VERSATEL TELECOM INTERNATIONAL N V
424B3, 1999-07-27
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>   1
                                             As Filed Pursuant to Rule 424(b)(3)
                                             Registration No. 333-81333


PROSPECTUS
                            [VERSATEL TELECOM LOGO]
                      VERSATEL TELECOM INTERNATIONAL N.V.

                           21,250,000 ORDINARY SHARES

              IN THE FORM OF SHARES OR AMERICAN DEPOSITARY SHARES
- --------------------------------------------------------------------------------

THIS IS AN INITIAL PUBLIC OFFERING BY VERSATEL TELECOM INTERNATIONAL N.V. AND A
NUMBER OF SELLING SHAREHOLDERS OF 21,250,000 ORDINARY SHARES IN THE FORM OF
SHARES OR AMERICAN DEPOSITARY SHARES. EACH ADS REPRESENTS ONE ORDINARY SHARE. OF
THE 21,250,000 ORDINARY SHARES OFFERED BY VERSATEL AND THE SELLING SHAREHOLDERS,
10,625,000 SHARES AND ADSS ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND
CANADA, AND 10,625,000 SHARES AND ADSS ARE BEING OFFERED INITIALLY OUTSIDE THE
UNITED STATES AND CANADA. THE CLOSING OF THE INTERNATIONAL OFFERING IS A
CONDITION TO THE CLOSING OF THE U.S. OFFERING. VERSATEL IS OFFERING AN AGGREGATE
OF 18,992,508 SHARES AND ADSS, AND THE SELLING SHAREHOLDERS ARE OFFERING AN
AGGREGATE OF 2,257,492 SHARES AND ADSS.

THIS OFFERING IS BEING MADE CONCURRENTLY WITH AN OFFERING BY VERSATEL OF
$180,000,000 11 7/8% SENIOR DOLLAR NOTES DUE 2009 AND E120,000,000 11 7/8%
SENIOR EURO NOTES DUE 2009. THE CLOSING OF THIS OFFERING IS CONDITIONED UPON THE
CLOSING OF THE NOTES OFFERING.

NO MARKET CURRENTLY EXISTS FOR OUR SHARES OR OUR ADSs.

AS PART OF THIS OFFERING, WE WILL OFFER TO SELECTED PERSONS, INCLUDING A NUMBER
OF OUR EMPLOYEES, THE RIGHT TO BUY UP TO 5% OF THE SHARES AND ADSS BEING SOLD BY
VERSATEL AT A 10% DISCOUNT TO THE PUBLIC OFFERING PRICE.

THE ADSs WILL BE LISTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET UNDER THE
SYMBOL "VRSA" AND THE SHARES WILL BE LISTED ON THE OFFICIAL MARKET OF AMSTERDAM
EXCHANGES N.V. UNDER THE SYMBOL "VRSA".

INVESTING IN THE SHARES AND ADSs INVOLVES RISKS. "RISK FACTORS" BEGINS ON PAGE
12.

<TABLE>
<CAPTION>
                                                             PER        PER
                                                            SHARE       ADS        TOTAL(1)
                                                            ------    -------    -------------
<S>                                                         <C>       <C>        <C>
Offering Price............................................  E10.00    $10.51     $ 223,316,250
Discounts and Commissions.................................  E 0.60    $ 0.63     $  13,398,975
Proceeds to VersaTel(2)...................................  E 9.40    $ 9.88     $ 187,616,731
Proceeds to selling shareholders..........................  E 9.40    $ 9.88     $  22,300,544
</TABLE>

- ------------------------
(1) Assuming all ordinary shares are sold in the form of Shares and translated
    at a rate of $1.0509 per E1.00.

(2) Calculated before giving effect to any employee and selected persons
    discount and estimated expenses.

We have granted the underwriters a 30-day option to purchase up to 3,187,500
additional ordinary shares in the form of Shares or ADSs on the same terms and
conditions as set forth above solely to cover over-allotments, if any.

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.
- --------------------------------------------------------------------------------

                Sole Global Coordinator and Book Running Manager

                                LEHMAN BROTHERS

                                Co-Lead Managers
AEX Listing Agent
ING BARINGS             BEAR, STEARNS & CO. INC.             PARIBAS CORPORATION

                                   Co-Manager

                               HAMBRECHT & QUIST

                            Internet distribution by
                            E*TRADE SECURITIES, INC.

JULY 23, 1999
<PAGE>   2

[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>   3

                               TABLE OF CONTENTS

<TABLE>
<S>                                   <C>
Summary.............................     1
Risk Factors........................    12
Disclosure Regarding Forward-Looking
  Statements........................    26
Use of Proceeds.....................    27
Dividend Policy.....................    28
Capitalization......................    29
Dilution............................    31
Exchange Rate Information...........    33
Unaudited Pro Forma Consolidated
  Financial Information.............    36
Selected Financial Data for
  VersaTel..........................    43
Selected Financial Data for
  Svianed...........................    45
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.....................    47
Business............................    63
  Svianed...........................    76
Management..........................    86
Principal Shareholders..............    93
Selling Shareholders................    95
Material Relationships and Related
  Transactions......................    96
Description of Capital Stock........    97
Description of American Depositary
  Receipts..........................   101
Description of Material
  Indebtedness......................   108
Shares Eligible for Future Sale.....   112
Tax Considerations..................   114
Underwriting........................   123
Legal Matters.......................   129
Experts.............................   129
Where You Can Find More
  Information.......................   129
General Listing Information.........   130
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 Shares and the
ADSs. 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.

     We are responsible for the accuracy and completeness of the information
contained in this prospectus. We confirm that, to the best of our knowledge, the
information contained in this prospectus, in all material respects, is accurate
and not misleading, and that no information has been omitted that would, in the
context of this offering, materially affect the accuracy of the information
contained in this prospectus.

     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 Shares and the ADSs on or about July
28, 1999. The Shares will be accepted for delivery through the facilities of
Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. ("NECIGEF"),
Morgan Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System and Cedel Bank, against payment in immediately available funds.
American Depositary Receipts ("ADRs") representing the ADSs will be accepted for
delivery through the facilities of The Depository Trust Company.

                                        i
<PAGE>   4

     You must comply with all applicable laws and regulations in force in any
jurisdiction in which you purchase, offer or sell the Shares or the ADSs or
possess or distribute this prospectus, and must obtain any required consent,
approval or permission for your purchase, offer or sale of the Shares or the
ADSs 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 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."

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

                                       ii
<PAGE>   5

                             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 Shares or ADSs 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.

                                       iii
<PAGE>   6

                                    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. 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.

     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
                                        1
<PAGE>   7

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.
                                        2
<PAGE>   8

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.
                                        3
<PAGE>   9

     - 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.

     - 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, increase the use of our network and expand our service
       portfolio.

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>   10

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>   11

                                  THE OFFERING

<TABLE>
<S>                                                  <C>
Shares offered by VersaTel.........................  18,992,508 Shares(1)
Shares offered by the Selling Shareholders.........  2,257,492 Shares(1)(2)
U.S. offering......................................  10,625,000 Shares
International offering.............................  10,625,000 Shares
Shares outstanding after the offering..............  59,059,810 Shares(3)
</TABLE>

ADSs...............................    Each ADS represents one Share.

Public Offering Price..............    E10.00 per Share and $10.51 per ADS.

Use of Proceeds....................    The net proceeds to us from this offering
                                       (after deducting underwriting discounts,
                                       estimated expenses and the employee and
                                       selected persons discount) are estimated
                                       to be $185.1 million. We will use the net
                                       proceeds of this offering to fund capital
                                       expenditures for the expansion of our
                                       network, and for acquisitions, working
                                       capital and other general corporate
                                       purposes, including operating deficits.

                                       We also expect to receive estimated net
                                       proceeds of $294.2 million from our
                                       concurrent offering of Senior Dollar
                                       Notes and Senior Euro Notes (after
                                       deducting underwriting discounts and
                                       estimated expenses), a portion of which
                                       we intend to use 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 the Notes 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.

                                       VersaTel will not receive any of the
                                       proceeds from the Shares or ADSs being
                                       sold by the selling shareholders. 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 Senior Dollar Notes and
                                       Senior Euro Notes.

NASDAQ Trading Symbol..............    The ADSs will be listed on the Nasdaq
                                       National Market under the symbol "VRSA".
                                        6
<PAGE>   12

Amsterdam Stock Exchange ("AEX")
  Trading Symbol...................    The Shares will be listed on the AEX
                                       under the symbol "VRSA".
- -------------------------

(1) May be delivered in the form of Shares or ADSs.

(2) Includes (i) 1,800,000 ordinary shares to be sold by Cromwilld pursuant to
    the terms of the Settlement Agreement and (ii) 457,492 ordinary shares
    ("Warrant Shares") to be sold by certain holders of Warrants issued by the
    Company. All such Warrant Shares will be issued at the time of the closing
    of this offering upon exercise by such selling shareholders on a cashless
    basis of outstanding warrants pursuant to certain registration rights
    granted to such selling shareholders. None of the Warrant Shares being sold
    by the selling shareholders represent ordinary shares issued and outstanding
    as of the date of this prospectus. Warrants covering an aggregate of
    5,000,100 (as adjusted) ordinary shares were issued by VersaTel on May 27,
    1998 and December 3, 1998 as part of an offering on each such date by
    VersaTel of units consisting of warrants and 13 1/4% senior notes due 2008.
    After consummation of the offering, Warrants covering an aggregate of
    4,482,891 ordinary shares will remain outstanding. See "Risk
    Factors -- Shares eligible for public sale after this offering could
    adversely affect our stock price" and "Shares Eligible for Future Sale."

(3) Based on 39,609,810 ordinary shares deemed 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. 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 earn-out
    obligations to former shareholders of SpeedPort and ITinera. Shares
    outstanding after the offering assumes no exercise of the over-allotment
    option by the underwriters. See "Description of Capital Stock -- Warrants"
    and "Management -- Stock Option Plans."
                                        7
<PAGE>   13

                   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 of Senior Dollar Notes and Senior Euro Notes, 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
</TABLE>

                                        8
<PAGE>   14

<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 (deficit)........................    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.
                                        9
<PAGE>   15

                       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
</TABLE>

                                       10
<PAGE>   16

<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)(4).....   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.

(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) Billable minutes are those minutes during which a call is connected to the
    VersaTel Network and for which we bill a customer.
                                       11
<PAGE>   17

                                  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. Simultaneously with the closing of this offering, we
will issue and sell $150,000,000 in aggregate principal amount of Senior Dollar
Notes due 2009 and E100,000,000 in aggregate principal amount of Senior Euro
Notes due 2009 (the "Third High Yield Offering"), approximately $152.2 million
of which will be used to refinance the Interim Loans. As of March 31, 1999,
after giving effect to the Third High Yield Offering, 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 the notes
issued in the Third High Yield Offering (the "Third Notes"; together with the
Existing Notes, the

                                       12
<PAGE>   18

"Notes") 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."

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 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.
These covenants will also likely prohibit us from paying dividends or making
other distributions in respect of the ordinary shares for the foreseeable
future. A failure to comply with these restrictions would constitute a default
under the indentures governing the Notes, and the 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 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 MAY AFFECT OUR ABILITY TO SATISFY OUR OBLIGATIONS
UNDER THE NOTES.

     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

                                       13
<PAGE>   19

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. 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 the holders of the Notes or for distributions to holders of our ordinary
shares. Any default under the Notes would have a material adverse effect on our
shareholders' equity. At March 31, 1999, after giving effect to the Third High
Yield Offering, 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 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 $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 Third Notes will not have the
benefit of any securities placed in escrow to fund any interest payments on the
Third 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 the Third 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, 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. Any default under the
Notes would have a material adverse effect on our shareholders' equity.

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 Third High Yield 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,

                                       14
<PAGE>   20

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.

     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

                                       15
<PAGE>   21

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.

     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

                                       16
<PAGE>   22

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.

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

                                       17
<PAGE>   23

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
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.

                                       18
<PAGE>   24

     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),

     - 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

                                       19
<PAGE>   25

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.

     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 Third High Yield 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 Third High
Yield 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.

                                       20
<PAGE>   26

     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.

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 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 this 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

                                       21
<PAGE>   27

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 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 NOTES.

     Pursuant to the terms of 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.

                                       22
<PAGE>   28

However, our existing contractual obligations or an inability to obtain adequate
resources may prevent us from consummating any offering to repurchase the Notes.
Our failure to complete an offer to repurchase the Notes would be an event of
default under the indentures governing the Notes and would, therefore, seriously
adversely affect our business.

WE MAY BE CONSIDERED A PASSIVE FOREIGN INVESTMENT COMPANY.

     For the year 1998, we were a "passive foreign investment company" (a
"PFIC") for U.S. federal income tax purposes. Although, based on our
projections, we do not expect to be a PFIC for 1999 or any subsequent year,
because our projections may prove to be inaccurate and, in particular, because
we have substantial passive assets in the form of cash from the First High Yield
Offering and the Second High Yield Offering, and will raise additional capital
in this offering and the Third High Yield Offering, we can provide no assurance
in that regard. U.S. Holders (as defined in "Taxation -- U.S. Tax
Considerations") that own Shares or ADSs at any time during a taxable year for
which we are a PFIC will be subject to a complex set of rules under the Internal
Revenue Code and, generally, could in effect be subject to additional tax upon
certain distributions by us or upon a sale or other disposition of such Shares
or ADSs. See "Tax Considerations -- U.S. Federal Income Tax Considerations." We
urge investors to consult their own tax advisors regarding the application of
the PFIC rules to their particular circumstances.

INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.

     The initial offering price of our Shares and ADSs will be substantially
higher than the pro forma net tangible book value per share of the outstanding
ordinary shares, including ordinary shares represented by the ADSs, immediately
after the offering. If you purchase Shares or ADSs in this offering, you will
incur an immediate and substantial dilution in the pro forma net tangible book
value per Share or ADS from the price you will have paid for the Shares or ADSs.
We also have a large number of outstanding options to purchase, and warrants
exercisable into, ordinary shares with exercise prices significantly below the
estimated initial public offering price. To the extent such options and warrants
are exercised, you will experience further dilution. We expect that warrants
covering approximately 457,492 ordinary shares will be exercised concurrently
with this offering, each at an exercise price of NLG 2.55 per share, which is
substantially less than the estimated initial public offering price range listed
on the cover page of this prospectus.

SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.

     After this offering and based on certain assumptions, there will be
59,059,810 outstanding ordinary shares, including ordinary shares represented by
the ADSs. There will be 62,247,310 shares, including ordinary shares represented
by the ADSs, outstanding if the underwriters exercise their over-allotment
option in full. Of these shares, the shares sold in this offering will be freely
tradeable except for any shares purchased by our "affiliates" as defined in Rule
144 under the Securities Act. Currently outstanding shares not sold in this
offering will not be registered under the Securities Act and may only be resold
in compliance with the registration requirements under the Securities Act or in
transactions not subject to, or pursuant to an exemption from, such act.

     Our directors, executive officers, and shareholders have agreed, subject to
certain limited exceptions, for a period of 180 days after the date of this
prospectus, that they will not, without the prior written consent of Lehman
Brothers Inc., directly or indirectly, offer to sell, sell or otherwise dispose
of any ordinary shares. See "Underwriting." As of the date of this prospectus,
there are outstanding 375,000 warrants to purchase 5,000,100 ordinary shares at
an exercise price of NLG 2.55 per share, which warrants were issued in
connection with the First High Yield Offering and the Second High Yield
Offering. All such warrants become exercisable upon completion of this offering.
Concurrently with the closing of this offering, the holders of 38,800 warrants
will exercise their warrants (on a cashless basis) and, immediately thereafter,
sell 457,492 ordinary shares (in the form of Shares or ADSs) issued upon

                                       23
<PAGE>   29

exercise of such warrants. We expect that there will be 336,200 unexercised
warrants outstanding after the closing of this offering, which, when exercised,
would result in the issuance of approximately 4,482,891 ordinary shares that
could only be resold in compliance with the registration requirements of the
Securities Act or in transactions not subject to, or pursuant to an exemption
from, such act. The warrant agreements governing the warrants provide that we
must, for those warrant holders who elect not to participate in this offering,
file a shelf registration statement with the Securities and Exchange Commission
pursuant to Rule 415 of the Securities Act with respect to any ordinary shares
issued upon exercise of warrants within 180 days after the closing of this
offering. Pursuant to the terms of the warrant agreements governing the
warrants, we are obliged to file a shelf registration statement immediately upon
closing of this offering in respect of any warrant holders who elect to sell
shares issued upon the exercise of warrants in this offering but are prevented
from selling any such shares by the underwriters. No such electing warrant
holders have been prevented from selling warrant shares in connection with the
offering.

     In addition, as of the date of this prospectus, there were outstanding
options to purchase 7,231,500 depositary receipts issued for ordinary shares
(348,000 of which are not dilutive in that the shares underlying such options
are currently outstanding and will be provided to us by the holders thereof),
none of which were fully vested and exercisable. An additional 591,500 shares
have been reserved for issuance under our 1999 Stock Option Plan. All of our
stock option plans provide that the option holder is not entitled to retain any
depositary receipts received by it as a result of the exercise of its option,
nor is the option holder entitled to exchange any depositary receipts for
ordinary shares. Upon exercise of its option by the option holder, the option
holder is required to offer the depositary receipts received by it to us or to
another party designated by us at the fair market value of the underlying
shares.

     In connection with the Settlement Agreement, we have issued an additional
200,000 ordinary shares to Cromwilld. In connection with the acquisitions of CS
Net, SpeedPort and ITinera, we are obligated to issue up to an aggregate of
555,000 additional ordinary shares. We also have earn-out obligations to former
shareholders of SpeedPort and ITinera covering an aggregate of 130,000 ordinary
shares. Upon issuance, any such shares could only be resold in compliance with
the registration requirements of the Securities Act or in transactions not
subject to, or pursuant to an exemption from, such act.

     We cannot predict if future sales of our ordinary shares, or the
availability of our ordinary shares for sale, will materially adversely affect
the market price for our ordinary shares or our ability to raise additional
capital by offering equity securities.

NO PUBLIC MARKET FOR THE SHARES AND ADSS AND THE PRICE OF THE SHARES AND ADSS
MAY BE VOLATILE.

     Prior to this offering there was no public market for the Shares or the
ADSs. We cannot predict the extent to which investor interest in us will lead to
the development of a trading market in the Shares and ADSs or how liquid that
market might become. The initial public offering price for the Shares and ADSs
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market.

     Recently, stock markets in the United States and Europe have experienced
significant price and volume fluctuations and the market prices of securities of
telecommunications services providers and technology companies, particularly
Internet-related companies, have been highly volatile. Investors may not be able
to resell their Shares or ADSs at or above the initial public offering price
listed on the front cover page of this prospectus. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation in the United States has often been instituted against
such a company. The institution of such litigation against us could result in
substantial costs and a diversion of our management's attention and resources,
which could materially adversely affect our business, results of operations and
financial condition.

                                       24
<PAGE>   30

WE HAVE ANTITAKEOVER PROVISIONS THAT COULD DELAY OR PREVENT A CHANGE IN CONTROL,
EVEN IF IT WOULD BENEFIT SHAREHOLDERS.

     Our articles of association provide for the possible issuance of preference
shares A, preference shares B and one priority share. Such shares may be issued
pursuant to a resolution of the general meeting of shareholders. However, our
management board is expected to seek, from the shareholders at a general
meeting, the authority to issue preference shares and the priority share subject
only to the prior approval of the supervisory board. The issuance of preference
shares or the priority share may deter or prevent a takeover attempt, including
an attempt that might result in a premium over the market place for our Shares
or ADSs:

     - Preference shares A and preference shares B.  Upon obtaining authority
       from the general meeting of shareholders to issue preference shares, our
       management board is expected to grant a call option on preference shares,
       which in the case of preference shares B will not exceed 100% of all our
       other outstanding shares, to an independent foundation (stichting) to be
       established under Netherlands law. In the event of a threatened hostile
       take-over bid, the foundation may exercise this option. The issuance of
       such preference shares could therefore inhibit a change of control.

     - Priority share.  Upon obtaining authority from the general meeting of
       shareholders to issue the priority share, our management board is
       expected to grant a call option on the priority share to an independent
       foundation (stichting) to be established under Netherlands law. In the
       event of a threatened hostile take-over bid, the foundation may exercise
       this option. The priority share carries special voting rights. The
       issuance of this priority share could therefore inhibit a change of
       control.

WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.

     We have never declared or paid any cash dividends on our ordinary shares.
We currently intend to retain any future earnings to finance operations, expand
our network, repay outstanding obligations and finance future acquisitions.
Therefore, we do not expect to pay any dividends in the foreseeable future. In
addition, the indentures governing the Notes severely limit and for the
foreseeable future, effectively prohibit, our ability to pay cash dividends on
our capital stock.

                                       25
<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.

                                       26
<PAGE>   32

                                USE OF PROCEEDS

     We estimate that the net proceeds to us from (i) the sale by us of
18,992,508 ordinary shares offered hereby will be approximately $185.1 million
(NLG 388.7 million) ($215.6 million (NLG 439.9 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
assuming that our employees and certain other persons will purchase 5% of the
Shares being offered by us at a 10% discount to the initial public offering
price, and (ii) the sale of the Dollar Notes and Euro Notes in the Third High
Yield Offering will be approximately $294.2 million (NLG 617.8 million) after
deducting underwriting discounts and estimated offering expenses payable by us.
This assumes that all ordinary shares are sold in the form of Shares and paid
for in euros, which are translated at a rate of E1.00 per $1.0509.

     Of the aggregate net proceeds of approximately $479.3 million (NLG 1,006.5
million) (assuming no exercise by the underwriters of their over-allotment
option) from this offering and the Third High Yield Offering, 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 Third High Yield 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 the Third High Yield 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 this
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 Third High Yield 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 this offering. Accordingly, our management will
have broad discretion in the application of such net proceeds.

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

                                       27
<PAGE>   33

                                DIVIDEND POLICY

     We have never declared or paid any dividends on our ordinary shares and we
do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings to finance operations, expand our
network, repay outstanding obligations and finance future acquisitions. Any
future determination to pay cash dividends will be at the discretion of the
shareholders, to be determined at a general meeting of shareholders. Our ability
to declare or pay cash dividends, if any, will be dependent upon the ability of
our subsidiaries to declare and pay dividends or otherwise transfer funds to
VersaTel, because VersaTel conducts its operations entirely through
subsidiaries. The indentures governing the Notes provide that, in general, we
may not declare or pay any dividend or make any other cash distribution to our
shareholders, unless we have generated sufficient cash flows from prior years.
These indentures limit and, for the foreseeable future, effectively prohibit,
our ability to declare or pay cash dividends. See "Description of Material
Indebtedness."

                                       28
<PAGE>   34

                                 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)
18,992,508 ordinary shares (all of which we have assumed are sold in the form of
Shares), (ii) the Third Notes offered in the Third High Yield Offering and (iii)
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 380.1
     million), (ii) the receipt of the U.S. dollar equivalent, of the estimated
     net cash proceeds from the Third High Yield Offering of $289.4 million (NLG
     590.4 million), after deducting the employees and selected persons discount
     of 10%) and (iii) the maintenance of $298.0 million (NLG 608.0 million)
     (reflecting the total proceeds of $475.7 million (NLG 970.4 million) from
     this offering and the Third High Yield 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.

                                       29
<PAGE>   35

 (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 the 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. See footnote
     (3) to "Summary -- The Offering" for the calculation of the as adjusted
     issued and outstanding share number.

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

                                       30
<PAGE>   36

                                    DILUTION

     As of March 31, 1999, our net tangible book value was NLG (112.5) million
($(55.1) million), or NLG (2.88) ($(1.41)) per ordinary share. "Net tangible
book value" per share represents the amount of our total tangible assets reduced
by the amount of our total liabilities, divided by the number of ordinary shares
outstanding. As of March 31, 1999, our net tangible book value, after giving
effect to the sale of 19,450,000 ordinary shares in the form of Shares offered
in this offering and the application of the net proceeds from such sale of NLG
380.0 million ($186.3 million) after deducting the underwriting discounts and
commissions and other estimated offering expenses), would have been
approximately NLG 267.6 million ($131.1 million), or NLG 4.58 ($2.24) per
ordinary share. This represents an immediate increase of NLG 7.46 ($3.65) per
ordinary share to existing shareholders and an immediate dilution of NLG 17.46
($8.56) per ordinary share to new investors.

     The following table illustrates this per share dilution:

<TABLE>
<CAPTION>
                                                         PER SHARE           PER ADS(1)
                                                   ---------------------   ---------------
<S>                                                <C>         <C>         <C>      <C>
Initial public offering price(2).................              NLG 22.04            $10.80
Consolidated net tangible book value as of March
  31, 1999(3)....................................  NLG (2.88)              $(1.41)
Increase in net tangible book value attributable
  to new investors...............................       7.46                 3.65
                                                   ---------               ------
Pro forma net tangible book value after this
  offering(4)....................................                   4.58              2.24
                                                               ---------            ------
Dilution to new investors purchasing Shares or
  ADSs(5)........................................              NLG 17.46            $ 8.56
                                                               =========            ======
</TABLE>

     Assuming this offering had occurred on March 31, 1999, the following table
summarizes the differences between the total consideration paid and the average
price per share paid by the existing shareholders, including the holders of
warrants, and the new investors with respect to the number of Shares purchased
from us:

<TABLE>
<CAPTION>
                                                                                        AVERAGE
                                                                                         PRICE
                         SHARES PURCHASED           TOTAL CONSIDERATION(6)             PER SHARE
                       --------------------   ----------------------------------        AND PER
                         NUMBER     PERCENT           AMOUNT             PERCENT       ADS(1)(2)
                       ----------   -------   -----------------------    -------   ------------------
<S>                    <C>          <C>       <C>            <C>         <C>       <C>         <C>
Existing
  shareholders.......  39,642,302    67.61%   NLG  61,092(7) $ 29,947(7)  12.74%   NLG  1.54   $ 0.76
New investors........  18,992,508    32.39%       418,540     205,167     87.26%       22.04    10.80
                       ----------    -----    -----------    --------     -----    ---------   ------
     Total...........  58,634,810      100%   NLG 479,632    $235,114       100%
                       ==========    =====    ===========    ========     =====
</TABLE>

                                       31
<PAGE>   37

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

(1) Proceeds from the sale of Shares received in euro have been converted into
    NLG at the rate of NLG 2.20371 per E1.00, which resulting amount has been
    converted into U.S. dollars at the rate of NLG 2.04 per $1.00.

(2) Because of changes in the U.S. dollar-Dutch guilder exchange rate since
    March 31, 1999, per ADS amounts do not reflect the per ADS price on the
    front cover page of this prospectus, which has been converted from euro at
    the rate of NLG 2.04 per $1.00.

(3) Consolidated net tangible book value per Share before this offering is
    determined by dividing VersaTel's consolidated net tangible book value at
    March 31, 1999 by 38,984,810, the number of ordinary shares then outstanding
    after giving effect to the assumed issuance of 130,000 shares in connection
    with the acquisition of CS Net. This calculation excludes the impact of (i)
    an aggregate of 625,000 ordinary shares reserved for issuance to former
    shareholders of SpeedPort and ITinera and issued to Cromwilld pursuant to
    the Settlement Agreement, (ii) options covering 7,231,500 ordinary shares
    that have been granted to employees (348,000 of which non-dilutive in that
    the shares underlying such options are currently outstanding and will be
    provided to us by the holders thereof), (iii) 5,000,100 ordinary shares
    reserved for issuance in connection with the exercise of then outstanding
    warrants and (iv) an aggregate of 130,000 ordinary shares approved for
    issuance in connection with earn-out obligations to former shareholders of
    SpeedPort and ITinera.

(4) The total number of outstanding ordinary shares for the purposes of
    calculating consolidated net tangible book value after this offering is
    59,059,810, assuming no exercise of the over-allotment option by the
    underwriters. This calculation excludes the impact of (i) options covering
    7,231,500 ordinary shares that have been issued to employees (348,000 of
    which 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 that will be reserved for issuance in connection
    with warrants outstanding after this offering and (iii) an aggregate of
    130,000 ordinary shares approved for issuance in connection with earn-out
    obligations to former shareholders of SpeedPort and ITinera.

(5) Dilution, for this purpose, represents the difference between the assumed
    initial public offering price per Share in this offering and the
    consolidated net tangible book value per Share at March 31, 1999 after
    giving effect to this offering and the assumptions contained in footnote
    (4), above.

(6) Does not include (i) estimated expenses of approximately NLG 38.5 million
    ($18.9 million) to be incurred in connection with this offering and (ii) any
    ordinary shares offered at a discount to the public offering price.

(7) Includes the cost of NLG 5,212 in connection with warrants issued in the
    First High Yield Offering and Second High Yield Offering.

                                       32
<PAGE>   38

                           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.

                                       33
<PAGE>   39

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.

                                       34
<PAGE>   40

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.

     Payment for Shares purchased in this offering may be made in Dutch guilders
or in euros (for non-cash payments only), but the price of ordinary shares
listed and traded on the Amsterdam Stock Exchange will be quoted exclusively in
euros.

                                       35
<PAGE>   41

             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

     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 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."

                                       36
<PAGE>   42

                      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)

<TABLE>
<CAPTION>
                                      HISTORICAL                           PRO FORMA
                               -------------------------   -----------------------------------------
                                VERSATEL       SVIANED     ADJUSTMENTS             COMBINED
                               -----------   -----------   -----------     -------------------------
                                   NLG           NLG           NLG             NLG          $(1)
<S>                            <C>           <C>           <C>             <C>           <C>
REVENUES.....................       39,561        56,683                        96,244        47,178
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        (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                                  53,872,134    53,872,184
FINANCIAL DATA:
  EBITDA(7)..................      (39,993)       17,915                       (22,078)      (10,823)
  Capital expenditures.......       77,255        13,256                        90,511        44,368
</TABLE>

                                       37
<PAGE>   43

- -------------------------
(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 the Third High Yield 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 the Third High Yield 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.

                                       38
<PAGE>   44

                      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                   (104,118)     (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
</TABLE>

                                       39
<PAGE>   45

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

(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         (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 the Third High Yield Offering (calculated using an interest rate of
    11 7/8% per annum) (ii) amortization of discount amounting to NLG 0.1 and
    (iii) NLG 0.5 million of amortization expense relating to the amortization
    of deferred financing costs incurred in connection with the acquisition of
    Svianed and the Third High Yield Offering.

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

(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.

                                       40
<PAGE>   46

                      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      604,484(2)       939,353    460,466
  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                     1,080,577    529,693
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>

                                       41
<PAGE>   47

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

(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 this offering of
    $186.3 million (NLG 380.0 million), (ii) the proceeds of the Third High
    Yield 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 this 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 Third Notes in the Third High Yield Offering.

(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 the Third High Yield 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 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 Warrant 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).

                                       42
<PAGE>   48

                      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>

                                       43
<PAGE>   49

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

                                       44
<PAGE>   50

                      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>

                                       45
<PAGE>   51

<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.

                                       46
<PAGE>   52

                    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.

                                       47
<PAGE>   53

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

                                                               (IN THOUSANDS)
BILLABLE MINUTES OF USE
  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>

     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

                                       48
<PAGE>   54

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.

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

                                       49
<PAGE>   55

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
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 to employees were issued at
their

                                       50
<PAGE>   56

then current fair market value we may nonetheless 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 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

                                       51
<PAGE>   57

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.

     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.

                                       52
<PAGE>   58

     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 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

                                       53
<PAGE>   59

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.

                                       54
<PAGE>   60

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.

<TABLE>
<CAPTION>
                                                  FISCAL YEARS ENDED     THREE MONTHS ENDED
                                                     DECEMBER 31,            MARCH 31,
                                                  -------------------    ------------------
                                                   1997        1998       1998       1999
                                                  -------    --------    -------    -------
                                                             (NLG IN THOUSANDS)
<S>                                               <C>        <C>         <C>        <C>
REVENUES BY SERVICE
  Data..........................................  29,213      36,016       6,757     10,305
  Voice.........................................  14,300      18,439       4,625      4,395
  Value Added Network Services..................   1,598       2,228         460        879
                                                  ------     -------     -------    -------
     Total......................................  45,111      56,683      11,842     15,579
REVENUES BY CUSTOMER
  Gak Group.....................................  32,037      34,460       8,467      9,429
  Others........................................  13,074      22,223       3,375      6,150
                                                  ------     -------     -------    -------
     Total......................................  45,111      56,683      11,842     15,579
</TABLE>

                                       55
<PAGE>   61

     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%.

                                       56
<PAGE>   62

     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 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.

                                       57
<PAGE>   63

     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.

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 of the Third High Yield Offering 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 Third
High Yield 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 Third 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

                                       58
<PAGE>   64

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 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

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<PAGE>   65

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 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 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.

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.

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<PAGE>   66

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.

     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 believes 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.

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<PAGE>   67

     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
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

     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.

     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.

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<PAGE>   68

                                    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.

     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

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<PAGE>   69

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 -- 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

     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:

     - 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 ("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.

     - 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

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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.

     - 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.

     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
United Kingdom                                                                   6600
Germany                                                                          5333
Canada                                                                           4286
France                                                                           3545
BENELUX (2)                                                                      2395
Italy                                                                            2352
Switzerland                                                                      2164
Japan                                                                            1792
Hong Kong                                                                        1718
</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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<PAGE>   71

     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

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<PAGE>   74

       4 self-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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<PAGE>   75

[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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<PAGE>   76

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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<PAGE>   77

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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<PAGE>   78

     - 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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<PAGE>   79

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

                                       74
<PAGE>   80

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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<PAGE>   81

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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<PAGE>   82

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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<PAGE>   83

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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<PAGE>   84

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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<PAGE>   85

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.

     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;

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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

     - 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.

     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

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supervise the policies pursued by the management board and the general course of
affairs of VersaTel 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

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computer systems. From 1975 to 1981 he served as a senior systems engineer with
Westinghouse 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 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.

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     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."

     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.

                                       90
<PAGE>   96

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.

     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.

     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.

     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

                                       91
<PAGE>   97

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.

                                       92
<PAGE>   98

                             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 offered hereby, 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.

<TABLE>
<CAPTION>
                                                                        PERCENT OF SHARES
                                                                          OUTSTANDING(1)
                                                                     ------------------------
                                                         NUMBER      BEFORE THE    AFTER THE
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 concurrently with this 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" and "Description of Capital Stock -- Warrants."

    Percentage of shares outstanding after the offering is based on the
    39,609,810 ordinary shares assumed to be outstanding prior to this offering
    plus (i) the 18,992,508 shares offered by VersaTel 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 this 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.

                                       93
<PAGE>   99

(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.

                                       94
<PAGE>   100

                              SELLING SHAREHOLDERS

     The following table sets forth estimated information regarding the
beneficial ownership of ordinary shares by the selling shareholders. Other than
Cromwilld, no selling shareholders own, as of the date of this prospectus, any
ordinary shares of VersaTel. All of the Shares and ADSs being sold by the
selling shareholders other than Cromwilld will be issued to such selling
shareholders concurrently with the closing of this offering upon the cashless
exercise by such selling shareholders of an aggregate of 38,800 warrants at an
exercise price of NLG 2.55 per share. Such warrants were issued by VersaTel on
May 27, 1998 and December 3, 1998 as part of the First High Yield Offering and
the Second High Yield Offering, respectively.

<TABLE>
<CAPTION>
                                         BEFORE THE OFFERING                     AFTER THE OFFERING
                                       -----------------------                ------------------------
                                        NUMBER       PERCENT       SHARES       NUMBER       PERCENT
                                       OF SHARES    OF SHARES      BEING      OF SHARES     OF SHARES
NAME                                     OWNED     OUTSTANDING    OFFERED       OWNED      OUTSTANDING
- ----                                   ---------   -----------   ----------   ----------   -----------
<S>                                    <C>         <C>           <C>          <C>          <C>
Cromwilld Limited....................  7,653,036      19.1%       1,800,000    5,853,036       9.9%
Grosvenor House
66/67 Athol Street
Douglas, Isle of Man
Boston Safe Deposit & Trust Co.(1)...    23,582          *           23,582            0         *
Mellon Bank Center, Room 3631
Pittsburgh, PA 15259
American Express Trust Co............   211,060          *          211,060            0         *
Reorganization Department N10/922
733 Marquette Ave.
Minneapolis, MN 55402
Deutsche BK AG.......................     3,537          *            3,537            0         *
31 West 52nd St.
New York, NY 10019
Fifth Third Bank.....................    23,582          *           23,582            0         *
Kim Honey - A.V.P.
38 Fountain Square Plaza
Cincinnati, OH 45263
U.S. Bank Trust N.A. ................   195,731          *          195,731            0         *
Marg Larson - SPER0503
18 E. 5th St.
St. Paul, MN 55101
</TABLE>

- ---------------
 *  Less than 1.0%.

(1) After this offering, Boston Safe Deposit & Trust Co. will continue to hold
    5,280 warrants exercisable into approximately 70,403 ordinary shares. Boston
    Safe Deposit & Trust Co., together with other warrant holders will own
    336,200 warrants covering 4,482,891 ordinary shares after the closing of
    this offering. All outstanding warrants become exercisable upon the closing
    of this offering. See "Shares Eligible for Future Sale."
                                       95
<PAGE>   101

                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., Lehman Brothers International (Europe) and Paribas Corporation,
an affiliate of Paribas, were the initial purchasers in the Second High Yield
Offering. Lehman Brothers International (Europe), ING Barings Limited and ING
Barings LLC are underwriters in the Third High Yield Offering. ING Barings
Limited and ING Barings LLC are each affiliates of the other. Hambrecht & Quist
LLC, an underwriter in this 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 the Third High Yield Offering.
Paribas Deelnemingen N.V., an affiliate of each of Paribas and Paribas
Corporation, is a shareholder of VersaTel. 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 of the Third High Yield 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 this 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. Shares received upon exercise of such options
would remain subject to the lock-up arrangements described under "Shares
Eligible for Future Sale."

                                       96
<PAGE>   102

                          DESCRIPTION OF CAPITAL STOCK

     VersaTel was incorporated under the law of The Netherlands on October 10,
1995, as a private company with limited liability, referred to as 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 naamloze vennootschap or an N.V., on October 15, 1998. VersaTel has its
corporate seat in Amsterdam, The Netherlands. VersaTel is registered under
number 33272606 at the Commercial Register in Amsterdam, The Netherlands.

     On April 13, 1999, VersaTel effected a 2-for-1 stock split. On July 14,
1999, a general meeting of shareholders approved an amendment to VersaTel's
articles of association to provide for, among other things, a consolidation of
its current Class A shares and Class B shares into one single class of ordinary
shares and the possible issuance of preference shares A, preference shares B and
a priority share. The amended articles of association will become effective
prior to the closing of this offering. Set forth below is a summary of the
relevant provisions of the amended articles of association of VersaTel and of
relevant provisions of Netherlands law.

SHARE CAPITAL

     The authorized capital of VersaTel is NLG 9.0 million consisting of
80,000,000 ordinary shares with a par value of NLG 0.05 each, 20,000,000
preference shares A with a par value of NLG 0.05 each, 80,000,000 preference
shares B with a par value of NLG 0.05 each and 1 priority share with a par value
of NLG 0.05. The authorized capital of VersaTel may be increased by a
shareholders' resolution and subsequent amendment of the articles of
association. The issued capital must at all times at least equal 20.0% of the
authorized capital.

ORDINARY SHARES

     Holders of ordinary shares are entitled to one vote per share. There are no
cumulative voting rights. Holders of ordinary shares have pre-emptive rights
with respect to an issue of ordinary shares in proportion to the total par value
of their individual shareholdings. Each ordinary share is entitled to
participate equally in dividends and in the distribution of funds in the event
of liquidation or dissolution of VersaTel and, in each case, following
distributions on preference shares A, preference shares B and the priority
share, if issued.

     Ordinary shares may be issued pursuant to a resolution passed at a general
meeting of shareholders or the shareholders, at a general meeting, may delegate
this power to another corporate body.

     The ordinary shares may, at the option of the shareholder, be in registered
form or bearer form. The ordinary shares shall, however, be made out to bearer
unless the shareholder indicates in writing to VersaTel that it wishes to
receive an ordinary share in registered form. Only ordinary shares in bearer
form are eligible for trading on the AEX.

Ordinary Bearer Shares

     Ordinary shares in bearer form will be represented by a single global share
certificate which will not be exchanged for single or other multiple physical
securities, and which VersaTel will lodge with NECIGEF for safe-keeping on
behalf of the parties entitled to the underlying ordinary shares. The ordinary
shares may only be transferred through the book-entry system maintained by
NECIGEF and in accordance with the articles of association of VersaTel.

Ordinary Registered Shares

     Holders of ordinary shares in registered form are entered in the register
of shareholders, which is updated regularly. No share certificates are issued,
however each shareholder may request VersaTel to issue an extract from the
shareholders' register with respect to its right to one or more registered
shares.

                                       97
<PAGE>   103

VersaTel is required to do this free of charge. A holder of an ordinary share in
registered form may at all times have such shares made out to bearer as further
described in the articles of association.

     As of the date of this prospectus, 39,054,810 ordinary shares are issued
and outstanding. Upon completion of this offering, 59,059,810 ordinary shares
will be issued and outstanding (assuming the underwriters do not exercise their
over-allotment option and certain other matters).

PREFERENCE SHARES A

     Holders of preference shares A will be entitled to one vote per share.
There are no cumulative voting rights. Preference shares A have no pre-emptive
rights. Preference shares A are entitled to an annual dividend, to be set by the
corporate body authorized to issue the preference shares A.

     Preference shares A may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. The preference shares A will be
in registered form and share certificates will not be issued.

     As of the date of this prospectus, no preference shares A are issued or
outstanding.

PREFERENCE SHARES B

     Holders of preference shares B will be entitled to one vote per share.
There are no cumulative voting rights. Preference shares B have no pre-emptive
rights. Preference shares B are entitled to a cumulative annual dividend
calculated on the basis of a fixed interest rate, as may be issued by the
European Central Bank from time to time, on the paid up portion of the nominal
value of the preference shares B, to the extent of the distributable profits,
prior to any dividend distribution on any of our other shares being made.

     Preference shares B may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. Notwithstanding such delegation,
an issue of preference shares B that would exceed 100% of the number of our
other outstanding shares will require the approval of our shareholders at a
general meeting. The preference shares B will be in registered form and share
certificates will not be issued.

     As of the date of this prospectus, no preference shares B are issued or
outstanding.

PRIORITY SHARE

     The holder of the priority share will be entitled to one vote. There are no
cumulative voting rights. However, the priority share will have certain special
voting rights as described below. The priority share has no pre-emptive rights.
The priority share is entitled to a nominal annual dividend of 20% of its
nominal value, to the extent of distributable profits.

     The priority share may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. The priority share will be in
registered form and share certificates will not be issued.

     As of the date of this prospectus, the priority share is not issued or
outstanding.

WARRANTS

     As of the date of this prospectus, there were 375,000 outstanding warrants
to purchase 5,000,100 ordinary shares at an exercise price of NLG 2.55 per
share. All such warrants become exercisable upon the completion of this offering
and we expect that 38,800 of such warrants will be exercised concurrently with
this offering pursuant to a cashless exercise thereof, which will leave 336,200
unexercised warrants following the closing of this offering. The warrant
agreements governing the warrants provide that we must file a shelf registration
statement with the Securities and Exchange Commission pursuant to Rule 415
within 180 days after the closing of this offering, for those warrant holders
who elect not to

                                       98
<PAGE>   104

participate in this offering. Our obligation to file a shelf registration
statement becomes effective immediately in respect of any Warrant holders who
elect to sell shares issued upon the exercise of warrants in this offering but
are not allowed to sell any such shares by the underwriters.

DIVIDENDS

     The profits of VersaTel are at the disposal of the shareholders at a
general meeting. Dividends shall be paid after the adoption of the annual
accounts of VersaTel. We may only pay dividends up to the distributable part of
our equity. Under Netherlands law, the sum of the called and paid-up capital and
certain statutory reserves is not distributable. Subject to the same limitation,
the general meeting of shareholders may resolve to pay dividends out of a
reserve not required by Netherlands law. Each ordinary share is entitled to
participate equally in dividends and in the distribution of funds in the event
of liquidation or dissolution of VersaTel. Preference shares A are entitled to
an annual dividend, to be set by the corporate body authorized to issue such
preference shares A. Preference shares B will be paid a cumulative annual
dividend calculated on the basis of a fixed interest rate on the paid up portion
of their nominal value, to the extent of distributable profits. The priority
share will be entitled to a nominal annual dividend of 20% of the nominal value,
to the extent of distributable profits.

ANNUAL ACCOUNTS

     Within 5 months after the end of our financial year, the board of managing
directors is required to prepare the annual accounts. This period may be
extended by the general meeting of shareholders for a period of 6 months on the
basis of special circumstances. The annual accounts accompanied by an annual
report must be submitted to the board of supervisory directors for signing and
must thereafter be adopted by the general meeting of shareholders. The annual
accounts and the annual report will be available to the shareholders and holders
of depositary receipts of shares at the office of VersaTel as from the date of
its preparation by the board of managing directors. See "Where You Can Find More
Information."

ANTI-TAKEOVER PROVISIONS

     The issuance of preference shares and priority shares may have an
anti-takeover effect and delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider to be in that shareholder's best
interests, including attempts that might result in a premium over the market
price to be paid for the ordinary shares.

     PREFERENCE SHARES.  Our management board is expected to seek, from the
shareholders at a general meeting, the authority to issue preference shares
subject only to the prior approval of the supervisory board. Upon obtaining such
authority, our management board is expected to grant a call option on the
preference shares not exceeding 100% of all our other outstanding shares to an
independent foundation (stichting) to be established under Netherlands law. In
the event of a threatened hostile takeover bid, the foundation may exercise this
option. The foundation will be entrusted with the obligation to take into
consideration our best interests and to prevent influences that may threaten our
continuity, independence or identity. The minimum amount required to be paid on
the preference shares upon issuance is 25% of the nominal amount issued.

     Notwithstanding any delegation by the shareholders at a general meeting of
the power to authorize the issuance of any preference shares, a proposed
issuance of preference shares B that would exceed 100% of the number of our
other outstanding shares will require the approval of our shareholders at a
general meeting. In all instances where preference shares are issued without
direct shareholder approval, the management board must explain the reason for
the issuance within 4 weeks at a general meeting of shareholders. Within 2 years
after the first issuance of preference shares, a general meeting of shareholders
must be held to vote on whether the preference shares should be repurchased or
canceled.

     PRIORITY SHARES.  Our management board is expected to seek, from the
shareholders at a general meeting, the authority to issue a priority share
subject only to the prior approval of the supervisory board. Upon obtaining such
authority, our management board is expected to grant a call option on the
priority

                                       99
<PAGE>   105

share to an independent foundation (stichting), to be established under
Netherlands law. In the event of a threatened hostile takeover bid, the
foundation may exercise this option. The priority share can only be transferred
with the approval of the management board and the supervisory board. The
priority share carries the following special voting rights:

     - the right to nominate members for appointment to the management board and
       supervisory board, which nominations may only be set aside by a
       resolution of the general meeting of shareholders adopted by two-thirds
       of the votes cast representing more than one-half of the issued nominal
       capital, and

     - the exclusive right to propose amendments to our articles of association,
       our merger or de-merger transactions or our dissolution.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the ADRs is The Bank of New York.

                                       100
<PAGE>   106

                  DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

AMERICAN DEPOSITARY RECEIPTS

     The Bank of New York will issue the American Depositary Receipts, or ADRs.
Each ADR will represent an ownership interest in a number of American Depositary
Shares, each of which represents one ordinary share which VersaTel will deposit
with a custodian in The Netherlands. Each ADR will also represent securities,
cash or other property deposited with The Bank of New York but not distributed
to ADR holders. The Bank of New York's Corporate Trust Office is located at 101
Barclay Street, New York, New York 10286, and its principal executive office is
located at One Wall Street, New York, NY 10286.

     You may hold ADRs either directly or indirectly through your broker or
other financial institution. If you hold ADRs directly, you are an ADR holder.
This description assumes you hold your ADRs directly. If you hold the ADRs
indirectly, you must rely on the procedures of your broker or other financial
institution to assert the rights of ADR holders described in this section. You
should consult with your broker or financial institution to find out what those
procedures are.

     Because The Bank of New York will be the legal owner of the ordinary
shares, ADR holders must rely on it to exercise the rights of a shareholder of
VersaTel. The obligations of The Bank of New York are set out in a deposit
agreement among VersaTel, The Bank of New York and you, as an ADR holder. The
deposit agreement and the ADRs are governed by New York law.

SHARE DIVIDENDS AND OTHER DISTRIBUTIONS

     The Bank of New York has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on ordinary shares or other deposited
securities, after deducting its fees and expenses. You will receive these
distributions in proportion to the number of ordinary shares your ADRs
represent.

     Cash.  The Bank of New York will convert any cash dividend or other cash
distribution VersaTel pays on the ordinary shares into U.S. dollars. If it is
not possible for The Bank of New York to convert such foreign currency in whole
or in part into U.S. dollars, or if any approval or license of any government is
needed and cannot be obtained, The Bank of New York may distribute the foreign
currency to, or in its discretion may hold the foreign currency uninvested and
without liability for interest for the accounts of, ADR holders entitled to
receive the same.

     Before making a distribution, The Bank of New York will deduct any
withholding taxes that must be paid under Netherlands law. See "Tax
Considerations -- Netherlands Tax Considerations." It will distribute only whole
U.S. dollars and cents and will round fractional cents to the nearest whole
cent.

     Shares.  The Bank of New York may, with the consent of VersaTel, and must
upon VersaTel's request, distribute new ADRs representing any shares VersaTel
may distribute as a dividend or free distribution. The Bank of New York will
only distribute whole ADRs. It will sell shares which would require it to issue
a fractional ADR and distribute the net proceeds in the same way as it does with
dividends or distributions of cash. If The Bank of New York does not distribute
additional ADRs, each ADR will also represent the additional deposited shares.

     Rights to receive additional shares.  If VersaTel offers holders of its
ordinary shares any rights to subscribe for additional ordinary shares or any
other rights, The Bank of New York may make these rights available to you.
VersaTel must first instruct The Bank of New York to do so and furnish it with
satisfactory evidence that it is legal to do so. If VersaTel does not furnish
this evidence and/or give these instructions, or if The Bank of New York
determines in its reasonable discretion that it is not lawful and feasible to
make such rights available to all or certain owners, The Bank of New York may
sell the rights

                                       101
<PAGE>   107

and allocate the net proceeds to Owner's accounts. The Bank of New York may
allow rights that are not distributed or sold to lapse. In that case, you will
receive no value for them.

     If The Bank of New York makes rights available to you, upon instruction
from you it will exercise the rights and purchase the shares on your behalf. The
Bank of New York will then deposit the shares and issue ADRs to you. It will
only exercise rights if you pay it the exercise price and any other charges the
rights require you to pay.

     U.S. securities laws may restrict the sale, deposit, cancellation, and
transfer of the ADRs issued after exercise of rights. For example, you may not
be able to trade the ADRs freely in the United States. In this case, The Bank of
New York may issue the ADRs under a separate restricted deposit agreement which
will contain the same provisions as the agreement, except for changes needed to
put the restrictions in place.

     Other Distributions.  The Bank of New York will send to you anything else
VersaTel distributes on deposited securities by any means it thinks is legal,
fair and practical. If it cannot make the distribution in that way, The Bank of
New York has a choice. It may decide to sell what VersaTel distributed and
distribute the net proceeds, in the same way as it does with cash. Or, it may
decide to hold what VersaTel distributed, in which case ADRs will also represent
the newly distributed property.

     The Bank of New York is not responsible if it decides that it is unlawful
or impractical to make a distribution available to any ADR holders. VersaTel has
no obligation to register ADRs, shares, rights or other securities under the
Securities Act. VersaTel also has no obligation to take any other action to
permit the distribution of ADRs, shares, rights or anything else to ADR holders.
This means that you may not receive the distributions VersaTel makes on its
shares or any value for them if it is illegal or impractical for VersaTel to
make them available to you.

DEPOSIT, WITHDRAWAL AND CANCELLATION

     The Bank of New York will issue ADRs if you or your broker deposit shares
or evidence of rights to receive shares with the custodian. Upon payment of its
fees and expenses and of any taxes or charges, such as stamp taxes or stock
transfer taxes or fees, The Bank of New York will register the appropriate
number of ADRs in the names you request and will deliver the ADRs at its
Corporate Trust Office to the persons you request.

     You may turn in your ADRs at the Corporate Trust Office of The Bank of New
York's office. Upon payment of its fees and expenses and of any taxes or
charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New
York will deliver the deposited securities underlying the ADRs at the office of
the custodian, except that The Bank of New York may deliver at its Corporate
Trust Office any dividends or distributions with respect to the deposited
securities represented by the ADRs, or any proceeds from the sale of any
dividends, distributions or rights, which may be held by The Bank of New York.
Or, at your request, risk and expense, The Bank of New York will deliver the
deposited securities at its Corporate Trust Office.

VOTING RIGHTS

     You may instruct The Bank of New York to vote the shares underlying your
ADRs but only if VersaTel asks The Bank of New York to ask for your
instructions. Otherwise, you will not be able to exercise your right to vote
unless you withdraw the ordinary shares underlying the ADRs. However, you may
not know about a meeting at which you may be entitled to vote enough in advance
to withdraw the shares.

     If VersaTel asks for your instructions, The Bank of New York will notify
you of the upcoming vote and arrange to deliver voting materials to you. The
materials will (1) describe the matters to be voted on and (2) explain how you,
on a certain date, may instruct The Bank of New York to vote the shares or

                                       102
<PAGE>   108

other deposited securities underlying your ADRs as you direct. For instructions
to be valid, The Bank of New York must receive them on or before the date
specified. The Bank of New York will try, as far as practical, subject to
Netherlands law and the provisions of VersaTel's articles of association, to
vote or to have its agents vote the shares or other deposited securities as you
instruct. The Bank of New York will only vote or attempt to vote as you
instruct. However, if The Bank of New York does not receive your voting
instructions on or before the date specified, it will give a proxy to vote your
shares to a person designated by VersaTel.

     VersaTel cannot assure you that you will receive the voting materials in
time to ensure that you can instruct The Bank of New York to vote your shares.
In addition, The Bank of New York and its agents are not responsible for failing
to carry out voting instructions or for the manner of carrying out voting
instructions. This means that you may not be able to exercise your right to vote
and there may be nothing you can do if your shares are not voted as you
requested.

     The Bank of New York shall fix a record date whenever:

        - any cash dividend or distribution shall become payable,

        - any distribution other than cash shall be made,

        - rights shall be issued with respect to the deposited securities,

        - The Bank of New York, for any reason, causes a change in the number of
          ordinary shares that are represented by each ADS, or

        - The Bank of New York receives notice of any meeting of holders of
          ordinary shares or other deposited securities.

     The purpose of fixing a record date is to determine which ADR holders are:

        - entitled to receive such dividend, distribution or rights,

        - entitled to receive the net proceeds from the sale of such dividend,
          distribution or rights, and

        - entitled to give instructions for the exercise of voting rights at any
          such meeting.

FEES AND EXPENSES

<TABLE>
<CAPTION>
                      If:                                 You must pay:
<S>  <C>                                      <C>
- -    An ADR is issued to you, including as    $5.00 (or less) per 100 ADSs (or
     a result of a distribution of shares     portion thereof)
     or rights or other property
- -    Your ADR is cancelled, including if      $5.00 (or less) per 100 ADSs (or
     the deposit agreement terminates         portion thereof)
- -    You receive any cash payment             $0.02 (or less) per ADS
- -    There is a transfer and registration     Registration or transfer fees
     of shares on the share register of
     VersaTel's registrar or foreign
     registrar from your name to the name
     of The Bank of New York or its agent
     when you deposit or withdraw shares
- -    The Bank of New York converts NLG to     Expenses of The Bank of New York
     U.S. dollars
</TABLE>

                                       103
<PAGE>   109

<TABLE>
<CAPTION>
                      If:                                 You must pay:
<S>  <C>                                      <C>
- -    The Bank of New York sends a cable,      Expenses of The Bank of New York
     telex or facsimile transmission (if
     expressly provided in the deposit
     agreement)
- -    The Bank of New York or the custodian    Your proportionate share of those
     pays taxes and other governmental        taxes or charges
     charges on any ADR or underlying
     share, such as stock transfer taxes,
     stamp duty or withholding taxes.
</TABLE>

PAYMENT OF TAXES

     The Bank of New York may deduct the amount of any taxes owed from any
payments to you. It may also sell deposited securities, by public or private
sale, to pay any taxes owed. You will remain liable if the proceeds of the sale
are not enough to pay the taxes. If The Bank of New York sells deposited
securities, it will, if appropriate, reduce the number of ADRs to reflect the
sale and pay to you any proceeds, or send to you any property, remaining after
it has paid the taxes.

RECLASSIFICATIONS, RECAPITALIZATIONS AND MERGERS

<TABLE>
<CAPTION>
                 If VersaTel:                                 Then:
<S>  <C>                                      <C>
- -    Changes the nominal or par value of      The cash, shares or other securities
     its shares                               received by The Bank of New York will
                                              become deposited securities.
- -    Reclassifies, splits up or               Each ADR will automatically represent
     consolidates any of the deposited        its equal share of the new deposited
     securities                               securities.
- -    Recapitalizes, reorganizes, merges,      The Bank of New York may with
     liquidate, sells all or substantially    VersaTel's approval and will if
     all of its assets, or takes any          VersaTel asks it to, execute and
     similar action                           deliver additional ADRs or ask you to
                                              surrender your outstanding ADRs in
                                              exchange for new ADRs, identifying
                                              the new deposited securities.
</TABLE>

AMENDMENT AND TERMINATION

     Versatel may agree with The Bank of New York to amend the deposit agreement
and the ADRs without your consent for any reason. If the amendment adds or
increases fees or charges, except for taxes and other governmental charges or
certain expenses of The Bank of New York, or prejudices an important right of
ADR holders, it will only become effective 30 days after The Bank of New York
notifies you of the amendment. At the time an amendment becomes effective, you
are considered, by continuing to hold your ADR, to agree to the amendment and to
be bound by the ADRs and the agreement as amended.

     The Bank of New York will terminate the agreement if VersaTel asks it to do
so. The Bank of New York may also terminate the agreement if The Bank of New
York has told VersaTel that it would like to resign and VersaTel has not
appointed a new depositary bank within 90 days. In both cases, The Bank of New
York must notify you at least 90 days before termination.

                                       104
<PAGE>   110

     After termination, The Bank of New York and its agents will be required to
do only the following under the agreement: (1) collect dividends and
distributions on the deposited securities, (2) deliver shares and other
deposited securities upon cancellation of ADRs, and shall sell rights as
provided in the agreement. One year after termination, The Bank of New York may
sell any remaining deposited securities by public or private sale. After that,
The Bank of New York will hold the money it received on the sale, as well as any
other cash it is holding under the agreement for the pro rata benefit of the ADR
holders that have not surrendered their ADRs. It will not invest the money and
has no liability for interest. The Bank of New York's only obligations will be
to account for the money and other cash and with respect to indemnification.
After termination our only obligations will be with respect to indemnification
and to pay certain amounts to The Bank of New York.

     The Bank of New York upon the written request or with the written approval
of VersaTel, may appoint one or more co-transfer agents for the purpose of
effecting transfers, combinations and split-ups of ADRs at designated transfer
offices on behalf of The Bank of New York. A co-transfer agent may require
evidence of your authority and compliance with applicable laws and other
requirements will be entitled to protection and indemnity to the same extent as
The Bank of New York.

LIMITATIONS ON OBLIGATIONS AND LIABILITY TO ADR HOLDERS

     The deposit agreement expressly limits VersaTel's obligations and the
obligations of The Bank of New York. It also limits VersaTel's liability and the
liability of The Bank of New York. VersaTel and The Bank of New York:

     - are only obligated to take the actions specifically set forth in the
       agreement without negligence or bad faith;

     - are not liable if either is prevented or delayed by law or the articles
       of association of VersaTel, or circumstances beyond their control from
       performing their obligations under the agreement;

     - are not liable if either exercises, or fails to exercise, discretion
       permitted under the agreement;

     - have no obligation to become involved in a lawsuit or other proceeding
       related to the ADRs or the agreement on your behalf or on behalf of any
       other party; and

     - may rely upon any advice of or information from legal counsel,
       accountants, any person depositing Shares, any ADR holder or any other
       person whom they believe in good faith is competent to give them that
       advice or information.

     In the agreement, VersaTel and The Bank of New York agree to indemnify each
other under specified circumstances.

REQUIREMENTS FOR DEPOSITARY ACTIONS

     Before The Bank of New York will issue or register transfer of an ADR, make
a distribution on an ADR, or permit withdrawal of shares, The Bank of New York
may require:

     - payment to stock transfer or other taxes or other governmental charges
       and transfer or registration fees charged by third parties for the
       transfer of any shares or other deposited securities, as well as the fees
       and expenses of The Bank of New York;

     - production of satisfactory proof of the identity of the person presenting
       shares for deposit or ADRs upon withdrawal and genuineness of any
       signature or other information it deems necessary; and

     - compliance with laws or regulations relating to ADRs or to the withdrawal
       of deposited securities and any such reasonable regulations it may
       establish, from time to time, consistent with the agreement, including
       presentation of transfer documents.

                                       105
<PAGE>   111

     The Bank of New York may refuse to deliver, transfer, or register transfers
of ADRs generally when the transfer books of The Bank of New York, or VersaTel
are closed or at any time if The Bank of New York or VersaTel thinks it
advisable to do so.

     You have the right to cancel your ADRs and withdraw the underlying shares
at any time except:

     - when temporary delays arise because: (1) The Bank of New York or VersaTel
       has closed its transfer books; (2) the transfer of shares is blocked to
       permit voting at a shareholders' meeting; or (3) Versatel is paying a
       dividend on the shares;

     - when you owe money to pay fees, taxes and similar charges; or

     - when it is necessary to prohibit withdrawals in order to comply with any
       laws or governmental regulations that apply to ADRs or to the withdrawal
       of shares or other deposited securities.

     This right of withdrawal may not be limited by any other provision of the
deposit agreement.

PRE-RELEASE OF ADRS

     In certain circumstances described below, subject to the provisions of the
deposit agreement, The Bank of New York may issue ADRs before deposit of the
underlying shares. This is called a pre-release of the ADR. The Bank of New York
may also deliver shares upon the receipt and cancellation of pre-released ADRs
(even if the ADRs are cancelled before the pre-release transaction has been
closed out). A pre-release is closed out as soon as the underlying shares are
delivered to The Bank of New York. The Bank of New York may receive ADRs instead
of shares to close out a pre-release. The Bank of New York may pre-release ADRs
only under the following conditions:

     (1) before or at the time of the pre-release, the person to whom the
         pre-release is being made must represent to The Bank of New York in
         writing that it or its customer, as the case may be:

        (a) owns the Shares or ADRs to be remitted,

        (b) will assign all beneficial rights, title and interest in the ADRs or
            shares to The Bank of New York and for the benefit of the holders,
            and

        (c) will not take any action with respect to the ADRs or Shares that is
            inconsistent with the assignment of beneficial ownership (including,
            without the consent of The Bank of New York, disposing of the ADRs
            or Shares) other than in satisfaction of the pre-release;

     (2) the pre-release must be fully collateralized with cash or other
         collateral that The Bank of New York considers appropriate; and

     (3) The Bank of New York must be able to close out the pre-release on not
         more than five business days' notice.

     In addition, The Bank of New York will limit the number of ADRs that may be
outstanding at any time as a result of pre-release, although The Bank of New
York may disregard the limit from time to time, if it thinks it is appropriate
to do so.

REPORTS AND OTHER COMMUNICATIONS

     The Bank of New York will make available for your inspection at its
Corporate Trust Office any reports and communications, including any proxy
soliciting material, it receives from VersaTel, if those reports and
communications are both (a) received by The Bank of New York as the holder of
the deposited securities and (b) made generally available by VersaTel to the
holders of the deposited securities. The Bank of New York will also, upon
written request, send you copies of those reports it receives from VersaTel.
VersaTel will provide those reports and communications, including any proxy
soliciting material, in English.

                                       106
<PAGE>   112

INSPECTION OF TRANSFER BOOKS

     The Bank of New York will keep books for the registration and transfer of
ADRs, which will be open for your inspection at all reasonable times. You will
only have the right to inspect those books if the inspection is for the purpose
of communicating with other owners of ADRs in connection with the business of
VersaTel or a matter related to the agreement or the ADRs.

                                       107
<PAGE>   113

                      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 Third 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

                                       108
<PAGE>   114

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 Third 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.

                                       109
<PAGE>   115

THE THIRD HIGH YIELD OFFERING

     Concurrent with this offering, VersaTel will issue $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. The notes will be sold to Lehman Brothers International (Europe), ING
Barings LLC and ING Barings Limited, as underwriters. Interest on the Third
Notes will be paid semi-annually on January 15 and July 15, beginning January
15, 2000. Unlike the holders of the Existing Notes, the holders the Third Notes
will not have the benefit of any securities placed in escrow to fund any
interest payments on the Third Notes. The Third Notes will be redeemable at the
option of VersaTel, in whole or in part, at any time on or after July 15, 2004,
at 105.937% of their principal amount, plus accrued interest, declining to 100%
of their principal amount, plus accrued interest, on or after July 15, 2007. In
addition, at any time prior to July 15, 2002, VersaTel may, at its option,
redeem from time to time up to 35% of the aggregate principal amount of either
series of Third Notes at a redemption price equal to 111.875% of the aggregate
principal amount thereof plus accrued and unpaid interest and additional
amounts, 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 such series remains outstanding immediately after
the occurrence of such redemption. The Third 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, 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 Third Notes rank equal in right of
payment to the First Notes, the Second Notes (except with respect to the
securities placed in escrow to fund interest payments on the First Notes and
Second Notes, respectively) 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 each series of Third Notes will contain 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, consolidations and mergers and provision of financial
statements and reports. Each indenture will also require VersaTel to commence
and consummate an offer to purchase the Third Notes, for 101% of the aggregate
principal amount, upon certain events constituting or which may constitute a
change of control of VersaTel. Under certain circumstances, VersaTel will be
required by each indenture to offer to purchase the Third Notes with the
proceeds of the sale of certain assets. Each indenture will also provide 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 Third Notes to become or to be declared to be immediately due and payable.
Holders of Third Notes may under certain circumstances be entitled to receive
additional payments in respect of taxes and similar charges in respect of
payments on the Third Notes. Each indenture governing the Third Notes will also
be subject to, and governed by, the Trust Indenture Act.

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

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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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                        SHARES ELIGIBLE FOR FUTURE SALE

     Sales of substantial amounts of ordinary shares in the public market
following the offering could adversely affect the market price of the ordinary
shares and adversely affect our ability to raise capital at a time and on terms
favorable to us.

     Of the 70,556,201 ordinary shares to be outstanding after the offering on a
fully-diluted basis (assuming that the underwriters do not exercise their
over-allotment option), the 21,250,000 Shares and ADSs offered hereby will be
freely tradeable without restriction in the public market unless such shares are
held by our "affiliates," as that term is defined in Rule 144(a) under the
Securities Act. For purposes of Rule 144, an "affiliate" of an issuer is a
person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, such issuer. The
remaining ordinary shares to be outstanding after the offering may only be sold
(i) in the public market upon the expiration of certain holding periods
applicable to "restricted securities" under Rule 144, subject to the applicable
volume, manner of sale and other limitations of Rule 144, (ii) in offshore
transactions under Regulation S of the Securities Act or (iii) pursuant to an
effective registration statement under the Securities Act.

     In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including an "affiliate," as
that term is defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (1)
1.0% of the then outstanding ordinary shares or (2) the average weekly trading
volume during the 4 calendar weeks preceding filing of notice of such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A shareholder who is deemed not to have been an "affiliate" of ours at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
shares for at least 2 years, would be entitled to sell such shares under Rule
144(k) without regard to the volume limitations, manner of sale provisions or
public information requirements.

     As of the date of this prospectus, there are 375,000 outstanding warrants
to purchase 5,000,100 ordinary shares at an exercise price of NLG 2.55 per
share. All such warrants become exercisable, and we expect that approximately
38,800 of such warrants will be exercised (on a cashless basis), upon completion
of this offering. We expect that a total of 2,257,492 Shares and ADSs will be
sold by the selling shareholders in this offering. After the closing of this
offering, we expect that there will be approximately 336,200 unexercised
warrants outstanding which, when exercised, would result in the issuance of
4,482,891 ordinary shares that could only be resold in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom. The warrant agreements governing the warrants provide that we must
file a shelf registration statement with the Securities and Exchange Commission
pursuant to Rule 415 under the Securities Act within 180 days after the closing
of this offering for those warrant holders who elect not to participate in this
offering. Our obligation to file a shelf registration statement becomes
effective immediately in respect of any warrant holders who elect to sell shares
issued upon the exercise of warrants in this offering but are not allowed to
sell any such shares by the underwriters.

     In addition, as of the date of this prospectus, there are outstanding
options to purchase 7,231,500 depositary receipts issued for 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),
none of which are fully vested and exercisable. An additional 591,500 shares
have been reserved for issuance under our 1999 Stock Option Plan. All of the
Company's stock option plans provide that the option holder is not entitled to
retain any depositary receipts received by it as a result of the exercise of its
option, nor is the option holder entitled to exchange any depositary receipts
for ordinary shares. Within one year after the exercise of its option, the
option holder is required to offer the depositary receipts

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received by it to VersaTel or to another party designated by VersaTel for the
fair market value of the underlying shares.

     Cromwilld Limited, which will own 5,853,036 shares after this offering, has
been granted certain piggyback registration rights which become effective 180
days from the date of this prospectus.

     In connection with the acquisitions of CS Net, Speedport and ITinera, we
are obligated to issue up to 555,000 additional ordinary shares, which will be
issued following this offering. We also have earn-out obligations to former
shareholders of SpeedPort and ITinera covering 130,000 ordinary shares. Upon
issuance, any such shares could only be resold in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom.

LOCK-UP ARRANGEMENTS

     Along with our executive officers and directors our current shareholders,
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
this offering, shares issuable upon exercise of options or shares issued to
consummate acquisitions) for a period of 180 days after the date of this
prospectus 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 the date of this offering, of
any ordinary shares acquired by such member before the date of this offering. In
addition, under AEX regulations, any holder of 5% or more of our outstanding
share capital before the date of this offering may not, for three years after
the date of this offering, sell, collectively with all other holders of 5% or
more of our outstanding share capital acquired before the date of this offering,
in the aggregate more than 25% of the number of our ordinary shares outstanding
before the date of this 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 this offering if a profit was made for one year or (ii) 75% of the
shares issued and outstanding before the date of this 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 this
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 this offering pursuant to the exercise of options
which were granted under our stock option plans prior to this offering.

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                               TAX CONSIDERATIONS

                         NETHERLANDS TAX CONSIDERATIONS

     The following discussion, subject to the limitations set forth therein,
describes the material Netherlands tax consequences of the acquisition,
ownership and disposition of the Shares or ADSs and is the opinion of Arthur
Andersen, special Netherlands tax counsel (belastingadviseurs) to VersaTel. This
opinion represents Arthur Andersen's interpretation of existing law. This
opinion does not address the income taxes imposed by any political subdivision
of The Netherlands or any tax imposed by any other jurisdiction. This opinion
does not discuss all the tax consequences that may be relevant to the holders in
light of their particular circumstances or to holders that are subject to
special treatment under applicable law and is not intended to be applicable in
all respects to all categories of investors. Changes in VersaTel's
organizational structure or the manner in which VersaTel conducts its business
may invalidate this opinion. The laws upon which this opinion is based are
subject to change, sometimes with retroactive effect. Changes in the applicable
laws may invalidate this opinion and this opinion will not be updated to reflect
such subsequent changes. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES OF THEIR ACQUIRING, OWNING AND
DISPOSING OF THE SHARES OR ADSs.

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. A deemed substantial interest is present if (part of) a substantial
interest has been disposed of, or is deemed to have been disposed of, on a
non-recognition basis. With respect to individuals, attribution rules exist in
determining the presence of a Substantial Interest. Unless indicated otherwise,
the term "shareholder", as used herein, includes individuals and entities as
defined under Netherlands tax law holding ordinary shares, but does not include
any such person having a Substantial Interest in VersaTel.

TAX CONSEQUENCES FOR RESIDENTS OR DEEMED RESIDENTS OF THE NETHERLANDS

DIVIDEND WITHHOLDING TAX

     Dividends that VersaTel distributes are subject to withholding tax at a
rate of 25%, unless:

     1.  the participation exemption applies and the ordinary shares are
         attributable to the business carried out in The Netherlands, or

     2.  dividends are distributed to a qualifying EU corporate shareholder
         satisfying the conditions of the EU directive, or

     3.  the rate is reduced by treaty.

     Dividends may include:

     - distributions of cash,

     - distributions of property in kind,

     - constructive dividends,

     - hidden dividends,

     - liquidation proceeds in excess of our recognized paid-in capital,

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     - proceeds from the redemption of shares in excess of our recognized
       paid-in capital,

     - stock dividends equal to their nominal value (unless distributed out of
       our recognized paid-in share premium), and

     - the repayment of paid-in capital not recognized as capital.

     The term "recognized paid-in capital" or "share premium" relates to our
paid-in capital or share premium as recognized for Netherlands tax purposes.

     Generally, a shareholder that resides, or is deemed to reside, in The
Netherlands will be allowed a credit against Netherlands income tax or
corporation tax for the tax withheld on dividends paid on ordinary shares. A
legal entity resident in The Netherlands that is not subject to Netherlands
corporate income tax, may, under certain conditions, request a refund of the tax
withheld.

     Dividends VersaTel pays to a corporate shareholder that qualifies for the
"participation exemption" (as defined in Article 13 of The Netherlands
Corporation Tax Act 1969 (the "Corporation Tax Act")) will not be subject to the
dividend withholding tax if the ordinary shares are attributable to the
shareholder's business carried out in The Netherlands. A resident corporate
shareholder will qualify for the participation exemption if, among other things,
the resident shareholder owns generally at least 5% of the nominal paid-up
capital.

INDIVIDUAL INCOME TAX AND CORPORATION INCOME TAX

     If the Shares or ADSs are held by an individual who resides, or is deemed
to reside, in The Netherlands, income derived from the Shares or ADSs is subject
to Netherlands income tax on a net income basis at graduated rates. An
individual generally is entitled to a dividend exemption of NLG 1,000 a year
(NLG 2,000 a year for married couples). Ordinary shares distributed to
individual shareholders from our share premium account (as recognized for
Netherlands tax purposes) are also exempt from Netherlands income tax. The
dividend exemption is not available to an individual shareholder if the ordinary
shares are:

     1.  attributable to a trade or business carried on by the shareholder, or

     2.  form part of a Substantial Interest.

     Dividends accruing to individual shareholders that hold a Substantial
Interest are subject to income tax at a rate of 25% on a net basis.

     Dividends received from Shares or ADSs or ordinary shares by an entity that
resides, or is deemed to reside, in The Netherlands will be subject to
Netherlands corporation tax on a net basis unless the company's shareholding
qualifies for the participation exemption. Dividends received from ordinary
shares by a pension fund as defined in the Corporation Tax Act are not subject
to Netherlands corporation tax.

CAPITAL GAINS REALIZED FROM THE SALE OR EXCHANGE OF SHARES OR ADSS

     Capital gains derived from the sale, conversion or disposition of Shares or
ADSs by an individual shareholder who resides, or is deemed to reside, in The
Netherlands are not subject to Netherlands income tax provided:

     1.  the Shares or ADSs were not acquired directly or indirectly by VersaTel
         or a subsidiary of VersaTel,

     2.  the shareholder did not have a (deemed) Substantial Interest in
         VersaTel's share capital at the time of the sale or exchange, and

     3.  the Shares or ADSs were not assets of a business.

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Capital gains realized by an individual shareholder that is a resident or a
deemed resident of The Netherlands on the disposal of Shares or ADSs forming
part of a (deemed) Substantial Interest are subject to tax at a rate of 25%.
Capital gains realized by an individual resident shareholder from the sale or
exchange of Shares or ADSs forming part of the assets of a shareholder's
business are subject to tax on a net income basis at the progressive income tax
rates.

     If the Shares or ADSs are held by an entity that is a resident or a deemed
resident of The Netherlands, capital gains realized from the sale or exchange of
ordinary shares are subject to corporation tax unless the shareholding qualifies
for the participation exemption. If the Shares or ADSs are held by a qualifying
pension fund, gains realized from the sale or exchange of ordinary shares are
exempt from Netherlands corporation tax.

NET WEALTH TAX

     An individual who resides, or is deemed to reside, in The Netherlands
generally will be subject to a net wealth tax at a rate of 0.7% on the fair
market value of the Shares or ADSs.

GIFT TAX AND INHERITANCE TAX

     Netherlands gift tax or inheritance tax will be due with respect to a gift
or inheritance of Shares or ADSs from a person who resided, or was deemed to
have resided, in The Netherlands at the time of the gift or his or her death.
Netherlands tax will be due in the case of a gift of Shares or ADSs by an
individual who at the time of the gift was neither resident nor deemed to be
resident in The Netherlands, if such individual dies within 180 days after the
date of the gift, while being resident or deemed resident in The Netherlands. A
Dutch national is deemed to have been resident of The Netherlands if he or she
was a resident in The Netherlands at any time during the 10 years preceding the
date of the gift or the date of his or her death. For gift tax purposes, each
person (regardless of nationality) is deemed to be a Netherlands resident if he
or she was a resident in The Netherlands at any time during the 12 months
preceding the date of the gift. The 10-year and 12-month residency rules may be
modified by treaty.

     Liability for payment of the gift tax or inheritance tax rests with the
donee or heir, respectively. The rate at which these taxes are levied is
primarily dependent on the fair market value of the gift or inheritance and the
relationship between the donor and donee or the deceased and heir(s). Exemptions
may apply under specific circumstances.

TAX CONSEQUENCES FOR NON-RESIDENTS OF THE NETHERLANDS

     This subsection applies to U.S. Holders (as defined below).

DIVIDEND WITHHOLDING TAX

     Dividends VersaTel distributes are subject to withholding tax at a rate of
25%, unless:

     1.  the participation exemption applies and the ordinary shares are
         attributable to the business carried out in The Netherlands, or

     2.  dividends are distributed to a qualifying EU corporate shareholder
         satisfying the conditions of the EU directive, or

     3.  the rate is reduced by treaty.

     Dividends may include:

     - distributions of cash,

     - distributions of property in kind,

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     - constructive dividends,

     - hidden dividends,

     - liquidation proceeds in excess of our recognized paid-in capital,

     - proceeds from the redemption of shares in excess of our recognized
       paid-in capital,

     - stock dividends equal to their nominal value (unless distributed out of
       our recognized paid-in share premium), and

     - the repayment of paid-in capital not recognized as capital.

     The term recognized paid-in capital or share premium relates to our paid-in
capital or share premium as recognized for Netherlands tax purposes.

     A non-resident shareholder may benefit from a reduced dividend withholding
tax rate pursuant to an income tax treaty in effect between the shareholder's
country of residence and The Netherlands. Under most Netherlands income tax
treaties, the withholding tax rate is reduced to 15% or less provided that:

     1.  the recipient shareholder does not have a permanent establishment in
         The Netherlands to which the ordinary shares and are attributable, and

     2.  the recipient shareholder is the beneficial owner of the dividends.

     Under the Income Tax Treaty of December 18, 1992 concluded between The
Netherlands and the United States (the "Treaty"), dividends we pay to a resident
of the United States generally will be subject to a dividend withholding tax
rate of 15%. The rate may be reduced to 5% if the beneficial owner is a United
States corporation that directly holds 10% or more of the voting power in our
Company. The Treaty exempts from withholding tax, dividends received by exempt
pension trusts and exempt organizations, under conditions as defined in the
Treaty. Except in the case of exempt organizations, dividends paid may benefit
from the reduced dividend withholding tax rate (or exemption from dividend
withholding tax) by filing the proper forms in advance of the dividend payment.
Exempt organizations remain subject to the statutory withholding rate of 25% and
must file a return to claim a refund of the tax withheld.

     A shareholder may not claim Treaty benefits unless:

     1.  the shareholder is a "resident" of the United States, as that term is
         defined in the Treaty, and

     2.  Article 26 (the "treaty shopping rules") does not preclude the
         shareholder's ability to claim Treaty benefits.

     The withholding of tax on dividend distributions on Shares or ADSs to a
non-resident corporate shareholder carrying on a business through a Netherlands
permanent establishment is not required as long as:

     1.  the Netherlands participation exemption applies, and

     2.  the Shares or ADSs form a part of the permanent establishment's
         business assets.

     To qualify for the participation exemption, this entity should hold
generally at least 5% of our nominal paid-up capital and the Shares or ADSs must
form a part of the permanent establishment's business assets.

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INDIVIDUAL INCOME TAX AND CORPORATION INCOME TAX

     A non-resident shareholder will not be subject to Netherlands income tax on
dividends received from VersaTel provided such shareholder does not or has not:

     1.  carried on a business in The Netherlands through a permanent
         establishment or a permanent representative that includes in its assets
         the Shares or ADSs,

     2.  held a Substantial Interest in VersaTel's share capital or, in the
         event the non-resident shareholder has held a Substantial Interest in
         VersaTel, such interest was a business asset in the hands of the
         shareholder,

     3.  shared directly (not through the beneficial ownership of shares or
         similar securities) in the profits of an enterprise managed and
         controlled in The Netherlands that owned or was deemed to have owned
         the Shares and ADSs, and

     4.  carried out employment activities in The Netherlands or served as a
         director or board member of any entity resident in The Netherlands, or
         served as a civil servant of a Netherlands public entity with which the
         holding of the Shares or ADSs was connected.

CAPITAL GAINS REALIZED FROM THE SALE OR EXCHANGE OF SHARES OR ADSS

     A non-resident shareholder will not be subject to Netherlands income tax on
capital gains derived from the sale, conversion or disposition of Shares or ADSs
provided the non-resident shareholder does not have or has not:

     1.  carried on a business in The Netherlands through a permanent
         establishment or a permanent representative that included in its assets
         the Shares or ADSs,

     2.  held a Substantial Interest in VersaTel's share capital or, in the
         event the non-resident shareholder has held a Substantial Interest in
         VersaTel, such interest was a business asset in the hands of the
         shareholder,

     3.  shared directly (not through the beneficial ownership of shares or
         similar securities) in the profits of an enterprise managed and
         controlled in The Netherlands which owned or was deemed to have owned
         Shares or ADSs, and

     4.  carried out employment activities in The Netherlands, or served as a
         director or board member of any entity resident in The Netherlands, or
         served as a civil servant of a Netherlands public entity, with which
         the holding of the Shares or ADSs was connected.

     Capital gains derived from the sale, conversion or disposition of Shares or
ADSs by a non-resident corporate shareholder, carrying on a business through a
permanent establishment in The Netherlands, are not subject to Netherlands
corporation tax provided:

     1.  the Netherlands participation exemption applies, and

     2.  the Shares or ADSs are attributable to the business carried out in The
         Netherlands.

     To qualify for the participation exemption, the shareholder must generally
hold at least 5% of our nominal paid-up capital and meet other requirements.

     Under most Netherlands tax treaties, the right to tax capital gains
realized by a non-resident shareholder from the sale or exchange of Shares or
ADSs is in many cases allocated to the shareholder's country of residence.

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NET WEALTH TAX

     A non-resident individual shareholder will not be subject to Netherlands
net wealth tax in respect of the Shares or ADSs provided the non-resident
shareholder does not or has not:

     1.  carried on a business in The Netherlands through a permanent
         establishment or a permanent representative that included in its assets
         the Shares or ADSs, and

     2.  shared directly (not through the beneficial ownership of shares or
         similar securities) in the profits of an enterprise managed and
         controlled in The Netherlands, which owned or was deemed to have owned
         Shares or ADSs.

GIFT TAX AND INHERITANCE TAX

     A gift or inheritance of Shares or ADSs from a non-resident shareholder
will not be subject to Netherlands gift tax or inheritance tax in the hands of
the donee or heir provided the non-resident shareholder was not:

     1.  a Dutch national who has been resident in The Netherlands at any time
         during the 10 years preceding the date of gift or the date of death or,
         in the event he or she was resident in The Netherlands during such
         period, the non-resident shareholder was not a Dutch national at the
         time of gift or death,

     2.  solely for the purpose of the gift tax, a resident of The Netherlands
         at any time during the 12 months preceding the time of the gift
         (however, in case of a gift by an individual who at the time of the
         gift was neither resident nor deemed to be resident in The Netherlands
         and such individual dies within 180 days after the date of the gift,
         while being resident or deemed to be resident in The Netherlands, such
         tax will be due),

     3.  engaged in a business in The Netherlands through a permanent
         establishment or a permanent representative which included in its
         assets Shares or ADSs, and

     4.  shared directly (not through the beneficial ownership of shares or
         similar securities) in the profits of an enterprise managed and
         controlled in The Netherlands which owned or is deemed to have owned
         Shares or ADSs.

                     U.S. FEDERAL INCOME TAX CONSIDERATIONS

     The following discussion describes the material U.S. federal income tax
considerations that may be relevant to a prospective purchaser of Shares or ADSs
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 distributions on, and the
disposition of, Shares or ADSs. 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 discussion deals only with Shares and ADSs
held by a U.S. Holder 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 of Shares or ADSs 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 Shares or ADSs as a position
in a "straddle," as a part of a short-sale, or as part of a hedging, conversion
or other integrated transaction, persons owning, directly, indirectly 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. Prospective purchasers of Shares or ADSs should consult with their own
tax advisors regarding the application of the U.S. federal income tax laws

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to their particular situations as well as to any additional tax consequences of
purchasing, holding or disposing of Shares or ADSs, including the applicability
and effect of the tax laws of any state, local or foreign jurisdiction.

     As used in this section, the term "U.S. Holder" means a beneficial owner of
a Share or ADS 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.

     In general, for U.S. federal income tax purposes, U.S. Holders of ADRs
evidencing ADSs will be treated as the owners of the Shares represented by the
ADSs.

CASH DISTRIBUTIONS

     Except as otherwise noted in the Passive Foreign Investment Company
("PFIC") discussion below, to the extent that a distribution on Shares or ADSs
is paid to a U.S. Holder out of the Company's current or accumulated earnings
and profits (as determined for U.S. federal income tax purposes), such
distribution will be includible in the U.S. Holder's gross income as foreign
source dividend income in an amount equal to the U.S. dollar value of such
distribution (without reduction for any applicable foreign withholding tax).
Therefore, in the event that any foreign tax is withheld from a distribution on
the Shares or ADSs, a U.S. Holder generally will be required to report gross
income in an amount greater than the cash received (although, as discussed
below, such U.S. Holder may be eligible to claim a deduction or a foreign tax
credit in respect of such foreign tax). To the extent that the amount of any
distribution on the Shares or ADSs exceeds the current and accumulated earnings
and profits of the Company (as determined for U.S. federal income tax purposes),
a U.S. Holder's pro rata share of such excess amount would be treated first as a
nontaxable return of capital that would be applied against and would reduce the
U.S. Holder's tax basis in its Shares or ADSs (but not below zero), and then as
capital gain. Distributions in excess of the Company's current and accumulated
earnings and profits (as determined for U.S. federal income tax purposes)
generally will not give rise to foreign source income and a U.S. Holder may be
unable to claim a foreign tax credit in respect of any Netherlands or other
foreign withholding tax imposed on such distributions unless (subject to
applicable limitations) the U.S. Holder has other foreign source income in the
appropriate category for foreign tax credit purposes. The Company believes that
it does not presently have current or accumulated earnings and profits for U.S.
federal income tax purposes. However, the Company cannot predict whether it will
have any such earnings and profits for future taxable years.

     Subject to certain conditions and limitations (including certain minimum
holding period requirements), the U.S. dollar value of the foreign income taxes,
if any, withheld from a distribution to a U.S. Holder on the Shares or ADSs may
be claimed as a credit against the U.S. Holder's U.S. federal income tax
liability. Alternatively, a U.S. Holder may claim a deduction for such amount of
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. However, with respect to any withholding tax
that may be imposed by The Netherlands, because Netherlands tax law may not
require the Company to remit the full amount of such withholding tax to the
Netherlands taxing authorities, U.S. Holders may be limited in their ability to
deduct or credit such Netherlands withholding tax for U.S. federal income tax
purposes. Dividends on Shares or ADSs generally will constitute "passive income"
or, in the case of certain U.S. Holders, "financial services income" for U.S.
foreign tax credit purposes. Special rules apply to certain individuals whose
foreign source income during the taxable year

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<PAGE>   126

consists entirely of "qualified passive income" and whose creditable foreign
taxes paid or accrued during the taxable year do not exceed $300 ($600 in the
case of a joint return).

     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 Shares or ADSs should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.

     The U.S. dollar value of any distribution to a U.S. Holder on Shares or
ADSs that is paid in a foreign currency will be calculated by reference to the
exchange rate in effect at the time the distribution is received by the U.S.
Holder (or a nominee, custodian or other agent of the U.S. Holder). A U.S.
Holder generally should not recognize any foreign currency gain or loss if such
foreign currency is converted into U.S. dollars on the day received. If a U.S.
Holder does not convert such foreign currency into U.S. dollars on the date of
receipt, however, such Holder may recognize foreign currency gain or loss (which
generally will be taxable as ordinary income or loss) upon a subsequent sale or
other disposition of the foreign currency.

     A corporate U.S. Holder will not be entitled to a dividends received
deduction with respect to distributions on Shares or ADSs by the Company.

SALE OF SHARES AND ADSS

     A U.S. Holder generally will recognize gain or loss upon a sale or other
disposition of Shares or ADSs in an amount equal to the difference between the
U.S. dollar value of the amount realized on the sale or other disposition and
the U.S. Holder's adjusted tax basis in the Shares or ADSs. Subject to the PFIC
discussion below, such gain or loss 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 where the U.S. Holder's holding period
exceeds one year. Any gain or loss recognized by a U.S. Holder on a sale or
other disposition of Shares or ADSs generally will be treated as United States
source gain or loss for foreign tax credit purposes. As a result of certain
limitations under the foreign tax credit provisions of the Code, a U.S. Holder
may be unable 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 Shares or ADSs. A U.S. Holder's ability to
deduct capital losses in respect of Shares and ADSs is subject to limitations.

PASSIVE FOREIGN INVESTMENT COMPANY

     In general, a foreign corporation is a PFIC for any taxable year in which
(i) 75% or more of its gross income consists of passive income (such as
dividends, interest, rents and royalties) or (ii) 50% or more of the average
quarterly value of its assets consists of assets that produce, or are held for
the production of, passive income. The Company was a PFIC for its 1998 taxable
year. While, based on its projections, the Company does not expect to be a PFIC
for its 1999, or any subsequent, taxable year, because those projections may
prove to be inaccurate and, in particular, because the Company has substantial
passive assets in the form of cash from the First High Yield Offering and the
Second High Yield Offering, and will raise additional capital in this offering
and the Third High Yield Offering, no assurance can be provided in that regard.

     If the Company were a PFIC for any taxable year, a U.S. Holder that held
Shares or ADSs in that taxable year generally would be subject to special rules
with respect to certain distributions made by the Company on the Shares or ADSs
and with respect to gains from dispositions of Shares or ADSs. In general, such
a U.S. Holder would be required to allocate such distributions or gains (as the
case may be) ratably over its holding period for such Shares or ADSs. That
portion of any such distributions or gains allocated to a prior taxable year
(other than a year prior to the first year in which the Company was a PFIC)
would effectively be taxed at the highest U.S. federal income tax rate in effect
for such year with respect to ordinary income and the U.S. Holder would be
subject to an interest charge on the
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<PAGE>   127

resulting tax liability (determined as if such tax liability had been due with
respect to the particular taxable year). That portion, if any, of such
distributions or gains not so allocated to a prior taxable year of the U.S.
Holder in which the Company was a PFIC would be included in the U.S. Holder's
income for the taxable year of the particular distribution or disposition and
taxed as ordinary income. The foregoing rules with respect to distributions and
dispositions may be avoided if a U.S. Holder is eligible for and timely makes
either a valid "QEF election" (in which case the U.S. Holder generally would be
required to include in income on a current basis its pro rata share of the
ordinary income and net capital gains of the Company) or a valid
"mark-to-market" election (in which case, subject to certain limitations, the
U.S. Holder would essentially be required to take into account the difference,
if any, between the fair market value and the adjusted tax basis of its Shares
and ADSs, at the end of a taxable year, in calculating its income for such
year). Prospective purchasers are urged to consult their own tax advisors
regarding the consequences of an investment in a PFIC.

BACKUP WITHHOLDING

     "Backup" withholding and information reporting requirements may apply to
payments made within the United States of dividends on Shares or ADSs and to
certain payments of proceeds of a sale or redemption of a Share or ADS paid to a
U.S. Holder. The Company, its agent, a broker, the Trustee or any paying agent,
as the case may be, may be required to withhold tax from any payment that is
subject to backup withholding at a rate of 31% of such payment if the U.S.
Holder fails to furnish the U.S. Holder's taxpayer 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 information 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 U.S. Holder's U.S.
federal income tax liability provided that the required information is furnished
to the U.S. Internal Revenue Service. Treasury regulations, generally effective
for payments made after December 31, 2000, modify certain of the certification
requirements for backup withholding. It is possible that the Company and other
withholding agents may request a new withholding certificate from U.S. Holders
in order to qualify for continued exemption from backup withholding under
Treasury regulations when they become effective.

                                       122
<PAGE>   128

                                  UNDERWRITING

     The underwriters of the offering of the Shares and ADSs in the United
States and Canada, for whom Lehman Brothers Inc. is acting as global coordinator
and U.S. representative, have severally but not jointly agreed, subject to the
terms and conditions of a U.S. underwriting agreement (the form of which is
filed as an exhibit to the Registration Statement of which this prospectus is a
part), to purchase from VersaTel and the selling shareholders the following
respective numbers of ordinary shares in the form of Shares and ADSs:

<TABLE>
<CAPTION>
                                                                 NUMBER OF
U.S. UNDERWRITERS                                             Shares and ADSs
- -----------------                                             ---------------
<S>                                                           <C>
Lehman Brothers Inc.........................................     3,127,500
ING Barings LLC.............................................     2,085,000
Bear, Stearns & Co. Inc. ...................................     2,085,000
Paribas Corporation.........................................     1,563,750
Hambrecht & Quist LLC.......................................     1,563,750
E*TRADE Securities, Inc.....................................       200,000
                                                                ----------
          Total.............................................    10,625,000
                                                                ==========
</TABLE>

     The underwriters of the concurrent offering of the Shares and ADSs outside
the United States and Canada, for whom Lehman Brothers International (Europe) is
acting as global coordinator and lead manager, have severally but not jointly
agreed, subject to the terms and conditions of an international underwriting
agreement (the form of which is filed as an exhibit to the Registration
Statement of which this prospectus is a part) to purchase from VersaTel and the
selling shareholders the following respective numbers of ordinary shares in the
form of Shares and ADSs:

<TABLE>
<CAPTION>
                                                                 NUMBER OF
INTERNATIONAL MANAGERS                                        Shares and ADSs
- ----------------------                                        ---------------
<S>                                                           <C>
Lehman Brothers International (Europe)......................     3,187,500
ING Barings Limited as agent for ING Bank N.V., London           2,125,000
  Branch....................................................
Bear, Stearns International Limited.........................     2,125,000
Paribas.....................................................     1,593,750
Hambrecht & Quist LLC.......................................     1,593,750
                                                                ----------
          Total.............................................    10,625,000
                                                                ==========
</TABLE>

     The underwriters may elect to receive all or a portion of their allotment
of ordinary shares (including ordinary shares purchased pursuant to the
over-allotment option described below) in the form of Shares or ADSs in order to
accommodate requests of investors.

     Each underwriting agreement provides that the obligations of the
underwriters are subject to the satisfaction of certain conditions, including
the delivery of legal opinions by legal counsel. The underwriters are obligated
to purchase all of the Shares or ADSs (other than those covered by the over-
allotment option) if they purchase any of the Shares or ADSs. The offering price
(per Share and per ADS) and underwriting discounts and commissions for the U.S.
offering and the international offering are identical. The closing of the
international offering is a condition to the closing of the U.S. offering, and
the closing of the U.S. offering is a condition to the closing of the
international offering.

                                       123
<PAGE>   129

     The selling shareholders will enter into a custody agreement pursuant to
which the selling shareholders will deposit with a custodian prior to the
closing of this offering the warrants they expect to exercise (or, in the case
of Cromwilld, the ordinary shares it expects to sell) at the closing of this
offering. In addition, pursuant to a power of attorney to be granted to one or
more officers of VersaTel by each selling shareholder, such officers will, in
the case of selling shareholders other than Cromwilld, exercise the warrants for
ordinary shares to be sold in this offering and will, for each selling
shareholder, execute the underwriting agreements on behalf of such selling
shareholder.

     We expect to incur approximately $18.9 million of discounts, commissions
and expenses in connection with this offering.

     The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of E0.36 per Share or $0.3783 per ADS. The underwriters
may allow, and such dealers may reallow, a concession not in excess of E0.10 per
Share or $0.10 per ADS on sales to certain other dealers. If all of the shares
are not sold at the initial offering price, the representatives may change the
public offering price and the other selling terms.

     We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 3,187,500 additional ordinary
shares in the form of Shares or ADSs at the public offering price less the
underwriting discount. The underwriters may exercise this option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent this option is exercised, each underwriter will be obligated,
subject to various conditions, to purchase a number of additional Shares or ADSs
approximately proportionate to its initial purchase commitment.

     We, our executive officers and directors and our current shareholders have
agreed not to do any of the following, whether any transaction described in
clause (1), (2) or (3) below is to be settled by delivery of ordinary shares or
other securities, in cash or otherwise, in each case without the prior written
consent of the representatives, on behalf of the underwriters, for a period of
180 days after the date of this prospectus:

(1) offer, sell, pledge, or otherwise dispose of, or enter into any transaction
    or device which is designed to, or could be expected to, result in the
    disposition by any person at any time in the future of, any ordinary shares
    or securities convertible into or exchangeable for ordinary shares, other
    than any of the following:

    - the ordinary shares (in the form of Shares or ADSs) sold under this
      prospectus,

    - ordinary shares we issue pursuant to employee benefit plans, qualified
      stock option plans or other employee compensation plans existing on the
      date of this prospectus or pursuant to currently outstanding options,
      warrants or rights, or

    - ordinary shares we use as consideration for acquisitions or that we issue
      in connection with strategic alliances, provided that the recipient of
      these ordinary shares agrees to be bound by any applicable transfer
      restrictions,

(2) sell or grant options, rights or warrants for ordinary shares or securities
    convertible into or exchangeable for our ordinary shares except for ordinary
    shares and options for ordinary shares which we issue or grant to our
    officers, directors or employees, or

(3) enter into any swap or other derivatives transaction that transfers to
    another, in whole or in part, any of the economic benefits or risks of
    ownership of ordinary shares.

     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 the date of this offering, of
any ordinary shares acquired by such member before the date of this offering.

                                       124
<PAGE>   130

Under AEX regulations, any holder of 5% or more of our outstanding share capital
before the date of this offering may not, for three years after the date of this
offering, sell, collectively with all other holders of 5% or more of our
outstanding share capital acquired before the date of this offering, in the
aggregate more than 25% of the number of our ordinary shares outstanding before
the date of this 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
this offering if a profit was made for one year or (ii) 75% of the shares issued
and outstanding before the date of this 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 this
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 this offering pursuant to the exercise of options
which were granted under our stock option plans prior to this offering.

     The U.S. underwriters and the international managers have entered into an
agreement among U.S. underwriters and international managers, pursuant to which
each U.S. underwriter has agreed, as part of the distribution of the Shares and
ADSs offered in the U.S. offering, that:

     - it is not purchasing any of the Shares and ADSs for the account of anyone
       other than a U.S. Person (as defined below), and

     - it has not offered or sold, will not offer, sell, resell or deliver,
       directly or indirectly, any of the Shares and ADSs or distribute any
       prospectus relating to the U.S. offering to anyone other than a U.S.
       Person.

     In addition, pursuant to the same agreement, each international manager has
agreed that, as part of the distribution of the Shares and ADSs offered in the
international offering:

     - it is not purchasing any of the Shares and ADSs for the account of a U.S.
       Person, and

     - it has not offered or sold, and will not offer, sell, resell or deliver,
       directly or indirectly, any of the Shares and ADSs, and will not
       distribute any prospectus relating to the international offering to any
       U.S. Person.

     The limitations described above do not apply to stabilization transactions
or other transactions specified in the underwriting agreements and the agreement
among U.S. underwriters and international underwriters, including:

     - some purchases and sales between U.S. underwriters and the international
       managers,

     - some offers, sales, resales, deliveries or distributions to or through
       investment advisors or other persons exercising investments discretion,

     - purchases, offers or sales by a U.S. underwriter who is also acting as an
       international manager or by an international manager who is also acting
       as a U.S. underwriter, and

     - other transactions specifically approved by the U.S. representative and
       the lead manager.

     As used herein, the term "U.S. Person" means any resident or national of
the United States or Canada, any corporation, partnership or other entity
created or organized in or under the laws of the United States or Canada, or any
estate or trust the income of which is subject to U.S. or Canadian federal
income taxation regardless of the source, the term "United States" means the
United States of America (including the District of Columbia) and its
territories, its possessions and other areas subject

                                       125
<PAGE>   131

to its jurisdiction, and the term "Canada" means Canada, its provinces, its
territories, its possessions and other areas subject to its jurisdiction.

     Each U.S. underwriter and international manager 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 Shares or ADSs, will not offer or sell any Shares or
       ADSs 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 business 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 Shares or ADSs 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 Shares or ADSs 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.

     Pursuant to the agreement among the U.S. underwriters and international
managers, sales may be made between the U.S. underwriters and the international
managers of the number of Shares or ADSs as may be mutually agreed. The price of
any Shares or ADSs so sold shall be the public offering price as then in effect
for the Shares or ADSs being sold by the U.S. underwriters and the international
managers less an amount equal to the selling concessions allocable to those
Shares or ADSs, unless otherwise determined by mutual agreement. To the extent
that there are sales between the U.S. underwriters and the international
managers pursuant to the agreement among U.S. underwriters and international
managers, the number of Shares or ADSs available for sale by the U.S.
underwriters or by the international managers may be more or less than the
amount specified on the cover page of this prospectus.

     At our request, the underwriters have reserved up to 900,000 ordinary
shares (in the form of Shares or ADSs), offered hereby for sale to selected
persons, including to our employees, supervisory board members, business
associates and other related parties, at a 10% discount from the initial public
offering price (in the case of the employees). The number of ordinary shares in
the form of Shares or ADSs available for sale to the general public will be
reduced to the extent these persons purchase reserved shares.

     The underwriters have informed us that they will not confirm sales to
discretionary accounts in excess of 5% of the Shares or ADSs offered by them.

     In connection with this offering, the U.S. representative and the lead
manager, on behalf of the U.S. underwriters and the international managers,
respectively, may purchase and sell Shares or ADSs in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of Shares or
ADSs in excess of the number of Shares or ADSs to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of our Shares or ADSs in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of our Shares or ADSs made for the purpose of preventing or retarding
a decline in the market price of our Shares or ADSs while this offering is in
progress.

     The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
U.S. representative or the lead manager, in

                                       126
<PAGE>   132

covering syndicate short positions or making stabilizing purchases, repurchases
Shares or ADSs originally sold by that syndicate member.

     Any of these activities may cause the price of our Shares or ADSs to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on a stock
exchange, in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.

     Neither we, the selling shareholders 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 the Shares or ADSs. In
addition, neither we, the selling shareholders 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.

     Purchasers of the Shares or ADSs offered in this prospectus may be required
to pay stamp taxes and other charges under the laws and practices of the country
of purchase, in addition to the offering price listed on the cover of this
prospectus.

     Prior to this offering, there has been no public market for the Shares or
the ADSs. The initial public offering price was negotiated among us and the
underwriters. Among the factors considered in determining the initial public
offering price of the Shares and ADSs, in addition to prevailing market
conditions, were our historical performance, estimates of our business potential
and our earnings prospects, an assessment of our management and the
consideration of the above factors in relation to market valuation of companies
in related businesses. There can be no assurance that the initial public
offering price corresponds to the price at which the Shares and ADSs will trade
in the public market subsequent to this offering or that an active market for
the Shares and ADSs will develop and continue after this offering.

     No action has been or will be taken in any jurisdiction by us, the selling
shareholders or by any underwriter that would permit a public offering of the
Shares or ADSs or possession or distribution of a prospectus in any jurisdiction
where action for that purpose is required, other than in the United States.
Persons who receive this prospectus are advised by us, the selling shareholders
and the underwriters to inform themselves about, and to observe any restrictions
as to, the offering of the Shares and ADSs and the distribution of this
prospectus.

     This prospectus may be used in connection with offers and sales of Shares
and ADSs offered initially outside the United States and Canada insofar as such
Shares or ADSs are reoffered or resold from time to time in the United States in
transactions that require registration under the Securities Act.

     This prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of the Shares or ADSs in Canada or any
province or territory thereof. Any offer or sale of the Shares or ADSs 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.

     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 and is an underwriter in the Third High Yield Offering. Each of ING
Barings Limited and ING Barings LLC, each an affiliate of the other, is an
underwriter in the Third

                                       127
<PAGE>   133

High Yield Offering. 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 of the Interim Loans which will be repaid with a portion of the net
proceeds of the Third High Yield Offering. Hambrecht & Quist LLC, an underwriter
in this 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 the Third High Yield Offering. Paribas Corporation was an
initial purchaser in the Second High Yield Offering. Paribas Deelnemingen N.V.,
an affiliate of each of Paribas and Paribas Corporation, is a shareholder of
VersaTel. See "Principal Shareholders."

     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 this 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. Shares received upon exercise of such options
would remain subject to the lock-up arrangements described under "Shares
Eligible for Future Sale."

     VersaTel and the selling shareholders have agreed to indemnify the
underwriters against 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.

                                       128
<PAGE>   134

                                 LEGAL MATTERS

     The validity of the Shares and ADSs 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 Shares and ADSs 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 Shares and
ADSs 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.

     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.

                                       129
<PAGE>   135

                          GENERAL LISTING INFORMATION

     This offering has been authorized and approved at an extraordinary general
meeting of shareholders held on May 18, 1999 and will be authorized and approved
at a meeting of our supervisory board expected to be held on July 22, 1999. All
other consents, approvals, authorizations or other formalities required under
Netherlands law to be obtained or satisfied in connection with this offering
have been obtained or satisfied.

     The latest audited financial information contained in this prospectus is as
of and for the year ended December 31, 1998. To the best of our knowledge, since
that date, there has been no material adverse change to our financial condition
that has not been disclosed in this prospectus.

     An application has been made to list VersaTel Telecom International N.V.'s
outstanding ordinary share capital on the Official Market of the stock exchange
of Amsterdam Exchanges N.V.

     We have taken appropriate measures to comply with the regulations on
insider trading pursuant to the Dutch Securities Transactions Supervision Act
1995 (Wet Toezicht Effectenverkeer 1995).

     Our audited consolidated financial statements as of and for the years ended
December 31, 1998, 1997 and 1996 will be available in English and our articles
of association will be available in Dutch and in English at our head office,
located at Paalbergweg 36, Amsterdam-Zuidoost, The Netherlands, and at ING
Barings, located at Foppingadreef 7, 1102 BD Amsterdam-Zuidoost.

     In The Netherlands, ING Bank N.V., located at Bijlmerplein 888, Amsterdam,
has been designated as dividend paying agent for the Shares.

     The estimated aggregate costs for this offering, including discounts,
commissions and expenses, are approximately $18.9 million.

                                       130
<PAGE>   136

                      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>   137

                    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>   138

                      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>   139

                      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>   140

                      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>   141

                      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>   142

                      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>   143
                      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.

(c) FOREIGN CURRENCY TRANSACTIONS

     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>   144
                      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>   145
                      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>   146
                      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>   147
                      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>   148
                      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.

     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 end of
the option period, to the Company or to another party designated by the Company,
at a purchase price equal to 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>   149
                      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 0.00 - 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 1.00 - 1.49.........         --            --              --             --            --
NLG 1.50 - 1.99.........         --            --              --             --            --
NLG 2.00 - 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>   150
                      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>   151
                      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>   152

                      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>   153

                      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>   154

                      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>   155

                      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.

     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 of or method of adoption of SFAS No. 133.

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>   156
                      VERSATEL TELECOM INTERNATIONAL N.V.

    NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  FOREIGN CURRENCY TRANSACTIONS

     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.

     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>   157
                      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>   158

                                  SVIANED B.V.

                              FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                           <C>
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>   159

                          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>   160

                                  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>   161

                                  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>   162

                                  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>   163

                                  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>   164

                                  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>   165

                                  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.

(c)  DISCOUNTS TO BE RECEIVED FROM KPN

     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>   166
                                  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>   167
                                  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>   168
                                  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>   169
                                  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>   170

                                  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>   171

                                  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>   172

                                  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>   173

                                  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>   174

                                  SVIANED B.V.

                    CONDENSED NOTES TO FINANCIAL STATEMENTS
                                  (UNAUDITED)

1. DESCRIPTION OF BUSINESS

     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

     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.

     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

                                      F-39
<PAGE>   175
                                  SVIANED B.V.

             CONDENSED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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.

     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>   176

                                                                         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>   177

     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>   178

     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>   179

     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>   180

                      VERSATEL TELECOM INTERNATIONAL N.V.

                           21,250,000 ORDINARY SHARES
                            IN THE FORM OF SHARES OR
                           AMERICAN DEPOSITARY SHARES

                          ----------------------------
                                   PROSPECTUS
                                 JULY 23, 1999
                          ----------------------------

                                LEHMAN BROTHERS
                                  ING BARINGS
                            BEAR, STEARNS & CO. INC.
                              PARIBAS CORPORATION
                               HAMBRECHT & QUIST
                            E*TRADE SECURITIES, INC.



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