399 5,544 20,179 9,892
Depreciation and
amortization.... 453 3,237 6,473 3,173 1,087 3,084 1,512
------- ------- ------- ------- ------- ------- -------
Total operating
expenses...... 10,892 38,169 86,027 42,170 12,091 35,748 17,524
------- ------- ------- ------- ------- ------- -------
Loss from
operations......... (4,464) (19,273) (46,466) (22,777) (5,689) (20,247) (9,925)
Interest expense
(income), net...... 269 534 25,810 12,652 200 17,852 8,751
Currency loss
(gain)............. -- 53 (5,146) (2,522) 115 40,283 19,747
------- ------- ------- ------- ------- ------- -------
Net loss before
income taxes....... (4,733) (19,860) (67,130) (32,907) (6,004) (78,382) (38,423)
Provision for income
taxes.............. -- -- 7 3 -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss........... (4,733) (19,860) (67,137) (32,910) (6,004) (78,382) (38,423)
======= ======= ======= ======= ======= ======= =======
Net loss per share
(basic and
diluted)(2)........ (0.47) (1.10) (2.06) (1.01) (0.31) (2.01) (0.99)
Weighted average
number of shares
outstanding(2)..... 10,008 18,084 32,622 32,622 19,159 38,985 38,985
FINANCIAL DATA:
EBITDA(3)............ (4,011) (16,036) (39,993) (19,604) (4,602) (17,163) (8,413)
Capital
expenditures....... 2,569 14,516 77,255 37,870 2,424 52,226 25,601
Ratio of earnings to
fixed charges(4)... -- -- -- -- -- -- --
Deficiency of
earnings plus fixed
charges to cover
fixed charges(5)... (4,464) (19,326) (41,320) (20,255) (5,804) (60,530) (29,672)
</TABLE>

11
<PAGE> 18

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ------------------------------
1996 1997 1998 1998 1999
------ ------- ------------------ ------- -------------------
NLG NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted
cash............... 4,443 1,495 583,570 286,064 5,298 559,366 274,199
Working capital
(excluding cash and
restricted cash)... (2,704) (24,774) (46,851) (22,966) (28,792) (89,608) (43,925)
Capitalized finance
cost............... -- -- 28,750 14,093 -- 28,000 13,725
Property, plant and
equipment, net..... 2,340 13,619 38,608 18,925 14,956 41,766 20,474
Construction in
progress........... -- -- 46,019 22,558 -- 92,205 45,199
Goodwill............. -- -- 4,556 2,233 -- 4,354 2,134
Total assets......... 8,160 19,331 723,397 354,606 26,189 757,123 371,139
Total long-term
obligations
(including current
portion)........... 4,185 8,931 688,796 337,645 15,949 748,609 366,965
Total shareholders'
equity (deficit)... 146 (18,214) (34,073) (16,702) (24,218) (112,455) (55,125)
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Number of billable
minutes
(thousands)(6)..... 5,769 6,230 7,127 12,432 26,863 34,021 48,287 69,165
Average revenue per
billable minute
(NLG).............. 0.87 0.85 0.65 0.51 0.35 0.30 0.26 0.21
Business customers
(at period end).... 1,144 1,459 1,828 2,459 3,562 4,434 5,649 7,180
Residential customers
(at period end).... -- -- 230 519 850 1,074 1,234 1,507
Carrier services
customers (at
period end)........ 1 1 1 3 3 3 4 7
</TABLE>

- -------------------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.

(4) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense. Earnings plus
fixed charges were insufficient to cover fixed charges by NLG 4.5 million in
1996, NLG 19.3 million in 1997, NLG 41.3 million in 1998, NLG 5.8 million
for the 3 months ended March 31, 1998 and NLG 60.5 million for the 3 months
ended March 31, 1999.

(6) Billable minutes are those minutes during which a call is connected to the
VersaTel Network and for which we bill a customer.

12
<PAGE> 19

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing VersaTel. Additional risks and uncertainties not presently
known to us or that we currently consider not material may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of our ordinary shares could decline,
and you may lose all or part of your investment.

OUR HISTORY OF SUBSTANTIAL NET LOSSES MAY CONTINUE INDEFINITELY AND MAKE IT
DIFFICULT TO FUND OUR OPERATIONS.

For the 3 months ended March 31, 1999 we had a loss from operating
activities of NLG 20.2 million and negative EBITDA of NLG 17.2 million and for
the 3 months ended March 31, 1998 we had a loss from operating activities of NLG
5.7 million and negative EBITDA of NLG 4.6 million. For the year ended December
31, 1998, we had a loss from operating activities of NLG 46.5 million and
negative EBITDA of NLG 40.0 million. For the year ended December 31, 1997, we
had a loss from operating activities of NLG 19.3 million and negative EBITDA of
NLG 16.0 million. For the year ended December 31, 1996 we had a loss from
operating activities of NLG 4.5 million and negative EBITDA of NLG 4.0 million.
In addition, we had an accumulated deficit of NLG 92.3 million and NLG 25.2
million as of December 31, 1998 and December 31, 1997, respectively, and an
accumulated deficit of NLG 170.7 million and NLG 31.2 million as of March 31,
1999 and March 31, 1998, respectively. We expect to continue to incur
significant further operating losses for the foreseeable future as we incur
additional costs in the build out of our network, the expansion of our marketing
and sales force and the introduction of new communications services and
products. Although we have experienced revenue growth since we commenced
operations in 1995, there can be no assurance our revenues will continue to
grow. You should also be aware that the prices of voice, data and Internet
communications services have fallen significantly in Europe in recent years, and
as competition increases, we expect that prices will continue to decline. As the
cost of providing services decreases, we expect these price reductions to be at
least partially offset, but you should be aware that we cannot be certain that
we will achieve or, if achieved, be able to maintain operating profits in the
future.

OUR SUBSTANTIAL DEBT OBLIGATIONS MAY HINDER OUR GROWTH AND PUT US AT A
COMPETITIVE DISADVANTAGE.

We have substantial indebtedness. In May 1998, we issued and sold units
consisting of $225,000,000 13 1/4% Senior Notes due 2008 and warrants to
purchase 3,000,000 (as adjusted) ordinary shares of the Company (the "First High
Yield Offering"). In December 1998, we issued and sold units consisting of
$150,000,000 13 1/4% Senior Notes due 2008 and warrants to purchase 2,000,100
(as adjusted) ordinary shares of the Company (the "Second High Yield Offering").
On June 11, 1999, we borrowed an aggregate of $150.0 million from Lehman
Commercial Paper Inc. and ING (U.S.) Capital, LLC pursuant to an interim loan
agreement (the "Interim Loans") for the purpose of financing in part our
acquisition of Svianed. As of March 31, 1999, after giving effect to the
issuance of the Notes offered hereby, the incurrence and repayment of the
Interim Loans and the acquisition of Svianed as if each had occurred on such
date, VersaTel's total consolidated indebtedness would have been approximately
$677.0 million. Subject to limits imposed by our debt obligations, we may
continue to incur substantial additional debt because the indentures governing
the notes issued in the First High Yield Offering (the "First Notes"), the notes
issued in the Second High Yield Offering (the "Second Notes"; together with the
First Notes, the "Existing Notes") and each series of Notes offered hereby do
not limit the amount of indebtedness that we may incur to finance the cost of
the development of our network. See "Selected Financial Data," the Financial
Statements included elsewhere in this prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

13
<PAGE> 20

COVENANTS IN OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO BORROW AND INVEST,
WHICH COULD IMPAIR OUR ABILITY TO EXPAND OR FINANCE OUR FUTURE OPERATIONS.

The indentures governing the Existing Notes and each series of Notes
contain a number of covenants that impose significant operating and financial
restrictions on us and our subsidiaries. Significant additional covenants are
also contained in our credit facility with Nortel (the "Nortel Facility"). These
restrictions significantly limit, and in some cases prohibit, among other
things, our and certain of our subsidiaries' ability to incur more debt, create
liens on assets, enter into business combinations or engage in certain
activities with our subsidiaries. A failure to comply with these restrictions
would constitute a default under the indentures governing the Existing Notes and
each series of Notes, and the Existing Notes and each series of Notes could
become immediately due and payable, which would seriously adversely affect our
business and our shareholders' equity.

Our high level of indebtedness and the limits imposed by our debt
obligations could have the following effects, among others:

- we may have difficulty in paying the interest on our outstanding debt and
any newly incurred debt,

- we may have difficulty finding sources of financing for working capital,
our capital expenditure requirements and the interest payments on our
outstanding debt,

- we will be unable to use a significant portion of our cash flow in our
business and we may be unable to react to industry or economic changes,
because of the portion of cash flow directed to paying interest and
principal on our debt, and

- we may be unable to react as quickly to changes in our business as our
competitors who have less debt and financial restrictions, which may put
us at a disadvantage and make us more vulnerable to adverse changes in
economic conditions.

DESPITE CURRENT LEVELS OF INDEBTEDNESS, WE MAY STILL BE ABLE TO INCUR
SUBSTANTIALLY MORE DEBT, WHICH COULD INTENSIFY THE RISKS DESCRIBED ABOVE.

The indentures governing the Existing Notes and each series of Notes do not
limit the amount of indebtedness that may be incurred to finance the cost of
development of our Network, and permit us to incur a significant amount of
additional indebtedness in the future. Much of that indebtedness will likely be
secured. Consequently, in the event of a bankruptcy, liquidation, dissolution,
reorganization or similar proceedings, the holders of any secured indebtedness
will be entitled to proceed against the collateral that secures such
indebtedness and such collateral will not be available for satisfaction of any
amounts owed under the Notes. In addition, our failure to comply with the
covenants and restrictions contained in the agreements governing any additional
borrowings could trigger defaults under such agreements. Such defaults could
result in a default under the Notes and could delay or preclude payment of
principal of or interest on the Notes. If new debt is added to our current debt
levels, the related risks that we now face could intensify. We anticipate that
we will incur additional indebtedness in the future.

OUR HOLDING COMPANY STRUCTURE WILL EFFECTIVELY SUBORDINATE THE NOTES TO THE
OBLIGATIONS OF OUR SUBSIDIARIES.

In December 1998, we transferred substantially all of our assets and
liabilities (except the Existing Notes) to our subsidiaries. Since that
transfer, we have been a holding company with no material assets, other than the
stock of our subsidiaries. Our subsidiaries now conduct substantially all of our
operations and directly own substantially all of our assets. You should be aware
that our subsidiaries have no obligation, contingent or otherwise, to pay any
amount pursuant to the Notes or to make any funds available for such payment.
Therefore, our operating cash flow and ability to meet our debt obligations,
including the Notes, will depend on the cash flow provided by our subsidiaries
in the form of loans, dividends or other payments to us as a shareholder. The
ability of our subsidiaries to make such payments to us will depend on their
earnings, tax considerations and legal restrictions. Although the indenture
governing each series of Notes limits the ability of our subsidiaries to enter
into consensual restrictions on

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<PAGE> 21

their ability to pay dividends and to make other payments, such limitations are
subject to a number of significant qualifications. See "Description of the
Notes -- Certain Covenants -- Limitation on Dividend and other Payment
Restrictions Affecting Restricted Subsidiaries." In the event of insolvency,
liquidation, dissolution or reorganization of any of our subsidiaries, the
creditors of each subsidiary would be entitled to payment in full from such
subsidiary's assets. After paying their own creditors, our subsidiaries may not
have any remaining assets for distribution to us as a shareholder and,
consequently, there may not be any assets available for payment to holders of
the Notes. The Notes, therefore, are effectively subordinated to the obligations
of our subsidiaries. At March 31, 1999, after giving effect to the issuance of
the Notes offered hereby, the incurrence and repayment of the Interim Loans and
the acquisition of Svianed as if each had occurred on such date, our
subsidiaries would have had total liabilities of NLG 85.0 million reflected on
our consolidated balance sheet.

POSSIBLE INABILITY TO MEET OUR DEBT SERVICE OBLIGATIONS MAY RESULT IN OUR
OUTSTANDING DEBT BECOMING DUE AND PAYABLE.

The consolidated net interest expense of VersaTel for the year ended
December 31, 1998, and for the 3 months ended March 31, 1999, after giving
effect to the issuance of the Notes offered hereby and the incurrence and
repayment of the Interim Loans as if each had occurred on January 1, 1998 and
January 1, 1999, respectively, would have been approximately $51.3 million and
$18.4 million, respectively, using the applicable exchange rates in effect on
January 1, 1999. The EBITDA of VersaTel for the year ended December 31, 1998,
and for the 3 months ended March 31, 1999, after giving effect to the Third High
Yield Offering and the incurrence and repayment of the Interim Loans as if each
had occurred on January 1, 1998 and January 1, 1999, respectively, would have
been approximately $(10.8) million and $(5.9) million, respectively. Unlike the
holders of the Existing Notes, the holders of the Notes will not have the
benefit of any securities placed in escrow to fund any interest payments on the
Notes. Accordingly, we will have to increase substantially our net cash flow in
order to meet our debt service obligations. In addition, after May 15, 2001, we
will no longer be able to rely on cash that has been set aside in escrow to meet
our debt service obligations on the Existing Notes. There is no certainty that
we will be able to generate sufficient cash flow from operating activities to
pay interest and principal on these Notes, the Existing Notes or any other
outstanding debt. Our ability to improve our operating performance and financial
results will depend not only on our ability to successfully implement our
business plan, but also upon economic, financial, competitive, regulatory and
other factors beyond our control, including fluctuations in exchange rates and
general economic conditions in the Benelux. If we are unable to meet the
repayment obligations, we may have to refinance our debt, including the Notes,
sell our assets or obtain new financing. We cannot assure you that any such
refinancing would be possible or that any such sales of assets or additional
financing could be achieved. If we cannot refinance or otherwise satisfy our
debt obligations we will be in default under such obligations, which could in
turn result in the Notes and other debt becoming immediately due and payable.

WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL TO EXPAND THE NETWORK WHICH MAY NOT BE
AVAILABLE ON ACCEPTABLE TERMS.

We will require significant amounts of capital to further develop and
expand our network, our sales and marketing efforts and our product and service
offerings. We expect that the capital raised from this offering, the First High
Yield Offering, the Second High Yield Offering, the sale of our ordinary shares
(in the form of Shares and ADSs) in the concurrent equity offering (the "Equity
Offering") and the Nortel Facility, together with other available financing and
cash flow from operations, will be sufficient to fund our current capital
requirements and anticipated losses for the next 12 months. However, we
continually re-evaluate our business objectives and are considering further
acquisitions, expansions of our services and acceleration of parts of our
current plans. In the past, we have raised more capital more quickly than we had
originally anticipated for similar reasons.

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<PAGE> 22

If these sources are not sufficient or if our plans or assumptions change
or prove to be incorrect, we may have to delay or abandon some of our
development and expansion plans or we may have to seek additional financing
earlier than anticipated. We may not be able to obtain additional financing or
we may not be able to obtain it on a timely basis or on terms favorable to us.
Our current debt obligations also restrict our ability to raise additional
financing and our subsequent use of any such additional financing. In addition,
any such additional financing is likely to be subject to additional financial
restrictions. A failure to acquire additional capital on acceptable terms may
seriously and adversely affect our business.

WE MAY ENCOUNTER DELAYS IN IMPLEMENTING ELEMENTS OF OUR BUSINESS STRATEGY, WHICH
COULD ADVERSELY AFFECT OUR GROWTH.

Our future success depends upon our ability to build and maintain our own
telecommunications network and to develop successfully our existing and new
products and services. Our success will depend specifically on our ability to
obtain and maintain, among other things, the following:

- experienced and qualified management and staff,

- additional switch sites,

- interconnection with PTTs' and other carriers' networks,

- the necessary licenses,

- additional transmission facilities, and

- the necessary easements and rights-of-way from property owners,
competitors and various levels of government.

We are not certain that our current cost estimates are correct or that we
will meet our current development schedule relating to construction of the
network. In 1998, we experienced a delay in obtaining rights-of-way on
approximately 60 kilometers of public property due to the uncertainty expressed
by some local governments as to the implications of the new telecommunications
act, which was recently adopted by the Netherlands parliament. Although
ultimately we did obtain these rights-of-way, these delays prevented us from
completing part of our network within the time originally anticipated. We and
certain other carriers are currently experiencing difficulties in obtaining a
right-of-way necessary to extend construction into Brussels. In addition, we
experienced additional delays in the planned construction of the network due to
weather-related flooding. Also, the successful implementation of our
construction and expansion strategy will be subject to a variety of other risks,
including operating and technical problems, regulatory uncertainties, delays in
the full implementation of the European Commission directives regarding
telecommunications liberalization, competition, the availability of capital and
the risk of damage to software and hardware resulting from adverse weather
conditions, fire, power loss, natural disasters and other causes. Any
significant increase in costs or any further delay in the schedule could have a
substantial negative effect on our financial condition. Even if our network is
successfully developed, we may not be able to operate it efficiently.

We have entered into agreements for the design and construction of key
components of our network. However, we have not entered into definitive
agreements relating to the development and construction of significant other
portions of our network and we cannot guarantee that we will enter into these
agreements or that any future construction will be completed efficiently. Even
when we do have such agreements, we cannot be certain that the development and
construction will proceed as planned and we have been unsatisfied with some of
such arrangements in the past. Further, our network depends on technology and
products we obtain from vendors that also supply our competitors. Such vendors
might stop supplying us and we might not be able to find suitable replacements.

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The development of our network is based on projections of the growth in
traffic volumes and routing preferences and the most cost-effective means of
constructing our network. If these projections are incorrect, it could have a
material adverse effect on our business.

ANY INABILITY TO MANAGE OUR RAPID GROWTH COULD ADVERSELY AFFECT OUR FINANCIAL
REPORTING, CUSTOMER SERVICE AND REVENUES.

Our growth strategy has placed and will continue to place a significant
strain on our management resources. In particular, the acquisition and
integration of Svianed, SpeedPort, VuurWerk and ITinera will require a
significant amount of management time and resources. Our ability to manage this
growth will require us to substantially enhance our management, financial and
information systems and to effectively develop and train our employee base. Our
billing system had been identified by our auditors as a potential weakness in
our system of internal controls and is in the process of being replaced by an
advanced system designed by Saville Systems. In this respect, management has,
among other things, revised its financial collection of data and call billing
procedures. Managing our growth will become even more challenging as we increase
our target markets and our product and service offerings. The inability to
achieve or effectively manage our growth could materially and adversely affect
our business.

WE MAY HAVE DIFFICULTY INTEGRATING OUR ACQUIRED BUSINESSES.

We have brought senior managers of many of our acquired businesses into our
management team and we are relying on these individuals to assist us in
integrating these acquired businesses into our business strategy. There can be
no guarantee that we will be able to attract and retain managers from any newly
acquired businesses or be successful in integrating any new managers and
businesses from our recent acquisitions.

We expect to realize operating synergies as a result of our recent
acquisitions. However, there is no assurance that we will be able achieve the
benefits that our management expects to realize or that the expected benefits
will be realized within the time frame we contemplate.

ONE CUSTOMER REPRESENTS A SIGNIFICANT PORTION OF OUR REVENUES.

As a result of our acquisition of Svianed, 35.8% of our revenues for the
year ended December 31, 1998, on a combined basis, would have come from the Gak
group of companies. The Gak group is under contract to use our data services
until May 2001. There can be no assurance that we will be able to retain the Gak
group as a customer after May 2001 or that our revenues from the Gak group would
not thereafter be significantly curtailed. We cannot assure you that any such
lost revenues could be replaced. A loss of the revenues derived from the Gak
group, without significant replacement revenue from other sources, could have an
adverse effect on our business.

WE MAY HAVE DIFFICULTIES IN UPGRADING AND PROTECTING OUR NETWORK, WHICH COULD
ADVERSELY AFFECT OUR GROWTH.

The success of our network will also depend on our continued ability to
provide high-quality telecommunications services through upgrading our systems
and our ability to protect our network from external damage. As we grow, the
timing and implementation of these upgrades will become more important. We
cannot guarantee that the quality and availability of our services will not be
disrupted because of our inability to make timely or error-free upgrades to our
network. Also, our network may be subject to external damage, in particular from
construction work, but also from events, such as floods and other accidents,
that can disrupt service. In fact, the construction of our Benelux network was
delayed due to significant rain and flooding of our ducts in The Netherlands
during the last 3 months of 1998. We have established design and management
techniques to address any disruptions that may occur; however, any prolonged
difficulty in accessing our network may threaten our relationship with our
customers and have an adverse impact on our business.

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<PAGE> 24

WE MAY NOT BE ABLE TO IMPLEMENT OUR NEW BILLING AND CUSTOMER INFORMATION SYSTEMS
ON SCHEDULE.

Sophisticated billing and information systems are vital to our growth and
our ability to:

- bill and receive payments from customers,

- reduce credit exposure, and

- monitor costs.

We have reviewed our billing system, in anticipation of our continued
growth. We had planned to replace our existing billing system during the second
quarter of 1999 with a billing system designed by Saville Systems. We now
anticipate that the new system will be implemented by the end of the third
quarter of 1999. We have experienced delays in the implementation of our new
system and have been forced to rely in the meantime on upgrades of our current
system. We may experience further delays, particularly in integrating acquired
businesses into our systems. If circumstances cause further delay in the
implementation of the new billing system, our billing process could be delayed
or interrupted, which could materially and adversely affect our business.

OUR LIMITED HISTORY AND EXPERIENCE COULD PLACE US AT A DISADVANTAGE TO
ESTABLISHED COMPETITORS AND MAY NOT BE A RELIABLE BASIS FOR EVALUATING OUR
PROSPECTS.

We were founded in October 1995 and, as a result, we have limited
experience as an operating company and have generated only limited revenues. We
entered the Belgian market in the third quarter of 1998 and intend to enter the
Luxembourg market in 2000. In both of these markets, we have limited or no
operating experience and services had previously been provided primarily by the
national PTTs. Through our acquisitions of CS Net in November 1998, SpeedPort
and VuurWerk in May 1999, and Svianed and ITinera in June 1999, we have entered
several markets for Internet-based services which represents a new and rapidly
developing market for us. Accordingly, our prospects must be considered in light
of the risks, expenses and delays inherent in establishing operations in markets
with long established competitors and other more recent entrants to the market
and our historical results may not be a reliable basis for evaluating our
prospects.

IF WE DO NOT ADAPT TO THE RAPID CHANGES IN THE TELECOMMUNICATIONS INDUSTRY, WE
COULD LOSE CUSTOMERS OR MARKET SHARE.

The European telecommunications industry is changing rapidly due to, among
other factors, liberalization, privatization of PTTs, technological
improvements, expansion of telecommunications infrastructure and the
globalization of the world's economies and trade. Such changes may happen at any
time and can significantly affect our operations. There can be no assurance that
one or more of these factors will not occur as we expect or will not have
unforeseen effects which could have a material adverse effect on us. There can
also be no assurance, even if these factors turn out as anticipated, that our
strategy will be successful in this rapidly evolving market.

The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new products and services, and
increased availability of transmission capacity, as well as the increasing
utilization of Internet-based technologies for voice and data transmission. Our
success will depend substantially on our ability to predict which of the many
possible current and future networks, products and services will be important to
finance, establish and maintain. In particular, as we further expand and develop
our network, we will become increasingly exposed to the risks associated with
the relative effectiveness of our technology and equipment. The cost of
implementation of emerging and future technologies could be significant, and
there can be no assurances that we will select appropriate technology and
equipment or that we will obtain appropriate new technology on a timely basis or
on satisfactory terms. The failure to obtain effective technology and equipment
may adversely affect our

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<PAGE> 25

ability to offer competitive products and services and the viability of our
operations and could have a material adverse effect on our business.

LOSS OF KEY PERSONNEL IN A COMPETITIVE EMPLOYMENT ENVIRONMENT COULD AFFECT OUR
GROWTH AND FUTURE SUCCESS.

Our success depends on the continued employment of Gary Mesch, our managing
director, Greg Mesch, our chief operations officer, Raj Raithatha, our chief
financial officer, Larry Hendrickson, our chief technology officer, Marc van der
Heijden, our chief regulatory counsel, and Jan Niewold, the managing director of
Svianed. You should also be aware that we do not have any "key person"
insurance. There is intense competition for qualified personnel in our industry
in Europe and the limited availability of qualified individuals could become an
issue of increasing concern in the future. Our financial condition depends upon
qualified personnel implementing a successful business plan. The loss of any of
the individuals listed above could adversely affect our business.

WE ARE DEPENDENT ON OUR COMPETITORS TO PROVIDE OUR CUSTOMERS WITH ACCESS TO OUR
NETWORK.

We do not own most of the telecommunications transmission infrastructure
that we presently use. We use extensively the telecommunications transmission
infrastructure of other carriers in the Benelux and we depend on interconnection
agreements with these carriers to connect our customers to our own network. Most
of these carriers are our competitors. Svianed in particular currently depends
heavily upon leased lines procured from KPN Telecom.

Our profitability significantly depends on our ability to achieve access,
on a timely basis and at attractive rates, to the facilities of our competitors,
who may try to limit such access.

Our dependence on third parties to provide our customers with access to our
network makes us susceptible to price fluctuations, service disruptions and
cancellations that are outside of our control. These occurrences historically
have resulted in the loss of some customers and could result in customer losses
in the future. For example, in October 1998, we experienced 2 temporary
disruptions as a result of a malfunction in the software of KPN Telecom, which
led to customers temporarily having to switch off our network. We believe that
we lost a limited number of customers due to those service disruptions. Such
disruptions may occur from time to time in the future.

Svianed's network is comprised of leased lines from KPN Telecom and
Internet uplinks from UUNet. Svianed's profitability depends on its ability to
continue to have access to the facilities of KPN Telecom and UUNet.

WE MAY BE AFFECTED BY THE YEAR 2000 ISSUE WHICH COULD DISRUPT OUR BUSINESS AND
OPERATIONS.

The Year 2000 issue is the result of computer programs using 2 digits
rather than 4 to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among others, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

VersaTel has initiated a formal Year 2000 project and recruited an
experienced Year 2000 project manager. We are undertaking a comprehensive
program to address the Year 2000 issue with respect to the following:

- our information technology systems,

- the telephony switching network (including equipment installed at
customers' premises),

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<PAGE> 26

- our non-information technology systems (including buildings, plant,
equipment, and other infrastructure systems that may contain embedded
microcontroller technology),

- the systems of our major vendors (insofar as they relate to our
business), and

- our customers.

This program involves 4 "Steps": (1) a wide ranging assessment of Year 2000
problems that might affect us; (2) the development and implementation of
remedies to address discovered problems; (3) the testing of our systems as
necessary; and (4) an analysis of our most likely worst-case scenario and the
preparation of contingency plans. We expect to complete Steps 1 and 2 of this
program during the second quarter of 1999 and Steps 3 and 4 by the end of the
third quarter of 1999.

We believe that the most likely worst effect of the Year 2000 issue would
be the inability of customers to complete calls. Nortel, the manufacturer of our
switches and transport hardware, has informed us that it believes our equipment
is Year 2000 compliant. We have requested guarantees from Nortel and Cisco
Systems, our supplier of router switches and certain other equipment, with
respect to Year 2000 compliance.

Our new billing system, which we expect to introduce in August 1999, has
been certified to be Year 2000 compliant. Even if it were to fail, we believe
that bills could still be distributed by modifying the time stamp on the call
detail record. The ability of our customer care team to supply quality service
would be seriously affected if our operating support systems failed. We are
asking for certificates of Year 2000 compliance from these manufacturers. Our
ability to collect direct debit payments depends upon financial institutions'
computer systems. We are seeking assurances of Year 2000 compliance from the
financial institutions and the utility suppliers that we use.

We expect to incur specific Year 2000 charges that are estimated to be less
than NLG 1.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risks Associated with Year 2000." We can
give no assurance that we will be successful in obtaining valid assurances,
certificates or guarantees, that the Year 2000 issue will not have an adverse
effect on us, that any effects could be resolved or that we will be reimbursed
for any additional expenditure under any of the assurances, certificates or
guarantees that we expect to obtain or otherwise.

Svianed has undertaken a number of measures to ensure that its business
will not be affected as a result of the Year 2000 issue. In 1997, Svianed
appointed a project leader and made an assessment of all systems and equipment
that could potentially be affected by the Year 2000 issue. The initial focus was
to ensure that the services provided by Svianed to its customers would not be
interrupted as a result of the Year 2000 issue. The next phase was to ensure
that Svianed's management control systems would not be affected by the Year 2000
issue. Starting in mid-1997, Svianed has obtained for all its purchases of
hardware and software guarantees as to their Year 2000 compliance. In addition,
the installed base of Cisco routers and Newbridge ATM and Frame Relay switches
have been confirmed by their suppliers to be Year 2000 compliant.

Svianed relies on leased lines from KPN Telecom for the provision of its
services. Svianed understands, based on information it has received from KPN
Telecom, that KPN Telecom has commenced a Year 2000 risk analysis and has
established a remediation plan intended to ensure that KPN Telecom will be Year
2000 compliant. Svianed has received a written confirmation from KPN Telecom
that it will maximize its effort to be Year 2000 compliant. However, Svianed has
not received any guarantee from KPN Telecom as to its Year 2000 compliance, and
we can give no assurance that Svianed's network will not experience any
interruptions as a result of any failure by KPN Telecom to be Year 2000
compliant.

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The most likely worst case scenario for Svianed would be a disruption of
its network management system. Svianed expects to incur costs of approximately
NLG 500,000 in connection with its Year 2000 readiness program, most of which
has already been expensed.

WE EXPECT TO ENCOUNTER INCREASING COMPETITION FROM DOMINANT MARKET PARTICIPANTS
AND NEW ENTRANTS.

The European telecommunications industry is a very competitive market that
is subject to both the continued dominance of PTTs and the arrival of new
entrants.

PTTs have significant competitive advantages over non-PTT market
participants which include:

- cost advantages as a result of economies of scale,

- greater market presence and network coverage,

- greater brand name recognition, customer loyalty and goodwill,

- control over domestic transmission lines and control over the access to
these lines by other participants, and

- close ties to national regulatory authorities that may be reluctant to
adopt policies that would adversely affect their competitive position.

Our policy in this competitive environment has been to price our products
and services at a discount to the PTTs, and to offer high quality customer
service, products and services. However, the prices of long distance calls in
most of our markets have decreased substantially and our larger competitors have
been able to use their greater financial resources to create severe price
competition. We believe that prices will continue to decrease for the
foreseeable future and that PTTs and other providers will continue to improve
their product offerings, which will increase these competitive pressures.

Our competition in the Benelux also comes from newer market entrants
including MCI WorldCom, Telfort, GTS/Esprit Telecom, COLT Telecom and other more
recent Internet-based competitors. Further, we believe that, as a result of the
introduction of the euro, there will be a greater transparency in prices in our
market which may lead to further price competition. Sustained price competition
could have a material adverse effect on our business.

EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR BUSINESS.

The proceeds from this offering will be denominated in U.S. dollars and
euros and the proceeds from the Equity Offering will be denominated in U.S.
dollars and euros. The costs and expenses relating to the expansion of our
network and the development of our sales and marketing resources have been and
will continue to be largely denominated in Dutch guilders, Belgian francs and,
increasingly, euros. Therefore, the expansion of our network and the development
of our sales and marketing resources will also be subject to currency exchange
rate fluctuations as we use the remaining proceeds from the First High Yield
Offering and the Second High Yield Offering and the proceeds from the Equity
Offering and this offering to pay our construction and acquisition costs.

The principal and interest due on the Existing Notes and the Dollar Notes
is payable in U.S. dollars. However, our revenues have been and will continue to
be largely denominated in Dutch guilders, Belgian francs and, increasingly, in
euros. Therefore, our ability to pay the interest and principal due on the Notes
will also depend on future exchange rates.

We denominate our financial reports in Dutch guilders while we maintain
significant U.S. dollar denominated assets and liabilities, so our reported
results of operations may be significantly affected by exchange rate movements.
Furthermore, we will become subject to greater foreign exchange fluctuations as
we expand our operations outside the Benelux and begin to receive revenues
denominated in currencies other than from countries that have adopted the euro
as their currency.

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ANY INABILITY TO IDENTIFY FUTURE ACQUISITION OPPORTUNITIES OR ACQUIRE THE
FINANCIAL AND MANAGEMENT RESOURCES TO PURSUE SUCH OPPORTUNITIES MAY HINDER OUR
GROWTH.

As part of our business strategy, we have acquired, entered into strategic
alliances with, and made investments in, companies in business areas that are
complementary to our current operations. Any such future strategic alliances,
acquisitions or investments would involve risks. Our strategy presents risks
inherent in assessing the value, strengths and weaknesses of acquisition and
investment opportunities, and in integrating and managing newly acquired
operations and improving their operating efficiency. In addition, such
acquisitions and investments could divert our resources and consume significant
management time. We cannot assure that any desired strategic alliance,
acquisition or investment can be made in a timely manner or on terms and
conditions acceptable to us. We cannot assure that we will be successful in
identifying attractive acquisition candidates, completing and financing
additional acquisitions on favorable terms, or integrating the acquired
businesses or assets into our existing operations. Our ability to make
acquisitions may depend on the availability of additional debt financing on
acceptable terms and will be subject to compliance with the covenants contained
in our debt instruments, including the indentures governing the Existing Notes
and the Notes.

WE MAY ENCOUNTER DELAYS, OPERATIONAL PROBLEMS AND INCREASED COST IF WE ARE
UNABLE TO ACQUIRE KEY EQUIPMENT FROM OUR MAJOR SUPPLIERS.

We are dependent on third party suppliers of hardware and software
components, including Nortel, Cisco, Hewlett Packard, Microsoft and Netscape.
Although we attempt to maintain a number of vendors for each product, a number
of components that we use in providing our network services are currently
available from only one source. For example, routers are currently available
only from Cisco. A failure by a supplier to deliver quality products to us on a
timely basis or our inability to develop alternate sources if and as required
could result in delays which could have a material adverse effect on us.

Our recourse against suppliers who fail to deliver products to us on a
timely basis is restricted by contractual liability limitations in supply
agreements and purchase orders and, in many cases, by practical considerations
relating to our desire to maintain good relationships with suppliers. Moreover,
we cannot be sure that we will be able to obtain such products on the scale we
require at an affordable cost or at all. Neither can we be certain that our
suppliers will not enter into exclusive arrangements with our competitors or
stop selling their products or components to us at commercially reasonable
prices or at all. Any failure of our sole or limited-source suppliers to provide
products or components that comply with our standards could have a material
adverse effect on us.

WE ARE CONTROLLED BY PARTIES WHOSE INTEREST MAY NOT BE ALIGNED WITH YOURS.

You should be aware that 5 shareholders currently own approximately 75.6%
of our shares on a fully diluted basis. Upon completion of the Equity Offering,
we expect these shareholders will own approximately 53.6% of our shares on a
fully diluted basis. Collectively, these shareholders have the power to exercise
voting and management control, and their interests may be different from your
interests and the interests of our other shareholders.

In the past, we have had disputes among these 5 shareholders arising out of
the shareholders' agreement and other matters. These disputes have in the past
diverted management time and resources. Pursuant to the Settlement Agreement
entered into by us and our shareholders, prior claims by Cromwilld, one of our
shareholders, have been released. We can give no assurance that there will be no
disputes in the future and that such disputes will not have a material adverse
effect on our business.

CHANGES IN THE REGULATORY ENVIRONMENT COULD AFFECT OUR ABILITY TO OFFER OUR
PRODUCTS AND SERVICES.

We expect that the implementation of directives and regulations of the
European Union intended to liberalize the telecommunications market will
essentially enable us to gain access to telecommunications

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<PAGE> 29

networks controlled by PTTs. A number of directives have been implemented by the
EU members, but several directives still remain to be implemented in the member
states, including the Benelux. A delay in the implementation of these directives
and regulations could have a material adverse effect on our business.

Our operations depend on the licenses, authorizations and registrations
that we have obtained in The Netherlands, Belgium and the United Kingdom and the
success of our applications for additional licenses, authorizations and
registrations in these and other jurisdictions. We have no guarantees that we
will be able to maintain or renew these licenses, authorizations and
registrations. The loss of, or failure to obtain, licenses, authorizations or
registrations or a substantial limitation thereof could have a material adverse
effect on our business.

There are currently few laws and regulations that specifically regulate
communications on the Internet. European and U.S. government authorities and
agencies are considering laws and regulations that address issues such as user
privacy, infringement pricing, on-line content regulation, intellectual property
ownership and taxation of on-line products and services. The EU has adopted 2
directives that impose restrictions on the collection and use of personal data,
guaranteeing citizens of EU Member States the right of access to their data, the
right to know where the data originated and the right to recourse in the event
of unlawful processing. However, to the best of our knowledge, no European court
has ever held a telecommunications services provider liable for content
transmitted over its network, although we can give no assurances that no laws or
regulations will be adopted that will impose such liability, or that any future
court rulings will not impose such liability. Any future regulation of the
Internet that imposes restrictions on the way we conduct our business could
seriously affect adversely our business.

THE NATURE OF OUR BUSINESS MAKES US SUSCEPTIBLE TO FRAUD AND BAD DEBT.

As a provider of telecommunications and Internet services, our operations
are potentially exposed to the risks of fraud and bad debt. Specifically, our
revenues for the 3 months ended December 31, 1997 were negatively impacted by a
case of fraud in October 1997, which we estimate resulted in a loss of
approximately NLG 1.0 million. The fraud involved the unauthorized use of one of
our test codes. As a result, a large number of calls were originated over the
course of 4 days and the associated origination and termination costs were
expensed as miscellaneous operating expenses. In addition, some of our regular
customers were unable to complete calls through our network. We lost revenue
from such customers and offered credits to these customers. While we believe
that changes in the technology we employ will curtail potential fraudulent use
of our facilities, we do not have insurance coverage for potential fraud in
place. Although we did not experience any fraudulent use of our facilities in
1998, any recurrence of such fraud could have a material adverse effect on our
business.

Although we make appropriate provisions for non-payment of monies owed to
us by our customers, our level of bad debt may increase. Any significant
increase in the level of bad debt could have a material adverse effect on our
business.

A CHANGE OF CONTROL MAY CAUSE DEFAULT UNDER THE INDENTURES GOVERNING THE
EXISTING NOTES AND THE NOTES.

Pursuant to the terms of the Existing Notes and the Notes, each holder can
require us to repurchase its Notes at a price equal to 101% of the principal
amount thereof in the event a change of control of VersaTel occurs. However, our
existing contractual obligations or an inability to obtain adequate resources
may prevent us from consummating any offering to repurchase the Existing Notes
or the Notes. Our failure to complete an offer to repurchase the Existing Notes
or the Notes would be an event of default under the indentures governing the
Existing Notes and the Notes and would, therefore, seriously adversely affect
our business.

23
<PAGE> 30

NO PUBLIC MARKET CURRENTLY EXISTS FOR THE NOTES AND THE PRICE OF THE NOTES MAY
BE VOLATILE.

There is no existing trading market for the Notes. Although the
underwriters have advised us that they currently intend to make a market in the
Notes, they are not obligated to do so and they may discontinue such
market-making at any time without notice in their sole discretion. Accordingly,
no assurance can be given as to the development or liquidity of any market for
the Notes. The liquidity of, and trading market for, the Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, VersaTel.

24
<PAGE> 31

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. Such statements can be
identified by the use of terminology such as "believes", "expects", "may",
"will", "should", "anticipate", "estimate", "continue" or other similar words.
We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
risks, uncertainties, and assumptions about us, including, among other things:

- our anticipated expansion plans for our network and growth strategies,

- our expectation of the impact of this expansion on our revenue potential,
cost basis and margins,

- our expectation of the competitiveness of our services,

- our intention to introduce new products and services,

- anticipated trends and conditions in our industry, including regulatory
reform and the liberalization of telecommunications services across
Europe, and

- our ability to compete, both nationally and internationally.

In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this prospectus might not occur. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Given these considerations, readers are cautioned not to place undue reliance on
such forward-looking statements.

25
<PAGE> 32

USE OF PROCEEDS

We estimate that the net proceeds to us from (i) the sale of the Dollar
Notes and Euro Notes in this offering will be approximately $294.2 million (NLG
617.8 million), after deducting underwriting discounts and estimated offering
expenses payable by us, and (ii) the sale by us of 18,992,508 ordinary shares
offered in the Equity Offering will be approximately $185.1 million (NLG 388.7
million) ($216.6 million (NLG 454.9 million) if the underwriters' over-allotment
option is exercised in full), after deducting underwriting discounts and
commissions and estimated offering expenses payable by us, and after deducting
the employee and selected persons discount of 10%. This assumes that all
ordinary shares are sold in the form of Shares and paid for in euros, which are
translated into U.S. dollars at a rate of E1.00 per $1.0509.

Of the aggregate net proceeds of approximately $479.3 million (NLG 1,006.5
million) from this offering and the Equity Offering (assuming no exercise by the
underwriters of their over-allotment option), we expect to use:

- approximately $152.2 million (NLG 319.6 million) to repay $131.25
million and $18.75 million in aggregate principal amount of, plus
accrued interest owing under, the Interim Loans made by Lehman
Commercial Paper Inc. and ING (U.S.) Capital, LLC, respectively,
affiliates of Lehman Brothers Inc., Lehman Brothers International
(Europe), ING Barings Limited and ING Barings LLC, each an
underwriter or an affiliate of an underwriter in this offering or
the Equity Offering;

- approximately $150.0 million (NLG 315.0 million) to fund capital
expenditures for expansion of our network, including approximately
$70.0 million (NLG 147.0 million) for the fiber construction for the
Benelux network and the local access network, approximately $50.0
million (NLG 104.8 million) for points of presence, switches and
related equipment, and approximately $30.0 million (NLG 62.9
million) for other capital expenditures; and

- the remaining amount of approximately $177.1 million (NLG 371.9
million) for acquisitions, working capital and other general
corporate purposes, including the funding of operating deficits.

The proceeds from this offering will be used only to repay the Interim
Loans and for acquisitions and the expansion of our network in a manner
consistent with the terms of the indentures governing the Existing Notes.

Although we have no commitments or agreements with respect to any specific
future acquisition, we expect to use a portion of the net proceeds of the Equity
Offering for the acquisition of businesses which are complementary to our own.
Pending the foregoing uses, we intend to invest the net proceeds from this
offering and the Equity Offering in short-term, investment grade,
interest-bearing instruments.

Notwithstanding the above, we cannot specify with certainty the particular
uses for the net proceeds of the Equity Offering. Accordingly, our management
will have broad discretion in the application of the proceeds of the Equity
Offering.

We will not receive any of the proceeds from the Shares or ADSs being sold
in the Equity Offering by the selling shareholders.

26
<PAGE> 33

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented on an actual basis and on an "as adjusted" basis to
reflect our receipt of the estimated net proceeds, after deducting underwriting
discounts, commissions and estimated offering expenses, from the sale of (i) the
Notes offered hereby and (ii) the offering by us of 18,992,508 ordinary shares
(all of which we have assumed are sold in the form of Shares) in the Equity
Offering and the acquisition of Svianed. You should read this capitalization
table together with "Selected Financial Data for VersaTel," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Consolidated Financial Information" and the historical
financial statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------------------
ACTUAL AS ADJUSTED
---------------------- ----------------------
NLG $(1) NLG $(1)
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and restricted cash(2).............. 559,366 274,199 1,169,169 573,122
========= ========= ========= =========
Current maturities of long-term
debt(3)................................ 71 35 2,571 1,260
Long-term debt (less current portion):
13 1/4% Senior Notes due 2008(4)....... 455,773 223,418 455,773 223,418
13 1/4% Senior Notes due 2008(5)....... 292,072 143,172 292,072 143,172
11 7/8% Senior Dollar Notes due
2009(6)............................. -- -- 364,530 178,691
11 7/8% Senior Euro Notes due
2009(6)............................. -- -- 262,523 128,688
Other debt(3).......................... 693 340 3,193 1,566
--------- --------- --------- ---------
Total debt.......................... 748,609 366,965 1,380,662 676,795
--------- --------- --------- ---------
Shareholders' equity:
Ordinary shares, par value NLG 0.05 per
share -- 150,000,000 shares
authorized, and 38,984,810 shares
issued and outstanding; 80,000,000
shares authorized and 59,059,810
shares issued and outstanding, as
adjusted(7)(8)...................... 1,949 955 2,922 1,432
Additional paid-in capital(8).......... 51,112 25,055 430,740 211,147
Warrants(4)(5)(8)...................... 5,212 2,555 4,673 2,291
Accumulated deficit.................... (170,728) (83,690) (170,728) (83,691)
--------- --------- --------- ---------
Total shareholders' equity
(deficit)......................... (112,455) (55,125) 267,607 131,179
--------- --------- --------- ---------
Total capitalization................ 636,154 311,840 1,648,269 807,974
========= ========= ========= =========
</TABLE>

- -------------------------

(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) The adjustment to cash and restricted cash reflects (i) the receipt of the
estimated net cash proceeds from this offering of $186.3 million (NLG
380.0 million), (ii) the receipt by us of the estimated net cash proceeds
from the Equity Offering of $289.4 million (NLG 590.5 million), after
deducting the employees and selected persons discount of 10% and (iii) the
maintenance of $298 million (NLG 608.8 million) (reflecting the total
proceeds of $475.7 million (NLG 970.5 million) from this offering and the
Equity Offering less approximately $177.7 million (NLG 362.5 million) used
to acquire Svianed) as cash pending application as provided in "Use of
Proceeds." Amounts paid in dollars have been translated into Dutch
guilders at the rate of $1.00 per NLG 2.04.

(3) The adjustment reflects assumed debt of NLG 5.0 million from the Svianed
acquisition.

27
<PAGE> 34

(4) NLG 3.3 million of the aggregate principal amount of the First Notes was
allocated to the warrants issued in connection with the First High Yield
Offering.

(5) NLG 1.9 million of the aggregate principal amount of the Second Notes was
allocated to the warrants issued in connection with the Second High Yield
Offering.

(6) The 11 7/8% Senior Dollar Notes and 11 7/8% Senior Euro Notes have been
translated into Dutch guilders at E1.00 per NLG 2.20371 and $1.00 per NLG
2.097, respectively.

(7) Actual shares issued and outstanding includes 130,000 ordinary shares that
we are obligated to issue, and which have been approved for issuance by
our shareholders, in connection with the acquisition of CS Net. Adjusted
shares issued and outstanding is based on 39,609,810 ordinary shares
outstanding prior to this offering which includes an aggregate of 755,000
ordinary shares that we are obligated to issue, and which have been
approved for issuance by our shareholders, in connection with the
acquisitions of CS Net, SpeedPort and ITinera, and which we issued to
Cromwilld in connection with the Settlement Agreement. Adjusted shares
issued and outstanding excludes (i) options covering an aggregate of
7,231,500 ordinary shares reserved for issuance to employees upon exercise
of options (348,000 of which are non-dilutive in that the shares
underlying such options are currently outstanding and will be provided to
us by the holders thereof), (ii) 4,482,891 ordinary shares reserved for
issuance upon exercise of then outstanding Warrants and (iii) an aggregate
of 130,000 ordinary shares approved for issuance by our shareholders in
connection with earnout obligations to former shareholders of SpeedPort
and ITinera.

(8) Gives effect to the sale of 457,492 Shares or ADSs by certain holders of
warrants in the Equity Offering, upon cashless exercise of 38,800
warrants, consisting of approximately 10% of the warrants issued in
connection with each of the First High Yield Offering and the Second High
Yield Offering.

There has been no material change in the capitalization of VersaTel since
March 31, 1999, except as reflected in the "as adjusted" column.

28
<PAGE> 35

EXCHANGE RATE INFORMATION

DUTCH GUILDERS TO U.S. DOLLARS

The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Dutch guilders expressed in
Dutch guilders per U.S. dollar through December 31, 1998 and, for periods
thereafter, the exchange rate of Dutch guilders per U.S. dollar (calculated
based on the Noon Buying Rate for euro). On March 31, 1999, the exchange rate
for Dutch guilders per U.S. dollar (calculated based on the Noon Buying Rate of
euro per U.S. dollar on such date) was NLG 2.04 per $1.00.

<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994.................................... 1.98 1.67 1.82 1.74
1995.................................... 1.75 1.52 1.60 1.60
1996.................................... 1.76 1.61 1.69 1.73
1997.................................... 2.12 1.73 1.95 2.03
1998.................................... 2.09 1.81 1.98 1.88
1999 (through July 22).................. 2.17 1.87 2.05 2.10
</TABLE>

- -------------------------

(1) The average of the Noon Buying Rates on the last day of each full month
during the period.

Netherlands law does not impose restrictions that would affect the
remittance of dividend or other payments to nonresident holders of the ordinary
shares or any other foreign exchange controls. Fluctuations in the exchange rate
between the Dutch guilder and the U.S. dollar in the past are not necessarily
indicative of fluctuations that may occur in the future.

BELGIAN FRANCS TO U.S. DOLLARS

The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Belgian francs expressed in
Belgian francs per U.S. dollar through December 31, 1998 and, for periods
thereafter, the exchange rate of Belgian francs per U.S. dollar (calculated
based on the Noon Buying Rate for euro). On March 31, 1999, the exchange rate
for Belgian francs per U.S. dollar (calculated based on the Noon Buying Rate of
euro per U.S. dollar on such date) was BEF 37.32 per $1.00. The exchange rate of
the Luxembourg franc to the U.S. dollar is the same as that of the Belgian franc
to the U.S. dollar.

<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994.................................... 36.53 30.73 33.43 31.85
1995.................................... 32.14 27.94 29.47 29.43
1996.................................... 32.27 29.50 30.97 31.71
1997.................................... 38.82 31.76 35.81 37.08
1998.................................... 38.50 33.19 36.31 34.36
1999 (through July 22).................. 39.79 34.15 37.58 38.39
</TABLE>

- -------------------------

(1) The average of the Noon Buying Rates on the last day of each full month
during the period.

Fluctuations in the exchange rate between the Belgian franc and the U.S.
dollar in the past are not necessarily indicative of fluctuations that may occur
in the future.

29
<PAGE> 36

U.S. DOLLARS TO EURO

Each of The Netherlands, Belgium and Luxembourg has adopted the euro as of
January 1, 1999. The table below sets forth, for the periods and dates
indicated, certain information concerning the Noon Buying Rates for euros
expressed in U.S. dollars per euro.

<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
First Quarter 1999...................... 1.18 1.07 1.11 1.08
Second Quarter 1999..................... 1.08 1.03 1.04 1.03
Third Quarter 1999 (through July 22).... 1.05 1.01 -- 1.05
</TABLE>

- -------------------------

(1) The average of the Noon Buying Rates on the last day of each full month
during the period.

Fluctuations in the exchange rate between the euro and the U.S. dollar in
the past are not necessarily indicative of fluctuations that may occur in the
future.

EUROPEAN MONETARY UNION

Pursuant to the Treaty on European Union, signed at Maastricht on February
7, 1992, the third stage of the European Monetary Union commenced on January 1,
1999. On that date, the euro was introduced and became legal tender in the
member states of the EU which are participating in the third stage of the
European Monetary Union, and those participating member states transferred
authority for conducting monetary policy to the European Central Bank. The
following 11 member states are participating on the third stage of the European
Monetary Union: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, The Netherlands, Portugal and Spain. From the start of the third
stage of the European Monetary Union, the value of the euro against the
currencies of each of the participating member states was irrevocably fixed.
Participating national currencies will be removed from circulation between
January 1, 2002 and June 30, 2002 and replaced by euro banknotes and coins.
During the transition period from January 1, 1999 through December 31, 2001, the
euro will be available only in "paperless form," pending the production and
release of euro banknotes and coins, while the participating countries' national
currencies will be maintained as non-decimal subdivisions of the euro. The
denomination of "legal instruments" (legislative and statutory provisions, acts
of administration, judicial decisions, contracts, unilateral legal acts,
payments instructions other than banknotes and coins, and other instruments with
legal effect) is not modified by the introduction of the euro itself and
payments originally designated in Dutch guilders, for instance, will continue to
be made in Dutch guilders, unless otherwise agreed by the parties. Under the
so-called "no compulsion -- no prohibition" principle, since January 1, 1999
private and public entities as well as individuals may agree on the use of
either euro (for non-cash payments only) or the participating countries'
national currencies for existing and new transactions. During the transition
period certain legal instruments (mainly government bonds and other debt
instruments) may be unilaterally redenominated in euro. As of January 1, 2002,
all references to the participating countries' national currencies contained in
legal instruments (not redenominated during the transitional period) are to be
understood as references to the euro.

Also, since January 1, 1999 the value of the national currency of a
participating country in the national currency of another country (whether a
participating members state or not) may be determined only through the bilateral
conversion method (by converting the first currency into euro and then
converting this euro equivalent amount into the second currency). The conversion
rates between the euro and the participating member states' national currencies
were irrevocably fixed on December 31, 1998. The conversion rate between the
euro and the Dutch guilder was fixed at NLG 2.20371 per E1.00 and the conversion
rate between the euro and the Belgian franc was fixed at BEF 40.3399 per E1.00.

30
<PAGE> 37

OUR RESPONSE TO THE INTRODUCTION OF THE EURO

We have published our historical financial statements, including our
audited financial statements, in Dutch guilders. We expect to begin preparing
our financial statements in euros commencing with the financial statements for
the fiscal year 2000, but not to restate our historical financial statements in
euros. Our financial statements for 2000 will contain a column converting euro
amounts to Dutch guilders for comparison purposes. We expect to keep our
accounting records in euros starting in 2000. We expect that our share capital
will be redenominated in euros in 2000.

31
<PAGE> 38

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma financial information of VersaTel has
been prepared by VersaTel in accordance with U.S. GAAP and is derived from, and
should be read in conjunction with, the historical audited financial statements
of VersaTel and Svianed included elsewhere in this prospectus. The unaudited pro
forma statement of operations data for the year ended December 31, 1998 give
effect to the Transactions as if they had occurred on January 1, 1998. The
unaudited pro forma statement of operations data for the 3 months ended March
31, 1999 give effect to the Transactions as if they had occurred on January 1,
1999. The unaudited pro forma balance sheet data as of March 31, 1999 give
effect to the Transactions as if they had occurred on such date.

The unaudited pro forma financial information set forth below reflects pro
forma adjustments that are based upon available information and certain
assumptions that VersaTel believes are reasonable. The acquisition of Svianed
will be accounted for under the acquisition method of accounting and,
accordingly, this method of accounting has been applied in the unaudited pro
forma financial information. Under the acquisition method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their estimated fair values at the time of the acquisition of Svianed.
Estimates of the fair values of the Svianed assets and liabilities have been
combined with the recorded values of the assets and liabilities of VersaTel in
the unaudited pro forma financial information. The estimates of fair value of
assets and liabilities are based on a number of assumptions which management
believe to be reasonable but which are subject to change. Such changes could
include, among other things, changes in the classification and useful lives of
intangible assets and the related amortization expense from amounts presented in
the pro forma financial information.

The unaudited pro forma financial information is presented for illustrative
purposes only and is not necessarily an indication of the results that would
have been achieved had such transactions been consummated as of the dates
indicated or that may be achieved in the future. The unaudited pro forma
financial information and accompanying notes should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

32
<PAGE> 39

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

OPERATING EXPENSES:
Cost of revenues, excluding
depreciation and
amortization................ 31,821 26,878 58,699 28,774
Selling, general and
administrative.............. 47,733 11,890 59,623 29,227
Depreciation and
amortization................ 6,473 8,751 35,119(2) 50,343 24,678
---------- ---------- ---------- ----------
Total operating expenses.... 86,027 47,519 168,665 82,679
---------- ---------- ---------- ----------
Operating result................. (46,466) 9,164 (72,421) (35,501)

OTHER INCOME (EXPENSES):
Foreign currency exchange gains
(losses), net............... 5,146 -- 5,146 2,522
Interest income................ 11,857 85 11,942 5,854
Interest expense -- third
parties..................... (37,522) (435) (78,434)(3) (116,391) (57,054)
Interest expense -- related
parties..................... (145) -- (145) (71)
---------- ---------- ---------- ----------
Total other income
(expense)................. (20,664) (350) (99,448) (48,749)
---------- ---------- ---------- ----------
Net result before income taxes... (67,130) 8,814 (171,869) (84,250)

PROVISION FOR INCOME TAXES....... 7 3,085 (4) 7 3
---------- ---------- ---------- ----------
Net result....................... (67,137) 5,729 (171,876) (84,253)
========== ========== ========== ==========

NET RESULT PER SHARE (Basic and
Diluted)(5)(6)................. (2.06) (3.19) (1.56)
Weighted average number of shares
outstanding(5)(6).............. 32,622,194 53,872,194 53,872,194
FINANCIAL DATA:
EBITDA(7)........................ (39,993) 17,915 (22,078) (10,823)
Capital expenditures............. 77,255 13,256 90,511 44,368
Ratio of earnings to fixed
charges(8)..................... -- 26.2 -- --
Deficiency of earnings plus fixed
charges to cover fixed
charges(9)..................... (41,320) -- (67,275) (32,979)
</TABLE>

33
<PAGE> 40

- -------------------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) Reflects the amortization, over the current period, of goodwill. Goodwill
reflects the excess of the acquisition price of Svianed over the fair value
of assets and liabilities of Svianed. The book value of tangible assets
acquired and liabilities assumed are assumed to approximate fair value. The
excess of the purchase price over the fair value of tangible assets acquired
and liabilities assumed was allocated to assets acquired based on
management's best estimate, based on discussion with VersaTel's advisers and
preliminary analysis of available financial and non-financial data, of the
fair values of such assets.

<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
--------------
<S> <C>
Total purchase price (including NLG 4,475 of acquisition
costs).................................................... (362,475)
Fair value of tangible assets acquired and liabilities
assumed................................................... 11,288
--------
Goodwill recorded on acquisition............................ (351,187)
========
</TABLE>

The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at January 1, 1998. Goodwill is
amortized over a period of 10 years.

(3) Interest expense reflects (i) NLG 74.4 million of interest expense relating
to this offering (calculated using an interest rate of 11 7/8% per annum)
(ii) amortization of discount amounting to NLG 0.5 and (iii) NLG 3.5 million
of amortization expenses relating to the amortization of deferred financing
costs incurred in connection with the acquisition of Svianed and this
offering.

(4) Reflects the assumption that VersaTel and Svianed would have filed a
consolidated tax return for the year ended December 31, 1998.

(5) Historical share numbers are adjusted to give effect to a 2-for-1 stock
split on April 13, 1999 and include 130,000 ordinary shares approved for
issuance by our shareholders in connection with the acquisition of CS Net.
Does not include (i) an aggregate of 425,000 shares that we are obligated to
issue in connection with the acquisitions of SpeedPort and ITinera and (ii)
200,000 shares which we issued to Cromwilld in connection with the
Settlement Agreement.

(6) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.

(7) EBITDA consists of earnings (loss) before interest expense, income taxes,
depreciation, amortization and foreign exchange gain (loss). EBITDA is
included because management believes it is a useful indicator of a company's
ability to incur and service debt. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other statements
of operations or cash flow data computed in accordance with U.S. GAAP or as
a measure of a company's results of operations or liquidity. Funds depicted
by this measure may not be available for management's discretionary use (due
to covenant restrictions, debt service payments, the expansion of our
network, and other commitments). Because all companies do not calculate
EBITDA identically, the presentation of EBITDA contained herein may not be
comparable to other similarly entitled measures of other companies.

(8) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense.

(9) The deficiency of earnings plus fixed charges to cover fixed charges is
calculated by adding (i) income (loss) from continuing operations before
income taxes plus (ii) fixed charges. Fixed charges consist of interest
expense.

34
<PAGE> 41

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -------------------------------------
VERSATEL SVIANED ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------------------
NLG NLG NLG NLG $(1)
<S> <C> <C> <C> <C> <C>
REVENUES............................ 15,501 15,579 31,080 15,235
OPERATING EXPENSES:
Cost of revenues, excluding
depreciation and
amortization................... 12,485 6,628 19,113 9,369
Selling, general and
administrative................. 20,179 3,734 23,913 11,722
Depreciation and amortization..... 3,084 2,472 8,761(2) 14,317 7,018
---------- ---------- ------- ---------- ----------
Total operating
expenses............... 35,748 12,834 57,343 28,109
---------- ---------- ---------- ----------
Operating result............... (20,247) 2,745 (26,263) (12,874)

OTHER INCOME (EXPENSES):
Foreign currency exchange gains
(losses), net.................. (40,283) -- (40,283) (19,747)
Interest income................... 6,043 26 6,069 2,975
Interest expense -- third
parties........................ (23,895) (70) (19,608)(3) (43,573) (21,360)
Interest expense -- related
parties........................ -- (68) (68) (33)
---------- ---------- ---------- ----------
Total other income
(expenses)................... (58,135) (112) (77,855) (38,165)
---------- ---------- ---------- ----------
Net result before income taxes...... (78,382) 2,633 (104,119) (51,039)

PROVISION FOR INCOME TAXES.......... -- 921 (921)(4) -- --
---------- ---------- ------- ---------- ----------
Net result.......................... (78,382) 1,712 (104,119) (51,039)
========== ========== ========== ==========
NET LOSS PER SHARE (Basic and
Diluted)(5)(6)...................... (2.01) (1.73) (0.85)
Weighted average number of shares
outstanding(5)(6)................. 38,984,810 60,234,810 60,234,810

FINANCIAL DATA:
EBITDA(7)......................... (17,163) 5,217 (11,946) (5,856)
Capital expenditures.............. 52,226 3,746 55,972 27,437
Ratio of earnings to fixed
charges(8)..................... -- 24.5 -- --
Deficiency of earnings plus fixed
charges to cover fixed
charges(9)..................... (60,530) -- (66,546) (32,621)
</TABLE>

35
<PAGE> 42

- -------------------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
--------------
<S> <C>
Total purchase price (including NLG 4,475 of acquisition (362,475)
costs)....................................................
Fair value of tangible assets acquired and liabilities 12,017
assumed...................................................
--------
Goodwill recorded on acquisition............................ (350,458)
========
</TABLE>

The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at January 1, 1999. Goodwill is
amortized over a period of 10 years.

(3) Interest expense reflects (i) NLG 18.6 million of interest expense relating
to this offering (calculated using an interest rate of 11 7/8% per annum,
(ii) amortization of discount amounting to NLG 0.1 and (iii) NLG 0.9 million
of amortization expense relating to the amortization of deferred financing
costs incurred in connection with the acquisition of Svianed and this
offering.

(4) Reflects the assumption that VersaTel and Svianed would have filed a
consolidated tax return for the year ended December 31, 1999.

(6) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.

36
<PAGE> 43

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- -------------------------------------
VERSATEL SVIANED ADJUSTMENTS COMBINED
-------- -------- ----------- -------------------
NLG NLG NLG NLG $(1)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... 329,551 5,318 604,485(2) 939,354 460,468
Restricted cash, current portion.............. 94,201 -- 94,201 46,177
Accounts receivable less allowance for
doubtful accounts.......................... 11,001 12,218 23,219 11,382
Inventory..................................... 2,992 397 3,389 1,661
Other current assets.......................... 17,439 2,976 20,415 10,007
-------- -------- --------- -------
Total current assets....................... 455,184 20,909 1,080,578 529,695
Fixed Assets:
Property and Equipment, net................... 41,766 20,427 62,193 30,487
Construction in Progress...................... 92,205 -- 92,205 45,199
-------- -------- --------- -------
Total fixed assets......................... 133,971 20,427 154,398 75,686
Restricted cash, net of current portion......... 135,614 -- 135,614 66,477
Capitalized finance costs, net.................. 28,000 -- 35,156(3) 63,156 30,959
Goodwill........................................ 4,354 -- 348,746(4) 353,100 173,089
Deferred tax assets............................. -- 158 158 77
-------- -------- --------- -------
Total assets............................... 757,123 41,494 1,787,003 875,981
======== ======== ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................. 50,556 4,390 54,946 26,935
Due to related parties........................ -- 4,759 4,759 2,333
Accrued liabilities........................... 70,413 6,630 77,043 37,766
Deferred income............................... -- 1,536 1,536 753
Current portion of long term debt............. -- 2,500 2,500 1,225
Current portion of capital lease
obligations................................ 71 -- 71 35
-------- -------- --------- -------
Total current liabilities.................. 121,040 19,815 140,855 69,047
Deferred Income, net of current portion.........
Capital Lease Obligations, net of current
portion....................................... 23 -- 23 11
Long Term Liabilities........................... 670 -- 670 328
Notes offered in the Third High Yield
Offering...................................... -- -- 627,053(5) 627,053 307,379
Long Term Debt (13 1/4% Senior Notes)........... 747,845 -- 747,845 366,591
Long Term Debt less of current portion.......... -- 7,500 (5,000)(6) 2,500 1,225
Pension obligation.............................. -- 450 450 221
-------- -------- --------- -------
Total liabilities............................... 869,578 27,765 1,519,396 744,802
Shareholders' Equity:
Share capital................................... 1,949 5,000 (4,027)(7)(8) 2,922 1,432
Additional paid-in capital...................... 51,112 -- 379,628(8) 430,740 211,147
Warrants........................................ 5,212 -- (539)(9) 4,673 2,291
Retained earnings (accumulated deficit)......... (170,728) 8,729 (8,729)(7) (170,728) (83,691)
-------- -------- --------- -------
Total shareholders' equity................. (112,455) 13,729 267,607 131,179
-------- -------- --------- -------
Total liabilities and shareholders'
equity................................ 757,123 41,494 1,787,003 875,981
======== ======== ========= =======
</TABLE>

37
<PAGE> 44

- -------------------------

(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) Reflects (i) the net proceeds received by VersaTel from the Equity Offering
of $186.3 million (NLG 380.0 million), (ii) the proceeds of this offering of
$307.3 million (NLG 626.9 million) net of capitalized finance costs of $17.2
million (NLG 35.2 million) and (iii) the acquisition cost of Svianed of NLG
362.5 million and the early repayment of NLG 5.0 million of long-term debt
of Svianed related thereto. Amounts paid in dollars have been translated
into Dutch guilders at the rate of $1.00 per NLG 2.04. Assumes all ordinary
shares offered in the Equity Offering are issued in the form of Shares.

(3) Reflects financing costs associated with the incurrence of the Interim Loans
and the issuance of the Notes.

(4) Goodwill reflects the excess of the acquisition price of Svianed over the
fair value of assets and liabilities of Svianed. The book value of tangible
assets acquired and liabilities assumed are assumed to approximate fair
value. The excess of the purchase price over the fair value of tangible
assets acquired and liabilities assumed was allocated to assets acquired
based on management's best estimate, based on discussion with VersaTel's
advisers and preliminary analysis of available financial and non-financial
data, of the fair values of such assets.

<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
--------------
<S> <C>
Total purchase price (including NLG 4,475 of acquisition (362,475)
costs)....................................................
Fair value of tangible assets acquired and liabilities 13,729
assumed...................................................
--------
Goodwill recorded on acquisition............................ (348,746)
========
</TABLE>

The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at March 31, 1999.

(5) Reflects aggregate principal amount of Senior Dollar Notes and Senior Euro
Notes to be issued in this offering.

(6) Reflects the early repayment of long-term debt as a result of the
acquisition of Svianed.

(7) Reflects the elimination of the shareholders' equity of Svianed.

(8) Reflects the issuance of 18,992,508 shares by VersaTel and 457,492 Warrant
Shares in connection with the Equity Offering, and the issuance of 130,000
ordinary shares that we are obligated to issue and which have been approved
for issuance by our shareholders, in connection with our acquisition of CS
Net. Assumes no exercise of the over-allotment option by the underwriters.

(9) Reflects cashless exercise of warrants representing 457,492 ordinary shares
in connection with the Offering (or approximately 10% of the warrants issued
in connection with each of the First High Yield Offering and the Second High
Yield Offering).

38
<PAGE> 45

SELECTED FINANCIAL DATA FOR VERSATEL

The following selected financial data of VersaTel as of and for the years
ended December 31, 1996, 1997 and 1998 have been prepared in accordance with
U.S. GAAP and have been derived from the historical financial statements of
VersaTel, which have been audited by Arthur Andersen, independent public
accountants. The selected financial data for VersaTel as of and for the 3 month
periods ended March 31, 1998 and 1999 are unaudited, but in the opinion of the
management contain all adjustments, consisting only of normal recurring
accruals, which are necessary for a fair presentation of results for interim
periods. You should read the information set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the historical audited financial
statements of VersaTel included elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------------- ----------------------------
1995(1) 1996 1997 1998 1998 1999
------- ------ ------- ------------------ ------ ------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................ 52 6,428 18,896 39,561 19,393 6,402 15,501 7,599
Operating expenses:
Cost of revenue, excluding
depreciation and
amortization................... 117 4,954 17,405 31,821 15,598 5,460 12,485 6,120
Selling, general and
administrative................. 538 5,485 17,527 47,733 23,399 5,544 20,179 9,892
Depreciation and amortization.... 11 453 3,237 6,473 3,173 1,087 3,084 1,512
------ ------ ------- ------- ------- ------ ------- -------
Total operating expenses....... 666 10,892 38,169 86,027 42,170 12,091 35,748 17,524
------ ------ ------- ------- ------- ------ ------- -------
Loss from operations............... (614) (4,464) (19,273) (46,466) (22,777) (5,689) (20,247) (9,925)
Interest expense (income), net..... 1 269 534 25,810 12,652 200 17,852 8,751
Currency loss (gain)............... -- -- 53 (5,146) (2,522) 115 40,283 19,747
------ ------ ------- ------- ------- ------ ------- -------
Net loss before income taxes....... (615) (4,733) (19,860) (67,130) (32,907) (6,004) (78,382) (38,423)
Provision for income taxes......... -- -- -- 7 3 -- -- --
------ ------ ------- ------- ------- ------ ------- -------
Net loss......................... (615) (4,733) (19,860) (67,137) (32,910) (6,004) (78,382) (38,423)
====== ====== ======= ======= ======= ====== ======= =======
Net loss per share (Basic and
Diluted)(3)...................... (0.09) (0.47) (1.10) (2.06) (1.01) (0.31) (2.01) (0.99)
Weighted average number of shares
outstanding(3)................... 6,654 10,008 18,084 32,622 32,622 19,159 38,985 38,985
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
-------------------------------------------------- ------------------------------
1995(1) 1996 1997 1998 1998 1999
------- ------ ------- ------------------ ------- -------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash......... 160 4,443 1,495 583,570 286,064 5,298 559,366 274,199
Working capital (excluding cash
and restricted cash)........... 436 (2,704) (24,774) (46,851) (22,966) (28,792) (89,608) (43,925)
Capitalized finance cost......... -- -- -- 28,750 14,093 -- 28,000 13,725
Property, plant and equipment,
net............................ 224 2,340 13,619 38,608 18,925 14,956 41,766 20,474
Construction in progress......... -- -- -- 46,019 22,558 -- 92,205 45,199
Goodwill......................... -- -- -- 4,556 2,233 -- 4,354 2,134
Total assets..................... 820 8,160 19,331 723,397 354,606 26,189 757,123 371,139
Total long-term obligations
(including current portion).... 614 4,185 8,931 688,796 337,645 15,949 748,609 366,965
Total shareholders' equity
(deficit)...................... (120) 146 (18,214) (34,073) (16,702) (24,218) (112,455) (55,125)
</TABLE>

39
<PAGE> 46

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------- -------------------------------
1995(1) 1996 1997 1998 1998 1999
-------- ------- -------- -------------------- ------- --------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS, EXCEPT PERCENTAGE, TOTAL CUSTOMERS AND AVERAGE REVENUE PER BILLABLE MINUTE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
SG&A as a percentage of revenue.... 1194.2% 85.3% 92.8% 120.7% 120.7% 86.6% 130.2% 130.2%
EBITDA(4).......................... (603) (4,011) (16,036) (39,993) (19,604) (4,602) (17,163) (8,413)
Capital expenditures............... 213 2,569 14,516 77,255 37,870 2,424 52,226 25,601
Ratio of earnings to fixed
charges(5)....................... -- -- -- -- -- -- -- --
Deficiency of earnings plus fixed
charges to cover fixed
charges(6)....................... (614) (4,464) (19,326) (41,320) (20,255) (5,804) (60,530) (29,672)
CASH FLOW DATA:
Net cash provided by (used in)
operating activities............. (715) (1,718) 5,765 (37,322) (18,295) (905) 9,777 4,793
Net cash used in investing
activities....................... (234) (2,569) (14,516) (82,036) (40,214) (2,424) (52,226) (25,601)
Net cash provided by financing
activities....................... 1,109 8,571 5,807 490,026 240,209 7,132 (14) (7)
OPERATIONS DATA:
Total customers (at period end).... 35 670 2,059 6,887 6,887 2,981 8,694 8,694
Number of billable minutes (in
thousands)(7).................... 51 6,487 23,361 121,603 121,603 12,432 69,165 69,165
Average revenue per billable
minute........................... 1.03 0.99 0.81 0.32 0.16 0.51 0.21 0.11
</TABLE>

- -------------------------

(1) The summary financial data for fiscal year 1995 reflects the financial
results of VersaTel for the period from October 10, 1995, the date of
incorporation, through December 31, 1995.

(2) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(3) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
Includes 130,000 shares approved for issuance in November 1998 by the
general meeting of shareholders in connection with the acquisition of CS
Net.

(4) EBITDA consists of earnings (loss) before interest expense, income taxes,
depreciation, amortization and foreign exchange gain (loss). EBITDA is
included because management believes it is a useful indicator of a company's
ability to incur and service debt. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other statements
of operations or cash flow data computed in accordance with U.S. GAAP or as
a measure of a company's results of operations or liquidity. Funds depicted
by this measure may not be available for management's discretionary use (due
to covenant restrictions, debt service payments, the expansion of our
network, and other commitments). Because all companies do not calculate
EBITDA identically, the presentation of EBITDA contained herein may not be
comparable to other similarly entitled measures of other companies.

(5) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense. Earnings plus
fixed charges were insufficient to cover fixed charges by NLG 0.6 million in
1995, NLG 4.5 million in 1996, NLG 19.3 million in 1997, NLG 41.3 million in
1998, NLG 5.8 million for the 3 months ended March 31, 1998 and NLG 60.5
million for the 3 months ended March 31, 1999.

(6) The deficiency of earnings plus fixed charges to cover fixed charges is
calculated by adding (i) income (loss) from continuing operations before
income taxes plus (ii) fixed charges. Fixed charges consist of interest
expense.

(7) Billable minutes are those minutes during which a call is connected to the
VersaTel Network and for which we bill a customer.

40
<PAGE> 47

SELECTED FINANCIAL DATA FOR SVIANED

The following selected financial data of Svianed as of and for the years
ended December 31, 1997 and 1998 have been prepared in accordance with U.S. GAAP
and have been derived from the historical financial statements of Svianed, which
have been audited by KPMG Accountants N.V., independent public accountants. The
selected financial data for Svianed as of and for the 3 month periods ended
March 31, 1998 and 1999 are unaudited, but in the opinion of management contain
all adjustments, consisting only of normal recurring accruals, which are
necessary for a fair presentation of results for interim periods. You should
read the information set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- Svianed" and the historical audited financial
statements of Svianed included elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------- -----------------------------
1997 1998 1998 1999
-------- -------------------- ------- ------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. 45,111 56,683 27,786 11,842 15,579 7,637
Operating expenses:
Cost of revenue, excluding depreciation and
amortization..................................... 23,550 26,878 13,176 6,342 6,628 3,249
Selling, general and administrative................ 8,331 11,890 5,828 2,448 3,734 1,830
Depreciation and amortization...................... 6,754 8,751 4,290 1,882 2,472 1,212
------- ------- ------- ------- ------- -------
Total operating expenses......................... 38,635 47,519 23,294 10,672 12,834 6,291
------- ------- ------- ------- ------- -------
Profit from operations............................... 6,476 9,164 4,492 1,170 2,745 1,346
Interest expense (income), net....................... 431 350 172 88 112 55
------- ------- ------- ------- ------- -------
Net profit before income taxes....................... 6,045 8,814 4,320 1,082 2,633 1,291
Provision for income taxes........................... (2,120) (3,085) (1,512) (379) (921) (452)
Net profit......................................... 3,925 5,729 2,808 703 1,712 839
======= ======= ======= ======= ======= =======
Net profit per share (Basic and Diluted)............. 785.0 1,145.8 561.6 140.6 342.4 167.8
Weighted average number of shares outstanding........ 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------- -----------------------------
1997 1998 1998 1999
------- ------------------ ------- ------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ 2,578 1,468 720 1,009 5,318 2,607
Working capital (excluding cash and restricted
cash).............................................. (808) (5,909) (2,897) (1,314) (4,224) (2,071)
Property, plant and equipment, net................... 14,648 19,153 9,389 17,442 20,427 10,013
Total assets......................................... 28,870 33,655 16,498 28,826 41,494 20,340
Total long-term obligations (including current
portion)........................................... 7,700 5,300 2,598 7,725 10,450 5,123
Total shareholders' equity (deficit)................. 11,288 12,017 5,891 11,991 13,729 6,730
</TABLE>

41
<PAGE> 48

<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ --------------------------
1997 1998 1998 1999
------- ------------------- ------ ----------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PERCENTAGE)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
SG&A as a percentage of revenue........................... 18.5% 21.0% 21.0% 20.7% 24.0% 24.0%
EBITDA(2)................................................. 13,230 17,915 8,782 3,052 5,217 2,558
Capital expenditures...................................... 8,454 13,256 6,498 4,676 3,746 1,836

CASH FLOW DATA:
Net cash provided by (used in) operating activities....... 6,622 19,646 9,630 3,107 2,596 1,273
Net cash used in investing activities..................... (8,454) (13,256) (6,498) (4,676) (3,746) (1,836)
Net cash provided by financing activities................. (2,500) (7,500) (3,676) -- 5,000 2,451
</TABLE>

- -------------------------

(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1999 of
NLG 2.04 per $1.00.

(2) EBITDA consists of earnings (loss) before interest income, interest expense,
income taxes, depreciation, amortization and foreign exchange gain (loss).
EBITDA is included because management believes it is a useful indicator of a
company's ability to incur and service debt. EBITDA should not be considered
as a substitute for operating earnings, net income, cash flow or other
statements of operations or cash flow data computed in accordance with U.S.
GAAP or as a measure of a company's results of operations or liquidity.
Funds depicted by this measure may not be available for management's
discretionary use (due to covenant restrictions, debt service payments, the
expansion of our network, and other commitments). Because all companies do
not calculate EBITDA identically, the presentation of EBITDA contained
herein may not be comparable to other similarly entitled measures of other
companies.

42
<PAGE> 49

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

You should read the following discussion and analysis in conjunction with
the Financial Statements contained elsewhere in this prospectus. See "Selected
Financial Data." Information contained below and elsewhere in this prospectus,
including information with respect to VersaTel's plans and strategy for its
business, may include forward-looking statements. See "Disclosure Regarding
Forward-Looking Statements."

OVERVIEW

We are a rapidly growing, competitive network operator focused primarily on
the Benelux, which consists of The Netherlands, Belgium and Luxembourg. Our
objective is to become the leading fully integrated provider of local access,
facilities-based broadband services, including voice, data and Internet services
to our customers in this region. During the past year, we have substantially
expanded our product offering from our initial offering of long distance voice
services. We currently offer a broad portfolio of voice, data and Internet
services to our business customers and a broad range of connectivity,
termination, co-location and hosting services to other telecommunications, data
and Internet service providers.

We are building a high bandwidth network throughout the Benelux to directly
connect to our customers and we are extending our network to connect to certain
key international destinations. As of May 31, 1999, our construction passed 12
city centers, 6 business parks and 5,200 buildings. We intend to complete our
international rings connecting the Benelux network, London and Paris and
connecting the Benelux network, Frankfurt, Dusseldorf and Paris by December
1999. We have completed our international connection from the Benelux network to
London and to Frankfurt. We currently have both a Nortel DMS 100 digital circuit
switch and a Cisco data switch in both Amsterdam and Antwerp. We expect to have
an additional Nortel DMS switch and an additional Cisco data switch installed in
each of Rotterdam, in the third quarter of 1999, and Brussels, in 2000. The
Nortel DMS switches enable us to deliver voice and ISDN telecommunications
services and the Cisco data switches allow us to support multiple data
communications protocols including ATM, IP (Internet Protocol), IPX (Novell),
Frame Relay and others.

On June 11, 1999, we acquired Svianed, the third largest provider of data
services in The Netherlands in terms of revenues. Svianed complements VersaTel's
strategy by providing data services to approximately 50 customers, primarily in
the financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
Through our acquisition of Svianed, we will be able to significantly accelerate
the deployment of our broadband data services product offerings by combining our
market presence with Svianed's data network management expertise. We intend to
directly connect Svianed's customers to, and transition Svianed's traffic onto,
our network in order to reduce our reliance on leased lines. We believe this
will significantly enhance the quality of our service offering to Svianed's
customers and reduce our costs. Since our financial results do not yet reflect
any of Svianed's operations, we have set forth below a separate discussion of
Svianed's historical results of operations. See "-- Svianed."

In May 1999, we acquired SpeedPort and VuurWerk and, in June 1999, we
acquired ITinera, each of which provides co-location, hosting and international
Internet services to business customers and other Internet service providers.
Also, in November 1998, we acquired CS Net, which provides Internet-based,
business-to-business transaction services for trade groups in specific
industries.

43
<PAGE> 50

REVENUES

Historically, our revenues were derived primarily from the provision of
long distance telecommunications services in The Netherlands and more recently
in Belgium. VersaTel's customer base predominately consists of small- and
medium-sized businesses and to a lesser extent residential customers. With the
acquisition of Svianed, a significant portion of our revenues in future periods
will be derived from the provision of data and Internet services to larger
customers. We also provide carrier services to other telecommunications, data
and Internet service providers.

Our revenues to date have been derived primarily from minutes of
telecommunications traffic billed. The percentage of our revenues that consist
of fixed monthly fees will increase substantially as a result of our acquisition
of Svianed. We expect this percentage to further increase as we continue to
deploy our network. The following table sets forth the total revenues and
billable minutes of use attributable to our operations for the years ended
December 31, 1997 and December 31, 1998, and for the 3 months ended March 31,
1998 and March 31, 1999, as well as our total number of customers, based on the
number of invoices issued, as of December 31, 1997 and December 31, 1998 and as
of March 31, 1998 and March 31, 1999.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- ------------------
1997 1998 1998 1999
------- -------- ------- -------
(AT PERIOD END)
<S> <C> <C> <C> <C>
CUSTOMERS
Business customers............................ 1,828 5,649 2,459 7,180
Residential customers......................... 230 1,234 519 1,507
Carrier services customers.................... 1 4 3 7
------ ------- ------- -------
Total...................................... 2,059 6,887 2,981 8,694
REVENUES (NLG IN THOUSANDS)
Business customers
Telephony.................................. 16,948 34,472 5,620 13,294
Internet/data.............................. -- 897 -- 828
Residential customers......................... 11 386 33 232
Carrier services customers.................... 1,937 3,806 749 1,147
------ ------- ------- -------
Total...................................... 18,896 39,561 6,402 15,501
BILLABLE MINUTES OF USE (IN THOUSANDS)
Business customers............................ 21,469 102,980 10,355 54,218
Residential customers......................... 42 1,817 105 1,298
Carrier services customers.................... 1,850 16,806 1,972 13,649
------ ------- ------- -------
Total...................................... 23,361 121,603 12,432 69,165
</TABLE>

44
<PAGE> 51

In 1997, all our revenues were generated in The Netherlands. In October
1998, we started generating revenues in Belgium. The geographical composition of
our revenues for the fiscal years ended December 31, 1997 and December 31, 1998
and for the 3 months ended March 31, 1998 and March 31, 1999 was as follows:

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------ ---------------
1997 1998 1998 1999
------- ------- ----- ------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
The Netherlands..................................... 18,896 39,324 6,402 14,644
Belgium............................................. -- 237 -- 857
------ ------ ----- ------
Total.......................................... 18,896 39,561 6,402 15,501
</TABLE>

Currently, small- to medium-sized businesses generate the majority of
VersaTel's revenues. We have also derived increasing amounts of revenue from
providing services, including switched voice and co-location services, to other
telecommunications, data and Internet service providers. As a result of our
acquisition of Svianed a substantial portion of our revenues will be derived
from providing data- and Internet services to larger customers. We have recently
changed our approach to reaching residential customers by offering carrier
select hosting services to switchless resellers, who themselves target the
residential market. We believe that this approach is a more cost-effective way
of reaching residential customers. As our network expands and as we have
available capacity, we intend to increase our marketing efforts in the carrier
services segment to increase the use of our network and to capture revenues and
margins from markets we do not target directly.

Our revenues, which are derived both from minutes of telecommunications
traffic billed and fixed fees, are allocated to the period in which the traffic
or fees have occurred. We expect that the percentage of our revenues
attributable to fixed fees will increase in future periods principally as a
result of the Svianed acquisition. We generally price our telecommunications
services at a discount to the local PTTs and expect to continue this pricing
strategy as we expand our operations. In general, PTTs have been reducing their
rates over the last several years. As a result, we have experienced and expect
to continue to experience declining revenues per minute. KPN Telecom reduced its
prices per minute of telecommunications traffic billed in May and July 1998 and
most recently in January 1999 and May 1999 with reductions of approximately
10.0%, 15.0%, 10.0% and 20.0%, respectively, which are expected to have an
adverse impact on margins in the near term. Additionally, we expect to increase
our national billable minutes, which are priced at lower rates than
international minutes. As national and wholesale billable minutes increase as a
percentage of total billable minutes, average revenue per billable minute will
further decline. However, due to technological improvements, liberalization of
the European telecommunications market and increased available transmission
capacity, both from third parties and as we build out our network, we expect
costs per minute to decline as well. Management believes that the decline of per
minute prices will out-pace the decline in per minute costs in 1999, resulting
in downward pressure on operating margins. Management believes that over the
long term, this trend will reverse and operating margins will thereby improve;
however, there can be no assurances that this will occur. If reductions in costs
do not in fact out-pace reductions in revenues, VersaTel may experience a
substantial reduction in its margins on calls which, absent a significant
increase in billable minutes of traffic carried or increased charges for other
services, would have a material adverse effect on our business and financial
results. In addition, the introduction of the euro may lead to a greater
transparency for prices in the European telecommunications market, which may
lead to further competition and price decreases.

45
<PAGE> 52

COST OF REVENUES

Our cost of revenues derived from telecommunications services is comprised
of origination costs, certain network costs and termination costs and is both
fixed and variable. Origination costs represent the cost of carrying traffic
from the customer to our network. Origination charges for calls transported to
our network are variable and are incurred on a per minute basis, including the
call set-up charges. Origination charges for business and residential customers
are charged by the PTTs to VersaTel.

We have experienced a significant decrease in origination costs and expect
that these will continue to decrease significantly over time due to competition
and regulatory orders. In July 1998, the Netherlands regulatory authority
Onafhankelijke Post en Telecommunicatie Autoriteit ("OPTA"), ruled that
origination and termination charges be reduced by 55% and 30%, respectively. In
addition, as we continue to build out our network, we intend to connect directly
as many business customers as economically feasible to the network, thereby
eliminating origination charges for these customers. These decreases would be
offset to some extent by amortization and depreciation charges associated with
the construction of our network. There can be no assurance that the trend in
decreasing access costs will continue. As a result, if origination costs do not
continue to decrease, anticipated decreases in revenues per minute would cause
us to experience a decline in gross margins per billable minute which would have
a material adverse effect on our business and financial performance.

Network costs represent the cost of transporting traffic between our
switches and points of interconnection and consist of depreciation and
amortization costs and the cost of leased lines. To date, our network costs and
Svianed's network costs have primarily consisted of the cost of leased lines as
well as, in the case of Svianed, Internet uplink costs. In the near term, we
expect that Svianed's network costs will increase our fixed costs as a
percentage of cost of revenues. However, as we continue to build out our
network, we expect depreciation and amortization costs to increase. We expect
this increase to be off-set, at least partially, by a reduction in the cost of
leased lines. In addition, as we provision Svianed's traffic onto our network,
we will experience a significant reduction in the cost of leased lines currently
attributable to Svianed. Depreciation and amortization costs are not included in
cost of revenues. As a result, network costs as a percentage of cost of revenues
will decline. See "-- Depreciation and Amortization."

Termination costs are the per minute costs associated with using carriers
to carry a call from the point of interconnection to the final destination.
Through least-cost routing, our switches direct calls to the most cost-efficient
carrier for the required destination. As we build out our network to new points
of interconnection, we expect to be able to reduce average termination costs per
minute. For example, once VersaTel establishes a direct link from Amsterdam to
Rotterdam, VersaTel will no longer pay for national termination costs on that
route and will only pay local and regional termination costs from the point of
interconnection in Rotterdam to the final destination in that city. We also
believe that per minute termination costs will continue to decrease due to
several additional factors, including: (i) the incremental build out of our
network, which will increase the number of carriers with which we interconnect;
(ii) the increase of minutes originated by VersaTel, which should lead to higher
volume discounts available to VersaTel; (iii) more rigorous implementation of
the European Commission directives requiring cost-based termination rates and
leased line rates; and (iv) the emergence of new telecommunication service
providers and the construction of new transmission facilities, which should
result in increased competition. There can be no assurance, however, that the
trend of decreasing termination costs will continue.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses are comprised primarily of
salaries, employee benefits, office and administrative expenses, professional
and consulting fees and marketing costs. These expenses have increased as we
have developed and expanded our workforce, and they are expected to continue to

46
<PAGE> 53

increase as we expand and establish new operations. Selling, general and
administrative expenses as a percentage of revenue will continue to vary from
period to period as a result of start-up costs relating to expansion into new
regions. Although we believe that all options issued for employees were issued
at their current fair market value. We may also incur additional compensation
expenses during the current and future fiscal periods attributable to (i) the
issuance of options to employees to the extent that the exercise prices thereof
are deemed to be below the fair market value thereof, and (ii) the issuance of
ordinary shares to employees at a discounted price in connection with this
offering.

We have grown substantially since our inception and we intend to continue
to grow by adding more sales, marketing and customer support staff and by
establishing additional sales offices. This growth involves substantial training
and start-up costs, a large portion of which will be reflected as fixed costs
and will be recorded as selling, general and administrative charges.
Accordingly, our results of operations will vary depending on the timing and
speed of our expansion strategy and, during a period of rapid expansion,
selling, general and administrative expenses will be relatively higher than
during more stable periods of growth. See "Business -- Sales and
Marketing -- Sales and Marketing Staff."

We expect that we will incur a one-time charge during the second and or
third quarters of the current fiscal year in connection with the Settlement
Agreement which will be comprised of (i) the difference between the NLG 7.50
price of the 200,000 shares issued to Cromwilld pursuant to the Settlement
Agreement and the fair market value of those shares, and (ii) legal and other
expenses incurred in connection therewith.

DEPRECIATION AND AMORTIZATION

VersaTel capitalizes and depreciates its fixed assets, including switching
equipment and fiber optic cable, over periods ranging from 3 to 25 years. In
addition, VersaTel capitalizes and amortizes the cost of installing dialers at
customer sites. The development of our network will require large capital
expenditures and larger depreciation charges in the future. Increased capital
expenditures will adversely affect our future operating results due to increased
depreciation charges and interest expense. See "Business -- Strategy" and
"Business -- Network."

FOREIGN EXCHANGE

VersaTel has substantial U.S. dollar denominated assets and liabilities and
its revenues are generated and costs incurred in certain other currencies,
primarily the Dutch guilder. VersaTel is therefore exposed to fluctuations in
the U.S. dollar and other currencies, which may result in foreign exchange gains
and/or losses. As both The Netherlands and Belgium have adopted the euro,
VersaTel will no longer be exposed to any fluctuations between the Dutch guilder
and the Belgian franc. At this moment only a limited number of equipment
purchases and consultancy activities are billed to VersaTel in currencies other
than Dutch guilders. VersaTel from time to time hedges a portion of its foreign
currency risk in order to lock into a rate for a given time.

RESULTS OF OPERATIONS

FOR THE 3 MONTHS ENDED MARCH 31, 1999 COMPARED TO THE 3 MONTHS ENDED MARCH 31,
1998

REVENUES increased by NLG 9.1 million to NLG 15.5 million for the 3 months
ended March 31, 1999 from NLG 6.4 million for the 3 months ended March 31, 1998,
representing an increase of 142.1%. The growth in revenues resulted primarily
from the addition of new customers, the introduction of national long distance
services in The Netherlands, the acquisition of CS Net, the introduction of
services in Belgium and an increase in wholesale traffic. Revenues for the 3
months ended March 31, 1999 as compared to the same period in 1998 were
negatively impacted by general price reductions initiated by KPN Telecom in May
1998, July 1998 and, most recently, January 1999 of approximately

47
<PAGE> 54

10.0%, 15.0% and 10%, respectively. VersaTel responded to these price reductions
by reducing its own prices, and VersaTel's revenues would have been higher
without such price reductions.

Billable minutes of use increased by 56.8 million to 69.2 million for the 3
months ended March 31, 1999 from 12.4 million for the 3 months ended March 31,
1998, representing an increase of 456.3%. The number of customers increased by
5,713 to 8,694 for the 3 months ended March 31, 1999 from 2,981 as of March 31,
1998.

COST OF REVENUES increased by NLG 7.0 million to NLG 12.5 million for the 3
months ended March 31, 1999 from NLG 5.5 million for the 3 months ended March
31, 1998, primarily reflecting an increase in billable minutes, increasing
interconnect capacity and short-term network capacity requirements (leased
lines) in Belgium. This increase was partially offset by declines in per minute
international termination and origination costs resulting from the migration of
customers from the DISA and VPN codes to the "1611" carrier select code.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased by NLG 14.7 million
to NLG 20.2 million for the 3 months ended March 31, 1999 from NLG 5.5 million
for the 3 months ended March 31, 1998, representing an 264.0% increase. This
primarily resulted from an increase in the cost of staff (including temporary
personnel and consultants) in the areas of network operations, customer service,
sales and marketing, installation services, accounting personnel, additional
facilities cost, expenses related to the expansion of our Belgium operations and
additional expenses as a result of the acquisition of CS Net.

DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 2.0 million to NLG
3.1 million for the 3 months ended March 31, 1999 from NLG 1.1 million for the 3
months ended March 31, 1998. This increase was primarily related to capital
expenditures incurred in connection with the deployment of an additional Nortel
DMS 100 switch in Antwerp, the expansion and deployment of the network and an
increase in the number of dialers installed due to customer growth and the
purchase of computer equipment and office furniture for new employees.

CURRENCY EXCHANGE LOSSES, NET, increased by NLG 40.2 million to NLG 40.3
million for the 3 months ended March 31, 1999 from NLG 0.1 million for the 3
months ended March 31, 1998 as a result of a net loss of VersaTel's U.S. dollar
denominated assets and liabilities on the balance sheet.

INTEREST INCOME increased by approximately NLG 6.0 million to NLG 6.0
million for the 3 months ended March 31, 1999 from NLG 14.0 thousand for the 3
months ended March 31, 1998. This increase was primarily related to VersaTel's
positive cash balance as a result of the First High Yield Offering and the
Second High Yield Offering.

INTEREST EXPENSE increased by NLG 23.7 million to NLG 23.9 million for the
3 months ended March 31, 1999 from NLG 0.2 million for the 3 months ended March
31, 1998. This increase is primarily related to the accrual of interest expense
on the Existing Notes.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1997

REVENUES increased by NLG 20.7 million to NLG 39.6 million for the fiscal
year ended December 31, 1998 from NLG 18.9 million for the fiscal year ended
December 31, 1997, representing an increase of 109.4%. The growth in revenues
resulted primarily from the addition of new customers, the introduction of
national long distance services in The Netherlands, the acquisition of CS Net,
the introduction of services in Belgium and an increase in wholesale traffic.
Revenues for the fiscal year ended December 31, 1998 as compared to the same
period in 1997 were negatively impacted by general price reductions initiated by
KPN Telecom in May 1998 and July 1998 of approximately 10.0% and approximately
15.0%, respectively. VersaTel responded to these price reductions by reducing
its own prices and VersaTel's revenues would have been higher without such price
reductions.

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<PAGE> 55

Billable minutes of use increased by 98.2 million to 121.6 million for the
fiscal year ended December 31, 1998 from 23.4 million for the fiscal year ended
December 31, 1997, representing an increase of 420.5%. The number of customers
increased by 4,828 to 6,887 as of December 31, 1998 from 2,059 as of December
31, 1997.

COST OF REVENUES increased by NLG 14.4 million to NLG 31.8 million for the
fiscal year ended December 31, 1998 from NLG 17.4 million for the fiscal year
ended December 31, 1997, primarily reflecting an increase in billable minutes,
increasing interconnect capacity and short-term network capacity requirements
(leased lines) in Belgium. This increase was partially offset by declines in per
minute international termination and origination costs resulting from the
migration of customers from the DISA and VPN codes to the "1611" carrier select
code.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 30.2 million
to NLG 47.7 million for the fiscal year ended December 31, 1998 from NLG 17.5
million for the fiscal year ended December 31, 1997, representing an 172.3%
increase. This primarily resulted from an increase in the cost of staff
(including temporary personnel and consultants) in the areas of network
operations, customer service, sales and marketing, installation services,
accounting personnel, a major brand advertising campaign and one time related
start-up expenses for Belgium operations network expenses.

DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 3.3 million to NLG
6.5 million for the fiscal year ended December 31, 1998 from NLG 3.2 million for
the fiscal year ended December 31, 1997. This increase was primarily related to
capital expenditures incurred in connection with the deployment of the Nortel
DMS 100 switches in Amsterdam and Antwerp, the expansion and deployment of the
network and an increase in the number of dialers installed due to customer
growth and the purchase of computer equipment and office furniture for new
employees.

CURRENCY EXCHANGE GAINS, NET, increased to NLG 5.1 million for the fiscal
year ended December 31, 1998 from a loss of NLG 53,000 for the fiscal year ended
December 31, 1997 as a result of the net gains of VersaTel's U.S. dollar
denominated assets and liabilities on the balance sheet.

INTEREST INCOME increased by approximately NLG 11.9 million to NLG 11.9
million for the fiscal year ended December 31, 1998 from NLG 21,000 for the
fiscal year ended December 31, 1997. This increase was primarily related to
VersaTel's positive cash balance as a result of the First High Yield Offering
and the Second High Yield Offering.

INTEREST EXPENSE increased by NLG 37.1 million to NLG 37.7 million for the
fiscal year ended December 31, 1998 from NLG 0.6 million for the fiscal year
ended December 31, 1997. This increase is primarily related to the accrual of
interest expense on the Existing Notes.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1996

REVENUES increased by NLG 12.5 million to NLG 18.9 million in the fiscal
year ended December 31, 1997 from NLG 6.4 million in the fiscal year ended
December 31, 1996, representing a 194.0% increase. The growth in revenues
resulted primarily from an increased number of customers, as well as increased
usage from existing customers. In both years, all revenues were generated in The
Netherlands.

Billable minutes of use increased by 16.9 million to 23.4 million in the
fiscal year ended December 31, 1997 from 6.5 million in the fiscal year ended
December 31, 1996, representing a 260.1% increase. The number of customers
increased by 1,389 to 2,059 as of December 31, 1997, from 670 as of December 31,
1996.

VersaTel's revenues in 1997 were negatively impacted by KPN Telecom's in
June 1997 introduction of a volume-based business customer discount plan
allowing for discounts of approximately 10.0% and by a general price reduction
in October 1997 of approximately 28.0%. In order to maintain VersaTel's price
discount relative to KPN Telecom's prices, VersaTel also introduced a discount
plan in June 1997 and

49
<PAGE> 56

again reduced its prices in October 1997. As a result of the overall reduction
in prices, VersaTel's revenues for the fourth quarter of 1997 were 13.0% lower
than its revenues of NLG 5.3 million for the third quarter of 1997. However,
billable minutes of use for the fourth quarter were 14.4% higher than the
billable minutes of use for the third quarter. VersaTel expects KPN Telecom to
continue to lower its prices and create new discount plans on a regular basis
and VersaTel expects to adjust its pricing accordingly.

COST OF REVENUES increased by NLG 12.4 million to NLG 17.4 million in the
fiscal year ended December 31, 1997 from NLG 5.0 million in the fiscal year
ended December 31, 1996, representing a 251.3% increase. As a percentage of
revenues, cost of revenues increased to 92.1% in the fiscal year ended December
31, 1997 from 77.1% in the fiscal year ended December 31, 1996, primarily as a
result of tariff reductions by VersaTel to respond to those implemented by KPN
Telecom which exceeded reductions in origination and termination costs.

VersaTel's revenues for the 3 months ended December 31, 1997 were
negatively impacted by a case of fraud in October 1997, which VersaTel estimates
affected approximately 4 days of customer traffic. The fraud involved the
unauthorized use of one of VersaTel's test codes. As a result, a large number of
calls were originated, primarily through ethnic calling shops, over the course
of 4 days and the associated origination and termination costs of NLG 0.6
million were expensed as miscellaneous operating expenses. In addition, as a
result of excessive call volumes, some customers were unable to complete calls
through our network and reverted to KPN Telecom for service. VersaTel lost
revenues from such customers and offered credits to these customers to cover the
price differential between KPN Telecom and VersaTel retroactively. As a result,
VersaTel estimates the total losses from the incident to be approximately NLG
1.0 million. VersaTel has filed the case with the local police authorities.
VersaTel believes that the risk of future fraud has been reduced with the
introduction of the "1611" access code (which prevents the type of fraud that
occurred from the unauthorized use of a test code from occurring) and by
tracking multiple calls with the same access code.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased by NLG 12.0 million
to NLG 17.5 million in the fiscal year ended December 31, 1997 from NLG 5.5
million in the fiscal year ended December 31, 1996, primarily as a result of
VersaTel's increased sales, and an increase in customer service, billing,
collections and accounting staff required to support revenue growth. Staff
levels grew by 38, to 70 employees at December 31, 1997 from 32 employees at
December 31, 1996, an increase of approximately 118.8%. As a percentage of
revenues, selling, general and administrative expenses increased to 92.8% in the
fiscal year ended December 31, 1997 from 85.3% in the fiscal year ended December
31, 1996, as a result of VersaTel's continuing investments in back-office
infrastructure and in people. Bad debt expense was NLG 81,000 for the fiscal
year ended December 31, 1997, or 0.4% of revenues.

DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 2.7 million to NLG
3.2 million in the fiscal year ended December 31, 1997, from NLG 0.5 million in
the fiscal year ended December 31, 1996, primarily due to increased capital
expenditures incurred in connection with the expansion and deployment of our
network.

INTEREST EXPENSE, NET increased by NLG 0.2 million to NLG 0.5 million in
the fiscal year ended December 31, 1997 from NLG 0.3 million in the fiscal year
ended December 31, 1996, primarily due to increased shareholders' loans.

50
<PAGE> 57

SVIANED

OVERVIEW

Svianed is the third largest provider of data services in The Netherlands
in terms of revenues. Svianed provides its data services to 50 customers,
primarily in the financial services and banking industry, including the
principal social insurance organization and the largest financial institution in
The Netherlands. These customers are served on a network which connects to over
600 buildings and utilizes over 700 leased lines covering approximately 6,000
kilometers. The Svianed network has 50 regional points of presence and
transports traffic at speeds of up to 150 Mbps.

Svianed has evolved from an internal unit responsible for network
management within the Gak Group into a company that provides data, voice and
value added network services to both the Gak Group as well as other customers.
Svianed was incorporated as a separate company in July 1995. The Gak Group is
responsible for the execution of and payments under a number of social insurance
laws in The Netherlands, such as the Unemployment Act and the Disability Act. In
addition, the Gak Group offers insurance services on a commercial basis to a
wide variety of clients.

REVENUES

Svianed's revenues are currently derived primarily from the provision of
data services in The Netherlands. Svianed's revenues to date have been derived
mostly from fixed monthly fees under long term contracts. In addition, Svianed
derives a portion of its revenues from minutes of telecommunications traffic
billed. Svianed's revenues are derived from data, voice and value added network
services and are generated primarily from large-sized customers.

Prior to 1996, all of Svianed's revenues were derived from the Gak Group.
In 1996, Svianed started generating revenues from other customers. In 1998,
39.2% of Svianed's revenues were derived from other customers, compared to 29.0%
in 1997 and 16.0% in 1996. The following table sets forth the total revenues
attributable to Svianed's operations for the year ended December 31, 1997 and
December 31, 1998 and for the 3 months ended March 31, 1998 and March 31, 1999,
as well as a break down of revenues from the Gak Group versus other customers
for such periods.

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<PAGE> 58

In 1997 and 1998, almost all of Svianed's revenues were generated in The
Netherlands. The geographical composition of Svianed's revenues for the fiscal
years ended December 31, 1997 and December 31, 1998 and for the 3 months ended
March 31, 1998 and March 31, 1999 was as follows:

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------ ----------------
1997 1998 1998 1999
------- ------- ------ ------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
The Netherlands.................................... 45,071 56,022 11,746 15,414
Belgium............................................ 40 661 96 165
------ ------ ------ ------
Total......................................... 45,111 56,683 11,842 15,579
</TABLE>

COST OF REVENUES

Svianed's cost of revenues is primarily fixed and consists of the cost of
leased lines and internet uplink costs. Currently, almost all of Svianed's
leased lines are leased from KPN Telecom. The prices for such leased lines are
set by OPTA. As a reseller of voice traffic, a portion of Svianed's cost of
revenues is also variable on a per minute basis.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses are comprised primarily of
salaries, employee benefits, office and administrative expenses and overhead
charges from the Gak Group as well as other charges for services and facilities
provided by the Gak Group. These expenses have increased as Svianed has
developed and expanded its workforce. Selling, general and administrative
expenses as a percentage of revenue have remained stable over the last years.

DEPRECIATION AND AMORTIZATION

Svianed capitalizes and depreciates its fixed assets, including its Cisco
routers and Newbridge Frame Relay and ATM switches, over periods ranging from 2
to 5 years.

FOREIGN EXCHANGE

Almost all of Svianed's revenues are generated in Dutch guilders and all of
its assets and liabilities are denominated in Dutch guilders. However, a
majority of equipment purchases are billed to Svianed in currencies other than
Dutch guilders.

RESULTS OF OPERATIONS

FOR THE 3 MONTHS ENDED MARCH 31, 1999 COMPARED TO THE 3 MONTHS ENDED MARCH 31,
1998

REVENUES increased by NLG 3.8 million to NLG 15.6 million for the 3 months
ended March 31, 1999 from NLG 11.8 million for the 3 months ended March 31,
1998, representing an increase of 31.6%. The growth in revenues resulted
primarily from the addition of new customers and additional revenues from
existing customers.

Revenues generated from services provided to the Gak Group increased by NLG
0.9 million to NLG 9.4 million for the 3 months ended March 31, 1999 from NLG
8.5 million for the 3 months ended March 31, 1998, representing an increase of
11.4%. Revenues generated from services provided to other customers increased by
NLG 2.8 million to NLG 6.2 million for the 3 months ended March 31, 1999 from
NLG 3.4 million for the 3 months ended March 31, 1998, representing an increase
of 82.2%.

COST OF REVENUES increased by NLG 0.3 million to NLG 6.6 million for the 3
months ended March 31, 1999 from NLG 6.3 million for the 3 months ended March
31, 1998, primarily reflecting an increase in the number of leased lines. This
increase was partially offset by declines in prices per leased

52
<PAGE> 59

line. In addition, Internet uplink costs increased as a result of increased
capacity requirements, which was partially off-set by a decrease in the cost per
Mb for this capacity.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 1.3 million to
NLG 3.7 million for the 3 months ended March 31, 1999 from NLG 2.4 million for
the 3 months ended March 31, 1998, representing a 52.5% increase. This increase
primarily resulted from an increase in the cost of staff.

DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 0.6 million to NLG
2.5 million for the 3 months ended March 31, 1999 from NLG 1.9 million for the 3
months ended March 31, 1998. This increase was primarily related to capital
expenditures incurred in connection with the investments in customer-related
equipment and investments in the expansion of the network.

INTEREST INCOME increased by NLG 10,000 to NLG 26,000 for the 3 months
ended March 31, 1999 from NLG 16,000 for the 3 months ended March 31, 1998. This
increase was primarily due to an increase in Svianed's positive cash balance.

INTEREST EXPENSE increased by NLG 34,000 to NLG 138,000 for the 3 months
ended March 31, 1999 from NLG 104,000 for the 3 months ended March 31, 1998.
This increase was primarily due to a loan of Gak Holding B.V.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1997

REVENUES increased by NLG 11.6 million to NLG 56.7 million for the fiscal
year ended December 31, 1998 from NLG 45.1 million for the fiscal year ended
December 31, 1997, representing an increase of 25.7%. The growth in revenues
resulted primarily from the addition of new customers and additional revenues
from existing customers.

Revenues generated from services provided to the Gak Group increased by NLG
2.5 million to NLG 34.5 million for the fiscal year ended December 31, 1998 from
NLG 32.0 million for the fiscal year ended December 31, 1997, representing an
increase of 7.6%. Revenues generated from services provided to other customers
increased by NLG 9.1 million to NLG 22.2 million for the fiscal year ended
December 31, 1998 from NLG 13.1 million for the fiscal year ended December 31,
1997, representing an increase of 70.0%.

COST OF REVENUES increased by NLG 3.3 million to NLG 26.9 million for the
fiscal year ended December 31, 1998 from NLG 23.6 million for the fiscal year
ended December 31, 1997, primarily reflecting an increase in the number of
leased lines. This increase was partially offset by declines in prices per
leased line. In addition, Internet uplink costs increased as a result of
increased capacity requirements, which was partially off-set by a decrease in
the cost per Mb for this capacity.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 3.6 million to
NLG 11.9 million for the fiscal year ended December 31, 1998 from NLG 8.3
million for the fiscal year ended December 31, 1997, representing an 42.7%
increase. This increase primarily resulted from an increase in the cost of
staff.

DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 2.0 million to NLG
8.8 million for the fiscal year ended December 31, 1998 from NLG 6.8 million for
the fiscal year ended December 31, 1997. This increase was primarily related to
capital expenditures incurred in connection with the investments in
customer-related equipment and investments in the expansion of the network.

INTEREST INCOME decreased by NLG 26,000 to NLG 85,000 for the fiscal year
ended December 31, 1998 from NLG 111,000 for the fiscal year ended December 31,
1997. This decrease was primarily due to a decrease in Svianed's positive cash
balance.

INTEREST EXPENSE decreased by NLG 107,000 to NLG 435,000 for the fiscal
year ended December 31, 1998 from NLG 542,000 for the fiscal year ended December
31, 1997. This decrease is primarily due to the repayment of an outstanding
loan.

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LIQUIDITY AND CAPITAL RESOURCES

We have incurred significant operating losses and negative cash flows as a
result of the development of our business and network. Prior to the First High
Yield Offering, VersaTel had financed its growth primarily through equity and
subordinated loans from its shareholders. In May 1998, VersaTel issued notes and
warrants in the First High Yield Offering and raised net proceeds, after
transaction expenses, of $216.2 million, $80.6 million of which was invested in
U.S. government securities placed in escrow to fund the first 6 interest
payments on the notes issued in the First High Yield Offering. In December 1998,
VersaTel issued notes and warrants in the Second High Yield Offering and raised
net proceeds, after transaction expenses, of $139.5 million, $45.7 million of
which was invested in U.S. government securities placed in escrow to fund the
first 5 interest payments on the notes issued in the Second High Yield Offering.
VersaTel has since used a significant amount of the remaining net proceeds of
the First High Yield Offering and the Second High Yield Offering to make capital
expenditures related to the expansion and development its network, to fund
operating losses and for other general corporate purposes. On June 11, 1999,
VersaTel borrowed $131.25 million in Interim Loans from Lehman Commercial Paper
Inc., an affiliate of Lehman Brothers Inc. and Lehman Brothers International
(Europe), and $18.75 million in Interim Loans from ING (U.S.) Capital, LLC, an
affiliate of each of ING Barings Limited and ING Barings LLC. The proceeds of
the Interim Loans, together with remaining proceeds from the Existing Notes,
were used to fund the purchase price of Svianed of approximately NLG 362.5
million. The Interim Loans bear interest at a minimum rate of 10.5% per annum
and mature on June 10, 2000. The proceeds from the issuance of the Notes offered
hereby will be used in part to repay the Interim Loans in full.

The general rate of inflation has been low in the Benelux in recent years.
We do not expect that inflationary pressures in the future, if any, will have a
material effect on our results of operations or financial condition.

Although we currently maintain significant cash balances, we will require
substantial additional capital to continue funding the expansion and development
of our network, including the expansion of local access infrastructure. Also, we
are continually re-evaluating our business objectives and are considering
further expansions of our services and the acceleration of our network
construction. We expect that the net proceeds of this offering and the Equity
Offering, combined with the Nortel Facility and the remaining proceeds from the
First High Yield Offering and the Second High Yield Offering and together with
other available financings and cash flows from operations, will provide us with
sufficient capital to fund planned capital expenditures and anticipated losses
for the next 12 months. We expect to raise additional funds through public or
private financings or from financial institutions.

We will be required to meet our debt service obligations on the Notes out
of cash reserves and net cash flow beginning in February 2000. In addition,
starting November 15, 2001, our funds that have been placed in escrow to cover
interest payments on the Existing Notes will have been exhausted. As a result,
we will need to increase substantially our net cash flow in order to meet our
debt service obligations.

To date, VersaTel has made limited use of bank facilities and capital lease
financing. In May 1999, VersaTel has reached an agreement with Nortel, pursuant
to which Nortel will extend vendor financing to VersaTel of up to E45.4 million
(approximately NLG 100.0 million) to be used to finance the purchase of
equipment from Nortel. To date, no amounts have been drawn under this facility.
VersaTel may seek to raise senior secured debt financing in the future to fund
the expansion of its network and for general corporate purposes.

Net cash provided by operating activities was NLG 9.8 million for the 3
months ended March 31, 1999 compared to NLG 0.9 million for the 3 months ended
March 31, 1998. This increase was primarily the result of an increase in current
liabilities which exceeded the operating loss incurred during the first quarter
of 1999. Net cash provided by operating activities was NLG 37.3 million for the
fiscal year ended

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<PAGE> 61

December 31, 1998 compared to NLG 5.8 million for the fiscal year ended December
31, 1997. This increase was primarily the result of operating losses incurred
during 1998.

Net cash used in investing activities was NLG 52.2 million in the 3 months
ended March 31, 1999 and NLG 2.4 million in the 3 months ended March 31, 1998.
Net cash used in investing activities was NLG 82.0 million in the fiscal year
ended December 31, 1998 and NLG 14.5 million in the fiscal year ended December
31, 1997. Substantially all the cash utilized by investing activities in both
fiscal years resulted from an increase in capital expenditures to expand our
network. We do not expect any material disruption nor any material expenditures
in connection with the transition of its billing and information systems to the
year 2000.

Net cash used in financing activities was NLG 14.0 thousand in the 3 months
ended March 31, 1999 and NLG 7.1 million in the 3 months ended March 31, 1998.
Net cash provided by financing activities in the 3 months ended March 31, 1998
resulted mainly from NLG 7.2 million of prepaid capital contributions from 2 of
our shareholders. Net cash provided by financing activities was NLG 490.0
million in the fiscal year ended December 31, 1998 and NLG 5.8 million in the
fiscal year ended December 31, 1997. Net cash provided by financing activities
in the fiscal year ended December 31, 1998, resulted mainly from NLG 419.6
million raised in the First High Yield Offering and NLG 268.5 million raised in
the Second High Yield Offering. Net cash provided by financing activities for
the year ended December 31, 1998, does not include the NLG 211.6 million of the
proceeds of the First High Yield Offering and the Second High Yield Offering
which is still invested in U.S. government securities and placed in escrow to
fund the remaining interest payments on the Existing Notes until and including
May 15, 2001. Net cash provided by financing activities in the fiscal year ended
December 31, 1997 resulted mainly from NLG 1.5 million of capital contributions
and NLG 4.5 million of subordinated loans obtained from one of our shareholders.

In February 1998, as part of a recapitalization, 2 of the 3 shareholders of
VersaTel, Telecom Founders B.V. and NeSBIC Venture Fund C.V., a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in VersaTel.
Although this contribution was received in February 1998, the formal
shareholders meeting approving the amount to be labeled as capital was not
executed until April 17, 1998. In addition, NeSBIC and Cromwilld converted their
subordinated convertible shareholder loans totaling NLG 3.6 million into
ordinary shares of VersaTel, and NeSBIC converted its NLG 4.5 million bridge
loan into ordinary shares of VersaTel. The third component of this
recapitalization was comprised of a new equity investment by Paribas
Deelnemingen N.V. of NLG 12.8 million. Lastly, VersaTel received from Telecom
Founders, NeSBIC, Paribas Deelnemingen N.V. and NPM Capital N.V. an additional
NLG 15.0 million in equity capital immediately prior to the closing of the First
High Yield Offering. As a result of this recapitalization, VersaTel's share
capital increased from NLG 7.0 million to NLG 50.1 million. See "Principal
Shareholders."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial department manages our funding, liquidity and exposure to
foreign exchange rate risks. It is our policy not to enter into any transactions
of a speculative nature.

Our debt obligations that are denominated in U.S. dollars expose us to
risks associated with changes in the exchange rates between the U.S. dollar and
the Dutch guilder and Belgian franc (which currencies are now both pegged to the
euro) in which our revenues are denominated. However, in conjunction with the
First High Yield Offering and the Second High Yield Offering, we have placed in
escrow and pledged for the benefit of the holders of the Existing Notes U.S.
government securities sufficient to pay interest due on the Existing Notes until
and including the scheduled interest payment on May 15, 2001. The Existing Notes
will mature on May 15, 2008 and VersaTel is not required to make any mandatory
redemptions (other than an offer to repurchase the Notes upon a change in
control of VersaTel) prior to maturity of the Existing Notes. Since the interest
rates on each of the First Notes and the Second Notes

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<PAGE> 62

is fixed, we have limited our exposure to risks due to fluctuations of interest
rates. At March 31, 1999 the fair value of the Existing Notes outstanding was
approximately $390.0 million.

The costs and expenses relating to the construction of our Network and the
development of our sales and marketing resources will largely be in Dutch
guilders, Belgian francs and, increasingly, euros. Therefore, the construction
of our network and the development of our sales and marketing resources will
also be subject to currency exchange rate fluctuations as we exchange the
proceeds from the First High Yield Offering and the Second High Yield Offering
to pay our construction costs. However, as of March 31, 1999 we had exchanged
all but $11.2 million of the proceeds from the First High Yield Offering and the
Second High Yield Offering into Dutch guilders. Prior to the application of the
net proceeds from the First High Yield Offering and the Second High Yield
Offering, such funds have been invested in short-term investment grade
securities. VersaTel from time to time hedges a portion of its foreign currency
risk in order to lock into a rate for a given time. In addition, we will become
subject to greater foreign exchange fluctuations as we expand our operations
outside The Netherlands and receive more revenues denominated in currencies
other than Dutch guilders, although the introduction of the euro has largely
eliminated these risks as all 3 Benelux countries have adopted the euro as their
legal currency. See "Exchange Rate Information -- European Monetary Union."

RISKS ASSOCIATED WITH THE YEAR 2000

THE YEAR 2000 AND VERSATEL'S READINESS

We have initiated a formal Year 2000 project and recruited an experienced
Year 2000 project manager. We are undertaking a comprehensive program to address
the Year 2000 issue with respect to the following:

- our information technology systems,

- the telephony switching network (including equipment installed at
customers' premises),

- our non-information technology systems (including buildings, plant,
equipment, and other infrastructure systems that may contain embedded
microcontroller technology),

- the systems of our major vendors (insofar as they relate to our
business), and

- our customers.

This program involves 4 "Steps": (1) a wide ranging assessment of Year 2000
problems that might affect VersaTel; (2) the development and implementation of
remedies to address discovered problems; (3) the testing of our systems where
necessary; and (4) an analysis of the most likely worst case scenario and the
preparation of contingency plans. We expect to complete Steps 1 and 2 of this
program during the second quarter of 1999 and Steps 3 and 4 during the third
quarter of 1999.

STEPS 1-2: ASSESSMENT OF YEAR 2000 ISSUES, DEVELOPMENT AND IMPLEMENTATION OF
REMEDIES

THE INFORMATION TECHNOLOGY SYSTEMS. VersaTel is currently undergoing a
major program to replace all of its existing operating support systems for
billing, customer care and mediation and expects to have completed the
replacement program by the end of the third quarter of 1999. In selecting the
new operating support systems, VersaTel asks for guarantees of Year 2000
compliance from its manufacturers. VersaTel is also checking all its custom
designed software for Year 2000 compliance.

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VersaTel uses Windows 95 and Windows NT 4.0 as its operating systems.
VersaTel expects to upgrade all of its Windows 95 operating systems to Windows
98, which is Year 2000 compliant, during the second quarter of 1999. VersaTel
expects to install the latest service pack for its NT 4.0 operating system,
which is Year 2000 compliant, during the second quarter of 1999. VersaTel does
not presently use any other desktop or server operating systems.

THE TELEPHONY SWITCHING NETWORK. VersaTel has consulted with Nortel, the
manufacturer of its DMS 100 telephony switches and transport layer, and believes
that Nortel's equipment is Year 2000 compliant. VersaTel has requested a
guarantee from Nortel regarding this compliance. We have requested a similar
guarantee from Cisco Systems, our supplier of router switches and certain other
equipment.

THE NON-INFORMATION TECHNOLOGY SYSTEMS. VersaTel's office buildings have
the following embedded systems: monitor alarms (intrusion and sensors),
personnel registration plus floor access, fire alarm, climate control and
electrical power maintenance (generators). VersaTel's facilities management team
is currently investigating if the embedded systems are Year 2000 compliant and
intends to ensure that they will be by the end of the second quarter of 1999.

MAJOR VENDORS' SYSTEMS. VersaTel is asking all of its major vendors to
demonstrate their approach to the Year 2000 problem and to give guarantees that
the millennium will not interrupt their services to VersaTel. VersaTel is
informing its vendors that Year 2000 compliance in their services and products
is an essential element of the existing business relationship. The managers
responsible for each vendor relationship are asking for these guarantees and the
response to date has been positive. VersaTel is now formalizing these requests,
sending letters, and compiling a list of vendors' responses.

CUSTOMERS' SYSTEMS. VersaTel's customer services department intends to
discuss with customers the Year 2000 issue, including whether or not such
customer is Year 2000 compliant and to suggest to customers that, where this
issue has not been resolved, the customer seek advice. We can give no assurances
that VersaTel's customers will either take such advice or be Year 2000 compliant
on a timely basis.

STEP 3: TESTING OF VERSATEL'S SYSTEMS

As VersaTel has tested its various systems and processes and them to be
Year 2000 compliant, it no longer plans to conduct a full operational test of
its entire business. VersaTel may, however, continue to test various systems and
processes through the remainder of the year, both on its own and together with
certain customers.

STEP 4: MOST LIKELY WORST CASE SCENARIO

VersaTel believes that the most likely worst effect of the Year 2000 issue
would be the inability of customers to complete calls. Nortel, the manufacturer
of VersaTel's switches, has conducted extensive Year 2000 tests with the EURO-8
software and has informed VersaTel that it believes VersaTel's switches are Year
2000 compliant. VersaTel has requested a guarantee from Nortel regarding this
compliance. We have requested a similar guarantee from Cisco Systems, our
supplier of router switches and certain other equipment.

If VersaTel's Year 2000 compliant billing system fails to function
correctly, VersaTel believes that bills could still be distributed by modifying
the call detail record's timestamp to reflect a pre-Year 2000 date.

The ability of VersaTel's customer care team to supply quality service
would be significantly affected if the operating support systems were not
available. Service provisioning, additional services and the development of new
customers could not continue effectively if the automated provisioning systems

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were to fail. VersaTel is asking for certificates from the manufacturers of
these systems stating that they are Year 2000 compliant.

VersaTel's ability to collect revenues depends upon certain financial
institutions' computer systems, because approximately 50.0% of its retail
customers pay by way of direct debit facilities. VersaTel is seeking assurances
from these financial institutions that they are Year 2000 compliant.

VersaTel believes that it is unlikely that any of the above situations will
occur due to the assurances of Year 2000 compliance that it expects to receive
from its vendors, software and systems programmers, customers and financial
institutions. In the event that one or more of the situations should occur,
VersaTel would attempt to rectify the problem with the appropriate entities.
However, we can give no assurance that VersaTel will be successful in obtaining
valid assurances or guarantees, that the Year 2000 issue will not have a
material adverse effect on VersaTel, that any Year 2000 effects will be resolved
or that VersaTel will be reimbursed for any additional expenditure under any of
the assurances or guarantees that it expects to obtain or otherwise.

COSTS RELATED TO THE YEAR 2000 ISSUE

To date, VersaTel has incurred approximately NLG 300,000 in costs for its
Year 2000 readiness program. A substantial portion of costs for the Year 2000
issue will be included in the replacement of the current generation of operating
support systems. VersaTel is replacing these systems to support its business
growth and not specifically to remedy the Year 2000 problem. VersaTel expects to
incur additional specific Year 2000 readiness charges that are estimated to be
less than NLG 1.0 million.

THE YEAR 2000 AND SVIANED'S READINESS

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BUSINESS

OVERVIEW

VersaTel is a rapidly growing, competitive network operator focused
primarily on the Benelux. Our objective is to become the leading fully
integrated provider of local access, facilities-based broadband services,
including voice, data and Internet services to our customers in this region. We
currently provide high-quality, competitively priced, telecommunications, data
and Internet services in The Netherlands and Belgium primarily to 4 targeted
market segments:

- business services -- small- and medium-sized businesses located
throughout the Benelux,

- local access services -- high bandwidth users within the Benelux which
are near and directly connected to our network,

- data services -- high bandwidth data customers with multiple sites
throughout the Benelux, and

- carrier services -- telecommunications, data and Internet service
providers.

With over 13,500 business customers and over 375 employees, we are a
leading alternative to KPN Telecom and Belgacom, the former monopoly
telecommunications carriers in The Netherlands and Belgium, respectively. Our
revenues grew from NLG 18.9 million for the year ended December 31, 1997 to NLG
39.6 million for the year ended December 31, 1998 and our revenues for the 3
months ended March 31, 1999 were NLG 15.5 million.

On June 11, 1999, we acquired Svianed, the third largest provider of data
services in The Netherlands. Svianed complements VersaTel's strategy by
providing data services to approximately 50 customers, primarily in the
financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
These customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Svianed had revenues of NLG 56.7 million and EBITDA of
NLG 17.9 million for the year ended December 31, 1998. For the 3 months ended
March 31, 1999, Svianed had revenues of NLG 15.6 million and EBITDA of NLG 5.2
million. The revenues for VersaTel and Svianed on a combined basis would have
been NLG 96.2 million for the year ended December 31, 1998 and NLG 31.1 million
for the 3 months ended March 31, 1999.

We are building a fully integrated broadband network to provide end-to-end
connectivity to our customers. Our network has been designed to pass through all
the major population and business centers in the Benelux and to connect city
centers, business parks and buildings along its route. Our network design
consists of 3 fully integrated elements:

- Benelux network -- multiple, integrated fiber optic rings connecting all
major population and business centers in the Benelux,

- local access infrastructure -- high bandwidth fiber optic and radio
connectivity to customers along our Benelux network route including city
centers, business parks and buildings, and

- international network -- fiber optic rings initially connecting London,
Dusseldorf, Frankfurt, Paris and the Benelux network.

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connecting the Benelux network, Frankfurt, Dusseldorf and Paris by December
1999. We have completed our international connection from the Benelux network to
London and to Frankfurt. We intend to directly connect Svianed's customers to,
and transition Svianed's traffic onto, our network in order to reduce our
reliance on leased lines. We believe this will significantly enhance the quality
of our service offering to Svianed's customers and reduce our costs.

In addition to Svianed, we have recently extended our product and service
offerings and expanded our customer base through the following strategic
acquisitions:

- VuurWerk -- a leading provider of web hosting, co-location, access and
e-commerce services in The Netherlands and Belgium. VuurWerk is one of
the largest providers of web hosting services in The Netherlands, with
more than 10,000 domain name registrations and approximately 6,000
customers.

- SpeedPort -- a provider of Internet co-location and connectivity
solutions for high bandwidth and mission critical Internet and e-commerce
applications. SpeedPort will use VersaTel's international fiber
connectivity to build its IP-based network to serve its customers.

- CS Net -- enables Internet-based trade communities to conduct
business-to-business transactions in specific industries. It currently
provides these services to 6 trade communities with 10,000 end users.

- ITinera -- a Belgium-based Internet service provider with over 950
business customers.

Over time, we intend to market most products and services of these
companies under the VersaTel brand. SpeedPort, however, will continue to market
its interest solutions under its current brands.

THE BENELUX MARKET OPPORTUNITY

- HIGH GROWTH POTENTIAL. Data and telecommunications revenues as a
percentage of gross domestic product ("GDP") of 5.3% in 1997 were still
relatively low compared to 6.3% in the United Kingdom and 7.0% in the
United States, each with a more developed communications market.

- HIGH INTENSITY OF COMMUNICATIONS TRAFFIC. The Benelux is a major
transportation and trade gateway which generates a relatively high level
of communications traffic. According to EITO

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(the European Information Technology Observatory), the total Benelux
telecommunication services market amounted to $14.2 billion in 1997. If
ranked as a single country, the Benelux would have been the fifth largest
telecommunications market in western Europe behind Germany, France, the
United Kingdom and Italy.

The following chart illustrates the relative importance of the Benelux
telecommunications market:
[TOP 10 INTERNATIONAL TRAFFIC MARKETS BAR CHART]

<TABLE>
<CAPTION>
- ------------- -----
<S> <C>
United States 22700.00
United Kingdom 6600.00
Germany 5333.00
Canada 4286.00
France 3545.00
BENELUX (2) 2395.00
Italy 2352.00
Switzerland 2164.00
Japan 1792.00
Hong Kong 1718.00
</TABLE>

- -------------------------

(1) Source: Telegeography 1999. All outgoing MiTT market data is 1997
information.

(2) The Benelux market figure is the aggregate figure of all outgoing MiTTs of
The Netherlands, Belgium and Luxembourg, net of intra-Benelux outgoing
international MiTTs.

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VersaTel currently operates in The Netherlands and in Belgium and plans to
extend its operations to Luxembourg in the future. The following table provides
a brief overview of the Benelux market:

<TABLE>
<S> <C>
Population(1)............................................... 26.2 million
Population Density(2)....................................... 351
persons/km(2)()
Per capita GDP in 1997(1)................................... $24,033
Total telecom expenditures in 1997(3)....................... $14.2 billion
Telecom expenditures as % of GDP in 1997(3)................. 2.6%
Benelux telecom expenditures as % of western Europe's
telecom expenditures in 1997(3)........................... 8.2%
Number of Internet devices in 1997(4)....................... 1,831,000
Expected annual growth Internet devices 1997-2001(4)........ 35.9%
Total Internet access revenues in 1997(4)................... $24.1 million
Expected annual growth Internet access revenues
1997-2001(4).............................................. 34.7%
</TABLE>

- -------------------------
(1) Source: The Economist Intelligence Unit and Quest Economics Database
(2) Source: International Telecommunications Union, 1998
(3) Source: The European Information Technology Observatory (EITO), 1997
(4) Source: International Data Corporation, 1998

BUSINESS STRATEGY

Our objective is to become the leading local access, facilities-based
operator for broadband voice, data and Internet services in the Benelux. The
principal elements of our strategy are:

- DEPLOY OUR BROADBAND NETWORK. We are deploying our fully integrated
broadband network to allow us to provide voice, data and Internet
services, as well as to support all major protocols. We believe that our
high capacity network will allow us to grow our customer base rapidly,
increase our margins and expand our service offerings. We have designed
our network to pass the major points of interconnection of other service
providers and to connect to major Internet exchanges. We believe we will
be one of the highest quality ISPs in the Benelux. In addition, we have
already started constructing our local access infrastructure in areas
where we have completed the Benelux network. We intend to complete 2 of
our international rings in December 1999. Also, we are deploying the
latest network technologies, such as IP over DWDM (dense wave division
multiplexing), and intend to add services to this platform as it proves
reliable. We intend to continue to actively participate in the
development of new network technologies in order to maximize the capacity
of our network and to expand our service offerings.

- FOCUS ON TARGETED CUSTOMER SEGMENTS WITH SPECIALIZED TEAMS. We have
identified 4 groups -- broadband local access customers, small- and
medium-sized businesses, broadband data services customers and other
telecommunications, data and Internet service providers -- as our
targeted customer segments. We have tailored our sales force, customer
care and billing system to meet the specific needs of each of our target
customer segments. We plan to continue to leverage our network, team
approach and operations to deliver services to meet our targeted
customers' needs.

- PROVIDE INNOVATIVE PRODUCTS AND SERVICES. We seek to continue to be
market leaders in providing our customers with advanced products and
services and plan to provide customized solutions to fit local market
needs. We intend to leverage our high bandwidth Network to offer
integrated services to our customers. By providing broadband services to
our customers we will be able to meet their demand for a single source
provider, competitive prices, high quality of service and guaranteed
access to bandwidth. By directly connecting our customers to our network
and by

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providing multiple services, we believe customers will be less likely to
switch to other service providers and that these customers will provide
relatively higher revenues and margins. Through our acquisition of
Svianed we will be able to significantly accelerate the deployment of our
broadband data services product offerings by combining our market
presence with Svianed's data and network management expertise.

- EXPAND CARRIER SERVICES. We plan to generate substantial revenue and
additional traffic on our network through sales to telecommunications,
data and Internet service providers lacking network infrastructure. Our
fully integrated broadband network, high quality systems and peering
arrangements are intended to allow us to offer a broad portfolio of
carrier services, high bandwidth connectivity, co-location, call
termination and hosting. In addition, we are able to provide our carrier
service customers with support systems, such as customer care and billing
solutions. This approach enables us to use our high capacity network to
obtain revenues and margins from market segments, such as residential
customers, that we do not currently target.

- FOCUS ON SUPERIOR CUSTOMER SERVICE. VersaTel strives to maintain a
competitive advantage over competitors in its target markets by providing
superior customer service in terms of responsiveness, accuracy and
quality. We believe that the Benelux market has been particularly
underserved by the PTTs and that providing a high level of customer
service is a key element to establishing customer loyalty and attracting
new customers. We were the first provider in the market of detailed
monthly billing statements and monthly call management reports which
identify savings to customers and enable them to manage their
telecommunications expenditures more effectively. We have invested in a
leading operational support system software and hardware to insure that
our back-office systems enable us to maintain a competitive advantage in
the market.

- PURSUE SELECTIVE ACQUISITIONS AND STRATEGIC RELATIONSHIPS. We plan to
continue to acquire other competitive telecommunications, data and
Internet service providers in order to accelerate the growth of our
customer base, our network and our service portfolio. As part of our
strategy, our acquisition of Svianed will accelerate our time to market
with our data services product offering, enhance our sales force and
expand our market presence in the Benelux. Through our acquisitions of CS
Net in November 1998, SpeedPort and VuurWerk in May 1999 and Svianed and
ITinera in June 1999, we have significantly expanded our Internet
services product offerings and expertise. In addition, we are actively
pursuing additional strategic relationships with alternative carriers in
Germany, France and the United Kingdom in order to establish
interconnection agreements, to partner in infrastructure projects and to
expand our geographic reach.

THE VERSATEL NETWORK

We are building a high bandwidth network designed to provide flexible,
broadband local access to business customers with connectivity to all major
business and population centers in the Benelux and to key international
destinations (the "VersaTel Network" or the "Network"). Our Network will have
the ability to carry voice, data and Internet traffic and will support all major
protocols, including Frame Relay, ATM and IP. We connect with the major Internet
exchanges in Amsterdam, Brussels, London, Paris, Dusseldorf and Frankfurt and
through our acquisition of SpeedPort we will be increasing the number and
quality of peering arrangements with leading carriers of IP traffic to enhance
our presence in the rapidly expanding European Internet services market.

NETWORK DESIGN PRINCIPLES

Our Network is designed to be scaleable, flexible, reliable and efficient:

- SCALEABILITY. We are constructing our Network to offer very high
capacity in all Network components, including ducts, fibers, DWDM, SDH
and operating support system platforms. We

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are placing 8 ducts, each capable of carrying over 300 fibers, on most
routes. We believe this will be enough to provide excess capacity for
future growth and will allow us to trade and sell a portion of our excess
capacity to other operators. We have installed DWDM equipment on our
initial fibers, which allows us to transmit multiple frequencies of light
on the same fiber strand. As a result, the capacity of a single fiber can
be increased by 16 times. Our SDH equipment will be capable of
transmitting at the rate of 10 Gbps (STM-64), with the ability to make 20
Gbps available, if necessary. Our design will enable us to deliver high
bandwidth to our customers while providing substantial potential for
future expansion.

- FLEXIBILITY. We believe our Network design will enable us to respond to
changes in service offerings, Network standards and protocols. We
currently have a Nortel DMS 100 digital circuit switch and a Cisco data
switch in both Amsterdam and Antwerp. We expect to have an additional
Nortel DMS switch and an additional Cisco data switch installed in
Rotterdam in the third quarter of 1999 and Brussels in 2000. The Nortel
DMS switches enable us to deliver voice and ISDN telecommunications
services and the Cisco data switches allow us to support multiple data
communications protocols including IP, IPX (Novell), ATM, Frame Relay and
others.

- RELIABILITY. The Network provides redundancy at multiple levels by using
a self-healing, shared protection ring structure to provide dual
direction routing capability in the event of cable damage or equipment
failure. SDH equipment automates most of the functions of routing and
connecting service bandwidth and reroutes these functions in the event of
failure. Our data and voice/ISDN networks also have alternate routing
capability to assure high availability of the services they deliver. We
have selected very reliable equipment from world class vendors, such as
Nortel and Cisco.

- EFFICIENCY. We believe we are constructing our Network in the most
efficient manner by routing the Network to target all the major business
parks and city centers in the Benelux and by installing high capacity
Network elements which will provide us with excess capacity to allow for
future growth. Also, this efficiency is maintained in our Network
operations by our use of the highest quality components and equipment and
by ensuring we continue to properly manage our Network.

NETWORK ELEMENTS

The VersaTel Network will consist of the following integrated elements:

- BENELUX NETWORK. We are constructing a high capacity, broadband network
that will offer local access connectivity to thousands of business
customers with flexible bandwidth fiber facilities. The Benelux network
will extend to all major commercial and population centers in the
Benelux, including most interconnection points with PTTs, other
telecommunications network operators and major Internet exchanges. We
have designed the Network route to pass through as many businesses as
possible by going through business communities and past major bandwidth
users. Approximately 90,000 businesses are located within one kilometer
of the network and approximately 270,000 businesses are located within 5
kilometers of the route. Physical access points will be provided near
each group of potential customers, at average intervals of 1.5
kilometers. While these features have increased the initial cost of our
network and the time to construct it, we expect that the total cost of
connecting to buildings will be lower and the time required for
connections will be reduced. A small portion of our network is being
constructed jointly with other carriers and some rural sections are being
completed by purchases of dark fiber and pending the completion of
construction, through leased lines. The initial phase of the Benelux
network consisting of 315 kilometers that connects our switches in
Amsterdam and Antwerp was placed in service in May 1999. An additional
200 kilometers of dark fiber and 535 kilometers of fiber-ready duct have
been constructed. By the end of 1999, we intend to have in service 4
self-

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healing rings consisting of 1,200 kilometers. By the middle of 2000, the Benelux
network is expected to consist of approximately 2,200 kilometers of fiber optic
rings.

- LOCAL ACCESS INFRASTRUCTURE. We are extending the Benelux network into
city centers, business parks and buildings with fiber optic rings and
radio systems to directly connect to customers. We started constructing
fiber optic infrastructure in business parks in January 1999. We intend
to connect our first customers shortly after the initial rings of the
Benelux network become operational, which we expect to occur by the third
quarter of 1999. We plan to construct over 300 kilometers of local access
infrastructure in 1999. Also, we began testing point-to-multipoint radio
systems technology at 2 sites in The Netherlands in the third quarter of
1998 and we plan to begin testing in Belgium by the third quarter of
1999. In addition, we are considering using unbundled local loop access
to reach customers when it becomes available.

- INTERNATIONAL NETWORK. We are establishing an international network that
will extend the Benelux network to several major interconnection and
Internet exchange points in Western Europe. Initially, these points will
be London, which we connected in March 1999, Frankfurt, which we
connected in May 1999, and Dusseldorf and Paris, which we expect to
connect by the end of 1999. The international network will consist of one
or more fiber pairs in fully redundant ring structures. We are also
considering acquiring fiber optic capacity to the United States to
improve our Network's Internet connectivity for SpeedPort's utilization.
Most of the international network will consist of fiber or SDH capacity
obtained from other operators, but we plan to own and operate the
transmission equipment.

As of May 31, 1999, our network passed the following city centers and
business parks in The Netherlands and Belgium:

<TABLE>
<CAPTION>
CITY CENTERS BUSINESS PARKS
- ---------------------------------------------- ----------------------------------
<S> <C> <C>
- - Amersfoort - Leiden - Amsterdam -- Bullewijk
- - Amsterdam - Rotterdam - Amsterdam -- Sloterdijk
- - Delft - Utrecht - Haarlem -- Waarderpolder
- - Haarlem - Antwerp - The Hague -- Plaspoelpolder
- - The Hague - Gent - Rotterdam -- Spaansepolder
- - Hilversum - Mechelen - Utrecht -- Lage Weide
</TABLE>

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[NETWORK DESIGN GRAPH]

SERVICE PLATFORMS

Our Network incorporates service platforms to deliver each of the major
service categories we offer or plan to offer. An SDH transmission platform
provides highly reliable transmission capacity for our other services and for
capacity leased to other operators, service providers and customers. A digital
circuit switching platform delivers voice and ISDN services. A data
communications platform based on ATM supports all major data protocols with high
quality service. An Internet services platform will support the Internet
services we provide to end users and our offering of outsourced services to ISPs
and content providers. In parallel, we are implementing an additional new
platform of IP equipment connected directly to DWDM/fiber which is intended to
support all types of services. By integrating the

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functions of SDH, ATM and circuit switching, this platform should provide a
lower cost and a more flexible design than traditional equipment. We plan to
carry services, including voice, data and Internet services, on this platform as
the quality of service management becomes proven.

DATA CENTERS

We intend to establish large scale data centers in Amsterdam, Antwerp,
Rotterdam and Brussels. We are designing these data centers to house our
transmission, IP routing and switching facilities. At these data centers, we
also expect to offer hosting, co-location and interconnection services to high-
volume customers, such as ISPs, in a secure, controlled site with direct access
to our Network. Through the acquisition of SpeedPort, we have acquired a data
center with 150 square meters of raised floor space for equipment housing and
fiber connectivity to both the SARA and NIKHEF parts of the Amsterdam Internet
Exchange. We are presently constructing a new Amsterdam data center which will
provide 1,000 square meters of raised floor space for equipment housing and will
also have direct fiber connectivity to both parts of the Amsterdam Internet
Exchange. In addition, SpeedPort will be constructing Internet co-location
facilities in London, Paris and Frankfurt.

PEERING AND TRANSIT ARRANGEMENTS

Our peering arrangements allow us to exchange traffic with these ISPs
without these ISPs, or us, having to pay transit costs. We will establish
peering arrangements with ISPs when equal traffic volumes are expected to be
exchanged. We currently have peering arrangements with 32 ISPs, including
Belgacom, Euronet, PSINet Europe, Demon Internet, @Home Benelux, World Online,
A2000 and other major ISPs in the Internet market in western Europe. We expect
to enter into additional peering arrangements with network-based ISPs in order
to support SpeedPort and our other Internet services. In addition we expect to
sell approximately 60 transit connections to ISPs and content providers.

NETWORK MANAGEMENT

We monitor our Network 24 hours a day and 7 days a week at our Network
operations center. Our Network operations center is able to identify Network
interruptions as soon as they occur and allows us to reroute traffic to ensure
termination. Our Network operations center has an uninterrupted power supply and
redundant communications access and computer processors. We own and control our
own points of presence in the Benelux which allows us immediate access for rapid
restoration when necessary. We have provided for a back-up Network operations
center in the event our primary Network operations center is forced off-line.

NETWORK IMPLEMENTATION

VersaTel has entered into a framework agreement with Nortel to supply most
initial transmission equipment, including SDH, radio, voice/ISDN switching and
the SDH network management system. This agreement includes vendor financing for
all Nortel products and services. A similar agreement with Cisco is providing
the data communications platform and Cisco's support services. We have
agreements with 4 leading construction companies in The Netherlands for Network
construction. Although Meijsen Ondergrondse Infrastructuren B.V. had originally
been contracted to oversee the construction of our Network, we have now
allocated construction responsibility to 3 additional contractors. We are now
adding another construction contractor in Belgium as well. These construction
companies are responsible for obtaining rights of way, civil engineering,
physical construction and testing of our Network. We have retained experienced
agents in both The Netherlands and Belgium to assist the construction companies
in obtaining rights of way.

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PRODUCTS AND SERVICES

VersaTel currently offers a wide range of business and carrier products and
services and continually evaluates potential product and service offerings,
including competitors' offerings, in order to retain and expand its customer
base and to increase revenue per customer.

BUSINESS PRODUCTS AND SERVICES OFFERINGS

We currently offer the following products and services to business
customers:

LONG DISTANCE TELEPHONY. VersaTel offers international and national long
distance telephony services to over 8,000 business and residential customers in
The Netherlands and over 600 business customers in Belgium. Our telephony
service is offered through our "1611" carrier select code and dial-around and
least-cost routing software installed in our customer PBXs.

ISDN SERVICES. We offer ISDN primary rate services to our customers in the
Benelux. This service primarily targets the business market with digital PBX's
and high volumes of outgoing and incoming traffic. Currently, ISDN is the
fastest growing service for business telephony in the western European market.

LAN TO LAN INTERCONNECT SERVICES. We offer high speed LAN (local area
network) to LAN interconnect services for multi-site business customers. This
service targets business customers that need to interconnect their multiple LANs
to share centralized computer data and applications efficiently. We will provide
end-to-end management of the wide area network, including the routers, at
customers' premises.

DEDICATED INTERNET CONNECTIVITY. We also offer dedicated high speed
Internet access services to business customers. This service provides high
bandwidth access to the Internet, e-mail facilities, news feed from news groups
and web space for hosting web-sites.

REMOTE ACCESS SERVICES. We offer efficient remote access services to
business customers enabling employees to access the corporate LAN from home.
These home offices will have secured access to the corporate network, data and
applications. This service will also be applied to tele-banking and tele-
shopping applications.

IP-BASED ELECTRONIC TRANSACTION SERVICES. CS Net provides Internet-based
business-to-business transaction services to vertical trade communities that act
as comprehensive sources of information, interaction and electronic commerce for
their users.

DIAL-IN INTERNET ACCESS SERVICES. We offer dial-in Internet access
services for the small- and medium-sized businesses. Our plan is to package our
long distance telephony service with an attractive Internet access service.

WEB HOSTING SERVICES. VuurWerk provides web hosting services targeting the
business market. This service consists of an integrated package of a domain
name, e-mail accounts, web space for hosting corporate web-sites and on-line
web-site statistics.

For a description of Svianed's current products and services see
"-- Svianed -- Products and Services".

We also expect to introduce the following retail products and services to
business customers within the next 12 months:

- virtual private network,

- toll/toll-free services,

- dial-in LAN interconnect services,

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- data VPN and Voice Over IP services,

- carrier pre-select (equal access) telephony, and

- Internet and telecommunications services over MDF access and xDSL
technology.

CARRIER PRODUCTS AND SERVICES

We currently offer the following products and services:

CALL TERMINATION SERVICES. We offer switched services to other
telecommunications service providers, including international and national call
termination services in the Benelux. As we complete our international network,
we will be able to offer call termination services in Germany, France and the
United Kingdom.

CO-LOCATION AND FACILITIES MANAGEMENT. We provide co-location services for
carriers wishing to extend and expand their networks by housing their own
computing and telecommunications equipment inside our secured premises within
the Benelux and selected international locations.

NETWORK CAPACITY FACILITIES. We sell and trade rights of way, ducts, dark
fiber, wave length and STM-16 capacity to other carriers.

VIRTUAL POINT-OF-PRESENCE DIAL-IN SERVICES. We offer virtual
point-of-presence services for telecommunications, data and Internet service
providers in order to allow cost-efficient dial-in capability and effective
remote access capabilities for their customers.

INTERNET TRANSIT SERVICES. We offer Internet transit services to
telecommunications and Internet service providers seeking transit services
between major Internet exchanges.

We expect to introduce the following carrier products and services in the
future:

- leased circuits (E1, E3, T3 and STM-1),

- switching, billing and customer care services for resellers,

- ISP hosting services, and

- Voice Over IP gateway and clearing house services.

SALES AND MARKETING

VersaTel seeks to capitalize on its position as a competitive
communications services provider that offers comprehensive customer service and
competitively priced communications services in the Benelux with a focus on
small and medium-sized businesses. We believe that we have created a prominent
brandname in our target market that we expect to successfully apply throughout
the Benelux. Over time we intend to market the products and services of our
acquired businesses under a common VersaTel brandname. We market our products
and services through several marketing channels, including database marketing,
targeted telemarketing, brand and promotional advertising, direct mail and our
direct sales force.

Our sales force is composed of direct sales personnel, telemarketers and
independent sales agents. Marketing is currently conducted by 40 direct sales
personnel in Amsterdam and Rotterdam and 16 in Antwerp. In the future, we expect
to significantly expand our direct sales force and open an additional sales
office in Brussels. With our recent acquisitions of Vuurwerk Internet B.V.,
SpeedPort N.V., ITinera Services N.V. and Svianed B.V., we have added
approximately 25 additional direct sales personnel. Our sales personnel make
direct calls to prospective and existing business customers, analyze business
customers' usage and service needs, and demonstrate how VersaTel's service
package will improve a customer's communications capabilities and costs. Each
member of our sales force is required to

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complete our intensive training program. In addition, we have a telemarketing
group that screens prospective customers and verifies call volumes.

We have also established a sales agent program under which sales agents
receive commissions, but are not employed by us. Agents are provided with an
advertising and sales promotion budget based on the volume of their sales. We
currently have approximately 100 such sales agents in The Netherlands and
approximately 50 in Belgium and intend to continue to increase the size of this
program. Sales agents primarily sell our business services offerings.

Our sales force is organized in the following 4 groups to target the
primary customer segments with a focused product portfolio that matches the
needs of these customer segments:

BUSINESS SERVICES. Our business services sales force targets our core
target market of small- and medium-sized businesses throughout The Netherlands
and Belgium. The customers targeted by this group currently access the Network
indirectly by manually dialing, using an auto-dialer, or through pre-programmed
PBX's, our "1611" carrier select code. As a result of OPTA's recent ruling, we
will be able to reach these customers through carrier pre-select (equal access)
and unbundled local loop access. The services offered to these customers also
include ISDN, Internet and LAN to LAN interconnection services.

LOCAL ACCESS SERVICES. Our local access services sales force targets
potential customers along the Benelux network with a high bandwidth service
package consisting of voice, data and Internet products. Unlike most other
competitive alternative communications services providers who focus primarily on
the main international cities, we will be able to offer high bandwidth services
to our customers at any point along the Benelux network. The customers targeted
by this team will access the Network directly through leased lines or, upon its
deployment, through our own local access infrastructure.

DATA SERVICES. Through our acquisition of Svianed, our data services sales
force targets potential customers with multiple locations throughout the Benelux
with high bandwidth requirements. These potential customers include medium- to
large-sized organizations that are located more than 5 kilometers from the
Network or do not seek a direct connection to the Network.

CARRIER SERVICES. Our carrier services sales force markets our product
portfolio to other telecommunications and Internet services providers, including
switchless resellers, in the Benelux and the countries reached by our
international network. Our focus is on developing a broad range of services that
addresses the specific needs of carrier customers targeting the Benelux.

CUSTOMERS

We market our services on a retail basis to business customers and on a
wholesale basis to other carriers and service providers.

SMALL- AND MEDIUM-SIZED BUSINESSES. Our target customers are small- and
medium-sized businesses (businesses with fewer than 500 employees). However,
with the acquisition of Svianed, we will now be able to offer high bandwidth
data services to large-sized customers. We focus particularly on those business
and industry segments which have historically generated significant volumes of
national and international traffic, such as financial services, information
technology services, transportation and import and export. We believe that the
small- and medium-sized business segment has been underserved by the PTTs and
the major alternative service providers. Traditionally, the PTTs and the other
major carriers have focused on offering their lowest rates and best services
primarily to larger, higher-volume business customers. Through our acquisition
of CS Net, we are able to offer business-to-business transaction services to
vertical trade communities.

CARRIER CUSTOMERS. Our carrier customers are global and regional network
operators, Internet service providers and switchless resellers serving specific
market segments in the Benelux. We focus

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primarily on high capacity and high volume customers. We believe that new
entrants to the telecommunications services market that provide voice, data or
Internet services in the Benelux region will require quality carrier services
and high bandwidth services to develop their market position.

RESIDENTIAL CUSTOMERS. Our initial focus with respect to residential
customers had been to market our services to employees of our business customers
and to residential customers in certain niche markets characterized by
high-volume calling patterns. Recently, we have refocused our efforts and we now
intend to target the residential market by offering carrier hosting services to
switchless resellers who target the residential market. We believe that this
approach is a more cost-effective way of reaching the residential market
segment.

CUSTOMER SERVICE

Our goal is to maintain an advantage over our competitors in our target
markets by providing superior customer service. We believe that providing a high
level of customer service is a key element to establishing customer loyalty and
attracting new customers. We have dedicated customer service representatives who
initiate contact with our customers on a routine basis to ensure customer
satisfaction and market new products. Customer service representatives are
available 24 hours a day, 365 days a year. In addition, we provide detailed
monthly billing statements and monthly call management reports which identify
savings to customers and enable them to manage their telecommunications
expenditures more effectively.

We also believe that technology plays an important role in customer
satisfaction. Advanced technological equipment is crucial to enabling the
provision of a high quality of service to our customers. It is our policy to
reduce technical risks as much as possible by buying proven products from world
leaders in the applicable technology. We have installed sophisticated
status-monitoring and diagnostic equipment at our Network operations center and
plan to install similar units on our SDH equipment. This equipment allows us to
identify and remedy network problems before they are detected by customers. By
providing superior customer service and through the effective use of technology,
we expect to maintain a competitive advantage in our target markets.

We use the Internet and Internet technology in our communications with our
customers. The information technology industry is demonstrating that providing
customer access to their own information records, through Internet-based
technologies, can result in increased customer satisfaction and loyalty while
reducing costs. We intend to begin to provide this type of Internet-based system
for sales, service ordering, customer inquiries, fault management and billing
with usage information in the third quarter of 1999.

BILLING AND INFORMATION SYSTEMS

We are in the process of replacing our current billing, customer care and
sales support system with advanced systems designed by Saville Systems and
Clarify. Our new billing system and customer care and sales support system will
be introduced in stages and we expect the first stage to be completed by the end
of the second quarter of 1999. We do not expect any material disruption in our
billing or information systems as a result of the Year 2000. In addition, we
have planned and budgeted replacements and enhancements to our information
systems to handle our growth in the size and complexity of our business, our
customer base and our product portfolio in areas such as work flow, fixed asset
management, sales support and service provisioning.

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SVIANED

Svianed, the third largest provider of data services in The Netherlands,
provides data services to approximately 50 customers, primarily in the financial
services and banking industries, including the principal social insurance
organization and the largest financial institution in The Netherlands. These
customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Prior to VersaTel's acquisition of Svianed, Svianed
was owned by Gak Holdings B.V., a government-controlled organization partially
responsible for the implementation of social security laws within The
Netherlands.

NETWORK

Svianed has an extensive network in The Netherlands comprised of leased
lines, regionally dispersed points of presence, data and Internet switches and
routers which serve 50 customers and over 100,000 end users. The following chart
describes the Svianed network:

[MAP of the Netherlands with Svianed's Network]

<TABLE>
<S> <C>
- - 50 regional points of presence - approximately 750 Cisco routers
- - over 700 leased lines covering 6,000 - 300 ISDN primary rate interface (PRI)
kilometers
- speeds of up to 150 Mbps
- - over 600 directly connected customer
buildings
- - 83 ATM and Frame Relay switches
</TABLE>

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PRODUCTS AND SERVICES

Many of Svianed's products and services are complementary to VersaTel's
products and services, any duplication will be rationalized over the next 18
months.

Svianed provides the following products and services to its customers:

LAN TO LAN INTERCONNECT. Connecting LANs at geographically dispersed
locations both within and outside The Netherlands.

LAN AND WAN MANAGEMENT. Svianed supplies and manages all active components
of a customer's LAN including ethernet switches.

REMOTE DIAL-IN. Regional dial-in connections to customers to their own
business networks for remote access.

TELEPHONY SERVICES. Svianed offers traditional voice communications,
particularly telephone exchanges and network facilities including management.

INTERNET ACCESS. Svianed provides access to the Internet, including mail,
web hosting and news services, in addition to security services, integration of
speech and data communications and computer telephony integration.

CO-LOCATION. Svianed offers customers the opportunity to co-locate their
network equipment at Svianed points of presence.

CUSTOMERS

Svianed currently has approximately 50 customers, the largest of which is
the Gak Group, who composed approximately 60.8% of Svianed's 1998 revenue. In
addition to the Gak Group, Svianed's other major clients include: ING Groep
(financial services), Achmea Groep (financial services and insurance), Belgacom
(telecommunications), Kluwer (publishing), Assurantie Data Network (insurance)
and Sociale Zekerheid (insurance). Additionally, Svianed provides dial-in
services and LAN/WAN management to a large Netherlands-based pension fund, as
well as one of the largest insurance companies in The Netherlands.

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COMPETITION

Until recently, the telecommunications market in each EU Member State has
been dominated by its respective PTT. Since the implementation of a series of
European Commission directives beginning in 1990, the EU Member States have
started to liberalize their respective telecommunications markets, permitting
alternative telecommunications providers to enter the market. Liberalization has
coincided with technological innovation to create an increasingly competitive
market, characterized by still-dominant PTTs as well as an increasing number of
new market entrants. Competition in the European long distance
telecommunications industry is driven by numerous factors, including price,
customer service, type and quality of services and customer relationships.

In The Netherlands, Belgium and Luxembourg, we compete or will compete
primarily with the national PTTs. As the former monopoly providers of
telecommunications services in these countries, the PTTs have an established
market presence, fully built networks and financial and other resources that are
substantially greater than ours. In addition, the national PTTs own and operate
virtually all of the infrastructure which we must currently access to provide
our services. We estimate that in each of these countries the national PTT still
controls the vast majority of the telecommunications market.

In addition, various new providers of telecommunications services have
entered the market in each of these countries, targeting various segments of the
market in these countries. Companies such as Telfort, a company formed by
British Telecom and Nederlandse Spoorwegen N.V., the Netherlands railroad
company, as well as Global One Communications, MCI Worldcom, GTS/Esprit Telecom
and EnerTel, compete with KPN Telecom for contracts with large multinational
companies in The Netherlands. MCI Worldcom, British Telecom, AT&T, TeleNet,
France Telecom, COLT Telecom, Unisource, a subsidiary of KPN Telecom, and
GTS/Esprit Telecom compete with Belgacom for contracts with large multinational
companies in Belgium.

The following table sets forth some of our most important competitors in
the areas of voice, data, Internet and carrier services:

<TABLE>
<CAPTION>
MARKET THE NETHERLANDS BELGIUM
- ------ -------------------- --------------------
<S> <C> <C>
Voice............................. KPN Telecom Belgacom
Telfort MCI Worldcom
MCI Worldcom GTS/Esprit Telecom
GTS/Esprit Telecom
COLT Telecom

Data.............................. KPN Telecom Belgacom
Global One MCI Worldcom
Telfort

Internet.......................... KPN Telecom Belgacom
MCI Worldcom/UUNet TeleNet
Wirehub
EuroNet

Carrier Services.................. KPN Telecom Belgacom
MCI Worldcom MCI Worldcom
EnerTel/WorldPort GTS/Esprit Telecom
GTS/Esprit Telecom
</TABLE>

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REGULATION

In Europe, the traditional system of monopoly PTTs has ensured the
development of broad access to telecommunications services; however, it has also
restricted the growth of high-quality and competitively priced voice and data
services. The liberalization in European telecommunications market is intended
to address these market deficiencies by ending PTTs' monopolies, allowing new
telecommunications service providers to enter the market and increasing the
competition within the European telecommunications market. The inefficiencies of
the traditional monopoly system, combined with the EU liberalization
initiatives, have created the current market opportunity for VersaTel's product
and service offerings.

The current regulatory framework in the EU and in the countries in which we
provide our services or intend to provide our services is briefly described
below. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on us, that national
or international regulators or third parties will not raise material issues with
regard to our compliance or noncompliance with applicable regulations or that
any changes in applicable laws or regulations will not have a material adverse
effect on us.

EUROPEAN UNION

Starting in 1987, the EC Green Paper on Telecommunications charted the
course for the current changes in the EU telecommunications industry by
advancing principles such as separation of operators from regulators,
transparency of procedures and information, cost orientation of tariffs, access
to monopoly infrastructure networks and the liberalization of services. In 1990,
the EU Member States approved 2 directives that established these principles in
EU law: the Open Network Provision ("ONP") Framework Directive and the EC
Services Directive. These 2 directives set forth the basic rules for access to
the PTT public networks and the liberalization of the provision of all
telecommunications services within the EU except for voice telephony.

The ONP Framework Directive established the conditions under which
competitors and users could gain cost-oriented access to the PTTs' public
networks. The EC Services Directive abolished the existing monopolies on, and
permitted the competitive provision of, all telecommunications services with the
exception of voice telephony. The intended effect of the Services Directive was
to permit the competitive provision of all services, other than voice telephony,
including value-added services and voice services to closed user groups. As a
result, many new entrants entered the market, labeling their services as closed
user group services, while in fact providing voice telephony services.

In 1992, the EC approved the ONP Leased Line Directive, which required the
PTTs to lease lines to competitors and end-users, and to establish cost
accounting systems for those products by the end of 1993. The national
regulatory authorities were to use this cost information to set cost-oriented
tariffs for leased lines. The purpose of the ONP Leased Lines Directive is to
ensure that, in a competitive market, all users continue to have access to
leased lines from at least one operator, under harmonized conditions of access
and use.

In 1996, the EC issued the Full Competition Directive, which requires EU
Member States to permit alternative infrastructure providers, such as existing
networks of cable companies, railroads, electric and other utility companies, to
resell capacity on these networks for the provision of services other than voice
telephony from July 1996. This allows VersaTel to lease transmission capacity
from companies other than the PTTs. The Full Competition Directive also
established January 1, 1998 as the date by which the EU Member States had to
establish a legal framework which removes all remaining restrictions on the
provision of telecommunications services, including voice telephony. Although
Spain, Greece, Portugal, Ireland and Luxembourg were each allowed to delay
implementation for various periods, only Greece had not implemented the Full
Competition Directive as of January 1, 1999. Subject to the foregoing, each EU
Member State is obliged, under EU law, to enforce the terms of the Full

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Competition Directive. Enforceability of the Full Competition Directive may be
challenged at the EU level or at the EU Member State level.

In addition to the Full Competition Directive, the EC issued the Licensing
Directive in April 1997 and the Interconnection Directive in June 1997. The
Licensing Directive establishes a common framework for general authorizations
and individual licenses in the field of telecommunication services. The
Licensing Directive is intended to allow telecommunications operators to benefit
from an EU-wide market for telecommunications and establish a common framework
for national authorization regimes and seeks to facilitate cross-border networks
and services. The Interconnection Directive standardizes regulatory frameworks
to be implemented by EU Member States and their national regulatory authorities,
including the regulation of public telecommunications networks and services. The
Interconnection Directive governs the manner in which alternative network
operators and service providers are permitted to interconnect with the PTTs'
public networks. The Interconnection Directive requires national regulators to
ensure that interconnection agreements with parties with significant market
power provide for access at cost-oriented rates.

The Interconnection Directive has been amended to provide for carrier
selection (ensuring that end-users can select the long distance or international
carrier of their choice on a call-by-call basis) as of January 1, 1998, and
carrier pre-selection (ensuring that end-users can select the long distance or
international carrier of their choice prior to the time calls are made) and
number portability (the ability of end-users to keep their numbers when changing
operators) by January 1, 2000. Carrier selection and carrier pre-selection are
required to be made available by carriers with significant market power. The
Interconnection Directive indicates that significant market power could be
assumed if the carrier's market share exceeds 25%, but Member States may adopt
different standards.

Despite these regulatory initiatives supporting the liberalization of the
telecommunications market, most EU Member States are still in the initial stages
of liberalizing their telecommunications markets and establishing competitive
regulatory structures to replace the monopolistic environment in which the PTTs
previously operated. For example, most EU Member States have only recently
established a national regulatory authority. In addition, the implementation,
interpretation and enforcement of these EC directives differ significantly among
the EU Member States. While some EU Member States have embraced the
liberalization process and achieved a high level of openness, others have
delayed the full implementation of the directives and maintain several levels of
restrictions on full competition.

There are currently few laws and regulations that specifically regulate
communications on the Internet. European and U.S. Government authorities and
agencies are considering laws and regulations that address issues such as user
privacy, pricing, on-line content regulation and taxation of on-line products
and services. In November 1995, the EC adopted a general directive regarding
certain privacy rights of citizens of EU Member States and in December 1997, the
EU adopted another directive designed to specifically address privacy rights in
the area of telecommunications services. These directives impose restrictions on
the collection and use of personal data, guaranteeing citizens of EU Member
States the right of access to their data, the right to know where the data
originated and the right to recourse in the event of unlawful processing.
Although, to the best of our knowledge, no European court has ever held a
telecommunications services provider liable for content transmitted over its
network, we can give no assurances that no laws or regulations will be adopted
that will impose such liability, or that any future court rulings will not
impose such liability. Any future regulation of the Internet could impose
restrictions on the way we conduct our business and could seriously affect our
business.

An overview of the regulatory framework in the individual markets where we
operate or intend to operate is described below. This discussion is intended to
provide a general outline, rather than a comprehensive discussion of the more
relevant regulations and current regulatory posture of these jurisdictions. We
require licenses, authorizations or registrations in all countries in which we
operate to

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provide our services. Licenses, authorizations and/or registrations have been
obtained in The Netherlands and Belgium and we have received an International
Facilities License in the United Kingdom. We have applied for a network license
in Germany. We intend to apply for such licenses and registrations in Luxembourg
and France in the near future. Although we expect that these licenses and
registrations will be granted, there can be no assurance that we will be able to
obtain such licenses, authorizations or registrations or that our operations
will not become subject to other regulatory authorization or registration
requirements in the countries in which we operate or plan to operate.

THE NETHERLANDS

The Telecommunications Act of 1998 provides the current regulatory
framework in The Netherlands. This new telecommunications act came into force on
December 15, 1998, and remedied the old legislative and regulatory patchwork
that had existed as a result of the implementation of a series of EC directives.
The new telecommunications act contains provisions that give registered
telecommunication services providers rights-of-way, subject to certain
conditions, thereby facilitating the construction of the VersaTel Network.

As part of the liberalization of the Netherlands telecommunications market,
the new independent supervisory authority, OPTA, was established by the Ministry
of Traffic and Waterways. OPTA started its activities on August 1, 1997. OPTA's
main tasks include ensuring compliance with the telecommunications laws and
regulations in The Netherlands, granting licenses for telecommunications
activities and resolving disputes among market participants, such as disputes
regarding interconnection rates. The rulings of OPTA, to date, have given us
confidence that new providers of telecommunications services will be granted
fair and equal access to the market in The Netherlands.

The Telecommunications Act also requires providers of public
telecommunications services to comply with the specific privacy provisions
contained in the act, which are based on the privacy directive of December 1997.
In general, providers of public telecommunications services must ensure the
protection of personal data and privacy of subscribers and remove the processed
data on subscribers with respect to the actual use of the network. In The
Netherlands, ISPs are considered to be providers of public telecommunications
service providers referred to in the Telecommunications Act. As a result, ISPs
are also bound by the specific privacy provisions for providers of public
telecommunications services contained in the Telecommunications Act.

In August 1997, we obtained one of the first Netherlands registrations to
operate as a telecommunications service provider of public voice telephony
(other than KPN Telecom). In September 1997, we obtained an infrastructure
license with rights-of-way for the construction and operation of
telecommunications facilities in a limited geographic area. In December 1998, we
obtained the first authorizations under the new telecommunications act to
operate as a public telecommunications services provider and network operator.
We have received licenses which allow us to test point-to-multipoint radio
technology in The Netherlands. It is expected that the Netherlands Government
will conduct an auction on frequencies for this point-to-multipoint radio
technology (fixed-wireless access) by the end of 1999. Since May 1999, we have
been able to offer our customers our own subscriber numbers, all of which start
with "750".

Since our founding in October 1995, we have adopted a proactive regulatory
strategy. In October 1996, we successfully challenged KPN Telecom's use of our
invoice records to offer our customers additional discounts. In a warning letter
to KPN Telecom, the Directorate for Competition (DG IV) of the EC held this to
be an abuse of power by KPN Telecom. Not only did the EC require KPN Telecom to
stop using information regarding the calling behavior of customers for
competitive activities, such as approaching our customers with discounts and
other special offers, it also questioned the legitimacy of KPN Telecom's
discount plans for business customers. The EC requires that such discounts be
based on actual cost savings and not on predatory pricing tactics. OPTA, to whom
the EC

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had delegated this matter, has recently ruled that these discount plans indeed
violate competition law principles and has required KPN Telecom to change them.

We were one of the first voice telephony competitors in The Netherlands to
interconnect with KPN Telecom and to implement a carrier select code in all of
KPN Telecom's telephone switches. The introduction of carrier pre-selection in
The Netherlands, which is expected to be introduced on January 1, 2000, will
allow customers the option to pre-select a carrier other than KPN Telecom for
all their international and national long distance calls. We continue to seek to
obtain lower interconnection rates from KPN Telecom. In July 1998, OPTA ruled
that KPN Telecom's origination and termination charges had to be reduced by
approximately 55% and 30%, respectively. The terms and conditions of
interconnection have had and will continue to have a material effect on the
competitive position of VersaTel.

In December 1998, OPTA issued a ruling on KPN Telecom's end-user tariffs,
which were deemed contrary to the principles on cost orientation. As a result,
KPN Telecom lowered its end-user tariffs for its national long distance services
by approximately 10% as of January 1, 1999. It is expected that OPTA's ruling
will have some negative effects on competition in the market in The Netherlands.

In December 1998, VersaTel filed a complaint with OPTA asserting that the
limited access provided by KPN Telecom to the KPN Telecom network hampered
VersaTel's growth. Our customers often experienced busy signals when they tried
to dial into the VersaTel Network through our access code. Other Netherlands
telecommunications services providers voiced similar complaints. OPTA recently
ruled that KPN Telecom must allow us access to their entire interconnection
network. In addition, OPTA ruled that KPN Telecom would be responsible for the
additional costs associated with the implementation of such ruling. The ruling
does not affect KPN Telecom's access rates.

In March 1999, OPTA issued a ruling, requiring KPN Telecom to offer
unbundled access to local customer access lines at the MDF in KPN Telecom's
central exchange offices. Unbundled local access may enable us to offer a high
bandwidth package to those customers that are not directly connected to our
Network.

BELGIUM

Belgium started the liberalization of its telecommunications market in 1991
with an amendment to the Belgian public post and telecommunications act. It
provided the basis for the privatization of Belgacom, and allowed new entrants
to the telecommunications services market to provide all services, with the
exception of voice telephony, upon obtaining a license. At the same time a new
regulatory entity was introduced, the Belgium Institute for Post and
Telecommunications (Belgisch Instituut voor Post en Telecommunicatie), under the
Ministry of Economy and Telecommunications.

A further amendment to this act was adopted by the Belgian Parliament in
December 1997, to implement the liberalization of voice telephony and
infrastructure. The amended act was published in the Belgian Official Journal on
January 19, 1998, but in order to implement the amended act certain
administrative regulations are required. To prevent any delays in providing
access to the market for new entrants, the Ministry of Economy and
Telecommunications issued a notice which opened the way for temporary licenses
for service providers and infrastructure operators.

On the basis of the amended telecommunications act, we applied for a
licence to construct and operate public telecommunications infrastructure and a
license to provide voice telephony nationwide. Both licenses where granted in
June 1998. For marketing purposes, we have reserved the same carrier select code
"1611" as we currently use in The Netherlands. In August, 1998, we obtained
interconnection with Belgacom for carrier selection and call termination
services in advance of concluding a definitive interconnect agreement in
November 1998.

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In July 1998, various Royal Decrees were published to replace the temporary
regime with a definitive one. On that basis, we had to file new applications for
an infrastructure license and a license for voice services. On November 9, 1998,
we were the first alternative telecommunications services provider to obtain a
definitive license for the provision of voice services. On December 21, 1998, we
obtained a definitive infrastructure license in Belgium and thereby obtained
rights of way in all of Belgium and a special interconnect tariff which is 15%
below the tariff for voice service providers.

In October 1998, we were granted geographic number ranges for the main
cities in Belgium, including Brussels, Antwerp, Kortrijk and Gand, in which we
plan to start operations. In addition, we obtained number ranges for toll-free
(0800) phone services and premium rate services.

Pursuant to the new telecommunications act, Belgacom is required as of
January 1, 2000, to introduce number portability and carrier pre-selection
(equal access). We expect that Belgacom will request the Belgian regulatory
entity, the Belgisch Instituut voor Post en Telecommunicatie, to delay these
introductions by 4 to 6 months.

The Belgisch Instituut voor Post en Telecommunicatie is also expected to
grant licenses for the utilization of point-to-multipoint systems for broadband
fixed wireless access. However, the procedure of assignment has not been chosen
by the Belgisch Instituut voor Post en Telecommunicatie. VersaTel intends to
file applications once such procedures are implemented.

LUXEMBOURG

The Luxembourg telecommunications market has been liberalized since July 1,
1998, 6 months after liberalization in most other EU Member States. Until that
date, P&T Telecom Luxembourg, a state-owned company, had a 100% monopoly in the
provision of basic voice telephony and telecommunications infrastructure. A new
regulatory entity, the Luxembourg Institute of Telecommunications (Institut
Luxembourgeois des Telecommunications), has been installed to oversee the newly
deregulated market. Under this new regulatory regime, competition is expected to
develop along the same lines as in the other Benelux countries.

In the second quarter of 1998, the Institut Luxembourgeois des
Telecommunications, in co-operation with the Ministry of Telecommunications,
published most of the secondary legislation and rulings with the intention to
provide a full liberalization of the telecommunications market. However, in the
third quarter of 1998, the EC initiated an infringement procedure against
Luxembourg asserting the insufficient implementation of the liberalization
directives and certain other directives. It primarily concerned the definition
of "universal service," the vocal telephony licensing procedure, the financing
of the Institut Luxembourgeois des Telecommunications and the adaptation of the
Luxembourg law in line with the EC Satellite Directive. In most instances, the
situation was assessed as resulting mainly from delays in the adoption of the
secondary legislation.

In January 1999, the Luxembourg government started a consultation period
which may lead to an assignment procedure for frequencies to operate
point-to-multi point systems for broadband fixed wireless access.

PROPERTIES

Our principal executive offices are located at Paalbergweg 36,
Amsterdam-Zuidoost, The Netherlands. The lease agreement for this location will
expire in May 2003. Our Belgian offices are located at Noorderlaan 133 in
Antwerp. The lease agreement for this location will expire in May 2007. We are
currently looking for additional or new office space in Amsterdam to accommodate
our future needs.

VuurWerk's offices are located at Gedempte Oude Gracht 82-E, 2011 GV
Haarlem, The Netherlands. The lease agreement for this location will expire on
September 31, 2000.

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SpeedPort's offices are located at Kruislaan 400, 1098 SM Amsterdam, The
Netherlands. The lease agreement for this location expires November 1, 1999.

CSNet's offices are located at Brugweg 56, 2741 KZ Wadinxveen, The
Netherlands. The lease agreement for this location expires on November 1, 1999.

ITinera's offices are located at Dam 171, 8500 Kortrijk, Belgium. The lease
agreement for this location expires on August 31, 2006.

Svianed's offices are located at Jan Tooropstraat 109, 1040 HD Amsterdam,
The Netherlands. The lease agreement for this location expires on January 1,
2000.

EMPLOYEES

As of May 31, 1999, VersaTel had 289 full-time employees and approximately
100 full-time consultants. In addition, we employ approximately 50 temporary
employees at any given time. None of our employees is represented by a labor
union or covered by a collective bargaining agreement, and we have never
experienced a work stoppage. We consider our employee relations to be good. With
our recent acquisitions of Vuurwerk Internet B.V., SpeedPort N.V., ITinera
Services N.V. and Svianed B.V., we have added 9, 18, 19 and 60 employees,
respectively.

INTELLECTUAL PROPERTY

We have registered the trademark (woordmerk) "VersaTel" with the Benelux
trademark bureau (Benelux Merkenbureau). Applications for similar registrations
are pending in the other EU Member States. We have obtained rights to the
Internet domain name "www.versatel.com" and initiated formal registration
procedures with Internic, the European Union domain registration authority.

LEGAL PROCEEDINGS

We have filed complaints in the past with the European Commission, OPTA and
the Minister of Transport and Waterways of The Netherlands as part of its
regulatory strategy. We also make routine filings with the regulatory agencies
and governmental authorities in the countries in which we operate or intend to
operate.

Cromwilld, one of our shareholders, objected to the Recapitalization, the
First Offering and the Second Offering and threatened to challenge in court
certain of VersaTel's actions in connection with the Recapitalization, the First
Offering and the Second Offering. In January 1999, Cromwilld filed, pursuant to
Article 2:345 of the Netherlands Civil Code, a petition with the Enterprise
Chamber (Ondernemingskamer) of the Court of Appeals in Amsterdam requesting the
appointment of one or more experts to investigate the management and affairs of
VersaTel. In May 1999, the Enterprise Chamber denied Cromwilld's request.

- the transfer of 146,988 of our ordinary shares held by Telecom Founders
B.V. to Cromwilld;

- the issuance of 200,000 of our shares on July 20, 1999 to Cromwilld at a
price of NLG 7.50 per ordinary share;

- the ability for Cromwilld to include 1,800,000 of its ordinary shares in
this offering;

- certain piggyback registration rights in favor of Cromwilld that will
take effect 180 days from the date hereof;

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- the payment by us of $300,000 for Cromwilld's fees and expenses related
to the Settlement Agreement and certain other matters;

- the acknowledgement by all parties to our shareholders' agreement that
the shareholders' agreement will be terminated concurrently with the
closing of this offering;

- the withdrawal by Cromwilld of its pending legal proceedings against us
and our shareholders;

- Cromwilld's full cooperation with this offering; and

VersaTel is from time to time involved in routine litigation in the
ordinary course of business. We believe that no currently pending litigation to
which VersaTel is a party will have a material adverse effect on our financial
position or results of operations.

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MANAGEMENT

The members of the supervisory board and the management board of VersaTel
and other significant employees of VersaTel and their respective ages and
positions are set forth below.

MANAGEMENT BOARD

R. Gary Mesch is the sole managing director (statutair directeur) of
VersaTel.

SUPERVISORY BOARD

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Leo W.A.M. van Doorne..................... 39 Chairman
Denis O'Brien, Jr.* ...................... 41 Member
Johan G. Wackwitz......................... 44 Member
James R. Meadows.......................... 46 Member
</TABLE>

* Pursuant to the Settlement Agreement, our shareholders, including Cromwilld,
are obligated to procure the resignation of Denis O'Brien from the Supervisory
Board after the closing of this offering.

EXECUTIVE OFFICERS AND KEY MANAGEMENT

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R. Gary Mesch............................. 46 Managing Director
W. Greg Mesch............................. 39 Chief Operations Officer
Raj Raithatha............................. 36 Chief Financial Officer
Larry Hendrickson......................... 56 Chief Technology Officer
Marc A.J.M. van der Heijden............... 40 Chief Regulatory Counsel
Jan J. Niewold............................ 52 Managing Director Svianed
Roel van der Wiele........................ 50 Senior Manager Operations Svianed
Philip Mathuis............................ 34 Manager Belgium Operations
John J.L. de Rooij........................ 40 Manager Business Services
Jaap J.R. Zuiderveld...................... 35 Manager Local Access Services
Gert Post................................. 35 Manager Carrier Services
Attila Gultuna............................ 33 Manager Product Marketing
Stephanie C.M. Kies....................... 31 Manager Marketing Communications
Leo Y.J. van der Veen..................... 43 Finance Manager
Ike Knuivers.............................. 44 Manager Network Operations
Hein A.M. Boot............................ 35 Manager Network Development
Ronan Murphy.............................. 32 Manager IT Operations & Development
</TABLE>

SUPERVISORY BOARD

Under Netherlands law and the articles of association of VersaTel, the
management of VersaTel is entrusted to the management board (Directie) under the
supervision of the supervisory board (Raad van Commissarissen). Under the laws
of The Netherlands, supervisory directors cannot at the same time be managing
directors of the same company. The primary responsibility of the supervisory
board is to supervise the policies pursued by the management board and the
general course of affairs of VersaTel

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and its business. In fulfilling their duties, the members of the supervisory
board are required to act in the best interests of VersaTel and its business.

Pursuant to the articles of association, the supervisory board consists of
such number of members as may be determined by the general meeting of
shareholders. The members of the supervisory board are appointed by the general
meeting of shareholders. Resolutions of the supervisory board require the
approval of a majority of the members. The supervisory board meets each time
this is deemed necessary by one of its members. Every retiring supervisory
director may be reappointed, provided that such supervisory director has not
attained the age of 72. A member of the supervisory board must retire not later
than on the day of the general meeting of shareholders held in the fiscal year
in which such member reaches the age of 72.

A member of the supervisory board may at any time be suspended or removed
by the general meeting of shareholders. The members of the supervisory board may
receive such compensation as may be determined by the general meeting of
shareholders.

We expect that Sander van Brummelen, a member of the board of directors of
Gak Groep N.V., will become a member of our Supervisory Board effective on July
23, 1999.

MANAGEMENT BOARD

The management of VersaTel is entrusted to the management board under the
supervision of the supervisory board. The articles of association provide that
the management board may from time to time adopt written policies governing its
internal organization. Such written policies require the approval of the
supervisory board. In addition, the articles of association list certain actions
which require prior approval of the supervisory board. Such actions include,
among other things: (i) borrowing or lending money; (ii) participating directly
or indirectly in the capital of another company; (iii) making any investments;
and (iv) providing security in the name of VersaTel or its property.

The management board consists of such number of members as may be
determined by the general meeting of shareholders. In addition, the general
meeting of shareholders appoints the members of the management board.

The general meeting of shareholders has the power to suspend or dismiss
members of the management board. The supervisory board also has the power to
suspend members of the management board. If a member of the management board is
temporarily prevented from acting, the remaining members of the management board
shall temporarily be responsible for the management of VersaTel. If all members
of the management board are prevented from acting, a person appointed by the
supervisory board (who may be a member of the supervisory board) will be
temporarily responsible for the management of VersaTel. The compensation and
other terms and conditions of employment of the members of the management board
are determined by the general meeting of shareholders.

BIOGRAPHIES

R. GARY MESCH has served as Managing Director of VersaTel individually or
through his position as President of Open Skies International Inc. ("Open
Skies") since October 1995. In 1991 he founded and became President of Open
Skies, a telecommunications consultancy with operations based in Amsterdam,
which provided consulting for early stage development of competitive European
telecommunications businesses. From 1991 to 1995 Open Skies advised such clients
as Unisource, PTT Telecom International, Inmarsat, NEC and Eurocontrol. In 1984
he founded and until 1990 he managed the commercial operations of NovaNet, a
Denver-based provider of satellite-based data communications networks. NovaNet
was acquired by ICG Communications in 1993. From 1981 to 1983 he served as
director of sales for Otrona Advanced Systems, a Colorado-based manufacturer of
high performance computer systems. From 1975 to 1981 he served as a senior
systems engineer with Westinghouse

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Electric. Mr. Gary Mesch holds a B.S. in Electrical Engineering from the
University of Colorado and an M.B.A. from Denver University.

LEO W.A.M. VAN DOORNE has served as Chairman of the Supervisory Board of
VersaTel nominated by NeSBIC since December 1995. Since 1996, Mr. van Doorne has
been the Managing Director of NeSBIC Groep B.V., a venture capital company and a
subsidiary of Fortis, an international group of more than 200 companies
operating in the fields of insurance, banking and investments. Worldwide, Fortis
has over 58,000 employees. From 1994 to 1996 he served as Managing Director of
NeSBIC Venture Management B.V. From 1990 to 1994 he was Regional Director of
Banque de Suez Nederland N.V. Mr. van Doorne serves as a member of the
supervisory board of various other companies. Mr. van Doorne holds a degree in
law from the University of Utrecht.

DENIS O'BRIEN, JR. has served as a member of the Supervisory Board of
VersaTel nominated by Cromwilld since December, 1996. Mr. O'Brien is Chairman of
the Board and Chief Executive Officer of Esat Telecom Group plc, a public
company listed on NASDAQ which he founded in 1991. In addition to his positions
with Esat, Mr. O'Brien has been the Chairman of the Board of Esat Digifone since
1996. Prior to the founding of ESAT Telecom plc, he was employed by Guinness
Peat Aviation ("GPA Group"), from 1983 to 1985. Mr. O'Brien holds an M.B.A. from
Boston College.

JOHAN G. WACKWITZ has served as a member of the Supervisory Board of
VersaTel nominated by Paribas since August 1998. Mr. Wackwitz is a member of the
management board of COBEPA S.A. and Paribas Deelnemingen N.V. From 1991 to 1993
he was employed by Paribas in its capital markets division and responsible for
the Benelux within the investment banking group. From 1979 to 1991 he served at
various management positions at Bankers Trust Company. Mr. Wackwitz serves as a
member of the supervisory board of various other companies. Mr. Wackwitz holds a
degree in economics from the Rijks Universiteit Groningen and an M.B.A. from
Columbia University.

JAMES R. MEADOWS has served as a member of the Supervisory Board of
VersaTel nominated by Telecom Founders since August 1998. Mr. Meadows is Senior
Vice President and co-founder of PrimeTEC International, Inc., a U.S.-based
international telecommunications services provider, since 1997. From 1989 to
1997 he served as Director Government Affairs at Capital Network System, Inc.
(CNSI), a telecommunications services provider. Mr. Meadows is a member of the
Board of Directors of Lone Star 2000, a public policy foundation, and of
Comptel. Mr. Meadows holds a degree in history from the University of Texas at
Austin.

W. GREG MESCH has served as Chief Operations Officer of VersaTel since
April 1998. From VersaTel's inception in 1995 until August 1998, he served as a
member of the Supervisory Board of VersaTel nominated by Telecom Founders and
has performed operations consulting roles for VersaTel. From 1993 to 1997, Mr.
Mesch was the Chief Operations Officer of Esat Telecom plc, a public company
listed on NASDAQ. From 1986 to 1992, he served as Chief Executive Officer of
Nova Net, a Denver-based provider of satellite-based data communications
networks, which he founded with his brother Mr. Gary Mesch. Mr. Mesch has been a
Director of In-Touch Associates Ltd., a U.K.-based telecommunications consulting
firm, since 1997 and is an Advisory Board Member to NeSBIC Converging
Technologies Fund. Mr. Mesch has an M.B.A. from Denver University.

RAJ RAITHATHA has served as Chief Financial Officer of VersaTel since April
1998. From 1994 to April 1998 he has served as Chief Financial Officer and
Director of Business Development of ACC Corp.'s European Operations. From 1992
to 1994 he served as Finance Director of Bay Trading Company. From 1989 to 1992
he served as divisional finance director at Securiguard Group plc and from 1987
to 1989 he was financial controller at Harrison Willis. From 1983 to 1987 he was
employed by KPMG Peat Marwick. Mr. Raithatha holds a degree in economics and
mathematics from the University of Cardiff, Wales.

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LARRY HENDRICKSON has served as Chief Technology Officer of VersaTel since
April 1998. From 1994 to 1998 he was senior consultant and partner of DDV
Telecommunications Strategies, a Benelux-based telecommunications consulting
company, and from 1993 to 1994 he was an independent telecommunications
consultant. From 1986 to 1993 he served at various management positions at
Cincinnati Bell, including President of Europe Group, President and Chief
Executive Officer of LDN Communications (Cincinnati Bell) and President of the
Mobile Communications Division of Cincinnati Bell Information Systems. From 1964
to 1986 he was employed by AT&T. Mr. Hendrickson holds a B.S. in management from
the Massachusetts Institute of Technology and completed the Advanced Management
Program at Harvard Business School.

MARC A.J.M. VAN DER HEIJDEN has served as Chief Regulatory Counsel to
VersaTel since June 1998. Mr. van der Heijden served as regulatory counsel to
VersaTel on matters of telecommunications law and regulatory policy since
October 1995 as an independent consultant. As an independent consultant on
telecommunications law he has acted as advisor to the EC, the governments of The
Netherlands and the United Kingdom, and various telephone companies, such as
France Telecom and KPN Telecom, and financial institutions, such as ABN AMRO and
Nederlandse Investerings Bank. He worked as an expert for KPMG Peat Marwick on
bidding processes for mobile telephony and sale of cable companies. Mr. Van der
Heijden holds a degree in law.

JAN J. NIEWOLD has served as Managing Director of Svianed since 1995. From
1986 to 1995 he held various positions in the EDP (Electronic Data Processing)
department of Gak. From 1982 to 1986 he was a network consultant employed by
Shell Nederland and Shell International. From 1972 to 1982 he was responsible
for the datacommunications network of the Netherlands National Aerospace
Laboratorium. From 1969 to 1972 he was a systems programmer at AKZO. Mr. Niewold
holds a degree in chemical engineering.

ROEL VAN DER WIELE has served as deputy director of Svianed since 1997. He
joined Svianed in 1995 as manager of the network operations department. From
1972 to 1995 he held various positions in the EDP department of Gak.

PHILIP MATHUIS has served as Manager Belgium Operations since January 1999.
From 1998 to 1999 he was Vice President of New Business Development for ASCOM
Tateco B.V., a telecommunications service provider. From 1997 to 1998, he served
as Business Development Director for Ericsson Paging Systems B.V. Holland, a
joint venture between ASCOM and Ericsson A.B. From 1988 to 1997 he served in
various other management positions at Ascom. Mr. Mathius holds an M.B.A. from
the Paris School of Management.

JOHN J.L. DE ROOIJ has served as Manager Business Services of VersaTel
since October 1995. From 1989 to 1995 he served as sales manager at Lanier
Office Products, initially as sales manager for fax and copier products for The
Netherlands and subsequently for the entire Benelux. The last 3 years at
Lanier's he acted as the European Training Manager. From 1986 to 1989 he served
as account manager for Wang Laboratories, The Netherlands. Mr. de Rooij holds a
degree in biology.

JAAP J.R. ZUIDERVELD has served as Manager Local Access Services of
VersaTel since January 1999. From 1996 to 1999 he worked at KPN Telecom. At KPN
Telecom he held several sales management positions, lastly as manager in the
IT/Software sector. From 1993 to 1996 he served as Global Account Manager and in
various other sales positions at BT(Worldwide) Ltd. From 1989 to 1993 he served
as account manager and in various other sales positions at Rank Xerox, The
Netherlands. Mr. Zuiderveld holds a degree in business administration.

GERT POST has served as Manager Carrier Services of VersaTel since May
1999. From 1991 to 1996 he held various management and sales positions at BT
(Worldwide) Ltd. From 1996 to 1999 he held various positions at Telfort B.V.,
most recently as a Business Unit Manager, responsible for Telfort's

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carrier and wholesale services. From 1985 to 1991 he served as an Account
Manager for KPN Telecom. Mr. Post holds degrees in business administration and
electrical engineering.

ATTILA GULTUNA has served as Manager Product Marketing of VersaTel since
November 1998. From 1997 to 1998 he was Manager Marketing and Business
Intelligence at Enertel, a facilities-based carrier in The Netherlands. From
1989 to 1997 he worked at KPN Telecom, in several positions in network
development, strategic planning and product marketing in the area of both data
and voice services. Mr. Gultuna holds a degree in electrical engineering.

STEPHANIE C.M. KIES has served as Manager Marketing Communications of
VersaTel since April 1999. From 1990 to March 1999 she worked at various
marketing positions at TNT, a global express distribution company, lastly in the
positions of Manager of Marketing Communications Benelux and Project Manager of
Corporate Identity Benelux.

LEO Y.J. VAN DER VEEN has served as Finance Manager of VersaTel since
November 1997. From 1995 to 1997 he worked as European Finance Manager at Morton
Automotive Safety Products. From 1994 to 1995 he served as controller Benelux of
Stratus Computers. From 1983 to 1993 he served as Director Finance &
Administration Benelux and in various other financial positions at NCR Benelux.
Mr. van der Veen holds a masters degree in international management from the
American Graduate School of International Management and degrees in business
administration and mechanical engineering.

IKE KNUIVERS has served as Manager Network Operations of VersaTel since
September 1998. From 1995 to 1998 he worked as Manager Network Services at
CasTel, a cable and telecommunications company in The Netherlands. From 1993 to
1995 he has served as Manager Projects of EDON, a utility company. From 1986 to
1993 he worked in various IT positions at HCS. From 1982 to 1986 he served as
Training Manager Air Traffic Control systems for Holland Signaal in Apeldoorn.
Mr. Knuivers holds a degree in electronics and computer science.

HEIN A.M. BOOT has served as Manager Network Development of VersaTel since
April 1999. From 1997 to March 1999 he worked at various positions at Telfort
B.V., a Netherlands based telecommunications service provider formed by British
Telecom and Nederlands Spoorwegen N.V., lastly as Manager Implementation and
Provisioning. From 1991 to 1996 he worked at various positions at BT (Worldwide)
Ltd., including Manager Systems Engineering. From 1989 to 1991 he worked at KPN
Telecom. Mr. Boot holds a degree in electrical engineering.

RONAN MURPHY has served as Manager IT Operations & Development of VersaTel
since March 1998. From 1996 to 1997 he worked as IT Manager at Esat Telecom
Group plc. During 1995 he was a consultant at various software companies in
Dublin. From 1989 to 1994 he served as development manager at AGS (a subsidiary
of NYNEX) and The Walt Disney Company. Mr. Murphy holds a degree in mathematics.

EXECUTIVE COMPENSATION

The total aggregate compensation for the supervisory board of VersaTel for
services in all capacities for 1998 was NLG 34,477. The total aggregate
compensation (including amounts paid pursuant to management and consulting
agreements) of all executive officers and key management (including the managing
director) of VersaTel as a group for 1998 was NLG 3,474,151. The total aggregate
compensation for the management board of VersaTel for services in all capacities
for 1998 was NLG 326,483. In 1998, options covering 1,100,000 ordinary shares
were granted to members of the management board and no options were granted to
members of the supervisory board. In 1999, we added a number of additional key
managers and we, therefore, expect the total aggregate compensation for all
executive officers and key management to increase for 1999. See "Material
Relationships and Related Transactions -- Additional Agreements."

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During 1998, VersaTel did not accrue any amounts to provide pension,
retirement and similar benefits to the executive officers of VersaTel or to any
of the managing or supervisory directors of VersaTel.

STOCK OPTION PLANS

1997 STOCK OPTION PLAN

In December 1996, our shareholders approved the 1997 Stock Option Plan. The
1997 Plan provides for the grant of options to certain key employees of VersaTel
to purchase depositary receipts representing an equal number of ordinary shares
of VersaTel. Under the 1997 Plan, no options have been granted with an
expiration date of more than 5 years after the granting of the option. The
option exercise price is determined in the particular grant of the option.

The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to VersaTel or to another party
designated by VersaTel at the applicable purchase price. Unless otherwise
specified in the particular grant of the option, the purchase price will be the
fair market value of the ordinary shares minus a penalty discount. The 1997 Plan
contains provisions in the event of a dispute regarding the fair market value of
the ordinary shares. The penalty discount, if any, is determined by the length
of employment of the particular option holder.

Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan. As of the date of this prospectus, 398,000 options
to purchase 398,000 depositary receipts had been granted under the 1997 Plan and
VersaTel does not intend to grant any more options under the 1997 Plan.

1998 STOCK OPTION PLAN

In March 1998, our shareholders approved the 1998 Stock Option Plan. The
1998 Plan allows VersaTel to grant options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. The option
period will commence at the date of the grant and will last 5 years. The option
exercise price shall be the economic value of the depositary receipt at the date
of the grant of the option. The 1998 Plan contains specific provisions for the
determination of the economic value of the depositary receipts.

As of the date of this prospectus, 5,000,000 options to purchase 5,000,000
depositary receipts have been granted under the 1998 Plan and the Company does
not intend to grant any more options under the 1998 Plan.

1999 STOCK OPTION PLAN

In January 1999, our shareholders approved the 1999 Stock Option Plan. The
1999 Plan allows VersaTel to grant options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. The option
period will commence at the date of the grant and will last 5 years. The option
exercise price shall be determined by VersaTel.

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The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it, within one year after the exercise
of the option, to VersaTel or to another party designated by VersaTel, at a
purchase price equal to the economic value of the depositary receipts. The 1999
Plan contains specific provisions for the determination of the economic value of
the depositary receipts.

As of the date of this prospectus, 1,908,500 options to purchase depositary
receipts have been granted under the 1999 Plan. VersaTel expects to grant an
additional 591,500 options under the 1999 Plan.

The depositary receipts issued under the 1997 Plan, the 1998 Plan and the
1999 Plan will be administered by the Stichting Administratiekantoor VersaTel.
As of the date of this prospectus, there have been 5,543,000 options granted to
our executive officers and key management. No options have been granted to any
of our supervisory board members.

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PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of the ordinary shares of VersaTel as of July 21, 1999 and as adjusted
to reflect the sale of Shares and ADSs in the Equity Offering, by each
beneficial owner of 5.0% or more of the ordinary shares and by the executive
officers and directors of VersaTel as a group. Cromwilld is one of the selling
shareholders in the Equity Offering.

<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING(1)
-----------------------------
NUMBER BEFORE EQUITY AFTER EQUITY
NAME OF BENEFICIAL OWNER OF SHARES OFFERING OFFERING
- ------------------------ ---------- ------------- ------------
<S> <C> <C> <C>
Telecom Founders B.V.(2)(3)........................... 6,603,596 16.7% 11.2%
NeSBIC Venture Fund C.V.(3)(4)........................ 15,162,896 38.3 25.7
Cromwilld Limited(3)(5)............................... 7,653,036 19.3 9.9
Paribas Deelnemingen N.V.............................. 7,282,340 18.4 12.3
NPM Capital N.V. ..................................... 2,352,942 5.9 4.0
---------- ---- ----
Total............................................... 39,054,810 98.6% 63.1%
All directors and executive officers as a group(6).... 14,256,632 36.0% 10.5%
</TABLE>

- -------------------------

(1) Percentages reflect the issuance of an aggregate of 555,000 ordinary shares
that we are obligated to issue and that have been approved for issuance by
our shareholders in connection with the acquisitions of CS Net, SpeedPort
and ITinera, but exclude 130,000 shares approved for issuance by our
shareholders in connection with earn-out obligations relating to the
acquisitions of SpeedPort and ITinera. Does not give effect to dilution from
the exercise of warrants covering 4,482,891 ordinary shares issued in the
First High Yield Offering and the Second High Yield Offering that not being
exercised in the Equity Offering or to options granted to employees covering
7,231,500 ordinary shares (348,000 of which are non-dilutive in that the
shares underlying such options are currently outstanding and will be
provided to us by the holders thereof) (all as adjusted to give effect to
the 2-for-1 stock split on April 13, 1999). See "Management -- Stock Option
Plans."

Percentage of shares outstanding after the offering is based on the
39,609,810 ordinary shares assumed to be outstanding prior to the Equity
Offering plus (i) the 18,992,508 shares offered by Versatel in the Equity
Offering and (ii) the 457,492 warrant shares being offered.

(2) Reflects the 146,988 shares transferred by Telecom Founders to Cromwilld in
connection with the settlement agreement. Telecom Founders B.V., a
Netherlands company, is a wholly owned subsidiary of Relyt Holdings N.V., a
Netherlands Antilles company owned by R. Gary Mesch. The Company understands
that Telecom Founders B.V. has issued depositary receipts representing
nearly half of its shareholding in VersaTel to certain persons including
officers and directors of VersaTel. Telecom Founders intends to exchange
some of those depositary receipts for ordinary shares of VersaTel at or
following the Equity Offering.

(3) Includes an aggregate 348,000 ordinary shares that may be forfeited by
Telecom Founders B.V., NeSBIC Venture Fund C.V. and Cromwilld Limited
pursuant to options exercised under the 1997 option plan. Includes 146,988
shares transferred to Cromwilld by Telecom Founders and 200,000 shares
issued to Cromwilld at a price of NLG 7.50 per share in connection with the
Settlement Agreement.

(4) Includes 1,274,510 ordinary shares held by NeSBIC Groep B.V., an affiliate
of NeSBIC Venture Fund C.V.

(5) Cromwilld Limited, an Isle of Man company, is controlled by Denis O'Brien, a
member of the Supervisory Board of VersaTel. Pursuant to the Settlement
Agreement, Mr. O'Brien will resign from the Supervisory Board upon the
closing of this offering. Includes (i) 200,000 shares purchased on July 20,
1999 at NLG 7.50 per share and (ii) the receipt of 146,488 shares from
Cromwilld on July 20, 1999, in each case pursuant to the Settlement
Agreement.

(6) Reflects (i) the 6,603,596 shares held by Telecom Founders B.V., beneficial
ownership of which may be attributed to Mr. R. Gary Mesch and/or certain
other officers and directors of VersaTel upon the exchange of their
depositary receipts in Telecom Founders, (ii) 7,653,036 shares held by
Cromwilld Limited, beneficial ownership of which may be attributed to Mr.
O'Brien and (iii) shares purchased by directors and executive officers in
connection with the discounted offer of Shares to employees and selected
persons. Percentage of shares outstanding after the offering reflects Mr.
O'Brien's anticipated resignation from the Supervisory Board following the
offering pursuant to the Settlement Agreement.

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MATERIAL RELATIONSHIPS AND RELATED TRANSACTIONS

SHAREHOLDERS' AGREEMENT

In December 1996, Telecom Founders, NeSBIC and Cromwilld entered into a
participation and shareholders' agreement, which contains, among other things,
provisions relating to the appointment of members of the Management Board and
the Supervisory Board, and provisions with respect to the funding of the
Company. The shareholders' agreement also contains provisions restricting the
transfer of shares of the Company. If a shareholder wishes to transfer its
shares, it must first offer the other shareholders the right to purchase such
shares. In addition, no shareholder may transfer its shares unless the
transferee has accepted and agreed to be bound by the provisions of the
shareholders' agreement, nor will the Company issue shares to any person unless
such person accepts and agrees to be bound by the shareholders' agreement. In
connection with their investment in VersaTel as part of the recapitalization,
Paribas and NPM Capital agreed to be bound by the terms of the Shareholders'
Agreement pursuant to deeds of accession and acknowledgment.

Pursuant to the Settlement Agreement, the shareholders' agreement will
terminate upon the completion of this offering.

ADDITIONAL AGREEMENTS

Mr. Greg Mesch is a director of In-Touch Associates Ltd., a London-based
telecommunications consulting company that performs services for the Company.
The amounts paid by the Company in respect of these services are not material.

RELATIONSHIPS

Lehman Brothers Inc., an affiliate of Lehman Brothers International
(Europe), was an initial purchaser in the First High Yield Offering. Lehman
Brothers Inc. and Lehman Brothers International (Europe) were initial purchasers
in the Second High Yield Offering. Lehman Brothers Inc., Lehman Brothers
International (Europe), ING Barings Limited and ING Barings LLC are underwriters
in the Equity Offering. Hambrecht & Quist LLC, an underwriter in the Equity
Offering, will act as a qualified independent underwriter, as defined in Rule
2720 of the Conduct Rules of the National Association of Securities Dealers,
Inc., in this offering. ING Barings Limited and ING Barings LLC are each
affiliates of the other. Lehman Commercial Paper Inc., an affiliate of each of
Lehman Brothers Inc. and Lehman Brothers (International) Europe, and ING (U.S.)
Capital, LLC, an affiliate of each of ING Barings Limited and ING Barings LLC,
are lenders under the Interim Loans, which will be repaid with a portion of the
net proceeds from this offering.

Affiliates of Lehman Brothers may provide loans to the Chief Executive
Officer, Chief Operating Officer and Chief Technology Officer of VersaTel in an
aggregate amount of approximately NLG 6.0 million to fund the exercise price of
certain employee options that may be exercised by them at the time of the
closing of the Equity Offering. Any such loans would be made on commercial
terms, including a pledge of the shares received upon such exercise and
reimbursement of legal fees and other expenses.

LOCK-UP ARRANGEMENTS

Along with our executive officers, and some of our shareholders and
directors, we have agreed, subject to certain exceptions, not to sell or
otherwise dispose of any ordinary shares (other than the Shares and ADSs offered
by VersaTel in the Equity Offering) for a period of 180 days after the date of
the prospectus relating to the Equity Offering without the prior written consent
of Lehman Brothers Inc.

Because we do not have a history of net profits, AEX regulations prohibit
any member of our supervisory board or management board, subject to the
exception described below, from disposing, after

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the date of the Equity Offering, of any ordinary shares acquired by such member
before the date of the Equity Offering. Under AEX regulations, any holder of 5%
or more of our outstanding share capital before the date of the Equity Offering
may not, for three years after the date of the Equity Offering, sell,
collectively with all other holders of 5% or more of our outstanding share
capital acquired before the date of the Equity Offering, in the aggregate more
than 25% of the number of our ordinary shares outstanding before the date of the
Equity Offering. This lock-up requirement applies unless we report a profit, in
which case such shareholders are entitled to dispose collectively of a maximum
of (i) 50% of the shares issued and outstanding before the date of the Equity
Offering if a profit was made for one year or (ii) 75% of the shares issued and
outstanding before the date of the Equity Offering if a profit was made for two
years.

Under AEX regulations, holders of 5% or more of our outstanding share
capital may dispose of their remaining interest if such disposition (i) is
consummated through a public secondary offering involving a due diligence
investigation and the issuance of a prospectus, (ii) complies with the listing
rules of the AEX and (iii) occurs at least one year after the date of the Equity
Offering. In addition, the lock-up arrangements will not prohibit any member of
our supervisory board or management board from disposing of any ordinary shares
acquired after the date of the Equity Offering pursuant to the exercise of
options which were granted under our stock option plans prior to the Equity
Offering.

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DESCRIPTION OF MATERIAL INDEBTEDNESS

THE FIRST HIGH YIELD OFFERING

In the First High Yield Offering in May 1998, VersaTel issued units
consisting of $225,000,000 in aggregate principal amount of 13 1/4% Senior Notes
due 2008 and warrants to purchase 3,000,000 (as adjusted) ordinary shares. The
units were sold to Lehman Brothers, Inc., as initial purchaser, who subsequently
sold them to institutional investors in reliance on exemptions under the
Securities Act. The notes and the warrants were separated in August 1998. In
December 1998, VersaTel completed a public exchange offer pursuant to which all
the notes issued in the First High Yield Offering were exchanged for
substantially identical notes registered under the Securities Act that are not
subject to transfer restrictions. For the purposes of this prospectus, the terms
"First Notes," "Second Notes" and "Existing Notes" shall refer to notes issued
initially and to notes exchanged therefor pursuant to the exchange offers
described in this section. The warrants issued in the First High Yield Offering
remain subject to transfer restrictions. As a result of the consummation of such
exchange offer, we are now subject to the information reporting requirements of
the Exchange Act. Interest on the First Notes will be paid semi-annually on May
15 and November 15, beginning November 15, 1998. In connection with the First
High Yield Offering, we purchased, pledged and placed in escrow U.S. government
securities in an amount sufficient to fund the first 6 interest payments on the
First Notes (through the interest payment date on May 15, 2001). The First Notes
are redeemable at our option, in whole or in part, at any time on or after May
15, 2003, at 106.625% of their principal amount, plus accrued interest,
declining to 100% of their principal amount, plus accrued interest, on or after
May 15, 2006. The First Notes may also be redeemed at the option of VersaTel, in
whole but not in part, at any time at a redemption price equal to the aggregate
principal amount thereof, plus liquidated damages, if any, to the date fixed by
VersaTel for redemption, and all additional amounts, if any, then due and which
will become due as a result of the redemption or otherwise, in the event of
changes affecting Netherlands taxes or as a result of any change in the
application of Netherlands tax laws or regulations that require VersaTel to pay
additional amounts that VersaTel determines cannot be avoided by taking
reasonable steps. The First Notes rank equal in right of payment to the Second
Notes, the Notes and all other senior indebtedness of VersaTel and will be
senior in right of payment to any future subordinated indebtedness of VersaTel.

The indenture governing the First Notes contains covenants applicable to
VersaTel and certain of its subsidiaries, limitations and requirements with
respect to indebtedness, restricted payments, dividends and other payments
affecting restricted subsidiaries, the issuance and sale of capital stock of
restricted subsidiaries, transactions with stockholders and affiliates, liens,
asset sales, issuances of guarantees of indebtedness by restricted subsidiaries,
sale-leaseback transactions, consolidations and mergers and provision of
financial statements and reports. The indenture also requires VersaTel to
commence and consummate an offer to purchase the First Notes for 101% of their
aggregate principal amount, upon events constituting or which may constitute a
change of control of VersaTel. In addition, under certain circumstances,
VersaTel is required by the indenture to offer to purchase the First Notes with
the proceeds of the sale of certain assets. The indenture also provides for
events of default which, if any of them occurs, would permit or require the
principal of, premium, if any, interest and any other monetary obligations on
the First Notes to become or to be declared to be immediately due and payable.
Holders of First Notes may under certain circumstances be entitled to receive
additional payments in respect of taxes and similar charges in respect of
payments on the First Notes. The terms of such covenants, such required offers
to purchase, such events of default and their consequences and such additional
payments, as well as related definitions, set forth in the indenture governing
the First High Yield Offering are substantially identical to those applicable to
the Second Notes, except that the indenture governing the Second High Yield
Offering also includes an optional redemption provision whereby VersaTel may,
for the first 3 years after such offering, redeem up to 35% of the Second Notes
with the net proceeds of

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certain public equity offerings by VersaTel. The indenture governing the First
Notes is subject to, and governed by, the Trust Indenture Act of 1939, as
amended.

THE SECOND HIGH YIELD OFFERING

In the Second High Yield Offering in December 1998, VersaTel issued units
consisting of $150,000,000 in aggregate principal amount of 13 1/4% Senior Notes
due 2008 and warrants to purchase 2,000,100 (as adjusted) ordinary shares. The
units were sold to Lehman Brothers, Inc., Lehman Brothers International (Europe)
and Paribas Corporation, as initial purchasers, who subsequently sold them to
institutional investors in reliance on exemptions under the Securities Act. The
notes and the warrants were separated in January 1999. In February 1999,
VersaTel completed a public exchange offer pursuant to which all the notes
issued in the Second High Yield Offering were exchanged for substantially
identical notes registered under the Securities Act that are not subject to
transfer restrictions. The warrants issued in the Second High Yield Offering
remain subject to certain transfer restrictions. Interest on the Second Notes
will be paid semi-annually on May 15 and November 15, beginning May 15, 1999. In
connection with the Second High Yield offering, we purchased, pledged and placed
in escrow U.S. government securities in an amount sufficient to fund the first 5
interest payments on the Second Notes (through interest payment date on May 15,
2001). The Second Notes are redeemable at the option of VersaTel, in whole or in
part, at any time on or after May 15, 2003, at 106.625% of their principal
amount, plus accrued interest, declining to 100% of their principal amount, plus
accrued interest, on or after May 15, 2006. In addition, at any time prior to
November 15, 2001, VersaTel may, at its option, redeem from time to time up to
35% of the aggregate principal amount of the Second Notes at a redemption price
equal to 113 1/4% of the aggregate principal amount thereof plus accrued and
unpaid interest, additional amounts, if any, and liquidated damages, if any, to
the date of redemption with the proceeds of one or more public equity offerings
by VersaTel, provided that at least 65% of the aggregate original principal
amount of the Second Notes remains outstanding immediately after the occurrence
of such redemption. The Second Notes may also be redeemed at our option of
VersaTel, in whole but not in part, at any time at a redemption price equal to
the aggregate principal amount thereof, plus liquidated damages, if any, to the
date fixed by VersaTel for redemption, and all additional amounts, if any, then
due and which will become due as a result of the redemption or otherwise, in the
event of changes affecting Netherlands taxes or as a result of any change in the
application of Netherlands tax laws or regulations that require VersaTel to pay
additional amounts that VersaTel determines cannot be avoided by taking
reasonable steps. The Second Notes rank equal in right of payment to the First
Notes, the Notes and all other senior indebtedness of VersaTel and will be
senior in right of payment to any future subordinated indebtedness of VersaTel.

The indenture governing the Second Notes contains covenants applicable to
VersaTel and certain of its subsidiaries, including limitations and requirements
with respect to indebtedness, restricted payments, dividends and other payments
affecting restricted subsidiaries, the issuance and sale of capital stock of
restricted subsidiaries, transactions with stockholders and affiliates, liens,
asset sales, issuances of guarantees of indebtedness by restricted subsidiaries,
sale-leaseback transactions, consolidations and mergers and provision of
financial statements and reports. The indenture also requires VersaTel to
commence and consummate an offer to purchase the Second Notes, for 101% of the
aggregate principal amount, upon certain events constituting or which may
constitute a change of control of VersaTel. In addition, under certain
circumstances, VersaTel is required by the indenture to offer to purchase the
Second Notes with the proceeds of the sale of certain assets. The indenture also
provides for events of default which, if any of them occurs, would permit or
require the principal of, premium, if any, interest and any other monetary
obligations on the Second Notes to become or to be declared to be immediately
due and payable. Holders of Second Notes may under certain circumstances be
entitled to receive additional payments in respect of taxes and similar charges
in respect of payments on the Second Notes. The indenture governing the Second
Notes is also subject to, and governed by, the Trust Indenture Act.

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NORTEL VENDOR FINANCING

In May 1999, VersaTel Telecom Europe B.V., as borrower, VersaTel Telecom
International N.V., as guarantor, and Nortel Networks International Finance &
Holding B.V., as agent and security agent, entered into a E45.4 million
(approximately NLG 100.0 million) multi-draw amortizing term loan facility,
governed by a loan agreement (the "Nortel Facility"). The purpose of the
facility is to finance the acquisition of telecommunications equipment from
Nortel. Interest is payable quarterly in arrears at a floating rate based on the
Euro Interbank Offered Rate. The Nortel Facility is solely secured by a lien on
the equipment acquired with the proceeds advanced under the Nortel Facility. In
addition, the Nortel Facility is guaranteed by VersaTel Telecom International
N.V., VersaTel Telecom Netherlands B.V. and VersaTel Telecom Belgium N.V. As of
the date hereof, no advances have been made under the Nortel Facility. The
Nortel Facility also contains covenants applicable to VersaTel and its
affiliates. The covenants include, but are not limited to, restrictions on the
incurrence of additional indebtedness, the issuance of capital stock,
amalgamations and mergers, asset sales and acquisitions and joint ventures. In
addition, under certain circumstances, VersaTel Europe may be required to repay
the facility upon the occurrence of a change of control. The Nortel Facility
provides for events of default which, if any of them occurs, would permit or
require the principal, interest and any other monetary obligations under the
Nortel Facility to become or to be declared immediately due and payable.

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DESCRIPTION OF THE NOTES

GENERAL

Each of the Dollar Notes and the Euro Notes will be issued by VersaTel
pursuant to an indenture (the "Dollar Indenture" and the "Euro Indenture,"
respectively, and together the "Indentures") in each case between VersaTel and
United States Trust Company of New York, as trustee (each a "Trustee" and
together the "Trustees"). The Indentures will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and by their
terms will be subject to and governed by the Trust Indenture Act. Holders of
Notes are referred to each Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indentures does not
purport to be complete and is qualified in its entirety by reference to each
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions."

VersaTel has made an application to list the Notes of each series on the
Luxembourg Stock Exchange however, we can provide no assurance that such listing
will be obtained. If and so long as any Notes are listed on the Luxembourg Stock
Exchange, VersaTel will maintain a special agent or, as the case may be, a
paying and transfer agent in Luxembourg. See "Listing and General Information."

RANKING

The Notes will be general unsecured obligations of VersaTel and will rank
senior in right of payment to all future indebtedness of VersaTel that is, by
its terms or by the terms of the agreement or instrument governing such
indebtedness, expressly subordinated in right of payment to the Notes, and pari
passu in right of payment with all existing and future senior indebtedness of
VersaTel, including the Existing Notes.

VersaTel has transferred substantially all of its assets and liabilities
(other than the Existing Notes) to its Restricted Subsidiaries. VersaTel,
therefore, is a holding company with limited assets and operates its business
through its Restricted Subsidiaries. Any right of VersaTel and its creditors,
including holders of the Notes, to participate in the assets of any of
VersaTel's Subsidiaries upon any liquidation or administration of any such
Subsidiary will be subject to the prior claims of the creditors of such
Subsidiary. The claims of creditors of VersaTel, including holders of the Notes,
will be effectively subordinated to all existing and future third-party
indebtedness and liabilities, including trade payables, of VersaTel's
Subsidiaries. At March 31, 1999, after giving effect to the issuance of the
Notes offered hereby, the incurrence and repayment of the Interim Loans and the
acquisition of Svianed as if each had occurred on such date, VersaTel's
Subsidiaries would have had total liabilities of NLG 85.0 million ($40.5
million) reflected on VersaTel's consolidated balance sheet. VersaTel and its
Subsidiaries may incur other debt in the future, including secured debt.

The Notes will not be entitled to any security and will not be entitled to
the benefit of any guarantees, except under the circumstances described under
"-- Certain Covenants -- Limitation on Issuances of Guarantees of Indebtedness
by Restricted Subsidiaries."

PRINCIPAL, MATURITY AND INTEREST

The Dollar Notes will be limited in aggregate principal amount to
$300,000,000, of which $180,000,000 will be offered in this offering, and the
Euro Notes will be limited in aggregate principal

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amount to E300,000,000, of which E120,000,000 will be offered in this offering.
Each series of Notes will mature on July 15, 2009. The redemption price at
maturity will be 100%. The Dollar Notes will bear interest at the rate of
11.875% per annum and the Euro Notes will bear interest at the rate of 11.875%
per annum, in each case payable semi-annually in arrears on each January 15 and
July 15 (each an "Interest Payment Date"), commencing on January 15, 2000 to the
Person in whose name the Note (or any predecessor Note) is registered at the
close of business on the preceding January 1 or July 1, as the case may be.
Interest on the Notes will start to accrue on the issuance date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. VersaTel may
issue additional Notes of each series ("Additional Notes") from time to time
after this offering up to an aggregate principal amount of $300,000,000 (in the
case of Dollar Notes) or E300,000,000 (in the case of Euro Notes), subject to
the provisions of the Indentures described below under "-- Certain Covenants"
and applicable law. Each series of Notes offered hereby and any Additional Notes
subsequently issued under each Indenture would be treated as a single class for
all purposes under such Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Principal of, premium, if any,
interest and Additional Amounts, if any, on the Notes will be payable at the
office or agency of VersaTel maintained for such purpose within the City and
State of New York or, at the option of VersaTel, payment of interest and
Additional Amounts, if any, may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes. Until otherwise designated by VersaTel, VersaTel's office or agency in
New York will be the office of each Trustee maintained for such purpose. The
Dollar Notes will be issued in minimum denominations of $1,000 (in principal
amount) and integral multiples thereof and the Euro Notes will be issued in
minimum denominations of E1,000 (in principal amount) and integral multiples
thereof. If any Notes are listed on the Luxembourg Stock Exchange, VersaTel will
appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg and reasonably acceptable to each Trustee, as an additional paying
and transfer agent. Upon the issuance of Definitive Notes, Holders will be able
to receive principal, interest and Additional Amounts, if any, on the Notes and
will be able to transfer Definitive Notes at the Luxembourg office of such
paying and transfer agent, subject to the right of VersaTel to mail payments in
accordance with the terms of each Indenture. In case of a transfer of a
Definitive Note in part, new Definitive Notes will be available at the office of
the Transfer Agent. Payment of principal on the Definitive Notes will be made
upon their surrender at an office of the paying agent in Luxembourg.

MANDATORY REDEMPTION

VersaTel will not be required to make mandatory redemptions or sinking fund
payments prior to maturity of the Notes.

OPTIONAL REDEMPTION

Except as described below and in the following paragraph or under
"Redemption for Taxation Reasons," the Notes will not be redeemable at
VersaTel's option prior to July 15, 2004. From and after July 15, 2004, the
Notes will be subject to redemption at the option of VersaTel, in whole or in
part, upon not less than 30 nor more than 60 days' prior notice, published in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Amsterdam (which is expected to be Het
Financieele Dagblad) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having a general calculation in Luxembourg (which is expected to be
the Luxemburger Wort)) as well as, in the case of Definitive Notes, mailed by
first-class mail to each Holder's registered address, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest and Additional Amounts, if any, to the applicable redemption
date (and, in the case of Definitive Notes, subject to the right of Holders of
record on the relevant record date to receive interest and Additional

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Amounts, if any, due on the relevant interest payment date in respect thereof),
if redeemed during the twelve-month period beginning on July 15 of each of the
years indicated below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004....................................... 105.937%
2005....................................... 103.958%
2006....................................... 101.979%
2007 and thereafter........................ 100.000%
</TABLE>

In addition, at any time on or prior to July 15, 2002, VersaTel may, at its
option, redeem up to 35% of the aggregate principal amount of the Notes of each
series originally issued under each Indenture on the Issue Date at a redemption
price equal to 111.875% of the aggregate principal amount the Dollar Notes or
the Euro Notes, as the case may be, plus accrued and unpaid interest and
Additional Amounts, if any, to the date of redemption (and in the case of
Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), with the Net Cash Proceeds of
one or more Public Equity Offerings received by, or invested in, VersaTel;
provided that, in each case, at least 65% of the aggregate original principal
amount of each series of Notes remains outstanding immediately after the
occurrence of such redemption; and provided, further, that notice of any such
redemption must be given to Holders within 30 days of the date of the closing of
any such Public Equity Offering. In the event of any redemption of the Notes,
payments will be made as described under "-- Principal, Maturity and Interest."

The aggregate principal amount of Notes to be redeemed shall be allocated
by VersaTel between the Dollar Notes and the Euro Notes in its sole discretion.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the relevant Trustee in compliance with the requirements of the
principal securities exchange, if any, on which such Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as such Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of $1,000 in
original principal amount (in the case of Dollar Notes) and no Note of E1,000 in
original principal amount or less (in the case of Euro Notes) shall be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued and delivered to the Depositary, or, in the case of
Definitive Notes, issued in the name of the Holder thereof in each case upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on the Notes or portions thereof called for redemption.

REDEMPTION FOR TAXATION REASONS

The Notes may be redeemed, at the option of VersaTel in whole but not in
part, at any time upon giving not less than 30 nor more than 60 days' notice to
the Holders (which notice shall be irrevocable), at a redemption price equal to
the principal amount thereof, together with accrued and unpaid interest, to the
date fixed by VersaTel for redemption (a "Tax Redemption Date"), and all
Additional Amounts (see "-- Withholding Taxes"), if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if VersaTel determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations or rulings promulgated
thereunder) of The Netherlands (or any political subdivision or taxing authority
thereof) or any other Relevant Taxing Jurisdiction (as defined in
"-- Withholding Taxes")affecting taxation which becomes effective on or after
the Issue Date, or (ii) any change in or new or different position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding,

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judgment or order by a court of competent jurisdiction), which change,
amendment, application or interpretation becomes effective on or after the Issue
Date, VersaTel is, or on the next Interest Payment Date would be, required to
pay Additional Amounts, and VersaTel determines that such payment obligation
cannot be avoided by VersaTel taking reasonable measures.

Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which VersaTel would be
obligated to make such payment or withholding if a payment in respect of the
Notes were then due. Prior to the publication or, where relevant, mailing of any
notice of redemption of the Notes pursuant to the foregoing, VersaTel will
deliver to each Trustee an opinion of an independent tax counsel of recognized
international standing to the effect that the circumstances referred to above
exist. Each Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.

CERTAIN COVENANTS

LIMITATION ON INDEBTEDNESS

(a) VersaTel will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that if no Default
or Event of Default shall have occurred and be continuing at the time, or would
occur as a consequence, of the Incurrence of any such Indebtedness, VersaTel may
Incur Indebtedness if immediately thereafter the ratio of (i) the aggregate
principal amount of Indebtedness of VersaTel and its Restricted Subsidiaries on
a consolidated basis outstanding as of the Transaction Date to (ii) the pro
forma Consolidated Cash Flow (the "Indebtedness to Consolidated Cash Flow
Ratio") for the preceding two full fiscal quarters multiplied by two, determined
on a pro forma basis as if any such Indebtedness had been Incurred and the
proceeds thereof had been applied at the beginning of such two fiscal quarters,
would be greater than zero and less than or equal to 5.0 to 1.

(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) VersaTel and (except for Indebtedness under subsections
(v), (vi) and (x)(A) below) any Restricted Subsidiary may Incur each and all of
the following:

(i) Indebtedness (other than Acquired Indebtedness) Incurred to
finance the cost (provided that such Indebtedness is Incurred at any time
on or before, or within 90 days following, the incurrence of such cost)
(including the cost of design, development, construction, acquisition,
installation or integration) of assets used in the Permitted Business or
Equity Interests of (A) a Restricted Subsidiary that owns principally such
assets from a Person other than VersaTel or a Restricted Subsidiary of
VersaTel or (B) any Person that is principally engaged in the Permitted
Business, that would become a Restricted Subsidiary and owns principally
such assets; provided that (x) any such Indebtedness of a Restricted
Subsidiary must be Incurred under one or more Credit Facilities, under one
or more Capitalized Leases or from the vendor of the assets, property or
services acquired with the proceeds of such Indebtedness, (y) the amount of
such Indebtedness of a Restricted Subsidiary may not exceed the Fair Market
Value of the assets so acquired and (z) the amount of such Indebtedness of
VersaTel, Incurred to acquire Equity Interests under clauses (A) and (B)
above, may not exceed the Fair Market Value of such assets of any
Restricted Subsidiary or any such Person so acquired;

(ii) Indebtedness of any Restricted Subsidiary owing to and held by
VersaTel, Indebtedness of VersaTel owing to and held by any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary owing to and held
by any other Restricted Subsidiary; provided that any subsequent issuance
or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer
of such Indebtedness (other than to VersaTel or another Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of

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such Indebtedness not permitted by this clause (ii); and provided, further,
that Indebtedness of VersaTel owing to and held by a Restricted Subsidiary
must be unsecured and subordinated in right of payment to the Notes;

(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness of
VersaTel or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (ii), (iv), (vii), (viii) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, and reasonable fees and
expenses); provided that such new Indebtedness shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced or refunded is pari passu with the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness
being refinanced or refunded and (D) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, has a Weighted Average
Life to Maturity which is not less than the remaining Weighted Average Life
to Maturity of the Indebtedness to be refinanced or refunded; and provided,
further, that in no event may Indebtedness of VersaTel be refinanced or
refunded by means of any Indebtedness of any Restricted Subsidiary pursuant
to this clause (iii);

(iv) Indebtedness (A) in respect of performance, surety or appeal
bonds or letters of credit supporting Trade Payables, in each case provided
in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder, and (C)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of
VersaTel or any of its Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary of VersaTel (other than Guarantees of
Indebtedness Incurred for the purpose of financing such acquisition by the
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary), in a principal amount not to exceed the gross proceeds
actually received by VersaTel or any Restricted Subsidiary in connection
with such disposition;

(v) Indebtedness, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described below under
"Legal Defeasance and Covenant Defeasance";

(vi) Indebtedness of VersaTel represented by the Notes;

(vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of VersaTel by a Restricted Subsidiary, in
each case permitted by and made in accordance with the "Limitation on
Issuances of Guarantees of Indebtedness by Restricted Subsidiaries"
covenant;

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(viii) Indebtedness under one or more Credit Facilities, in an
aggregate principal amount at any one time outstanding not to exceed the
greater of (x) NLG 70.0 million and (y) 80.0% of Eligible Accounts
Receivable at any one time outstanding, subject to any permanent reductions
required by any other terms of either Indenture;

(ix) Acquired Indebtedness; provided that the aggregate amount of such
Acquired Indebtedness (other than the Indebtedness Incurred under one or
more Credit Facilities, under one or more Capitalized Leases or from the
vendor of assets, property or services acquired with the proceeds of such
Indebtedness) of the Person that is to become a Restricted Subsidiary or be
merged or consolidated with or into VersaTel or any Restricted Subsidiary
in the contemplated transaction, outstanding at the time of such
transaction does not exceed the Fair Market Value of the plant, property
and equipment (excluding property, plant and equipment securing any of the
Credit Facilities or vendor financings or subject to any Capital Leases
referred to in this clause (ix)) of any Restricted Subsidiary so acquired;

(x) Indebtedness of (A) VersaTel not to exceed, at any one time
outstanding, 2.00 times the Net Cash Proceeds from (1) the issuance and
sale, other than to a Subsidiary, of Equity Interests (other than
Redeemable Stock and excluding any Ordinary Shares issued in connection
with the Recapitalization) of VersaTel and (2) capital contributions made
in VersaTel (other than by a Subsidiary) less, in each case, the amount of
such proceeds used to make Restricted Payments as provided in clause (C)(2)
of the first paragraph or clause (iii) or (iv) of the second paragraph of
the "Limitation on Restricted Payments" covenant and (B) VersaTel or
Acquired Indebtedness of a Restricted Subsidiary (provided that any such
Indebtedness of such Restricted Subsidiary must be incurred under one or
more Credit Facilities, under one or more Capitalized Leases or from the
vendor of the assets, property or services acquired with the proceeds of
such Indebtedness) not to exceed, at any one time outstanding, the fair
market value of any Telecommunications Assets acquired by VersaTel or such
Restricted Subsidiary in exchange for Equity Interests of VersaTel issued
after the Issue Date; provided, however, that in determining the fair
market value of any such Telecommunications Assets so acquired, if the
estimated fair market value of such Telecommunications Assets exceeds (x)
$2.0 million (as estimated in good faith by the Board of Directors), then
the fair market value of such Telecommunications Assets will be determined
by a majority of the Board of Directors of VersaTel, which determination
will be evidenced by a resolution thereof, and (y) $10.0 million (as
estimated in good faith by the Board of Directors), then VersaTel will
deliver to each Trustee a written appraisal as to the fair market value of
such Telecommunications Assets prepared by an internationally recognized
investment banking or public accounting firm (or, if no such investment
banking or public accounting firm is qualified to prepare such an
appraisal, by an internationally recognized appraisal firm); and provided
further that such Indebtedness (other than the Indebtedness Incurred under
one or more Credit Facilities, under one or more Capitalized Leases or from
the vendor of assets, property or services acquired with the proceeds of
such Indebtedness) does not mature prior to the Stated Maturity of the
Notes and the Weighted Average Life to Maturity of such Indebtedness is
longer than that of the Notes;

(xi) Indebtedness outstanding as of the Issue Date; and

(xii) Indebtedness (in addition to Indebtedness permitted under
clauses (i) through (xi) above) in an aggregate principal amount
outstanding at any one time not to exceed the greater of (A) NLG 100
million and (B) an amount equal to 5% of VersaTel's consolidated net
tangible assets as of such date.

(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included; provided,
however, that the foregoing shall not in any way be deemed to limit the
provisions of

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"-- Limitation on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries." For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, (A) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, VersaTel, in its sole discretion, shall classify (and from time to time
may reclassify) such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of such clauses and (B) the
principal amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with U.S. GAAP.

LIMITATION ON RESTRICTED PAYMENTS

VersaTel will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on account of any Equity Interest in VersaTel or any Restricted Subsidiary to
the holders thereof, including any dividend or distribution payable in
connection with any merger or consolidation (other than (A) dividends or
distributions payable solely in Equity Interests (other than Redeemable Stock)
of VersaTel, (B) dividends or distributions made only to VersaTel or a
Restricted Subsidiary and (C) pro rata dividends or distributions on Capital
Stock of a Restricted Subsidiary held by Persons other than VersaTel or a
Restricted Subsidiary), (ii) purchase, redeem, retire or otherwise acquire for
value any Equity Interests of VersaTel or any Equity Interests of any Restricted
Subsidiary (other than any such Equity Interests owned by VersaTel or any
Restricted Subsidiary), (iii) make any principal payment or redeem, repurchase,
defease, or otherwise acquire or retire for value, in each case, prior to any
scheduled repayment, or maturity, any Indebtedness of VersaTel that is
subordinated in right of payment to the Notes, or (iv) make any Investment,
other than a Permitted Investment, in any Person (all such payments or any other
actions described in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments") unless, at the time of, and after giving effect to,
the proposed Restricted Payment:

(A) no Default or Event of Default shall have occurred and be
continuing;

(B) VersaTel could Incur at least $1.00 of additional Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant; and

(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in good faith
by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) after the Issue Date is less than the sum
of (1) Cumulative Consolidated Cash Flow minus 150% of Cumulative
Consolidated Fixed Charges, plus (2) 100% of the aggregate Net Cash
Proceeds received by VersaTel after the Issue Date as a capital
contribution or from the issuance and sale of its Equity Interests (other
than Redeemable Stock, and excluding any Ordinary Shares issued in
connection with the Offering or the Recapitalization) to a Person (other
than a Restricted Subsidiary of VersaTel), plus (3) the aggregate amount by
which Indebtedness (other than any Indebtedness subordinated in right of
payment to the Notes) of VersaTel or any Restricted Subsidiary is reduced
on VersaTel's balance sheet upon the conversion or exchange (other than by
a Restricted Subsidiary of VersaTel) subsequent to the Issue Date into
Equity Interests (other than Redeemable Stock and less the amount of any
cash, or the fair value of property, distributed by VersaTel or any
Restricted Subsidiary upon such conversion or exchange) and plus (4)
without duplication of any amount included in the calculation of
Consolidated Net Income, in the case of repayment of, or return of capital
in respect of, any Investment constituting a Restricted Payment made after
the Issue Date, an amount equal to the lesser of the repayment of, the
return of capital with respect to, such Investment and the cost of such
Investment, in either case less the cost of the disposition of such
Investment and net of taxes.

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The foregoing provisions shall not prohibit: (i) the payment of any
dividend within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would comply with the provisions of each Indenture;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph
(b) of the "Limitation on Indebtedness" covenant; (iii) the repurchase,
redemption or other acquisition of Equity Interests in VersaTel in exchange for,
or out of the Net Cash Proceeds of, a substantially concurrent capital
contribution or offering of Equity Interests (other than Redeemable Stock) in
VersaTel to any Person (other than a Restricted Subsidiary); (iv) the
repurchase, redemption or other acquisition of Indebtedness of VersaTel which is
subordinated in right of payment to the Notes in exchange for, or out of the Net
Cash Proceeds of, a substantially concurrent capital contribution or offering of
Equity Interests (other than Redeemable Stock) in VersaTel to any Person (other
than a Restricted Subsidiary); (v) the purchase of any subordinated Indebtedness
at a purchase price not greater than 101% of the principal amount thereof
following a Change of Control pursuant to an obligation in the instruments
governing such subordinated Indebtedness to purchase or redeem such subordinated
Indebtedness as a result of such Change of Control; provided, however, that no
such purchase or redemption shall be permitted until VersaTel has completely
discharged its obligations described under "-- Repurchase of Notes upon a Change
of Control" (including the purchase of all Notes tendered for purchase by
holders) arising as a result of such Change of Control; (vi) repurchases of
warrants issued in connection with the First Offering and the Second Offering;
and (vii) repurchases of Equity Interests of VersaTel from employees of VersaTel
or any of its Restricted Subsidiaries deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise price of
such options; provided that any payments made pursuant to this clause (vii) may
not exceed in aggregate $500,000 in any fiscal year of VersaTel; provided that,
in the case of clauses (ii) through (vii), no Default or Event of Default shall
have occurred and be continuing or occur as a consequence of the actions or
payments set forth therein.

Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payment referred to in clauses (ii), (iii)
and (iv) thereof) shall be included in calculating whether the conditions of
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant have been met with respect to any subsequent Restricted Payments. In
the event the proceeds of an issuance of Equity Interests (other than Redeemable
Stock) of VersaTel are used for the redemption, repurchase or other acquisition
of the Notes, then the Net Cash Proceeds of such issuance shall be included in
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of the Notes.

LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES

VersaTel will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Equity Interests of such
Restricted Subsidiary owned by VersaTel or any other Restricted Subsidiary, (ii)
pay any Indebtedness owed to VersaTel or any other Restricted Subsidiary, (iii)
make loans or advances to VersaTel or any other Restricted Subsidiary, or (iv)
transfer any of its property or assets to VersaTel or any other Restricted
Subsidiary.

The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being

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amended, supplemented, extended, refinanced, renewed or replaced; (ii) existing
under or by reason of applicable law; (iii) existing with respect to any
Restricted Subsidiary acquired by VersaTel or any Restricted Subsidiary after
the Issue Date, or the property or assets of such Restricted Subsidiary, and
existing at the time of such acquisition and not incurred in contemplation
thereof, which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the property or
assets of such Person so acquired, and any amendments, supplements, extensions,
refinancings, renewals or replacements of agreements containing such
encumbrances or restrictions; provided that the encumbrances and restrictions in
any such amendments, supplements, extensions, refinancings, renewals or
replacements are no more restrictive than those encumbrances or restrictions
that are then in effect and that are being amended, supplemented, extended,
refinanced, renewed or replaced; (iv) in the case of clause (iv) of the first
paragraph of this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is,
or is subject to, a lease, purchase mortgage obligation, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of VersaTel or any Restricted Subsidiary not otherwise
prohibited by each Indenture or (C) arising or agreed to in the ordinary course
of business, not relating to any Indebtedness, and that do not, individually or
in the aggregate, materially detract from the value of property or assets of
VersaTel or any Restricted Subsidiary to VersaTel or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock in, or property and assets of, such Restricted
Subsidiary; provided that such restriction shall terminate if such transaction
is abandoned or if such transaction is not consummated within six months of the
date such agreement was entered into; or (vi) contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was issued if
(A) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Indebtedness or agreement, (B) the encumbrance or restriction is not materially
more disadvantageous to the holders of the Notes than is customary in comparable
financings (as determined by the Board of Directors) and (C) the Board of
Directors determines that any such encumbrance or restriction will not
materially affect VersaTel's ability to make principal or interest payments on
the Notes. Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent VersaTel
or any Restricted Subsidiary from creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant that
limit the right of the debtor to dispose of the assets securing such
Indebtedness.

LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES

VersaTel will not, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue, transfer, convey, sell, lease or otherwise dispose of
any shares of Capital Stock (including options, warrants or other rights to
purchase shares of such Capital Stock) of such Restricted Subsidiary or any
other Restricted Subsidiary to any Person (other than (i) to VersaTel or a
Wholly Owned Restricted Subsidiary, (ii) issuances of director's qualifying
shares, (iii) as required by applicable law, issuances or sales to foreign
nationals of the jurisdiction in which a Restricted Subsidiary is organized, and
(iv) Strategic Minority Capital Stock Issues), unless (A) immediately after
giving effect to such issuance, transfer, conveyance, sale, lease or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and (B) any Investment in such Person remaining after giving effect
to such issuance, transfer, conveyance, sale, lease or other disposition would
have been permitted to be made under the "Limitation on Restricted Payments"
covenant if made on the date of such issuance, transfer, conveyance, sale, lease
or other disposition (valued as provided in the definition of "Investment").

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LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES

VersaTel will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction or series of
transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any direct
or indirect holder (or any Affiliate of such holder) of 5% or more of any class
of Capital Stock of VersaTel or with any Affiliate of VersaTel or any Restricted
Subsidiary, unless (i) such transaction or series of transactions is on terms
that are no less favorable to VersaTel or such Restricted Subsidiary than could
reasonably be obtained in a comparable arm's-length transaction with a Person
that is not such a holder or Affiliate, (ii) if such transaction or series of
transactions involves aggregate consideration in excess of $2.0 million, then
VersaTel shall deliver to each Trustee a resolution set forth in an Officers'
Certificate adopted by a majority of the Board of Directors, including a
majority of the independent, disinterested directors, approving such transaction
or series of transactions and certifying that such transaction or series of
transactions comply with clause (i) above, and (iii) if such transaction or
series of transactions involves aggregate consideration in excess of $5.0
million, then VersaTel will deliver to each Trustee a written opinion as to the
fairness to VersaTel or such Restricted Subsidiary of such transaction or series
of transactions from a financial point of view from an internationally
recognized investment banking firm (or, if an investment banking firm is
generally not qualified to give such an opinion, by an internationally
recognized appraisal firm or accounting firm).

The foregoing limitation does not limit and will not apply to (i) any
transaction between VersaTel and any of its Restricted Subsidiaries or between
Restricted Subsidiaries; (ii) the payment of reasonable and customary regular
fees to directors of VersaTel who are not employees of VersaTel; and (iii)
payment of dividends or other distributions in respect of Equity Interests of
VersaTel or any Restricted Subsidiary permitted by the "Limitation on Restricted
Payments" covenant.

LIMITATION ON LIENS

VersaTel will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) on any asset or property of VersaTel or any Restricted
Subsidiary without making effective provisions for all of the Notes and all
other amounts due under each Indenture to be directly secured equally and
ratably with (or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.

LIMITATION ON ASSET SALES

VersaTel will not, and will not permit any Restricted Subsidiary to, make
any Asset Sale unless (i) VersaTel or the Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets sold or disposed of and (ii) at least 80% of the
consideration received for such Asset Sale consists of cash or Cash Equivalents
or Replacement Assets or the assumption of Indebtedness which ranks equal in
right of payment with the Notes.

VersaTel shall, or shall cause the relevant Restricted Subsidiary to, apply
the Net Cash Proceeds from an Asset Sale within 270 days of the receipt thereof
to (A) permanently repay unsubordinated Indebtedness of VersaTel or Indebtedness
of any Restricted Subsidiary, in each case owing to a Person other than VersaTel
or any of its Restricted Subsidiaries, (B) invest in Replacement Assets, or (C)
in any combination of repayment, prepayment, and reinvestment permitted by the
foregoing clauses (A) and (B).

Each Indenture will provide that any Net Cash Proceeds from the Asset Sale
that are not invested as provided and within the time period set forth in the
second paragraph of this "Limitation on Asset Sales" covenant will be deemed to
constitute "Excess Proceeds." If at any time the aggregate amount of Excess
Proceeds exceeds $5.0 million, VersaTel shall, within 30 business days
thereafter, make an offer
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to all Holders of Notes (an "Asset Sale Offer") to purchase on a pro rata basis
the maximum principal amount of Notes, that is an integral multiple of $1,000
(in the case of Dollar Notes) or E1,000 (in the case of Euro Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the outstanding principal amount thereof, plus accrued and
unpaid interest thereon, plus Additional Amounts, if any, to the date fixed for
the closing of such offer (and, in the case of Definitive Notes, subject to the
right of a Holder of record on the relevant record date to receive interest due
on the relevant interest payment date and Additional Amounts, if any, in respect
thereof), in accordance with the procedures set forth in each Indenture.
VersaTel will commence an Asset Sale Offer with respect to Excess Proceeds
within thirty business days after the date that Excess Proceeds exceeds $5.0
million by publishing or, where relevant, mailing the notice required pursuant
to the terms of each Indenture, with a copy to each Trustee. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, subject to applicable law, VersaTel may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the selection of such Notes for purchase will be made by each
Trustee in the same manner as the Notes are redeemed, as described under
"-- Optional Redemption." Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.

VersaTel will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder and will comply
with the applicable laws of any non-U.S. jurisdiction in which an Asset Sale
Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of an Indenture, VersaTel will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in such Indenture by virtue thereof.

LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES

VersaTel will not permit any Restricted Subsidiary, directly or indirectly,
to guarantee, assume or in any other manner become liable with respect to any
Indebtedness of VersaTel unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to each Indenture providing for a
Guarantee of all of VersaTel's obligations under the Notes and such Indenture on
terms substantially similar to the guarantee of such Indebtedness, except that
if such Indebtedness is by its express terms subordinated in right of payment to
the Notes, any such assumption, Guarantee or other liability of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated in right of
payment to such Restricted Subsidiary's assumption, Guarantee or other liability
with respect to the Notes substantially to the same extent as such Indebtedness
is subordinated to the Notes and (ii) such Restricted Subsidiary waives, and
will not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
VersaTel or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; provided that any Restricted
Subsidiary may guarantee Indebtedness of VersaTel under a Credit Facility if
such Indebtedness is Incurred in accordance with the "-- Limitation on
Indebtedness" covenant.

Notwithstanding the foregoing, any Guarantee of all of VersaTel's
obligations under the Notes and the Indentures by a Restricted Subsidiary may
provide by its terms that it will be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of VersaTel, of all of VersaTel's and each Restricted Subsidiary's
Equity Interests in, or all or substantially all of the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the
Indentures) or (ii) the release or discharge of the guarantee which resulted in
the creation of such Guarantee, except a discharge or release by or as a result
of payment under such guarantee.

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BUSINESS OF VERSATEL; RESTRICTION ON TRANSFERS OF EXISTING BUSINESS

VersaTel will not, and will not permit any Restricted Subsidiary to, be
principally engaged in any business or activity other than a Permitted Business.
In addition, VersaTel and any Restricted Subsidiary will not be permitted,
directly or indirectly, to transfer to any Unrestricted Subsidiary (i) any of
the licenses, permits or authorizations used in the Permitted Business of
VersaTel and any Restricted Subsidiary or (ii) any material portion of the
"property and equipment" (as such term is used in VersaTel's consolidated
financial statements) of VersaTel or any Restricted Subsidiary used in the
licensed service areas of VersaTel and any Restricted Subsidiary.

PROVISION OF FINANCIAL STATEMENTS AND REPORTS

VersaTel will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not VersaTel has a
class of securities registered under the Exchange Act, (i) all annual and
quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Forms 20-F and 10-Q
if VersaTel were required to file such Forms (which financial statements shall
be prepared in accordance with U.S. GAAP), including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual financial information, a report thereon by VersaTel's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if VersaTel were required to file such
reports. Such quarterly financial information shall be filed with the Commission
within 45 days following the end of each fiscal quarter of VersaTel, and such
annual financial information shall be furnished within 90 days following the end
of each fiscal year of VersaTel. Such annual financial information shall include
the geographic segment financial information required to be disclosed by
VersaTel under Item 101(d) of Regulation S-K under the Securities Act. VersaTel
will also be required (a) to file with each Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which VersaTel files such reports and documents with the
Commission or the date on which VersaTel would be required to file such reports
and documents if VersaTel were so required, and (b) if filing such reports and
documents with the Commission is not accepted by the Commission or is prohibited
under the Exchange Act, to supply at VersaTel's cost copies of such reports and
documents to any prospective holder promptly upon request. In addition, for so
long as the Notes remain outstanding and VersaTel is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act nor exempt
from reporting under Rule 12g3-2(b) of the Exchange Act, VersaTel shall furnish
to the Holders and to securities analysts and prospective investors, upon their
request, any information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act and, to any beneficial holder of Notes, information of
the type that would be filed with the Commission pursuant to the foregoing
provisions, upon the request of any such holder, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
shall require, copies of all reports and information described above will be
available during normal business hours at the office of the listing agent in
Luxembourg.

REPURCHASE OF NOTES UPON A CHANGE OF CONTROL

Upon the occurrence of a Change of Control, VersaTel will make an offer to
purchase all or any part (equal to $1,000 in principal amount (in the case of
Dollar Notes) and equal to E1,000 in principal amount (in the case of Euro
Notes) and, in each case, in integral multiples thereof) of each series of Notes
pursuant to the offer described below (the "Change of Control Offer") at a price
in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the date of
repurchase, plus Additional Amounts, if any, to the date of repurchase (and in
the case of Definitive Notes, subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date and Additional Amounts, if any,

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in respect thereof). Each Indenture provides that within 30 days following any
Change of Control, VersaTel will publish notice of such in a leading newspaper
having a general circulation in New York (which is expected to be the Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) (and, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mail a notice to each
Holder (and if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, will publish
notice in a newspaper having a general circulation in Luxembourg (which is
expected to be Luxemburger Wort)), with a copy to each Trustee, with the
following information: (i) that a Change of Control Offer is being made pursuant
to the covenant entitled "Repurchase of Notes upon a Change of Control" and that
all Notes properly tendered pursuant to such Change of Control Offer will be
accepted for payment; (ii) that the purchase price and the purchase date, which
will be no earlier than 30 days nor later than 60 days from the date such notice
is published, or where relevant, mailed, except as may be otherwise required by
applicable law (the "Change of Control Payment Date"); (iii) that any Note not
properly tendered will remain outstanding and continue to accrue interest; (iv)
that unless VersaTel defaults in the payment of the Change of Control Payment,
all Notes accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest on the Change of Control Payment Date; (v) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the applicable paying
agent and at the address specified in the notice prior to the close of business
on the third Business Day preceding the Change of Control Payment Date; (vi)
that Holders will be entitled to withdraw their tendered Notes and their
election to require VersaTel to purchase such Notes; provided, however, that the
applicable paying agent receives, not later than the close of business on the
last day of the offer period, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes tendered for purchase, and
a statement that such Holder is withdrawing his tendered Notes and his election
to have such Notes purchased; and (vii) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the principal amount of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount (in the case of
Dollar Notes) or E1,000 in principal amount (in the case of Euro Notes) or, in
each case, in an integral multiple thereof.

VersaTel will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder and will comply
with the applicable laws of any non-U.S. jurisdiction in which a Change of
Control Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to a Change
of Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of either Indenture, VersaTel will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in such Indenture by virtue
thereof. The provisions relating to VersaTel's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.

Each Indenture will provide that on the Change of Control Payment Date,
VersaTel will, to the extent permitted by law, (i) accept for payment all Notes
of each series or portions thereof properly tendered pursuant to the Change of
Control Offer, (ii) deposit with each paying agent an amount equal to the
aggregate Change of Control Payment in respect of the Notes or portions thereof
so tendered and (iii) deliver, or cause to be delivered, to each Trustee for
cancellation the Notes so accepted together with an Officers' Certificate
stating that such Notes or portions thereof have been tendered to and purchased
by VersaTel. Each Indenture will provide that each paying agent will promptly
either (x) pay to the Holder against presentation and surrender (or, in the case
of partial payment, endorsement) of the

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Global Notes or (y) in the case of Definitive Notes, mail to each Holder of
Notes the Change of Control Payment for such Notes, and each Trustee will
promptly authenticate and deliver to the Holder of the Global Notes a new Global
Note or Notes or, in the case of Definitive Notes, mail to each Holder a new
Definitive Note, as applicable, equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided, however, that each new
Definitive Note will be in a principal amount of $1,000 (in the case of Dollar
Notes) or a principal amount of E1,000 (in the case of Euro Notes) or, in each
case, in an integral multiple thereof. VersaTel will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.

If VersaTel is unable to repay all of its Indebtedness that would prohibit
repurchase of the Notes or is unable to obtain the consents of the holders of
Indebtedness, if any, of VersaTel outstanding at the time of a Change of Control
whose consent would be so required to permit the repurchase of Notes, then
VersaTel will have breached such covenant. This breach will constitute an Event
of Default under each Indenture if it continues for a period of 30 consecutive
days after written notice is given to VersaTel by the relevant Trustee or the
holders of at least 25% in aggregate principal amount of the Notes outstanding.
In addition, the failure by VersaTel to repurchase Notes at the conclusion of
the Change of Control Offer will constitute an Event of Default without any
waiting period or notice requirements.

There can be no assurances that VersaTel will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
any covenant that may be contained in other securities of VersaTel which might
be outstanding at the time). The above covenant requiring VersaTel to repurchase
the Notes will, unless the consents referred to above are obtained, require
VersaTel to repay all Indebtedness then outstanding which by its terms would
prohibit such Note repurchase, either prior to or concurrently with such Note
repurchase.

The existence of a Holder's right to require VersaTel to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire VersaTel in a transaction that would constitute a
Change of Control.

CONSOLIDATION, MERGER AND SALE OF ASSETS

VersaTel will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or in
a series of related transactions) to, any Person or permit any Person to merge
with or into VersaTel, and VersaTel will not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of VersaTel or VersaTel and its
Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) VersaTel will be the continuing Person, or the Person (if other than
VersaTel) (the "Surviving Entity") formed by such consolidation or into which
VersaTel is merged or that acquired or leased such property and assets of
VersaTel will be a corporation organized and validly existing under the laws of
The Netherlands, Germany, France, Belgium, the United Kingdom or the United
States of America, any state thereof or the District of Columbia and shall
expressly assume, by supplemental indentures, executed and delivered to each
Trustee, all of the obligations of VersaTel with respect to the Notes under each
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, VersaTel, or any
Person becoming the successor obligor of the Notes, shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of VersaTel
immediately prior to such transaction; (iv) immediately after giving effect to
such transaction on a pro forma basis VersaTel, or any Person becoming the
successor obligor of the Notes, as the case may be, (A) prior to the third
anniversary of the Issue Date, would have an Indebtedness to

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Consolidated Cash Flow Ratio no greater than such ratio immediately prior to
such transaction or (B) on or after the third anniversary of the Issue Date,
could Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant; (v) VersaTel delivers to each Trustee an
Officers' Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and an Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indentures comply with each Indenture; and (vi) VersaTel shall have delivered to
each Trustee an opinion of tax counsel reasonably acceptable to such Trustee
stating that (A) Holders will not recognize income, gain or loss for U.S.
federal or Netherlands income tax purposes as a result of such transaction and
(B) no taxes on income (including taxable capital gains) will be payable under
the tax laws of the Relevant Taxing Jurisdiction by a Holder who is or who is
deemed to be a non-resident of the Relevant Taxing Jurisdiction in respect of
the acquisition, ownership or disposition of the Notes, including the receipt of
principal of, premium and interest paid pursuant to such Notes.

EVENTS OF DEFAULT

The following constitute "Events of Default" under each Indenture: (a) a
default for 30 days or more in the payment when due of interest on the Notes or
Additional Amounts, if any, with respect to the Notes; (b) a default in the
payment of principal of (or premium, if any, on) any Note when the same becomes
due and payable at maturity, upon acceleration, redemption or otherwise; (c) a
default in the payment of principal or interest on Notes required to be
purchased pursuant to an Asset Sale Offer as described under "Limitation on
Asset Sales" or pursuant to a Change of Control Offer as described under
"Repurchase of Notes upon a Change of Control"; (d) a failure to perform or
comply with the provisions described under "Consolidation, Merger and Sale of
Assets"; (e) a default in the performance of or breach of any other covenant or
agreement of VersaTel in such Indenture or under either series of Notes and such
default or breach continues for a period of 30 consecutive days after written
notice by the relevant Trustee or the holders of 25% or more in aggregate
principal amount of such series of Notes; (f) a default occurs on any other
Indebtedness of VersaTel or any Restricted Subsidiary if either (x) such default
is a failure to pay principal of such Indebtedness when due after any applicable
grace period and the principal amount of such Indebtedness is in excess of $5.0
million or (y) as a result of such default, the maturity of such Indebtedness
has been accelerated prior to its scheduled maturity and such default has not
been cured within the shorter of (i) 60 days and (ii) the applicable grace
period, and such acceleration has not been rescinded, and the principal amount
of such Indebtedness together with the principal amount of any other
Indebtedness of VersaTel and its Restricted Subsidiaries that is also in default
as to principal, or the maturity of which has been accelerated, aggregates $5.0
million or more; (g) failure to pay final judgments and orders against VersaTel
or any Restricted Subsidiary (not covered by insurance) aggregating in excess of
$5.0 million (treating any deductibles, self-insurance or retention as not so
covered), which final judgments remain unpaid, undischarged and unstayed for a
period in excess of 30 consecutive days following entry of the final judgment or
order that causes the aggregate amount for all such final judgments or orders
outstanding and not paid, discharged or stayed to exceed $5.0 million; (h) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of VersaTel or any of its Significant Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of VersaTel or
any of its Significant Subsidiaries or for all or substantially all of the
property and assets of VersaTel or any of its Significant Subsidiaries or (C)
the winding up or liquidation of the affairs of VersaTel or any of its
Significant Subsidiaries and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (i) VersaTel or
any of its Significant Subsidiaries (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or

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similar official of VersaTel or any of its Significant Subsidiaries or for all
or substantially all of the property and assets of VersaTel or any of its
Significant Subsidiaries or (C) effects any general assignment for the benefit
of creditors.

If an Event of Default (other than an Event of Default specified in clauses
(h) or (i) above) occurs and is continuing under either Indenture, the relevant
Trustee or the Holders of at least 25% in aggregate principal amount of the
relevant series of Notes then outstanding, by written notice to VersaTel, may
declare the principal of, premium, if any, accrued and unpaid interest and other
monetary obligations (including Additional Amounts, if any) on all the then
outstanding Notes of such series to be immediately due and payable. Upon such a
declaration, such principal of, premium, if any, interest and other monetary
obligations on such Notes shall be immediately due and payable. In the event of
a declaration of acceleration because an Event of Default set forth in clause
(f) above has occurred and is continuing, such declaration of acceleration shall
be automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (f) shall be remedied or cured by VersaTel
and/or the relevant Restricted Subsidiaries or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clauses (h) or (i) above
occurs, the principal of, premium, if any, accrued interest and other monetary
obligations on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
either Trustee or any Holder. Holders of at least a majority in principal amount
of each series of outstanding Notes, by written notice to VersaTel and to the
relevant Trustee, may waive all past defaults and rescind and annul a
declaration of acceleration and its consequences if (i) all existing Events of
Default, other than the nonpayment of the principal of, premium, if any,
interest and other monetary obligations on such series of Notes that have become
due solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of defaults, see
"-- Amendment, Supplement and Waiver".

Holders of Notes may not enforce each Indenture or the Notes except as
provided in each Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes of either series may
direct the relevant Trustee in its exercise of any trust or power. Each
Indenture will provide that each Trustee thereunder may withhold from Holders of
Notes notice of any continuing Default (except a Default relating to the payment
of principal, premium, if any, interest, or Additional Amounts, if any) if it
determines that withholding notice is in their interest. Each Indenture will
further provide that each Trustee thereunder shall have no obligation to
accelerate the Notes if, in the best judgment of such Trustee, acceleration is
not in the best interest of the Holders.

Each Indenture will require that VersaTel will deliver annually an
Officers' Certificate to each Trustee thereunder certifying that a review has
been conducted of the activities of VersaTel and VersaTel's performance under
such Indenture and that VersaTel has fulfilled all obligations thereunder or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default and the nature and status thereof. VersaTel will also be
obligated to notify each Trustee of any default or defaults in the performance
of any covenants or agreements under each Indenture within five business days of
becoming aware of any such default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No director, officer, employee, incorporator or stockholder of VersaTel
shall have any liability for any obligations of VersaTel under the Notes or
either Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. federal securities laws, and it is
the view of the Commission that such a waiver is against public policy.

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LEGAL DEFEASANCE AND COVENANT DEFEASANCE

The obligations of VersaTel under each Indenture will terminate (other than
certain obligations) and will be released upon payment in full of all of the
Notes of each series. VersaTel may, at its option and at any time, elect to have
all of its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") and cure all then existing Events of Default except for (i) the
rights of Holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, interest and Additional Amounts, if any, on such
Notes when such payments are due or on the redemption date solely out of the
trust created pursuant to each Indenture, (ii) VersaTel's obligations with
respect to Notes concerning issuing temporary Notes, or, where relevant,
registration of such Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of each
Trustee, and VersaTel's obligations in connection therewith and (iv) the Legal
Defeasance provisions of each Indenture. In addition, VersaTel may, at its
option and at any time, elect to have the obligations of VersaTel released with
respect to certain covenants that are described in the Indentures ("Covenant
Defeasance"), and thereafter any omission to comply with such obligations shall
not constitute a Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment on other
indebtedness, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to either series of Notes,

(i) VersaTel must irrevocably deposit, or cause to be irrevocably
deposited, with the relevant Trustee, in trust, for the benefit of the
Holders of (A) the Dollar Notes, cash in U.S. dollars, U.S. Government
Securities or a combination thereof and (B) the Euro Notes, cash in euros,
European Government Securities or a combination thereof, in such amounts as
will be sufficient, in the opinion of an internationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
interest and Additional Amounts, if any, due on the outstanding Notes on
the stated maturity date or on the applicable redemption date, as the case
may be, of such principal, premium, if any, interest and Additional
Amounts, if any, due on the outstanding Notes of each series;

(ii) in the case of Legal Defeasance, VersaTel shall have delivered to
the relevant Trustee (A) an opinion of counsel in the United States
reasonably acceptable to such Trustee confirming that, subject to customary
assumptions and exclusions, (1) VersaTel has received from, or there has
been published by, the U.S. Internal Revenue Service a ruling or (2) since
the Issue Date, there has been a change in the applicable U.S. federal
income tax law such that a ruling is no longer required, in either case to
the effect that, and based thereon such opinion of counsel in the United
States shall confirm that, subject to customary assumptions and exclusions,
the Holders of the outstanding Notes will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Legal
Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred and (B) an opinion of
counsel in The Netherlands reasonably acceptable to such Trustee to the
effect that (1) Holders will not recognize income, gain or loss for
Netherlands income tax purposes as a result of such Legal Defeasance and
will be subject to Netherlands income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred and (2) payments from the defeasance trust will
be free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of The Netherlands or any
political subdivision thereof or therein having the power to tax;

(iii) in the case of Covenant Defeasance, VersaTel shall have
delivered to the relevant Trustee (A) an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming

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that, subject to customary assumptions and exclusions, the Holders of the
outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to such tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred and (B) an opinion of counsel in The Netherlands reasonably
acceptable to such Trustee to the effect that (1) Holders will not
recognize income, gain or loss for Netherlands income tax purposes as a
result of such Covenant Defeasance and will be subject to Netherlands
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred and
(2) payments from the defeasance trust will be free and exempt from any and
all withholding and other income taxes of whatever nature imposed or levied
by or on behalf of The Netherlands or any political subdivision thereof or
therein having the power to tax;

(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of such
deposit;

(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument to which VersaTel is a party or by which VersaTel
is bound;

(vi) VersaTel shall have delivered to the relevant Trustee an opinion
of counsel to the effect that, as of the date of such opinion and subject
to customary assumptions and exclusions following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable Netherlands and U.S. federal or state law,
and that such Trustee has a perfected security interest in such trust funds
for the ratable benefit of the Holders;

(vii) VersaTel shall have delivered to the relevant Trustee an
Officers' Certificate stating that the deposit was not made by VersaTel
with the intent of defeating, hindering, delaying or defrauding any
creditors of VersaTel or others; and

(viii) VersaTel shall have delivered to the relevant Trustee an
Officers' Certificate and an opinion of counsel in the United States (which
opinion of counsel may be subject to customary assumptions and exclusions)
each stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.

SATISFACTION AND DISCHARGE

Each Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder when either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to VersaTel) have been delivered to
each Trustee thereunder for cancellation; or (ii) (A) all such Notes not
theretofore delivered to such Trustee for cancellation have become due and
payable by reason of the making of a notice of redemption or otherwise or will
become due and payable within one year and VersaTel has irrevocably deposited or
caused to be deposited with such Trustee as trust funds in trust an amount of
money sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to such Trustee for cancellation for principal, premium,
if any, and accrued and unpaid interest and Additional Amounts, if any, to the
date of maturity or redemption; (B) no Default with respect to such Indenture or
the Notes issued thereunder shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any other
instrument to which VersaTel is a party or by which it is bound; (C) VersaTel
has paid, or caused to be paid, all sums payable by it under such Indenture; and
(D) VersaTel has delivered irrevocable instructions to each Trustee under such
Indenture to apply the deposited money toward the

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payment of such Notes at maturity or the redemption date, as the case may be. In
addition, VersaTel must deliver an Officers' Certificate and an opinion of
counsel to the relevant Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.

WITHHOLDING TAXES

All payments made by VersaTel on the Notes (whether or not in the form of
Definitive Notes) will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or levied by or on
behalf of The Netherlands or any jurisdiction in which VersaTel or any Surviving
Entity is organized or is otherwise resident for tax purposes or any political
subdivision thereof or any authority having power to tax therein or any
jurisdiction from or through which payment is made (each a "Relevant Taxing
Jurisdiction"), unless the withholding or deduction of such Taxes is then
required by law or the interpretation or administration thereof. If any
deduction or withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by VersaTel
with respect to Notes of either series, including payments of principal,
redemption price, interest or premium, VersaTel will pay such additional amounts
(the "Additional Amounts") as may be necessary in order that the net amounts
received in respect of such payments by the Holders of such Notes or the
relevant Trustee, as the case may be, after such withholding or deduction, equal
the respective amounts which would have been received in respect of such
payments in the absence of such withholding or deduction; except that no such
Additional Amounts will be payable with respect to:

(i) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;

(ii) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by VersaTel to provide information concerning the nationality,
residence or identity of such Holder or beneficial owner or to make any
declaration or similar claim or satisfy any information or reporting
requirement, which is required or imposed by a statute, treaty, regulation
or administrative practice of the Relevant Taxing Jurisdiction as a
precondition to exemption from all or part of such Taxes;

(iii) except in the case of the winding up of VersaTel, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or

(iv) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.

Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (i) to (iv) inclusive
above.

Upon request, VersaTel will provide each Trustee with documentation
satisfactory to each Trustee evidencing the payment of Additional Amounts.
Copies of such documentation will be made available to the Holders upon request.

VersaTel will pay any present or future stamp, court or documentary taxes,
or any other excise or property taxes, charges or similar levies which arise in
any jurisdiction from the execution, delivery or registration of the Notes or
any other document or instrument referred to therein, or the receipt of any
payments with respect to the Notes, excluding any such taxes, charges or similar
levies imposed by any
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jurisdiction outside of The Netherlands, the United States of America or any
jurisdiction in which a Paying Agent is located, other than those resulting
from, or required to be paid in connection with, the enforcement of the Notes or
any other such document or instrument following the occurrence of any Event of
Default with respect to the Notes.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next two succeeding paragraphs, each Indenture
and the Notes of each series issued thereunder may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Notes of each series then outstanding (including consents obtained in
connection with a tender offer or exchange offer for such series of Notes), and
any existing Default or Event of Default and its consequences or compliance with
any provision of each Indenture or the Notes issued thereunder may be waived
with the consent of the Holders of a majority in principal amount of the
outstanding Notes of such series (including consents obtained in connection with
a tender offer or exchange offer for such Notes).

Each Indenture will provide that, with respect to each series of Notes,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a nonconsenting Holder of Notes): (i) reduce
the principal amount of either series of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any such Note or alter or waive the provisions with respect to
the redemption of such Notes, (iii) reduce the rate of or change the time for
payment of interest on any such Notes, (iv) waive a Default in the payment of
principal of, or premium, interest or Additional Amounts, if any, on, such Notes
(except a rescission of acceleration of such Notes by the Holders of at least a
majority in aggregate principal amount of such Notes and a waiver of the payment
default that resulted from such acceleration with respect to such Notes), or in
respect of a covenant or provision contained in such Indenture which cannot be
amended or modified without the consent of all Holders, (v) make any Note
payable in money other than that stated in such Notes, (vi) make any change in
the provisions of such Indenture relating to waivers of past Defaults or the
rights of Holders of such Notes to receive payments of principal of, or premium,
interest or Additional Amounts, if any, on, such Notes, (vii) make any change in
the amendment and waiver provisions in such Indenture, (viii) make any change in
the provisions of such Indenture described under "-- Withholding Taxes" that
adversely affects the rights of any Holder of the Notes issued thereunder, (ix)
amend the terms of such Notes or such Indenture in a way that would result in
the loss of an exemption from any of the Taxes described thereunder or an
exemption from any obligation to withhold or deduct Taxes as described
thereunder unless VersaTel agrees to pay Additional Amounts in respect thereof,
or (x) impair the right of any Holder of such Notes to receive payment of
principal of, or interest on, such Holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such Holder's Notes.

Each Indenture will provide that, notwithstanding the foregoing, without
the consent of any Holder of Notes, VersaTel and each Trustee together may amend
or supplement such Indenture or the Notes issued thereunder (i) to cure any
ambiguity, omission, defect or inconsistency, (ii) to provide for uncertificated
Notes in addition to or in place of certificated Notes, (iii) to provide for the
assumption of VersaTel's obligations to Holders of such Notes in order to comply
with the covenant relating to mergers, consolidations and sales of assets, (iv)
to make any change that would provide any additional rights or benefits to the
Holders of such Notes or that does not adversely affect the legal rights under
such Indenture of any such Holder, (v) to add covenants for the benefit of the
Holders or to surrender any right or power conferred upon VersaTel, or (vi) to
comply with requirements of the Commission in order to effect or maintain the
qualification of such Indenture under the Trust Indenture Act.

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The consent of the Holders is not necessary under either Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.

NOTICES

Notices regarding the Notes of both series will be (i) published in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Amsterdam (which is expected to be Het
Financieele Dagblad) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or (ii) in the case of Definitive Notes, mailed to
Holders by first-class mail at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Notes are listed
on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, published in a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxemburger Wort)). Notices given by publication
will be deemed given on the first date on which publication is made and notices
given by first-class mail, postage prepaid, will be deemed given five calendar
days after mailing.

CONCERNING EACH TRUSTEE

Each Indenture will contain certain limitations on the rights of each
Trustee, should it become a creditor of VersaTel, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. Each Trustee will be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue, or resign.

Each Indenture will provide that the Holders of a majority in principal
amount of the outstanding Notes issued thereunder will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the relevant Trustee, subject to certain exceptions. Each
Indenture will provide that in case an Event of Default shall occur (which shall
not be cured), the relevant Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of his own
affairs. Subject to such provisions, each Trustee will be under no obligation to
exercise any of its rights or powers under the relevant Indenture at the request
of any Holder of such Notes, unless such Holder shall have offered to such
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.

GOVERNING LAW

Each Indenture and the Notes issued thereunder will be, subject to certain
exceptions, governed by, and construed and interpreted in accordance with, the
law of the State of New York.

ENFORCEABILITY OF JUDGMENTS

Since most of the operating assets of VersaTel and its Subsidiaries are
outside the United States, any judgment obtained in the United States against
VersaTel or a Subsidiary, including judgments with respect to the payment of
principal, premium, if any, interest, Additional Amounts, if any, redemption
price and any purchase price with respect to the Notes, may not be collectible
within the United States.

VersaTel has been informed by its Netherlands counsel, Stibbe Simont
Monahan Duhot, that in such counsel's opinion the laws of The Netherlands
applicable therein permit an action to be brought in a court of competent
jurisdiction in The Netherlands on a judgment of a United States federal court
or a court of the State of New York sitting in the borough of Manhattan in the
City of New York respecting the enforcement of the Notes and the Indentures;
subject to certain exceptions the principal of which may be summarized as
follows: a final judgment for the payment of money obtained in a United States

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court, which is not subject to appeal or any other means of contestation and is
enforceable in the United States, would in principle be upheld by a Netherlands
court of competent jurisdiction when asked to render a judgment in accordance
with such final judgment by a United States court, without substantive
re-examination or relitigation on the merits of the subject matter thereof;
provided that such judgment has been rendered by a court of competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in proceedings of a penal or revenue nature, that its content and
possible enforcement are not contrary to public policy or public order of The
Netherlands, and that such judgment does not concern the recognition of punitive
damages which have no bearing on the amount of damages incurred.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Indentures. Reference is made to each Indenture for the full definition of all
terms as well as any other capitalized term used herein for which no definition
is provided. For purposes of the Indentures, unless otherwise specifically
indicated, the term "consolidated" with respect to any Person refers to such
Person consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person. For purposes of the following definitions
and the Indentures generally, all calculations and determinations shall be made
in accordance with U.S. GAAP and shall be based upon the consolidated financial
statements of VersaTel and its subsidiaries prepared in accordance with U.S.
GAAP.

"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into VersaTel or any Restricted Subsidiary or assumed in
connection with an Asset Acquisition by VersaTel or a Restricted Subsidiary and
not incurred in connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary, such merger or consolidation or such Asset Acquisition;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into VersaTel or any Restricted Subsidiary or such Asset
Acquisition shall not be Indebtedness.

"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

"Asset Acquisition" is defined to mean (i) any capital contribution (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise) by VersaTel or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by VersaTel or any Restricted Subsidiary,
in either case pursuant to which such Person shall become a Restricted
Subsidiary or shall be consolidated, merged with or into VersaTel or any
Restricted Subsidiary or (ii) an acquisition by VersaTel or any of its
Restricted Subsidiaries of the property and assets of any Person (other than
VersaTel or any of its Restricted Subsidiaries) that constitute substantially
all of an operating unit or line of business of such Person or which is
otherwise outside the ordinary course of business.

"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by VersaTel or any of its
Restricted Subsidiaries to any Person (other than VersaTel or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the

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property and assets of an operating unit or line of business of VersaTel or any
of its Restricted Subsidiaries or (iii) any other property and assets of
VersaTel or any of its Restricted Subsidiaries outside the ordinary course of
business (including the receipt of proceeds paid on account of the loss of or
damage to any property or asset and awards of compensation for any asset taken
by condemnation, eminent domain or similar proceedings). For the purposes of
this definition, the term "Asset Sale" shall not include (a) any transaction
consummated in compliance with "-- Consolidation, Merger and Sale of Assets" and
the creation of any Lien not prohibited by "-- Certain Covenants -- Limitation
on Liens"; provided, however, that any transaction consummated in compliance
with such "-- Consolidation, Merger and Sale of Assets" description involving a
sale, conveyance, assignment, transfer, lease or other disposal of less than all
of the properties or assets of VersaTel and the Restricted Subsidiaries shall be
deemed to be an Asset Sale with respect to the properties or assets of VersaTel
and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of VersaTel or any Restricted
Subsidiary, as the case may be; and (c) any transaction consummated in
compliance with "-- Certain Covenants -- Limitation on Restricted Payments." In
addition, solely for purposes of "-- Certain Covenants -- Limitation on Asset
Sales," any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million in any fiscal year shall be deemed not to be an "Asset Sale."

"Board of Directors" is defined to mean the Supervisory Board of VersaTel.

"Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.

"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.

"Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with U.S. GAAP, is required to be capitalized and reflected as a liability on
the balance sheet of such Person; and "Capitalized Lease Obligation" is defined
to mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.

"Cash Equivalents" is defined to mean, (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) certificates of deposit and eurodollar time deposits
with maturities of 360 days or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 360 days and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500 million; (c) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (a) and (b) entered
into with any financial institution meeting the qualifications specified in
clause (b) above; (d) commercial paper rated P-1, A-1 or the equivalent thereof
by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
respectively, and in each case maturing within six months after the date of
acquisition; (e) marketable direct obligations of the United Kingdom, The
Netherlands, Belgium, Germany or France or obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), of the type and
maturity described in clauses (a) through (d) above of foreign obligors, which
have ratings described in such clauses or equivalent ratings from comparable
foreign rating agencies; and (f) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(a) through (e) above.

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"Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total
voting power of the then outstanding Voting Stock of VersaTel on a fully diluted
basis; (ii) individuals who at the beginning of any period of two consecutive
calendar years constituted the Board of Directors (together with any directors
who are members of the Board of Directors on the date hereof and any new
directors whose election by the Board of Directors or whose nomination for
election by VersaTel's stockholders was approved by a vote of at least two
thirds of the members of the Board of Directors then still in office who either
were members of the Board of Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of such Board of Directors then
in office; (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of VersaTel to any such
"person" or "group" (other than to a Restricted Subsidiary); or (iv) the merger
or consolidation of VersaTel with or into another corporation or the merger of
another corporation with or into VersaTel with the effect that immediately after
such transaction any such "person" or "group" of persons or entities shall have
become the beneficial owner of securities of the surviving corporation of such
merger or consolidation representing a majority of the total voting power of the
then outstanding Voting Stock of the surviving corporation.

"Commission" is defined to mean the United States Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of the Indentures such commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

"Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication) Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and non
recurring gains or losses or sales of assets), (iii) any amount attributable to
depreciation and amortization expense and (iv) all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge to the extent that it
requires or represents an accrual of, or reserve for, cash charges in any future
period), less all non-cash items increasing Consolidated Net Income (excluding
any items which represent the reversal of an accrual of, or reserve for,
anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with U.S. GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow of (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to VersaTel or another Restricted Subsidiary to the
extent of such restriction.

"Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.

"Consolidated Interest Expense" is defined to mean with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with U.S. GAAP; all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by such Person or any
of its Restricted Subsidiaries), less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by such Person and its Restricted

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Subsidiaries during such period; excluding, however, any amount of such interest
of any Restricted Subsidiary to the extent the net income of such Restricted
Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to
the last proviso of such definition.

"Consolidated Net Income" is defined to mean with respect to any Person for
any period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period determined on a consolidated basis and in
conformity with U.S. GAAP; provided that the following items shall be excluded
in computing Consolidated Net Income (without duplication): (i) the net income
(or loss) of any Restricted Subsidiary accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with such Person or any
of its Restricted Subsidiaries or all or substantially all of the property and
assets of such Restricted Subsidiary are acquired by such Person or any of its
Restricted Subsidiaries; (ii) any gains or losses (on an after-tax basis) but
not losses attributable to Asset Sales; (iii) all extraordinary gains and gains
from Currency Agreements or Interest Rate Agreements and gains from the
extinguishment of debt; (iv) the net income (or loss) of any other Person (other
than net income (or loss) attributable to a Restricted Subsidiary) in which such
other Person (other than such Person or any of its Restricted Subsidiaries) has
a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Restricted Subsidiaries
by such other Person during such period; (v) net gains attributable to write-ups
of assets or write-downs of liabilities (determined after taking into account
losses attributable to write-downs of assets or write-ups of liabilities up to
but not in excess of such gains); and (vi) the cumulative effect of a change in
accounting principles after the Issue Date; and provided, further, that there
shall be further excluded therefrom the net income (but not the net loss) of any
Restricted Subsidiary (calculated separately for such Restricted Subsidiary in
the same manner as provided above) that is subject to a restriction which
prevents the payment of dividends or the making of distributions to VersaTel or
another Restricted Subsidiary to the extent of such restriction.

"Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in VersaTel or any of its Restricted Subsidiaries, each item
to be determined in conformity with U.S. GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).

"Credit Facilities" is defined to mean one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.

"Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of VersaTel and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.

"Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of VersaTel and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.

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"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.

"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.

"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with
U.S. GAAP) of any Person that are not more than 60 days past their due date and
that were entered into in the ordinary course of business on normal payment
terms as shown on the most recent consolidated balance sheet of such Person
filed with the Commission, all in accordance with U.S. GAAP.

"Equity Interests" is defined to mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).

"European Government Securities" is defined to mean direct obligations of,
or obligations guaranteed by, Belgium, France, Germany or The Netherlands, for
the payment of which obligations or guarantee the full faith and credit of
Belgium, France, Germany or The Netherlands, as the case may be, is pledged,
which are not callable or redeemable at the option of the issuer thereof and
which are payable in euros.

"Fair Market Value" is defined to mean, with respect to any asset or
property, the price (after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction; provided, however,
that the Fair Market Value of any such asset or assets shall be determined
conclusively by the Board of Directors acting in good faith, which determination
shall be evidenced by a resolution of such Board delivered to each Trustee.

"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that the accrual of interest shall not be considered an Incurrence of
Indebtedness.

"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the purchase price
of property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (D)
representing Capitalized Lease Obligations, (ii) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed

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redemption or repurchase price of Redeemable Stock of such Person at the time of
determination and (v) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided (x) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with U.S. GAAP and (y) that Indebtedness shall not include any
liability for federal, state, local or other taxes.

"Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.

"Investment" in any Person is defined to mean any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with U.S. GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to others or any payment for any property
or services for the account or use of others), or any purchase or acquisition of
Equity Interests, bonds, notes, debentures, or other similar instruments issued
by, any other Person. For purposes of the definition of "Unrestricted
Subsidiary," the "Limitation on Restricted Payments" covenant and the
"Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries"
covenant described above, (i) "Investment" shall include (a) the Fair Market
Value of the assets (net of liabilities) of any Restricted Subsidiary of
VersaTel at the time that such Restricted Subsidiary of VersaTel is designated
an Unrestricted Subsidiary and shall exclude the Fair Market Value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of VersaTel and
(b) the Fair Market Value, in the case of a sale of Equity Interests in
accordance with the "Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant such that a Person no longer constitutes a
Restricted Subsidiary, of the remaining assets (net of liabilities) of such
Person after such sale, and shall exclude the fair market value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of VersaTel and
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its Fair Market Value at the time of such transfer.

"Issue Date" is defined to mean the date on which the Notes of each series
are originally issued under each respective Indenture.

"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).

"Most Recent Balance Sheet" is defined to mean, with respect to any Person,
the most recent consolidated balance sheet of such Person reported on by a
recognized firm of independent accountants without qualification as to scope.

"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or

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sold with recourse to VersaTel or any Restricted Subsidiary of VersaTel) and
proceeds from the conversion of other property received when converted to cash
or Cash Equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
agreements), (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be paid as a result of such
sale and (iv) appropriate amounts to be provided by VersaTel or any Restricted
Subsidiary of VersaTel as a reserve against any liabilities associated with such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as determined in conformity with U.S. GAAP; provided that such amounts
which cease to be held as reserves shall be deemed Net Cash Proceeds; and (b)
with respect to any capital contribution or any issuance or sale of Equity
Interests (other than Redeemable Stock), the proceeds of such capital
contribution, issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent (1) such
obligations are financed, directly or indirectly, with money borrowed from
VersaTel or any Restricted Subsidiary or otherwise financed or sold with
recourse to VersaTel or any Restricted Subsidiary or (2) the capital
contribution or purchase of the Equity Interests is otherwise financed, directly
or indirectly, by VersaTel or any Restricted Subsidiary, including through funds
contributed, extended, guaranteed or otherwise advanced by VersaTel or any
Affiliate) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.

"Officers' Certificate" is defined to mean a certificate signed on behalf
of VersaTel by two officers of VersaTel, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of VersaTel that meets the requirements set forth
in the Indentures.

"Permitted Business" is defined to mean the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) constructing, creating,
developing or marketing communications related network equipment, software and
other devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in clause (i) or (ii) above.

"Permitted Holder" is defined to collectively mean Telecom Founders B.V.,
NeSBIC Venture Fund C.V., Cromwilld Limited, Paribas Deelnemingen N.V., NPM
Capital N.V. and any Affiliate of the foregoing Persons.

"Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, VersaTel or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with U.S. GAAP; (iii) stock, obligations or securities received in
satisfaction of judgments; (iv) Investments in any Person (the primary business
of which is related, ancillary or complementary to the business of VersaTel on
the date of such Investment) at any one time outstanding (measured on the date
each such Investment was made without giving effect to subsequent changes in
value) in an aggregate amount not to exceed the greater of (x) $10.0 million and
(y) 5.0% of VersaTel's total consolidated assets as of the end of the most
recently

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completed fiscal quarter; (v) Investments in Cash Equivalents; (vi) Investments
made as a result of the receipt of noncash consideration from any Asset Sale
made in compliance with the "Limitation on Asset Sales" covenant; (vii)
Investments made in the ordinary course of the telecommunications business in
the Permitted Business and on ordinary business terms in the Permitted Business
in consortia formed to construct transmission infrastructure for use primarily
in the Permitted Business, provided such Investment entitles VersaTel to rights
of way or rights of use on such transmission infrastructure; and (viii)
Investments made in the ordinary course of the telecommunications business and
on ordinary business terms as partial payment for constructing a network
relating principally to the Permitted Business.

"Permitted Liens" is defined to mean (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of VersaTel or any of its
Restricted Subsidiaries; (v) Liens (including extensions and renewals thereof)
upon real or personal property of a Restricted Subsidiary purchased or leased
after the Issue Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred by such Restricted Subsidiary in
compliance with the "Limitation on Indebtedness" covenant (1) to finance the
cost of the item of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of the acquisition
and the Incurrence of such Indebtedness or (2) to refinance any Indebtedness of
a Restricted Subsidiary previously so secured, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any
such Lien shall not extend to or cover any property or assets other than such
item of property or assets; (vi) any interest or title of a lessor in the
property subject to any Capitalized Lease or operating lease of a Restricted
Subsidiary which, in each case, is permitted under the relevant Indenture; (vii)
Liens on property of, or on Equity Interests in or Indebtedness of, any Person
existing at the time such Person becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens were not created, incurred or assumed in
contemplation of such transaction and do not extend to or cover any property or
assets of VersaTel or any Restricted Subsidiary other than the property or
assets so acquired; (viii) Liens arising from the rendering of a final judgment
or order against VersaTel or any Restricted Subsidiary of VersaTel that does not
give rise to an Event of Default; (ix) Liens encumbering customary initial
deposits and margin deposits and other Liens that are either within the general
parameters customary in the industry or incurred in the ordinary course of
business, in each case, securing Indebtedness under Interest Rate Agreements and
Currency Agreements; (x) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
VersaTel or any of its Restricted Subsidiaries in the ordinary course of
business in accordance with the past practices of VersaTel and its Restricted
Subsidiaries prior to the Issue Date; (xi) Liens existing on the Issue Date or
securing the Notes or any Guarantee of the Notes; (xii) Liens granted after the
Issue Date on any assets or Equity Interests in VersaTel or its Restricted
Subsidiaries created in favor of the Holders; (xiii) Liens created in connection
with the incurrence of any Indebtedness permitted to be Incurred under clause
(iii) of paragraph (b) of the "Limitation on Indebtedness" covenant; provided
that the Indebtedness which it refinances is secured by similar Liens; (xiv)
Liens securing Indebtedness under Credit Facilities incurred in compliance with
clause (viii) of paragraph (b) of the "Limitation on Indebtedness"

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covenant; and (xv) any Liens arising in respect of any escrow or similar account
established in connection with the issuance of any notes (including Additional
Notes) which are pari passu with the Notes and arising under any escrow or
similar agreement executed in connection with the issuance of any such notes.

"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.

"Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Sale or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Sale or Asset
Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.

"Public Equity Offering" is defined to mean an underwritten primary public
offering of Ordinary Shares of VersaTel pursuant to an effective registration
statement under the Securities Act.

"Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under "-- Certain Covenants -- Limitation on Asset Sales" and
"-- Repurchase of Notes upon a Change of Control" and (y) any such requirement
only becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.

"Replacement Assets" is defined to mean any property, plant or equipment of
a nature or type that are used or usable in Permitted Businesses.

"Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of VersaTel that is then not an Unrestricted Subsidiary.

"Share Capital" is defined to mean, at any time of determination, the
stated capital of the Equity Interests (other than Redeemable Stock) and
additional paid-in capital of VersaTel as set forth on the Most Recent Balance
Sheet of VersaTel at such time.

"Stated Maturity" is defined to mean, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.

"Strategic Minority Capital Stock Issues" is defined to mean issuances or
sales of common stock of a Restricted Subsidiary, principally engaged in
business outside The Netherlands, to a Person which is

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principally engaged in the Permitted Business and which has an equity market
capitalization, a net asset value or annual revenues of at least $500 million,
which issuances or sales do not represent more than 49% of the outstanding
common stock of such Restricted Subsidiary; provided that any such Strategic
Minority Capital Stock Issue is made to only one such Person with respect to any
Restricted Subsidiary.

"Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (A) more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof
whether in the form of membership, general, special or limited partnership or
otherwise and (B) such Person or any Restricted Subsidiary of such Person is a
controlling general partner, co-venturer, manager or similar position or
otherwise controls such entity.

"Telecommunications Assets" is defined to mean, with respect to any Person,
assets used in the Permitted Business (or Equity Interests of a Person that
becomes a Restricted Subsidiary, the assets of which consist principally of such
Telecommunications Assets) that are purchased or acquired by VersaTel or a
Restricted Subsidiary after the Issue Date.

"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by VersaTel or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.

"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by VersaTel or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.

"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of VersaTel
which at the time of determination is an Unrestricted Subsidiary (as designated
by the Board of Directors in the manner provided below) and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of VersaTel (including any newly acquired or newly formed Subsidiary
of VersaTel) to be an Unrestricted Subsidiary unless such Subsidiary, or any of
its Subsidiaries, owns any Equity Interests or Indebtedness of, or owns or holds
any Lien on any property of, VersaTel or any Restricted Subsidiary; provided
that (a) VersaTel certifies in an Officers' Certificate that such designation
complies with the covenants described under "Limitation on Restricted Payments",
(b) such Subsidiary is not party to any agreement, contract, arrangement or
understanding with VersaTel or any Restricted Subsidiary of VersaTel unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to VersaTel or such Restricted Subsidiary than those that might
reasonably be obtained in a comparable arm's-length transaction at the time from
Persons who are not Affiliates of VersaTel, (c) neither VersaTel nor any of its
Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe
for additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating results
and (d) such Subsidiary and its Subsidiaries has not at the time of designation,
and does not thereafter, Incur any Indebtedness other than Unrestricted
Subsidiary Indebtedness. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of VersaTel; provided that immediately
after giving effect to such designation (x) VersaTel could Incur $1.00 of
additional Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described above on a pro forma basis taking into account
such designation and (y) no Default or Event of Default shall have occurred and
be continuing. Any such designation by the Board of Directors shall be evidenced
to each Trustee by promptly filing with

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such Trustee a copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.

"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of
any Unrestricted Subsidiary (i) as to which neither VersaTel nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of VersaTel or any such
Restricted Subsidiary being the primary obligor on, guarantor of, or otherwise
liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of VersaTel or any Restricted Subsidiary to declare,
a default on such Indebtedness of VersaTel or any Restricted Subsidiary or cause
the payment thereof to be accelerated or payable prior to its Stated Maturity.

"U.S. GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.

"U.S. Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the United States of America, for the payment of
which obligations or guarantee the full faith and credit of the United States is
pledged and which are not callable or redeemable at the option of the issuer
thereof.

"Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.

"Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i)(a) the sum of the products of the number of years from such date of
determination to the dates of each successive scheduled principal payment of, or
redemption or similar payment with respect to, such Indebtedness multiplied by
(b) the amount of such principal payment, by (ii) the sum of all such principal
payments.

"Wholly Owned Restricted Subsidiary" is defined to mean any Restricted
Subsidiary all of the outstanding voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by VersaTel.

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BOOK-ENTRY, DELIVERY AND FORM

The Dollar Notes will be represented by one global note in registered,
global form without interest coupons (collectively, the "Global Dollar Note").
The Global Dollar Note initially will be deposited upon issuance with the
relevant Trustee as custodian for The Depositary Trust Company in New York, New
York (the "Depositary"), and registered in the name of the Depositary or its
nominee, in each case for credit to an account of a direct or indirect
participant as described below.

The Euro Notes will be represented by one global note in registered, global
form without interest coupons (collectively, the "Global Euro Note"; together
with the Global Dollar Note, the "Global Notes"). The Global Euro Note initially
will be deposited upon issuance with the relevant Trustee as custodian for the
Depositary and registered in the name of the Depositary or its nominee for
credit to the subscribers' respective accounts at Euroclear and Cedel Bank
("CEDEL").

Payments of any amounts owing in respect of the Global Notes will be made
through one or more paying agents to the Depositary or its nominee in proportion
to their respective interests as the registered owner thereof. All amounts
payable under the Dollar Notes will be payable in dollars and all amounts
payable under the Euro Notes will be payable in euros, except as described
below. None of VersaTel, any Trustee, the transfer agent or any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.

VersaTel expects that the Depositary or any nominee thereof, upon receipt
of any payments made in respect of the Global Notes, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Notes as shown on the records of
the Depositary. VersaTel also expects that payments by participants to owners of
beneficial interests in the Global Notes held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.

Payments to beneficial owners of the Global Euro Note in respect of
principal and interest on the Euro Notes will be made in euros, except as may
otherwise be agreed between any applicable securities clearing system and any
holders. Payments will be subject in all cases to any fiscal or other laws and
regulations applicable thereto. None of VersaTel, the relevant Trustee or any
paying agent shall be liable to any holder of the Global Euro Note or other
person for any commissions, costs, losses or expenses in relation to or
resulting from any currency conversion or rounding effected in connection
therewith.

Investors may be subject to foreign exchange risks that may have important
economic and tax consequences to them.

Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to the Depositary, a nominee of the Depositary or to a
successor of the Depositary or its nominee. Beneficial interests in the Global
Notes may not be exchanged for Notes in certificated form except in the limited
circumstances described below.

In addition, transfer of beneficial interests in Global Notes will be
subject to the applicable rules and procedures of the Depositary and its direct
or indirect participants (including, if applicable, those of Euroclear and
CEDEL), which may change from time to time.

The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar and the offices of our transfer agent in Luxembourg.

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DEPOSITARY PROCEDURES

The Depositary has advised VersaTel that the Depositary is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of Participants. The Participants
include securities brokers and dealers (including the underwriters), banks,
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
"Indirect Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through the Participants
or Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of the
Depositary are recorded on the records of the Participants and Indirect
Participants.

The Depositary has also advised VersaTel that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, the Depositary will
credit the accounts of Participants designated by the underwriters with portions
of the principal amount of such securities, as the case may be, and (ii)
ownership of such interests in the Global Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depositary (with respect to Participants) or by Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
such securities).

Investors in the Global Notes may hold their interests therein directly
through the Depositary, if they are Participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) that are Participants in
such system. Euroclear and CEDEL will hold interests in the Global Notes on
behalf of their Participants through customers' securities accounts in their
respective names on the books of their respective depositories, which are Morgan
Guaranty Trust Company of New York, Brussels office, as operator of Euroclear,
and Citibank, N.A. as operator of CEDEL. The depositories, in turn, will hold
such interests in the Global Notes in customers' securities accounts in the
depositories' names on the books of the Depositary. All interests in the Global
Notes, including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of the Depositary. Those interests held by Euroclear
or CEDEL may also be subject to the procedures and requirements of such system.

The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Notes to such persons may be limited
to that extent. Because the Depositary can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having a beneficial interest in the Global Notes to pledge
such interest to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of such interests, may be affected
by the lack of physical certificate evidencing such interests.

Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
holders thereof under the applicable Indenture for any purpose.

Payments in respect of the principal, premium, Additional Amounts (as
defined), if any, and interest on the Global Notes registered in the name of the
Depositary or its nominee will be payable by the paying agent to the Depositary
or its nominee in its capacity as the registered holder of such Global Note
under the relevant indenture. Under the terms of each Indenture, VersaTel and
the relevant Trustee will treat the persons in whose names the applicable series
of Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither VersaTel, each Trustee nor any agent of
VersaTel or such

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Trustee has or will have any responsibility or liability for (i) any aspect of
the Depositary's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Notes, or for maintaining, supervising or reviewing any of the
Depositary's records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the Global Notes or (ii) any
other matter relating to the actions and practices of the Depositary or any of
its Participants or Indirect Participants.

The Depositary has advised VersaTel that its current practices, upon
receipt of any payment in respect of the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Notes, as the
case may be, as shown on the records of the Depositary. Payments by Participants
and the Indirect Participants to the beneficial owners of Notes will be governed
by standing instructions and customary practices and will not be the
responsibility of the Depositary, either Trustee or VersaTel. None of VersaTel
or either Trustee will be liable for any delay by the Depositary or its
Participants in identifying the beneficial owners of the Notes, and VersaTel and
each Trustee may conclusively rely on and will be protected in relying on
instructions from the Depositary or its nominee as the registered owner of the
Notes for all purposes.

Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Notes will trade in the Depositary's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of the Depositary and its Participants.

Transfers between Participants in the Depositary will be effected in
accordance with the Depositary's procedures, and will be settled in same-day
funds. Transfers between participants in Euroclear and CEDEL will be effected in
accordance with their respective rules and operating procedures.

Cross market transfers between Participants in the Depositary, on the one
hand, and Euroclear or CEDEL participants, on the other hand, will be effected
through the Depositary in accordance with the Depositary's rules on behalf of
Euroclear or CEDEL, as the case may be, by its respective depository; however,
such cross market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Dollar Note or Global
Euro Note in the Depositary, and making or receiving payment in accordance with
normal procedures for same-day fund settlement applicable to the Depositary.
Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositories for Euroclear or CEDEL.

Due to time zone differences, the securities accounts of a Euroclear or
CEDEL participant purchasing an interest in the Global Notes from a Participant
in the Depositary will be credited, and any such crediting will be reported to
the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL) immediately
following the settlement date of the Depositary. Cash received in Euroclear or
CEDEL as a result of sales of interests in the Global Notes by or through a
Euroclear or CEDEL participant to a Participant in the Depositary will be
received with value on the settlement date of the Depositary but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following the Depositary's settlement date.

The Depositary has advised VersaTel that it will take any action permitted
to be taken by a Holder of Notes only at the direction of one or more
Participants to whose account the Depositary interests in

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the Global Notes are credited and only in respect of such portion of the
aggregate principal amount of the Dollar Notes or Euro Notes as to which such
Participant or Participants has or have given direction. However, if there is an
Event of Default under the Notes, the Depositary reserves the right to exchange
the applicable Global Note for legended Notes in certificated form, and to
distribute such Notes to its Participants.

The information in this section concerning the Depositary, Euroclear and
CEDEL and their book-entry systems has been obtained from sources that VersaTel
believes to be reliable, but VersaTel takes no responsibility for the accuracy
thereof.

Although the Depositary, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
participants in the Depositary, Euroclear and CEDEL, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of VersaTel, the underwriters
or either Trustee will have any responsibility for the performance by the
Depositary, Euroclear or CEDEL or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

DEFINITIVE SECURITIES

If (i) at any time the Depositary is unwilling or unable to continue as a
depositary, or either of Euroclear and CEDEL ceases to be a clearing agency, for
either Global Note and a successor depositary or clearing agency, as the case
may be, is not appointed by VersaTel within 90 days or (ii) certain other events
occur, as provided in the applicable Indenture, then definitive securities will
be issued in exchange for the applicable Global Note, which certificates will
bear the legend referred to in "Notice to Investors."

SAME DAY SETTLEMENT AND PAYMENT.

Each indenture will require that payments in respect of each series of
Notes represented by the Global Notes (including principal, premium, if any,
interest and Additional Amounts, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Depositary. With respect to
Definitive Notes, VersaTel will make all payments of principal, premium, if any,
interest and Additional Amounts, if any, by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address. VersaTel expects that secondary trading in the Definitive Notes will
also be settled in immediately available funds.

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TAX CONSIDERATIONS

NETHERLANDS TAX CONSIDERATIONS

The following is a summary of the principal Netherlands tax consequences
relevant to the ownership and disposition of Notes to U.S. Holders (as defined
below for the purposes of this section "Netherlands Tax Considerations"). This
summary is not exhaustive of all the possible tax consequences that may be
relevant to Holders in light of their particular circumstances and potential
investors are advised to consult their own tax advisors in order to determine
the final tax consequences of the ownership and disposition of Notes in their
own particular circumstances. In particular, this summary does not cover all tax
consequences applicable to joint venture vehicles, such as LLC's and partnership
structures.

This summary is based on the tax laws of The Netherlands, as well as the
Convention between the United States of America and the Kingdom of The
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income (the "Treaty"), to the extent they were
published and effective as of January 5, 1999. Changes made to these laws or
Treaty after that date may have retroactive effect, and may effect the tax
consequences described herein.

The outline is based on the assumption that the U.S. Holder:

(i) is not and has not been for at least five years, a resident or
deemed resident of The Netherlands for purposes of Netherlands tax
legislation;

(ii) does not have or will not obtain an enterprise or an interest in
an enterprise which, in whole or in part, is carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise the Notes are attributable;

(iii) is not directly entitled (the term directly means, in this
context, not through the beneficial ownership of shares or similar
securities) to all or a share of the profits of an enterprise that is
managed and controlled in The Netherlands while the Notes form part of the
assets of, or are otherwise attributable to, such enterprise;

(iv) does not have or will not obtain a substantial interest (as
defined below) or deemed substantial interest in VersaTel according to the
criteria under Netherlands tax law currently in force or in the event such
Holder does have such an interest, this substantial interest qualifies as
asset of, or is otherwise attributable to an enterprise;

(v) does not carry out and has not carried out employment activities
on the territory of The Netherlands, or as director or board member of an
entity resident in The Netherlands or as a civil servant of a Netherlands
public body with which the holding of the Notes is connected; and

(vi) can obtain full benefit under the Treaty

(hereinafter, "U.S. Holder").

SUBSTANTIAL INTEREST

A shareholder that owns, either via shares or options, directly or
indirectly, 5% or more of any class of shares, or 5% or more of the total issued
share capital of a company resident in The Netherlands (a "Substantial
Interest") is subject to special rules. Profit participation rights which give
the holder rights to 5% or more of the annual profit or 5% or more of the
liquidation proceeds of the target company will also qualify as substantial
interest. With respect to individuals, certain attribution rules exist in
determining the presence of a Substantial Interest.

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NETHERLANDS INCOME TAX

A U.S. Holder of Notes is not subject to Netherlands Corporate Income Tax
("NCIT") or Netherlands Individual Income Tax ("NIIT") under the above
assumptions.

INTEREST, WITHHOLDING TAX AND TAX TREATY LIMITATIONS

Interest paid to a U.S. Holder that does not have a Substantial Interest is
not subject to NCIT or NIIT. Furthermore, according to article 12 of the Treaty,
interest paid to a U.S. Holder entitled to the benefits of the Treaty can only
be subject to NCIT or NIIT in the country of residence of the recipient of the
interest. As a result, no NCIT or NIIT will be due on interest paid to a U.S.
Holder that has a Substantial Interest, provided they can obtain full benefit of
the Treaty.

The Netherlands will not levy withholding taxes on the payment of interest
under the Notes, provided that the interest payment is not dependent on the
profits of the Company. If such link can be established there is a risk that the
interest would be subject to Netherlands withholding tax as described under
"Dividend withholding tax". For this discussion it is assumed that such link
cannot be established.

CAPITAL GAINS

Under Netherlands laws, capital gains realized upon disposition of any or
all of the Notes by a U.S. Holder are only taxable if the U.S. Holder has a
Substantial Interest or if the U.S. Holder has an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
Netherlands enterprise, the Notes are attributable. Moreover, as a result of
article 14 of the Treaty, the right to tax capital gains realized upon
disposition of any or all of the Notes by a U.S. Holder entitled to the benefits
of the Treaty, is allocated to the United States, unless allocable to a
Netherlands enterprise referred to above.

NET WEALTH TAX

A U.S. Holder of the Notes will not be subject to Netherlands net wealth
tax in respect thereof provided that:

(i) such U.S. Holder is not an individual or, if he or she is an
individual, provided that the Holder is neither a resident of The
Netherlands nor deemed to be a resident of The Netherlands;

(ii) the U.S. Holder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise, as the case may be, to which
enterprise the Notes are attributable; and

(iii) such U.S. Holder is not directly entitled (the term directly
means, in this context, not through the beneficial ownership of shares or
similar securities) to all or a share of the profits of an enterprise that
is managed and controlled in The Netherlands while the Notes form part of
the assets of, or are otherwise attributable to, such enterprise.

GIFT, ESTATE OR INHERITANCE TAXES

No gift, estate or inheritance taxes will arise in The Netherlands in
respect of the transfer of a Note by way of gift by a person who is neither a
resident nor a deemed resident of The Netherlands, or on the death of such
person, provided that:

(i) the transfer is not construed as a gift made by or on behalf of a
person who is a resident or a deemed resident of The Netherlands;

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(ii) the Notes do not form part of the assets of, and are not
otherwise attributable to, an enterprise owned by the donor or the deceased
or in which the donor or the deceased owned an interest and which in whole
or in part is carried on through a permanent establishment or a permanent
representative in The Netherlands; and

(iii) such Notes form part of the assets of, and are not otherwise
attributable to an enterprise that is managed and controlled in The
Netherlands and to which all or a share of the profits thereof the Holder
of a note is directly entitled (the term directly means, in this context,
not as the beneficial owner of shares or similar securities).

EUROPEAN UNION PROPOSALS

In May 1998, the European Commission presented to the Council of Ministers
of the European Union a proposal to oblige member states to adopt either a
"withholding tax system" or an "information reporting system" in relation to
interest, discounts and premiums. It is currently unclear whether this proposal
will be adopted. The "withholding tax system" would require a paying agent
established in a member state to withhold tax at a minimum rate of 20%, from any
interest, discount or premium paid to an individual resident in another member
state unless such an individual presents a certificate obtained from the tax
authorities of the member state in which he is resident confirming that those
authorities are aware of the payment due to that individual. The "information
reporting system" would require a member state to supply to other member states
details of any payment of interest, discount or premium made by paying agents
within its jurisdiction to an individual resident in another member state. For
these purposes, the term "paying agent" is widely defined and includes an agent
who collects interest, discounts or premiums on behalf of an individual
beneficially entitled to them. If this proposal is adopted, it will not apply to
payments of interest, discounts and premiums made before January 1, 2001.

U.S. TAX CONSIDERATIONS

The following discussion describes the material U.S. federal income tax
considerations that may be relevant to a prospective purchaser of Notes that is
a U.S. Holder (as defined below) and, subject to the limitations and
qualifications stated herein, represents the opinion of Shearman & Sterling,
special tax counsel to the Company, as to the material U.S. federal income tax
consequences to a U.S. Holder of the receipt of interest on, and disposition of,
the Notes (as well as the treatment of market discount and premium, if any, with
respect to a Note). This discussion is based on the Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed Treasury regulations,
revenue rulings, administrative interpretations and judicial decisions (all as
of the date hereof and all of which are subject to change, possibly with
retroactive effect, and different interpretations). Except as specifically set
forth herein, this summary deals only with Notes purchased by a U.S. Holder on
original issuance and held as capital assets within the meaning of Section 1221
of the Code. This discussion does not address all of the tax consequences that
may be relevant to prospective purchasers in light of their particular
circumstances or to persons subject to special tax rules, such as insurance
companies, financial institutions, dealers in securities or foreign currencies,
tax-exempt investors, persons holding the Notes as a position in a "straddle,"
as part of a short sale, hedging, conversion or other integrated transaction,
persons owning, actually or constructively, 10% or more of the voting stock of
the Company, or persons whose functional currency (as defined in Section 985 of
the Code) is not the U.S. dollar. The Notes are expected to be issued at their
principal amount and, accordingly, this summary assumes that the Notes will not
be issued with original issue discount for U.S. federal income tax purposes.
Persons considering the acquisition of Notes should consult with their own tax
advisors with regard to the application of the U.S. federal income tax laws to
their particular situations as well as any other tax consequences of purchasing,
holding or disposing of Notes, including the applicability and effect of the
laws of any state, local or foreign jurisdiction.

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As used in this section, the term "U.S. Holder" means a beneficial owner of
a Note who or that is for U.S. federal income tax purposes (i) a citizen or
individual resident of the United States, (ii) a corporation or partnership
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject to
U.S. federal income taxation regardless of its source, or (iv) a trust if (A) a
U.S. court is able to exercise primary supervision over the administration of
the trust, and one or more U.S. persons have the authority to control all
substantial decisions of the trust or (B) the trust has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.

PAYMENT OF INTEREST

Interest on the Notes will be taxable to a U.S. Holder as ordinary income
at the time it is paid or accrued in accordance with the U.S. Holder's method of
accounting for tax purposes. In addition to interest, a U.S. Holder will be
required to include in income Additional Amounts, if any, paid on the Notes.
Except as discussed below, the amount of interest a U.S. Holder will be required
to include in income in respect of the Notes will not be reduced for any
withholding tax imposed by The Netherlands or any other foreign jurisdiction,
notwithstanding that such withheld tax would not in fact be received by such
U.S. Holder. Thus, a U.S. Holder may be required to recognize income on the
Notes in an amount greater than the cash received in respect of payments made on
the Notes. Subject to applicable limitations in the Code (including certain
minimum holding period requirements), a U.S. Holder may be entitled to claim a
foreign tax credit for the amount of any applicable withholding tax imposed in
respect of such payments. Alternatively, a U.S. Holder may claim a deduction for
the amount of such foreign income taxes withheld in a taxable year, but only if
such U.S. Holder does not elect to claim a foreign tax credit in respect of any
foreign taxes paid by it in the taxable year. Interest income on the Notes
generally will constitute foreign source income and generally will be considered
"passive income" (or "high withholding tax interest" if the applicable
withholding tax is imposed at a rate of 5% or more) or "financial services
income" for foreign tax credit purposes. The rules relating to foreign tax
credits are extremely complex and the availability of a foreign tax credit
depends on numerous factors. Prospective purchasers of Notes should consult
their own tax advisors concerning the application of the U.S. foreign tax credit
rules to their particular situations.

A cash basis U.S. Holder receiving an interest payment in euros will be
required to include in income the U.S. dollar value of such payment (determined
using the spot rate in effect on the date such payment is received) regardless
of whether such payment is subsequently converted into U.S. dollars. Generally,
no exchange gain or loss will be recognized by such a cash basis U.S. Holder if
such euros are converted to U.S. dollars on the date received. The U.S. federal
income tax consequences of the conversion of euros into U.S. dollars is
described below. See "-- Transactions in Euros."

An accrual basis U.S. Holder will be required to include in income the U.S.
dollar value of the euro interest that accrues on a Euro Note in a taxable year,
determined by translating such interest at the average rate of exchange for the
relevant interest accrual period or, with respect to an interest accrual period
that spans two taxable years, at the average rate for the portion of such
interest accrual period within the taxable year. The average rate of exchange
for an interest accrual period (or portion thereof) is the simple average of the
exchange rates for each business day of such period (or such other average that
is reasonably derived and consistently applied). An accrual basis U.S. Holder
may elect to translate accrued interest on a Euro Note using the spot rate in
effect on the last day of an interest accrual period (or the last day of the
taxable year for the portion of such period within the taxable year). In
addition, a U.S. Holder may elect to use the spot rate in effect on the date of
receipt (or payment) for such purpose if such date is within five business days
of the last date of an interest accrual period (or portion thereof). Any such
election must be made in a statement filed with the electing U.S. Holder's
return for a taxable year, and is applicable to all debt instruments held by the
U.S. Holder at any time during or after such year, unless changed with the
consent of the Internal Revenue Service (the "IRS").

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Upon receipt of an interest payment in respect of accrued interest on a
Euro Note, an accrual basis U.S. Holder will recognize ordinary gain or loss in
an amount equal to the difference, if any, between the U.S. dollar value of the
payment received in respect of such accrued interest (determined using the spot
rate in effect on the date such payment is received) and the U.S. dollar value
of the amount previously included in income with respect to such accrued
interest (as determined in the manner described in the preceding paragraph). Any
such gain or loss will be treated as ordinary income or loss but generally will
not be treated as interest income or expense, except to the extent provided by
future regulations or administrative pronouncements of the IRS. The U.S. federal
income tax consequences of the conversion of euros into U.S. dollars is
described below. See "-- Transactions in Euros."

MARKET DISCOUNT AND PREMIUM

If a U.S. Holder purchases a Note for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for U.S. federal income tax purposes, unless such difference is less
than a specified de minimis amount.

Unless a U.S. Holder elects to accrue market discount as described below,
such U.S. Holder will be required to treat any partial principal payment on, or
any gain realized on the sale, exchange, retirement or other disposition of, a
Note having market discount as ordinary income to the extent of the lesser of
(i) the amount of such payment or realized gain and (ii) the market discount
that has not previously been included in income and is treated as having accrued
on such Note at the time of such payment or disposition. Market discount on a
Note, if any, will be considered to accrue on a straight-line basis during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue on a constant-yield basis.

A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note having market discount until the maturity of the Note
or its earlier disposition. A U.S. Holder may elect to include market discount
in income currently as it accrues (on either a straight-line or a constant-yield
basis), in which case such U.S. Holder will not be subject to the rules
described above regarding the treatment of gain as ordinary income upon the
disposition of, and the receipt of certain cash payments on, a Note and
regarding the deferral of interest deductions.

In the case of a Euro Note, any accrued market discount not previously
taken into income shall be translated into U.S. dollars at the spot rate on the
date a U.S. Holder disposes of the Euro Note (or receives a partial principal
payment to which the accrued market discount relates). No part of such accrued
market discount is treated as exchange gain or loss. With respect to a U.S.
Holder of a Euro Note that elects to include market discount in income currently
as it accrues, such accrued market discount shall be treated in a similar manner
as accrued interest on a Euro Note held by an accrual basis U.S. Holder. See
"-- Payment of Interest."

If a U.S. Holder purchases a Note for an amount that is greater than its
principal amount, such U.S. Holder will be considered to have purchased such
Note at a "premium" equal in amount to such excess, and may elect (in accordance
with applicable Code provisions) to amortize such premium, on a constant yield
method over the remaining term of the Note (subject to special rules concerning
early call provisions). If an election to amortize the premium on a Note, if
any, is not made, the premium will decrease the gain or increase the loss
otherwise recognized on a taxable disposition of the Note. In the case of a Euro
Note, the amount of amortizable premium, if any, is determined in euros and, in
effect, translated into U.S. dollars using the exchange conventions applicable
to payments of interest. See "-- Payment of Interest" above. A U.S. Holder that
elects to amortize premium on a Euro Note will recognize foreign exchange gain
or loss equal to the difference between the U.S. dollar value of the foreign
currency amount so amortized, determined on the date the Euro Note was acquired,
and the U.S. dollar value of such amount, as determined in the preceding
sentence.

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<PAGE> 142

An election to include market discount in income currently, or to amortize
premium, once made, applies to all debt obligations held or subsequently
acquired by the electing U.S. Holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.

DISPOSITIONS

Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
will recognize taxable gain or loss in an amount equal to the difference, if
any, between such U.S. Holder's adjusted tax basis in such Note and the amount
realized on such sale, exchange or retirement. For this purpose, the amount
realized on the sale, exchange or retirement of a Note will not include any
amount attributable to accrued but unpaid interest, which will be taxable as
such to the extent not previously included in income. For purposes of
determining the amount of any gain or loss recognized by a U.S. Holder on the
sale, exchange or retirement of a Euro Note for euros, the amount realized upon
such sale, exchange or retirement will be the U.S. dollar value of the euros
received based on the spot exchange rate in effect on either (i) the date of the
sale, exchange or retirement or (ii) as set forth below, the settlement date. A
U.S. Holder's tax basis in a Note generally will be the purchase price of such
Note on the date of purchase (or, in the case of a Euro Note, the U.S. dollar
value of the purchase price determined by translating the purchase price into
U.S. dollars at the spot rate in effect on the date of purchase), increased by
any market discount with respect to the Note previously included in income by
the U.S. Holder and reduced by any premium with respect to the Note which the
U.S. Holder has amortized. If a Note is acquired or disposed of through an
established securities market within the meaning of the Treasury regulations,
the U.S. dollar cost to, or amount realized by, a cash or an electing accrual
basis U.S. Holder will be determined based on the spot rate in effect on the
settlement date for such acquisition or disposition, as the case may be. Except
with respect to gains or losses attributable to changes in currency exchange
rates, as described below, and market discount, as described above, any gain or
loss recognized by a U.S. Holder on the sale, exchange or retirement of a Note
generally will be capital gain or loss and, in the case of certain non-corporate
U.S. Holders, may be subject to U.S. federal income tax at a preferential rate
if the U.S. Holder's holding period for the Note exceeds one year. Gain or loss
realized by a U.S. Holder on the sale, exchange, or other disposition of a Note
generally will be treated as income or loss, as the case may be, from sources
within the United States for purposes of applicable foreign tax credit
limitations, unless the gain or loss, as the case may be, is attributable to an
office or fixed place of business maintained by the U.S. Holder outside of the
United States and certain other conditions are met. A U.S. Holder's ability to
deduct capital losses in respect of a Note is subject to limitations.

Gain or loss recognized by a U.S. Holder on the sale, exchange or
retirement of a Euro Note that is attributable to fluctuations in the rate of
exchange between the U.S. dollar and the euro will be treated as ordinary income
or loss and generally will not be treated as interest income or expense except
to the extent provided by future regulations or administrative pronouncements of
the IRS. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the payments with respect to
foreign currency principal determined on the date such payment is received or
such Euro Note is disposed of and including any payment with respect to accrued
interest, and (ii) the U.S. dollar value of payments with respect to foreign
currency principal determined on the date such United States Holder acquired
such Note, and the U.S. dollar value of accrued interest income and market
discount previously included in income with respect to such Euro Note (generally
determined by translating such interest or market discount at the average
exchange rate for the applicable accrual period or the spot rate as described in
"-- Payments of Interest"). Such foreign currency gain or loss is recognized on
the sale, exchange or retirement of a Euro Note only to the extent of total gain
or loss recognized on such sale or retirement.

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<PAGE> 143

As a result of certain limitations with respect to the availability of
foreign tax credits under the Code, a U.S. Holder may not be able to claim a
foreign tax credit for Netherlands withholding taxes, if any, imposed on the
proceeds received upon a sale, exchange, repurchase by the Company or other
disposition of Notes. Prospective investors should consult their own tax
advisors concerning the application of the U.S. foreign tax credit rules to
their particular situations.

TRANSACTIONS IN EUROS

Euros received by a U.S. Holder as interest on, or proceeds from the sale,
exchange or retirement of, a Euro Note generally will have a tax basis equal to
their U.S. dollar value at the time such interest is received or at the time
payment is received in consideration of such sale, exchange or retirement. The
amount of gain or loss recognized by a U.S. Holder on a sale or other
disposition of such euros will be equal to the difference between (i) the amount
of U.S. dollars, or the fair market value in U.S. dollars of the other currency
or property received in such sale or other disposition and (ii) the U.S.
Holder's tax basis of such euros.

A U.S. Holder that purchases a Euro Note with previously owned euros will
recognize foreign exchange gain or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in such euros and the U.S. dollar
value of such Euro Note on the date of purchase. Generally, any such gain or
loss will be ordinary income or loss and will not be treated as interest income
or expense, except to the extent provided by future regulations or
administrative pronouncements of the IRS. However, a U.S. Holder that converts
U.S. dollars to euros and immediately uses such euros to purchase a Euro Note
ordinarily would not recognize any foreign exchange gain or loss in connection
with such conversion or purchase.

BACKUP WITHHOLDING

"Backup" withholding and information reporting requirements may apply to
certain payments of principal of and interest on a Note and to certain payments
of proceeds of the sale or retirement of a Note. The Company, its agent, a
broker, the Trustee or any paying agent, as the case may be, will be required to
withhold tax from any payment that is subject to backup withholding at a rate of
31.0% of such payment if the U.S. Holder fails to furnish his taxpayer
identification number (social security number or employer identification
number), to certify that such U.S. Holder is not subject to backup withholding,
or to otherwise comply with the applicable requirements of the backup
withholding rules. Certain U.S. Holders (including, among others, corporations)
are not subject to the backup withholding and reporting requirements. Any
amounts withheld under the backup withholding rules from a payment to a U.S.
Holder generally may be claimed as a credit against such holder's U.S. federal
income tax liability provided that the required information is furnished to the
IRS.

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<PAGE> 144

UNDERWRITING

The underwriters named below, acting through Lehman Brothers International
(Europe), have severally but not jointly agreed, subject to the terms and
conditions of an underwriting agreement dated July 23, 1999 (the form of which
is filed as an exhibit to the Registration Statement of which this prospectus is
a part), to purchase from us, and we have agreed to sell to the underwriters,
the aggregate principal amount of Dollar Notes and Euro Notes set forth opposite
their respective names below:

<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
AMOUNT OF DOLLAR AMOUNT OF EURO
UNDERWRITERS NOTES NOTES
- ------------ ------------------- -------------------
<S> <C> <C>
Lehman Brothers International (Europe)................ $157,500,000 E105,000,000
ING Barings LLC(1).................................... 22,500,000 15,000,000
------------ ------------
Total....................................... $180,000,000 E120,000,000
============ ============
</TABLE>

- ---------------

(1) Together with ING Barings Limited

The underwriting agreement provides that the obligation of the underwriters
to purchase the Notes is subject to the satisfaction of certain conditions,
including the delivery of legal opinions by legal counsel. Subject to the terms
and conditions of the underwriting agreement, the underwriters must purchase all
of the Notes from us if they purchase any of them.

The underwriters will pay us the offering price less the underwriting
discount specified on the cover of this prospectus. We estimate that we will
incur approximately $17.3 million of discounts, commissions and expenses in
connection with the offering of the Notes.

Each underwriter has represented and agreed to all of the following:

- it has not offered or sold and, prior to the date six months after the
date of issue of the Notes, will not offer or sell any Notes to persons
in the United Kingdom except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995,

- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulation with respect to anything
done by it in relation to the Notes in, from or otherwise involving the
United Kingdom, and

- it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any document received by it in connection
with the issue of the Notes if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise be issued or passed upon.

The Notes are new securities for which there currently is no market. The
underwriters have advised us that they presently intend to make a market in the
Notes as permitted by applicable laws and regulations. The underwriters are not
obligated to make a market in the Notes, however, and they may discontinue this
market making at any time in their sole discretion. Accordingly, we cannot
assure you that there will be adequate liquidity or adequate trading markets for
the Notes, or, if a market does develop, at what prices the Notes will trade. If
the underwriters cease to act as market makers for the Notes for any reason, we
cannot assure you that another firm or person will make a market in the Notes.

In connection with this offering, the underwriters may engage in certain
transactions that stabilize the price of the Notes. These transactions may
consist of bids or purchases for the purpose of pegging,

138
<PAGE> 145

fixing or maintaining the price of the Notes. If the underwriters create a short
position in the Notes by selling more Notes than are listed on the cover page of
this prospectus, then the underwriters may reduce that short position by
purchasing Notes in the open market. In general, the purchase of a security for
the purpose of stabilization or reducing a short position could cause the price
of that security to be higher than it might otherwise be in the absence of those
purchases.

Neither we nor the underwriters make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of either series of Notes. In addition, neither we nor the
underwriters make any representation that anyone will engage in these
transactions or that these transactions, once commenced, will not be
discontinued without notice.

This prospectus may be used in connection with offers and sales of Notes
offered initially outside the United States and Canada insofar as such Notes are
reoffered or resold from time to time in the United States in transactions that
require registration under the Securities Act.

No action has been taken or will be taken in any jurisdiction by us or the
underwriters that would permit a public offering of the Notes in any
jurisdiction where action for such purpose is required, other than in the United
States. Persons into whose possession this prospectus comes are required by
VersaTel and the underwriters to inform themselves about, and to observe any
restrictions as to, this offering and the distribution of this prospectus.

This prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of the Notes in Canada or any province or
territory thereof. Any offer or sale of the Notes in Canada will be made only
pursuant to an exemption from the prospectus filing requirement and an exemption
from the dealer registration requirement (where such an exemption is not
available, offers or sales shall be made only by a registered dealer) in the
relevant Canadian jurisdiction where such offer or sale is made.

Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), if more than 10% of the net proceeds of a
public offering of debt securities are to be paid to members of the NASD that
are participating in the offering, or affiliated or associated persons, the
yield on the debt securities distributed to the public must be no lower than
that recommended by a "qualified independent underwriter," as defined in Rule
2720 of the Conduct Rules of the NASD. Because Lehman Commercial Paper Inc., an
affiliate of each of Lehman Brothers Inc. and Lehman Brothers International
(Europe) and the arranger and a lender of the Interim Loans, and ING (U.S.)
Capital, LLC, an affiliate of each of ING Barings Limited and ING Barings LLC
and a lender of the Interim Loans, will receive more than 10% of the net
proceeds of this offering as a result of the repayment of amounts outstanding
under the Interim Loans, Hambrecht & Quist LLC (the "Independent Underwriter"),
an underwriter in the Equity Offering, will act as a qualified independent
underwriter in connection with this offering. The Independent Underwriter in its
role as qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of this
prospectus and the registration statement of which this prospectus forms a part.
The yield on the Notes sold to the public will be no lower than that recommended
by such qualified independent underwriter.

Some of the underwriters have, directly or indirectly, performed investment
and commercial banking or financial advisory services to us, for which they have
received customary fees and commissions, and they expect to provide these
services to us and our affiliates in the future, for which they also expect to
receive customary fees and commissions. Lehman Brothers Inc., an affiliate of
Lehman Brothers International (Europe), was an initial purchaser in the First
High Yield Offering and the Second High Yield Offering. Lehman Brothers
International (Europe) was an initial purchaser in the Second High Yield
Offering. Lehman Brothers Commercial Paper Inc., an affiliate of each of

139
<PAGE> 146

Lehman Brothers Inc. and Lehman Brothers International (Europe), and ING (U.S.)
Capital, LLC, an affiliate of each of ING Barings Limited and ING Barings LLC,
are lenders of the Interim Loans which will be repaid with a portion of the net
proceeds of this offering. Lehman Brothers Inc., Lehman Brothers International
(Europe), ING Barings Limited and ING Barings LLC are underwriters in the Equity
Offering and will receive compensation for such services.

Affiliates of Lehman Brothers may provide loans to the Chief Executive
Officer, Chief Operating Officer and Chief Technology Officer of VersaTel in an
aggregate amount of approximately NLG 6.0 million to fund the exercise price of
certain employee options that may be exercised by them at the time of the
closing of the Equity Offering. Any such loans could be made on commercial
terms, including a pledge of the shares received upon such exercise and
reimbursement of legal fees and other expenses.

We have agreed to indemnify the underwriters and the Independent
Underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the underwriters may be required to
make in respect of any of those liabilities.

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<PAGE> 147

LEGAL MATTERS

The validity of the Notes offered hereby will be passed upon for VersaTel
by Shearman & Sterling, New York, New York. Certain legal matters will be passed
upon for the underwriters by Simpson Thacher & Bartlett, London, England. The
validity of the Notes with respect to Netherlands corporate law will be passed
upon for VersaTel by Stibbe Simont Monahan Duhot, Amsterdam, The Netherlands and
certain matters of Netherlands tax law will be passed upon for VersaTel by
Arthur Andersen, Amsterdam, The Netherlands. Certain matters of Netherlands law
will be passed upon for the underwriters by Nauta Dutilh, Amsterdam, The
Netherlands.

EXPERTS

The financial statements of VersaTel as of December 31, 1996, 1997 and 1998
and for each of the years then ended, included in this prospectus, have been
audited by Arthur Andersen, and are included herein in reliance upon the
authority of said firm as expert in preparing said reports.

The financial statements of Svianed B.V. as of December 31, 1997 and 1998
and for each of the years in the two-year period ended December 31, 1998 have
been included in this prospectus in reliance upon the report of KPMG Accountants
N.V., and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, or the
"Commission," a Registration Statement on Form F-1 under the Securities Act, and
the rules and regulations promulgated thereunder, with respect to the Notes
offered hereby. This prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. Statements contained in this prospectus as
to the contents of any contract or other document that is filed as an exhibit to
the Registration Statement are not necessarily complete and each such statement
is qualified in all respects by reference to the full text of such contract or
document.

You may read and copy all or any portion of the Registration Statement and
the exhibits thereto at the Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can request copies of these documents, upon payment of a
duplication fee, by writing to the Commission. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the Commission's
public reference rooms. Also, the Commission maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.

As a result of the registration under the Securities Act of the Existing
Notes, we are subject to the information and period reporting requirements of
the Exchange Act of 1934 and, in accordance therewith, we file periodic reports
and other information with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system. Such periodic reports and other
information will be available for inspection and copying at the public reference
facilities, regional offices and Web site of the Commission referred to above.
We will also make available such reports at the office of the paying agent in
Luxembourg if any of the Notes are listed on the Luxembourg Stock Exchange.

In addition, pursuant to the indentures governing the Existing Notes and
the warrant agreements governing the warrants, we have agreed to file with the
Securities and Exchange Commission all annual financial statements and other
financial information that are required to be contained in a filing with the
Commission on Form 20-F. Furthermore, we have agreed to file with the Commission
all quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Form 10-Q, if we
were required to file such form. Such quarterly information will be filed with
the Commission within 45 days following the end of each fiscal quarter, and such
annual information will be filed within 90 days following the end of each fiscal
year of VersaTel.

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<PAGE> 148

GENERAL LISTING INFORMATION

LISTING

Application has been made to list the Notes on the Luxembourg Stock
Exchange. We can provide no assurance that such listing will be obtained. If
such listing is obtained, the Articles of Association of the Company and the
legal notice relating to the issue of the Notes will be deposited prior to the
listing with the Registrar of the District Court in Luxembourg (Greffier en Chef
du Tribunal d'Arrondissement a Luxembourg), where such documents are available
for inspection and where copies thereof can be obtained upon request. If and so
long as the Notes are listed on the Luxembourg Stock Exchange, an agent for
making payments on, and transfers of, Notes will be maintained in Luxembourg.

AUTHORIZATION

VersaTel has obtained all necessary consents, approvals and authorizations
in connection with the issue of the Notes. The issue of the Notes was authorized
by a resolution of the Supervisory Board of VersaTel passed on July 22, 1999.

NO MATERIAL CHANGE

Except as disclosed in this prospectus, there has been no material change
in the financial position of VersaTel since March 31, 1999 and no material
adverse change in the financial position or prospects of VersaTel since March
31, 1999.

LITIGATION

VersaTel is not involved in any litigation or arbitration proceedings which
relate to claims or amounts which are material in the context of the issue of
the Notes or that may have, or have had during the 12 months preceding the date
of this prospectus, a material adverse effect on the financial position of
VersaTel, nor, so far as any of them is aware, is any such proceeding pending or
threatened.

DOCUMENTS AVAILABLE

If any Notes are listed on the Luxembourg Stock Exchange, copies of the
following documents may be inspected at the specified office of the Paying and
Transfer Agent in Luxembourg.

- Articles of Association of VersaTel; and

- the Indentures relating to the Notes (which include the form of the note
certificates).

In addition, copies of the most recent consolidated financial statements of
VersaTel for the preceding financial year, and any interim quarterly financial
statements published by VersaTel, will be available at the specified office of
the Paying and Transfer Agent in Luxembourg if and so long as the Notes are
listed on the Luxembourg Stock Exchange.

CLEARING SYSTEMS

The Notes have been accepted for clearance through the facilities of
Euroclear and Cedel. See "Book-Entry, Delivery and Form." The CUSIP number of
the Euro Notes is 925301AJ2. The CUSIP number for the Dollar Notes is 925301AH6.

NOTICES

All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to holders of the Notes at
their registered addresses as recorded in the Register;

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<PAGE> 149

and (ii) if and so long as the Notes are listed on the Luxembourg Stock Exchange
and it is required by the rules of the Luxembourg Stock Exchange, publication of
such notice to the holders of the Notes in English in a leading newspaper having
general circulation in Luxembourg (which is expected to be the Luxembourg Wort)
or, if such publication is not practicable, in one other leading English
language daily newspaper with general circulation in Europe, such newspaper
being published on each business day in morning editions, whether or not is
shall be published in Saturday, Sunday or holiday editions.

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<PAGE> 150

VERSATEL TELECOM INTERNATIONAL N.V.
FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998, 1997
and 1996.................................................. F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Financial Statements............................... F-7
Unaudited Consolidated Balance Sheets as of March 31, 1999
and 1998.................................................. F-17
Unaudited Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998................ F-18
Unaudited Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998................ F-19
Notes to the Unaudited Consolidated Financial Statements as
of March 31, 1999 and for the Three Months Ended March 31,
1998 and 1998............................................. F-20
</TABLE>

F-1
<PAGE> 151

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To VersaTel Telecom International N.V.

We have audited the consolidated balance sheets as of December 31, 1996,
1997 and 1998 of VERSATEL TELECOM INTERNATIONAL N.V. (formerly known as VERSATEL
TELECOM B.V.) and the consolidated statements of operations, shareholders'
equity and cash flows for each of the years then ended. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in The Netherlands which do not differ in any significant respect from
United States generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VersaTel Telecom
International N.V. as of December 31, 1996, 1997 and 1998 and the result of its
operations and their cash flows for each of the years then ended, in conformity
with United States generally accepted accounting principles.

ARTHUR ANDERSEN

Amsterdam, The Netherlands
April 13, 1999

F-2
<PAGE> 152

VERSATEL TELECOM INTERNATIONAL N.V.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
NLG NLG NLG
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................................... 372,014 1,346 4,290
Restricted cash, current portion......................... 89,752 76 100
Accounts receivable, net................................. 7,902 1,804 1,209
Inventory, net........................................... 1,083 418 135
Prepaid expenses and other............................... 12,909 1,995 33
------- ------- ------
Total current assets.................................. 483,660 5,639 5,767
------- ------- ------
Fixed Assets:
Property and Equipment, net.............................. 38,608 13,619 2,340
Construction In Progress................................. 46,019 -- --
------- ------- ------
Total fixed assets.................................... 84,627 13,619 2,340
------- ------- ------
Restricted cash, net of current portion.................. 121,804 73 53
Capitalized finance costs, net........................... 28,750 -- --
Goodwill, net............................................ 4,556 -- --
------- ------- ------
Total assets.......................................... 723,397 19,331 8,160
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................... 39,863 20,674 1,958
Due to related parties................................... 806 249 218
Accrued liabilities...................................... 28,005 7,691 1,653
Deferred income, current portion......................... -- 98 --
Current portion of capital lease obligations............. 71 279 253
------- ------- ------
Total current liabilities............................. 68,745 28,991 4,082
Deferred Income, net of current portion.................... -- 341 --
Capital Lease Obligations, net of current portion.......... 37 108 327
Subordinated Convertible Shareholder Loans................. -- 8,105 3,605
Long Term Liabilities...................................... 670 -- --
Long Term Debt (13 1/4% Senior Notes)...................... 688,018 -- --
------- ------- ------
Total Liabilities..................................... 757,470 37,545 8,014
------- ------- ------
Shareholders' Equity:
Ordinary shares, NLG 0.05 par value...................... 1,949 958 891
Additional paid-in capital................................. 51,112 6,037 4,604
Warrants................................................... 5,212 -- --
Accumulated deficit........................................ (92,346) (25,209) (5,349)
------- ------- ------
Total shareholders' equity............................ (34,073) (18,214) 146
------- ------- ------
Total liabilities and shareholders' equity....... 723,397 19,331 8,160
======= ======= ======
</TABLE>

F-3
<PAGE> 153

VERSATEL TELECOM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1998 1997 1996
NLG NLG NLG
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING REVENUES................................ 39,561 18,896 6,428
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation........ 31,821 17,405 4,954
Selling, general and administrative............. 47,733 17,527 5,485
Depreciation and amortization................... 6,473 3,237 453
---------- ---------- ----------
Total operating expenses................ 86,027 38,169 10,892
---------- ---------- ----------
Operating loss............................... (46,466) (19,273) (4,464)
---------- ---------- ----------
OTHER INCOME (EXPENSES):
Foreign currency exchange gains (losses), net... 5,146 (53) --
Interest income................................. 11,857 21 4
Interest expense -- third parties............... (37,522) (41) (24)
Interest expense -- related parties............. (145) (514) (249)
---------- ---------- ----------
Total other income (expenses)........... (20,664) (587) (269)
---------- ---------- ----------
Loss before income taxes..................... (67,130) (19,860) (4,733)
PROVISION FOR INCOME TAXES........................ (7) -- --
---------- ---------- ----------
Net loss..................................... (67,137) (19,860) (4,733)
========== ========== ==========
NET LOSS PER SHARE (Basic and Diluted) in NLG..... (2.06) (1.10) (0.47)
Weighted average number of shares outstanding..... 32,622,194 18,084,188 10,008,494
</TABLE>

F-4
<PAGE> 154

VERSATEL TELECOM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL
SHARES ORDINARY PAID-IN ACCUMULATED
OUTSTANDING SHARES CAPITAL WARRANTS DEFICIT TOTAL
----------- -------- ---------- -------- ----------- -------
NLG NLG NLG NLG NLG
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995...... 9,900,000 495 -- -- (616) (121)
Shareholder contributions......... 7,920,000 396 4,604 -- -- 5,000
Net loss........................ -- -- -- -- (4,733) (4,733)
---------- ----- ------ ----- ------- -------
Balance at December 31, 1996...... 17,820,000 891 4,604 -- (5,349) 146
Shareholder contributions......... 1,339,286 67 1,433 -- -- 1,500
Net loss........................ -- -- -- -- (19,860) (19,860)
---------- ----- ------ ----- ------- -------
Balance, December 31, 1997........ 19,159,286 958 6,037 -- (25,209) (18,214)
Shareholder contributions......... 19,695,524 985 44,750 5,212 -- 50,947
Shares issued for acquisition..... 130,000 6 325 -- -- 331
Net loss.......................... -- -- -- -- (67,137) (67,137)
---------- ----- ------ ----- ------- -------
Balance, December 31, 1998........ 38,984,810 1,949 51,112 5,212 (92,346) (34,073)
========== ===== ====== ===== ======= =======
</TABLE>

F-5
<PAGE> 155

VERSATEL TELECOM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- ------
NLG NLG NLG
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ (67,137) (19,860) (4,733)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization........................... 6,473 3,237 453
Amortization finance cost............................... 1,250 -- --
Restricted cash......................................... 149 4 --
Deferred income......................................... (440) 440 --
Changes in other operating assets and liabilities
Accounts receivable..................................... (6,098) (595) (1,157)
Inventory............................................... (665) (282) (114)
Prepaid expenses and other.............................. (10,914) (1,963) 330
Accounts payable........................................ 19,189 18,716 1,754
Due to related parties.................................. 557 30 218
Accrued liabilities..................................... 20,314 6,038 1,531
-------- ------- ------
Net cash provided by (used in) operating
activities......................................... (37,322) 5,765 (1,718)
-------- ------- ------
Cash Flows from Investing Activities:
Capital expenditures.................................... (77,255) (14,516) (2,569)
Goodwill paid on acquisition............................ (4,781) -- --
-------- ------- ------
Net cash used in investing activities................ (82,036) (14,516) (2,569)
-------- ------- ------
Cash Flows from Financing Activities:
Proceeds from (redemptions of) capital lease
obligations.......................................... (279) (193) 421
Proceeds from (repayments of) subordinated convertible
shareholder loans.................................... (8,105) 4,500 3,150
Proceeds from long term liabilities..................... 670 -- --
Proceeds from long term debt (13 1/4% Senior Notes)..... 688,018 -- --
Restricted cash......................................... (211,556) -- --
Finance cost............................................ (30,000) -- --
Warrants................................................ 5,212 -- --
Shareholder contributions............................... 46,066 1,500 5,000
-------- ------- ------
Net cash provided by financing activities............ 490,026 5,807 8,571
-------- ------- ------
Net Increase (Decrease) in Cash........................... 370,668 (2,944) 4,284
Cash, beginning of the year............................... 1,346 4,290 6
-------- ------- ------
Cash, end of the year..................................... 372,014 1,346 4,290
======== ======= ======
Supplemental Disclosures of Cash Flow Information:
Cash paid for --
Interest (net of amounts capitalized)................ 26,260 510 96
Income taxes......................................... -- -- --
</TABLE>

F-6
<PAGE> 156

VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. GENERAL

VersaTel Telecom International N.V., formerly known as VersaTel Telecom
B.V. ("VersaTel" or the "Company"), incorporated in Amsterdam on October 10,
1995, provides international and national telecommunications services in the
Benelux region.

2. FINANCIAL CONDITION AND OPERATIONS

For the year ended December 31, 1998, the Company had a loss from operating
activities of NLG 46,466. In addition, the Company had an accumulated deficit of
NLG 92,346 as of December 31, 1998.

Although the Company expects to incur operating losses and net losses for
the foreseeable future as it incurs additional costs associated with the
development and expansion of the Company's network, the expansion of its
marketing and sales organization and the introduction of new telecommunications
services, it has a positive working capital of NLG 414,915 at December 31, 1998,
which should enable it to continue its operations through December 31, 1999.

3. SIGNIFICANT ACCOUNTING PRINCIPLES

(A) BASIS OF PRESENTATION

The accompanying consolidated financial statements of the company have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP"). The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

The Company maintains its accounts under Dutch tax and corporate
regulations and has made certain out-of-book memorandum adjustments to these
records presenting the accompanying financial statements in accordance with U.S.
GAAP.

(B) PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the operations
of the following wholly-owned (directly or indirectly) subsidiaries:

- VersaTel Telecom Europe B.V.

- Bizztel Telematica B.V.

- CS Net B.V.

- VersaTel Telecom Netherlands B.V.

- VersaTel Telecom Belgium N.V.

- CS Engineering B.V.

The results of the subsidiaries are included from the respective dates of
acquisition or incorporation by the Company during 1998. All significant
intercompany accounts and transactions have been eliminated.

F-7
<PAGE> 157
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On May 29, 1998 and August 10, 1998 the Company acquired the shares of
Bizztel Telematica B.V. ("Bizztel") in 2 phases. The key figures of Bizztel as
included in the December 31, 1998 financial statements of VersaTel are sales of
NLG 269, total assets NLG 189, total equity of NLG (722) and net loss for the
period of NLG (257).

The Company applied the purchase accounting method. The goodwill, being the
difference between the purchase price amounting to NLG 1,132 in total and the
net asset value as of acquisition date, is being capitalized and amortized in 5
years.

On November 6, 1998 the Company acquired the shares of CS Net B.V., which
owns 100% of the shares of CS Engineering B.V. (together, "CS Net"). The key
figures of CS Net as included in the December 31, 1998 financial statements of
VersaTel are sales of NLG 897, total assets NLG 1,332, total equity of NLG 921
and net income for the period of NLG 80.

The Company applied the purchase accounting method. The goodwill, being the
difference between the purchase price amounting to NLG 3,307 in cash and 130,000
shares of VersaTel (valued at NLG 2.55 per share for the purpose of determining
the goodwill) and the net asset value as of acquisition date, is being
capitalized and amortized in 10 years. Furthermore, an earn-out arrangement with
the former shareholders has been agreed-upon. Any payments resulting from this
earn-out arrangement will be recorded as an adjustment to the purchase price
upon the time they become certain. No such adjustments have yet been recorded.

For both entities, pro forma financial statements have been omitted for
materiality reasons.

The Company's functional currency is the Dutch guilder. Transactions
involving other currencies are converted into Dutch guilders using the exchange
rates which are in effect at the time of the transactions.

At the balance sheet date, monetary assets and liabilities which are
denominated in other currencies are adjusted to reflect the current exchange
rates. Gains or losses resulting from foreign currency remeasurements are
reflected in the accompanying statements of operations.

(D) INVENTORY

Inventory, consisting primarily of dialers to be installed at customer
locations, is stated at the lower of cost (first-in, first-out) or market value.

(E) ADVERTISING EXPENSES

Advertising costs are expensed as incurred, and amounted to NLG 1,224, NLG
1,972 and NLG 5,259 in 1996, 1997 and 1998 respectively.

(F) INTANGIBLE ASSETS

Goodwill originating from the acquisition of investments represents the
difference of the net asset value and the acquisition cost of the investments at
the time of the acquisition. The goodwill is amortized on a straight-line basis
over a period varying from 5 to 10 years. Total accumulated amortization per
December 31, 1998 amounts to NLG 226.

F-8
<PAGE> 158
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred financing costs are costs incurred in connection with the issuance
of Senior Notes (the "Notes") during 1998 by the Company. Amortization is being
recorded over the term of the Notes as interest expense in the consolidated
statement of operations.

(G) RECOGNITION OF OPERATING REVENUES AND COST OF REVENUES

Operating revenues are recognized when the service is rendered. Cost of
revenues is recorded in the same period as the revenues are recorded.

The cost of telecommunication usage charged by the third party carriers to
the Company in connection with the telecommunication services rendered by the
Company to its customers, as well as other telecommunication costs, including
leased lines, are included in cost of revenues.

(H) SEGMENTAL REPORTING

Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information" has been issued and is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires certain disclosures about business segments of an enterprise, if
applicable. The adoption of SFAS No. 131 did not have an effect on the Company's
financial statements, as the Company currently manages its operations as one
segment under the guidelines of the new standard.

(I) RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued the Statement of Position 98-1
("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which provides guidance on accounting for the costs
of computer software developed or obtained for internal use. This SOP requires
computer software costs that are incurred in the preliminary project stage to be
expensed as incurred. Once the capitalization criteria of the SOP have been met,
directly attributable development costs should be capitalized. It also provides
guidance on the treatment of upgrade and maintenance expenditures. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. Costs incurred
prior to initial application of this SOP, whether capitalized or not, should not
be adjusted to the amounts that would have been capitalized had this SOP been in
effect when those costs were incurred. The Company has adopted this SOP in its
1998 consolidated financial statements.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or a liability
measured as its fair value. It also requires that changes in the derivative's
fair value be recognized currently into earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.

SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and can not be applied retroactively. The Company has not yet quantified the
impacts of adopting SFAS No. 133 on the financial statements and has not
determined the timing or method of adoption of SFAS No. 133.

F-9
<PAGE> 159
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(J) ORDINARY SHARES AND STOCK SPLIT

Ordinary shares, with a par value of NLG 0.05 and consisting of 140,000,000
class A shares and 10,000,000 class B shares, of which 17,820,000, 19,159,286
and 38,984,810 class A shares were outstanding at December 31, 1996, 1997 and
1998, respectively. No class B shares were issued.

On April 13, 1999, a two-for-one stock split was effected, which resulted
in the issuance of 19,492,405 additional shares of class A ordinary shares. All
per share and weighted average share amounts have been restated to reflect this
stock split.

4. RECAPITALIZATION

To increase the equity of the Company by means of the conversion of
subordinated debt and cash contribution by its shareholders, the Company has
completed a four part recapitalization in 1998.

The Subordinated Convertible Shareholder Loans were converted into ordinary
shares of the Company in February and April 1998. Furthermore, additional cash
contributions in equity capital were received in April and May 1998 amounting to
NLG 43,100 in total.

5. RESTRICTED CASH

Restricted cash balances of NLG 153, NLG 149 and NLG 211,556 at December
31, 1996, 1997 and 1998, respectively, include mainly amounts restricted in
connection with the payment of interest to the holders of the Senior Notes, and
bank guarantees to the lessors of the Company's buildings.

The amounts restricted in connection with interest payments to the holders
of the Notes include the interest to be paid until and including May 15, 2001
over the first tranche of Senior Notes and the interest to be paid until and
including May 15, 2001 over the second tranche of Senior Notes, which have
restricted balances of NLG 125,777 and NLG 85,779 respectively. The (total)
current portion is presented as Current portion of restricted cash. The
non-current portion is presented as Restricted Cash, net of current portion.

The bank guarantee to the lessors terminates upon cancellation of the lease
agreements for the respective buildings, and amounted to NLG 90.

6. ACCOUNTS RECEIVABLE

Accounts receivable are presented net of an allowance for doubtful accounts
of NLG 0, NLG 65 and NLG 347 at December 31, 1996, 1997 and 1998, respectively.

7. PREPAID EXPENSES AND OTHER

Prepaid Expenses and Other as of December 31, 1998, 1997 and 1996,
respectively, include an amount of NLG 5,897, NLG 1,564 and NLG 0, respectively,
which relates to value added taxes.

8. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful life
of the related asset. Property and equipment operated by the Company under a
capital lease agreement are capitalized.

F-10
<PAGE> 160
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Listed below are the major classes of property and equipment and their
estimated useful lives in years as of December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
USEFUL LIFE 1998 1997 1996
----------- ------ ------ -----
<S> <C> <C> <C> <C>
Leasehold improvements.................... 5 3,555 911 40
Telecommunications equipment.............. 2-10 37,264 14,750 2,376
Other..................................... 3-5 7,929 1,546 388
------ ------ -----
Property and equipment.................. 48,748 17,207 2,804
Less Accumulated depreciation........... 10,140 3,588 464
------ ------ -----
Property and equipment, net............. 38,608 13,619 2,340
====== ====== =====
</TABLE>

Presented under deferred income is cash received in connection with the
sublease by the company of part of its building. As the sublease was terminated
in 1998, the amount is no longer recorded in the December 31, 1998 balance
sheet.

9. CONSTRUCTION IN PROGRESS

The Company continues to build out its network in the Benelux and securing
rights-of-way. The resulting assets as of December 31, 1998 have been recorded
at cost under the caption "Construction in progress."

During the time of the construction interest is capitalized at a rate of
13 1/4%, the total capitalized interest at December 31, 1998 being NLG 1,393.

10. CAPITAL LEASE OBLIGATIONS

The Company entered into a master lease agreement with a finance company to
lease certain telecommunications and EDP equipment.

Commitments for minimum rentals under non-cancellable leases at the end of
1998 are as follows:

<TABLE>
<S> <C>
1999........................................................ NLG 73
2000........................................................ 19
2001........................................................ 19
2002........................................................ 4
-------
Total minimum lease payments................................ 115
Less amount representing interest........................... 7
-------
Present value of net minimum lease payments, including
maturities of NLG 71...................................... NLG 108
=======
</TABLE>

F-11
<PAGE> 161
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property, plant and equipment at year-end include the following amounts for
capitalized leases:

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Telecommunications equipment..................... NLG 820 NLG 820
Other............................................ 28 28
------- -------
848 848
Less allowances for depreciation................. 740 461
------- -------
NLG 108 NLG 387
======= =======
</TABLE>

11. SENIOR NOTES

On May 27, 1998 and December 3, 1998 the company issued two tranches of
Senior Notes for respectively $225,000 and $150,000 with an interest rate of
13 1/4% due 2008, and warrants to purchase respectively 3,000,000 and 2,000,100
shares at an exercise price of NLG 2.55 per share, respectively.

The discount on the second tranche of Senior Notes (amounting to 4%) is
netted against the Notes and will be amortized on a straight-line basis over a
period equal to the term of the Senior Notes. The amortization charge is treated
as interest expense in the income statement.

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet. The carrying amounts reported in
the consolidated balance sheets for cash, trade receivables, accounts payable
and accrued expenses approximate fair value based on the short-term maturity of
these instruments. The carrying amount of the Company's borrowings under the
long-term debt agreements approximates fair value as the interest rates on these
long-term debts approximates the current market interest rates.

12. EMPLOYEE BENEFIT PLANS

The Company has established two stock option plans: the 1997 Stock Option
Plan (the "1997 Plan"), and the 1998 Stock Option Plan (the "1998 Plan").

The 1997 Plan provides for the grant of options to certain key employees of
the Company to purchase depositary receipts issued for ordinary shares of the
Company. Under the 1997 Plan, no options may be granted with an expiration date
of more than five years after the granting of the option. The options will be
granted for free with an exercise price to be determined in the particular grant
of the option.

The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to the Company or to another party
designated by the Company, at the Purchase Price (as defined in the 1997 Plan).
Unless otherwise specified in the particular grant of the option, the Purchase
Price will be the fair market value of the ordinary shares minus a penalty
discount. The 1997 Plan contains provisions in the event of a dispute regarding
the fair market value of the ordinary shares. The penalty discount, if any, is
determined by the length of employment of the particular option holder.

F-12
<PAGE> 162
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan.

As of December 31, 1998, 398,000 options to purchase 398,000 depositary
receipts had been granted under the 1997 Plan and the Company does not intend to
grant any more options under the 1997 Plan.

The 1998 Plan provides for the grant of options to employees to purchase
depositary receipts issued for ordinary shares of the Company. The option period
will commence at the date of the grant and will last 5 years. The option
exercise price shall be the economic value of the depositary receipt at the date
of the grant of the option. The 1998 Plan contains specific provisions for the
determination of the economic value of the depositary receipts.

As of December 31, 1998, 5,000,000 options to purchase 5,000,000 depositary
receipts have been granted under the 1998 Plan.

The fair value of the depository receipts at the date of the grant equals
the exercise price of the options granted under the 1998 Stock Option Plan. This
value was based on transactions conducted on an at arm's length basis, with
third parties becoming shareholders.

The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor Versatel.

In October 1995, FASB Statement No. 123 "Accounting for Stock-Based
Compensation" was issued. The Company has adopted the disclosure provisions of
FASB Statement No. 123 in 1997, but opted to remain under the expense
recognition provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for options granted
under the Stock Option Plans. Accordingly, for the years ended December 31, 1997
and 1998 no compensation was recognized for options granted under these schemes.
Had compensation cost for stock options awarded under these plans been
determined consistent with FASB Statement No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
1998 1997
------- -------
NLG NLG
<S> <C> <C> <C>
Net loss:...................................... As reported (67,137) (19,860)
Pro forma (69,405) (19,887)
Net loss per share (basic and diluted):........ As reported (2.06) (1.10)
Pro forma (2.06) (1.10)
</TABLE>

F-13
<PAGE> 163
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The movement in options outstanding during the 2 years ended December 31,
1997 and 1998 is summarized in the following table:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SHARES SUBJECT AVERAGE EXERCISE
TO OPTION PRICE
-------------- ----------------
<S> <C> <C>
Outstanding at January 1, 1997.................... -- --
Granted during 1997............................... 398,000 NLG 0.54
---------
Outstanding at December 31, 1997.................. 398,000 NLG 0.54
Granted during 1998............................... 5,000,000 NLG 2.27
---------
Outstanding at December 31, 1998.................. 5,398,000 NLG 2.14
=========
</TABLE>

The weighted average fair value of options granted in the year ended
December 31, 1998 was estimated at NLG 0.46 as at the date of grant using the
Black-Scholes stock option pricing model. The following weighted average
assumptions were used: dividend yield of 0.00% per annum, annual standard
deviation (volatility) of 0.00%, risk free interest rate of 4.46% and expected
term of 5 years.

For options granted in the year ended December 31, 1998 with an exercise
price equal to market price at grant date, the weighted average exercise price
and fair value at grant date were estimated at NLG 2.27 and NLG 0.46
respectively.

The exercise prices for options outstanding at the end of the year ranged
from NLG 0.30 to NLG 2.55, with a weighted average exercise price of NLG 2.14
and a remaining contractual life of 4.28 years.

The following table summarizes information about the stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY EXERCISABLE
- ------------------------------------------------------------------- -----------------------------
WEIGHTED WEIGHTED
RANGE AVERAGE AVERAGE WEIGHTED
OF EXERCISE REMAINING EXERCISE AVERAGE EXERCISE
PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
----------- --------- ---------------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
NLG 0 - 0.49............ 99,000 3.0 0.30 99,000 0.30
NLG 0.50 - 0.99......... 299,000 3.5 0.63 299,000 0.63
NLG 1 - 1.49............ -- -- -- -- --
NLG 1.50 - 1.99......... -- -- -- -- --
NLG 2 - 2.49............ 4,350,000 4.32 2.23 4,350,000 2.23
NLG 2.50 - 3.00......... 650,000 4.46 2.55 650,000 2.55
</TABLE>

13. TAXES

The Company had income tax carry-forwards of approximately NLG 1,800 at
December 31, 1996, NLG 8,200 at December 31, 1997 and NLG 42,300 at December 31,
1998, which may be utilized to reduce future income taxes payable.

F-14
<PAGE> 164
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The income tax carry-forwards do not expire and can be utilized
indefinitely under Netherlands tax legislation. A valuation allowance has been
established for the entire amount of the Net Operating Loss carry-forwards due
to the uncertainty of its recoverability.

There were no significant temporary differences which gave rise to deferred
tax assets and liabilities at December 31, 1996 or 1997. At December 31, 1998 a
temporary difference has arisen due to the different treatment of finance costs
for fiscal purposes. No deferred taxes have been recorded in this respect.

14. NET SALES

The geographical composition of net sales is as follows:

<TABLE>
<CAPTION>
1998
----------
<S> <C>
The Netherlands............................................. NLG 39,324
Belgium..................................................... 237
----------
Total............................................. NLG 39,561
==========
</TABLE>

In 1996 and 1997, all sales were realized in The Netherlands.

15. RELATED PARTY TRANSACTIONS

At December 31, 1996, 1997 and 1998 the Company had various accounts
payable to and accruals outstanding relating to related parties. These related
mainly to interest payable on the subordinated convertible shareholder loans of
approximately NLG 174 and NLG 199 at December 31, 1996 and 1997.

In the normal course of business, the Company uses a consultancy firm in
which one of the Company's officers is a director. Accounts payable to this
consultancy firm at December 31, 1998 amounted to NLG 806 and the 1998 expense
to the Company in this respect was approximately NLG 3,300.

16. RENT AND OPERATING LEASE COMMITMENTS

Future minimum commitments in connection with rent and other operating
lease agreements are as follows at December 31, 1998:

<TABLE>
<S> <C>
1999........................................................ NLG 4,635
2000........................................................ 4,571
2001........................................................ 4,571
2002........................................................ 4,313
2003........................................................ 2,092
2004 and further............................................ 2,352
----------
NLG 22,534
==========
</TABLE>

Rent and operating lease expenses amounted to approximately NLG 585 in 1997
and NLG 1,937 in 1998. The main part of future commitments relates to the
renting of Points-of-Presence ("POP's") for a ten-year period.

F-15
<PAGE> 165
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET

Commitments in connection with the roll-out of the Company's network, not
yet recorded on the balance sheet amount to approximately NLG 75,000 as of
December 31, 1998. Reference is made to Note 9.

18. LEGAL PROCEEDING

One of the shareholders of the Company objected to the Recapitalization as
described under Note 4, and to the issuance of the 2 tranches of Senior Notes as
described under Note 11, and threatened to challenge in court certain of
VersaTel's actions in connection with the Recapitalization and the issuance of
the Notes. In January 1999, this shareholder filed, pursuant to article 2:345 of
the Netherlands Civil Code, a petition with the Enterprise Chamber of the Court
of Appeals in Amsterdam requesting the appointment of one or more experts to
investigate the management and affairs of VersaTel. If this request will be
granted, the person or persons appointed by the court will file a report with
the court upon conclusion of the investigation. The Netherlands Civil Code
provides that if the findings in such report indicate the mismanagement of the
company involved, the Enterprise Chamber of the Court of Appeals may, in its
discretion, at the request of either the petitioner, the other shareholders of
the company representing at least 10% of the outstanding share capital, or the
Solicitor-General with the Court of Appeals, take one or more of the following
actions: (i) suspend or dismiss one or more of the managing or supervisory
directors; (ii) appoint on a temporary basis one or more managing or supervisory
directors; (iii) deviate on a temporary basis from such provisions of the
articles of association of the company as indicated by the court; (iv) transfer
shares in the company on a temporary basis; and (v) dissolve the company.

Based upon advice from the Company's legal counsel, it is unlikely that
this objection would have a material impact on the Company's consolidated
balance sheets or statements of operations.

F-16
<PAGE> 166

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................... 5,149 329,551
Restricted cash, current portion........................ 76 94,201
Accounts receivable, net................................ 3,321 11,001
Inventory, net.......................................... 777 2,992
Prepaid expenses and other.............................. 1,837 17,439
------- --------
Total current assets............................ 11,160 455,184
------- --------
Fixed Assets:
Property, plant and equipment, net...................... 14,956 41,766
Construction in progress................................ -- 92,205
------- --------
Total fixed assets.............................. 14,956 133,971
------- --------
Restricted cash, net of current portion................... 73 135,614
Capitalized finance costs, net............................ -- 28,000
Goodwill, net............................................. -- 4,354
------- --------
Total assets.................................... 26,189 757,123
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ 24,345 50,556
Due to related parties.................................. 530 --
Accrued liabilities..................................... 9,583 70,413
Current portion of capital lease obligations............ 269 71
------- --------
Total current liabilities....................... 34,727 121,040
------- --------
Capital lease obligations, net of current portion......... 50 23
------- --------
Long term liabilities..................................... 325 670
------- --------
Subordinated Convertible Shareholder Loans................ 8,105 --
------- --------
Prepaid Shareholder Contributions......................... 7,200 --
------- --------
Long term debt (13 1/4% Senior Notes)..................... -- 747,845
------- --------
Total liabilities............................... 50,407 869,578
Shareholders' Equity:
Ordinary shares, NLG 0.05 par value..................... 958 1,949
Additional paid-in capital.............................. 6,037 51,112
Warrants................................................ -- 5,212
Accumulated deficit..................................... (31,213) (170,728)
------- --------
Total shareholders' equity...................... (24,218) (112,455)
------- --------
Total liabilities and shareholders' equity...... 26,189 757,123
======= ========
</TABLE>

See notes to the unaudited consolidated financial statements.
F-17
<PAGE> 167

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES........................................ 6,402 15,501
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation................ 5,460 12,485
Selling, general and administrative..................... 5,544 20,179
Depreciation and amortization........................... 1,087 3,084
---------- ----------
Total operating expenses........................ 12,091 35,748
---------- ----------
Operating loss..................................... (5,689) (20,247)
---------- ----------
OTHER INCOME (EXPENSES):
Foreign currency exchange gains (losses), net........... (115) (40,283)
Interest income......................................... 14 6,043
Interest expense -- third parties....................... (27) (23,895)
Interest expense -- related parties..................... (187) --
---------- ----------
Total other income (expenses)................... (315) (58,135)
---------- ----------
Loss before income taxes........................... (6,004) (78,382)
PROVISION FOR INCOME TAXES................................ -- --
---------- ----------
Net loss........................................... (6,004) (78,382)
========== ==========
NET LOSS PER SHARE (Basic and Diluted) in NLG............. (0.31) (2.01)
Weighted average number of shares outstanding............. 19,159,286 38,984,810
</TABLE>

See notes to the unaudited consolidated financial statements.
F-18
<PAGE> 168

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ (6,004) (78,382)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization........................... 1,087 3,084
Amortization finance cost............................... -- 750
Exchange loss on long-term debt and restricted cash..... -- 41,568
Changes in other operating assets and liabilities Accounts
receivable.............................................. (1,517) (3,099)
Inventory............................................... (359) (1,909)
Prepaid expenses and other.............................. 158 (4,530)
Accounts payable........................................ 3,671 10,693
Due to related parties.................................. 281 (806)
Accrued liabilities..................................... 1,778 42,408
------ -------
Net cash provided by (used in) operating
activities...................................... (905) 9,777
====== =======
Cash Flows from Investing Activities:
Capital expenditures.................................... (2,424) (52,226)
------ -------
Net cash used in investing activities.............. (2,424) (52,226)
====== =======
Cash Flows from Financing Activities:
Redemptions of capital lease obligations................ (68) (14)
Shareholder contributions............................... 7,200 --
------ -------
Net cash provided by (used in) financing
activities...................................... 7,132 (14)
====== =======
Net Increase (Decrease) in Cash........................... 3,803 (42,463)
Cash, beginning of the period............................. 1,346 372,014
------ -------
Cash, end of the period................................... 5,149 329,551
====== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid for --
Interest (net of amounts capitalized)................ -- --
Income taxes......................................... -- --
</TABLE>

See notes to the unaudited consolidated financial statements.
F-19
<PAGE> 169

VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

1. FINANCIAL PRESENTATION AND DISCLOSURES

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of VersaTel Telecom International N.V. and its
wholly-owned subsidiaries (the "Company") have been prepared in conformity with
US generally accepted accounting principles ("US GAAP") and contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of March 31, 1999, and
the results of operations and cash flows for the three months ended March 31,
1998 and 1999.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's 1998 audited financial statements and
the notes related thereto, filed on Form 20-F. The results of operations for the
three months ended March 31, 1999 may not be indicative of the operating results
for the full year.

As of March 31, 1999, the Company (directly or indirectly) wholly-owned the
following subsidiaries:

- VersaTel Telecom Europe B.V.
- VersaTel Telecom Netherlands B.V.
- VersaTel Telecom Belgium N.V.
- Bizztel Telematica B.V.
- CS Net B.V.
- CS Engineering B.V.

All intercompany assets, liabilities and transactions have been eliminated
in consolidation.

2. SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.

3. INVENTORIES

Inventory, consisting primarily of dialers to be installed at customer
locations, is stated at the lower of cost (first-in, first-out) or market value.

F-20
<PAGE> 170
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. FOREIGN CURRENCY TRANSACTIONS

For the three months ended March 31, 1999 an unrealized exchange loss of
approximately NLG 59,800 was recorded on the long-term debt (13 1/4% senior
notes, denominated in U.S. dollars). In the same period, an unrealized exchange
gain was recorded on the restricted cash, denominated in U.S. dollars, to an
amount of approximately NLG 18,300.

5. FINANCIAL CONDITION AND OPERATIONS

For the period ended March 31, 1999, the Company had a loss from operating
activities of NLG 20,247. In addition, the Company had an accumulated deficit of
NLG 170,728 as of March 31, 1999.

Although the Company expects to incur operating losses and net losses for
the foreseeable future as it incurs additional costs associated with the
development and expansion of the Company's network, the expansion of its
marketing and sales organization and the introduction of new telecommunications
services, it has a positive working capital of NLG 334,144 at March 31, 1999,
which should enable it to continue its operations through December 31, 1999. The
Company expects to raise additional funds in 1999 through public or private
financings or from financial institutions.

6. COMMITMENTS

Commitments in connection to the roll-out of the Company's network, not yet
recorded on the balance sheet, amount to approximately NLG 65,000 as of March
31, 1999.

An earn-out arrangement with the former shareholders of CS Net B.V. has
been agreed-upon. Any payments resulting from this earn-out arrangement will be
recorded as an adjustment to the purchase price upon the time they become
certain. No such adjustments have yet been recorded.

7. LEGAL PROCEEDING

One of the shareholders of the Company objected to the 1998
recapitalization as described in Form 20-F, and to the issuance of the two
tranches of senior notes as described in Form 20-F, and threatened to challenge
in court certain of the Company's actions in connection with the
recapitalization and the issuance of the senior notes. In January 1999, this
shareholder filed, pursuant to article 2:345 of the Netherlands Civil Code, a
petition with the Enterprise Chamber of the Court of Appeals in Amsterdam
requesting the appointment of one or more experts to investigate the management
and affairs of the Company. In May 1999, the Enterprise Chamber denied the
shareholder's request. However, it is not certain whether or not this
shareholder will attempt to frustrate, block or challenge our future actions.

8. SUBSEQUENT EVENTS

In May 1999 the Company acquired Amstel Alpha B.V. and its direct and
indirect subsidiaries, SpeedPort N.V. and Glabana U.S.A., Inc. (collectively,
"SpeedPort"). The unaudited key figures of

F-21
<PAGE> 171
VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SpeedPort as of April 30, 1999 are summarized as follows: no sales, total assets
NLG 1,000, and a net loss for the period since inception in 1998 until April 30,
1999 of NLG 2,200.

In May 1999 the Company acquired 7-Klapper Beheer B.V. and its subsidiaries
Vuurwerk Internet B.V. and Vuurwerk Acces B.V. (collectively "Vuurwerk"). The
unaudited figures of Vuurwerk as of December 31, 1998 are summarized as follows:
1998 sales of NLG 3,800, assets NLG 6,000 and a net income of NLG 1,400.

In June 1999 the Company acquired ITinera Services N.V. ("ITinera"). Key
(unaudited) figures for ITinera over 1998 are as follows: sales of NLG 870, a
net loss for the year of NLG 254 and total assets as of December 31, 1998 of NLG
1,481.

In June 1999 the Company acquired Svianed B.V. Key unaudited figures for
Svianed as of April 30, 1999 are sales of NLG 21,100, total assets NLG 40,100
and a net income for the period from January 1, 1999 until April 30, 1999 of NLG
3,300.

On April 13, 1999 a two-for-one stock split was effected, which resulted in
the issuance of 19,492,405 additional shares of class A ordinary shares. The
authorized capital of the Company now consists of 140,000,000 class A shares and
10,000,000 class B shares, each with a par value of NLG 0.05. All share, per
share and weighted average share amounts have been restated in this document to
reflect this stock split. As of March 31, 1999, 38,984,810 class A shares (as
adjusted) were outstanding and no class B shares were issued.

In 1999, the Company issued options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. As of the
date of this prospectus, 2,115,000 options to purchase depositary receipts have
been issued under the 1999 Plan. As the exercise price of the 1999 options is
significantly below the estimated fair market value of the shares, the Company
will have to record a compensation expense in its June 30, 1999 financial
statements. The Company is in the process of quantifying this compensation
expense.

F-22
<PAGE> 172

SVIANED B.V.

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report................................ F-24
Balance Sheets as of December 31, 1998 and 1997............. F-25
Statements of Operations for the Years Ended December 31,
1998 and 1997............................................. F-26
Statements of Shareholder's Equity for the Years Ended
December 31, 1998 and 1997................................ F-27
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997............................................. F-28
Notes to Financial Statements............................... F-30
Condensed Balance Sheets as of March 31, 1999 and 1998...... F-35
Condensed Statements of Operations for the Three Months
Ended March 31, 1999 and 1998............................. F-36
Condensed Statement of Shareholder's Equity as of March 31,
1999 and 1998............................................. F-37
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998............................. F-38
Condensed Notes to Financial Statements..................... F-39
</TABLE>

F-23
<PAGE> 173

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND THE SHAREHOLDER OF SVIANED B.V.

We have audited the accompanying balance sheets of Svianed B.V. as of
December 31, 1998 and 1997, and the related statements of operations,
shareholder's equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards in The Netherlands which do not differ in any significant respect from
generally accepted auditing standards in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Svianed B.V. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles in
the United States of America.

KPMG Accountants N.V.

Amsterdam, The Netherlands
March 15, 1999

F-24
<PAGE> 174

SVIANED B.V.

BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. 1,468 2,578
Trade accounts receivable, less allowance for doubtful
accounts of NLG 250 in 1998 and NLG nil in 1997.... 4,618 5,536
Due from group companies.............................. 5,476 4,254
Inventory............................................. 129 215
Prepaid expenses...................................... 190 298
Discounts to be received from KPN..................... 1,454 590
Other current assets.................................. 1,062 681
------ ------
Total current assets............................... 14,397 14,152
Property and equipment, less accumulated depreciation... 19,153 14,648
Deferred tax assets..................................... 105 70
------ ------
Total assets.................................. 33,655 28,870
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable...................................... 2,306 4,107
Due to group companies................................ 8,713 2,706
Short term portion of long term debt.................. 2,500 2,500
Deferred income....................................... 3,132 1,943
Accrued liabilities................................... 679 876
Other liabilities..................................... 1,508 250
------ ------
Total current liabilities.......................... 18,838 12,382
Long term debt.......................................... 2,500 5,000
Pension obligation...................................... 300 200
------ ------
Total liabilities.................................. 21,638 17,582
------ ------
Shareholder's equity
Common shares, NLG 1,000 par value, authorized 25,000
shares; issued and outstanding 5,000 in 1998 and
1997............................................... 5,000 5,000
Retained earnings..................................... 7,017 6,288
------ ------
Total shareholder's equity......................... 12,017 11,288
------ ------
Total liabilities and shareholder's equity.... 33,655 28,870
====== ======
</TABLE>

The accompanying notes form an integral part of these Financial Statements.
F-25
<PAGE> 175

SVIANED B.V.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES:
Related party revenues.................................... 34,460 32,037
Other revenues............................................ 22,223 13,074
------ ------
Total operating revenues............................... 56,683 45,111
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation.................. 26,878 23,550
Selling, general and administrative expenses.............. 11,890 8,331
Depreciation expense...................................... 8,751 6,754
------ ------
Total operating expenses............................... 47,519 38,635
------ ------
Operating Income.......................................... 9,164 6,476
OTHER INCOME (EXPENSE):
Interest income........................................... 85 111
Interest expense.......................................... (435) (542)
------ ------
Net income before income taxes.............................. 8,814 6,045
PROVISION FOR INCOME TAXES................................ (3,085) (2,120)
------ ------
Net income.................................................. 5,729 3,925
------ ------
</TABLE>

The accompanying notes form an integral part of these Financial Statements.
F-26
<PAGE> 176

SVIANED B.V.

STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)

<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED SHAREHOLDER'S
SHARES EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance as at 31 December, 1996........................ 5,000 2,363 7,363
Net income............................................. -- 3,925 3,925
----- ------ ------
Balance as at 31 December, 1997........................ 5,000 6,288 11,288
Net income............................................. -- 5,729 5,729
Dividends.............................................. -- (5,000) (5,000)
----- ------ ------
Balance as at 31 December, 1998........................ 5,000 7,017 12,017
===== ====== ======
</TABLE>

The accompanying notes form an integral part of these Financial Statements.
F-27
<PAGE> 177

SVIANED B.V.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................................. 5,729 3,925
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 8,751 6,754
Deferred tax.............................................. (35) --
Deferred income........................................... 1,189 1,943
Provision for doubtful accounts........................... 250 --
Change in other operating assets and liabilities:
Decrease (increase) in accounts receivable................ 668 (3,796)
Increase in due from group companies...................... (1,222) (152)
Increase in accrued receivables and other receivables..... (1,137) (33)
Decrease (increase) in inventory.......................... 86 (215)
Decrease (increase) in accounts payable................... (1,801) 473
Increase (decrease) in due to group companies............. 6,007 (817)
Increase (decrease) in accrued and other liabilities...... 1,061 (1,460)
Increase in pension obligation............................ 100 --
------- --------
Net cash provided by Operating Activities.............. 19,646 6,622
======= ========
Cash flows from Investing Activities:
Capital expenditures...................................... (13,256) (8,454)
------- --------
Net cash used in Investing Activities..................... (13,256) (8,454)
======= ========
</TABLE>

The accompanying notes form an integral part of these Financial Statements.
F-28
<PAGE> 178

SVIANED B.V.

STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
Cash flows from Financing Activities:
Dividends paid............................................ (5,000) --
Repayment of borrowings................................... (2,500) (2,500)
------- -------
Net cash used by Financing Activities.................. (7,500) (2,500)
======= =======
Net decrease in cash and cash equivalents................... (1,110) (4,332)
Cash and cash equivalents at beginning of period............ 2,578 6,910
------- -------
Cash and cash equivalents at end of period.................. 1,468 2,578
======= =======
</TABLE>

Supplemental Disclosures of Cash Flow Information:

<TABLE>
<S> <C> <C>
Income tax paid............................................. 2,120 1,656
Interest paid............................................... 408 540
</TABLE>

The accompanying notes form an integral part of these Financial Statements.
F-29
<PAGE> 179

SVIANED B.V.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Svianed B.V. (the "Company") is a wholly owned entity of Gak Holding B.V.,
which is wholly owned by Gak Group. The Company is a provider of integrated data
and telecommunications network services in The Netherlands. The Company
considers its operations to be in one business segment and internally makes
operating decisions, allocates resources and assesses performance based on one
segment.

Although the Company is a stand alone entity, an allocation was determined
for the pension costs associated with the Gak Holding B.V. defined benefit
pension plan based upon the employees future service costs in compliance with
statements of Financial Accounting Standards (SFAS) No. 87 Employers' Accounting
for Pensions. The fair value of the plan assets were allocated at the group
transfer value, which is a prescribed amount stipulated in the defined benefit
pension plan. Therefore these costs are not necessarily representative of the
pension costs of the company under a separate plan.

Included in the company results are group charges relating to costs in
connection with legal, internal audit and other administrative services provided
by Gak Holding B.V. on behalf of the Company. The Company's management believes
such costs are reflective of actual benefits received by the Company.

The Company is part of a fiscal unity with Gak Group. For purposes of these
financial statements the income taxes are calculated as if the company was a
stand alone corporation and therefore tax expense is calculated at 35% of pre
tax income, which represents the statutory income tax rate in The Netherlands.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist mainly of cash at banks on demand. For
purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.

(b) INVENTORY

Finished goods are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out method. Cost of work in progress
consists of the direct salary costs and a charge for indirect costs.

Discounts represent volume discounts on the KPN network rental agreements
and are accrued based on volume utilized by the company on a monthly basis.

(d) REVENUE RECOGNITION

Revenues are recorded in the period in which the service is rendered. Cash
received in advance of services rendered is recorded as deferred income.

F-30
<PAGE> 180
SVIANED B.V.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(e) PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. The Company depreciates its
property and equipment using the straight-line method over the estimated useful
lives less the residual value. The useful life of property and equipment is 5
years or less.

(f) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.

(g) PENSIONS

The Company employees are covered under the Gak Group defined benefit
pension plan. The benefits are based on years of service and the employee's
compensation. The cost of this program is being funded currently. The Company
has included an allocation of the Gak Group defined benefit pension plan
obligation for its employees in compliance with SFAS No. 87 in the Company's
financial statements.

(h) ADVERTISING EXPENSE

Advertising costs are expensed as incurred, and amounted to NLG 415,000 in
1998 (1997: NLG 506,000).

(i) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates and assumptions are used in the amounts
reflected as allowance for doubtful accounts and recovery of deferred tax
assets. Actual results could differ from those estimates.

(j) FAIR VALUE OF FINANCIAL INSTRUMENTS

For all financial instruments, the carrying value is considered to
approximate the fair value due to the relatively short maturity of the
respective instruments.

3. RELATED PARTY TRANSACTIONS

Of the 1998 revenues realized from group companies, NLG 5.7 million relate
to subscriptions recharges relating to telephone access (1997: NLG 6.5 million)
for all Gak Group companies. The rest of the group revenues relate mainly to
capacity leases.

1998 costs charged by group companies to the company includes lease on
premises of NLG 850,000 (1997: NLG 697,000) and charges for various
administrative services and support of NLG 538,000 (1997: 585,000).

F-31
<PAGE> 181
SVIANED B.V.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The accounts due to the group companies for 1998 as of December 31, 1998
includes income tax payable of NLG 3,120,000 (1997: NLG 2,120,000) and dividends
payable of NLG 5,000,000.

4. INVENTORY

Inventory is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................... 24 16
Work in progress............................. 105 199
--- ---
129 215
=== ===
</TABLE>

5. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Telecommunications and computer equipment.... 44,907 32,101
Furniture.................................... 29 --
------- -------
44,936 32,101
Accumulated depreciation..................... (25,783) (17,453)
------- -------
Property and equipment, net.................. 19,153 14,648
======= =======
</TABLE>

6. LONG-TERM DEBT

Svianed has a loan, maturing 1 December 2000, with ING Bank of originally
NLG 10,000,000. The fixed interest rate is 5.42% per year. Principal payments of
NLG 2,500,000 will be made in 1999 and 2000. Gak Holding B.V. is a joint
guarantor of the loan.

7. INCOME TAXES

Income tax expenses attributable to income consist of:

<TABLE>
<CAPTION>
1998 1997
----- ------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Current..................................................... 3,120 2,120
Deferred.................................................... (35) --
----- ------
Total....................................................... 3,085 2,120
===== ======
</TABLE>

Since there are no material permanent differences between the book basis
and the tax basis, income tax expense approximates 35% (the Dutch statutory
rate) of net income before taxes.

F-32
<PAGE> 182
SVIANED B.V.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred taxes at December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
----- ------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Pension obligation.......................................... 105 70
</TABLE>

In assessing the ability to realize deferred tax assets, management
considers whether it is more likely than not that some portions or all of the
portions of all the deferred tax assets will not be realized. Based upon the
level of historical taxable income and projections for future taxable income and
the periods for which the deferred tax assets are deductible. Management
believes it is more likely than not that it will realize the benefits of these
deductible differences.

8. COMMITMENTS

As per 31 December 1998, Svianed has the following off balance sheet
commitments:

- Rental agreement for the building of NLG 951,000 per year. The agreement
has an expiration date of 1 January 2000. After this date, the agreement
is terminable every six months.

- Rental agreement KPN network of NLG 3,000,000 per year. After one year,
this agreement is converted into a month-to-month lease.

- Service agreement for the KPN network of NLG 744,000 per year. This is a
3-year agreement and can be terminated with sale of the network.

- Service agreements of NLG 200,000 per year.

- Subscription agreements with KPN for NLG 330,000 per year. After one year
this agreement is converted into a month-to-month lease.

- Subscription agreements with WorldCom and UUnet of NLG 2,900,000 per
year. The expiration date is 31 December 1999.

- Lease agreements for company cars for NLG 421,000 per year. The
agreements have a term of 3 years.

LEASES

Future minimum rental commitments under non-cancelable operating leases as
of 31 December 1998 are as follows:

<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
--------------
<S> <C>
1999........................................................ 7,602
2000........................................................ 421
2001........................................................ 421
-----
8,444
=====
</TABLE>

F-33
<PAGE> 183
SVIANED B.V.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company is part of Gak Holding Group and therefore all companies within
the Gak Holding Group are jointly and severally liable.

9. PENSIONS

Pension costs incurred for the year ended December 31, 1998 was NLG 600,000
(1997: NLG 400,000). Contributions to the Gak Group plan were NLG 400,000 for
the year ended December 31, 1998 (1997: NLG 440,000).

The assumptions used in calculating the SFAS 87 pension obligation of the
Gak Group and allocated to Svianed B.V. were as follows:

<TABLE>
<CAPTION>
1998 1997
----- -----
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Weighed -- average assumptions as of 31 December:
Discount rate............................................... 5% 6%
Expected rate of return on plan assets...................... 6% 6%
Rate of compensation increase............................... 5% 5%
</TABLE>

10. SUBSEQUENT EVENTS (UNAUDITED)

On June 11, 1999, VersaTel Telecom International N.V. acquired 100% of the
capital of the Company.

Due to the change of the Company's shareholder, the Company will not
receive certain value added tax (VAT) benefits since it will not be part of the
Gak Holding B.V. fiscal tax unity, effective from the date of change of the
shareholder. As such, an estimated liability relating to VAT of approximately
NLG 1,2 million will be realized in 1999. The company expects to recover a total
amount of approximately NLG 1,1 million in the period 1999 through 2002.

F-34
<PAGE> 184

SVIANED B.V.

CONDENSED BALANCE SHEETS

AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
--------- ---------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. 5,318 1,009
Trade accounts receivable, less allowance for doubtful
accounts of NLG 125 on March 31, 1999 and NLG nil on
March 31, 1998......................................... 7,008 5,572
Due from group companies.................................. 5,210 1,972
Inventory................................................. 397 187
Prepaid expenses.......................................... -- 793
Discounts to be received from KPN......................... 1,470 346
Other current assets...................................... 1,506 1,426
------ ------
Total current assets................................... 20,909 11,305
Property and equipment, less accumulated depreciation....... 20,427 17,442
Deferred tax assets......................................... 158 79
------ ------
Total assets...................................... 41,494 28,826
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... 4,390 1,917
Due to group companies.................................... 4,759 2,555
Short term portion of long term debt...................... 2,500 2,500
Deferred income........................................... 1,536 3,132
Accrued expenses.......................................... 6,529 1,259
Other liabilities......................................... 101 247
------ ------
Total current liabilities.............................. 19,815 11,610
Long term debt.............................................. 7,500 5,000
Pension obligation.......................................... 450 225
------ ------
Total liabilities...................................... 27,765 16,835
Shareholder's equity
Common shares, NLG 1,000 par value, authorized 25,000
shares; issued and outstanding 5,000 in 1999 and
1998................................................... 5,000 5,000
Retained earnings......................................... 8,729 6,991
------ ------
Total shareholder's equity............................. 13,729 11,991
------ ------
Total liabilities and shareholder's equity........ 41,494 28,826
====== ======
</TABLE>

The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-35
<PAGE> 185

SVIANED B.V.

CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998
------------ ------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES:
Related party revenues.................................... 9,429 8,467
Other revenues............................................ 6,150 3,375
------- -------
Total operating revenues............................... 15,579 11,842
OPERATING EXPENSES:
Cost of revenues, excluding depreciation.................. 6,628 6,342
Selling, general and administrative expenses.............. 3,734 2,448
Depreciation expenses..................................... 2,472 1,882
------- -------
Total operating expenses............................... 12,834 10,672
------- -------
Operating Income.......................................... 2,745 1,170
OTHER INCOME (EXPENSE):
Interest income........................................... 26 16
Interest expense -- third parties......................... (70) (104)
Interest expense -- related parties....................... (68) --
------- -------
Net income before income taxes............................ 2,633 1,082
PROVISION FOR INCOME TAXES.................................. (921) (379)
------- -------
Net income................................................ 1,712 703
======= =======
</TABLE>

The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-36
<PAGE> 186

SVIANED B.V.

CONDENSED STATEMENTS OF SHAREHOLDER'S EQUITY
AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)

<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED SHAREHOLDER'S
SHARES EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance as at 31 December, 1997........................ 5,000 6,288 11,288
Net income............................................. -- 703 703
----- ------ ------
Balance as at 31 March, 1998........................... 5,000 6,991 11,991
===== ====== ======
Balance as at 31 December, 1998........................ 5,000 7,017 12,017
Net income............................................. -- 1,712 1,712
----- ------ ------
Balance as at 31 March, 1999........................... 5,000 8,729 13,729
===== ====== ======
</TABLE>

The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-37
<PAGE> 187

SVIANED B.V.

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income........................................ 1,712 703
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 2,472 1,882
Deferred tax.................................... (53) (9)
Deferred income................................. (1,596) 1,189
Provision for doubtful accounts................. 125 --
Change in other operating assets and liabilities:
Increase in accounts receivable................. (2,515) (36)
Decrease in due from group companies............ 266 2,282
Increase in accrued receivables and other
receivables.................................. (270) (996)
Increase (decrease) in inventory................ (268) 28
Increase (decrease) in accounts payable......... 2,084 (2,190)
Decrease in due to group companies.............. (3,954) (151)
Increase in accrued and other liabilities....... 4,443 380
Increase in pension obligation.................. 150 25
------ ------
Net cash provided by Operating Activities.... 2,596 3,107
====== ======
Cash flows from Investing Activities:
Capital expenditures............................ (3,746) (4,676)
------ ------
Net cash used in Investing Activities........ (3,746) (4,676)
====== ======
Cash flows from Financing Activities:
Proceeds from new loan.......................... 5,000 --
------ ------
Net cash provided by Financing Activities.... 5,000 --
====== ======
Net increase (decrease) in cash and cash
equivalents..................................... 3,850 (1,569)
Cash and cash equivalents at beginning of
period.......................................... 1,468 2,578
------ ------
Cash and cash equivalents at end of period........ 5,318 1,009
====== ======
Supplemental disclosure of Cash Flow Information:
Income tax paid................................... -- --
Interest paid..................................... 137 101
</TABLE>

The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-38
<PAGE> 188

SVIANED B.V.

CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

1. DESCRIPTION OF BUSINESS

Although the Company is a stand alone entity, an allocation was determined
for the pension costs associated with the Gak Holding B.V. defined benefit
pension plan based upon the employees future service costs in compliance with
Statements of Financial Accounting Standards (SFAS) No. 87 Employers' Accounting
for Pensions. The fair value of the plan assets were allocated at the group
transfer value, which is a prescribed amount stipulated in the defined benefit
pension plan. Therefore these costs are not necessarily representative of the
pension costs of the company under a separate plan.

Included in the Company results are group charges relating to costs in
connection with legal, internal audit and other administrative services provided
by Gak Holding B.V. on behalf of the Company. The Company's management believes
such costs are reflective of actual benefits received by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements and related notes at March 31, 1999 and for the
three months ended March 31, 1998 are unaudited and prepared in conformity with
the accounting principles applied in the Company's 1998 financial statements for
the year ended December 31, 1998. In the opinion of management, such interim
financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the results for such periods.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year or any
other interim period.

3. INTERCOMPANY LOAN

The Company acquired a loan of Gak Holding B.V. of NLG 5 million as of
January 1, 1999. The fixed interest rate is 5.42% per year. Principal payments
of NLG 2,500,000 will be made as of December 31, 2001 and December 31, 2002.

4. SUBSEQUENT EVENTS

On June 11, 1999, VersaTel Telecom International N.V. acquired 100% of the
capital of the Company.

F-39
<PAGE> 189
SVIANED B.V.

CONDENSED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1.2 million will be realized in 1999. The company expects to recover a total
amount of approximately NLG 1.1 million in the period 1999 through 2002.

Due to the change of the Company's shareholder, the loan of Gak Holding
B.V. has been fully repaid as of June 2, 1999, prior to its maturity.

F-40
<PAGE> 190

ANNEX A

GLOSSARY

ACCESS COSTS -- The costs paid by long distance carriers to the local
telephone companies for accessing the local networks of the local telephone
companies to originate and terminate long distance calls.

ADM (ADD-DROP MULTIPLEXER) -- A multiplexer which controls cross connect
between individual circuits by software, permitting dynamic cross connect of
individual 64 kbps circuits within an El line.

ATM (ASYNCHRONOUS TRANSFER MODE) -- An international standard for
high-speed broadband packet-switched networks, operating at digital transmission
speeds above 1.544 Mbps.

BANDWIDTH -- The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the greater
the information-carrying capacity of such medium. For fiber optic transmission,
electronic transmitting devices determine the bandwidth, not the fibers
themselves. Bandwidth is measured in Hertz (analog) or Bits Per Second
(digital).

BITS -- The smallest unit of digital information utilized by electronic
information processing, storage or transmission systems.

BPS (BITS PER SECOND) -- The basic measuring unit of speed in a digital
transmission system; the number of bits that a transmission facility can convey
between a sending location and a receiving location in one second.

CARRIER -- A company authorized by a regulatory agency to provide
communications services.

CARRIER PRE-SELECTION -- The ability of end users to select the long
distance or international operator of their choice prior to the time their calls
are first made.

CARRIER SELECTION -- The ability of end users to select on a call-by-call
basis the long distance or international operator of their choice.

CIRCUIT SWITCHING -- A switching technique that establishes a dedicated
transmission path between originating and terminating points and holds that path
open for the duration of a call.

CO-LOCATION -- When an end-user or competing local telecommunications
service provider locates telephone network equipment at the building that houses
switches belonging to another telephone carrier, the user or competing provider
is said to be "co-located" with the other telephone carrier. The advantage for
the co-locating party is that it can make a direct connection to local and long
distance facilities and substantially reduce access costs.

CLOSED USER GROUP -- A group of customers with some affiliation with one
another and which are treated for regulatory purposes as not being the public.

CONNECTIVITY -- The property of a network that allows dissimilar devices to
communicate with each other.

DARK FIBER -- Any installed fiber optic cable lacking a light transmission
or signal, as opposed to in-service or "lit" fiber.

DWDM (DENSE WAVELENGTH DIVISION MULTIPLEXING) -- A multiplexing technique
allowing multiple different signals to be carried simultaneously, with
transmission capacity as high as 160 Gbps, on a fiber by allocating resources
according to frequency on non-overlapping frequency bands.

DIAL AROUND -- Use of carrier access numbers and/or carrier identification
codes to place a call through a carrier other than the one presubscribed to the
originating phone.

A-1
<PAGE> 191

E1 -- The European counterpart to the North American T-1 transmission
speed. The T-1 is a type of digital carrier transmitting voice or data at 1.544
Mbps. A T-1 carrier can handle up to 24 multiplexed 64 Kbps digital voice/data
channels. A T-1 carrier system can use metallic cable, microwave radio or
optical fiber as a transmission media.

E3 -- The European counterpart to the North American T-3 transmission
speed. The T-3 is a type of digital carrier transmitting voice or data at 34
Mbps (see also "E1").

FACILITIES -- Transmission lines, switches and other physical components
used to provide telephone service.

FACILITIES-BASED -- When a carrier owns or leases a network and facilities
to run that network, services offered on it are said to be facilities-based.

FACILITIES-BASED CARRIER -- A company that owns or leases its international
network facilities including undersea fiber optic cables and switching
facilities rather than reselling time provided by another facilities-based
carrier.

FIBER -- A filament, usually of glass, through which light beams carrying
voice, data or video transmissions are guided.

FIBER OPTIC -- Technology based on thin filaments of glass or other
transparent materials used as the medium for transmitting coded light pulses
that represent data, image and sound. Fiber optic technology offers extremely
high transmission speeds. The medium of choice for the telecommunications
industry. Fiber is immune to electrical interferences and environmental factors
that affect copper wiring and satellite transmission. Fiber optic technology
involves sending laser light pulses across glass strands in order to transmit
digital information. A strand of fiber optic cable is as thick as a human hair
yet has more bandwidth capacity than a copper wire the width of a telephone
pole.

FIBER OPTIC RING NETWORK -- Where a network is configured in bi-directional
circular fashion. If a portion of the ring malfunctions, the signal can be
re-routed back the way it came, around the circle, to complete the connection.

FRAME RELAY -- A method of achieving high-speed, packet-switched data
transmissions within digital networks at transmission speeds between 56 Kbps and
1.544 Mbps.

Gbps (GIGA BITS PER SECOND) -- A measurement of speed for digital signal
transmission expressed in billions of bits per second.

INTERCONNECT -- Connection of a telecommunications device or service to the
PSTN.

INTRANET -- A corporate communications system that uses the global Internet
protocol for employee-to-employee communications and information transactions.
An intranet allows employees of a company to access company and customer
information not available to the public, receive company or customer information
and communicate with other employees.

IP (INTERNET PROTOCOL) -- The standard that defines the information unit
being passed among the host computers and packet-switched networks that make up
the Internet. The Internet protocol provides the basis for packet delivery on
the Internet.

IPX -- Novell NetWare connection protocol.

ISDN (INTEGRATED SERVICES DIGITAL NETWORK) -- Switched network providing
end-to-end digital connectivity for simultaneous transmission of voice and/or
data over multiple multiplexed communications channels and employing
transmission and out-of-band signaling protocols that conform to
internationally-defined standards.

A-2
<PAGE> 192

Kbps (THOUSANDS OF BITS PER SECOND) -- A measurement of speed for digital
signal transmission expressed in thousands of bits per second.

LAN (LOCAL AREA NETWORK) -- A private data communications network linking a
variety of data devices, such as computer terminals, personal computer
terminals, personal computers and microcomputers, all housed in a defined
building, plant or geographic area.

LOCAL LOOP -- That portion of the local telephone network that connects the
customer's premises to the local exchange provider's central office or switching
center. This includes all the facilities starting from the customer premises
interface which connects to the inside wiring and equipment at the customer
premises to a terminating point within the switching wire center.

Mbps (MILLIONS OF BITS PER SECOND) -- A measurement of speed for digital
signal transmission expressed in millions of bits per second.

MDF (MAIN DISTRIBUTION FRAME) -- patch panel for connecting customer
equipment.

MULTIPLEXING -- An electronic or optical process that combines a large
number of lower-speed transmission lines into one high-speed line by splitting
the total available bandwidth of the high-speed line into narrower bands, or by
allotting a common channel to several different transmitting devices, one at in
sequence. Multiplexing devices are widely used in networks to improve efficiency
by concentrating traffic.

NACD (NETWORK AUTOMATIC CALL DISTRIBUTION) -- provides call queuing and
distribution functions.

NUMBER PORTABILITY -- The ability of end users to keep their number when
changing operators.

OPERATING SUPPORT SYSTEMS -- A general term encompassing the electronic and
manual systems used to fill orders for retail and wholesale telephone services.

PLATFORM -- A group of unbundled network elements assembled and sold
together as a package.

PBX (PRIVATE BRANCH EXCHANGE) -- A switching system within an office
building that allows calls from outside to be routed directly to the individual
instead of through a central number. A PBX also allows for calling within an
office by way of four-digit extensions.

POP (POINTS OF PRESENCE) -- A location containing switches or other
networking equipment through which users connect to a network.

PROTOCOL -- A formal set of rules and conventions governing the formatting
and relative timing of message exchange between 2 communicating points in a
computer system or data communications network.

PSTN (PUBLIC SWITCHED TELEPHONE NETWORK) -- A telephone network which is
accessible by the public through private lines, wireless systems and pay phones.

PTT (POSTAL, TELEPHONE AND TELEGRAPH COMPANY) -- The dominant carrier or
carriers in each Member State of the EU, until recently, often, but not always,
government-owned or protected.

REDUNDANCY -- Incorporation of duplicate components into a system so that a
duplicate component immediately takes over if the primary components fails.

REMOTE ACCESS -- A PBX feature that allows a user at an outside location to
access certain PBX features, such as call answering and advance calling, by
telephone. The user dials a direct distance dialing number to connect to the PBX
and then dials authorization and instruction codes to get the PBX services.

A-3
<PAGE> 193

RESELLER -- A carrier that does not operate its own transmission facilities
(although it may own its own switches or other equipment), but obtains
communications services from another carrier for resale to the public for
profit.

ROUTER -- A device for interconnecting local area networks that have
dissimilar operating protocols but which share a common network interconnection
protocol.

ROUTING -- Process of selecting the correct circuit path for a message.

SDH (SYNCHRONOUS DIGITAL HIERARCHY) -- SDH is a set of standards for
optical communications transmission systems that define optical rates and
formats, signal characteristics, performance, management and maintenance
information to be embedded within the signals and the multiplexing techniques to
be employed in optical communications transmission systems. SDH facilitates the
interoperability of dissimilar vendors' equipment and benefits customers by
minimizing the equipment necessary for telecommunications applications. SDH also
improves the reliability of the local loop connecting customers' premises to the
local exchange provider, historically one of the weakest links in the service
delivery.

SONET (SYNCHRONOUS OPTICAL NETWORK STANDARD) -- An ultra-high-speed, fiber
optic transmission standard for large-scale, fiber-based digital transmission
networks that use equipment from many different manufacturers. It is the first
telecom industry agreement on standardized interfaces between fiber optic
transmission systems and is well on the way to becoming an international
standard.

STM-1 (SYNCHRONOUS TRANSPORT MODULE) -- SDH notation for data transport,
used for transport and connection providing capacity of 155 Mbps.

SWITCH -- A sophisticated computer that accepts instructions from a caller
in the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form a transmission path
between users. Switches allow telecommunications service providers to connect
calls directly to their destination, while providing advanced features and
recording connection information for future billing.

T1 OR T3 -- see "E1" or "E3".

TELEPHONY -- A generic term describing voice telecommunications.

TRAFFIC -- A generic term that includes any and all calls, messages and
data sent and received by means of telecommunications.

WAN (WIDE AREA NETWORK) -- a large-scale, high speed communications network
used primarily for interconnecting local area and metro area networks located in
different cities, states or countries.

xDSL -- a digital subscriber line providing high speed customer connection
over copper pairs.

A-4
<PAGE> 194

PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY

VERSATEL TELECOM INTERNATIONAL N.V.
Paalbergweg 36

1105 BV Amsterdam-Zuidoost

The Netherlands

INDEPENDENT AUDITORS

ARTHUR ANDERSEN
Prof. W.H. Keesomlaam 8
1183 DJ Amstelveen
The Netherlands

LEGAL ADVISERS

To the Issuer

<TABLE>
<S> <C>
As to U.S. Law As to Dutch Law
SHEARMAN & STERLING STIBBE SIMONT MONAHAN DUHOT
599 Lexington Avenue Strawinskylaan 2001
New York, NY 10022-6069 1077 ZZ Amsterdam
U.S.A. The Netherlands
To the Underwriters
As to U.S. Law As to Dutch Law
SIMPSON THACHER & BARTLETT NAUTA DUTILH
99 Bishopsgate Prinses Irencstraat 59
London EC2M 3YH 1077 WV Amsterdam
England The Netherlands
</TABLE>

TRUSTEE, REGISTRAR, PRINCIPAL PAYING AND TRANSFER AGENT

UNITED STATES TRUST COMPANY OF NEW YORK
770 Broadway, 13th Floor
New York, New York 10003
U.S.A.

LISTING AGENT, PAYING AND TRANSFER AGENT

KREDIETBANK, S.A. LUXEMBOURGEOISE
43, Boulevard Royal
L-2955 Luxembourg
<PAGE> 195

VERSATEL TELECOM INTERNATIONAL N.V.

$180,000,000 11 7/8% SENIOR DOLLAR NOTES DUE 2009

E120,000,000 11 7/8% SENIOR EURO NOTES DUE 2009

----------------------------

PROSPECTUS

JULY 23, 1999

----------------------------

LEHMAN BROTHERS
ING BARINGS
<PAGE> 196

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection with
the distribution of the securities being registered, other than underwriting
discounts and commissions.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 85,068
NASD filing fee............................................. 25,000
Printing and engraving expenses............................. 450,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 250,000
Blue sky fees and expenses.................................. 5,000
Miscellaneous expenses...................................... 50,000
----------
Total.................................................. 1,350,056
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Netherlands law does not prohibit indemnification of directors, employees
and agents of corporations. The Company has obtained liability insurance for its
directors, employees and agents. Under Netherlands law, the legal reasonableness
and fairness test means that such indemnity cannot be relied on where the
individual has been grossly negligent, fraudulent or dishonest.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following securities of the Company, that were sold by the Company
within the past three years, were not registered under the Securities Act. The
information has been adjusted for a two-for-one stock split which was effected
on April 13, 1999.

On December 27, 1996, VersaTel issued and sold 396,000 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 249,999; 4,232,000
ordinary shares to Cromwilld Limited for an aggregate consideration of NLG
2,671,704; and 3,292,000 ordinary shares to NeSBIC Venture Fund C.V. for an
aggregate consideration of NLG 2,078,273. These shares were issued in reliance
on Regulation S under the Securities Act.

On October 21, 1997, VersaTel issued and sold 1,339,286 ordinary shares to
NeSBIC Venture Fund C.V. for an aggregate consideration of NLG 1,500,000. These
shares were issued in reliance on Regulation S under the Securities Act.

On April 8, 1998, VersaTel issued and sold 5,752,808 ordinary shares to
Paribas Deelnemingen N.V. for an aggregate consideration of NLG 12,799,998.
These shares were issued in reliance on Regulation S under the Securities Act.

On April 17, 1998, VersaTel issued and sold 629,214 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 1,400,000. On the
same day, the NLG 1,767,000 subordinated convertible shareholder loan extended
by NeSBIC Venture Fund C.V. was converted into 1,051,786 ordinary shares, the
NLG 4,500,000 bridge loan extended by NeSBIC Venture Fund C.V. was converted
into 2,678,572 ordinary shares, and NeSBIC Venture Fund C.V. contributed an
additional NLG 5,800,000 for 2,606,742 ordinary shares. These shares were issued
in reliance on Regulation S under the Securities Act.
II-1
<PAGE> 197

On April 27, 1998, the NLG 1,838,000 subordinated convertible shareholder
loan extended by Cromwilld Limited was converted into 1,838,000 ordinary shares.
These shares were issued in reliance on Regulation S under the Securities Act.

On May 27, 1998, VersaTel issued and sold 725,370 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 1,849,694; 1,274,510
ordinary shares to NeSBIC Groep B.V. for an aggregate consideration of NLG
3,250,000; 1,529,532 ordinary shares to Paribas Deelnemingen N.V. for an
aggregate consideration of NLG 3,900,306 and 2,352,942 ordinary shares to NPM
Capital N.V. for an aggregate consideration of NLG 6,000,000. These shares were
issued in reliance on Regulation S under the Securities Act.

On May 27, 1998, VersaTel issued and sold 225,000,000 units consisting of
$225,000,000 in principal amount of 13 1/4% senior notes due 2008 and warrants
to purchase 3,000,000 ordinary shares. The units were sold to Lehman Brothers,
Inc., as initial purchaser, who subsequently sold them to certain institutional
investors in reliance on Rule 144A and Regulation S under the Securities Act.
The notes and the warrants were separated in August 1998. In December 1998,
VersaTel completed a public exchange offer pursuant to which all the notes
issued in this offering were exchanged for substantially identical notes
registered under the Securities Act. The warrants issued in this offering have
not been registered under the Securities Act.

On December 3, 1998, VersaTel issued and sold 150,000 issued units
consisting of $150,000,000 in principal amount of 13 1/4% senior notes due 2008
and warrants to purchase 2,000,100 ordinary shares. The units were sold to
Lehman Brothers, Inc., Lehman Brothers International (Europe) and Paribas
Corporation, as initial purchasers, who subsequently sold them to certain
institutional investors in reliance on Rule 144A and Regulation S under the
Securities Act. The notes and the warrants were separated in January 1999. In
February 1999, VersaTel completed a public exchange offer pursuant to which all
the notes issued in this offering were exchanged for substantially identical
notes registered under the Securities Act. The warrants issued in this offering
have not been registered under the Securities Act.

In connection with the acquisition of CS Net B.V., VersaTel sold 130,000
ordinary shares to the former shareholders of CS Net B.V. in November 1998.
These shares were sold in reliance on Regulation S under the Securities Act. As
of the date of this Registration Statement none of these 130,000 shares have
been issued. These shares are expected to be issued following the completion of
this offering.

In connection with the acquisition of Amstel Alpha B.V. (the parent of
SpeedPort N.V.), VersaTel sold 375,000 ordinary shares to the former
shareholders of Amstel Alpha B.V. in May 1999. These shares were sold in
reliance on Regulation S under the Securities Act. In addition, VersaTel has
earn-out obligations to these former shareholders covering an additional 100,000
ordinary shares. As of the date of this Registration Statement, none of these
475,000 shares have been issued. These shares are expected to be issued
following the completion of this offering.

In connection with the acquisition of ITinera Services N.V., VersaTel sold
50,000 ordinary shares to the former shareholders of ITinera Services N.V. in
May 1999. These shares were sold in reliance on Regulation S under the
Securities Act. In addition, VersaTel has earn-out obligations to these
shareholders covering an additional 30,000 ordinary shares. As of the date of
this Registration Statement, none of these 80,000 shares have been issued. These
shares are expected to be issued following the completion of this offering.

On July 20, 1999, VersaTel issued and sold 200,000 ordinary shares to
Cromwilld Limited at a price of NLG 7.50 per ordinary share. These shares were
sold in reliance on Regulation S under the Securities Act.

II-2
<PAGE> 198

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2* Articles of Association of the Company
4.1* Form of Dollar Indenture, between the Company and United
States Trust Company of New York, as Trustee
4.2* Form of Euro Indenture, between the Company and United
States Trust Company of New York, as Trustee
4.3 Form of Dollar Note (included in Exhibit 4.1)
4.4 Form of Euro Note (included in Exhibit 4.2)
5.1 Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2 Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
8.1 Opinion of Shearman & Sterling regarding tax matters
10.1(1) Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.2(2) Indenture, dated December 3, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.3* Warrant Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York, as Warrant
Agent
10.4* Warrant Agreement, dated December 3, 1998, between the
Company and United States Trust Company of New York, as
Warrant Agent
10.5(1) Escrow Agreement, dated May 27, 1998, among the Company and
United States Trust Company of New York, as Trustee and
Escrow Agent
10.6(2) Escrow Agreement, dated December 3, 1998, among the Company
and United States Trust Company of New York, as Trustee and
Escrow Agent
10.7* Participation and Shareholders Agreement, dated December 27,
1996, among Telecom Founders B.V., NeSBIC C.V., Cromwilld
Limited, VersaTel Telecom B.V., R. Gary Mesch and Open Skies
International, Inc.
10.8* Loan Agreement, dated May 26, 1999, among VersaTel Telecom
Europe B.V., as Borrower, the Company, as Guarantor, and
Nortel Networks International Finance & Holding B.V., as
Agent and Security Agent
10.9(3) Agreement for the Sale and Purchase of Shares of Svianed
B.V., dated June 11, 1999, among VersaTel Telecom Europe
B.V., Gak Holding B.V. and Svianed B.V.
12.1* Statement re computation of earnings to fixed charges
21.1* List of subsidiaries
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)
23.2 Consent of Stibbe Simont Monahan Duhot (included in Exhibit
5.2)
</TABLE>

II-3
<PAGE> 199

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.3 Consent of Arthur Andersen
23.4 Consent of KPMG Accountants N.V.
24.1 Powers of attorney (included in the signature page hereof)
25.1 Statement of Eligibility of United States Trust Company of
New York, Trustee
</TABLE>

- -------------------------
* Previously filed

(1) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File number 333-59979) initially filed with the Securities and
Exchange Commission on July 27, 1998 and incorporated herein by reference.

(2) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File Number 333-70449) initially filed with the Securities and
Exchange Commission on January 12, 1999 and incorporated herein by
reference.

(3) Previously filed as an exhibit to the Company's report on Form 6-K, filed
with the Securities and Exchange Commission on June 21, 1999 and
incorporated herein by reference.

(b) Financial Statement Schedules

(1) Financial Statements

The Financial Statements filed as part of this Registration Statement
are listed in the Index to Financial Statements on page F-1.

(2) Schedules

Schedules are omitted because they are either not required, are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14, Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment to the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.

II-4
<PAGE> 200

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.

(3) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.

II-5
<PAGE> 201

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on a Form F-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Amsterdam, State of The Netherlands, on the 23rd day
of July, 1999.

VersaTel Telecom International N.V.

By: /s/ R. GARY MESCH
---------------------------------------
R. Gary Mesch
Managing Director

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated, either in person or by power of attorney, on the 23rd day
of July, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ R. GARY MESCH Managing Director (principal executive
- --------------------------------------------------- officer)
R. Gary Mesch

/s/ RAJ RAITHATHA Chief Financial Officer (principal financial
- --------------------------------------------------- and accounting officer)
Raj Raithatha

* Supervisory Director
- ---------------------------------------------------
Leo W.A.M. van Doorne

Supervisory Director
- ---------------------------------------------------
Denis O'Brien

* Supervisory Director
- ---------------------------------------------------
Johan G. Wackwitz

/s/ JAMES MEADOWS Supervisory Director
- ---------------------------------------------------
James Meadows

- ------------------------
* By Raj Raithatha by power of attorney
</TABLE>

II-6
<PAGE> 202

AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the undersigned in the capacity
indicated on the 23rd day of July, 1999.

<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<C> <S>

/s/ DONALD J. PUGLISI Managing Director of Puglisi & Associates
- ---------------------------------------------------
Donald J. Puglisi
</TABLE>

II-7
<PAGE> 203

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2* Articles of Association of the Company
4.1* Form of Dollar Indenture, between the Company and United
States Trust Company of New York, as Trustee
4.2* Form of Euro Indenture, between the Company and United
States Trust Company of New York, as Trustee
4.3 Form of Dollar Note (included in Exhibit 4.1)
4.4 Form of Euro Note (included in Exhibit 4.2)
5.1 Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2 Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
8.1 Opinion of Shearman & Sterling regarding tax matters
10.1(1) Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.2(2) Indenture, dated December 3, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.3* Warrant Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York, as Warrant
Agent
10.4* Warrant Agreement, dated December 3, 1998, between the
Company and United States Trust Company of New York, as
Warrant Agent
10.5(1) Escrow Agreement, dated May 27, 1998, among the Company and
United States Trust Company of New York, as Trustee and
Escrow Agent
10.6(2) Escrow Agreement, dated December 3, 1998, among the Company
and United States Trust Company of New York, as Trustee and
Escrow Agent
10.7* Participation and Shareholders Agreement, dated December 27,
1996, among Telecom Founders B.V., NeSBIC C.V., Cromwilld
Limited, VersaTel Telecom B.V., R. Gary Mesch and Open Skies
International, Inc.
10.8* Loan Agreement, dated May 26, 1999, among VersaTel Telecom
Europe B.V., as Borrower, the Company, as Guarantor, and
Nortel Networks International Finance & Holding B.V., as
Agent and Security Agent
10.9(3) Agreement for the Sale and Purchase of Shares of Svianed
B.V., dated June 11, 1999, among VersaTel Telecom Europe
B.V., Gak Holding B.V. and Svianed B.V.
12.1* Statement re computation of earnings to fixed charges
21.1* List of subsidiaries
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)
23.2 Consent of Stibbe Simont Monahan Duhot (included in Exhibit
5.2)
23.3 Consent of Arthur Andersen
23.4 Consent of KPMG Accountants N.V.
24.1 Powers of attorney (included in the signature page hereof)
25.1 Statement of Eligibility of United States Trust Company of
New York, Trustee
</TABLE>

- -------------------------
* Previously filed

(3) Previously filed as an exhibit to the Company's report on Form 6-K, filed
with the Securities and Exchange Commission on June 21, 1999 and
incorporated herein by reference.

<PAGE> 1
Exhibit 5.1

[SHEARMAN & STERLING LETTERHEAD]

(212) 848-4000

July 23, 1999

VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam - Zuidoost
The Netherlands

Ladies and Gentlemen:

We have acted as special United States counsel to VersaTel Telecom
International N.V., a Netherlands company (the "Company"), in connection with
the filing by the Company under the Securities Act of 1933, as amended (the
"Act") of a registration statement on Form F-1 (the "Registration Statement")
with the United States Securities and Exchange Commission (the "Commission").
Pursuant to the Registration Statement, U.S.$180,000,000 aggregate principal
amount of the U.S dollar denominated senior notes due 2009 (the "Dollar Notes")
and euro 120,000,000 aggregate principal amount of euro denominated senior notes
due 2009 (the "Euro Notes", and together with the Dollar Notes, the "Notes") are
to be issued pursuant to a U.S. dollar note indenture (the "Dollar Indenture")
and a euro note indenture (the "Euro Indenture", and together with the Dollar
indenture, the "Indentures"), respectively, each between the Company and United
States Trust Company of New York, as trustee (the "Trustee").

In our capacity as special United States counsel to the Company, we
have examined the Registration Statement, the form of Dollar Indenture and the
form of Euro Indenture filed as Exhibits 4.1 and 4.2, respectively, to the
Registration Statement, a form of a Dollar Note and a form of a Euro Note
contained in the Dollar Indenture and the Euro Indenture, respectively, and
originals or copies certified or otherwise identified to our satisfaction of
such documents as we have deemed necessary or appropriate to enable us to render
the opinions expressed below.

Based upon the foregoing, it is our opinion that, assuming the
Indentures will be executed substantially in the form as filed as Exhibits 4.1
and 4.2 to the Registration Statement, and that the Notes have been duly
authenticated by the Trustee and have been duly authorized, executed, issued and
delivered by the Company under the laws of The Netherlands, the Notes will
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as enforcement
thereof may be limited by

<PAGE> 2
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium and other similar laws
relating to or affecting enforcement of creditors' rights generally and by
possible judicial action giving effect to foreign governmental actions or
foreign laws affecting creditors' rights and except as enforcement thereof is
subject to general principles of equity (regardless of whether such enforcement
may be sought in a proceeding in equity or law).

The opinion set forth in the above paragraph is qualified to the extent
that we have assumed the due authorization, execution and delivery of the
Indentures by the Trustee.

We are attorneys admitted to practice law in the State of New York and
we do not express herein any opinion as to any matters governed by or involving
conclusions under the laws of any other jurisdiction other than the federal law
of the United States of America. In rendering the opinion expressed herein, we
have, with your approval, relied without independent investigation as to all
matters governed by or involving conclusions under the law of the Netherlands
upon the opinion (including the qualifications, assumptions and limitations
expressed therein) of Stibbe Simont Monahan Duhot, Dutch counsel for the
Company, of even date herewith, a copy of which is attached hereto.

This opinion may be delivered to Stibbe Simont Monahan Duhot which may
rely on this opinion to the same extent as if such opinion were addressed to it.

We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the prospectus which is included in the Registration
Statement.

Very truly yours,

Shearman & Sterling

<PAGE> 1

Exhibit 5.2
[STIBBE SIMONT MONAHAN DUHOT LETTERHEAD]

A.F.J.A. Leijten, advocaat

VersaTel Telecom International N.V.
P.O. Box 22697
1100 DD Amsterdam

23 July 1999

Dear Sirs,

We are acting as special legal counsel in the Netherlands on matters of Dutch
law to VersaTel Telecom International N.V. (the "Company") in connection with
the filing by the Company of a registration statement on Form F-1 with the
United States Securities and Exchange Commission (the "Registration Statement").
Pursuant to the Registration Statement, up to $ 180,000,000 aggregate principal
amount of the Company's 11.875% Senior Dollar Notes due 2009 and EURO
120,000,000 aggregate principal amount of the Company's 11.875% Senior Euro
Notes due 2009 (together the "Senior Notes") will be sold to the public as
soon as practicable after the effective date of the Registration Statement
referred to above. The sale of the Senior Notes will be made pursuant to an
Underwriting Agreement between the Company and Lehman Brothers International
(Europe) as representative of the several underwriters named in Schedule 1
thereof to be dated 23 July 1999 (the "Underwriting Agreement"), an indenture
(the "Dollar Indenture") to be dated 23 July 1999 between the Company and United
States Trust Company of New York, as trustee (the "Dollar Trustee") and an
indenture (the "Euro Indenture") to be dated 23 July 1999 between the Company
and United States Trust Company of New York as trustee (the "Euro Trustee").

In rendering this opinion we have examined and relied upon the following
documents:

(1) A draft of the Underwriting Agreement, marked ST&B Draft July 18, 1999;

(2) Drafts of the Dollar Indenture and the Euro Indenture (together:
the "Indentures"), both marked STB Draft 7/19/99;

(3) a copy of the Preliminary Offering Memorandum (the "Preliminary Offering
Memorandum") in relation to the issue of the Senior Notes, dated 30 June
1999;
<PAGE> 2

(4) an on-line excerpt dated 21 July 1999 of the registration of the Company
in the Trade Register of the Chamber of Commerce of Amsterdam, The
Netherlands (the "Excerpt");

(5) the draft amended articles of association (statuten) of the Company to be
dated 23 July 1999, to be executed on that date before Mr. J.H.M. Carlier,
civil-law notary, officiating in Amsterdam, The Netherlands (the "New
Articles");

(6) a copy of the Deed of Incorporation of the Company (the "Deed of
Incorporation"), executed on 10 October 1995, before Mr Albert Peter van
Lidth de Jeude, civil-law notary, officiating in Amsterdam, The
Netherlands;

(7) a company certificate of even date hereof attached hereto as Annex 1 (the
"Company Certificate");

and such other documents and such treaties, laws, rules, regulations, and the
like, as we have deemed necessary as a basis for the opinions hereinafter
expressed.

The documents referred to under (1) and (2) above shall hereinafter collectively
be referred to as the "Agreements".

We have assumed:

(i) the genuineness of all signatures;

(ii) the authenticity of all agreements, certificates, instruments, and other
documents submitted to us as originals;

(iii) the conformity to the originals of all documents submitted to us as
copies;

(iv) that the documents referred to under (1), (2) and (5) above will be duly
and validly signed and executed by all parties thereto on the dates
indicated, substantially in the form as examined by us as drafts; and

(v) that the contents of the Excerpt and the Company Certificate are true and
complete as of the date hereof.

Based on the foregoing and subject to any factual matters or documents not
disclosed to us in the course of our investigation, and subject to the
qualifications and limitations stated hereafter, we are of the opinion that:

A. The Company has been duly incorporated and is validly existing as a
"naamloze vennootschap" (company with limited liability) under the laws of
The Netherlands.

B. The Senior Notes, to be sold as contemplated in the Registration Statement,
when duly executed, authenticated, issued and delivered in accordance with
the provisions of the Indentures, will constitute the legal, valid, binding
and enforceable obligations of the

-2-
<PAGE> 3
Company, except that enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfer), reorganization, moratorium and other similar laws relating to or
affecting enforcement of creditors' rights generally.

C. The choice of New York law as the law governing the Senior Notes is valid
and binding under the laws of The Netherlands, except (i) to the extent
that any term of the Agreements or any provision of New York law applicable
to the Agreements is manifestly incompatible with the public policy (ordre
public) of The Netherlands, and except (ii) that a Dutch court may give
effect to mandatory rules of the laws of another jurisdiction with which
the situation has a close connection, if and insofar as, under the laws of
that other jurisdiction those rules must be applied, whatever the chosen
law. However, in our opinion, (i) there is nothing in Dutch law which would
render any term of the Agreements manifestly incompatible with the public
policy (ordre public) of The Netherlands, and (ii) no such mandatory rules
of Dutch law are applicable to the Agreements, except that to the extent
that issues would involve the corporate organisation of the Company, the
courts of The Netherlands will apply Netherlands law as mandatorily
applicable to such issues, regardless the chosen law applicable to the
Agreements.

In rendering the opinions expressed herein, we have, with your approval, relied
without independent investigation as to all matters governed by or involving
conclusions under the federal law of the United States of America and the law of
the State of New York, upon the opinion (including the qualifications,
assumptions and limitations expressed therein) of Shearman & Sterling, United
States counsel to the Company, of even date herewith.

In addition to the other assumptions and qualifications contained herein, this
opinion letter is further subject to the following qualification:

Since there is no treaty between the United States and The Netherlands
providing for the reciprocal recognition and enforcement of judgments,
United States judgments are not enforceable in The Netherlands. However, a
final judgment for the payment of money obtained in a United States court,
which is not subject to appeal or any other means of contestation and is
enforceable in the United States, would in principle be upheld by a
Netherlands court of competent jurisdiction when asked to render a judgment
in accordance with such final judgment by a United States court, without
substantative re-examination or relitigation on the merits of the subject
matter thereof; provided that such judgment has been rendered by a court of
competent jurisdiction, in accordance with rules of proper procedure, that
it has not been rendered in proceedings of a penal or revenue nature and
that its content and possible enforcement are not contrary to public policy
or public order of The Netherlands. We resume our opinion as to whether
this practice extends to default judgments.

We express no opinion on any law other than the law of The Netherlands as it
currently stands

-3-
<PAGE> 4
and has been interpreted in published case law of the courts of The Netherlands
as per the date hereof. We express no opinion on any laws of the European
Communities (insofar as not implemented in The Netherlands in statutes or other
regulations of general application).

This opinion is strictly limited to the matters stated herein and may not be
read as extending by implication to any matters not specifically referred to.
Nothing in this opinion should be taken as expressing an opinion in respect of
any representations or warranties, or other information, or any other document
examined in connection with this opinion except as expressly confirmed herein.

We hereby consent to the use of this opinion as Exhibit 5.2 to the Registration
Statement and to the use of our name under the caption "Legal Matters" contained
in the prospectus which is included in the Registration Statement.

Yours sincerely,

/s/ A.F.J.A. Leijten /s/ M.W. Josephus Jitta
- ---------------------- ------------------------

A.F.J.A. Leijten M.W. Josephus Jitta

-4-
<PAGE> 5
ANNEX 1

COMPANY CERTIFICATE

The undersigned, J.A. van Berne, Corporate Secretary of VersaTel Telecom
International N.V. (the "Company") and authorised to represent the Company,
hereby declares the following to Stibbe Simont Monahan Duhot in order for them
to rely on the contents hereof in the framework of the legal opinion to be
issued by them to us in relation to the Registration Statement on Form-1
relating to the proposed offering of up to $ 180,000,000 aggregate principal
amount of our 11.875% Senior Dollar Notes due 2009 and EURO 120,000,000
aggregate principal amount of our 11.875% Senior Euro Notes due 2009:

1. The Company has not proposed and the shareholders of the Company have not
resolved to dissolve the Company;

2. The Company is not involved in legal proceedings which are aimed at the
dissolution of the Company;

3. The Company has not applied for suspension of payment and has not been
declared bankrupt;

4. Since the shareholders resolution of 14 July 1999 to amend the Company's
articles of association, no resolution to amend the articles of association
of the Company has been taken;

5. Prior to the shareholders resolution of 14 July 1999 to amend the Company's
articles of association, no resolution to amend the articles of association
of the Company has been taken, which has not been carried out up to this
date;

Signed by J.A. van Berne on 23 July 1999.

/s/ J.A. van Berne
_____________________________

<PAGE> 1

[SHEARMAN & STERLING LETTERHEAD]

EXHIBIT 8.1

July 23, 1999

VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam - Zuidoost
The Netherlands

Ladies and Gentlemen:

We have acted as special United States tax counsel to VersaTel
Telecom International N.V., a Netherlands company (the "Company"), in connection
with the filing by the Company under the Securities Act of 1933, as amended (the
"Act"), of a registration statement dated July 22, 1999 on Form F-1 (the
"Registration Statement") with the United States Securities and Exchange
Commission (the "Commission"), relating to the registration and the sale of
US$180,000,000 aggregate principal amount of the Company's 11.875% Senior Dollar
Notes due 2009 and E120,000,000 aggregate principal amount of the Company's
11.875% Senior Euro Notes due 2009 (collectively, the "Notes"), as set forth in
the prospectus dated July 23, 1999 contained in the Registration Statement (the
"Prospectus").

In our capacity as such counsel, we hereby confirm as of the
date hereof that, although the discussion set forth under the caption "Tax
Considerations -- U.S. Tax Considerations" in the Prospectus does not address
all of the possible United States federal income tax considerations that may be
relevant to a potential purchaser of Notes, such discussion, insofar as it
relates to statements of law or legal conclusions under the laws of the Untied
States, fairly presents the information called for and, subject to the
limitations and qualifications stated therein, represents our opinion as to the
material United States federal income tax consequences to a "U.S. Holder" (as
defined in the Prospectus) of the receipt of interest on, and the disposition
of, Notes.

In rendering our opinion, we have examined (i) the
Registration Statement, (ii) the Prospectus, and (iii) such other documents and
material as we have considered necessary or appropriate for purposes of this
opinion (together, the "Documents"). This opinion is premised, among other
things, on the initial and continuing accuracy of the facts, representations,
covenants
<PAGE> 2
and other information set forth in the Documents and assumes that the
transactions contemplated by the Documents will be consummated in accordance
with the terms thereof. We have also assumed that any Documents that were
reviewed in draft form will be duly executed or finalized substantially in the
form that we have reviewed and that, where applicable, they will be valid and
binding as of the date hereof in accordance with their terms.

This opinion is based on presently applicable United States
federal income tax law and no assurance can be given that future legislative,
judicial or administrative developments will not adversely affect the
conclusions expressed herein. Moreover, in rendering this opinion, we undertake
no responsibility to advise you of any new developments in the application or
interpretation of United States federal income tax law and this opinion may not
be relied upon to the extent that there is any new development in such law as it
relates to the conclusions expressed herein.

We have not considered and do not express any opinion other
than as expressly set forth above with respect to United States federal income
tax. Nor have we addressed the tax consequences, if any, under the laws of any
state, locality or foreign jurisdiction.

We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the reference to
us in the first paragraph under the caption "Tax Considerations -- U.S. Tax
Considerations" in the Prospectus. In giving such consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act, and the rules and regulations of the Commission
promulgated thereunder.

Very truly yours,

Shearman & Sterling

<PAGE> 1

EXHIBIT 23.3

CONSENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to use of our reports
(and to all references to our Firm) included in or made part of this
Registration Statement on Form F-1 for VersaTel Telecom International N.V.

Arthur Andersen

Amsterdam, The Netherlands

July 23, 1999

<PAGE> 1

EXHIBIT 23.4

CONSENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the inclusion of our report dated March 15, 1999, with
respect to the balance sheets of Svianed B.V. as of December 31, 1998 and 1997
and the related statements of operations, shareholder's equity and cash flows
for the years then ended, in the Registration Statement on Form F-1 of VersaTel
Telecom International N.V. and to the reference to our firm under the heading
"Experts" in the prospectus.

KPMG Accountants N.V.

Amsterdam, The Netherlands

July 23, 1999

<PAGE> 1

EXHIBIT 25.1

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

------------------------

FORM T-1

STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

------------------------

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(B)(2)

------------------------

UNITED STATES TRUST COMPANY OF NEW YORK

(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
NEW YORK 13-3818954
(JURISDICTION OF INCORPORATION IF NOT A U. S. (I. R. S. EMPLOYER IDENTIFICATION NO.)
NATIONAL BANK)

114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
</TABLE>

NONE
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

------------------------

VERATEL TELECOM INTERNATIONAL N.V.

(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
THE NETHERLANDS 00-0000000
(STATE OR OTHER JURISDICTION OF (I. R. S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

PAALBERGWEG 36
1105 BV AMSTERDAM- ZUIDOOST
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

$180,000,000 SENIOR DOLLAR NOTES DUE 2009

E120,000,000 EURO SENIOR NOTES DUE 2009

(TITLE OF THE INDENTURE SECURITIES)
<PAGE> 2

GENERAL

1. GENERAL INFORMATION

FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.

FEDERAL RESERVE BANK OF NEW YORK (2ND DISTRICT), NEW YORK, NEW YORK
(BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM)
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
NEW YORK STATE BANKING DEPARTMENT, ALBANY, NEW YORK

(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

THE TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

2. AFFILIATIONS WITH THE OBLIGOR

IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

NONE

3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND 15:

THE OBLIGOR IS CURRENTLY NOT IN DEFAULT UNDER ANY OF ITS OUTSTANDING
SECURITIES FOR WHICH UNITED STATES TRUST COMPANY OF NEW YORK IS TRUSTEE.
ACCORDINGLY, RESPONSES TO ITEMS 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND
15 OF FORM T-1 ARE NOT REQUIRED UNDER GENERAL INSTRUCTION B.

16. LIST OF EXHIBITS

<TABLE>
<C> <C> <S>
T-1.1 -- ORGANIZATION CERTIFICATE, AS AMENDED, ISSUED BY THE STATE OF
NEW YORK BANKING DEPARTMENT TO TRANSACT BUSINESS AS A TRUST
COMPANY, IS INCORPORATED BY REFERENCE TO EXHIBIT T-1.1 TO
FORM T-1 FILED ON SEPTEMBER 15, 1995 WITH THE COMMISSION
PURSUANT TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED BY
THE TRUST INDENTURE REFORM ACT OF 1990 (REGISTRATION NO.
33-97056).
T-1.2 -- INCLUDED IN EXHIBIT T-1.1.
T-1.3 -- INCLUDED IN EXHIBIT T-1.1.
T-1.4 -- THE BY-LAWS OF UNITED STATES TRUST COMPANY OF NEW YORK, AS
AMENDED, IS INCORPORATED BY REFERENCE TO EXHIBIT T-1.4 TO
FORM T-1 FILED ON SEPTEMBER 15, 1995 WITH THE COMMISSION
PURSUANT TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED BY
THE TRUST INDENTURE REFORM ACT OF 1990 (REGISTRATION NO.
33-97056).
T-1.6 -- THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE
TRUST INDENTURE ACT OF 1939, AS AMENDED BY THE TRUST
INDENTURE REFORM ACT OF 1990.
T-1.7 -- A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
</TABLE>

NOTE

AS OF JULY 21, 1999, THE TRUSTEE HAD 2,999,020 SHARES OF COMMON STOCK
OUTSTANDING, ALL OF WHICH ARE OWNED BY ITS PARENT COMPANY, U.S. TRUST
CORPORATION. THE TERM "TRUSTEE" IN ITEM 2, REFERS TO EACH OF UNITED STATES TRUST
COMPANY OF NEW YORK AND ITS PARENT COMPANY, U. S. TRUST CORPORATION.

IN ANSWERING ITEM 2 IN THIS STATEMENT OF ELIGIBILITY AS TO MATTERS
PECULIARLY WITHIN THE KNOWLEDGE OF THE OBLIGOR OR ITS DIRECTORS, THE TRUSTEE HAS
RELIED UPON INFORMATION FURNISHED TO IT BY THE OBLIGOR AND

1
<PAGE> 3

WILL RELY ON INFORMATION TO BE FURNISHED BY THE OBLIGOR AND THE TRUSTEE
DISCLAIMS RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
------------------------

PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE
TRUSTEE, UNITED STATES TRUST COMPANY OF NEW YORK, A CORPORATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE STATE OF NEW YORK, HAS DULY CAUSED THIS STATEMENT
OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, ALL IN THE CITY OF NEW YORK, AND STATE OF NEW YORK, ON THE 21TH OF
JULY 1999.

UNITED STATES TRUST COMPANY
OF NEW YORK, TRUSTEE

BY: /s/ GERARD F. GANEY
----------------------------------
GERARD F. GANEY
SENIOR VICE PRESIDENT

2
<PAGE> 4

THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT.

UNITED STATES TRUST COMPANY OF NEW YORK
114 WEST 47TH STREET
NEW YORK, NY 10036

JULY 21, 1999

SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, DC 20549

GENTLEMEN:

PURSUANT TO THE PROVISIONS OF SECTION 321(B) OF THE TRUST INDENTURE ACT OF
1939, AS AMENDED BY THE TRUST INDENTURE REFORM ACT OF 1990, AND SUBJECT TO THE
LIMITATIONS SET FORTH THEREIN, UNITED STATES TRUST COMPANY OF NEW YORK ("U.S.
TRUST") HEREBY CONSENTS THAT REPORTS OF EXAMINATIONS OF U.S. TRUST BY FEDERAL,
STATE, TERRITORIAL OR DISTRICT AUTHORITIES MAY BE FURNISHED BY SUCH AUTHORITIES
TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST THEREFOR.

VERY TRULY YOURS,

UNITED STATES TRUST COMPANY OF
NEW YORK

BY: /S/ GERARD F. GANEY
------------------------------------
GERARD F. GANEY
SENIOR VICE PRESIDENT
<PAGE> 5

EXHIBIT T-1.7

UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1999
($ IN THOUSANDS)

<TABLE>
<S> <C>
ASSETS
CASH AND DUE FROM BANKS................................... $ 139,755
SHORT-TERM INVESTMENTS.................................... 85,326
SECURITIES, AVAILABLE FOR SALE............................ 528,160
LOANS..................................................... 2,081,103
LESS: ALLOWANCE FOR CREDIT LOSSES......................... 17,114
----------
NET LOANS......................................... 2,063,989
PREMISES AND EQUIPMENT.................................... 57,765
OTHER ASSETS.............................................. 125,780
----------
TOTAL ASSETS...................................... $3,000,775
==========
LIABILITIES
DEPOSITS:
NON-INTEREST BEARING................................. $ 623,046
INTEREST BEARING..................................... 1,875,364
----------
TOTAL DEPOSITS.................................... 2,498,410
SHORT-TERM CREDIT FACILITIES.............................. 184,281
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.................. 126,652
----------
TOTAL LIABILITIES................................. $2,809,343
==========
STOCKHOLDER'S EQUITY
COMMON STOCK.............................................. 14,995
CAPITAL SURPLUS........................................... 53,041
RETAINED EARNINGS......................................... 121,759
UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE FOR SALE, NET OF TAXES....................... 1,637
----------
TOTAL STOCKHOLDER'S EQUITY........................ 191,432
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY........ $3,000,775
==========
</TABLE>

I, RICHARD E. BRINKMANN, MANAGING DIRECTOR & COMPTROLLER OF THE NAMED BANK DO
HEREBY DECLARE THAT THIS STATEMENT OF CONDITION HAS BEEN PREPARED IN CONFORMANCE
WITH THE INSTRUCTIONS ISSUED BY THE APPROPRIATE REGULATORY AUTHORITY AND IS TRUE
TO THE BEST OF MY KNOWLEDGE AND BELIEF.

RICHARD E. BRINKMANN,
MANAGING DIRECTOR & COMPTROLLER

MAY 18, 1999