VERSATEL TELECOM INTERNATIONAL N V, 6-K, 2000-11-14

VERSATEL TELECOM INTERNATIONAL N V
6-K, 2000-11-14
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2000

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

Versatel Telecom International N.V.
(Exact name of Registrant as specified in its charter)

Hullenbergweg 101
1101 CL Amsterdam-Zuidoost
The Netherlands
(Address of principal executive offices)

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

Indicate by check mark whether the
registrant files or will file
annual reports under cover Form
20-F or Form 40-F.

Form 20-F X Form 40-F ___

Indicate by check mark whether the registrant by
furnishing the information contained in this Form
is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.

Yes ___ No X

If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A

================================================================================

<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

QUARTERLY REPORT ON FORM 6-K
FOR THE PERIOD ENDED SEPTEMBER 30, 2000

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS..................................................2

Audited Consolidated Balance Sheet as of December 31, 1999 and
Unaudited Consolidated Balance Sheet as of September 30, 2000.........2

Unaudited Consolidated Statements of Operations for the Three Months
Ended September 30, 2000 and September 30, 1999 and for the Nine
Months Ended September 30, 2000 and September 30, 1999................4

Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and September 30, 1999.......................5

Audited Consolidated Statement of Shareholders' Equity for the Year
Ended December 31, 1999 and Unaudited Consolidated Statement of
Shareholders' Equity for the Nine Months Ended September 30, 2000.....7

Notes to the Unaudited Consolidated Financial Statements..............8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........24

PART II -OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS....................................................27

ITEM 2. CHANGES IN SECURITIES................................................27

ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................27
.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................27

ITEM 5. OTHER INFORMATION....................................................27

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................27

<PAGE>

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 6-K includes forward-looking statements.
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:

o Our anticipated expansion plans for our network and growth
strategies,
o Our expectation of the impact of this expansion on our revenue
potential, cost basis and margins,
o Our expectation of the competitiveness of our services,
o Our intention to introduce new products and services,
o Anticipated trends and conditions in our industry, including
regulatory reform and the liberalization of telecommunications
services across Europe, and
o Our ability to compete, both nationally and internationally.

In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this Form 6-K 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.

PRESENTATION OF INFORMATION

As of January 1, 2000, we publish our financial statements in euros. In
this document, references to "U.S. dollars" or "$" are to United States dollars,
references to "Dutch guilders" or "NLG" are to the currency of The Netherlands,
and references to "euros" or "Euro " are to the currency introduced at the start
of the third stage of Economic and Monetary Union ("EMU") pursuant to the Treaty
establishing the European Economic Community, as amended by the Treaty on
European Union. Solely for the convenience of the reader, this document contains
translations of certain euro amounts into U.S. dollars at specified rates. These
translations should not be construed as representations that the euro 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 euros into U.S. dollars has been made at Euro 1.00 per $0.88,
the noon buying rate in the City of New York for cable transfers in euros as
certified for customs purposes by the Federal Reserve Bank of New York on
September 30, 2000.

1
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VERSATEL TELECOM INTERNATIONAL N.V.

AUDITED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999 AND UNAUDITED CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 2000
(amounts in thousands)

<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
----------------- ------------------
(unaudited)
Euro Euro US$
<S> <C> <C> <C>
ASSETS

Current Assets:
Cash.................................................. 984,782 1,377,190 1,211,927
Restricted cash, current portion...................... 44,580 49,552 43,606
Accounts receivable, net.............................. 13,377 68,403 60,195
Inventory, net........................................ 2,028 3,775 3,322
Unbilled revenues..................................... 13,221 25,055 22,048
Prepaid expenses and other............................ 29,594 47,151 41,493
------------- ----------- ------------
Total current assets............................. 1,087,582 1,571,126 1,382,591
------------- ----------- ------------

Fixed Assets:
Property, plant and equipment, net.................... 232,694 439,665 386,905
Construction in progress.............................. 81,803 170,417 149,967
------------- ----------- ------------
Total fixed assets............................... 314,497 610,082 536,872
------------- ----------- ------------

Investments........................................... -- 23,032 20,268
Restricted cash, net of current portion............... 21,469 -- --
Capitalized finance costs, net........................ 28,255 43,097 37,926
Other non-current assets.............................. 14,344 15,525 13,662
Goodwill, net......................................... 196,973 243,148 213,970
------------- ----------- ------------

Total assets.......................................... 1,663,120 2,506,010 2,205,289
============= =========== ============
</TABLE>

See notes to the unaudited consolidated financial statements.

2
<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

AUDITED CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1999 AND UNAUDITED CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 2000
(amounts in thousands)

<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
----------------- ----------------------
(unaudited)
Euro Euro US$

<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable.................................... 71,165 106,504 93,723
Accrued liabilities................................. 73,249 204,401 179,873
Unearned revenue................................... 2,359 13,461 11,846
Current portion of capital lease obligations........ 14,866 968 852
------------ ----------- -----------
Total current liabilities...................... 161,639 325,334 286,294
------------ ----------- -----------

Capital lease obligations, net of current portion... 27,214 6,565 5,777
Long-term liabilities............................... 5,071 43,643 38,406
Long-term debt...................................... 961,527 1,713,138 1,507,561
------------ ----------- -----------

Total liabilities.............................. 1,155,451 2,088,680 1,838,038
------------ ----------- -----------

Shareholders' Equity:
Ordinary shares, NLG 0.05 par value................. 1,797 2,008 1,767
Additional paid-in capital.......................... 743,619 995,012 875,611
Warrants............................................ 2,088 761 670
Accumulated deficit................................. (239,835) (580,451) (510,797)
------------ ------------ ------------
Total shareholders' equity..................... 507,669 417,330 367,251
------------ ----------- -----------

Total liabilities and shareholders' equity.......... 1,663,120 2,506,010 2,205,289
============ =========== ===========

</TABLE>

See notes to the unaudited consolidated financial statements.

3
<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000 AND
SEPTEMBER 30, 1999
(amounts in thousands, except for per share amounts)

<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- --------------------------------
1999 2000 1999 2000
--------- ---------------------- --------- --------------------
Euro Euro US$ Euro Euro US$
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES .................. 17,702 48,517 42,695 35,456 124,196 109,292

OPERATING EXPENSES:
Cost of revenues, excluding
depreciation......................... 13,184 41,976 36,939 27,086 97,260 85,589
Selling, general and administrative . 19,833 74,567 65,619 54,011 164,295 144,580
Depreciation and amortization ....... 8,610 22,416 19,726 13,671 59,069 51,980
-------- -------- -------- -------- -------- --------
Total operating expenses ....... 41,627 138,959 122,284 94,768 320,624 282,149
-------- -------- -------- -------- -------- --------

Operating Loss ................. (23,925) (90,442) (79,589) (59,312) (196,428) (172,857)

OTHER INCOME (EXPENSES):
Foreign currency exchange gains
(losses), net ....................... 10,323 (41,920) (36,889) (19,983) (67,261) (59,190)
Interest income ..................... 2,891 15,285 13,451 7,858 38,809 34,152
Interest expense .................... (24,299) (45,595) (40,124) (46,911) (118,751) (104,500)
Result from investments ............. -- (85) (75) -- 2,182 1,920
Other expense ....................... -- -- -- (1,830) -- --
-------- -------- -------- -------- -------- --------
Total income expenses, net ..... (11,085) (72,315) (63,637) (60,866) (145,021) (127,618)
-------- -------- -------- -------- -------- --------

Loss before income taxes ....... (35,010) (162,757) (143,226) (120,178) (341,449) (300,475)
-------- -------- -------- -------- -------- --------

Credit from/(provision for) income
taxes ............................... -- -- -- (1,313) 41 36
-------- -------- -------- -------- -------- --------

Loss before minority interest .. (35,010) (162,757) (143,226) (121,491) (341,408) (300,439)

Minority interest ................... -- -- -- -- 792 697
-------- -------- -------- -------- -------- --------

Net loss ....................... (35,010) (162,757) (143,226) (121,491) (340,616) (299,742)
-------- -------- -------- -------- -------- --------

Net loss per share (basic and
diluted) ............................ (0.61) (1.85) (1.63) (2.68) (4.03) (3.54)

Weighted average number of shares
outstanding ......................... 57,584 87,795 87,795 45,332 84,621 84,621
</TABLE>

See notes to the unaudited consolidated financial statements.

4
<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(amounts in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------
September 30, 1999 September 30, 2000
----------------------------------------------
Euro Euro US$
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ................................................. (121,491) (340,616) (299,742)
Adjustments to reconcile net loss to net cash used in operating
activities--
Depreciation and amortization ............................ 13,671 59,069 51,981
Amortization finance cost ................................ 1,193 5,446 4,792
Convertible interest payable ............................. -- 19,113 16,819
Gain on sale of investments .............................. -- (6,514) (5,732)
Exchange loss on long-term debt and restricted cash ...... 17,694 66,344 58,383
Stock option compensation expense ........................ 12,557 5,684 5,002
Changes in other operating assets and liabilities
Accounts receivable ...................................... (5,568) (47,459) (41,764)
Inventory ................................................ (1,090) (1,477) (1,300)
Prepaid expenses and other ............................... (8,485) (30,518) (26,856)
Accounts payable ......................................... 19,804 26,039 22,914
Due to related parties ................................... (366) -- --
Deferred income .......................................... 139 11,102 9,770
Accrued liabilities ...................................... 32,591 101,503 89,323
---------- ---------- ----------
Net cash used in operating activities .................. (39,351) (132,284) (116,410)
========== ========== ==========

Cash Flows from Investing Activities:
Capital expenditures ..................................... (109,892) (325,816) (286,718)
Cash received from disposal of fixed assets .............. -- 11,793 10,378
Finance costs senior notes and convertible loans ......... (9,196) (19,414) (17,084)
Acquisition of business, net of cash acquired ............ (184,082) (92,754) (81,624)
Net proceeds from sale of business ....................... -- 13,079 11,510
---------- ---------- ----------
Net cash used in investing activities .................. (303,170) (413,112) (363,538)
========== ========== ==========

Cash Flows from Financing Activities:
Payments under capital lease obligations ................. (457) (34,547) (30,401)
Proceeds from short-term loans ........................... -- 12,497 10,997
Proceeds from long-term debt ............................. -- 33,499 29,479
Proceeds from senior notes and convertible loans ......... 291,282 655,611 576,938
Restricted cash .......................................... 22,247 26,151 23,013
Proceeds exercised warrants .............................. -- 1,615 1,421
Proceeds exercised options ............................... -- 1,798 1,582
Shareholder contributions ................................ 207,042 241,180 212,239
---------- ---------- ----------
Net cash provided by financing activities .............. 520,114 937,804 825,268
========== ========== ==========

Net Increase in Cash .......................................... 177,593 392,408 345,320
Cash, beginning of the period ................................. 168,813 984,782 866,608
---------- ---------- ----------
Cash, end of the period ....................................... 346,406 1,377,190 1,211,928
========== ========== ==========
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------
September 30, 1999 September 30, 2000
----------------------------------------------
Euro Euro US$
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid for--
Interest (net of amounts capitalized) .................. 24,127 53,678 47,237

See notes to the unaudited consolidated financial statements.
</TABLE>

6
<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

AUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND UNAUDITED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Amounts in thousands of euros, except for share and per share amounts)

<TABLE>
<CAPTION>
Number of Additional
shares Ordinary paid-in Accumulated
outstanding shares capital Warrants deficit Total
----------- ------------- --------------- ------------ ----------- ---------
Euro Euro Euro Euro Euro
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ...... 38,984,810 884 23,194 2,365 (41,905) (15,462)
Shareholder contributions ....... 37,380,008 848 700,906 -- -- 701,754
Shares issued for acquisition.... 425,000 10 4,241 -- -- 4,251
Warrants exercised .............. 495,168 11 265 (277) -- (1)
Stock options exercised ......... 1,940,000 44 1,915 -- -- 1,959
Deferred compensation ........... -- -- 12,557 -- -- 12,557
Issuance of subsidiary shares.... -- -- 541 -- -- 541
Net loss ........................ -- -- -- -- (197,930) (197,930)
---------- --------- ---------- ---------- ---------- ---------
Balance, December 31, 1999 ...... 79,224,986 1,797 743,619 2,088 (239,835) 507,669

Shareholders contributions ...... 5,139,000 117 238,229 -- -- 238,346
Shares issued for acquisition.... 87,246 2 2,831 -- -- 2,833
Stock options exercised ......... 1,275,726 29 1,770 -- -- 1,799
Warrants exercised .............. 2,770,539 63 2,879 (1,327) -- 1,615
Deferred compensation ........... -- -- 5,684 -- -- 5,684
Net loss ........................ -- -- -- -- (340,616) (340,616)
---------- --------- ---------- ---------- ---------- ---------
Balance, September 30, 2000 ..... 88,497,497 2,008 995,012 761 (580,451) (417,330)
========== ========= ========== ========== ========== =========

</TABLE>

See notes to the unaudited consolidated financial statements.

7
<PAGE>

VERSATEL TELECOM INTERNATIONAL N.V.

NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS

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
subsidiaries (the "Company") have been prepared in conformity with U.S.
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 September 30, 2000, and the
results of operations and cash flows for the nine months ended September 30,
1999 and 2000.

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 1999 audited financial
statements and the notes related thereto, filed on Form 20-F, as amended. The
results of operations for the three and nine months ended September 30, 2000 may
not be indicative of the operating results for the full year.

As of September 30, 2000, the Company (directly or indirectly) 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.
- Numedi Net N.V. (70% owned by the Company)
- 7-klapper Beheer B.V.
- VuurWerk Internet B.V.
- VuurWerk Access B.V.
- ITinera Services N.V.
- Svianed B.V.
- Versatel Deutschland Holding GmbH
- Versatel Deutschland Verwaltungs GmbH
- Versatel Deutschland GmbH (formerly known as VEW Telnet GmbH and for this
filing further referred to as such)
- KomTel Gessellschaft fur Kommunikations-und Informationsdienste mbH (80%
owned by the Company)("Komtel")
- KomTel Service GmbH (100% owned by KomTel)

8
<PAGE>

- Klavertel N.V.
- Compath N.V.
- Keys-Tone Communications N.V.
- MMDI N.V.
- Versatel Internet Group N.V.
- Zon Nederland N.V. (92% owned by the Company)
- Versatel Internet Group Germany GmbH
- Versatel Internet Group Belgium N.V.
- Versatel 3G N.V.

All intercompany assets, liabilities and transactions have been
eliminated in consolidation.

As of September 30, 2000, the Company (directly or indirectly) owned
the following investments:

- VersaPoint N.V. (50%)
- Hot Orange B.V. (9%)
- Consumerdesk B.V. (5%)
- DOKUM Gesellschaft fur Telekommunikation mbH (10% owned by Versatel
Deutschland GmbH)
- RuhrNET Gesellschaft fur Telekommunikation mbH (24% owned by Versatel
Deutschland GmbH)
- BORnet Gesellschaft fur Telekommunikation mbH (5% owned by Versatel
Deutschland GmbH)

The Company holds certain investments accounted for under the equity
method. The Company accounts for an investment under the equity method if the
investment gives the Company the ability to exercise significant influence, but
not control, over an investee. Significant influence is generally deemed to
exist if the Company has an ownership interest in the voting stock of the
investee of between 20% and 50%, although other factors, such as representation
on the investee's Board of Directors and the impact of commercial arrangements,
are considered in determining whether the equity method of accounting is
appropriate.

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" and in June
2000 issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities" SFAS No. 133 and 138 establish 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 as 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.

<PAGE>

SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, are
effective for fiscal years beginning after June 15, 2000 and can not be applied
retroactively. The Company has not yet quantified the impact of adopting SFAS
No. 133 and No. 138 on the financial statements and has not yet determined the
method of adoption of SFAS No. 133 and No. 138.

The Emerging Issues Task Force (EITF) recently issued EITF 99-19
"Reporting Revenue Gross as a Principal versus Net as an Agent" which outlines
the criteria when a company should report revenue based on (a) the gross amount
billed to a customer or (b) the net amount retained (that is, the amount billed
to the customer less the amount paid to a supplier). In assessing whether
revenue should be reported gross with separate display of cost of sales to
arrive at gross profit or on a net basis, the new standard requires companies to
assess, among other things, whether the company acts as principal in the
transaction, takes title to the products, has risks and rewards of ownership,
such as the risk of loss for collection, delivery, or returns, and acts as an
agent or broker (including performing services, in substance, as an agent or
broker) with compensation on a commission or fee basis. If these factors
indicate the company performs as an agent or broker without assuming the risks
and rewards of ownership of the goods, sales on these transactions would be
reported on a net basis. Net income would not differ based on whether a company
reports revenue on the gross amount billed to the customer or the net amount
retained.

EITF 99-19 is effective for the quarter ending December 31, 2000. The
Company is currently considering EITF 99-19 regarding the presentation of sales
on certain of its transactions based on the relevant facts and circumstances.

2. Current Events

On September 29, 2000 shareholders of the Company approved the
appointment of Mr. Raj Raithatha as Chief Executive Officer (CEO) and appointed
Gary Mesch, founder and former CEO of the Company, as a member of the
Supervisory Board. Gary Mesch has assumed the non-executive Chairman's position,
replacing Leo van Doorne, who will remain a member of the Supervisory Board. In
addition, Mr. Philippe Santin has accepted the position as Chief Financial
Officer and has joined the Company on November 1, 2000. In order to further
increase the management strength and depth, the Executive Board has been
restructured. Besides Mr. Aad Beekhuis (Chief Operations Officer), Mr. Marc van
der Heijden (VP Regulatory Affairs) and Mr. Greg Mesch (Chief Executive Officer
Versatel Internet Group), Mr. Jan van Berne (General Counsel and VP Legal and
Corporate Affairs) and Mr. Daniel Hayes (Chief Information Officer) have been
appointed as members of the Executive Board.

On September 29, 2000, the Company granted an additional 133,600
employee stock options under the 2000 Stock Option Plan. As of September 30,
2000, the Company has granted 2,265,000 options of the 3,000,000 options under
the 2000 Stock Option Plan as approved by the Supervisory Board. The Company
expects to grant an additional 735,000 stock options during the remainder of
2000 under the 2000 Stock Option Plan.

On September 20, 2000, the Company suspended its German consumer flat
fee Internet service offered under the brand name Sonne. The interconnect
charges associated with providing this service were beyond the Company's
expectations due to a higher than expected number of customers utilizing this
service and a higher average usage per customer. Subsequently, the

<PAGE>

Company has not offered any other flat fee consumer Internet services in Germany
and does not have any intentions of offering such services in the future. The
Company incurred approximately Euro 18 million in non-recurring charges related
to the aforementioned services.

On August 4, 2000, the Company sold Amstel Alpha B.V. and its wholly
owned subsidiaries SpeedPort N.V. and Glabana, U.S.A., Inc. to Conxion
Corporation, USA for $10 million in cash, free of debt. The gain on the sale of
these companies amounted to Euro 1.9 million.

On June 9, 2000, the Company acquired 100% of the outstanding ordinary
shares of Klavertel N.V. and its wholly owned subsidiaries Compath N.V. and
Keys-Tone N.V. from @Value B.V. and other shareholders. The Company paid Euro
2,833,333 to the sellers in shares of the Company at Euro 32.475 per share
(87,246 shares). On the closing date of the transaction any additional amount of
Euro 1,416,667 was kept in escrow by the notary to be paid to the sellers on
November 16, 2000, in accordance with their earn-out arrangements. Payment under
the earn-out arrangement can, at the option of the Company, be made either in
shares of the Company or in cash. If the Company opts for shares, these shares
are to be issued by the Company at the average of the opening and closing price
of the Company's shares on the Amsterdam Stock Exchange on November 15, 2000.

On April 19, 2000, Versatel and NorthPoint Communications Group Inc.,
created VersaPoint N.V, pursuant to a joint venture agreement, dated March 8,
2000. We account for VersaPoint under the equity method. VersaPoint N.V. will
combine NorthPoint's DSL Network deployment and operations expertise with
Versatel's established broadband local access network, DSL operations in the
Benelux and Germany, and local market and regulatory experience. NorthPoint and
Versatel have agreed to an initial investment of Euro 50 million each in
VersaPoint (for an aggregate of Euro 100 million). As of September 30, 2000,
Versatel and NorthPoint had contributed Euro 25 million each.

On March 30, 2000, the Company and some of its shareholders sold
9,350,000 ordinary shares at Euro 49 per share, with the Company selling
4,675,000 of these shares. The aggregate net proceeds to the Company were Euro
238.3 million, after offering expenses. The Company also issued Euro 360 million
4% senior convertible notes due 2005 for aggregate net proceeds, after offering
expenses, of approximately Euro 350.0 million. In addition, the Company issued
Euro 300 million 11 1/4% senior notes due 2010 for aggregate net proceeds, after
offering expenses, of approximately Euro 282.0 million.

11
<PAGE>

On March 24, 2000, Versatel acquired 80% of the outstanding common
shares of KomTel GmbH from Stadtwerke Flensburg GmbH and other shareholders for
Euro 61.6 million in cash and the assumption of approximately Euro 13.0 million
in existing debt. Versatel has an option to purchase the remaining 20% from
Stadtwerke Flensburg GmbH in 2002 for Euro 15.4 million. Key (unaudited) figures
for KomTel as of December 31, 1999 under German GAAP are: sales of Euro 31.0
million, shareholders' equity of Euro 3.7 million, total assets of Euro 35.6
million and a loss for the financial year ended December 31, 1999 of Euro 9.6
million.

3. Foreign Currency Transactions

The Company's functional and reporting currency is the euro.
Transactions involving other currencies are converted into euro using the
exchange rates, which are in effect at the time of the transactions.

We have substantial U.S. dollar denominated assets and liabilities. 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 re-measurements are reflected in the
accompanying statements of operations.

For the nine months ended September 30, 2000 an exchange loss of Euro
76.9 million was realized on the long-term debt (13 1/4% Senior Notes and
11 7/8% Senior Notes, denominated in U.S. dollars). In the same period, an
exchange gain was realized on cash, denominated in U.S. dollars, to an amount of
Euro 8.6 million and on the restricted cash, fully denominated in U.S. dollars,
a gain of Euro 3.9 million.

4. Financial Condition and Operations

For the nine months period ended September 30, 2000, the Company had a
loss of Euro 340.6 million. In addition, the Company had an accumulated deficit
of Euro 580.5 million as of September 30, 2000.

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 cash balance of Euro 1,377.2 million and a positive working
capital of Euro 1,245.8 million at September 30, 2000, which should enable it to
continue its operations through 2002. The Company expects to raise additional
funds in 2002 through public or private financing or from financial
institutions.

5. Commitments

Commitments, mainly in connection to the roll-out of the Company's
network and the lease agreement relating to the new principal executive offices
of the Company, not yet recorded on the balance sheet, amount to approximately
Euro 75 million as of September 30, 2000.

The Company has entered into earn-out arrangements with the former
shareholders of ITinera Services N.V., which will require the Company to issue a
total of 25,000 shares in the Company to the former shareholders if ITinera
Services N.V. meets certain revenue and income

12
<PAGE>

thresholds. Any payments resulting from these earn-out arrangements will be
recorded as adjustments to the purchase price upon the time they become certain.
No such adjustments have been recorded yet.

The Company has entered into earn-out arrangements with the former
shareholders of Klavertel N.V., which will require the Company to make a
remaining payment of the purchase price of Euro 1,416,667 to the former
shareholders. Payment may be made, at the Company's option and in accordance
with an agreed upon earn-out formula, either in cash or in shares of the
Company. If the Company opts for shares, these shares are to be issued by the
Company at the average of the opening and closing price of the Company's shares
on the Amsterdam Stock Exchange on November 15, 2000.

6. Subsequent Events

On November 15, 2000 the Company and NorthPoint will each contribute an
additional Euro 25 million (Euro 50 million in aggregate) to VersaPoint N.V. as
part of their committed funding in accordance with the joint venture agreement
dated March 8, 2000. The total amount the Company has invested in VersaPoint
since the date of its incorporation (including the contribution on November 15)
will be Euro 50 million.

In October 2000, the Company was informed by the public prosecutor of
potential civil and criminal tax liabilities relating to certain employee stock
options granted prior to the Company's initial public offering in July 1999.
Although the Company consulted with its Dutch tax advisors and the Dutch tax
authorities prior to issuing these options and believes that its tax treatment
of these options was correct, the Company is in negotiations with the public
prosecutor to settle these charges (without admitting or denying guilt). The
public prosecutor has indicated that he intends to seek a penalty and tax
payment up to approximately Euro 15 million. The Company intends to vigorously
challenge both the tax payment as well as the payment of any significant penalty
amount. In view of the uncertainties related hereto, no provision has been made
in the accompanying third quarter results.

On October 13, 2000 Free Label B.V. and Radio 538 Internet B.V. - the
two minority shareholders in Zon Nederland N.V.- notified the Company that they
wish to exercise their option to acquire additional shares in the Company
according to their Strategic Partner Agreements. To date, no additional shares
have been issued to Free Label B.V. and Radio 538 Internet B.V.

On October 31, 2000 a total of 17,500 shares in the Company were issued
to the former shareholders of ITinera Services N.V. as part of their earn-out
arrangements. A remaining amount of 7,500 shares in the Company will be issued
to the former shareholders of ITinera Services N.V. on December 31, 2000.

In July 2000, the Company participated in the Dutch UMTS auction. The
Company withdrew from the auction after it received a letter from Telfort
(another auction participant) threatening legal action if Versatel continued the
auction process after an undefined level of bidding was exceeded. The Company
has petitioned against several decisions taken by the government during the
auction process and is currently awaiting a response from the government. On
November 1, 2000, a hearing was held by the Directory General of

<PAGE>

Telecommunications & Post (a unit of the Ministry of Transport, Water Management
& Public Works) regarding the Company's complaints in relation to the Dutch UMTS
auction. As a result of this hearing, the NMa (the Dutch competition authority)
announced an investigation of both Telfort and the Company. The results from
this investigation have not been made public yet, but the Company believes that
its actions were within the limits of the auction rules. The Company does not
expect any material impact on its business or financial position as a result of
this investigation.

14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

We are a rapidly growing, competitive communications network operator
in our target market of the Benelux and northwest Germany. We are a leading
alternative to the former monopoly telecommunications carriers in these regions.
Our objective is to become the leading fully integrated provider of local
access, facilities-based broadband services, including voice, data and Internet
services, to business customers in our target market. We provide high-quality,
competitively priced telecommunications, data and Internet services to three
targeted market segments:

o Business Services -- small and medium-sized businesses located
throughout our target market.

o Local Access Services -- high bandwidth users within our target
market located near to our network.

o Carrier Services -- other telecommunications, data and Internet
service providers.

In addition to our core business of providing broadband services to
business customers in the Benelux and northwest Germany, we have created two
additional ventures to further participate in the rapidly growing opportunity
for Internet and data services:

o The Versatel Internet Group consists of our consumer Internet
operations in The Netherlands, Belgium and other related
investments. In The Netherlands and Belgium our services consist
of Internet access, e-mail and portal services without any
associated registration or subscription fees, commonly known as
"free Internet" under the brand name Zon. In Germany, the
Versatel Internet Group launched a "flat fee" service under the
brand name Sonne for unlimited access without any of the
associated per minute telephony charges in June of 2000. On
September 20, we discontinued Sonne's flat fee product offering,
and we have not subsequently offered any other flat fee consumer
Internet services in Germany under the brand name Sonne and we
have no plans to offer such services in the future. As of
September 30, 2000, we had over 800,000 registered subscribers of
our Zon service offering in The Netherlands. We continue to
evaluate options to realize the value of Zon, including a
flotation or otherwise.

o In April 2000, we launched VersaPoint N.V., a DSL-based broadband
service provider. We own 50% of VersaPoint jointly with
NorthPoint Communications Group, Inc., a U.S. based DSL service
provider. VersaPoint has been created to initially provide
wholesale DSL services to communications providers in The
Netherlands, Germany, France, United Kingdom and Belgium. Since
we do not own the majority of VersaPoint, we do not consolidate
VersaPoint's results in our own results and we account for our
VersaPoint investment using the equity method. In The Netherlands
and Germany we purchase DSL services from

<PAGE>

VersaPoint in order to allow us to reach customers that are
either too small or too far away from our network to economically
justify connections to our network with our own fiber. Also,
VersaPoint purchases services from us in The Netherlands and
Germany. As of September 30, 2000, VersaPoint had constructed 93
co-location facilities in The Netherlands and Germany and it had
been awarded another 656 in The Netherlands, Germany and the
United Kingdom.

Our growth to date, driven by both organic expansion and acquisitions,
has been focussed on continuing to increase the number of customers we serve and
the number of services we provide each customer. Our organic growth is
characterized primarily by the expansion of our network to reach additional
potential customers and further development of the products and services that we
offer our customers. Our acquisitions, which include Svianed B.V. in The
Netherlands and VEW Telnet GmbH and KomTel GmbH in Germany, have provided us
with additional customers, expanded our network, enhanced our service offering
and expanded our geographical focus.

As of September 30, 2000 we had 1,757 km fiber backbone in service in
the Benelux and 2,577 km fiber in service in Germany. In the addition, we had
750 km of local access fiber in service in the Benelux consisting of 38 business
parks, 18 city rings and 59 near overlay network extensions. In Germany, we had
460 km of local access fiber in service. Also, we had 473 buildings connected to
our network in the Benelux (including 89 co-location facilities) and 170
buildings connected in Germany (including 30 co-location facilities) directly
connected to our network.

As we continue to expand our operations, we anticipate that net losses
also will continue to be significant due to the selling, general and
administrative costs related to the expansion of our business, the leasing of
access and transmission capacity, and increasing depreciation and amortization
costs resulting from the continuing build-out of our network and interest
charges associated with our outstanding debt. In addition, currency fluctuations
between the euro and the U.S. dollar may have an adverse impact on our net
income as a result of our U.S. dollar denominated indebtedness.

Revenues

We derive our revenues from both minutes of communications traffic
billed which are variable by customer from period to period and fixed monthly
fees for services provided to our customers. We allocate our revenues to the
period in which the traffic was terminated or fees have been generated. The
composition of our customer base, service offering and geographical focus has
continued to evolve as a result of the further development of our network,
acquisitions (Svianed, VEW Telnet and KomTel) and the expansion of our product
offering. As a result, we have significantly increased the portion of our
revenues generated from fixed monthly fees, expanded our geographical focus to
include northwest Germany and expanded our customer base to include larger
customers.

Historically, we have priced our variable communications services at a
discount to the local PTTs and expect to continue this pricing strategy as we
expand our operations. In general, prices for communications services have
decreased over the last several years, both for voice

<PAGE>

traffic as well as for data and Internet services. In The Netherlands, KPN
Telecom N.V. reduced its prices per minute of telecommunications traffic several
times in the past 2 years, most recently in October 2000. Such reductions are
expected to have an adverse impact on margins in the near term as we have
responded by reducing our prices. In Belgium, Belgacom N.V. introduced several
discount programs for selected customer groups, which we subsequently matched.
Also, Germany has experienced similar levels of price reductions which we have
matched. In addition, the introduction of the euro has made pricing more
transparent in the European telecommunications market, which may lead to further
competition and price decreases. Our data and Internet services continue to be
priced at competitive market levels, but are less influenced by the pricing
power of the incumbent operators.

A substantial portion of our revenues is attributable to fixed monthly
fees, primarily through the provision of data and Internet services such as
Internet connectivity, Internet Web-hosting and LAN-to-LAN Interconnect
services. For the nine months ended September 30, 2000, 42.2% of our revenues
were generated from the provision of data and Internet services. Our variable
revenues are generated by minutes of communications billed for voice telephony
services originated by our customers, terminating voice telephony traffic to
customers directly connected to our network and the termination of dial-up
Internet traffic onto our network for both Zon and other Internet service
providers. Our consumer Internet division generates revenues from the
termination of minutes of traffic onto our network as described above, selling
advertising on our portals and to a lesser extent receiving a percentage of some
of the e-commerce revenue generated by our subscribers.

The following table sets forth the total revenues attributable to our
operations for the fiscal years ended December 31, 1998 and December 31, 1999
and for the nine months ended September 30, 1999 and September 30, 2000.

Fiscal Years Ended Nine Months Ended
December 31, September 30,
--------------------------------- -------------------------------
1998 1999 1999 2000
---------------- ------------- ------------- --------------
(euros in thousands)
<S> <C> <C> <C> <C>
Revenues
Business customers
Telephony........................... 15,643 31,695 21,834 49,784
Data................................ -- 14,109 7,704 19,084
Internet............................ 407 4,942 2,765 18,902
Residential customers
Telephony........................... 175 405 290 5,735
Internet............................ -- 286 9 8,413
Carrier Services customers
Telephony........................... 1,727 5,194 2,854 12,460
Data................................ -- 1,907 -- 6,012
Other............................... -- -- -- 3,806
--------- --------- ---------- ---------
Total............................ 17,952 58,538 35,456 124,196

</TABLE>

17
<PAGE>

Customers
---------

Historically, we generated our revenues from small- and medium-sized
business customers. Following the acquisition of Svianed in 1999, we started to
generate revenues from larger customers, such as the GAK Group, which
represented 9.6% of our revenues for the nine months ended September 30, 2000.
In the Benelux, Versatel approaches the residential market by providing carrier
services such as carrier select hosting to resellers, who themselves target the
residential market. As our network has expanded, we have increased 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. In
Germany, we believe market dynamics including the high penetration of ISDN
services, justify offering services directly to the residential market in
selected situations. The companies we acquired in Germany have residential
customers among their customer base and have resulted in a substantial increase
in our residential customer base.

As a result of our continued growth, our total number of business
customers, including data and Internet customers was more than 50,000 as of
September 30, 2000. The following table sets forth the total number of customers
for our services, for the fiscal years ended December 31, 1998 and December 31,
1999 and for the nine months ended September 30, 1999 and September 30, 2000:

Zon subscribers........................ - 275,000 140,000 800,000

</TABLE>
-----------
* Does not include certain customers in Vuurwerk, CS Net, ITinera and VEW
Telnet.

Geographical focus
------------------

We generate revenues in The Netherlands, Belgium and Germany. The
geographical composition of our revenues for the fiscal years ended December 31,
1998 and December 31, 1999 and for the nine months ended September 30, 1999 and
September 30, 2000 was as follows:

<PAGE>

</TABLE>

Cost of Revenues

Our costs of revenues are comprised of fixed network costs and variable
costs associated with the origination and termination of minutes of
communication traffic. To date, our fixed network costs have primarily consisted
of leased lines for sections of our backbone network, leased lines for directly
connecting customers to our network, fees to other Internet service providers
for the termination of Internet traffic, interconnection charges, and
subscription charges. Origination and termination costs represent the cost of
carrying minutes of communication traffic from our customers to our network and
from our network to the final destination, respectively.

We are experiencing a reduction in the costs associated with leased
lines as we have begun replacing leased lines with our own network. However, in
order to accelerate deployment of our local access strategy, we may seek to
connect customers to our network temporarily through leased lines. We expect
fixed network costs in the long run to decline due to the continuing build out
of our network, technological improvements, further liberalization of the
European telecommunications market and increased availability of transmission
capacity.

We expect the variable costs associated with minutes of communications
traffic to decline on a per minute basis for several factors, including: (a) the
incremental build out of our network, which will increase the number of points
we interconnect with the PTTs and the number of carriers with which we
interconnect, (b) the increase of minutes we originate and terminate, which
should lead to higher volume discounts available to us, (c) more rigorous
implementation of the European Community directives requiring cost-based
termination rates and leased line rates and (d) the emergence of new
telecommunication service providers and the construction of new transmission
facilities, which should result in increased competition. However, there can be
no assurance that the trend of decreasing variable costs will continue. As a
result, if reductions in variable costs do not in fact out-pace reductions in
variable revenues, we may experience a substantial reduction in our margins on
minutes of communication traffic 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.

<PAGE>

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 for both our core business and our
consumer Internet business. These expenses have increased as we have developed
and expanded our operations. We expect selling, general and administrative
expenses as a percentage of revenue to vary from period to period.

Depreciation and Amortization

We capitalize and depreciate our fixed assets, including switching and
transmission equipment, routers, fiber optic cable and rights of use, over
periods ranging from three to 20 years. Historically, we have capitalized and
amortized the cost of installing dialers at customer sites. The development of
our network, including construction, indefeasable rights of use, and equipment,
will require large capital expenditures resulting in larger depreciation charges
in the future. In addition, the goodwill associated with our acquisitions of
Svianed, VEW Telnet and KomTel will account for a substantial portion of our
depreciation and amortization charge. We capitalize interest charges for the
costs related to that portion of our network which is under construction, which
among other things consists of overlay sections, network equipment, and city
rings, using the average interest rate of our outstanding debt. In addition, we
capitalize selling, general and administrative expenses to the extent that they
relate to network development activities, IT development or product development.
Increased capital expenditures will adversely affect our future operating
results due to increased depreciation charges.

Foreign Exchange

We have substantial U.S. dollar denominated assets and liabilities but
our revenues are generated and costs incurred almost entirely in euros. We are
therefore exposed to fluctuations in the U.S. dollar and the euro, which may
result in foreign exchange gains and/or losses. A number of equipment purchases
and consultancy activities are billed to us in currencies other than the euro.

Results of Operations

For the three months ended September 30, 2000 compared to the three
months ended September 30, 1999

Revenues increased by Euro 30.8 million to Euro 48.5 million for the
three months ended September 30, 2000 from Euro 17.7 million for the three
months ended September 30, 1999, representing an increase of 174.1%. The growth
in revenues resulted primarily from the addition of new customers, the provision
of additional data and Internet services in The Netherlands, Belgium and
Germany, the acquisitions of VEW Telnet and KomTel and an increase in carrier
services. Included in the revenues for the three months ended September 30, 2000
are the revenues of VEW Telnet (acquired December 1, 1999) of Euro 8.3 million
and the revenues of KomTel (acquired March 24, 2000) of Euro 8.5 million and a
one time sale of excess duct capacity of Euro 0.4 million. Included in the
revenues are data and Internet services revenues amounting to Euro 21.8 million
for the three months ended September 30, 2000 up from Euro 7.4 million for the
three months ended September 30, 1999, representing an increase of 193.6%.
The per minute revenue of voice

20
<PAGE>

telecommunications has been negatively impacted by frequent price reductions.
However, these per minute declines have been more than off-set by an increase in
billable minutes.

Our total number of business customers increased to more than 50,000 as
of September 30, 2000. As of September 30, 2000, Zon had 800,000 registered
subscribers in The Netherlands.

Cost of revenues increased by Euro 28.8 million to Euro 42.0 million
for the three months ended September 30, 2000 from Euro 13.2 million for the
three months ended September 30, 1999, primarily reflecting an increase in
billable minutes, purchases of increased interconnect capacity, additional
leased lines and Internet termination charges. Included in the cost of revenues
are non-recurring expenses of approximately Euro 8.0 million related to
interconnect charges for the consumer Internet service of Sonne in Germany. Our
flat fee consumer Internet service in Germany has been suspended and all charges
associated with terminating this service have been recognized. Also, our cost of
revenues have been negatively impacted as Dutch mobile phone operators have
instituted call-blocking to prevent us from utilizing lower international
terminating alternatives compared to their higher cost termination charges for
fixed to mobile communications minutes. Our cost of revenues have been
positively impacted by the fact that we were able to reduce the dependency on
leased lines to connect our customers directly on to our backbone network.

Selling, general and administrative expenses increased by Euro 54.8
million to Euro 74.6 million for the three months ended September 30, 2000 from
Euro 19.8 million for the three months ended September 30, 1999, representing an
276.0% 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
acquisitions of VEW Telnet and KomTel. Included are a non-cash charge of Euro
5.7 million related to the issuance of employee stock options, nonrecurring
charges for a restructuring provision of Euro 5.0 million and a write-off of
future marketing, advertising and related cost amounting to Euro 10.0 as a
result of the suspension of our flat fee consumer Internet service in Germany.

Depreciation and amortization expenses increased by Euro 13.8 million
to Euro 22.4 million for the three months ended September 30, 2000 from Euro 8.6
million for the three months ended September 30, 1999. This increase was
primarily related to capital expenditures incurred in connection with the
expansion of our network, an increase in the number of buildings connected to
our network, an increase in the number of dialers installed, the purchase of
computer equipment and office furniture and the amortization of goodwill of Euro
0.8 million and Euro 1.7 million as a result the acquisitions of VEW Telnet and
KomTel, respectively.

Currency exchange losses, net, increased by Euro 52.2 million to a loss
of Euro 41.9 million for the three months ended September 30, 2000 from a profit
of Euro 10.3 million for the three months ended September 30, 1999 due to the
revaluation of our U.S. dollar denominated liabilities resulting from the
appreciation of the U.S. dollar against the euro.

<PAGE>

Interest income increased by approximately Euro 12.4 million to Euro
15.3 million for the three months ended September 30, 2000 from Euro 2.9 million
for the three months ended September 30, 1999. This increase was primarily
related to our positive cash balance as a result of our debt and equity
offerings.

Interest expense increased by Euro 21.3 million to Euro 45.6 million
for the three months ended September 30, 2000 from Euro 24.3 million for the
three months ended September 30, 1999. This increase is primarily related to the
accrual of interest expense on the notes issued as a result of our debt
offerings.

Result from investments amounted to Euro 0.1 million for the three
months ended September 30, 2000. No result from investments were incurred for
the three months ended September 30, 1999. The result relates to the application
of the equity accounting method of our investment in VersaPoint and to the book
gain on the sale of our interest in Speedport N.V.

For the nine months ended September 30, 2000 compared to the nine
months ended September 30, 1999

Revenues increased by Euro 88.7 million to Euro 124.2 million for the
nine months ended September 30, 2000 from Euro 35.5 million for the nine months
ended September 30, 1999, representing an increase of 250.3%. The growth in
revenues resulted primarily from the addition of new customers, the provision of
additional data and Internet services in The Netherlands, Belgium and Germany,
the acquisitions of Svianed, VEW Telnet and KomTel and an increase in carrier
services. Included in the revenues for the nine months ended September 30, 2000
are the revenues of Svianed (acquired June 1, 1999) of Euro 19.8 million and the
revenues of VEW Telnet (acquired December 1, 1999) of Euro 20.4 million and the
revenues for KomTel (acquired March 24, 2000) of Euro 17.8 million and a one
time sale of excess duct capacity of Euro 0.4 million. Included in the revenues
are data and Internet service revenues amounting to Euro 52.4 million for the
nine months ended September 30, 2000 up from Euro 10.5 million for the nine
months ended September 30, 1999, representing an increase of 400.2%. The per
minute revenue of voice telecommunications has been negatively impacted by
frequent price reductions. However, these per minute declines have been more
than off-set by an increase in billable minutes.

Our total number of business customers, increased to more than 50,000
as of September 30, 2000. As of September 30, 2000, Zon had 800,000 registered
subscribers in The Netherlands.

Cost of revenues increased by Euro 70.2 million to Euro 97.3 million
for the nine months ended September 30, 2000 from Euro 27.1 million for the nine
months ended September 30, 1999, primarily reflecting an increase in billable
minutes, purchases of increased interconnect capacity additional leased lines
and Internet termination charges. Included in the cost of revenues are
non-recurring expenses of approximately Euro 8.0 million related to interconnect
charges for the consumer Internet service of Sonne in Germany. Our flat fee
consumer Internet service in Germany has been suspended and all charges
associated with terminating this services have been recognized. Also, our cost
of revenues have been negatively impacted as Dutch mobile phone operators have
instituted call-blocking to prevent us from utilizing lower international
terminating alternatives compared to their higher cost termination charges for
fixed to mobile

<PAGE>

communications minutes. Our cost of revenues are being positively impacted by
the fact that we are able to reduce the dependency on leased lines to connect
our customers directly on to our backbone network.

Selling, general and administrative expenses increased by Euro 110.3
million to Euro 164.3 million for the nine months ended September 30, 2000 from
Euro 54.0 million for the nine months ended September 30, 1999, representing an
204.2% 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
acquisitions of Svianed, VEW Telnet and KomTel. Included are a non-cash charge
of Euro 5.7 million related to the issuance of employee stock options,
nonrecurring charges for a restructuring provision of Euro 5.0 million and a
write-off of future marketing, advertising and related cost amounting to Euro
10.0 as a result of the suspension of our flat fee consumer Internet service in
Germany.

Depreciation and amortization expenses increased by Euro 45.4 million
to Euro 59.1 million for the nine months ended September 30, 2000 from Euro 13.7
million for the nine months ended September 30, 1999. This increase was
primarily related to capital expenditures incurred in connection with the
expansion of our network, an increase in the number of buildings connected to
our network and an increase in the number of dialers installed, the purchase of
computer equipment and office furniture for our new headquarters and datacenter
and the amortization of goodwill of Euro 12.2 million, Euro 2.3 million and Euro
3.5 million as a result the acquisitions of Svianed, VEW Telnet and KomTel
respectively.

Currency exchange losses, net, increased by Euro 47.3 million to a loss
of Euro 67.3 million for the nine months ended September 30, 2000 from a loss of
Euro 20.0 million for the nine months ended September 30, 1999 due to the
revaluation of our U.S. dollar denominated liabilities resulting from the
appreciation of the U.S. dollar against the euro.

Interest income increased by approximately Euro 30.9 million to Euro
38.8 million for the nine months ended September 30, 2000 from Euro 7.9 million
for the nine months ended September 30, 1999. This increase was primarily
related to our positive cash balance as a result of our debt and equity
offerings.

Interest expense increased by Euro 71.9 million to Euro 118.8 million
for the nine months ended September 30, 2000 from Euro 46.9 million for the nine
months ended September 30, 1999. This increase is primarily related to the
accrual of interest expense on the notes issued as a result of our debt
offerings.

Result from investments amounted to Euro 2.2 million for the nine
months ended September 30, 2000. No result from investments were incurred for
the nine months ended September 30, 1999. The result relates to the book gain on
the sale of our interest in Telebel GmbH and Speedport N.V. and the application
of the equity accounting method adjustment of our investment in VersaPoint.

Other expense amounted to Euro 1.8 million for the nine months ended
September 30, 1999. No other expenses were incurred for the nine months ended
September 30, 2000. This expense

<PAGE>

was related to a settlement agreement of one of the shareholders of Versatel and
related legal expenses.

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 May 1998,
we financed our growth primarily through equity and subordinated loans from our
shareholders. Since then, we have raised an aggregate of Euro 1,960 million and
$565 million in net proceeds, net of offering expenses, in a series of debt and
equity offerings, most recently in March 2000, when we (i) issued Euro 300
million 11 1/4% Senior Euro Notes due 2010, (ii) sold 9,350,000 ordinary shares
(4,675,000 of which were sold by a number of selling shareholders) as well as
(iii) issued Euro 360 million of 4% senior convertible notes due 2005. We raised
net proceeds, after transaction expenses, of Euro 282.0 million, Euro 238.3
million and Euro 350.0 million, in these offerings, respectively.

We have used a significant amount of the net proceeds of the debt and
equity offerings to make capital expenditures related to the expansion and
development of its network, to acquire various companies, to fund operating
losses and for other general corporate purposes.

Our existing cash balances, together with other available financings
and cash flows from operations, will provide us with sufficient capital to fund
planned capital expenditures to expand our local access network, invest in
Internet activities such as Web-hosting and data services, fund our investment
in VersaPoint N.V. and the fiber transmission related to the digital subscriber
line (or DSL) roll-out, as well as for acquisitions and anticipated losses
through 2002. We expect to raise additional funds in 2002 through public or
private financings or from financial institutions.

Although we currently maintain significant cash balances, we may
require additional capital earlier than anticipated to continue funding the
expansion and development of our network and service offerings as well as for
acquisitions. We may also participate, alone or together with one or more
partners, in auctions for UMTS wireless licenses in our target markets, other
than The Netherlands where we were unable to obtain such license. However, we do
not consider this a strategic priority.

To date, we have made limited use of bank facilities and capital lease
financing. We may seek to raise senior secured debt financing in the future to
fund the expansion of our network and for general corporate purposes.

After May 15, 2001, our funds that have been placed in escrow to cover
interest payments on the high yield notes issued in 1998 will have been
exhausted and, as a result, we will need to increase substantially our net cash
flow in order to meet our debt service obligations.

Net cash used in operating activities was Euro 132.3 million for the
nine month period ended September 30, 2000 compared to Euro 39.4 million for the
nine month period ended September 30, 1999. This increase was primarily the
result of an increase in operating losses, the increase in depreciation of our
operational network assets and the increase in accounts receivable as a result
of increased revenues.

<PAGE>

Net cash used in investing activities was Euro 413.1 million in the
nine month period ended September 30, 2000 compared to Euro 303.2 million in the
nine month period ended September 30, 1999. This increase was the result of the
acquisition of KomTel, ongoing capital expenditures to expand our network and
operations as well as the finance cost incurred in the first quarter as a result
of the equity and debt offerings in March 2000.

Net cash provided by financing activities was Euro 937.8 million the
nine month period ended September 30, 2000 compared to Euro 520.1 million during
the nine month period ended September 30, 1999. This increase was primarily the
result of the equity and debt offerings in March 2000.

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<PAGE>

ITEM 3. 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 euro in which our revenues are denominated. However, in conjunction with our
two high yield offerings in 1998 we have placed in escrow and pledged for the
benefit of the holders of the notes issued in these high yield offerings U.S.
government securities sufficient to pay interest due on such notes until and
including the scheduled interest payment on May 15, 2001.

The notes issued in the two high yield offerings in 1998 will mature on
May 15, 2008. The high yield notes issued in July 1999 will mature on July 15,
2009. The high yield notes issued in March 2000 will mature on March 30, 2010.
Our convertible notes will mature on December 17, 2004 and March 30, 2005,
respectively. Unless previously redeemed or converted, we are not required to
make any mandatory redemptions (other than an offer to repurchase these notes
upon a change in control of Versatel) prior to maturity of these notes. Since
the interest rate on each of the notes issued in the high yield offerings is
fixed and the effective interest rate on our convertible notes increases at
fixed increments, we have limited our exposure to risks due to fluctuations of
interest rates. At September 30, 2000, the fair value of the notes issued in the
high yield offerings was approximately Euro 801.4 million and the fair value of
our convertible notes was approximately Euro 549.5 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 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 remaining proceeds from our dollar
denominated offerings to pay our construction costs. However, as of September
30, 2000, we had exchanged all but $24.5 million of the proceeds from these
offerings into Dutch guilders or euros. Prior to the application of the net
proceeds from these offerings, 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 may become subject to greater foreign exchange fluctuations as we
continue to 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 three Benelux
countries and Germany have adopted the euro as their legal currency.

26
<PAGE>
PART II - OTHER INFORMATION

ITEM 1. 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 our
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.

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

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

None.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 14, 2000.

VERSATEL TELECOM INTERNATIONAL N.V.

By: /s/ RAJ RAITHATHA
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Raj Raithatha
Chief Executive Officer

By: /s/ PHILIPPE SANTIN
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Philippe Santin
Chief Financial Officer