Global Crossing 20-F 2008 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington DC.20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number                

Global Crossing (UK) Telecommunications Limited

(Exact name of Registrant as specified in its charter)

Global Crossing (UK) Finance Plc

Fibernet Group Limited

Fibernet UK Limited

Fibernet Limited

(Additional Registrant)

England and Wales

(Jurisdiction of incorporation or organization)

1 London Bridge, London, SE1 9BG, United Kingdom

(Address of principal executive offices)

Bernard Keogh

Telephone: +44 (0) 845 000 1000, Facsimile: +44 (0) 207 904 2930

1 London Bridge, London, SE1 9BG, United Kingdom

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

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

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

11.75% pound sterling-denominated senior secured notes due 2014

10.75% US dollar-denominated senior secured notes due 2014

Guarantees relating to 10.75% senior secured notes due 2014 and 11.75% senior secured notes due 2014

(Title of Class)

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares, nominal value £1.00 per share: 101,000 shares.

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

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

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

Indicate by check mark which basis of accountancy the registrant has used to prepare the financial statements including in this filing:

US GAAP  ¨ International Financial Reporting Standards as                      issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Identity of Directors, Senior Management and Advisors	3
ITEM 2.	Offer Statistics and Expected Timetable	3
ITEM 3.	Key Information	4
ITEM 4.	Information on the Company	23
ITEM 4A.	Unresolved Staff Comments	37
ITEM 5.	Operating and Financial Review and Prospects	38
ITEM 6.	Directors, Senior Management and Employees	56
ITEM 7.	Major Shareholders and Related Party Transactions	65
ITEM 8.	Financial Information	68
ITEM 9.	The Offer and Listing	69
ITEM 10.	Additional Information	69
ITEM 11.	Quantitative and Qualitative Disclosures About Market Risk	78
ITEM 12.	Description of Securities other than Equity Securities	79
PART II
ITEM 13.	Defaults, Dividend Arrearages and Delinquencies	80
ITEM 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	80
ITEM 15.	Controls and Procedures	80
ITEM 16.	[RESERVED]	81
ITEM 16.A.	Audit Committee Financial Expert	81
ITEM 16.B.	Code of Ethics	81
ITEM 16.C.	Principal Accountant Fees and Services	81
ITEM 16.D.	Exemptions From the Listing Standards for Audit Committees	82
ITEM 16.E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	82
ITEM 16.G.	Corporate Governance	82
PART III
ITEM 17.	Financial Statements	83
ITEM 18.	Financial Statements	83
ITEM 19.	Exhibits	84
FINANCIAL STATEMENTS		F-1

PART I

PRESENTATION OF INFORMATION

Corporate Organization

All references in this annual report on Form 20-F to:

• “we,” “us,” “our,” the “Company,” and “GCUK” are to Global Crossing (UK) Telecommunications Limited and its consolidated subsidiaries, including the Issuer, except where expressly stated otherwise or the context otherwise requires;

• “Guarantors” are to GCUK, Fibernet Group Limited (formerly Fibernet Group plc), Fibernet UK Limited and Fibernet Limited;

• “Guarantees” are to the guarantees by the Guarantors of the Notes on a senior basis;

• “Fibernet Group” are to, collectively, Fibernet Group Limited, a company incorporated in England and Wales, and its consolidated subsidiaries at such time;

• “Fibernet” are to Fibernet Group, excluding Fibernet Holdings Limited and Fibernet GmbH, which were transferred to Global Crossing International Ltd, one of our affiliates, prior to our acquisition of Fibernet Group Limited on December 28, 2006;

• “GC Acquisitions” are to GC Acquisitions UK Limited, a wholly owned subsidiary of GCL formed for the purpose of acquiring Fibernet Group plc;

• “GCI” are to Global Crossing International Ltd, a wholly owned subsidiary of GCL;

• the “Issuer” and “GC Finance” are to Global Crossing (UK) Finance Plc, a company organized under the laws of England and Wales, and our direct, wholly owned finance subsidiary that is the Issuer of the Notes guaranteed by the Guarantors and which has had no trading activity, except where expressly stated otherwise or the context otherwise requires;

• “GCL,” “Global Crossing,” “our parent” and “our parent company” are to Global Crossing Limited, a company organized under the laws of Bermuda and our indirect parent company by which we are indirectly wholly owned;

• “old parent company” or “old parent” are to Global Crossing Ltd., a company formed under the laws of Bermuda and our parent company’s predecessor;

• “Bidco,” “our immediate parent” and “our immediate parent company” are to Global Crossing (Bidco) Limited, a company organized under the laws of England and Wales and our direct parent company by whom we are directly wholly owned and which is indirectly wholly owned by GCL;

• “Group Companies” and “GC Group” are to the group of companies owned directly or indirectly by GCL, including us;

• “STT” are to STT Communications Ltd, a Singapore company, a subsidiary of Temasek Holdings (Private) Limited regarded as our ultimate parent company; and

• “Network Rail” are to Network Rail Infrastructure Limited, the successor to Railtrack plc, as the operator of the UK national railway infrastructure network.

Financial and Other Information

All references in this annual report on Form 20-F to:

• the “UK” are to the United Kingdom;

• “pounds sterling,” “sterling,” “£” or “pence” are to the lawful currency of the United Kingdom;

• the “United States” or the “US” are to the United States of America;

• “US$,” “US Dollars,” “dollars” or “$” are to the lawful currency of the United States;

• the “EU” are to the European Union;

• “euro” or “€” are to a lawful currency of the European Union;

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• the “Initial Notes” are to the 10.75% dollar-denominated senior secured notes and the 11.75% pounds sterling-denominated senior secured notes issued by the Issuer on December 23, 2004 and to the exchange notes that the Issuer issued pursuant to a registered exchange offer in respect of such notes;

• the “Additional Notes” are to the 11.75% pounds sterling-denominated senior secured notes issued by the Issuer on December 28, 2006, and to the exchange notes issued by the Issuer pursuant to a registered exchange offer in respect of such notes;

• the “Notes” and “Senior Secured Notes” are to, collectively, the Initial Notes and the Additional Notes; and

• the “Indenture” are to the indenture, dated December 23, 2004, governing the Notes.

The consolidated financial statements and the related notes in this annual report on Form 20-F have been prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and IFRS as adopted by the EU. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB, however, the differences have no impact on the Company’s consolidated financial statements for the years presented. References to “IFRS” hereafter should be construed as reference to IFRS as issued by the IASB.

Some financial information has been rounded and, as a result, the numerical figures shown as totals in this annual report on Form 20-F may vary slightly from the exact arithmetic aggregation of figures that precede them.

CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION

The following table sets forth, for the periods indicated, certain information concerning the noon buying rate in the City of New York for cable transfers in pounds sterling as certified by the Federal Reserve Board for customs purposes, or the “noon buying rate,” for pounds sterling expressed in dollars per £1.00. As of April 10, 2009, the noon buying rate for pounds sterling expressed in dollars per £1.00 was 1.464.

	Dollars per £1.00
	2004	2005	2006	2007	2008	2009 (through April 10)
Exchange rate at end of period (Year ended December 31, except 2009)	1.916	1.719	1.959	1.961	1.462	1.464
Average exchange rate during period*	1.836	1.815	1.858	2.007	1.842	1.441
Highest exchange rate during period	1.948	1.929	1.979	2.110	2.031	1.525
Lowest exchange rate during period	1.754	1.714	1.726	1.924	1.440	1.366

* The average of the noon buying rates for cable transfer in pound sterling as certified for customs purposes by the Federal Reserve Bank of New York on the last business day of each month during the applicable period (through April 10 in the case of 2009).

Month	Highest exchange rate during the month	Lowest exchange rate during the month
October 2008	1.780	1.547
November 2008	1.616	1.479
December 2008	1.546	1.440
January 2009	1.525	1.366
February 2009	1.494	1.422
March 2009	1.473	1.376
April 2009	1.480	1.440

MARKET AND INDUSTRY DATA

In this annual report on Form 20-F, we rely on and refer to information and statistics regarding our industry. We obtained these market data from independent industry publications or other publicly available information. Although we believe that these sources are reliable, we have not independently verified and do not guarantee the accuracy and completeness of this information.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains certain “forward-looking statements,” as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements set forth anticipated results based on management’s plans and assumptions. From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have attempted to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will”, “could” and similar expressions in connection with any discussion of future events or future operating or financial performance or strategies or trends. Such forward-looking statements include, but are not limited to, statements regarding:

• our services, including the development and deployment of data products and services based on Internet Protocol (“IP”) and other technologies and strategies to expand our targeted customer base and broaden our sales channels and the opening and expansion of our data center and collocation services;

• the operation and maintenance of our network, including with respect to the development of IP-based services and data center and collocation services;

• our liquidity and financial resources, including anticipated capital expenditures, funding of capital expenditures and anticipated levels of indebtedness and the ability to raise capital through financing activities, including capital leases and similar financings;

• trends related to and management’s expectations regarding capital expenditures, results of operations, required capital expenditures, revenues from existing and new lines of business and sales channels, adjusted earnings before interest, tax and depreciation, order volumes and cash flows including but not limited to those statements set forth below in Item 5 in “Operating and Financial Review and Prospects”; and

• sales efforts, expenses, interest rates, foreign exchange rates, and the outcome of contingencies, such as legal proceedings.

We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our quarterly and current reports on Form 6-K or that GCL makes regarding us in its current reports on Form 8-K. Also note that we provide the following cautionary discussion of risks and uncertainties related to our businesses. These are factors that we believe, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 21E of the Securities Exchange Act of 1934. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Our forward-looking statements are subject to a variety of factors that could cause actual results to differ significantly from current beliefs and expectations. In addition to the risk factors identified in Item 3.D. “Key Information—Risk Factors”, the operations and results of our business are subject to risks and uncertainties identified elsewhere in this annual report on Form 20-F as well as general risks and uncertainties such as those relating to general economic conditions and demand for telecommunications services.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

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ITEM 3. KEY INFORMATION

A. Selected Financial Data

You should read the following selected financial data together with the Item 5 “Operating and Financial Review and Prospects” and our financial statements and the accompanying notes thereto included elsewhere in this annual report on Form 20-F.

The selected financial data as at December 31, 2004, 2005 and 2006 and for the years ended December 31, 2004 and 2005 were derived from our financial statements which are not included in this annual report on Form 20-F. The selected financial data as at December 31, 2007 and 2008 and for each of the years ended December 31, 2006, 2007 and 2008 have been derived from our consolidated financial statements and related notes thereto included elsewhere in this annual report on Form 20-F.

The historical financial data has been prepared in conformity with IFRS (see note 2 “accounting policies” within the accompanying consolidated financial statements).

In reading the selected historical financial data, please note the following:

• On December 28, 2006, we announced that our subsidiary, GC Finance, had completed its offering of the Additional Notes. The £52.0 million aggregate principal amount of the Additional Notes was priced at 109.25 percent of par value and the issue raised £56.8 million in gross proceeds. The Additional Notes were issued under the Indenture pursuant to which GC Finance issued the Initial Notes.

• On December 28, 2006, proceeds from the offering were used to acquire Fibernet from GC Acquisitions, and to pay fees and expenses incurred in connection with the acquisition of Fibernet by GCUK and the offering of the Additional Notes. Upon completion of the acquisition by GCUK, Fibernet guaranteed the Additional Notes and all other obligations under the Indenture. Prior to the acquisition by GCUK, Fibernet Group transferred its German business operations to GCI, by way of a transfer of Fibernet Holdings Limited, and its wholly owned subsidiary Fibernet GmbH, to GCI, for consideration of £1 and the assumption, by GCI, of £3.6 million of debt outstanding to Fibernet. See note 4 (“business combinations”) within the accompanying consolidated financial statements included elsewhere in this annual report on Form 20-F.

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• Fibernet results from December 28, 2006 only are included within the following income statement data.

• Fibernet’s position as of December 31, 2006, 2007 and 2008 only is included within the following balance sheet data.

	Year ended December 31,
	2004			2005			2006(3)			2007			2008
Profit and Loss Account Data:
Revenue	£	271,096		£	239,498		£	240,612		£	296,620		£	322,832
Cost of sales		(156,735	)		(136,317	)		(147,481	)		(177,665	)		(200,487	)
Gross profit		114,361			103,181			93,131			118,955			122,345
Operating expenses:
Distribution costs		(10,504	)		(10,009	)		(10,385	)		(15,710	)		(18,361	)
Administrative expenses		(40,258	)		(47,738	)		(53,683	)		(69,468	)		(75,037	)
Net gain arising from acquisition of Fibernet		—			—			7,755			—			—
		(50,762	)		(57,747	)		(56,313	)		(85,178	)		(93,398	)
Operating profit		63,599			45,434			36,818			33,777			28,947
Finance costs, net		(613	)		(39,919	)		(14,688	)		(29,021	)		(58,360	)
Tax benefit/(charge)		11,364			2,477			(9,377	)		(6,297	)		(432	)
Profit/(loss)	£	74,350		£	7,992		£	12,753		£	(1,541	)	£	(29,845	)
Balance Sheet Data (at period end):
Cash and cash equivalents	£	21,193		£	44,847		£	40,309		£	23,954		£	36,100
Trade and other receivables(1)		64,633			59,954			59,182			66,237			56,276
Working capital/(deficit)(2)		6,897			(8,532	)		(18,399	)		618			(25,633	)
Intangible assets, net		1,634			1,296			14,241			13,351			11,955
Property, plant and equipment, net		135,593			129,005			182,556			185,719			179,544
Total assets		241,092			255,382			336,877			318,933			324,866
Senior secured notes		(195,335	)		(209,094	)		(249,631	)		(248,946	)		(286,928	)
Obligations under finance leases		(39,615	)		(30,342	)		(32,423	)		(32,187	)		(24,225	)
Other debt obligations		—			—			(399	)		(893	)		(980	)
Total shareholders’ deficit		(219,105	)		(204,718	)		(196,272	)		(194,952	)		(217,212	)
Other data:
Depreciation and amortization	£	21,193		£	20,104		£	24,551		£	42,161		£	44,699
Capital expenditures		7,811			9,452			20,435			32,531			21,860
EBITDA(4)		84,792			65,538			60,319			75,938			73,646

⁽¹⁾ Trade and other receivables are due in less than one year and include operating and non-operating receivables from other Group Companies. Excluding the receivables from other Group Companies, trade and other receivables due in less than one year are £63.6 million and £53.7 million at December 31, 2007 and 2008, respectively.

⁽²⁾ Working capital/(deficit) consists of the current portion of trade and other receivables, less trade and other payables. Working capital/(deficit) includes operating and non-operating receivables and payables from other Group Companies. Excluding all receivables and payables from other Group Companies, there was a working capital surplus of £5.8 million at December 31, 2007 and a working capital deficit of £17.6 at December 31, 2008.

⁽³⁾ Initial accounting for the acquisition of Fibernet was determined only provisionally as at December 31, 2006. In accordance with IFRS 3 “Business Combinations” (“IFRS 3”), any adjustment to the provisional values as a result of completing the initial accounting requires restatement of comparative financial statements. During the year ended December 31, 2007, an adjustment to increase the liabilities assumed in the acquisition was recorded which resulted in a change in the amount of negative goodwill and resulting gain recorded at the acquisition date. This adjustment has been reflected in the consolidated income statement for the year ended as at December 31, 2006.

5

⁽⁴⁾ EBITDA, calculated using IFRS financial information, consists of profit/loss for the period before tax benefit/(charge), net finance costs, depreciation and amortization. Although EBITDA is not a measure of operating profit/(loss), operating performance or liquidity under IFRS, we have presented EBITDA in accordance with Section 4.17 of the Indenture governing the Senior Secured Notes. Some investors may consider EBITDA a relevant indicator of operating performance and of the ability to service indebtedness and fund on-going capital expenditures, especially in a capital intensive industry such as telecommunications. You should not use EBITDA as a substitute for the analysis provided in our income statements or in our cash flow statements. Our calculation of EBITDA may not be consistent with the EBITDA measures of other companies and is not consistent with GCL’s calculation of Adjusted cash EBITDA. The following table reconciles EBITDA to profit/loss:

	Year ended December 31,
	2004			2005			2006(1)			2007			2008
Profit/(loss)	£	74,350		£	7,992		£	12,753		£	(1,541	)	£	(29,845	)
Finance costs, net		613			39,919			14,688			29,021			58,360
Tax (benefit)/charge		(11,364	)		(2,477	)		9,377			6,297			432
Recognition of negative goodwill		—			—			(1,050	)		—			—
Depreciation		14,217			15,444			19,041			31,730			32,910
Amortization		6,976			4,660			5,510			10,431			11,789
EBITDA	£	84,792		£	65,538		£	60,319		£	75,938		£	73,646

⁽¹⁾ Initial accounting for the acquisition of Fibernet was determined only provisionally as at December 31, 2006. In accordance with IFRS 3, any adjustment to the provisional values as a result of completing the initial accounting requires restatement of comparative financial statements. During the year ended December 31, 2007, an adjustment to increase the liabilities assumed in the acquisition was recorded which resulted in a change in the amount of negative goodwill and resulting gain recorded at the acquisition date. This adjustment has been reflected in the consolidated income statement for the year ended as at December 31, 2006.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business, and any investment in us, is subject to a number of significant risks, including those described below. Additional risks and uncertainties not presently known to us, or that we currently believe are immaterial, could also impair our business, financial condition, results of operations and our ability to fulfill our obligations under the Notes. See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness—Senior Secured Notes.”

In addition to the risk factors identified under the captions below, the operations and results of our business are subject to risks and uncertainties identified elsewhere in this annual report on Form 20-F as well as general risks and uncertainties such as those relating to general economic conditions and demand for telecommunications services.

Risks related to Our Business and Industry

We face a number of risks related to current global economic conditions and the severe tightening in the global credit markets.

Recently, the global economy and capital and credit markets have been experiencing exceptional turmoil and upheaval. Many major economies entered significant recessions in 2008 which continue into 2009. Ongoing concerns about the systemic impact of potential long-term and wide-spread recession, volatile energy costs, geopolitical issues, the availability, cost and terms of credit, consumer and business confidence, substantially increased unemployment and the crisis in the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for both established and emerging economies, including those in which we operate. In the second half of 2008, added concerns fueled by government interventions in financial systems led to increased market uncertainty and instability in the US, UK and other international capital and credit markets. These conditions have contributed to economic uncertainty of unprecedented levels. The availability, cost and terms of credit have also been and may continue to be adversely affected by illiquid markets

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and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in many cases cease to provide, credit to businesses and consumers. These factors have led to a substantial and continuing decrease in spending by businesses and consumers, and a corresponding decrease in global infrastructure spending. Continued turbulence in the US, UK and other international markets and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition, including our ability to refinance maturing debt instruments and to access the capital markets and obtain capital lease financing to meet liquidity needs. This financial crisis may have an impact on our business and financial condition in the following ways as well as others that we currently cannot predict:

• Negative impacts from increased financial pressures on customers: Uncertainty about current and future global economic conditions and credit markets may cause consumers, business and governments to defer purchases in response to tighter credit, decreased availability of cash and credit and declining business and consumer confidence, and may affect the solvency of our customers. Accordingly, future demand for our products and services could differ from our current expectations. Similarly, our customers may experience liquidity issues of their own that adversely affect our ability to collect amounts due from them in a timely fashion, or at all. In addition, if the global economy and credit markets continue to deteriorate and our future sales decline, our financial condition and results of operations would be adversely impacted; and

• Negative impacts from increased financial pressures on our ability to maintain and further enhance our network: We plan to arrange financing with vendors and third parties for a significant portion of the capital expenditures that we plan for 2009 for the maintenance and upgrade of capacity and services for our telecommunication systems. The lack of credit in the global capital markets may constrain our ability to obtain such financing on commercially reasonable terms or at all. To the extent we are not able to obtain appropriate financing, we may not be able to implement certain of our growth investments budgeted for 2009 and thereby not realize additional revenues to support our business.

We may not be able to achieve anticipated economies of scale.

We expect that economies of scale will allow us to grow revenues while incurring incremental costs that are proportionately lower than those applicable to our existing business. If the increased costs required to support our revenue growth turn out to be greater than anticipated, we may be unable to improve our profitability and/or cash flows even if revenue growth goals are achieved. The current downturn in the world economy could temper our growth, although the value we offer prospective customers could attract business in a cost-saving environment.

Improvements in our cost structure in the short term become more difficult as the amount of potential savings decreases due to the success of past savings initiatives. Cost savings initiatives put a strain on our existing employees and make it more challenging to foster an engaged and enthusiastic workforce. Customer service, which is a critical component of our value proposition, could suffer if employee engagement were to deteriorate.

Future cash flows may not meet our expectations.

Our cash flow expectations are predicated on significant revenue growth in our target enterprise and carrier data sales channels, including economies of scale expected from such growth, and the success of ongoing cost reduction initiatives. Our expectations are also based in part on arranging capital leases and other forms of equipment financing. Our ability to arrange such financing will depend on credit market conditions, which have continued to tighten due to the ongoing crisis in global capital markets. If we are unable to arrange such financings, we may not be able to make all necessary or desirable capital and other expenditures to run and grow our business and/or to comply with certain provisions of the Indenture which requires us to offer to repurchase outstanding Notes upon occurrence of certain events under the Indenture.

Access vendors could force us to accelerate payments to them, which would adversely impact our working capital and liquidity.

Cost of access represents our single largest expense and gives rise to material current liabilities. In the past, certain telecommunications carriers from whom we purchase access services demanded that we pay for access services on a timelier basis, which resulted in increased demands on our liquidity. If such demands were to continue to a greater degree than anticipated, or if access vendors were to insist on significant deposits to secure our access payment obligations, we could be prevented from meeting our cash flow projections and our long-term liquidity requirements. The current downturn in the world economy and tightening of global credit markets could cause access vendors to insist upon timelier payment or the provision of security deposits.

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The restrictive covenants in the Indenture limit and future debt instruments may limit our financial and operational flexibility.

The Indenture contains covenants and events of default that are customary for high-yield debt and senior secured credit facilities, including limitations on:

• incurring or guaranteeing additional indebtedness;

• dividend and other payments to holders of equity and subordinated debt;

• investments or other restricted payments;

• asset sales, consolidations, and mergers;

• creating or assuming liens; and

• transactions with affiliates.

These covenants impose significant restrictions on our operations.

A significant portion of our assets have been pledged to secure our indebtedness under the Indenture and under certain lease facilities secured by the assets being leased (the “Capital Lease Facilities”). A failure to comply with the covenants contained in the Indenture or the Capital Lease Facilities could result in an event of default, which, if not cured or waived, could result in an acceleration of such debts, which would have a material adverse effect on our business, results of operations and financial condition. For example, certain of our capital lease agreements contain non-financial covenants which require specific tracking and reporting procedures for the physical location of the leased assets. The failure to satisfy these covenants allows the lessor to accelerate payments under the lease. If the indebtedness under the Indenture or the Capital Lease Facilities were to be accelerated, we would have to raise funds from alternative sources, which may not be available on favorable terms, on a timely basis or at all.

For a further discussion of these issues and our indebtedness, see Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness”.

Risks related to our operations

Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control.

Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control. The primary factors, among other things, that may affect our results of operations include the following:

• changes in pricing policies or the pricing policies of our competitors;

• general economic conditions as well as those specific to our industry;

• demand for our higher margin services;

• costs of acquisitions, including the integration of such acquisitions; and

• changes in regulations and regulatory rulings.

A delay in generating revenue or the timing of recognizing revenue and expenses could cause significant variations in our operating results from quarter to quarter. It is possible that in future quarters our results may be below analysts’ and investors’ expectations.

Our rights to the use of the fiber that make up our network may be affected by the financial health of our fiber providers.

A significant part of our network and some of our other transmission facilities are held by us through long-term leases or indefeasible rights to use (“IRU”) agreements with various companies that provide us access to facilities or fiber owned by them. A bankruptcy or financial collapse of one of these providers could result in a loss of our rights under such leases and agreements with the provider, which in turn could have a negative impact on the integrity of our network and ultimately on our results of operations.

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We may not be able to continue to connect our network to incumbent carriers’ networks or maintain Internet peering arrangements on favorable terms.

We must be party to interconnection agreements with incumbent carriers and certain independent carriers in order to connect our customers to the public switched telephone network (“PSTN”). If we are unable to renegotiate or maintain interconnection agreements on favorable terms, it could adversely affect our ability to provide services. New IP-based networking technologies are becoming more generally adopted within the industry and new commercial and charging models are being developed for interworking between these networks. The extent to which such new models may affect our business is currently uncertain.

Peering agreements with Internet service providers allow us to access the Internet and exchange transit for free with these providers. Depending on the relative size of the carriers involved, these exchanges may be made without settlement charge. Recently, many Internet service providers that previously offered peering have reduced or eliminated peering relationships or are establishing new, more restrictive criteria for peering and an increasing number of these service providers are seeking to impose charges for transit. Increases in costs associated with Internet and exchange transit could have a material adverse effect on our margins for our products that require Internet access. We may not be able to renegotiate or maintain peering arrangements on favorable terms, which would impair our growth and performance.

It is expensive and difficult to switch new customers to our network, and lack of cooperation of incumbent carriers can slow the new customer connection process.

It is expensive and difficult for us to switch a new customer to our network because:

• we usually charge the potential customer certain one-time installation fees, and, although the fees may be less than the cost to install a new customer, such fees may deter a potential customer from switching to our network; and

• we require cooperation from the incumbent carrier in instances where there is no direct connection between the customer and our network, which can complicate and delay provision of a new customer’s service.

Many of our principal competitors, the domestic and international incumbent carriers, are already established providers of local telephone services to all or virtually all telephone subscribers within their respective service areas. Their physical connections from their premises to those of their customers are expensive and difficult to duplicate. To complete the new customer provisioning process, we rely on the incumbent carrier to process certain information. The incumbent carriers have a financial interest in retaining their customers, which could reduce their willingness to cooperate with our new customer provisioning requests, thereby adversely impacting our ability to compete and grow revenues. Further consolidation of incumbent carriers with other telecommunications service providers may make these problems more acute.

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

Our telecommunications systems, and those of our parent, are subject to the risks inherent in large-scale, complex fiber-optic telecommunications systems. The operation, administration, maintenance and repair of these systems require the coordination and integration of sophisticated and highly specialized hardware and software technologies and equipment located throughout the world and require significant operating and capital expenses. These systems may not continue to function as expected in a cost-effective manner. For example, as our network elements become obsolete or reach their design life capacity, our operating expenses could significantly increase depending on the nature and extent of repairs or replacements. The failure of the hardware or software to function as required could render a cable system unable to perform at design specifications.

Interruptions in service or performance problems, for whatever reason, could undermine confidence in our services and cause us to lose customers or make it more difficult to attract new ones. In addition, because many of our services are critical to our customers’ businesses, a significant interruption in service could result in lost profits or other losses to customers. Although we attempt to disclaim liability for these losses in our service agreements, a court might not enforce a limitation on liability under certain conditions, which could expose us to financial loss. Also, we often provide customers with guaranteed service level commitments. If we are unable to meet these guaranteed service level commitments for whatever reason, we may be obligated to provide our customers with credits, generally in the form of free service for a short period of time, which could negatively affect our operating results.

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The failure of our operations support systems (“OSS”) to perform as we expect could impair our ability to retain customers and obtain new customers, or provision their services, or result in increased capital expenditures.

Our business depends on our ability to continue to develop effective business support systems. This is a complicated undertaking requiring significant resources and expertise and support from third-party vendors. We need business support systems for:

• implementing customer orders for services;

• provisioning, installing and delivering these services;

• timely and accurate billing for these services; and

• ensuring that we manage access costs efficiently.

We need these business support systems to expand and adapt to our continued growth. We have generally been successful in moving customers to new services, and we therefore face a continuing challenge as business support systems become outdated and expensive to maintain, and the support available to them becomes limited. We have utilized and will continue to utilize the business support systems developed or maintained by our parent and its affiliates. Our parent and its affiliates are developing and upgrading the business support systems globally. We are closely involved in this effort and will benefit from certain of the enhancements in the global business support systems in our business in the UK. We cannot assure you, however, that the development and upgrade of the global business support systems will be successful, will be completed on a timely basis, or will satisfy the specific needs of our business. This could have a material adverse effect on our business, results of operations and financial condition. In particular, a failure of our operations support systems could adversely affect our ability to process orders and provision sales, and to bill for services efficiently and accurately, all of which could cause us to suffer customer dissatisfaction, loss of business, loss of revenue or the inability to add customers on a timely basis, any of which would adversely affect our revenues.

Recent capital expenditure levels may not be sustainable.

While capital expenditures have remained relatively stable in recent years, such levels may not be sustainable in the future, particularly as our business continues to grow. Our ability to fund future capital expenditures may be limited by our ability to generate sufficient cash flow, including raising any necessary financings, which could prove to be difficult if the adverse conditions in the credit markets continue.

Intellectual property and proprietary rights of others could prevent us from using necessary technology.

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

We are exposed to significant currency exchange rate risks and our results of operations may suffer due to currency translations.

Commencing in September 2008, the pound sterling has weakened considerably against both the US Dollar, in which a significant portion of Senior Secured Notes are denominated, and the Euro. This depreciation has had an adverse impact on our finance costs. If this weakening continues, it could have an adverse impact on our results going forward. In addition, the further weakening of the pound sterling against those currencies would increase the pound sterling equivalent of liabilities held by us in those currencies.

In addition, where we issue invoices for our services in currencies other than pounds sterling, our operating results may suffer due to currency translations in the event that such currencies depreciate relative to the pound sterling and we cannot or do not elect to enter into currency hedging arrangements in respect of those payment obligations. Declines in the value of foreign currencies relative to the pound sterling could adversely affect our ability to market our services to customers whose revenues are denominated in those currencies.

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Many of our government customers have the right either to terminate their contracts with us, or to reduce the services they purchase from us if a change of control occurs.

Many of our government contracts contain broad change of control provisions that permit the customer to terminate the contract in the event that we undergo a change of control. A termination in many instances gives rise to other rights of the customer, including, in some cases, the right to purchase certain of our assets used in servicing those contracts. Certain change of control provisions may be triggered when any lender (other than a bank lender in the normal course of business) or one or a group of holders of the Notes would have the right to control us or the majority of our assets upon any event, including upon bankruptcy. If the holders of the Notes have the right to control us or the majority of our assets upon such event, it could be deemed to be a change of control of the Company. Similarly, if STT’s ownership interest in GCL falls below certain levels, it could be deemed to be an indirect change of control of us. In addition, most of our government contracts do not include significant minimum usage guarantees. Thus the applicable customers could simply choose not to use our services and move to another telecommunications provider. If any of our significant government contracts are terminated as a result of a change of control or otherwise, or if the applicable customers were to significantly reduce the services they purchase under these contracts, we could experience a material adverse effect on our business, results of operations and financial condition.

Our dependence on a number of key personnel.

Our business is managed by a number of key personnel, including our directors, the loss of any of whom could have a material adverse effect on our business. In addition to our senior management, we rely upon key personnel of GCL, our parent company. Many of our key personnel spend time working for our parent or its affiliates and the amount of time they spend doing so is often out of our control. Our business and operations depend upon qualified personnel successfully implementing our business plan. We can offer no assurances that we will be able to attract and retain skilled and qualified personnel for senior management positions. The loss of key personnel employed by our parent or their need to spend additional time working for our parent or its affiliates or our failure to recruit and retain key personnel or qualified employees could have a material adverse effect on our business, results of operations and financial condition.

Our revenue is concentrated in a limited number of customers.

A significant portion of our revenue comes from a limited number of customers. For example, 52.9% (2007: 52.9%) of our revenue for the year ended December 31, 2008 came from our ten top customers. The public sector generated 45.6% (2007: 32.1%) of our revenue for the year ended December 31, 2008.

If we lose one or more of our major customers, or if one or more of our major customers significantly decreases use of our services, it may materially adversely affect our business, operations and financial condition. Our future operating results will depend on the success of these customers and our other large customers, and our success in selling services to them. If we were to lose a significant portion of the revenue from any of our top customers, we would not be able to replace that revenue in the short term.

The absence of firm commitments to purchase minimum levels of revenue or services in the majority of our customer contracts.

With few exceptions, our contracts with our customers do not provide for committed minimum revenues or service usage thresholds. Moreover, many of them contain benchmarking or similar provisions permitting or requiring the periodic renegotiation or adjustment of prices for our services based upon, among other things, changes in market prices within the industry. Accordingly, we cannot assure you that, even with respect to customer contracts of significant duration, we will be able to maintain per-unit pricing or overall revenue streams at current levels. If unit pricing declines and we are unable to sell additional services to such customers or services to new customers, or commensurately reduce costs, there could be a material adverse effect on our business, results of operations and financial condition.

We rely on a limited number of third party suppliers.

We depend on a limited number of suppliers and vendors for equipment and services relating to our network infrastructure. If these suppliers or vendors:

• experience financial or technical problems;

• develop favorable relationships with our competitors;

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• experience interruptions or other problems in their own businesses; or

• cannot or do not deliver these network components or services on a timely basis.

Then our ability to obtain sufficient quantities of the products and services we require to operate our business successfully may be diminished, and our business and operating results could suffer significantly. In certain instances, we may rely on a single supplier that has proprietary technology and/or provides key services that has become core to our infrastructure and business. As a result, we have come to rely upon a limited number of network equipment manufacturers, service providers and other suppliers, including BT, Ericsson, Network Rail, telent, Dimension Data and Siemens. If we needed to seek alternative suppliers, we may be unable to obtain satisfactory replacement suppliers on economically attractive terms, on a timely basis or at all, which could have a material adverse effect on our business, results of operations and financial condition.

Insolvency could lead to termination of certain of our contracts.

The lease to us by Network Rail (which owns the United Kingdom’s railway infrastructure) of fiber optic cable and ancillary equipment and our capacity purchase agreement with them which enables our use of the copper cable and private automatic branch exchange equipment (“PABXs”) which we use to deliver managed voice services to the train operating companies, comprise a key set of contractual documents in our relationship with Network Rail. The deed of grant is a related agreement that gives us wayleave rights until at least 2046 that permit us to maintain existing leased and owned fiber and network equipment and to lay new fiber and install new equipment, subject to specified payments to Network Rail. If we become insolvent, Network Rail becomes entitled, but not obligated, with certain exceptions, to terminate the lease, the capacity purchase agreement and the related deed of grant described above. Certain of our other customer contracts, including many of our government contracts, contain clauses entitling the counterparty to terminate should we become insolvent. Some of these contracts contain similar termination provisions that would apply if a direct or indirect parent company of us, including GCL, becomes insolvent. The loss of rights under the lease with Network Rail, the deed of grant, the capacity purchase agreement or any of the significant customer contracts containing similar termination provisions could have a material adverse effect on our business, results of operations and financial condition.

Risks related to Competition and our Industry

We face significant competition in the marketplace.

In the enterprise and carrier data and voice channels, we compete chiefly with various divisions of BT, Cable & Wireless and Verizon, which, on a combined basis, have a majority of the market share for these services. Concerning the government and rail sectors in particular, our principal competitors are BT and Cable & Wireless. Other competitors include COLT, Virgin Media, KCOM and Geo. Depending on the type of customer, we will compete on the basis of level of service, quality of technology and price. Our network reach, which includes not only the ability to connect with customers but also the ability to decrease the distance between enterprise entities and their point of interconnection with our network, is also a significant factor that determines our ability to compete for customers in the enterprise sector. The level of competition we face could lead to a reduction in our revenues and margins as well as other material adverse effects on our business, operations and financial condition.

The prices that we charge for our services have been decreasing, and we expect that such decreases will continue over time.

We expect overall price erosion in our industry to continue at varying rates based on our service portfolio and reflective of marketplace demand and competition relative to existing capabilities and availability and general macroeconomic conditions. Accordingly, our historical revenues are not indicative of our future revenues based on comparable traffic volumes. If the prices for our services decrease for whatever reason and we are unable to increase profitable sales volumes through additional services or otherwise or correspondingly reduce operational costs, our operating results would be adversely affected. Similarly, future price decreases could be greater than we are anticipating.

Technological advances and regulatory changes are eroding traditional barriers between formerly distinct telecommunications markets, which could increase the competition we face and put downward pressure on prices.

New technologies, such as voice over internet protocol (“VoIP”), and regulatory changes are blurring the distinctions between traditional and emerging telecommunications markets. As a result, a competitor in any of our business areas could potentially compete in our other business areas.

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We face competition in each of our markets from the incumbent carrier in that market and from more recent market entrants. In addition, we could face competition from other companies, such as other competitive carriers, cable television companies, microwave carriers, wireless telephone system operators and private networks built by large end-users or municipalities. The introduction of new technologies may reduce the cost of services similar to those that we plan to provide and create significant new competitors with superior cost structures. If we are not able to compete effectively with any of these industry participants, or if this competition places excessive downward pressure on prices, our operating results will be adversely affected.

The Office of Communications (“Ofcom”) is encouraging new operators to build their own infrastructures to compete with BT. At the same time, BT is constructing a new, IP-based network which it refers to as a “21st Century” network. At present, it is not clear how operators will connect with this network. There are currently no proposals as to how and at what level BT will charge for access to the network. Regulation has historically provided for the expansion of competition in the marketplace and the subsequent lowering of tariffs charged across the industry. However, there is no way to know with certainty what regulatory actions Ofcom and other governmental and regulatory agencies may take in the future. Individually and collectively, these matters could have negative effects on our business, which could materially and adversely affect our consolidated business, operations and financial condition.

Many of our competitors have superior resources, which could place us at a cost and price disadvantage.

Many of our existing and potential competitors have significant competitive advantages, including greater market presence, name recognition and financial, technological and personnel resources, superior engineering and marketing capabilities, more ubiquitous network reach, and significantly larger installed customer bases. As a result, many of our competitors can raise capital at a lower cost than we can, and they may be able to adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities (including regulatory changes) more readily, and devote greater resources to the development, marketing and sale of products and services than we can. Also, our competitors’ greater brand name recognition may require us to price our services at lower levels in order to win business. Our competitors’ financial advantages may give them the ability to reduce their prices for an extended period of time if they so choose. Many of these advantages are expected to increase with the trend toward consolidation by large industry participants.

Our selection of technology could prove to be incorrect, ineffective or unacceptably costly, which would limit our ability to compete effectively.

The telecommunications industry is subject to rapid and significant changes in technology, evolving industry standards, changing customer needs, emerging competition and frequent new product and service introductions. The future success of our business will depend, in part, on our ability to adapt to these factors in a timely and cost-effective manner. If we do not replace or upgrade technology and equipment that becomes obsolete, or if the technology choices we make prove to be incorrect, ineffective or unacceptably costly, we will be unable to compete effectively because we will not be able to meet the expectations of our customers, which would cause our results to suffer.

UK regulations require us to maintain a number of licenses and permits, the loss of any of which could affect our ability to conduct our business.

If we fail to comply with regulatory requirements or to obtain and maintain certain licenses and permits, including payment of related fees, we may not be able to conduct our business. In addition, we have obtained rights-of-way from utilities, railroads, incumbent carriers and other persons. These regulatory requirements, or the terms attaching to such rights-of-way, could change in a manner that significantly increases our costs or otherwise adversely affects our operations.

Terrorist attacks and other acts of violence or war may adversely affect the financial markets and our business and operations.

Significant terrorist attacks against the UK, the US or other countries in which we or other Group Companies operate are possible. It is possible that our physical facilities or network control systems could be the target of such attacks or that such attacks could impact other telecommunications companies or infrastructure or the Internet in a manner that disrupts our operations. Terrorist attacks (or threats of attack) also could lead to volatility or illiquidity in world financial markets and could otherwise adversely affect the economy. These events could adversely affect our business and our ability to obtain financing on favorable terms. In addition, it is

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becoming increasingly difficult and expensive to obtain adequate insurance for losses due to terrorist attacks. Uninsured losses as a result of such attacks could have a material adverse effect on our business, results of operations and financial condition.

Other risks

Our real estate restructuring provision represents a material liability, the calculation of which involves significant estimation.

As of December 31, 2008, our real estate restructuring reserve aggregated £31.0 million of continuing building lease obligations and broker commissions, offset by anticipated receipts of £20.6 million from existing subleases and £5.8 million from subleases projected to be entered into in the future. Although we believe these estimates to be reasonable, actual sublease receipts could be materially less than we have estimated which could in turn have a material adverse effect on our business, results of operations and financial condition.

The influence of our parent, actions our parent takes, or actions we are obliged to take as a result of our parent’s actions, together with the interest of certain of our directors due to ownership of, or options to purchase, our parent’s stock, may conflict with our interests.

Our parent company indirectly owns 100% of our share capital. Because our parent’s interests may differ from ours, actions our parent takes as a stockholder with respect to us may not be favorable to us or to holders of our Notes. Although we put into place upon the closing of the offering of the Initial Notes operational agreements to address the relationship between us and our parent, we remain dependent on our parent’s decisions regarding corporate strategies, its financial performance and other factors which may affect our parent as our sole stockholder. Also, the interests of our parent’s controlling stockholder, STT, may differ from ours. STT might impose certain strategic and other decisions on us through their control of our parent. We can offer no assurance that the interests of our parent or STT will not conflict with the interests of the holders of our Notes regarding these matters.

In addition to our operational agreements, our parent company can influence what we do with available cash flow. For example, during 2003 and 2004, we periodically upstreamed a portion of our cash on hand and operating cash flow to our parent company and its affiliates to repay loans. Although we did not upstream any cash in 2005, in 2006 we upstreamed $80.8 million via intercompany loans, $30.4 million of which were repaid in 2006. A further $5.0 million was upstreamed and repaid in 2007. We did not upstream any cash in 2008. It is possible that our parent company may use us as a source of funding, subject to the terms of the Indenture and applicable restrictions under English law, and that we will continue to upstream available cash to fund our parent’s and its subsidiaries’ operations. The terms of the Indenture permit certain upstream payments including, subject to certain restrictions, upstreaming up to 50% of our Operating Cash Flow, as defined in the Indenture.

Some of our directors and officers own or have options to purchase or other rights to receive our parent’s common stock and participate in our parent company’s incentive compensation programs. This could create, or appear to create, potential conflicts of interest when our directors and officers are faced with decisions that could have different implications for our parent than they do for us. Such directors and officers may not be liable to us or our stockholders for a breach of any fiduciary duty as one of our directors and officers by reason of the fact that our parent or any of its affiliates pursues or acquires a corporate opportunity for itself, directs a corporate opportunity to another person or such director or officer does not communicate information regarding such corporate opportunity to us, each of which could eventuality could have a material adverse effect on our business, results of operations and financial condition.

Our business may be disrupted due to the sharing of corporate and operational services with our parent.

We are a wholly-owned, indirect subsidiary of our parent and have received, and will receive in the future, corporate and operational services from our parent and its affiliates. In connection with the offering of the Initial Notes, we entered into a series of agreements formalizing the agreements under which we receive these services. See Item 7.B. “Major Shareholders and Related Party Transactions—Related Party Transactions—Inter-company Agreements.” We rely, and will continue to rely, on our parent and its affiliates to maintain the integrity of these services. Under certain circumstances, the pricing formulas for these services may change and, in other instances, our parent may cease to provide these services, including by terminating the agreements on one year’s prior notice. In the event our parent discontinues providing these services, there can be no assurance that we could obtain them on the same terms. Moreover, deterioration in the financial situation of our parent may adversely affect our ability to operate due to our reliance on our parent and its affiliates in some of these areas. This could have a material adverse effect on our business, results of operations and financial condition.

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Risk Related to the Notes and our Organizational Structure

Our ability to generate cash depends on many factors beyond our control.

The ability to make payments on our indebtedness, including the Notes, and to fund planned operating and capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors, including other factors discussed above under “—Risks Related to Our Business and Industry”, that are beyond our control. This has led to limited access to the capital markets by companies in our industry. Our access to the capital markets may also be limited in the future if our parent were to become financially distressed.

If our future cash flow from operations are insufficient to pay our debt obligations or to fund other liquidity needs, we may be forced to sell assets or attempt to restructure or refinance our existing indebtedness. We may also be required to raise additional debt or equity financing in amounts that could be substantial. We cannot assure our holders of the Notes that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness, including principal, interest and other amounts due in respect of the Notes. Nor can we assure holders of our Notes that we will generate sufficient cash flow to fund our other liquidity needs. We may need to refinance all or a portion of its debt, including the Notes, on or before maturity, and our ability to refinance such debt is generally dependent upon the availability and cost of credit. A disruption in the capital markets, such as the type of disruption that emerged in Europe and the United States during 2007, and has continued through the date of this report, could limit our ability to obtain credit at a reasonable cost. We cannot assure holders of the Notes that we will be able to refinance any of our debt, including the Notes, on commercially reasonable terms if at all.

The holders of the Notes should not rely upon funds from our parent company or its affiliates to service obligations under the Notes.

We have historically served, and in the future may serve, as a source of funding for our parent company and its affiliates. Prior to 2003, we incurred substantial amounts of intercompany indebtedness owed to our parent company and its affiliates. Since the second quarter of 2003, we have periodically made repayments on this indebtedness from our positive cash flow. Moreover, we upstreamed substantially all of the net proceeds of the offering of the Initial Notes on December 20, 2004, through repayment of debt or otherwise, to our parent company and its subsidiaries with the result that as at December 31, 2004 we had a zero intercompany balance. The intercompany debt balance remained zero as of December 31, 2005. As of December 31, 2007 there were loans due from affiliates of £25.3 million, comprising a $50.4 million loan due from Global Crossing Europe Limited (“GCE”). See note 26 “related parties” within the accompanying consolidated financial statements for the year ended December 31, 2008 included elsewhere in this annual report on Form 20-F. As of December 21, 2008 there were loans due from affiliates of £34.9 million, comprising a $50.4 million loan due from GCE.

We expect that our parent company may use us as a source of funding, subject to the terms of the Indenture and applicable English law, and that we may, accordingly, upstream available cash to fund our parent’s operations. This may happen in the form of loans or dividends or other distributions. However, it will not be possible for us to pay dividends to our shareholder, an indirect subsidiary of our parent, until such time as our accumulated realized profits exceed our accumulated realized losses. It is anticipated, therefore, that we will not be in a position to pay dividends for some time, and any funds to be upstreamed to our parent would be made by us by way of an intercompany loan. To the extent that these amounts take the form of loans, we are subject to the risk that our parent company and its affiliates will be unable to repay these amounts. The ability of our parent to repay these amounts is predicated upon, among other things, its financial condition and solvency.

On May 9, 2007, GCL entered into a $250.0 million five-year senior secured term credit facility (as amended, the “Term Loan Agreement”) with certain subsidiaries of GCL under which Goldman Sachs Credit Partners L.P. acts as administrative and collateral agent for a group of lenders. The term loan was increased to $350.0 million pursuant to an amendment to the Term Loan Agreement executed on June 1, 2007. In addition, under the terms of the GCL Term Loan Agreement, loans that we make to our parent or its subsidiaries are required to be subordinated to their payment obligations under the GCL Term Loan Agreement. Such subordination would restrict our ability to recover amounts under such intercompany loans during periods in which our parent would be experiencing financial difficulties. To the extent that these amounts take the form of dividends or other corporate distributions, there will be no obligation at all on the part of our parent company or its affiliates to repay these amounts. Although the terms of the Indenture restrict our ability to upstream amounts to our parent company and its affiliates in the future, these restrictions are subject to a number of important qualifications and exceptions that are described in the Indenture. The terms of the Indenture permit certain upstream payments including, subject to certain restrictions, upstreaming up to 50% of our Operating Cash Flow, as defined in the Indenture.

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Accordingly, we cannot assure holders of our Notes that we will have any access to funds from our parent company or its affiliates and the holders of the Notes, therefore, should not rely upon funds from them to service obligations under the Notes.

The restrictive covenants in the Indenture or future debt instruments may limit our operating flexibility. Our failure to comply with these covenants could result in defaults under the Indenture and any future debt instruments even though we may be able to meet our debt service obligations.

The Indenture imposes significant operating and financial restrictions on us. These restrictions significantly limit, among other things, our ability to:

• incur or guarantee additional indebtedness and issue certain preferred stock;

• engage in layering of debt;

• make certain payments, including dividends or other distributions, with respect to our shares or our restricted subsidiaries’ shares (save for dividends or other distributions by a restricted subsidiary to us or another restricted subsidiary);

• prepay or redeem subordinated debt or equity;

• make certain investments;

• create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to us by our restricted subsidiaries or on the transfer of assets to us by any of our restricted subsidiaries;

• sell, lease or transfer certain assets, including stock of restricted subsidiaries;

• engage in certain transactions with affiliates;

• enter into unrelated businesses; and

• consolidate or merge with other entities.

All these limitations are subject to significant exceptions and qualifications. See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness”. These covenants could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest. Any future debt instruments may also contain similar or more restrictive provisions that may affect our ability to engage in certain transactions in the future.

The restrictions in the Indenture governing the Notes and such other restrictions could limit our ability to obtain future financing, incur capital expenditures, withstand a future downturn in our business or the economy in general or otherwise take advantage of business opportunities that may arise. If we fail to comply with these restrictions, the holders of our Notes, or lenders under any future debt instrument, could declare a default under the terms of the relevant debt, even though we are able to meet debt service obligations and this could cause certain of our debt to become immediately due and payable. If our parent company or the guarantors of the GCL Term Loan Agreement fail to comply with the terms of that facility, then the lenders under that facility could declare a default. A declaration of default under the GCL Term Loan Agreement would have a material adverse effect on our parent, and consequently, would be likely to have a material adverse effect on us.

If a creditor accelerated any debt, we cannot assure holders of our Notes that we would have sufficient funds available, or that we would have access to sufficient capital from other sources, to repay the debt. Even if we could obtain additional financing, we cannot assure holders of our Notes that the terms would be favorable to us. If we default on any secured debt, the secured creditors could foreclose on their liens. As a result, any event of default could have a material adverse effect on our business and financial condition and could prevent us from paying amounts due under the Notes.

The Issuer is a subsidiary that was initially formed for the purpose of facilitating the issuance of the Initial Notes and has limited assets and revenue generating operations. The Issuer will be dependent upon GCUK to provide it with funds sufficient to meet its obligations under the Notes.

The Issuer was formed as a wholly owned subsidiary of GCUK for the purpose of facilitating the issuance of the Initial Notes. The Issuer has no operations and does not serve as a holding company for any operating subsidiaries. The intercompany loans funded with the proceeds from the Initial Notes and with the proceeds of the Additional Notes are the Issuer’s only significant assets. As such, the Issuer will be wholly dependent upon us to make payments on the inter-company loan or to make other funding arrangements in order for it to pay amounts due on the Notes.

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A significant portion of our assets will not be pledged for the benefit of the holders of the Notes. The collateral securing the Notes and the Guarantees may be diluted under certain circumstances. The value of the collateral securing the Notes and the Guarantees may not be sufficient to satisfy our obligations with regards to the holders of our Notes.

The Notes will be secured by certain of our assets and the assets of the Issuer, including the capital stock of GCUK’s subsidiaries, the Issuer and Fibernet. However, a significant portion of our assets will not serve as collateral for the Notes. In particular, we will not pledge:

• certain parts of the network leased by us, including any telecommunications cables and other equipment under a finance lease with Network Rail under which we lease approximately 20% of our lit fiber (calculated by fiber kilometers);

• any rights, title, interest or obligations under certain specified excluded contracts, including (i) any contract in which our counterparty is a UK governmental entity; and (ii) any contract in which our counterparty is a contractor or subcontractor to a UK governmental entity (these excluded contracts include those with the Foreign and Commonwealth Office (“FCO”), OGCbuying.solutions and other important customers);

• any equipment or assets owned by us located on the premises of the parties to excluded contracts and any equipment or assets used exclusively by us in connection with the provision of services and the performance of obligations under such contracts;

• property that we have pledged to Camelot in connection to our relationship with them; or

• any contract or agreement (or rights or interests thereunder) which, if charged, would constitute a breach or default or result in the invalidation or unenforceability of any rights, title or interest of the chargor under such contract or agreement.

Because these exceptions to the pledge mean that security will not be given over all or substantially all of our assets, the collateral agent will not be able to appoint either an administrative receiver or an administrator via an out of court procedure as a holder of a qualifying floating charge. The option to appoint an administrator by this route would likely otherwise have been available under applicable English insolvency law. The option to appoint an administrative receiver would also likely otherwise have been available under applicable English insolvency law for “Capital Market Arrangement” transactions as defined in the Insolvency Act 1986.

Moreover, the collateral that secures the Notes and the Guarantees may also secure additional debt to the extent permitted by the terms of the Indenture governing the Notes, including any further additional notes governed by the Indenture. The rights of the holders of the Notes to the collateral would be diluted by any increase in the debt secured by the collateral, including debt represented by additional notes issued under the Indenture.

Concurrent with the issue of the Initial Notes we entered into a five-year cross-currency interest rate swap transaction with an affiliate of Goldman, Sachs & Co., ending December 2009, to minimize exposure to any dollar/sterling currency fluctuations related to interest payments on the dollar-denominated ($200 million) Initial Notes. The swap transaction converts the US Dollar currency rate on interest payments to a specified pound sterling rate. At December 31, 2008 there was an asset of £2.8 million and an unrealized gain of £2.7 million on the swap. In connection with the swap transaction, the affiliate of Goldman, Sachs & Co. was granted a security interest in the collateral securing the Notes ranking equally with the security interest of the holders of the Notes. The security interest secures all obligations owed to the affiliate of Goldman, Sachs & Co. if a default occurs on the swap transaction or if the swap transaction is terminated. Depending on prevailing currency exchange rates, these obligations may be substantial. Any proceeds resulting from the exercise of security interests in the collateral will be shared pro rata among it and the holders of the Notes.

The value of the collateral and the amount to be received upon a sale of such collateral will depend upon many factors including, among others:

• the condition of the collateral;

• the ability to sell the collateral in an orderly sale;

• factors then affecting the telecommunications industry;

• the condition of the economy;

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• the availability of buyers;

• the time at which the collateral is sold; and

• the market price for assets that are similar to the collateral.

By their nature, portions of the collateral, including pledged capital stock of GCUK’s subsidiaries and real property and real property rights, may be illiquid and may have no readily ascertainable market value. In addition, a significant portion of the collateral consists of assets that may only be usable, and thus retain value, as part of our existing operating business. For example, although the collateral includes the portion of our fiber optic cable network that we own and that we are not prohibited by contract to pledge, it does not include the portion of our fiber optic cable network that is subject to the lease from Network Rail. Furthermore, although the collateral includes certain of our premises and other equipment that we are not prohibited by contract to pledge, it does not include such equipment that is subject to a right to purchase by certain of our government agency end-users. Accordingly, any such sale of the collateral separate from the sale of certain operating businesses may not be feasible or of significant value. To the extent that holders of other secured debt or third parties enjoy liens (including statutory liens), whether or not permitted by the Indenture, such holders or third parties may have rights and remedies with respect to the collateral securing the Notes and the Guarantees that, if exercised, could reduce proceeds available to satisfy the obligations under the Notes and the Guarantees.

The ability of the collateral agent to foreclose on the secured property may be limited.

Bankruptcy law could prevent the collateral agent on behalf of the holders of the Notes from repossessing and disposing of the collateral upon the occurrence of an event of default if the Issuer, the Guarantors or their respective creditors commence a bankruptcy proceeding before the collateral agent repossesses and disposes of the collateral. Under bankruptcy laws in certain jurisdictions, including the United States, secured creditors such as the holders of the Notes are prohibited from repossessing their security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. It is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, and to what extent such payments would be made, and whether or when the collateral agent could repossess or dispose of the collateral or whether or to what extent a holder of the Notes would be compensated for any delay in payment or loss of value of the collateral.

We may not have the ability to raise the funds necessary to finance a change of control offer upon the occurrence of certain events constituting a change of control as required by the Indenture.

Upon the occurrence of a “change of control”, as defined in the Indenture, the Issuer will be required to make an offer to purchase all outstanding Notes at a price in cash equal to 101% of the principal amount thereof, plus any accrued and unpaid interest to the date of repurchase. Events involving a change of control may result in an event of default under any other debt that may be incurred in the future. This could result in an acceleration of the payment of that debt as well. We cannot assure holders of our Notes that the Issuer would have sufficient resources to repurchase the Notes or pay its obligations under the Notes or that we would have sufficient resources to do so if the debt under any other future debt were accelerated upon the occurrence of a change of control. If a change of control occurs at a time when we or the Issuer are prohibited from purchasing the Notes under any other debt agreements, we or the Issuer could seek the consent of any lenders to purchase the Notes or could attempt to refinance the borrowings that prohibit our repurchase of the Notes. If we or the Issuer do not obtain that consent or repay the borrowings, the prohibition from purchasing the Notes would remain. In addition, we expect that we would require third-party financing to make an offer to repurchase the Notes upon a change of control. We cannot assure you that we would be able to obtain such financing. Any failure by the Issuer to repurchase any of the tendered Notes would constitute an event of default under the Indenture, which would likely cause a default under any other indebtedness.

The change of control provision contained in the Indenture may not necessarily afford you protection in the event of certain important corporate events, including a reorganization, restructuring, merger or other similar transaction involving us that may adversely affect you, because such corporate events may not involve a shift in voting power or beneficial ownership or, even if they do, may not constitute a “change of control” as defined in the Indenture. Except for the exceptions and qualifications that are described in the Indenture governing the Notes, the Indenture does not contain provisions that require us to offer to repurchase or redeem the Notes in the event of a reorganization, restructuring, merger, recapitalization or similar transaction.

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The definition of “change of control” contained in the Indenture includes a disposition of all or substantially all of the assets of GCUK and its restricted subsidiaries taken as a whole to any person. Although there is a limited body of US case law interpreting the phrase “all or substantially all,” there is no precise established definition of the phrase under applicable US law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of GCUK and its restricted subsidiaries taken as a whole. As a result, it may be unclear as to whether a change of control has occurred and whether the Issuer is required to make an offer to repurchase the Notes.

We could be substantively consolidated into a bankruptcy proceeding with our parent company or its subsidiaries if it were to seek protection from its creditors in bankruptcy.

Substantive consolidation is a doctrine used by courts in the United States to treat the assets and liabilities of different, but related, entities as though a single merged entity held those assets and liabilities in order to ensure the equitable treatment of all creditors. Under existing case law, application of the doctrine of substantive consolidation does not affect the interests of secured creditors in the collateral securing their claims. The case law applying the doctrine generally states that courts should use it sparingly because of the inequities that could result from its application, including the harm its invocation could cause to creditors who relied on the separate legal existence of any of the entities being consolidated in extending credit to that entity.

Different courts purport to follow different tests in the application of the doctrine, but in the majority of jurisdictions, the application of the doctrine is fact intensive and requires the consideration of factors, among others, such as whether creditors relied on the separate legal existence of one of the entities sought to be consolidated in extending credit and the manner in which the entities conducted themselves, both as a legal matter (for example, whether corporate formalities were followed) and as a business matter (for example, whether the entities held themselves out as separate and distinct entities instead of a single, integrated business entity). Some jurisdictions also consider, among other things, whether the benefits of consolidation to the combined creditor pool outweigh the harm that consolidation may cause.

If our parent company were the subject of a voluntary or involuntary bankruptcy proceedings in the United States, it or its other subsidiaries or their creditors could seek to have a US court substantively consolidate our assets and liabilities with those of our parent company or its other subsidiaries. Based on existing facts, we believe that any effort to substantively consolidate us with our parent company or its other subsidiaries would be without merit. However, as the application of the doctrine is fact-intensive, such applications may take into account both facts existing as of the date of this annual report on Form 20-F and subsequent facts (such as the manner in which the legal affairs of our parent and its subsidiaries are conducted). If a US court were to substantively consolidate us with our parent company or its other subsidiaries and, in the event that:

• the claims of the holders of the Notes were under secured; or

• the court held that the substantive consolidation would not give effect to the security interests and liens in favor of the Notes to the same extent (or at least not to a lesser extent) as such security interests and liens would have been enforced without consolidation,

then there could be a material adverse effect on our ability to make payments on the Notes.

Holders of the Notes may have difficulty enforcing their rights across multiple jurisdictions.

The Issuer and each Guarantor is incorporated in England. Our parent company is incorporated under the laws of Bermuda and has substantial ties to the United States and its other subsidiaries are incorporated in various jurisdictions. In the event that any one of the Issuer, any Guarantor, our parent company or any of its subsidiaries experiences financial difficulty, it is not possible to predict with certainty the jurisdiction or jurisdictions in which insolvency or similar proceedings would be commenced or the outcome of such proceedings.

If a bankruptcy, insolvency or similar event occurs, there could be proceedings involving our parent company or its subsidiaries in England, Bermuda, the United States or elsewhere and it is possible that we could be made a part of these proceedings. Multi-jurisdictional proceedings are likely to be complex and costly for creditors and otherwise may result in greater uncertainty and delay regarding the enforcement of the holders of the Notes rights. The rights of the holders of the Notes under the Notes and the Guarantees could be subject to the insolvency and administrative laws of several jurisdictions, and therefore we cannot assure holders of the Notes that they will be able to effectively enforce their rights in such complex multiple bankruptcy, insolvency or similar proceedings.

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In addition, the bankruptcy, insolvency, administrative and other laws of these various jurisdictions may be materially different from, or be in conflict with, one another and those with which holders of the Notes may be familiar, including in the areas of the rights of creditors, the priority of governmental and other creditors, the ability to obtain post-petition interest and the duration of the proceedings. These laws may also not be as favorable to the interests of the holders of the Notes as the laws with which they may be familiar. The application of these laws, or any conflict among them, could call into question whether any particular jurisdiction’s laws should apply and could adversely affect the ability of the holders of the Notes to enforce their rights under the Notes and the Guarantees in the relevant jurisdictions or limit any amounts that they may receive.

US federal and state statues could allow courts, under specific circumstances, to void the Guarantees and require holders of Notes to return payments received from the Guarantors, or the Guarantees may be otherwise limited by applicable laws or subject to certain procedures that could limit or prevent the Guarantors from making payments under the Guarantees.

Each Guarantee provides the holders of Notes with a direct claim against the relevant Guarantor. However, a Guarantor (other than GCUK) may be released from its Guarantee at any time upon certain transfers by GCUK or its restricted subsidiaries, of all capital stock of such Guarantor in accordance with the provisions of the Indenture. In addition, in some other circumstances, a Guarantor may be released from its subsidiary Guarantee in connection with our designation of such Guarantor as an unrestricted subsidiary.

In addition, the enforcement of such Guarantees against each of the Guarantors would be subject to certain defenses generally available in connection with guarantees. These laws and defenses include those that relate to fraudulent conveyance or transfer, bankruptcy claw-back, corporate purpose, conflicts of interest, or similar laws, regulations or defenses affecting the rights of creditors generally.

Under the US federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

• received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee;

• was insolvent or rendered insolvent by reason of such incurrence;

• was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or

• intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.

The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

• the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;

• if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

• it could not pay its debts as they become due.

On the basis of historical financial information, recent operating history and other factors, we believe that each Guarantor, after giving effect to its Guarantee of the Notes, was not insolvent, did not have unreasonably small capital for the business in which it is engaged and did not incur debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. In the event that any Guarantee obligation is clawed-back or deemed to be invalid or unenforceable, you would cease to have any claim against the relevant Guarantor and would be a creditor solely of the Issuer, or would have a reduced claim against such Guarantor.

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English insolvency laws may limit the ability of holders of the Notes to recover amounts due on the Notes and the Guarantees.

Because the Issuer and each of the Guarantors are UK-registered corporations and our respective centers of main interest (as referred to in the EC Regulation on Insolvency Proceedings 2000, or European Insolvency Regulations) are in England, any insolvency proceedings by or directed against us are likely to be pursuant to English laws (although, as mentioned in “—Holders of the Notes may have difficulty enforcing their rights across multiple jurisdictions” we cannot exclude the possibility that, given our parent company’s ties to the United States, the US bankruptcy code might apply). Due to the nature of English insolvency laws, the claims of the holders of the Notes against the Issuer and, under each Guarantee, each Guarantor, and their ability to protect their interests will be affected in a different manner and by different factors than they would be under US bankruptcy law. Although both systems have as a basic principle the fair distribution of a company’s assets among its creditors, there are differences between the two systems. Creditors who benefit from a fixed charge may be able to realize the relevant asset by the appointment of a receiver. The charge securing the Notes is a fixed charge over certain assets and a floating charge over certain of the other assets.

Under English law, certain claims receive priority over claims secured by way of a floating charge, including contributions to occupational pension plans, salaries owed to employees, and administration expenses. Liquidation expenses will also be paid in priority to a floating chargeholder claim upon the enactment of a new section of the Insolvency Act 1986 which will be introduced by the Companies Act 2006, which came into force on April 6, 2008. Obligations owed to the HM Revenue & Customs (“HMRC”), rank alongside all other unsecured creditors of an insolvent company.

Where the property of a company is subject to a floating charge and the company enters into a formal insolvency process, the insolvency practitioner is obligated to “ring-fence” a proportion of assets covered by that floating charge for distribution to the company’s unsecured creditors. Such proportion will not be available for distribution to holders of a floating charge over those assets except to the extent that the amount exceeds the amount required to satisfy unsecured debts. The proportion which will be set aside is 50% of the first £10,000 and 20% of property exceeding £10,000, to a maximum ring-fenced amount of £600,000.

Under the Insolvency Act 1986, the English courts may, on an application by the company, the directors of the company or one or more creditors, make an administration order in respect of an English company if the court is satisfied that the company is or is likely to become unable to pay its debts and that an administration order is likely to achieve the purpose of administration which is specified in the legislation may be met by the making of the order. An administrator must perform his functions with the objective of (i) rescuing the company as a going concern; or (ii) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration); or (iii) realizing property in order to make a distribution to one or more secured or preferential creditors. The administrator must perform his functions in the interests of the creditors, as a whole. During the administration, no proceedings or other legal process may be commenced or continued against the debtor, except with the leave of the court or the consent of the administrator. If either we or the Issuer were to commence administration proceedings, the Notes and the Guarantees could not be enforced while in administration without having obtained such permission.

The holder of a floating charge relating to the whole or substantially the whole of the company’s property, or the company itself or its directors may place a company into administration using an out-of-court procedure. The trustee will not hold such a charge, will not be entitled to commence an administration out of court and will not be given prior notice of the making of, or an intention to make, an administration order.

A liquidator or an administrator has the power to challenge transactions of the company if the company is insolvent at the “relevant time” (as set out below) or becomes insolvent as the result of the transaction in question.

A company enters into a transaction with a person at an undervalue if, at a time in the period of two years ending with the onset of the insolvency of the company:

• the company makes a gift to that person;

• the company enters into a transaction with that person on terms that provide for the company to receive no consideration; or

• the company enters into a transaction with that person for a consideration the value of which, in money or money’s worth, is significantly less than the value in money or money’s worth of the consideration provided by the company.

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An administrator or liquidator of the company may apply to the court where there is shown to have been a transaction at an undervalue, and the court may make an order to restore the position to what it would have been if the company had not entered into the transaction (unless the court is satisfied that the company that entered into the transaction did so in good faith and for the purpose of carrying on its business, and that, at the time it did so, there were reasonable grounds for believing that the transaction would benefit the company).

If there has been a transaction at an undervalue and it can be shown that the transaction was undertaken in order to put the company’s assets beyond the reach of a potential creditor (otherwise known as a transaction defrauding creditors), it is also possible for an administrator or liquidator, or any other person who has been prejudiced by the transaction (which includes creditors of the company), to make an application to the court. There is no time limit for such an application. In such circumstances, the court may make such order as to restore the position to that which it would have been and to protect the interests of creditors who would be prejudiced.

If the liquidator or administrator can show that the company has given a “preference” to any person at a time in the period of six months ending with the onset of liquidation or administration (or at a time in the period of two years ending with the onset of the insolvency of the company if the preference is to a person with specified affiliations with the company) and, at the time of the preference, the company was technically insolvent or became so as a result of the preferential transaction, a court has the power, among other things, to void the preferential transaction.

For these purposes, a company gives preference to a person if that person is one of the company’s creditors (or a surety or guarantor for any of the company’s debts or liabilities) and the company takes an action that has the effect of putting that person into a position which, in the event of the company going into insolvent liquidation, will be better than the position that person would have been in if that action had not been taken. The court may not make an order voiding a preferential transaction unless it is satisfied that the company was influenced by a desire to put that person in a better position. If a court were to find that payments on the Notes or the Guarantees are preferences, this provision of English law may lead to an adjustment of our and the Issuer’s obligations in relation to the Notes.

Where a floating charge is created in favor of any person at a time in the period of twelve months ending with the onset of that company’s insolvency (or at a time in the period of two years ending with the onset of that company’s insolvency if the charge is given in favor of a person with specified affiliations with the company), that floating charge is invalid except to the extent that it has received valuable consideration in return for creating the charge. However, the collateral agent could not appoint an administrator out of court but instead would have to apply to the court to have an administrator appointed. This is because the exceptions to the pledge mean that security will not be given over the whole or substantially the whole of our assets. For the same reason, the collateral agent could not appoint an administrative receiver under the capital markets exception to the prohibition of appointment of an administrative receiver in the Insolvency Act 1986. The security documents therefore do not contain provisions dealing with the appointment of an administrator out of court or an administrative receiver.

Under English insolvency law, any debt payable in a currency other than pounds sterling (such as US Dollars, in the case of certain of the Notes and the Guarantees) must be converted into pounds sterling at the “official exchange rate” prevailing on the date when the debtor went into liquidation or administration. The “official exchange rate” for these purposes is the middle market exchange rate on the London Foreign Exchange Market at the close of business, as published for the date in question or, if no such rate is published, such rate as the court determines. Accordingly, if we or the Issuer are insolvent, holders of the US Dollar-denominated Notes may be subject to exchange rate risk between the date that the Issuer or we went into liquidation and receipt of any amounts to which such holders of Notes may become entitled.

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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Corporate Information

GCUK was incorporated on April 25, 1990 as a limited company under the laws of England and Wales. GC Finance, our wholly owned finance subsidiary, was incorporated on October 22, 2004 as a limited company under the laws of England and Wales. Our wholly owned subsidiaries Fibernet Group Limited (formerly Fibernet Group plc), Fibernet UK Limited and Fibernet Limited were incorporated under the laws of England and Wales on January 26, 1996, June 17, 1994 and February 24, 1986, respectively.

The address of our registered office, together with that of our wholly owned subsidiaries, is 1 London Bridge, London, SE1 9BG, United Kingdom and our telephone number is +44 845 000 1000.

Corporate History

We originated as the network services arm of Racal Telecommunications Limited (“Racal” or “our predecessor company”). Racal began operations in fixed line communications in 1988 when the UK government awarded it the contract to establish and maintain the government Data Network. Through this contract, Racal’s network services business provided managed voice and data services and other communications offerings to numerous UK government departments.

As the volume of this business increased, it made commercial sense for Racal to own its own network infrastructure and assets, allowing it to lower its cost base and provide a platform to offer more advanced services at improved margins. In December 1995, Racal acquired BR Telecommunications (“BRT”), one of the companies that emerged out of the UK railway privatization process. BRT owned the rights and assets that Racal considered necessary to create a viable telecommunications company based on the fiber network originally created for the UK national railway, together with associated contracts.

Acquiring BRT provided Racal with the opportunity to manage a substantial communications network infrastructure. It also allowed Racal to extend this infrastructure on a cost-effective basis through its long-term wayleave rights over the land of the British Railways Board as well as Network Rail, then called Railtrack plc, that was the new operator of the national railway infrastructure (although not the trains themselves). In addition, BRT brought to Racal a series of medium- and long-term contracts for services provided to the newly privatized national railway infrastructure, as well as to the train operating companies (“TOCs”). The addition of these customer contracts significantly increased Racal’s telecommunications customer base.

Leveraging its network assets, Racal was able to market and deliver advanced managed network services to a growing range of customers, while retaining its core focus on the government and rail sectors. Meanwhile, our old parent company was building the world’s largest integrated IP network, based on fiber-optic technology. As part of its overall strategy, our old parent acquired us in November 1999. In addition, as part of our old parent’s acquisition of Frontier Communications in September 1999, we acquired Frontier’s UK businesses, including the termination of national and international voice services, which now constitutes part of our business.

The Fibernet Acquisition

Fibernet Group was founded in 1986. Historically a competitor as well as one of our largest carrier customers, Fibernet is a provider of specialist telecommunications services in the United Kingdom. Fibernet Group’s customers are typically organizations in the retail, financial services and manufacturing sectors. Fibernet Group also provides services to its service provider customers.

During 2006, our affiliate, GC Acquisitions acquired Fibernet Group plc, a publically listed company. Following application made to the Financial Services Authority, Fibernet Group plc shares were de-listed from the official list of the London Stock Exchange. In December 2006, we acquired Fibernet from GC Acquisitions.

On December 28, 2006, we announced that the Issuer had completed its offering of the Additional Notes. The £52.0 million aggregate principal amount of Additional Notes was priced at 109.25 percent of par value and the issue raised £56.8 million in gross proceeds. The Additional Notes were issued under the Indenture pursuant

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to which the Issuer previously issued its Initial Notes. Proceeds from this offering were used to acquire Fibernet from GC Acquisitions and to pay fees and expenses incurred in connection with the acquisition. Upon completion of the acquisition by GCUK, Fibernet guaranteed the Additional Notes and all other obligations under the Indenture. Prior to the acquisition by GCUK, Fibernet Group transferred its German business operations, by way of a transfer of Fibernet Holdings Limited and its wholly owned subsidiary Fibernet GmbH, to GCI, for consideration of £1 and the assumption, by GCI, of £3.6 million of debt outstanding to Fibernet. This £3.6 million debt was settled by GCI in full in June 2007.

Historically, Fibernet Group classified its customer base into enterprise customers, service provider customers and customers it reached via its systems partners. Since being acquired by GC Acquisitions, and then by us, its customer base has been reclassified into enterprise customers and carrier customers, designating its original enterprise customers and its enterprise customers reached via its systems partners as its enterprise customers and designating its original service provider customers and the service provider customers reached via its systems partners as its carrier customers. This new classification aligns the customer base of Fibernet with GCUK’s classification of its enterprise customers and carrier customers. Where we refer to Fibernet’s customers in this annual report on Form 20-F, unless the context requires otherwise, we are referring to these new classifications. Revenue from Fibernet’s enterprise and carrier customers represented 32% and 68%, respectively, of its revenue for the year ended December 31, 2008.

Fibernet Group’s financial results for the fiscal year ended August 31, 2006 included revenue of £48.9 million and an operating loss of £1.4 million.

During 2007 we completed the integration of Fibernet into our business.

B. Business Overview

Services Offered

We are a leading UK communications solutions provider offering a suite of IP and telecommunications services. We are an indirect, wholly-owned subsidiary of, and the principal UK telecommunications business of, Global Crossing. We have a strong and established enterprise customer base, including over 100 UK government departments, information technology systems integrators, rail sector customers and major corporate clients, to whom we provide tailored services. These enterprise customers represented 79.8% of our revenue for the year ended December 31, 2008. We also provide services to our carrier customers, who are typically national and international communications service providers, including mobile network operator customers.

We operate the most extensive fiber optic network in the UK after BT and Cable & Wireless. Because of our network’s reach and capacity, we believe that we are well positioned to take advantage of new business opportunities with modest incremental capital expenditure.

Despite the highly competitive nature of the telecommunications industry we operate in, we have been able to maintain a significant recurring revenue stream and stable margins through a strong product and service suite and strong customer relationships. Our financial results for the year ended December 31, 2008 included revenue of £322.8 million, operating profit of £28.9 million and the generation of £40.9 million of operating cash flow, after interest payments of £33.1 million.

We provide a wide range of managed telecommunications services, to government and other public sector organizations, major corporations and other communications companies.

Enterprise Services

In general, we provide enterprise customers with a range of managed services that typically are complex in character. These services are predominantly managed data and IP services tailored to address our customers’ specific requirements. We also supply managed voice services, including national and international direct dial, teleconferencing and non-geographic number services (for example, toll-free services) and VoIP. We frequently bundle our voice services with data services and supply them on a competitive basis with customized tariff structures.

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We provide both managed data and traditional voice services and IP-based services. The components of our traditional voice and data communications services include the following products:

• Managed services. We provide managed data and voice services, offering all of the benefits of a private corporate telecommunications network, with full management of the network infrastructure, including technology refreshes, security and maintenance. Our managed data and voice services offer 24 hour network monitoring, fault reporting and competitive service level agreements (“SLA”). With the acquisition of Fibernet, we are able to provide additional managed services that include, among others, data center connectivity, low cost connectivity for organizations with bandwidth demands and real time transaction replications.

• Data connectivity through access to national and international IP networks. We have a converged IP-based services platform. We have built a high speed multi-service multi-protocol label switching (“MPLS”)/IP core network with full end to end support for Class of Service (“CoS”) and Quality of Service (“QoS”). This is enabling us to offer IP-based services such as IP-based virtual private networks (“IP-VPN”), VoIP and IP Video delivered over a single access loop (i.e. a converged service) to our customers, whether in isolation or bundled with an end to end managed solution. Our implementation of a high speed MPLS core along with IP CoS/QoS and associated SLAs, provide a high level of performance, making it ideal for customers such as government, financial, media and entertainment organizations.

• Leased lines and international private leased lines. We provide both domestic private leased lines and international private leased lines. Our private leased lines provide point-to-point capacity on a cost-effective basis with security and 24-hour availability. Our international private leased lines, supplied by means of trading agreements with our parent, provide uncompromised security and 24-hour availability. Both our domestic private leased lines and our international private leased lines are suitable for voice, video and data transmission.

• Direct dial voice services. We provide direct dial voice calling to fixed geographic and non-geographic numbers in the UK and international locations. We provide routing and delivery of calls over our own voice transmission network and out to the PSTN networks of other operators via a collection of both domestic and international carrier interconnections.

• Ethernet connectivity. We provide point-to-point and point-to-multi-point virtual private network (“VPN”) Ethernet services within the UK and across Europe, North America and Asia. These can be standalone services or used as access to IP-VPN or Converged Service offerings.

• Professional services. We have historically assisted certain of our customers with design, assessment and project and lifecycle management exercises undertaken by them. We are currently formalizing a full professional services capability together with selected partners. This capability includes, but is not limited to, local area network (“LAN”) and wide area network (“WAN”) diagnostics and infrastructure discovery and assessment on a customers existing network, enabling more intelligent Voice, Data and Converged solutions to be deployed to meet our customers’ commercial and operational efficiency needs—often resulting in lower bandwidth being required than expected. This new range of services is expected to generate new revenue streams and help to strengthen long term relationships with new and existing customers.

The components of our IP-based services include IP-VPN, VoIP and IP Video services:

• IP-VPN.IP-VPN is the corner stone of our converged service offering. It provides customers with a secure connection between their offices, business partners and customers within a virtual private IP network consisting of intranets and extranets running over our backbone. This allows customers to send traditional data as well as VoIP and IP Video, and any other IP-based service between sites and/or the public telephony network. This is possible through our implementation of CoS/QoS, to ensure that the VoIP, video and data traffic is correctly handled within the customer’s network. Through our flexible billing capabilities we can provide efficient charging schemes such that customers only pay for the traffic they send rather than the fixed bandwidth required in traditional implementations of data, voice and video networking. In addition, we recently introducedContent Delivery Network services, implementing a multi-vendor reselling approach to bring our customers a fast, efficient way to move content among their employees, customers and vendors.

• VoIP. VoIP enables cost effective transport of voice over our IP network. Currently customers using our IP-VPN products have the benefit of transferring voice as data over their IP-VPNs. With our suite of VoIP services, a customer is able to receive inbound calls from the PSTN, send calls to the PSTN or to manage a short-code dial plan for calls between sites.

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• IP Video. We offer IP Video point-to-point connectivity over our IP network, enabling such applications as video conferencing from the desktop.

• Hosted IP telephony.We have partly completed the first phase of the development of a range of hosted IP telephony services which ultimately will include a full suite of unified communications and collaborative services. Hosted IP telephony offerings now comprise the UK’s only pan-government accredited, secure version of such services, while a separate set of offers on segregated infrastructure for the broader commercial (i.e. non-government) enterprise sector is nearing completion. Hosted IP telephony services should complement Global Crossing’s existing capability to meet the other market needs for IP PABX delivered VoIP services.

The Hosted IP Telephony Service may be combined with Global Crossing’s IP-VPN service to produce a true converged solution or taken as a standalone product. Third-party IP-VPN connectivity is also being supported.

Already this development has helped secure a long term contract renewal with OGCbuying.solutions, an Executive Agency of the Office of Government Commerce (“OGC”) in the Treasury, which utilizes hosted IP telephony in the provision of managed telephony services across the government, a new contract win with HMRC, and interest from customers and potential customers in the commercial enterprise sector.

The acquisition of Fibernet brought with it the capability to build managed optical networking solutions, for example, to link data centers.

Carrier Services

Our Carrier Services consist of sales to other network operators and communications providers of IP transit, Ethernet, local loop, wavelengths and private lines. We also sell wholesale voice services that include carrier voice service, “One Rate” service, carrier pre-select and non-geographic numbering. We currently provide capacity, dark fiber and empty fiber ducts to third parties pursuant to lease agreements and IRU agreements.

Our Carrier data services include:

• Structured capacity. Our structured capacity service offerings encompass point-to-point connectivity and maintenance services for which we charge annual service fees.

• Wavelengths. Wavelengths (usually 2.5 Gbit/s or 10 Gbit/s) continue to be a popular product for carriers looking to acquire large quantities of capacity.

• Private line. “Global Crossing Private Line” is a basic connectivity, structured capacity service allowing customers to build private networks and carry a full range of their business-critical applications. This includes Partial Private Circuits (“PPC”), which are local access circuits built deep into the BT exchanges.

• Ethernet services. “Global Crossing Ethersphere” is a connectivity service ranging from Point to Point to MultiPoint to MultiPoint connectivity at speeds of 10Mb, 100Mb and 1Gb. Point to point Ethernet connectivity is available at data rates of up to 10Gbps.

• Capacity, dark fiber and empty duct IRUs. We sell the right to use capacity on our network which can take the form of structured capacity, dark fiber or space in empty fiber ducts on our terrestrial networks.

• IP Transit. Our “IP Transit Service” offers international carriers and internet service providers (“ISPs”) wholesale internet connectivity to all worldwide domains.

In addition to our carrier data services, we provide the following carrier voice services:

• Carrier voice service. Our carrier voice service offers wholesale voice call completion to most destinations throughout the world (whether on a fixed or mobile network). Interconnects can be provided on Time Division Multiplexing (“TDM”) or VoIP.

• Voice local services. Our voice local services provide local inbound numbers to our Carrier customers, including number portability.

• One Rate. Our “One Rate” service is a special pricing and billing option allowing customers to terminate very significant volumes of voice traffic to pre-determined UK fixed destinations for a single monthly charge.

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• Carrier pre-select. Carrier pre-selection enables carrier customers to automatically pre-select us as a carrier of choice for voice traffic without the need to create their own network infrastructure or links into our network. We provide these services through a web-based interface.

• Non-geographic numbering. Our non-geographic number service provides our customers with the ability to offer toll-free local or national rate access for most western European nations.

• London carrier ring. Our London carrier ring provides connectivity among carriers wishing to exchange data or voice traffic, regardless of whether the carriers are on a time division multiplexing platform or an IP platform.

Collaboration Services

We offer a full range of collaboration services, including the audio, video and Web conferencing services described below:

Videoconferencing Services. These services provide video over IP and Integrated Services Digital Network (“ISDN”) platforms, using multipoint bridging to connect multiple sites. Our iVideoconferencing^SM offering sends ISDN calls onto our IP network, minimizing dependence on international ISDN lines for superior quality, reliability and cost savings. Enhanced options available with our videoconferencing services include scheduling, recording and hybrid meetings that combine our audio and video services.

Audio Conferencing. Ready-Access^® is our on-demand/reservationless audio conferencing service with toll free access in key business markets worldwide.Event Call provides highly reliable, operator assisted, full-service conference calls. Participants can access this service by dialing in on either a toll or a toll-free number, or by being dialed out to by an operator. This service is suitable for as few as three or up to thousands of participants. Enhanced service options includePostView^® conference playback, taping/transcription service, translation services and on-line participant lists.

Web Conferencing. Ready-Access Web Meeting is fully integrated withReady-Access audio conferencing for on-demand collaboration, allowing customers to manage their calls on-line, change account options, share presentations with participants, and record entire meetings, including visuals.eMeeting is a full-featured Web conferencing application that allows customers to collaborate and share documents, presentations, applications, data and feedback with polling and instant messaging features.Global Crossing Live Meetinguses technology licensed from Microsoft^® to allow multiple attendees to participate in meetings using only their computer, a phone, and an Internet connection. We have integratedReady-Access as an audio conferencing component intoLive Meeting.

Customers

We have an established enterprise customer base of over 500 customers, including more than 100 UK government departments, information technology systems integrators, rail transport agencies and medium to large corporate clients across various industry segments. We also have carrier customers. Revenue from our enterprise customers and carrier customers represented 79.8% and 20.1%, of our total revenues respectively, for the year ended December 31, 2008. Revenue from government departments, a component of enterprise revenue, represented 45.6% of total revenue for the year ended December 31, 2008. We typically enter into multi-year service contracts with our enterprise customers and provide them with a range of services tailored to their specific requirements. Revenue from enterprise customers with whom we have multi-year contractual relationships represented 76.7% of our total revenue for the year ended December 31, 2008.

Enterprise Customers

Since November 1999, we have derived the majority of our enterprise revenue from UK government departments and rail transport agencies. Over time, we have experienced growth through sources including the expansion of existing government relationships, such as the provision of services for our government customers during their technology refreshes and capacity upgrades, and the development of new customer relationships. During 2008, we entered into 921 new contracts with existing enterprise customers and added 84 new enterprise customers. Our enterprise revenue was £219.7 million, £247.3 million and £257.6 million for the years ended December 31, 2006, 2007 and 2008, respectively. Our enterprise customers are typically large organizations with significant annual telecommunications budgets, which, along with the long-term nature of the contracts, have historically provided us with significant recurring revenue. Certain of our principal customer relationships include: British Council; EDS (Her Majesty’s Prisons); FCO; Her Majesty’s Revenue and Customs; Lockheed Martin; Network Rail; and OGCbuying.solutions (Managed Telecom Service).

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The table below sets forth information regarding our enterprise revenue concentration. These amounts represent revenue for the periods indicated.

	Year ended December 31,
	2006		2007		2008
	(in millions)
Enterprise revenue from Top 20 Customers(1)	£	183.8	£	186.0	£	199.0
Other Enterprise Revenue(1)		35.9		61.3		58.6
Total Enterprise Revenue(1)	£	219.7	£	247.3	£	257.6

⁽¹⁾ Revenue in this table is based on historical information and does not necessarily indicate future revenue-generating capability.

The acquisition of the Fibernet Group expanded our enterprise customer base through the inclusion of large organizations with high bandwidth and complex data networking requirements in the financial services, retail and manufacturing sectors.

Carrier Customers

We provide carrier services to a range of leading mobile and fixed line operators. Our carrier customers include Vodafone, O2, AT&T, BT, Cable & Wireless, Sprint, KCOM, ntl:Telewest (now part of Virgin Media), Verizon, Easynet and COLT. The services that these operators require vary according to the current reach and capacity and planned build of their assets in the United Kingdom and include for example, usage-based interconnection services Ethernet, wavelengths, local loop access and prepaid leases.

Our carrier customers accounted for 20.1% of our revenue in the year ended December 31, 2008. During this period, no carrier customers individually accounted for more than 2% of total revenue.

Our Core Network

We operate a high capacity and resilient optical transport network which consists of approximately 15,690 route kilometers (9,750 route miles) of national fiber optic cable which covers in excess of 130 towns and cities, approximately 45% of which is owned by us. The remainder is leased by us. Approximately 55% of this fiber runs in troughs along the UK rail network. Our core fiber network interconnects to local network providers at 395 points of presence (“PoPs”)—including sites where we extend into our customer premises and telehousing facilities—and 78 main switching units. This number of interconnections provides us with extensive customer reach at an advantageous cost of access.

Our nationwide fiber optic network currently contains lit fiber (optical fiber that has been connected to transmission equipment and is in use) and significant dark fiber (optical fiber that is not connected to transmission equipment and is not in use). We own approximately 75% of the currently lit fiber and, wherever possible, when usage increases require us to light additional capacity, we light our owned fiber rather than leased fiber. We believe that our existing network reach and capacity are sufficient to support a substantially increased revenue stream and customer base with modest incremental capital expenditure.

Business Strategy

Our strategy is to capitalize on the expected growth in demand for complex, converged IP, managed telecommunications services and capacity while maintaining our recurring revenue stream and stable margins:

• Focus on managed services and solutions to enterprise customers. Our primary focus is on further developing our managed service business by maintaining and growing revenue from our existing enterprise customer base and adding new customers, which we believe will allow us to preserve a recurring revenue stream with stable margins. The delivery of complex and tailored managed services and solutions under long-term contracts allows us to become an integrated and embedded component of our customers’ telecommunications requirements.

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• Leverage embedded infrastructure and existing customer relationships. We benefit from a large existing customer base, which provides us with a potential market for additional revenue streams. We intend to increase our revenue from existing customers (including those acquired with Fibernet) both by selling increased volumes of the services we currently offer (for example, by growing the number of end-users at customer sites and increasing the network capacity at those customer sites) and by introducing new services in the future, including IP-based services and services historically provided by Fibernet. For a number of our customers, we have invested in developing customer-specific services and solutions and we have also upgraded customer premises equipment, including routers, switches and handsets. We believe this investment and the depth of our involvement in our customers’ businesses reduces churn and provides the basis to offer additional services to our existing customers at lower incremental costs and resulting in improved margins. By purchasing these additional services from us, our customers are able to avoid the disruption risks associated with adding a new telecommunications provider. We have adopted a continuous improvement management approach to enhance the customer experience and are investing in processes, systems, personnel and tools to better enable our customers to configure and manage our services. We routinely survey our customers with the help of an independent research firm to identify opportunities to improve service. These surveys reflect strong customer satisfaction ratings in network performance, account support, service activity and billing assistance. We have created an award-winning, Web-based customer interface,uCommand^®, which allows customers to monitor and manage their networks in real time. Our worldwide network is monitored from multiple, global network operating centers on a 24/7 basis, providing redundancy and serving as a single point of contact for all service matters.

• Migrate technology to IP-based services. Current technology allows us to provide integrated voice and data services over a single IP-based platform. Wherever appropriate to customers’ needs, we are migrating services from traditional voice and data services to IP-based services. These IP services, including IP-VPN and VoIP will allow us to provide converged voice and data services. Fibernet’s enterprise customers now have access to our IP-based services and our global IP network. We anticipate that these initiatives will increase our total revenue and enable us to realize network operating efficiencies for these newly delivered services and networks by allowing us to introduce new data and voice services, and provide those services to our customers at lower unit costs than they currently pay for legacy services.

• Further build cooperative sales efforts with systems integrators and others. We deliver new products and enhance our sales penetration through cooperative approaches with systems integrators, network suppliers, equipment manufacturers and other third parties. We believe we are an attractive partner for such business partners due to our network reach, our experience in the provisioning of managed services and solutions and our IP capabilities. These business partners assist us in securing new customers and allow us to bundle our services with their equipment or applications. We currently cooperate with a number of companies, including Siemens, Ericsson, Fujitsu, Lockheed Martin and Steria.

• Continue to manage cost of access. We continually manage our cost of access through supplier management, optimization of our existing circuit base, detailed invoice analysis and implementation of regulatory driven improvements. We work closely with our largest supplier (BT) to provide last mile connectivity to our customer base by interconnecting our networks at a physical level to obtain products at a wholesale cost level and reduce the cost of purchase of retail products through appropriate discount schemes. Models developed by our specialists allow us to routinely validate invoiced circuits against tariffs and to identify circuits which are sub-optimally routed. Past participation in regulatory driven product enhancements (wholesale circuits) have resulted in considerable savings and we continue to implement other recently introduced products, such as wholesale line rental and wholesale Ethernet services.

• Focus on Employees. We formed a cross-regional and cross-functional Employee Steering Committee tasked with promoting and raising employee engagement. We introduced an improved employee recognition program highlighting significant employee accomplishments. Various training and development initiatives help empower our employees and prepare them for advancement.

For 2009, we have set a number of operational objectives which we believe will help enhance revenue growth and/or profitability. First, we are implementing actions to improve our cost structure particularly in the area of cost of access but also including a voluntarily unpaid leave scheme available to our employees. Second, we expect to continue to focus strongly on customer loyalty, by driving enhancements to ensure superior customer service. Third, we intend to continue to focus on motivating our employees, who are critical to our differentiation and our ability to meet our other objectives. Fourth, we intend to invest in products and services by augmenting capacity and selectively bringing new products to market, such as hosted IP telephony and Ethernet services, while enhancing our flagship VPN and VoIP offerings and expanding our data center capabilities.

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Market and Competitive Position

The general telecommunications business in the United Kingdom continues to be very competitive with a significant amount of competition resulting from liberalizations and de-regulation.

We currently compete with different divisions of BT, Cable & Wireless, Verizon, COLT, ntl:Telewest (part of Virgin Media), KCOM (previously Affiniti) and Thus (now part of Cable & Wireless). Verizon, COLT, Thus and KCOM have a less extensive national footprint than we do and are not geographically present in many portions of the United Kingdom that our network to covers. BT, Cable & Wireless and ntl:Telewest can be considered to have national presence and have significant network assets.

Given our relative size we believe that we can compete effectively in the United Kingdom market place and that the current consolidation that is occurring in our industry is supportive to us. Many competitors are just starting their acquisition and integration activities and shedding staff at a time when we are structurally stable. This potentially presents us with a window of opportunity to strike for increased market share when our competitors may be temporarily distracted by other activities.

Key Partnerships and Relationships

There are a number of partnerships and commercial relationships which are key to the current and continued success of our business.

BT is a significant supplier of ours and provides most of our access needs in the UK.

Network Rail is a key supplier due to our owning and leasing cable located across the rail network. Siemens and Ericsson are also key suppliers, and work with us for product innovation and introductions to improve our overall service offering.

Inter-company Agreements for UK Trading

Our business operation is dependent on a number of our parent’s and its affiliates’ global corporate functions and access to its network and services elsewhere in the world. In turn, our business provides services to our affiliates in Europe and termination facilities for international circuits in the United Kingdom.

The interactions are as follows:

• We provide GCE, co-location space at Slough for facilities that form part of its network.

• GC Pan European Crossing UK Limited (“GC PEC”) provides us with co-location space at its Docklands premises for facilities that form part of our UK network.

• We provide a dark fiber cable route to GCE for the route from Whitesands in Cornwall to London.

• Our parent’s Global Network Operations Centers provide network management for our customers’ networks globally, including our customers in the United Kingdom.

• Our parent company provides finance, legal, product management, marketing, engineering, IT, and corporate support to us in varying degrees. These are embodied in an allocation of our parent’s corporate overhead, which is charged to us.

• We provide private line termination for UK based customers of other entities in the GC Group.

• We provide termination for inbound voice minutes from the US and the rest of the world.

• Our parent provides termination of outbound minutes that originate in the UK.

For details of specific agreements, see Item 7.B. “Major Shareholders and Related Party Transactions”.

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Network Rail and British Railways Board

British Rail originally developed a significant portion of our network in the 1980s and early 1990s. During that time, British Rail was a state-owned enterprise which owned and operated the national railway system in the United Kingdom. British Rail used its extensive network of railway property and rights of way to install fiber-optic and copper telecommunications networks across the United Kingdom. As part of the privatization of British Rail in 1994, portions of these network assets and associated liabilities were transferred to a newly created company. Other portions of these network assets and customer contracts for the provision of telecommunications services over the network were assigned to BRT, which was eventually acquired by our predecessor company in 1995.

At the time of their formation, BRT and Network Rail entered into a number of agreements. The principal agreements include:

• The BR Telecommunications lease of Network Rail facilities. BRT leased certain fiber cables, distribution facilities, and transmission and switching equipment from Network Rail. The lease also covered certain copper cables and PABX equipment, which we use to deliver managed voice services to TOCs. We refer to these latter items of the lease as the copper assets. In connection with its plans to modernize the signaling system on the UK railways, Network Rail issued a notice to terminate our entitlement to use the copper assets, which termination became effective on March 31, 2005. In November 2004, we entered into a capacity purchase agreement with Network Rail that provides us with the right to use capacity over these copper assets until March 2010.

• The Network Rail lease of BR Telecommunications capacity. Network Rail retained the right to a specified amount of capacity to be carried over the assets originally leased to BRT in exchange for annual payments. We refer to this agreement as the grant of use. This grant of use was supplanted by a telecommunications service agreement effective in March 2005.

• The deed of grant. We are party to a deed of grant with Network Rail giving us easement rights to retain existing equipment and to install new equipment on Network Rail lands and property. Under the deed of grant, we own long-term wayleave rights until at least 2046 over Network Rail’s land, permitting us to maintain existing leased and owned fiber and network equipment, and providing our right to lay new fiber and install new equipment on Network Rails property, subject to the payment of specified wayleave payments to Network Rail. We have a management agreement with Network Rail that regulates any new network layout. This is a very cost effective and easy way for us to extend our network in the UK. This mechanism has been used extensively and profitably during the period of the operation of this agreement.

Regulatory Environment

Introduction

As one of the national markets that was liberalized earlier than most other comparable countries, the UK is generally accepted as having a reasonably mature regulatory structure. This maturity, together with a consistent policy in favor of network-based competition, has helped to create an environment that continues to support multiple network operators and is relatively positive in relation to our business activities.

Regulatory Framework

On July 25, 2003, the United Kingdom implemented four EU Communications Directives (“the directives”) including:

• the Framework Directive (Directive 2002/21/EC);

• the Access Directive (Directive 2002/19/EC);

• the Authorization Directive (Directive 2002/20/EC); and

• the Universal Services Directive (Directive 2002/22/EC).

The directives established a new regime for the regulation of electronic communications networks (“ECNs”), and electronic communications services (“ECSs”) and this regime is codified by the Communications Act 2003 (“the 2003 Act”).

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As a result of the 2003 Act, we no longer need to hold a license to run our network or to supply services, as had previously been the case under the old regime set out in the Telecommunications Act 1984. Instead, general authorizations allow us to build and operate networks and provide our services, subject only to general conditions which are applicable to all operators in the UK. Among other things, the general conditions relate to the handling of complaints, information about service standards and remedies and appropriate use of telephone numbering as set out from time to time in the National Telephone Numbering Plan.

European Union 2006 Review

On November 13, 2007, the European Commission (the “EC” or the “Commission”) published proposals for a revision to the current regulatory framework applying to the sector. The proposals consist of the following:

• a draft directive amending the Universal Service Directive and the Directive on Privacy in the electronic communications sector (the “citizens rights” directive);

• a draft directive amending the Framework Directive, the Access Directive, and the Authorization Directive (the “better regulation” directive); and

• a draft regulation establishing a European Electronic Communications Market Authority.

These proposals are at an advanced stage, and are currently being considered by the European Parliament and Council of Ministers. The Commission’s proposals have been subject to change since their publication and various stakeholders, including the Company, have made representations during the process, both at the EU and national levels. These new regulatory measures will not become effective until such time as may be ultimately agreed by the EU.

Ofcom Strategic Review

Under the 2003 Act, Ofcom, the UK regulator, has a duty to ensure, among other things, a wide range of EC services is available throughout the UK. In performing this duty, Ofcom must consider the desirability of promoting competition, effective forms of self-regulation, innovation and investment. Accordingly, and with a view to fulfilling this duty, Ofcom periodically undertakes sector-focused consultations in which interested parties, including EC network operators, are invited to take part.

In September 2005, Ofcom published the conclusions of its Telecommunications Strategic Review (“TSR”) which had been commenced in early 2004. At the same time, the Ofcom Board announced that it had formally accepted legally-binding undertakings (which had been subject to consultation over the summer of 2005) from BT Group plc.

The TSR addresses issues that are significant to our business, namely the manner in which effective and sustainable competition can be achieved in the UK telecom market; whether there is scope for a significant reduction in regulation; the incentivization of efficient and timely investment in next-generation networks; and whether there remains a case for the structural or operational separation of BT. Accordingly, both BT’s compliance with its undertakings and any development of regulatory policy arising from this strategic review will be important to our business.

In more than 230 separate undertakings, which are set out in detail on the Ofcom website, BT has agreed to substantive structural, product and governance changes, affecting both its current and future networks. These undertakings create a new regulatory approach to the access infrastructure operated by BT in the UK.

BT undertook to establish a separate division of the BT group, referred to in the TSR as the ‘Access Services Division’. BT has complied with this obligation by creating its Openreach division which controls and operates the physical network assets making up BT’s local access network and backhaul network. It includes all staff and management tiers necessary for managing these assets.

BT Equivalence of Inputs

BT undertook to supply a range of products in the wholesale markets identified to all communications providers (including its own downstream operations) on the same timescales, terms and conditions (including price) and by the same systems and processes. BT will provide to all providers the same information about these products and their associated services, systems and processes. This set of rules has been termed equivalence of inputs (“EoI”) between BT’s downstream divisions and its downstream competitors. BT commenced delivery of such products relevant to our business on September 30, 2006.

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Such EoI is to be applied to a range of wholesale products on a specified timetable including: wholesale line rental; local loop unbundling; wholesale extension service; IPStream; backhaul extension services and various other products when they are provided in the future. BT has also offered a public, but not legal, commitment to deliver EoI for certain wholesale line rental products at earlier dates than those set out in the undertakings.

BT has established an Equivalence of Access Board (“EAB”) and an Equivalence of Access Office (“EAO”) tasked with policing BT’s compliance in relation to its undertakings. The EAO published guidelines in February 2006, explaining how complaints will be handled.

On December 19, 2008, Ofcom published the most recent in a series of 18 detailed revisions to the specific undertakings that were entered into by BT in 2005 to give effect to BT’s functional separation and we have engaged with Ofcom throughout this process.

BT Confidentiality Structure

In addition to the undertakings related to Openreach, several of BT’s undertakings are required to guard against inappropriate information flows and influence passing between different parts of its organization, and to monitor its compliance with these undertakings. These include provisions for an organizational separation between BT’s upstream operations (such as BT Wholesale) and its downstream operations (such as BT Retail), including a confidentiality structure between the two, and more specific protections to ensure that BT Wholesale acts in an independent and non-discriminatory fashion.

Wholesale Mobile Voice Call Termination

In March 2007 Ofcom issued a Statement in relation to wholesale mobile voice call termination. As a consequence, a four year period of charge was introduced which will cap the average charges which all five UK mobile network operators (“MNOs”) may levy to terminate traffic originated on fixed networks. In May 2007, this decision was appealed by BT to the Competition Appeal Tribunal which subsequently referred certain matters to the Competition Commission. On January 22, 2009, the Competition Commission’s Determination was published which found that the average termination charges levied by MNOs were excessive and that, by the end of the charge control period (March 2011), should be materially lower than had been permitted by Ofcom. At this time, the Competition Appeal Tribunal (“CAT”) has yet to determine what remedy should be applied and the Company understands that the outcome may be subject to appeal. Until the legal process has been exhausted, the Company is unable to assess whether there will be a material reduction in its cost of access as a result of this proceeding.

In July 2007, Ofcom published a series of Statements regarding disputes between BT and five MNOs regarding the price BT would be required to pay the MNOs for terminating calls on mobile handsets connected to their networks. These disputes relate to the period from September 2006 to March 2007 and the Ofcom determinations adversely affected the Company’s purchase price from BT during this period. While the impact of these Statements is not believed to be material to our results or operations these Statements could increase the risk to the company of retrospective increases to BT’s charges for transit services. The Company and others, including BT and two MNOs, disputed the Ofcom determinations and our Appeal was heard, by the CAT during February 2008. On May 20, 2008, the CAT upheld the Company’s appeal and in its judgment, the CAT gave guidance to Ofcom as to how it should deal with similar commercial disputes in future. On August 15, 2008 the CAT determined the termination rates that would apply during the historical period from Sept 2006 to March 2007. The termination rates set by the CAT for this period were lower than the rates that had previously been permitted by Ofcom.

Dispute over Historic Charges for Wholesale Leased Lines for the period June 2004 – Sept 2008

In June 2004, Ofcom issued its findings in respect of a leased line market review (“initial review”). Leased lines, or private circuits, provide dedicated transmission capacity between customer sites and can carry both voice and data traffic. At a wholesale level, this review included both the terminating and trunk segment market and examined market dominance. A follow up review was performed in 2007 and Ofcom commenced a formal consultation on policy issues in January 2008.

At the time of its initial review in 2004, Ofcom concluded that BT was dominant in certain wholesale leased line markets, and introduced a cost-orientation obligation across BT’s leased line portfolio and price controls in respect of wholesale leased line terminating segments using traditional (i.e. copper) interfaces (“TI”). In June 2008, the Company and others entered into a dispute with BT in relation to BT’s adherence with its regulatory

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pricing obligations and this dispute was filed with Ofcom. On July 25, 2008, Ofcom decided to open a proceeding on this matter. Subsequently, BT identified that it had found errors in their regulatory financial statements for the period year ended March 31, 2005 until the year ended March 31, 2007 and in September 2008, BT published its restated regulatory financial statement for the year ended March 31, 2007. This dispute is still being considered by Ofcom and the Company is unable to assess its possible impact.

Wholesale Leased Line Review and Charge Controls for the period October 2008 – Sept 2012

In December 2008, Ofcom published its second review of the wholesale leased line market and issued a proposal for a further charge control which would apply during the period from October 2008 until September 2012. The proposal included continuing price regulation of wholesale leased line TI terminating segments and additional regulation of the charges for TI trunk circuits, wholesale Ethernet services and certain supporting equipment and accommodation services. The consultation closed on March 20, 2009 and the Company has been engaged with Ofcom throughout this process. The final outcome is expected to result in certain price changes being backdated to October 1, 2008, however, until the final Statement is published by Ofcom we are unable to fully assess the impact of the final outcome on our business.

Next Generation Networks

Next Generation Network (“NGN”) development is a significant technological change which requires substantial investment and detailed planning. In March 2006, after a public consultation exercise that commenced in June 2005, Ofcom set out its approach to facilitating effective cross-industry coordination and to providing greater clarity to operators and investors about the regulatory framework for NGN development.

Ofcom’s approach has included the establishment of a new industry body, NGN UK. This body has undertaken preliminary work on the technical and commercial arrangements for NGN development. Its initial priority has been to help companies develop an effective technical and commercial framework for interconnection between NGNs. Ofcom is expected to consult publicly during spring 2009 on the main commercial priorities which have been identified as evaluation and development of a new charging framework and charging model.

Industry

Developments within the Telecommunications Industry

Historically, the majority of telecommunications networks supported voice calls and were built with copper wires used for point-to-point voice connectivity, interconnected with basic switching systems. These networks were designed to carry voice calls in their native analogue form and had limited capability. In more recent times, as technology evolved, the voice signals were digitized and multiplexed together for higher speed, and more efficient, transmission over optical fibers. The process of multiplexing was basic, allocating a fixed amount of the available network resource to each signal, but it still increased flexibility by allowing low-speed digital signals to be combined with the digitized voice signals for transmission over optical fibers.

The development of complex digital applications—for example, the exchange of information over the internet, business transactions using e-commerce, and video streaming services, together with the increased connectivity opportunities as more and more users subscribe to internet-based services—has driven modern network operators to develop much higher speeds of connectivity and advanced protocols for managing the interconnection of individual applications, utilizing greatly increased computing power which is more readily available and affordable.

Competitors in the industry now seek to increase efficiency and flexibility, using the principle of “convergence” for all switching and transmission applications based on the “packet” principle. Complex digital applications use the packet principle to divide up information into manageable packets, then combine the packets from several applications together for high-speed and ultra-high speed transmission. This packet principle can be applied to all digital applications and extended to digitized voice signals, thereby “converging” in a common packet-based switching and transmission network. The protocol used to manage the interconnection of these packets is IP, which has become accepted as the industry standard.

This principle of convergence is a common development across the core of most operators’ networks. Access to these networks from customers is achieved through a number of different methods and technologies. Copper networks are still used with advanced modulating techniques, generically known as broadband, to support high-speed digital access. The incumbent operators generally have control over the copper networks.

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Because it is cost prohibitive for the newer operators to develop copper networks, various regulatory rulings are used to enable wider access to the copper network. Alternatively, wireless is becoming an increasingly attractive method for network access, for mobile access, for example at WI-FI “hot spots”, and fixed, high-speed access.

Key Industry Sectors

The telecommunications market generally consists of four basic sectors:

• long distance services;

• local exchange services;

• wireless services; and

• data/managed network services.

Telecommunications providers will offer one or more of these services to business or consumer segments.

Some telecommunications carriers focus on providing traditional voice and data services to business and residential customers. Long distance carriers, on the other hand, primarily provide only the connection between two local networks, transferring voice transmissions over a larger, interconnected regional or national network. Local exchange services carriers may provide traditional voice services that connect end-user customers within a designated local area, and these carriers often provide the local portion of most long distance calls or the broadband connections. Many telecommunications providers provide both local and long distance services. Wireless carriers transmit voice and data transmissions made through a wireless network to a mobile phone or other mobile device, such as a laptop computer enabled with WI-FI.

Some telecommunications providers, including Global Crossing, have built and operate networks to efficiently support the developing trend in demand for increasingly complex digital applications, and to continue to provide voice services, through solutions employing the principles of converged networks. The efficiency and inherent flexibility of a converged network means that network services can be grouped and managed to provide a customer-specific solution. Customers of managed services typically include multinational corporations, government agencies or other large organizations.

Network Technology for Managed Services

Managed services have been available for some time, including managed data wide area or local area networks, or data WAN or LAN, or managed voice networks, including PABXs. The technology traditionally used for these early managed services was Asynchronous Transfer Mode (“ATM”) and frame relay, for data networks, and TDM for voice networks and these networks still predominate in the industry.

ATM and frame relay networks use packet-switching technology to transmit both data and voice. Packet switching divides information such as voice, video or data into bits of data that are packaged into data cells. Cells are routed between local networks using ATM technology, which organizes the cells and transmits them over a common network to another end-point based on specifications coded onto the cells. TDM networks are principally capable of handling only voice traffic in a circuit switching environment.

Most telecommunications carriers with this type of network deploy multi-platform switches for both frame relay and ATM. These multi-platform switches can convert any type of data to a cell or packet and transmit them through different types of data networks. Transmission of data in this manner requires a data protocol, which permits computers to transmit and exchange packets of information using a common software language. Protocols are the critical technology in data networking because they dictate the speed, flexibility, security and integrity with which data can be exchanged between computers.

IP has become the protocol used for the management of wide area connectivity for most digital applications and digital voice, such as VoIP, applications. Within an operator’s network, ATM and frame relay may still be used to manage the IP connections across the network, but increasingly for converged networks the IP connections are managed by another technology known as MPLS.

MPLS is a set of protocols for provisioning and managing multiple protocol networks. MPLS uses a technique known as label switching to forward data through a network and it facilitates very high-speed data connections. MPLS overlays a packet-switched IP network to help better manage traffic flow and provides virtual links or tunnels through the network to improve the efficiency of connections. In this environment, the convergence of carrying voice and data over one network infrastructure is fully supportable.

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Telecommunications Services Management

Management of telecommunications services has become an integral part of many companies’ strategies to gain competitive advantages or achieve operating efficiencies and hence our focus on providing managed services to our customers. The IP and MPLS developments allow voice and data networks to converge and to offer increased security on public networks, and through this technology operators are able to allocate and manage network resources on a customer-by-customer basis, creating customer-specific IP-VPNs within their network IP-VPNs.

The growing availability of services benefiting from converged networks, and the complexities of managing these services internally, are encouraging companies to outsource larger portions of their telecommunications functions to specialized providers of IP-VPNs, thereby creating cost savings and allowing them to focus on their core businesses. The market growth in IP-VPNs is providing operators with the economies of scale to develop new and innovative communications services, which further benefit customers and ultimately reduce customers’ telecommunications costs, including total cost of ownership, whilst providing for greater flexibility in providing for increasing bandwidth needs.

Furthermore, the provision of services utilizing IP-VPNs to manage all aspects of communications requirements within a customer enterprise is becoming increasingly attractive to a broader range of customers, particularly as this enables them to benefit from this technology without having to make subscale investments.

C. Organizational Structure

Set forth in the diagram below is a simplified corporate organizational chart for us, the Issuer, our parent company and its shareholders. Also reflected in this diagram are certain of our existing debt obligations.

⁽¹⁾ STT is in the business of media and telecommunications services, investment holdings and management services. STT’s shareholdings (including common and preferred stock) are as of March 31, 2009, and are on a non-diluted basis.

⁽²⁾ Incorporated under the laws of England and Wales

A full listing of our subsidiaries can be found in Item 4.A. “Information on the Company—History and Development of the Company”

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D. Property, Plant and Equipment

Property

We operate from approximately 199 properties (comprising 11 freeholds and 188 leaseholds) in the United Kingdom. The majority of our leasehold properties are held on standard commercial terms prevailing in the market at the time the leases were entered into. We occupy the following main premises:

Town	Floor areas sqf	Ownership	Use
Basingstoke	40,180	Leasehold	Office
Basingstoke	42,744	Leasehold	Network/office
Basingstoke	19,345	Leasehold	Network
Crewe	19,421	Leasehold	Network/office
Slough	26,749	Leasehold	Network/office
London	23,605	Leasehold	Office
London	7,086	Leasehold	Network
London	6,374	Leasehold	Technical
Leigh	6,834	Leasehold	Network
Leeds	4,360	Leasehold	Office
Liverpool	6,040	Leasehold	Network
York	5,000	Leasehold	Network/office

IT Systems

During 2005, we migrated our financial IT systems from Oracle to SAP. We went live with SAP on January 1, 2006. Our human resources systems are based on a corporate SAP service and our payroll system is outsourced to ADP. Our billing system is largely run on Expresscom.

We operate Metasolv as the core of our service management system, performing the following key functions:

• Provisioning workflow engine—Providing a disciplined framework for the provision cycle and ensuring that service configuration and network inventory data are captured at the time of provision.

• Service configuration database—Housing a structured information set that provides master records in accordance with robust data structures for all service instances.

• Network inventory database—On a service basis, Metasolv is being populated with inventory data or provided with links to other platforms where these are more appropriate to master inventory data.

Fibernet migrated to SAP from an “off the shelf” financial system with effect from July 1, 2007. In the fourth quarter of 2007, the Fibernet billing system was migrated to Expresscom.

Insurance

Our parent company generally maintains property, business interruption, general liability and related insurance coverage for the GCL group of companies for which we are named insureds.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

You should read the following discussion together with the consolidated financial statements and the related notes to those consolidated financial statements contained elsewhere in this annual report on Form 20-F. We have prepared the consolidated financial statements in conformity with IFRS (see note 2 “accounting policies” within the accompanying consolidated financial statements).

Some of the information in the review set forth below and elsewhere in this annual report on Form 20-F includes forward-looking statements that involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements” and Item 3.D. “Key information—Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in the forward-looking statements contained in this annual report on Form 20-F.

Executive summary

Overview

We continue to be one of the leading UK providers of managed network communications services offering a suite of IP and legacy telecommunications services. We serve a range of government and public sector organizations, participants in the rail industry, major corporations and other communications companies, providing a full range of managed data and voice products and services that support a migration path to a fully converged IP environment. We offer these services using an IP-based network that directly connects in excess of 130 towns and cities in the UK.

We are an indirect, wholly owned subsidiary, and the principal UK business, of GCL. Our own network is a part of GCL’s global IP-based network that directly connects approximately 400 cities in more than 45 countries and delivers services to more than 690 cities in more than 60 countries and six continents around the world.

Industry

Whilst the competitive landscape in the telecommunications industry continues to change, we believe we are well positioned to take advantage of these changes and actively monitor events in this area. We continue to analyze potential corporate development opportunities that would increase our scale and efficiency and/or expand our product sets and network reach.

Principal trends

Intense competition in the market place continues to place downward pressure on prices. In addition, technological advances and regulatory changes are eroding traditional barriers between formerly distinct telecommunications markets and could further increase the competition we face and put additional downward pressure on prices.

Our business is generally not seasonal in nature.

Strategy

As described more fully in Item 4.B. “Information on the Company—Business Overview—Business Strategy”, our strategy calls for a continued focus on and investment in our target enterprise (including those in the government and rail sectors) and carrier data channels, thereby capitalizing on anticipated continued growth in the demand for bandwidth and IP services. We believe we are well positioned to take advantage of ongoing changes in the telecommunications industry, including globalization and industry consolidation, which we expect to result in increased demand from customers seeking network diversity and redundancy from a supplier who can meet their requirements worldwide.

For 2009, we have set a number of operational objectives which we believe will help enhance revenue growth and/or profitability. First, we are implementing actions to improve our cost structure particularly in the area of cost of access but also including a voluntarily unpaid leave scheme available to our employees. Second, we expect to continue to focus strongly on customer loyalty, by driving enhancements to ensure superior customer service. Third,

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we intend to continue to focus on motivating our employees, who are critical to our differentiation and our ability to meet our other objectives. Fourth, we intend to invest in products and services by augmenting capacity and selectively bringing new products to market, such as hosted IP telephony and Ethernet services, while enhancing our flagship VPN and VoIP offerings and expanding our data center capabilities.

Successful execution of these objectives is subject to numerous risks and uncertainties, including the risks described in Item 3.D. “Key Information—Risk Factors,” above. In particular:

• It becomes more difficult to continue to improve our cost structure in the short term as the opportunities for further savings decreases due to the success of past savings initiatives.

• Cost savings initiatives put a strain on our existing employees and make it more challenging to foster an engaged and enthusiastic workforce. Customer service, which is a critical component of our value proposition, could suffer if employee engagement were to deteriorate.

• Investing in new and enhanced products and services and improving the customer experience require additional expenditures. While we intend to finance these costs partially through improved operating results and cash flows, our capital plan for 2009 also contemplates partially financing our capital expenditures through vendor financing and equipment leasing. We may not be able to raise such financing on acceptable terms or at all.

• The current slowdown in global economic conditions could temper our growth, although the value we offer prospective customers could attract business in a cost-saving environment.

• While we believe that economies of scale will allow us to grow revenues while incurring incremental costs that are proportionately lower than those applicable to our existing business, if the increased costs required to support our revenue growth turn out to be greater than anticipated, we may be unable to improve our profitability and/or cash flows even if revenue growth goals are achieved.

• If the increased operating and capital expenses required to support our revenue growth turn out to be greater than anticipated or anticipated revenue growth is not achieved, we may be unable to improve our cash flows. If our cash flows do not improve, we would need to arrange additional financing facilities or arrange intercompany loans from other Group Companies. See “—Liquidity and Capital Resources,” below.

2008 Highlights

During 2008, revenues increased by £26.2 million or 8.8% to £322.8 million from £296.6 million in 2007. This increase was driven by growth in the existing customer base and the acquisition of new customers in specific enterprise and carrier target markets.

During 2008, we posted an operating profit of £28.9 million. We generated £40.9 million of operating cash flow, after interest payments of £33.1 million, and a net increase in cash and cash equivalents of £12.1 million.

Despite current economic conditions, we continue to see strong demand for our IP services and as a result continue to win new business. Many government agencies and enterprises continue to refresh their more traditional technologies and take advantage of converged IP services. However, the telecommunications market in the UK remains highly competitive. One of our principal customer relationships in the year ended December 31, 2008 was with Camelot, the current holder of the license to operate the UK National Lottery. Camelot had deployed a landline-based ISDN network related to the operation of the UK National Lottery. This network was provided by us. On August 31, 2007, Camelot entered into an enabling agreement with the National Lottery Commission which officially appointed Camelot as operator of the National Lottery for a 10 year period from February 2009. On October 9, 2007, Camelot announced its intention to replace its existing landline-based ISDN network with a broadband satellite communications network to be supplied by another service provider. Camelot has substantially completed the migration of the network. In the fourth quarter of 2008 revenue from our relationship with Camelot decreased by £1.2 million to £5.4 million compared with £6.6 million in the third quarter of 2008. We expect revenues to decline in the first quarter of 2009 by substantially all the £5.4 million recorded in the fourth quarter of 2008. Furthermore, although our relationship with Camelot continues, we do not expect to earn significant revenue from this relationship in the future. Our revenue from sales to Camelot was approximately £26.0 million and £25.2 million for 2007 and 2008, respectively.

In the short term, we expect to see a marginal decline in revenue as a result of the Camelot network. We anticipate that new orders already signed during 2008, and the strong demand that we continue to see, will offset that impact in the second half of 2009 and start to deliver medium term growth in our revenues.

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Relationship with Our Parent Company and its Affiliates

Operational Relationships

We have a number of operating and financial relationships with other companies in the GC group. For example, we have historically assisted our parent company group in terminating voice traffic within the UK while our parent company group assists us with terminating international voice traffic. We benefit from a broad range of corporate functions conducted by our parent company group, including senior management activities, human resources, corporate development and other functions and services. In addition, we share certain portions of our network with our parent company group as well as certain personnel, who may have functional responsibilities for both our business as well as our parent’s European and global businesses. Lastly, we may share tax losses accrued by us and some of our affiliates with other UK affiliates of our parent company.

The costs of these functions and services have been historically allocated on a basis that we believe is a reasonable reflection of the utilization of each service provided to or the benefit received by our parent and subsidiaries of our parent. The allocated costs, while reasonable, may not necessarily be indicative of the costs that would have been incurred by us if we had performed these functions or received these services as a stand-alone entity. Contemporaneous with the offering of the Initial Notes, we entered into a series of inter-company agreements in order to document more clearly the way in which we govern these relationships. Under the terms of these agreements, each of which was effective as of October 1, 2004, all services that the parent company had in the past provided to us continue to be available to us on a non-exclusive basis, and the pricing for each of these services is based on a formula that allocates costs based on actual use, market prices or on our percentage of the overall group revenue or assets, as applicable. Payments under the agreements are subject to an annual limitation, although any amounts exceeding that limitation will be permitted to be paid if the amounts are permitted under the Indenture governing the Notes. In some cases, the costs of these services are borne solely by our parent company. We also entered into other inter-company agreements with our parent company, including those for allocating costs of shared resources and voice termination.

The pricing formulas in the agreement may be changed from time to time, so long as they remain within the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration of the Organization for Economic Co-operation and Development (“OECD”) guidelines. See Item 7.B. “Major shareholders and Related Party Transactions—Related Party Transactions—Inter-company Agreements.”

We do not expect these agreements to have a material impact on our cost structure as (i) amounts of actual costs charged to us are subject to actual usage; (ii) the method of allocation must be in accordance with OECD guidelines; and (iii) the amounts of actual costs charged to us are subject to the application of the limitations provided for in the corporate services agreement, one of the inter-company agreements.

We have historically included an annual worldwide allocation management fee in our financial statements under “Administrative Expenses” for any administrative service that our parent company or its affiliates provided to us (such as legal or Information Systems services). This continued in 2008 and we will continue to account for the net financial effect of these services in that line item (see note 26 “related party transactions” within the accompanying consolidated financial statements).

Following the acquisition of certain property assets on December 9, 2004 from Bidco, these assets continue to be used by other Group Companies who are charged a rental based on the depreciation expense on the assets used (see note 5 “operating profit” within the accompanying consolidated financial statements).

Financial Relationships

We may, from time to time, upstream cash to our parent and other Group Companies, subject to the restrictions in the covenants in the Indenture and as permitted by English law and we may from time to time borrow funds from our parent and other Group companies. See “—Liquidity and Capital resources”.

Except as noted below, we have not historically made significant loans to Group Companies. Under the terms of the GCL Term Loan Agreement, future loans from the Company made to GCL or another Group Company which has guaranteed such facility (i.e., substantially all GCL subsidiaries other than GCUK and its subsidiaries and certain GCL subsidiaries doing business in Latin America) must be subordinated to the payment of obligations under the GCL Term Loan Agreement. The terms of any intercompany loan made by us to our parent or other Group Companies are negotiated at the time the loans are made in light of our ongoing liquidity requirements, the restrictions contained in the covenants in the Indenture, the GCL Senior Secured Term Loan

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Facility (which facility requires any such future loans to be subordinated to the obligations thereunder of our parent or such other Group Companies) and the requirements of English law.

On April 12, 2006, the Company entered into an intercompany credit agreement (the “credit agreement”) with GCE. As at December 31, 2007 and 2008, there were loans of US$50.4 million (equivalent to £25.3 million and £34.9 million as at December 31, 2007 and 2008, respectively) due from GCE. The terms of the credit agreement include a parent guarantee from GCL. The loan balances currently outstanding relate to loans made using (i) 50% of the Operating Cash Flow, as permitted and defined under the Indenture; and (ii) GCUK’s Eligible Excess Cash, defined in the Indenture as excess cash remaining after the consummation of the Annual Repurchase Offer, and have an effective interest rate of 13.5%. These loans mature five business days prior to the principal outstanding on the Senior Secured Notes. In the year ended December 31, 2008, finance revenue of £13.2 million (being interest income of £3.6 million, in addition to a foreign exchange gain of £9.6 million) has been recognized in the condensed consolidated income statement in respect of these loans. In the year ended December 31, 2007, finance revenue of £3.2 million (being interest income of £3.6 million, less a foreign exchange loss of £0.4 million) has been recognized in the consolidated income statement in respect of these loans.

GCE’s and GCL’s obligations in respect of the outstanding loans under the intercompany credit agreement are not subordinated to their obligations under the GCL Term Loan Agreement since such loans were made prior to the date such facility came into effect.

On April 11, 2007, the Company entered into a US$15.0 million commitment to GCE in accordance with the Indenture and under the same terms and conditions set forth in the intercompany credit agreement. On May 2, 2007 the Company made a loan to GCE pursuant to this commitment in the amount of US$5.0 million, which was repaid in full on June 30, 2007. In the years ended December 31, 2007 and 2008, total finance revenue of £0.1 million and £nil, respectively, has been recognized in the consolidated income statements in respect of this loan. This commitment lapsed in 2007.

Prior to its acquisition by GCUK, Fibernet Group transferred its German business operations to GCI, a wholly owned subsidiary of GCL, for consideration of £1 and the assumption of £3.6 million of debt outstanding to Fibernet. This loan had an effective interest rate of 9.75% and was repaid, in full, to the Company on June 30, 2007. In the years ended December 31, 2007 and 2008, total finance revenue of £0.2 million and £nil, respectively, has been recognized in the consolidated income statements in respect of this loan.

There were no loan balances due to other companies in the GC Group as at December 31, 2008. We have agreed the terms of a loan of up to $15.0 million from GC Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

A. Results of Operations

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying consolidated financial statements, which have been prepared in conformity with IFRS. The preparation of financial statements, in conformity with IFRS, requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reported period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed “critical”, as they are both most important to the financial statements presentation and require management’s most difficult, subjective or complex judgments as a result of the need to make an estimate about the effect of matters that are inherently uncertain. For a full description of our significant accounting policies, see note 2 “accounting policies” to the accompanying consolidated financial statements.

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Provisions for Credit Notes

During each reporting period, we must make estimates for potential future sales credits to be issued in respect of current revenues, related to billing errors, service interruptions and customer disputes which are recorded as a reduction in revenue. We analyze historical credit activity and changes in customer demands related to current billing and service interruptions when evaluating our credit note provision requirements. We reserve for known billing errors and service interruptions as incurred. We review customer disputes and reserve against those we believe to be valid claims. We also estimate a general sales credit reserve related to unknown billing errors and disputes based on such historical credit activity. The determination of the sales credit and customer dispute credit reserve requirements involves significant estimation and assumption. The actual credit notes issued may deviate from this estimate due to changes in the underlying data. We review the estimates every period and may be required to adjust the estimate in a subsequent period. There have been no material adjustments in any of the periods presented. The provision for credit notes was £4.1 million, £4.6 million and £4.6 million at December 31, 2006, 2007 and 2008, respectively. For the years ended December 31, 2006, 2007 and 2008 an expense of £1.3 million £0.5 million and £0.1 million, respectively, was recorded in the income statements.

Cost of Access Accruals

Cost of access, our single largest expense, amounting to approximately £77.0 million £88.0 and £101.1 million, or 32.0%, 29.7% and 31.3% of revenue for the years ended December 31, 2006, 2007 and 2008, respectively, is expensed as incurred. The recognition of these costs involves the use of various management estimates and assumptions and requires us to rely on non-financial systems. Consistent with other costs recorded in each reporting period, we incur a significant amount of services for which suppliers have not yet billed us during that period. We therefore need to make significant estimates for our access costs, specifically regarding traffic resulting in usage-based access costs. Our cost of access primarily comprises charges for leased lines for dedicated facilities and of usage-based voice charges paid to other carriers to originate and/or terminate switched voice traffic. The usage-based voice accruals are a direct result of the traffic volume in the particular month for which we do not have invoices at the time of the close of our monthly reporting period. We utilize the minute volumes reports from our switched network that feed into an internal access reporting system, which also maintains our access supplier contract and tariff rates on a rate table to assist in estimating our usage-based access costs. Dedicated facility access costs are also estimated based on the number of circuits and the average circuit costs, based on our internal records, adjusted for contracted rate changes. Management monitors the accuracy of our systems to measure network volumes and track circuits, and our rate tables are updated frequently to maintain the accuracy of the rate structure we have with our access providers and per the current regulated tariff rates. After receipt of invoices from access providers (which can take some time), we evaluate whether we require an aggregate adjustment to the total accrual. In certain instances, we engage in a reconciliation process with the access providers in order to arrive at a mutual understanding of the appropriate level of charges. We typically maintain an accrual for the amount subject to dispute and generally withhold payment until the dispute is settled. Due to the complexity of the combination of changing regulations, pricing fluctuations, measuring traffic volumes and new supplier agreements, the estimates are subject to change. Changing regulations regarding access rules and related charges also create uncertainty regarding how the changes may impact the rate tables that we maintain internally. In spite of the difficulties involved in the estimation process, we believe we have established adequate access cost accruals due to our overall approach.

Valuation of Intangible assets and Property, plant and equipment

We assess intangible assets and property, plant and equipment that have finite useful economic lives for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable or otherwise as required by accounting standards. Factors that would indicate potential impairment include the following:

• significant under-performance relative to expected historical or projected future operating results;

• significant changes in the use of our assets or a change in our business strategy;

• significant changes in technology and the regulatory environment; and

• significant negative industry or economic trends.

Recoverability of assets is measured under IFRS by a comparison of the carrying amount of an asset to its recoverable amount, calculated as the higher of the net selling price or the discounted future net cash flows expected to result from the use of the asset and its eventual disposition.

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If the assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the net realizable value of the assets and is recorded as a charge to operating income. The most significant estimates made in determining discounted future net cash flows include the selection of the appropriate discount rates, residual asset values, our estimated long-term growth rates and the number of years on which to base the cash flow projections. While we believe that our assumptions are appropriate, such estimated amounts could differ materially from what will actually occur in the future.

Based on our assessment of recoverability, we have no such impairments during the years ended December 31, 2006, 2007 and 2008.

Pension Benefits

Our employees participate in two occupational pension schemes: the Global Crossing Shared Cost Section of the Railways Pension Scheme, which is a defined benefit scheme; and the Global Crossing Pension Scheme, which has a defined contribution section and a defined benefit section. The Company accounts for retirement benefits in accordance with IAS 19 “Employee benefits”.

The pension assets, liabilities and expense recorded are based on a number of actuarial assumptions. These assumptions include the discount rate, the expected long-term rate of return on plan assets and inflation rates. The assumptions are based on current market conditions, historical information and consultation with and input from our actuaries. These assumptions are reviewed annually. While we believe that the assumptions we use are appropriate based on available information, these assumptions may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter lives of participants. These differences may result in a significant impact on the amount of our future pension expense and resulting asset or liability.

Income Taxes

We have significant deferred tax assets related primarily to net operating losses (“NOLs”) and other temporary differences. The realization of these assets is not assured and depends on taxable income generated in the future. Management has exercised judgment in determining the extent of the realization of these assets based upon estimates of future taxable income. Where there is an expectation that, on the balance of probabilities, there will not be sufficient taxable profits in the future, no deferred tax asset has been recognized. If actual events differ from our management’s estimates, or to the extent that these estimates are adjusted in the future, any changes to the realizability of these estimates could materially impact our financial position and results of operations. At December 31, 2008, we had a total unrecognized deferred tax asset of £97.1 million (2007: £90.3 million).

Restructuring

We have engaged in restructuring activities, which require us to make significant judgments and estimates in determining restructuring charges, including, but not limited to, sublease income or disposal costs, length of time on market for abandoned rented facilities, and contractual termination costs. Such estimates are inherently judgmental and changes in such estimates, especially as they relate to contractual lease commitments and related anticipated third-party sublease payments, could have a material effect on the onerous lease liabilities and consolidated income statement. This restructuring provision is composed of continuing building lease obligations and broker commissions for the restructured sites (aggregating £31.0 million as of December 31, 2008), offset by anticipated receipts from existing and future third-party subleases. As of December 31, 2008, anticipated third-party sublease receipts were £26.4 million, representing £20.6 million from subleases already entered into and £5.8 million for subleases projected to be entered into in the future. A significant amount of judgment is involved in determining the amount and timing of these projected subleases. We continue to review our anticipated costs and third-party sublease payments on a quarterly basis and record adjustments for changes in these estimates in the period such changes become known. For further information related to our restructuring activities see note 17 “provisions” within the accompanying consolidated financial statements.

Inflation

We do not believe that our business is impacted by inflation to a significantly different extent than the general economy.

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Results of operations for the year ended December 31, 2008 compared with the results of operations for the year ended December 31, 2007

The following table summarizes our consolidated income statements for the years ended December 31, 2007 and 2008.

	Year ended December 31,
	2007			2008			Change			% Change
	(in thousands)
Revenue	£	296,620		£	322,832		£	26,212		8.8	%
Cost of sales		(177,665	)		(200,487	)		(22,822	)	(12.8	)%
Gross profit		118,955			122,345			3,390		2.9	%
Distribution costs		(15,710	)		(18,361	)		(2,651	)	(16.9	)%
Administrative expenses		(69,468	)		(75,037	)		(5,569	)	(8.0	)%
		(85,178	)		(93,398	)		(8,220	)	(9.7	)%
Operating profit		33,777			28,947			(4,830	)	(14.3	)%
Finance revenue		4,527			14,056			9,529		210.5	%
Finance charges		(33,548	)		(72,416	)		(38,868	)	(115.9	)%
Tax charge		(6,297	)		(432	)		5,865		93.1	%
Loss	£	(1,541	)	£	(29,845	)	£	(28,304	)	(1836.2	)%

Discussion of significant variances:

Revenue

	Year ended December 31,
	2007		2008		Change		% Change
	(in thousands)
Enterprise	£	247,324	£	257,596	£	10,272	4.2	%
Carrier data		43,748		58,626		14,878	34.0	%
Carrier voice		5,048		6,110		1,062	21.0	%
Intercompany		500		500		—	NM
	£	296,620	£	322,832	£	26,212	8.8	%

NM – zero balances and comparisons from positive to negative numbers are not meaningful

Revenues are separated into sales channels based on our target markets and sales structure: (i) enterprise, (ii) carrier data, and (iii) carrier voice.

The enterprise sales channel includes the provision of voice, data, managed and collaboration services to government and public sector organizations, participants in the rail industry and major corporations. The carrier data sales channel includes the provision of data products, including IP, transport and capacity services, to carrier customers in addition to the provision of voice, data, and managed services to or through business relationships with other carriers and system integrators. The carrier voice sales channel includes the provision of UK domestic and international long distance voice services to carrier customers.

Revenue increased in 2008 compared with 2007 primarily as a result of strong demand for broadband leases, enterprise voice services and IP-VPN data products. In addition, included in 2008 is approximately £1.3 million of incremental revenue related to a contract review of acquired Fibernet customers. Despite current economic conditions, we continue to see strong interest in our IP services and as a result continue to win new business. Many government agencies and enterprises continue to refresh their more traditional technologies and take advantage of converged IP services.

A number of our UK carrier customers continue to enhance both their mobile broadband and next generation networks. This is due in part to the success of mobile broadband products launched by them. This has presented us with increased selling opportunities as our customers upgrade bandwidth to accommodate the increase in traffic volumes. In addition to successfully cross-selling our products to the customers acquired with Fibernet, we have also been successful in cross-selling existing Fibernet products into our legacy customer base.

However, the UK telecommunications market remains highly competitive.

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One of our principal customer relationships in the year ended December 31, 2008 was with Camelot, the current holder of the license to operate the UK National Lottery. Camelot had deployed a landline-based ISDN network related to the operation of the UK National Lottery. This network was provided by us. On August 31, 2007, Camelot entered into an enabling agreement with the National Lottery Commission which officially appointed Camelot as operator of the National Lottery for a 10 year period from February 2009. On October 9, 2007, Camelot announced its intention to replace its existing landline-based ISDN network with a broadband satellite communications network to be supplied by another service provider. Camelot has substantially completed the migration of the network. In the fourth quarter of 2008 revenue from our relationship with Camelot decreased by £1.2 million to £5.4 million compared with £6.6 million in the third quarter of 2008. We expect revenues to decline in the first quarter of 2009 by substantially all the £5.4 million recorded in the fourth quarter of 2008. Furthermore, although our relationship with Camelot continues, we do not expect to earn significant revenue from this relationship in the future. Our revenue from sales to Camelot was approximately £26.0 million and £25.2 million for 2007 and 2008, respectively.

In the short term, we expect a marginal decline in our consolidated revenues as a result of the Camelot network migration. We anticipate that new orders already signed during 2008, and the strong demand that we continue to see, will offset that impact in the second half of 2009 and start to deliver growth in revenues, operating results and cash flows.

Our sales order levels, which are a key indicator of continuing strength in customer demand for our services, remained at healthy levels during 2008. This metric is used by management as a leading business indicator offering insight into near term revenue trends. The gross values of these monthly recurring orders are estimated based on new business acquired, and they exclude the effects of attrition, the replacement of existing services with new services, and credits.

Cost of Sales

Our cost of sales consists of four primary components, including:

• cost of access (including for rights-of-way and wayleaves);

• customer-specific costs for operating leases and cost-plus arrangements;

• depreciation and amortization, including amortization of installation costs; and

• third-party maintenance costs.

Cost of access is the cost associated with transporting traffic to and from our customers’ premises from and to the closest point of entry on our network or between PoPs on our network where we require additional capacity or service protection. These costs are the largest component of our cost of sales during the financial periods discussed in this section. We also include expenses in respect of rights-of-way and wayleaves in our cost of access. These expenses arise both as a result of our existing network and when we add additional capacity.

Customer-specific costs relate primarily to the cost of leasing customer-specific equipment for enterprise customers who are purchasing our services under long-term contracts. This includes voice equipment for certain of our managed voice customers. Other costs included in this category are cost-plus arrangements.

The depreciation expense that we include in cost of sales relate to the depreciation of technical property and equipment, principally telecommunications equipment like switches, IP routers, add-drop multiplexers, transmission equipment and customer premises equipment, as well as computer equipment, terrestrial cable and fiber, and leasehold improvements. Amortization expenses that we include in cost of sales relate to the amortization of installation costs, computer software, and acquired intangible assets.

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Third-party maintenance costs are costs we pay to unaffiliated companies to provide maintenance services for the portion of our network which we either own or have acquired under a long-term right of use. The majority of these expenses are the cost of maintaining customer-specific equipment for managed service enterprise customers. We also contract for the maintenance of our network including that portion of our network which lies along railway routes.

	Year ended December 31,
	2007		2008		Change			% Change
	(in thousands)
Cost of access	£	87,973	£	101,092	£	13,119		14.9	%
Customer specific costs(1)		33,880		41,464		7,584		22.4	%
Depreciation and amortization		37,889		41,354		3,465		9.1	%
Third party maintenance		17,923		16,577		(1,346	)	(7.5	)%
	£	177,665	£	200,487	£	22,822		12.8	%

⁽¹⁾ For operating leases and cost-plus arrangements only.

Cost of access increased in 2008 compared with 2007 primarily driven by increases in revenue and associated access charges. The increase was slightly offset by our cost reduction initiatives to optimize access networks costs and effectively lower unit prices.

Customer-specific costs increased in 2008 compared with 2007 primarily relating to an increase in costs associated with a significant contract signed in the fourth quarter of 2007. The increase was partially offset by lower cost of equipment sales in 2008 when compared to 2007.

Depreciation and amortization increased in 2008 compared with 2007 primarily due to additions to property plant and equipment.

Third party maintenancedecreased in 2008 compared with 2007 primarily resulting from the termination and renegotiation, following the acquisition of Fibernet, of certain maintenance contracts.

Distribution Costs

Our distribution costs consist of the fixed and variable compensation we pay to our sales force and the overhead associated with our sales offices and marketing efforts. This overhead includes selling and distribution expenses arising from advertising and marketing, professional services and office expenses and facilities costs.

The increase in our distribution costs in 2008 compared with 2007 was primarily due to higher staff costs of £2.2 million due to (i) recruitment and payroll costs associated with the additional sales staff recruited in early 2008 to take advantage of opportunities in the UK market; (ii) higher commissions paid to sales employees; and (iii) pay rises effective from the beginning of the second quarter of 2008.

Administrative Expenses

Administrative expenses include the salaries we pay to our employees, excluding salaries for our sales force which is recorded under distribution costs, and the overhead costs associated with our headquarters and back-office activities. This overhead includes administrative expenses arising from professional services, advertising and marketing, office expenses, facilities costs and depreciation and amortization. A portion of these costs result from the worldwide allocation management fee referred to under “—Relationship with our Parent Company and its Affiliates—Operational Relationships” above.

The increase in administrative expenses in 2008 compared with 2007 was primarily due to (i) a less favorable foreign exchange impact on non-pounds sterling denominated balances (excluding our Senior Secured Notes and intercompany loan with GCE) in 2008 compared to 2007 (£2.5 million); (ii) a credit relating to a property tax rebate in 2007 (£1.3 million); and (iii) a reduction in utility costs in the first quarter of 2007 as a result of a favorable settlement of prior year charges with a vendor (£0.9 million). These increases were partially offset by a reduced depreciation charge on administrative assets in 2008 as compared to 2007 (£0.9 million).

Finance Revenue

Our finance revenues consist of the interest we earn on our bank deposits and late receipts and loans with affiliated companies, together with the associated foreign exchange income/expense.

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The increase in finance revenue in 2008 compared with 2007 was primarily due to a more favorable exchange rate impact on the US Dollar-denominated intercompany loan with GCE in 2008 compared with 2007. Between December 31, 2007 and 2008 the British pound sterling weakened from 1.99 US Dollars to 1.44 US dollars per 1 pound sterling compared to a relatively neutral movement between December 31, 2006 and 2007.

Finance Charges

Our finance costs consist primarily of the interest we pay on our third-party debt, together with the associated foreign exchange income/expense, and finance leases.

The increase in finance charges in 2008 compared 2007 was primarily due to an unfavorable exchange rate on the US Dollar-denominated Senior Secured Notes in the second half of 2008 compared with 2007. Between December 31, 2007 and 2008 pound sterling weakened from $1.99 to $1.44 US Dollars for £1 pound sterling compared to a relatively neutral movement between December 31, 2006 and 2007. In 2004, the Company entered into a five year cross currency interest rate swap to minimize exposure of any US Dollar to pound sterling currency conversion for the interest payments due on the US Dollar-denominated Senior Secured Notes. The unfavorable exchange rate described above therefore impacts the carrying value of the US Dollar denominated Senior Secured Notes and not interest payments on these Notes.

Tax

We generated taxable profits in recent years but have been able to eliminate all of our tax liability by using a portion of the unrecognized losses carried forward from prior years and group relief from related companies under the tax sharing agreement.

During the year ended December 31, 2007 and 2008, we recognized a current year tax charge of £1.0 million and £0.4 million, respectively, which reflects an amount payable under the tax sharing agreement for tax relief claimed from other UK entities of the GC Group.

During the year ended December 31, 2007, we reduced our recognized deferred tax asset by £5.3 million primarily due to a change in our estimate of their future realization and during 2008 there was no further deferred tax movement. At December 31, 2007 and 2008, no deferred tax asset was reflected within our consolidated balance sheet. We had unutilized NOLs carried forward of £288 million and £211 million at the end of 2007 and 2008, respectively. We do not believe that there is any restriction under current law or regulations that will limit our ability to continue carrying these NOLs forward or to apply them to offset future taxable income.

Results of operations for the year ended December 31, 2007 compared to the results of operations for the year ended December 31, 2006

The following table summarizes our consolidated income statements for the years ended December 31 2006 and 2007.

	Year ended December 31,
	2006			2007			Change			% Change
	(in thousands)
Revenue	£	240,612		£	296,620		£	56,008		23.3	%
Cost of sales		(147,481	)		(177,665	)		(30,184	)	(20.5	)%
Gross profit		93,131			118,955			25,824		27.7	%
Distribution costs		(10,385	)		(15,710	)		(5,325	)	(51.3	)%
Administrative expenses		(53,683	)		(69,468	)		(15,785	)	(29.4	)%
Net gain arising from acquisition of Fibernet		7,755			—			(7,755	)	NM
		(56,313	)		(85,178	)		(28,865	)	(51.3	)%
Operating profit		36,818			33,777			(3,041	)	(8.3	)%
Finance revenue		1,503			4,527			3,024		201.2	%
Finance charges		(16,191	)		(33,548	)		(17,357	)	(107.2	)%
Tax charge		(9,377	)		(6,297	)		3,080		32.8	%
Profit/(loss)	£	12,753		£	(1,541	)	£	(14,294	)	NM

NM—zero balances and comparisons from positive to negative numbers are not meaningful

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Revenue

	Year ended December 31,
	2006		2007		Change			% Change
	(in thousands)
Enterprise	£	219,658	£	247,324	£	27,666		12.6	%
Carrier data		16,035		43,748		27,713		172.8	%
Carrier voice		4,394		5,048		654		14.9	%
Intercompany		525		500		(25	)	(4.8	)%
	£	240,612	£	296,620	£	56,008		23.3	%

Enterprise revenue increased primarily due to (i) the net effect of Fibernet on our enterprise revenue during 2007 (£23.9 million); (ii) settlement with a certain customer (£2.2 million); and (iii) additional revenues from a significant contract signed in the fourth quarter of 2007 (£1.8 million).

Carrier data revenue increased primarily due to (i) the net effect of Fibernet on our carrier data revenue during 2007 (£26.6 million); and (ii) revenues from new business within the carrier data channel (£1.2 million).

Cost of Sales

	Year ended December 31,
	2006		2007		Change		% Change
	(in thousands)
Cost of access	£	76,975	£	87,973	£	10,998	14.3	%
Customer specific costs(1)		31,117		33,880		2,763	8.9	%
Depreciation and amortization		22,757		37,889		15,132	66.5	%
Third party maintenance		16,632		17,923		1,291	7.8	%
	£	147,481	£	177,665	£	30,184	20.5	%

⁽¹⁾ For operating leases and cost-plus arrangements only.

Cost of access increased primarily due to (i) the inclusion of Fibernet in our results for a full year in 2007 (£9.9 million); and (ii) incremental costs associated with increases in enterprise and carrier voice sales volume (£2.6 million). These increases are partially offset by cost reductions as a result of migrating newly won customers from third party networks onto our own network in addition to certain one time benefits in the second and fourth quarters of 2007 (£1.6 million).

The increase in customer-specific costs is primarily due to the inclusion of Fibernet in our results for a full year in 2007 (£1.7 million).

The increase in depreciation and amortization is primarily due to the inclusion of Fibernet in our results for a full year in 2007 (£14.3 million).

The increase in third-party maintenance is primarily due to the inclusion of Fibernet in our results for a full year in 2007 (£2.4 million), partially offset by negotiated contractual reductions.

Distribution Costs

The increase in our distribution costs in 2007 compared with 2006 was primarily due to (i) the inclusion of Fibernet for a full year in 2007 (£3.4 million); and (ii) additional staff costs (£2.1 million) due to (a) a staff motivation and retention program introduced in March 2007; (b) pay rises effective from the start of the second quarter of 2007; and (c) higher commissions paid to sales employees.

We saw a reduction in salaries and related benefits in the second half of 2007 when compared to the first half of 2007 as a result of headcount decreases from the May 10, 2007 restructuring plan (see note 17 “provisions” to the accompanying consolidated financial statements) and attrition. However, partially offsetting this was an increase in commissions paid to sales employees in the second half of 2007 when compared to the first half of 2007.

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Administrative Expenses

The increase in administrative expenses in 2007 compared with 2006 was primarily due to (i) the inclusion of Fibernet for a full year in 2007 (£10.9 million) including a £1.3 million charge related to the restructuring of a Fibernet facility in 2007 and a £1.3 million credit relating to a property tax rebate in 2007; (ii) restructuring charges relating to the employee work force reductions from the May 10, 2007 restructuring plan (£1.5 million); (iii) additional staff costs (£3.1 million) due to (a) staff motivation and retention awards granted in March 2007; (b) higher average headcount in 2007 as compared to 2006; (c) a higher bonus accrual in 2007 compared to 2006; and (d) pay rises effective from the start of the second quarter of 2007; (iv) an increase in our intercompany management fee (comprising costs charged under the corporate services and shared service agreement) in 2007 (£0.9 million); and (v) less favorable exchange rate movements on foreign denominated balances (excluding the Notes and loans to Group Companies) in 2007 compared with 2006 (£0.4 million). These increases are partially offset by (i) a restructuring credit in the first quarter of 2007 resulting from the Company’s decision to reoccupy a building previously restructured, which is partially offset by changes made to our assumptions relating to other restructured properties (£0.8 million, net); and (ii) a reduction in utility costs in the first quarter of 2007 as a result of a favorable settlement of prior year charges with a vendor (£0.9 million).

We saw a reduction in salaries and related benefits in the second half of 2007 when compared to the first half of 2007 as a result of headcount reductions from the May 10, 2007 restructuring plans and attrition.

Net gain arising from acquisition of Fibernet

In 2006 the Company recognized an £8.4 million non-cash, non-taxable gain, resulting from the deemed settlement of pre-existing relationships with Fibernet and a £1.1 million gain resulting from negative goodwill arising from the acquisition of Fibernet (see note 4 “business combinations” within the accompanying consolidated financial statements). These gains were partially offset by the recognition of a £1.7 million restructuring charge relating to the termination of redundant Fibernet employees and the restructuring of a Fibernet facility lease agreement (see note 17 “provisions” within the accompanying consolidated financial statements).

Finance Revenue

The increase in finance revenue in 2007 compared with 2006 was primarily due to (i) the inclusion of Fibernet for a full year in 2007 (£0.9 million); (ii) additional interest receivable on intercompany loans with GCE (£1.0 million); and (iii) a less unfavorable foreign exchange rate movement on loans due from GCE in 2007 compared with 2006 (£1.6 million). See “Relationship with our Parent Company and its Affiliates—Loans to Group Companies” above for more information. These increases are partially offset by interest received on higher average cash balances held on deposit throughout 2006 compared to 2007 (£0.5 million).

Finance Charges

The increase in finance charges in 2007 compared 2006 was primarily due to (i) interest payable on the Additional Notes in 2007 (£6.0 million); (ii) a more favorable exchange rate movement on US Dollar-denominated Senior Secured Notes in 2006 compared with 2007 (£10.6 million); and (iii) the inclusion of Fibernet for a full year in 2007 (£0.6 million).

Tax

During the year ended December 31, 2006 and 2007, we recognized a current year tax charge of £0.8 million and £1.0 million, respectively, which reflects an amount payable under the tax sharing agreement for tax relief claimed from other UK entities of the GC Group.

During the year ended December 31, 2006, we reduced our deferred tax asset by £8.6 million due to a change in our estimate of the future realization of our deferred tax assets, which had been created by prior years’ tax losses. At December 31, 2006 we had net unutilized operating losses carried forward of £309 million. At December 31, 2006 a £5.3 million deferred tax asset was reflected within our consolidated balance sheet due to the Company considering that it was more likely than not that sufficient profits would be available against which to offset the deferred tax asset.

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During the year ended December 31, 2007, we reduced our deferred tax asset by £5.3 million due to (i) £0.4 million charge relating to the effect of the change in the UK corporation tax rate from 30% to 28%; (ii) £2.6 million utilized based on taxable income arising from operating activities in the year; and (iii) £2.3 million reduction reflecting the amount considered more likely than not not to be realized in the foreseeable future. At December 31, 2007 we had net unutilized operating losses carried forward of £288 million. At December 31, 2007 no deferred tax asset was reflected within our consolidated balance sheet as it was not deemed more likely than not that sufficient profits would be available against which to offset the deferred tax asset. We do not believe that there is any restriction under current law or regulations that will limit our ability to continue carrying these NOLs forward or to apply them to offset future taxable income.

B. Liquidity and Capital Resources

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors (such as satisfactory resolution of contingent liabilities) that are beyond our control.

Based on our current level of operations and anticipated cost management and operating improvements, we believe our expected cash flow from operations, available cash and other sources of available financing including intercompany loans, will be adequate to meet our future liquidity needs for at least the next twelve months.

There can be no assurance, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We cannot provide assurances that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. Furthermore, we cannot provide any assurances that the ongoing crisis in the global capital markets and adverse general economic conditions will not have a material impact on our future operations and cash flows.

We monitor our capital structure on an ongoing basis and from time to time we consider financing and refinancing options to improve our capital structure and to enhance our financial flexibility. Our ability to enter into new financing arrangements is subject to restrictions in our outstanding debt instruments (as described below under “Indebtedness”) and to the rights of ST Telemedia under our parent’s outstanding preferred shares. At any given time we may pursue a variety of financing opportunities, and our decision to proceed with any financing will depend, among other things, on prevailing market conditions and available terms.

At December 31, 2008 our available liquidity consisted of £36.1 million of cash and cash equivalents. During 2008, we posted operating income of £28.9 million and a net loss of £29.8 million, generated £40.9 million of cash provided by operating activities and had a net increase in cash and cash equivalents of £12.1 million.

In the long term, we expect our operating results and cash flows to continue to improve as a result of the continued growth of our higher margin enterprise and carrier data business, including the economies of scale expected to result from such growth, and from ongoing cost reduction initiatives to optimize the access network and effectively lower unit prices. Thus, in the long term we expect to generate positive cash flow from operating activities in an amount sufficient to fund all investing and financing requirements, subject to the possible need to refinance our existing major debt instruments as described below. However, our ability to improve cash flows is subject to the risks and uncertainties described above under Item 3.D. “Key information—Risk Factors”.

In the short-term, we expect cash provided by operating activities to exceed purchases of property and equipment. This expectation is based in part on raising financing for such property and equipment from vendors and others comparable to those arranged in 2008. Our ability to arrange such financings is subject to negotiating acceptable terms from equipment vendors and financing parties. This could prove more difficult given current adverse conditions in the credit markets.

Our short-term liquidity and more specifically our quarterly liquidity expectations are subject to considerable variability as a result of the timing of interest payments as well as the factors noted below. Therefore, even though certain of our interim periods may have negative cash flows we expect cash provided by operating activities to exceed purchases of property and equipment for the full year 2009. In 2008, in all but one quarter, our cash provided by operating activities exceeded purchases of property and equipment.

• Intra-quarter and working capital variability significantly impacts our cash flows such that our intra-quarter cash balances tend to drop to levels significantly lower than those levels prevailing at the end of a given quarter.

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• The continuing adverse conditions in global credit markets and general economic conditions could cause customer buying patterns to change as a result of their cash conservation efforts, which could have an adverse impact on our cash flows. These adverse conditions could also adversely impact our working capital to the extent suppliers seek more timely payment from us or customers pay us on a less timely basis which could have an adverse impact on our cash flows. These adverse conditions could also adversely impact our working capital to the extent suppliers seek more timely payment from us or customers pay us on a less timely basis.

• Our liquidity may also be adversely affected if we are found liable in respect of contingent legal, tax and other liabilities, and the amount and timing of the resolution of these contingencies remain uncertain.

• Within 120 days after each calendar year, we must offer to purchase a portion of the Senior Secured Notes at 100% of their principal amount with 50% of the Operating Cash Flow (as defined in the Indenture) for that year. In respect of 2008, we anticipate offering to purchase £7.4 million of the Notes, excluding accrued interest.

• We have agreed the terms of a loan of up to $15.0 million from GC Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

The vast majority of our long-term debt matures after 2010. However, we do have approximately £18.3 million related to various other debt agreements that are due and payable in 2009. With regard to our major debt instruments, the £105.0 million and $200.0 million original principal amount of our Senior Secured Notes matures in 2014 (subject to early redemption) if cash on hand at the time any of these debt instruments mature is insufficient to satisfy these and our other debt repayment obligations, we would need to access the capital markets to meet our liquidity requirements. Such access would depend on market conditions and our credit profile at the time. The ongoing crisis in global capital markets could make it more difficult for us to obtain debt financing.

We may, from time to time, loan funds to or borrow funds from our parent and other Group Companies in order to satisfy our liquidity needs and the liquidity needs of those Group Companies. The terms of any intercompany loan made between us and our parent or other Group Companies are negotiated at the time the loans are made in light of the parties’ ongoing liquidity requirements, the restrictions contained in the applicable debt covenants and the requirements of applicable law.

At December 31, 2008, there was an outstanding intercompany loan balance of $50.4 million (equivalent to £25.3 million and £34.9 million as at December 31, 2007 and 2008, respectively) due to us which is guaranteed by GCL. This loan balance matures five business days prior to the December 15, 2014 scheduled maturity of the Senior Secured Notes, bears an effective interest rate of 13.5%, and is unsecured. Although the borrower may elect to repay early without penalty at any time, we may demand repayment only in the event of a default under the Indenture which would result in the accelerated repayment of the outstanding principal amount of Senior Secured Notes.

In 2007 we signed an agreement for a £5.0 million finance lease facility, of which £2.0 million had been drawn down as at December 31, 2008. The remaining £3.0 million of this facility is no longer available for drawdown. Interest on this facility is incurred at the lenders’ cost of funds plus 6.25%, with a repayment period of 3 years from the date of draw down. The amounts currently drawn down bear interest at rates between 12.29% and 12.56%, with lease repayments required to be made until September 2010.

In the first quarter of 2008, we signed an agreement for a £3.9 million finance lease facility, of which £3.5 million had been drawn down as at December 31, 2008. The remainder of this facility is no longer available for draw down. Interest on this facility is incurred at the lenders’ cost of funds plus 5.25%, with lease repayments required to be made until February 2011.

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Cash Flow Activity

The table below shows our net cash flow for the years ended December 31, 2007 and 2008.

	Year ended December 31,
	2007			2008			Change			% Change
	(in thousands)
Net cash provided by operating activities	£	14,453		£	40,869		£	26,416		182.8	%
Net cash used in investing activities		(27,880	)		(17,410	)		10,470		(37.6	)%
Net cash used in financing activities		(2,928	)		(11,313	)		(8,385	)	286.4	%
Net (decrease)/increase in cash and cash equivalents	£	(16,355	)	£	12,146		£	28,501		NM

NM – zero balances and comparisons from positive to negative numbers are not meaningful

Net cash provided by operating activities consists of five major ongoing components: profit/(loss) adjusted for net finance charges, income tax, depreciation and amortization, and certain other significant non-cash items; changes in working capital; changes in provisions; changes in other assets and liabilities; and interest paid. Within working capital, the major items are increases and decreases in payables and receivables. We include inter-company trade payables and receivables in those categories, as well as certain inter-company financial obligations that do not qualify as debt.

Net cash flow used in investing activities includes interest received on bank deposits and loans receivable from Group Companies and payments to acquire intangible and tangible fixed assets and subsidiaries, net of cash acquired.

Net cash flow used in financing activities includes the issuance of the Notes, loans provided by and repaid to Group Companies and repayments of capital lease obligations.

Net Cash Flow from Operations

During 2008 net cash provided by operating activities increased £26.4 million to £40.9 million when compared with 2007. The increase was primarily due to our efforts in the first quarter of 2007 to significantly reduce days payable outstanding with key access vendors and to additional cash flows generated from cash collections from the growth of our revenues in 2008.

Net Cash Flow from Investing Activities

During 2008 net cash used in investing activities decreased when compared with 2007, primarily due to the substantial completion of the capital expenditures required by a large network construction contract for a leading mobile network operator and certain other network enhancements in 2007.

Net Cash Flow from Financing Activities

During 2008, net cash used in financing activities increased when compared with 2007, primarily due to (i) repayment to the Company of a £3.6 million intercompany loan balance, in full, in the second quarter of 2007; (ii) a £2.0 million receipt from a sale and buyback of certain network assets under a finance lease arrangement in the fourth quarter of 2007; (iii) the repurchase of £1.2 million of Senior Secured Notes on completion of the excess cash offer in respect of the year ended December 31, 2007 in the second quarter of 2008; and (iv) £1.3 million additional finance lease and other debt obligation repayments during 2008 when compared with 2007.

Indebtedness

At December 31, 2008, we had £312.1 million of outstanding indebtedness, consisting of £286.9 million of Senior Secured Notes, £24.2 million of finance leases and £1.0 million in respect of other debt obligations. We were in compliance with all covenants in the Indenture as at December 31, 2008.

Senior Secured Notes

On December 23, 2004, the Issuer issued the Initial Notes comprising $200.0 million in aggregate principal amount of 10.75% US Dollar-denominated senior secured notes and £105.0 million in aggregate principal amount of 11.75% pound sterling-denominated senior secured notes. The Initial Notes were issued at a discount of approximately £3.0 million. The Initial Notes mature on the tenth anniversary of their issuance.

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On December 28, 2006, the Issuer completed its offering of the Additional Notes. The £52.0 million aggregate principal amount of Additional Notes was priced at 109.25% of par value and the issue raised £56.8 million in gross proceeds. The Additional Notes were issued under the Indenture. The proceeds from the Additional Notes were used to finance the Fibernet acquisition.

Interest is payable in cash semi-annually on June 15 and December 15. The discount, premium and fees associated with the issuance of the Notes are amortized over the term of the Notes using the effective interest method.

The Notes are senior obligations of the Issuer and rank equal in right of payment with all of its future debt. The Guarantors have guaranteed the Notes as a senior obligation ranking in equal right of payment with all of their existing and future debt. The Notes are secured by certain assets of the Guarantors, including the capital stock of the Issuer, but certain material assets of the Guarantors do not serve as collateral for the Notes.

The Issuer may redeem the Notes in whole or in part, at any time on or after December 15, 2009, at redemption prices decreasing from 105.375% (for the US Dollar-denominated Notes) or 105.875% (for the pound sterling-denominated Notes) in 2009 to 100% of their principal amount in 2012 and thereafter, plus any accrued and unpaid interest. At any time before December 15, 2009, the Issuer may redeem either or both series of Notes, in whole or in part, by paying a “make-whole” premium, calculated in accordance with the Indenture. The Issuer may also redeem either or both series of Notes, in whole or in part at a price equal to their principal amount plus accrued and unpaid interest, upon certain changes in tax laws and regulations.

The Notes were issued under the Indenture, which includes covenants and events of default that are customary for high-yield senior note issuances. The Indenture limits the ability of the Company and its restricted subsidiaries to, among other things (i) incur or guarantee additional indebtedness; (ii) pay dividends or make other distributions to repurchase or redeem its stock; (iii) make investments or other restricted payments; (iv) create liens; (v) enter into certain transactions with affiliates; (vi) enter into agreements that restrict the ability of its material subsidiaries to pay dividends; and (vii) consolidate, merge or sell all or substantially all of its assets.

Within 120 days after the period ending December 31, 2005 and each twelve month period thereafter, the Company must offer to purchase a portion of the Senior Secured Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the purchase date, with 50% of the Operating Cash Flow (as defined in the Indenture) from that period. (the “Annual Repurchase Offer”). Operating Cash Flow means the Company’s consolidated net income plus non-cash charges minus capital expenditures, calculated in accordance with the terms of the Indenture. In respect of the year ended December 31, 2007, the Company made an offer for and repurchased approximately £1.2 million principal amount of Notes.

In respect of the, year ended December 31, 2008, we anticipate offering to purchase £7.4 million principal amount of the Notes, excluding accrued interest. Any such offer is required to be made within 120 days of such date, and the related purchases must be completed within 150 days after year-end.

A loan or dividend by the Company to GCL and its affiliates is a restricted payment under the Indenture. Under the Indenture such a payment (i) may be made only if the Company is not then in default under the Indenture and would be permitted at that time to incur additional indebtedness under the applicable debt incurrence test; (ii) may generally be made only within ten business days of consummation of each Annual Repurchase Offer; and (iii) would generally be limited to 50% of the Company’s Operating Cash Flow plus the portion, if any, of the applicable Annual Repurchase Offer that the holders of the Notes decline to accept. In addition, so long as we are not then in default under the Indenture, we may make up to £10.0 million in the aggregate in restricted payments in excess of 50% of Operating Cash Flow for a given period; provided that any such excess payments shall reduce the amount of restricted payments permitted to be paid out of future Operating Excess Cash Flow. Under the GCL Term Loan Agreement, any future loans from the Company to GCL or GCL’s other subsidiaries must be subordinated to the payment of obligations under our parent’s Term Loan Agreement. The terms of any inter-company loan by the Company to GCL or GCL’s other subsidiaries are required by the Indenture to be at arm’s length and, if for a sum in excess of £5.0 million, must be approved by a majority of the disinterested members of our Board of Directors, including its independent members. We cannot pay dividends to our shareholder, an indirect subsidiary of our parent, until such time as our accumulated realized profits exceed our accumulated realized losses, We do not expect this to occur for some time and any funds to be upstreamed to our parent or other Group Companies will continue to be in the form of intercompany loans.

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In August 2005, we filed a registration statement with the SEC in relation to an offer to exchange the Initial Notes for publicly tradable notes that have identical terms (except for terms concerning additional interest and transfer restrictions). The exchange offer was completed in September 2005. The exchange notes together with the unregistered Notes that remain outstanding after the completion of the exchange offer are treated as a single class of debt securities under the Indenture. The US Dollar-denominated exchange Notes are eligible for trading in the Private Offerings, Resales, and Trading through Automatic Linkages Market, commonly referred to as the Portal Market. As of September 27, 2005 when the exchange offer closed, the exchange offer was taken up by 99.93% of the holders of the $200.0 million 10.75% senior secured notes and 100% of the holders of the £105.0 million 11.75% senior secured notes.

In August 2007, we filed a registration statement with the SEC in relation to an offer to exchange the Additional Notes for publicly tradable notes that have identical terms (except for terms concerning additional interest and transfer restrictions). As of September 21, 2007 when the exchange offer closed, the exchange offer was taken up by 100% of the holders of the £52.0 million 11.75% Senior Secured Notes.

Our Lease Obligations

We have capitalized commitments for property, plant and equipment and computer software that qualify as obligations under finance leases. Our leases with Network Rail, the largest of our finance leases, includes fiber and equipment on the rail network with the last lease ending in 2018. At December 31, 2008, the total liability under the Network Rail leases was £13.7 million, a decrease in our liability of £3.3 million during the year. The other finance leases have a total liability of £8.6 million outstanding at December 31, 2008, and include voice equipment supporting various customers. Obligations under finance leases are recognized in current and non current liabilities in the consolidated balance sheets included within our consolidated financial statements.

Our operating leases cover both leases of real property and leases of equipment. The real property leases require us to make payments aggregating about £118.2 million (see note 21 “operating lease commitments” within the accompanying consolidated financial statements).

C. Research and development, patents and licenses

Not applicable.

D. Trend information

We believe that the most important factor affecting our future results will be our ability to retain our existing customers. We have long-term contracts with many of our enterprise customers, and our ability to renew those contracts and to attract new business at acceptable margins, will be key to our financial success. Growing our relationships with our existing and new customers and migrating them to IP-based platforms are other important success factors.

Despite current economic conditions, we continue to see strong interest in our IP services and as a result continue to win new business. Many government agencies and enterprises continue to refresh their more traditional technologies and take advantage of converged IP services. However, the UK telecommunications market remains highly competitive.

A number of our UK carrier customers continue to enhance both their mobile broadband and next generation networks. This is due in part to the success of mobile broadband products launched by them. This has presented us with increased selling opportunities as our customers upgrade bandwidth to accommodate the increase in traffic volumes. In addition to successfully cross-selling our products to the customers acquired with Fibernet, we have also been successful in cross-selling existing Fibernet products into our legacy customer base.

One of our principal customer relationships in the year ended December 31, 2008 was with Camelot, the current holder of the license to operate the UK National Lottery. Camelot had deployed a landline-based ISDN network related to the operation of the UK National Lottery. This network was provided by us. On August 31, 2007, Camelot entered into an enabling agreement with the National Lottery Commission which officially appointed Camelot as operator of the National Lottery for a 10 year period from February 2009. On October 9, 2007, Camelot announced its intention to replace its existing landline-based ISDN network with a broadband satellite communications network to be supplied by another service provider. Camelot has substantially completed the migration of the network. In the fourth quarter of 2008 revenue from our relationship with Camelot decreased by £1.2 million to £5.4 million compared with £6.6 million in the third quarter of 2008. We

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expect revenues to decline in the first quarter of 2009 by substantially all the £5.4 million recorded in the fourth quarter of 2008. Furthermore, although our relationship with Camelot continues, we do not expect to earn significant revenue from this relationship in the future. Our revenue from sales to Camelot was approximately £26.0 million and £25.2 million for 2007 and 2008, respectively.

In the short term, we expect a marginal decline in our consolidated revenues as a result of the Camelot network migration. We anticipate that new orders already signed during 2008, and the strong demand that we continue to see, will offset that impact in the second half of 2009 and start to deliver the medium term growth in revenues.

Our sales order levels, which are a key indicator of continuing strength in customer demand for our services, remained at healthy levels during 2008. This metric is used by management as a leading business indicator offering insight into near term revenue trends. The gross values of these monthly recurring orders are estimated based on new business acquired, and they exclude the effects of attrition, the replacement of existing services with new services, and credits.

E. Off-Balance Sheet Arrangements

Off balance sheet arrangements are defined as being any transaction, agreement or other contractual arrangement to which an entity unconsolidated by the Company, is a party, under which the Company has (i) any obligation under a guarantee contract; (ii) a retained or contingent interest in assets transferred to an unconsolidated entity; (iii) an obligation under a derivative instrument; or (iv) any obligation, including a contingent obligation, arising out of a variable interest.

We are not party to any off-balance sheet arrangements.

F. Contractual Obligations

Tabular Presentation of Cash Commitments at December 31, 2008

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Debt obligations(1)	£	485,881	£	37,285	£	64,709	£	64,709	£	319,178
Finance lease and hire purchase obligations		29,536		12,111		9,175		3,944		4,306
Other debt obligations		604		536		68		—		—
Operating lease obligations		118,237		10,919		21,669		17,398		68,251
Purchase obligations(2)		92,063		48,331		25,653		5,165		12,914
Pension obligations		13,616		1,241		2,594		2,767		7,014
Total	£	739,938	£	110,424	£	123,868	£	93,983	£	411,663

⁽¹⁾ The amounts presented include both principal and interest. The principal repayment of the Notes of approximately £294.2 million is included within the “More than 5 years” section of the table. As the Operating Cash Flow will vary from period to period we have not predicted early purchases of the Notes. The $200.0 million principal has been translated for all periods at the December 31, 2008, year-end rate of 1.4435 US Dollars to one pound sterling. The US Dollar interest included in the period up to five years has been calculated using the swap rate of 1.945 US Dollars for one pound sterling. The US Dollar interest included in periods of more than five years has been calculated using the bond rate of 10.75% and has been translated at a rate of 1.4435 US Dollars to one pound sterling. The pound sterling interest has been calculated using the bond rate of 11.75%.

⁽²⁾ Amounts represent contractual commitments to third parties to purchase network access services (£34.8 million), the undiscounted value of rental payments for restructured properties (£27.2 million), maintenance services for portions of our network (£13.3 million) and other purchase commitments (£16.8 million, which includes £14.0 million in respect of committed capital expenditure).

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The Issuer’s Board of Directors consists of the same individuals as ours. The business address of each director of the Issuer and the Company is 1 London Bridge, London, SE1 9BG, England. Certain of our senior managers have responsibilities for their respective functions in Europe in addition to their responsibility for our management. In some instances, our and our parent’s senior management is not employed by us, but by one of our affiliates.

Our Directors, executive management and senior management, and their ages and positions, are as follows:

Name	Age	Position
John McShane(1)	47	Chairman; Executive Vice President and General Counsel, Global Crossing Limited
Anthony D Christie(1)(2)	47	Managing Director, UK and Europe
Niall Anderson(1)(2)	43	Chief Marketing Officer—Europe, Middle East and Africa
George McDevitt(1)(2)(3)	42	Chief Financial Officer, UK and Europe
Richard Atkins(1)	57	Non-Executive Director
Ed McCormack(1)(4)	54	Non-Executive Director
Peter Cladingbowl(2)(6)	44	Vice President, Operations, Europe, Middle East and Africa
Gabriel Del Campo(2)	43	Vice President, Data Center, Europe, Middle East and Africa and Global Product Manager
Pat Gennette(2)(6)	48	Head of Information Technology, Europe, Middle East and Africa
Isabel Howson(2)	52	Vice President, Human Resources—UK
Anthony Judd(2)	43	Regional Vice President—Enterprise Sales UK
Bernard Keogh(2)(5)	41	Regional General Counsel, Europe
Derek M Lister(2)	47	Vice President of Carrier Sales, UK
Robert Turnbull(2)	56	Vice President, Access Management, UK and Europe

⁽¹⁾ Member of the GCUK Board of Directors.

⁽²⁾ Member of the Company’s executive management.

⁽³⁾ George McDevitt was appointed to the GCUK Board of Directors in February 2008.

⁽⁴⁾ Ed McCormack was appointed to the GCUK Board of Directors following the resignation of John Hughes in January 2008.

⁽⁵⁾ Bernard Keogh resigned from the GCUK Board of Directors in February 2008.

⁽⁶⁾ In April 2008, Peter Chubb resigned from the Company as Vice President of Operations, with effect from May 2008 and was replaced by Peter Cladingbowl, whose responsibility for Information Systems was taken over by Pat Gennette.

John McShane joined the board of GCUK in June 2005, and was appointed Chairman in July 2007. Mr. McShane was named executive vice president and general counsel of Global Crossing in March 2002. Mr. McShane oversees and manages all of our parent’s legal matters. Mr. McShane joined Global Crossing in February 1999 as European assistant general counsel where he oversaw and managed legal affairs for the European region, including the build out of the PEC network. As assistant general counsel he also had responsibility for the oversight of worldwide sales and telecommunications network outsourcing transactions for Global Crossing’s Solutions business unit and major vendor supply agreements. Prior to joining Global Crossing, Mr. McShane spent twelve years at several international law firms, including positions as an associate at Simpson Thacher & Bartlett from 1987 through 1996 and as senior counsel at Shearman and Sterling, Cadwalader, Wickersham & Taft, and Brown & Wood, where his main focus was on representing major commercial banks, financial institutions and corporations in connection with a broad range of their corporate, commercial and financing activities.

Anthony D. Christie became Managing Director in March 2007. Mr. Christie was named executive vice president and chief marketing officer of Global Crossing in November 2003. From February 2002 through November 2003, Mr. Christie served as senior vice president, global product management, having previously served as senior vice president, business integration and strategic planning from November 2001. Prior to joining

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Global Crossing, Mr. Christie was vice president, business development and strategic planning for Asia Global Crossing from March 2000 through October 2001. In this position, Mr. Christie was accountable for all business and corporate development, joint venture and mergers and acquisitions activities, as well as overall strategic planning for Asia Global Crossing. Prior to joining Asia Global Crossing, Mr. Christie was general manager and network vice president at AT&T Solutions in New York City from November 1999 through March 2000, having also held the position of Global Sales and Operations vice president in AT&T’s outsourcing division from June 1998 through November 1999. From June 1997 through June 1998, Mr. Christie was a Sloan Fellow at MIT. Prior thereto, Mr. Christie held positions in AT&T’s International Operations Division that included an assignment as the regional managing director for the Consumer Markets Division in Asia.

Niall Anderson was appointed to the board of GCUK in February 2007. Mr. Anderson became Chief Marketing Officer (“CMO”)-Europe, Middle East and Africa (“EMEA”) in September 2007. From April 2006 until this time he held the roles of regional vice president of enterprise sales and Managing Director Enterprise. In his capacity as Managing Director Enterprise, Mr. Anderson strengthened Global Crossing’s significant presence in the government, rail transportation and corporate sectors, leading the transformation of the sales strategy to develop new business outside GCUK’s core segments, creating a commercial business unit structured around closely targeted vertical markets and incorporating new capabilities in the financial services sector as a result of the Fibernet acquisition. In his current role as CMO-EMEA, Mr. Anderson takes responsibility for ensuring that Global Crossing’s product development and strategic market positioning reflects its regional focus and supports continued company growth as well as aligning with global corporate objectives. Mr. Anderson has more than 15 years’ experience in the telecommunications and IT industries. Before joining Global Crossing, he held a number of successful sales positions at Equant, including head of sales for UK and Ireland. At Equant, he restructured the sales organization, creating a demand-led strategy and developing a highly successful integration business. Prior to this, Mr. Anderson was involved in developing the service provider strategy at Sun Microsystems and held a variety of sales positions including regional sales manager, UK sales manager and vice president of UK sales at Axinter Communications & Integration, which later became Comparex Networks.

George McDevitt became a director of GCUK in February 2008. Mr. McDevitt joined Global Crossing in September 2007 as Chief Financial Officer (“CFO”) for UK & Europe. Mr. McDevitt has almost 20 years experience as a finance professional with extensive experience at senior management and board level across Europe. Prior to joining Global Crossing, he spent 15 years at Oracle, most recently as Vice President of Finance covering UK, Ireland, Israel & South Africa, with extensive experience in merging over 20 acquisitions. Former roles at Oracle included Vice President of Finance for their Consulting practice across EMEA. Mr. McDevitt also set up a Shared Service Centre in Dublin and a Global Finance function in India. He sat on the CBI Regional Council and was a Trustee of the Central Berkshire Education Business Partnership, which is dedicated to developing young people’s skills, knowledge and experience. Mr. McDevitt is a qualified member of the Chartered Institute of Management Accountants.

Richard Atkins joined the board of GCUK in June 2005. From 2002 to 2005, he was the General Manager of IBM Global Services North Region, where he was responsible for end-to-end strategy, sales and profit and loss management. From 1997 to 2002, he held various other positions at IBM, including the positions of General Manager at different divisions of IBM Global Services from 2000 to 2002 and Vice President of IBM Global Services, Service Delivery, EMEA Geoplex from 1999 to 2000. From 1991 to 1996, Mr. Atkins was the finance director of Data Sciences. Mr. Atkins was also a member of the IBM Senior Leadership Team.

Ed McCormack joined the board of GCUK in January 2008. From 2006 to 2007, Mr. McCormack acted as a strategic advisor to the President, and the wider Executive team, of FLAG Telecom. Prior to this, Mr. McCormack was an executive of FLAG Telecom for ten years, serving as a Member of the FLAG Board from 2000 to 2006. He served as the CFO from February 1996 to November 2000 and was appointed Chief Operating Officer in March 2000. Prior to that time, Mr. McCormack spent 17 years with Bechtel, the engineering and construction company, where his final position was CFO of Bechtel Europe, Africa, Middle East and South West Asia.

Peter Cladingbowl serves as Vice-President, Operations, EMEA. Previously, Vice President, European and UK Information systems and prior to that part of the Global Network Operations team where he held the position of Director Business Operations and was responsible for operational support systems and global network performance management. During this time, network availability rose to 99.99% and he put in place a strategy for intelligent network systems with the objective of both improving the overall customer experience and operational productivity by creating a “self aware” network. Mr. Cladingbowl joined Global Crossing from Racal Telecom where, as product planning and process manager, he developed and implemented an on-line product catalogue and order management system. In his early career with Global Crossing, Mr. Cladingbowl led the

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program to integrate business and network management systems. Mr. Cladingbowl has substantial experience in manufacturing and started his career as a geophysical engineer in the off-shore oil industry. He holds a BSC (Mech.) Eng from the University of Cape Town, South Africa.

Gabriel Alejandro Del Campo serves as Vice President, Datacenter, EMEA and is the Global Product Manager. Originally from Argentina, Mr. Del Campo has over 22 years of experience in the information and communications technology industry. Prior to this role from 1997 he was the Senior Vice President Datacenter for the Latin America Region for Impsat Fiber Networks Inc., before its acquisition by Global Crossing in 2007, where he developed the business from scratch to become one of the market leaders in the region. Mr. Del Campo has also worked for Startel, a Telefonica and Telecom company for two years, has been general manager of a leading Enterprise Resource Planning software company and worked nine years at IBM Argentina in various marketing, sales and business management positions.

Patrick Gennetteserves as Head of Information Technology, EMEA in which he leads all areas of the Information Technology area with the Europe Middle East and Africa region including operations, applications development, vendor management and budget. Mr. Gennette has more than 19 years experience in managing telecommunications computing systems at Global Crossing and over 8 years collaborating with business and technical areas within EMEA on both products and systems initiatives. Previously at Global Crossing Mr. Gennette worked within the applications development area; specifically in mediation, cost-of-access, tax, billing, rating, commissions and credit & collections systems. He has played key roles in the OSS integration of independent mediation and billing systems acquired internationally by Global Crossing.

Isabel Howson serves as Vice President of Human Resources for Global Crossing in the UK. Ms. Howson has more than 25 years’ experience as an HR professional with extensive experience at senior management and board level. Her career spans multiple industries including telecommunications, financial services, modern manufacturing, and publishing. Ms. Howson has extensive experience of implementing HR strategies to support organizational change and restructuring, employee relations and the management of growth through acquisition. Before joining Global Crossing in April 2007, she was HR Director for Fibernet Group Plc with responsibility for formulating and delivering its HR strategy for the UK and Europe. Prior to Fibernet, Ms. Howson held senior HR positions at Barclays Bank, where she was head of organizational change and introduced leadership and cultural change management programs, Rolls Royce and HarperCollins Publishers and has worked as a consultant on HR to the National Health Service and the telecommunications sector.

Anthony Judd serves as Regional Vice President-Enterprise Sales UK. Mr. Judd has worked in the telecommunications industry for 27 years holding senior positions in a very broad range of roles including sales, service, operations, outsourcing, and business consulting and leading an internal change programme with McKinsey. Prior to joining Global Crossing in February 2006, Mr. Judd served with Cable & Wireless for 20 years, initially in engineering roles and culminating as Head of Sales Operations and Services for the UK reporting to the Chief Executive Officer. For 13 years at Cable & Wireless Mr. Judd worked within the service and sales area and in 2004 was responsible for creating the Cable & Wireless Oil sector which generated growth in global revenues and for selling and delivering Cable & Wireless’s first and largest integrated managed service customer.

Bernard Keogh was appointed Regional General Counsel, Europe in January 2004. Prior to this, he held various roles within Global Crossing affiliates, which he joined in April 2000. From January 1999 to March 2000, he was the Chief Legal Adviser at the Commission for Communications Regulation, the telecommunications regulatory body in Ireland. From 1990 to 1999, he practiced law with William Fry, a leading corporate and commercial law firm in Dublin, Ireland. Mr. Keogh was a director of GCUK between July 2004 and February 2008.

Derek Lister joined GCUK in December 2006 following the acquisition of Fibernet where he served as director for all sales functions in the UK and Germany and was a member of the executive team. Mr. Lister was appointed as our Vice President of Carrier Sales, UK in February 2007 and serves on the Company’s senior management team. Mr. Lister was responsible for the integration of the GCUK and Fibernet UK carrier sales functions into a single unit, structured around three teams, strategic accounts (focused on developing new business with existing major customers), carrier and ISP (tasked with generating growth through new relationships with tier-2 operators) and indirect channels (whose focus is on building co-operative relationships with partners who operate the virtual network model for their customers). Mr. Lister has more than 22 years’ experience in the telecommunications and IT industries. Before joining GCUK, he spent six years with Fibernet and prior to this was business development director for ntl Broadcast, where he was heavily involved in bringing new and emerging technologies to market, including broadcast, mobile data and digital TV. Whilst at ntl, he

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created a new sales team selling to corporates and small to medium enterprises, which grew to be a $100.0 million business. He also served as chairman of the IPTV Forum in Europe between 1999 and 2000. Prior to ntl, Mr. Lister spent 11 years with CTE, Scotland’s largest telecoms reseller. His roles included new business development and account management of corporate clients.

Robert Turnbull became Vice President, Access Management in May 2001. From January 1998 to January 2001, he was Director Carrier Relations for Axxon Telecom, a switched reseller operating in Europe. Mr. Turnbull was previously employed by T-Mobile, Germany as Director, International Business Development where he was responsible for acquisition of mobile licenses in Taiwan and Italy. Prior to T-Mobile, Mr. Turnbull worked for Cable & Wireless from 1973 to 1996 and held a number of technical, operational and management positions globally, including in the United States, Japan, Sweden and the United Kingdom.

B. Compensation

Our Director and Executive Compensation

The aggregate remuneration (which consists of salary, bonus and other compensation) paid by us or by a member of the GCL group of companies to all of our directors and executive management (totaling fifteen persons⁽¹⁾ ) for the 2008 financial year was approximately £2.4 million⁽²⁾ . This does not include the compensation paid to John McShane as he is not directly involved in the day-to-day management of GCUK. Of this aggregate compensation, approximately is £1.4 million was paid in salaries. For 2008, the highest paid director or executive received £0.6 million, including salary, bonuses, benefits-in-kind and pension contributions.

Except for Mr. Atkins, Mr. McCormack and Mr. Hughes (until his resignation) who were paid £0.1 million in aggregate, we did not compensate our directors independently for their services in their capacity as members of the Board of Directors.

⁽¹⁾ This number includes the directors and executive management that served throughout 2008 together with those members of the Company’s Directors and executive management who either left (Peter Chubb and John Hughes) or joined (Pat Gennette and Gabriel Del Campo) during 2008. The remuneration of each of these persons, with the exception of John McShane, for the 2008 financial year is included in the above aggregate remuneration figure.

⁽²⁾ Bernard Keogh’s compensation was translated from euros to pounds sterling at £1.00 = €1.2759 the average rate for the year ended December 31, 2008. Anthony Christie’s compensation was translated from US Dollars to pounds sterling at £1.00 = $1.8918 the average rate for the year ended December 31, 2008.

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Our directors and executive management (excluding those members of the Company’s executive management who left the Company during 2008 and whose stock based awards were exercised or lapsed in 2008) held the following stock-based awards (including stock options), as of March 31, 2009 :

Name	Number Outstanding	Exercise price ($)	Option Expiration Date/RSU Vesting Date
John McShane	50,000	10.16	December 9, 2013
	15,000	15.39	December 15, 2014
	3,888		December 31, 2009	*
	10,000		March 13, 2010	*
	32,000		December 31, 2010	*
	16,000		March 4, 2011	*
	28,829		April 8, 2009	*
	155,717
Anthony Christie	38,000	10.16	December 9, 2013
	15,000	15.39	December 15, 2014
	3,888		December 31, 2009	*
	10,000		March 13, 2010	*
	28,000		December 31, 2010	*
	14,000		March 4, 2011	*
	24,702		April 8, 2009	*
	133,590
Niall Anderson	842		December 31, 2009	*
	2,200		March 13, 2010	*
	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	7,264		April 8, 2009	*
	13,306
George McDevitt	1,037		December 31, 2009	*
	2,700		March 13, 2010	*
	3,500		December 31, 2010	*
	3,500		March 4, 2011	*
	10,959		April 8, 2009	*
	21,696
Peter Cladingbowl	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	5,910		April 8, 2009	*
	8,910
Gabriel Del Campo	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	5,435		April 8, 2009	*
	8,435
Patrick Gennette	2,696		April 8, 2009	*
	2,696
Isabel Howson	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	6,330		April 8, 2009	*
	9,330
Anthony Judd	259		December 31, 2009	*
	700		March 13, 2010	*
	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	3,959

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Name	Number Outstanding	Exercise price ($)	Option Expiration Date/RSU Vesting Date
Bernard Keogh	667	15.39	December 15, 2014
	940		December 31, 2009	*
	2,400		March 13, 2010	*
	3,500		December 31, 2010	*
	3,500		March 4, 2011	*
	10,430		April 8, 2009	*
	21,437
Derek Lister	259		December 31, 2009	*
	700		March 13, 2010	*
	1,500		December 31, 2010	*
	1,500		March 4, 2011	*
	3,959
Robert Turnbull	486		December 31, 2009	*
	1,300		March 13, 2010	*
	3,000		December 31, 2010	*
	3,000		March 4, 2011	*
	7,633		April 8, 2009	*
	15,419

* Restricted stock units (“RSU”)

Our Parent’s Director and Executive Compensation

Our Parent’s 2008 Bonus Program

On March 4, 2008 our parent company’s board of directors adopted the Global Crossing annual bonus program for 2008 (the “2008 Bonus Program”) at the recommendation of our parent’s compensation committee. Substantially all non-sales employees of Global Crossing and its affiliates participate in the 2008 Bonus Program. The program was intended to retain such employees and to motivate them to help Global Crossing achieve its financial and business goals.

Actual awards under the 2008 Bonus Program were to be paid only if our parent achieved specified performance goals for 2008 relating to earnings (the “EBITDA Metric”) (representing 70% of the overall target opportunity), the net change in cash and cash equivalents (the “Cash Use Metric”) (representing 20% of the overall target opportunity) and/or customer satisfaction (the “Customer Specific Metric”) (representing 10% of the overall target opportunity). The payout for each performance opportunity was to be calculated independently of the other once financial results for 2008 have been determined. Specifically, each participant was to earn (i) 40% of his or her target award for a given opportunity if the threshold financial performance goal for that opportunity had been achieved; (ii) 100% of his or her target award for a given opportunity if the target financial performance goal for that opportunity had been achieved; or (iii) 140% of his or her target award for a given opportunity if the maximum financial performance goal for that opportunity had been achieved or exceeded. Attainment of these objectives at threshold level was intended to require satisfactory financial performance; target payout was intended to require more than satisfactory performance; and maximum payout was intended to require performance that significantly exceeds our parent company’s expectations. The Compensation Committee had in its discretion to calculate the performance results without regard to items deemed by the committee to be extraordinary, nonrecurring or unusual in nature, and other adjustments may have been made based on plan terms. Straight-line interpolation was to be used to determine the payout for performance between the threshold and target goals or between the target and maximum goals. No payout was to be made for performance below threshold. After reviewing GCL’s financial performance the GCL Compensation Committee approved the payout which will be made primarily in restricted stock units which vested no later than April 8, 2009.

Our Parent’s Stock Incentive Plan

Certain of our directors, officers and employees benefit from our parent’s 2003 Global Crossing Limited Stock Incentive Plan, as amended through June 2007, (“2003 Plan”). Moreover, certain people with significant operational control over us are not actually employed by us but by our parent or its affiliates and they also benefit from this plan. We do not have any other independent stock incentive plan.

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In contrast to bonuses that are paid for prior year accomplishments, equity grants represent incentives tied to future stock price appreciation. They are intended to provide participants with a direct incentive to enhance shareholder value. Equity grants are awarded at the discretion of our parent’s compensation committee and are primarily based on an evaluation of competitive market data, an individual executive’s performance and the anticipated contribution that the executive officer will make to Global Crossing. Global Crossing makes equity grants under the 2003 Plan.

In 2005 and 2006, executive officers and select key employees received their grants in the form of RSUs. The 2005 grant provided that approximately half of the RSUs would vest solely based on the continued employment of the participant through June 14, 2008 and approximately half would vest on December 31, 2007, based on corporate financial performance for the combined 2005 and 2006 fiscal years. The 2006 grant provided that approximately half of the RSU’s would vest solely based on continued employment of the participant through March 7, 2009 and approximately half would vest on December 31, 2008, based on corporate financial performance for the combined 2006 and 2007 fiscal years. An RSU entitles the participant to receive a share of unrestricted common stock of our parent company on the vesting date.

At the March 13, 2007 meeting, our parent’s compensation committee determined that none of the financial performance measures had been met in respect of the 2005 grants and that there would be no vesting of the half of the RSUs dependant upon the achievement of such financial measures. Vesting of time-based RSUs on June 14, 2008 remained in effect for those participants who remained employed with Global Crossing on that date. At its meeting on March 4, 2008, our parent company’s compensation committee determined that GCL achieved gross margin in its enterprise, carrier data, and indirect channel segment above the threshold gross margin measure in respect of the 2006 grants. GCL did not achieve the threshold performance measures relating to earnings and cash use. It was established that the 2006 Performance Shares payout will be 11.8% of target amounts. All 2006 Performance Shares vested on December 31, 2008, subject to continued employment through that date.

At its March 13, 2007 meeting, our parent company’s compensation committee approved the grant of RSUs to our directors and executive management as shown in the table of stock options above. Each RSU will vest on March 13, 2010, subject to the participant’s continued employment through that date and subject to earlier pro-rata vesting in the event of death or long-term disability. See Item 6.B. “Our Director and Executive Compensation” for further detail of these grants.

In addition, a target performance share opportunity was established for each participant. Each performance share earned will be paid out in unrestricted shares of common stock of our parent on December 31, 2009, subject to the participant’s continued employment through that date and subject to earlier pro-rata payout in the event of death or long-term disability. See Item 6.B. “—Our Director and Executive Compensation” for further detail of these grants.

Each participant’s target performance share opportunity comprises three separate award opportunities: One based on a goal related to combined 2007 and 2008 EBITDA Metric performance in an amount equal to 40% of the overall target opportunity; one based on a goal related to combined 2007 and 2008 Cash Use Metric performance in an amount equal to 40% of the overall target opportunity; and one based on a goal for combined 2007 and 2008 revenue minus cost of access expense for our parent’s “Invest and Grow” operating segment (“Invest and Grow Metric”) in an amount equal to 20% of the overall target opportunity. Performance shares with respect to each of the EBITDA Metric opportunity, the Cash Use Metric opportunity and the Invest and Grow Metric opportunity will be earned only if our parent achieves specified financial performance goals relating to that opportunity. Specifically, each grantee will earn (i) 50% of his or her target award for a given opportunity if the threshold financial performance goal for that opportunity is achieved; (ii) 100% of his or her target award for a given opportunity if the target financial performance goal for that opportunity is achieved; or (iii) 150% of his or her target award for a given opportunity if the maximum financial performance goal for that opportunity is achieved or exceeded. Attainment of these objectives at threshold level is intended to require satisfactory financial performance; target payout is intended to require more than satisfactory performance; and maximum payout is intended to require performance that significantly exceeds our parent company’s expectations. Straight-line interpolation will be used to determine the payout for performance between the threshold and target goals or between the target and maximum goals. No payout will be made for performance below threshold and the payout for performance above maximum is capped at 150% of target opportunity.

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On March 13, 2007, our parent company’s compensation committee also reviewed a number of internal and external factors relating to compensation and to the retention and motivation of key management talent. These factors included:

• several measures of our parent’s recovery and success during the three years preceding that date, such as: strong total shareholder return of 63%, doubling the return of the Nasdaq Telecom Index; making significant strides towards profitability and positive cash flow; and demonstrating the ability to make strategic acquisitions and to grow organically and inorganically, all of which demonstrate the importance of retaining the current management team and employee base;

• the current critical stage of GCL’s development and the need for a significant and well executed effort to successfully integrate acquired businesses while at the same time achieving continued organic growth, identifying and executing on other potential acquisition opportunities and realizing our parent’s strategic vision; and

• the competitive labor market in telecommunications and other technology businesses, fostering increased demand for experienced leadership.

In light of the above factors, the compensation committee recommended, and our parent’s board of directors approved, the granting of special retention and motivation awards to substantially all non-sales employees of Global Crossing and its subsidiaries consisting principally of share grants with vesting periods of 6 months or 6 months and 12 months. See Item 6.B. “—Our Director and Executive Compensation” for further detail of these grants.

In connection with the Company’s annual long-term incentive program for 2008, on March 4, 2008, the Company awarded 20,500 restricted stock units to employees which vest on March 4, 2011 and 20,500 performance share opportunities to employees which vest on or before March 15, 2011, in each case subject to continued employment through the vesting date and subject to earlier pro-rata payout in the event of death or long-term disability. Each participant’s target performance share opportunity is based on total shareholder return over a three year period as compared to two peer groups. Depending on how the Company ranks in total shareholder return as compared to the two peer groups, each grantee may earn 0% to 200% of the target number of performance shares. No payout will be made if the average ranking of the Company’s total shareholder return relative to each of the two peer groups (weighted equally) is below the 30th percentile, and the maximum payout of 200% will be made if such average ranking is at or above the 80th percentile. In the event of a change of control (as defined in the 2003 Global Crossing Limited Stock Incentive Plan), the performance share opportunity payout shall be determined on the basis of the Company’s relative total shareholder return against such indices (as described above) calculated through the relevant termination or change of control date.

Employment Agreements

Our affiliates have entered into separate employment agreements with Messrs. McShane, Christie, Cladingbowl, Keogh, Lister, Turnbull and Del Campo. We do not have employment agreements with these individuals. We have entered into contracts for services with Messrs. Atkins and McCormack. In addition, the terms of Messrs. McShane’s and Christie’s employment have been defined by the Global Crossing Limited Key Management Protection Plan (“GCLKMPP”).

In connection with our parent company’s emergence from bankruptcy, it adopted the GCLKMPP on December 9, 2003, to provide enhanced severance benefits for the executive officers and certain other key employees of the Company named in the GCLKMPP.

The GCLKMPP is intended to retain executive officers and other key executives by mitigating their concerns about financial hardship in the event of an involuntary actual or constructive termination without “cause” (as defined in the plan). The GCLKMPP was originally adapted by GCL on December 9, 2003, and provided enhanced severance benefits for the executive officers and certain other key employees of the GC Group named in the GCLKMPP. Specifically, if a participant’s employment were terminated by our parent (other than for cause or by reason of death or disability), or if he or she were to terminate employment for “good reason” (generally, an unfavorable change in employment status or compensation), the GCLKMPP, as amended effective December 31, 2007, entitles him or her to receive (i) a lump sum payment equal to the “severance multiplier” of 1 times or 2 times of his or her annual base salary plus target bonus opportunity (reduced by any cash severance benefit otherwise paid to the participant under any other applicable severance plan or severance arrangement); (ii) a prorated portion of the annual target bonus for the year in which the termination occurred

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subject to minimum target bonus amounts established for purposes of calculating severance; (iii) continuation of life and health insurance coverages for a number of years equal to the severance multiplier; and (iv) payment for outplacement services in an amount not to exceed 30% of his or her base salary.

We entered into contracts for service with each of Mr. Atkins and Mr. McCormack whereby each was appointed a director for an initial period of two years. The contract with Mr. Atkins was, on its expiration, renewed for an additional period of two years. The contract with Mr. Atkins provides that he serve on and chair the Audit Committee of our Board of Directors. The contract with Mr. McCormack provides that he serve on the Audit Committee of our Board of Directors. Each contract may be terminated upon one month’s written notice from either party. We are also entitled immediately to terminate the contract in certain specified circumstances.

C. Board Practices

Our Board of Directors is currently composed of six, two of whom are independent directors. Each director has one vote. Resolutions are adopted by a majority vote of those present. Under our articles of association, we are required to have a minimum of two directors and at least two directors must be present for a quorum. There is one committee of the Board, namely an audit committee. The audit committee is composed of three directors, two of whom are independent directors. The audit committee currently comprises Richard Atkins (non executive), Ed McCormack (non executive) and John McShane. Richard Atkins has been designated as the audit committee financial expert. Under its terms of reference, the audit committee has principal oversight of our financial statements and the appointment of our auditors. Our independent directors review and approve any changes to our inter-company agreements. Under our articles of association, directors are not required to retire by rotation. For additional details regarding the responsibilities of our audit committee, see Item 16.A. “Audit Committee Financial Expert”.

D. Employees

We share certain employees with our parent. In certain instances, people have functions within our Company but are not employed by us. These employees are employed by our parent or one of our parent’s subsidiaries. Similarly, certain people are employed by us but devote some amount of their time to either our parent or one of our parent’s other subsidiaries.

The number of employees (excluding contractors) at the end of the year for each of the years ended December 31, 2006, 2007 and 2008 was 714, 687 and 762, respectively.

The following table provides about a breakdown of our employees (excluding contractors) by function group as at December 31, 2008. In addition to the responsibilities that certain of these employees have within our business, they will devote a proportion of their time to supporting the other legal entities within their respective functional areas in Europe.

Function Group	Total
Access management	10
Administration	9
Carrier Sales	26
Enterprise Sales & Collaboration Services	107
Field Operations	372
Finance	44
Global Operations	78
Human Resources	8
Information Systems	56
Legal	4
Marketing	33
Procurement	6
Real Estate	9
Total	762

We believe employee relations are excellent, with no significant time lost to industrial action in recent years.

We have a recognition and procedural agreement with the Transport and Salaried Staff’s Association and the National Union of Rail, Maritime and Transport Workers unions for various of our 44 staff on former railway

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terms and conditions. The agreement provides procedural arrangements for dealing with any collective issues relating to all contractual conditions of employment, including pay and benefits, working hours, holiday entitlements and principles of grading structures.

E. Share Ownership

See Item 6.B. “—Compensation” and Item 7.A. “Major Shareholders and Related Party Transactions—Major Shareholders” for a discussion of the information required by this item.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of March 31, 2009, the following shareholders were the beneficial owners of 5% or more of each class of GCL’s voting securities: STT Crossing Ltd. beneficially owned 29,351,431 common shares and all 18,000,000 senior preferred shares of GCL; FMR Corp. beneficially owned 8,119,516 common shares and Iridian Asset Management LLC beneficially owned 4,020,621 common shares.

As of March 31, 2009, there were 57,893,369 shares of common stock and 18,000,000 senior preferred shares issued and outstanding in respect of GCL. The senior preferred shares are convertible pursuant to a certificate of designations into GCL common stock on a one-for-one basis (subject to dilution adjustment).

As such, the combination of common stock and senior preferred shares held by STT Crossing Ltd. and any of its subsidiaries that are shareholders of GCL from time to time constitute 62.4 % of GCL’s aggregate outstanding voting stock. To our knowledge, STT Crossing Ltd. has sole voting and investment power with respect to these shares.

Based on information provided in Form 4 filed by such entities on September 8, 2008, STT Crossing Ltd. is an indirect subsidiary of Temasek Holdings (Private) Limited (“Temasek”) and is located at 10 Frere Felix De Valois Street, Port Louis, Mauritius. Temasek, through its indirect ownership of STT Crossing Ltd, may be deemed to have voting and dispositive power over the shares; however, pursuant to Rule 13d-4 under the Exchange Act, Temasek expressly disclaims beneficial ownership of such shares.

B. Related Party Transactions

Inter-company Agreements

Upon the closing of our offering of the Initial Notes, we entered into a series of inter-company agreements with GCL and certain of our affiliates that were effective as of October 1, 2004 to formally document the way in which these relationships are governed and formalize the method of payment for the services under these agreements. Fees for these services are generally estimated and paid quarterly, with an annual make-whole payment for any outstanding amounts. The inter-company agreements document terms that are substantially the same as those that informally governed the relationship between our parent company and us prior to the closing of the offering of the Initial Notes, with the exception of the payment terms. Our Board of Directors approved the terms of each inter-company agreement. Each agreement may be terminated (i) at the request of any party to such agreement with one year’s prior written notice; or (ii) immediately in the event of a change of control under the Indenture or the maturity, redemption or defeasance of the Notes, in each case pursuant to the terms of the Indenture.

Corporate Services Agreement

We have entered into a corporate services agreement with GCL specifically Global Crossing Development Corp (“GCDC”), and GCE. The agreement is effective as from October 1, 2004. Both GCDC and GCE are subsidiaries of GCL. Pursuant to the agreement’s terms, the other parties to the agreement will provide, or have third-party agents provide, certain corporate services to us on a non exclusive basis, including information systems, legal, tax, finance and accounting, mergers and acquisitions, management, human resources, office and facilities, corporate development, network engineering, risk management, and product development. The agreement also provides for the allocation of (i) management remuneration, including bonus; (ii) charitable contributions; and (iii) depreciation and amortization of certain shared assets. We are not obligated to use the corporate services provided for in the agreement. If, at any point during the agreement’s term, the parties no longer provide a corporate service to GCL’s other subsidiaries, they are not obligated to provide such service to us.

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We will be charged for the corporate services that we choose to obtain based on:

• our revenue relative to other subsidiaries of GCL for legal, tax, finance and accounting, mergers and acquisitions, management, charitable contributions, office and facilities, corporate development, product development, and risk management services;

• a pro rata allocation of headcount for information services and human resources; or

• a pro rata allocation of property, plant and equipment for network engineering.

In addition, we will be charged for cash-based bonuses to management of GCL and its subsidiaries based on our revenue relative to other subsidiaries of GCL, but non-cash-based bonuses will be allocated in full to GCL or, in either case, on such basis as may be reasonably considered to be within the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration of the OECD.

Payment of any Restricted Corporate Services Fee (as defined in the Indenture governing our Notes) under the agreement may only be made to the extent permitted under the terms of the Indenture governing the Notes. Under the agreement, “Restricted Corporate Services” means the amount of service fees under the agreement (excluding the amount of any management bonuses) for a fiscal year that exceed the Service Fee Limit for such fiscal year minus any such service fees required to be paid by law, regulation or any competent governmental taxing authority. Under the agreement, “Service Fee Limit” means an amount in pounds sterling, calculated on an annual basis that (i) for the three months ending December 31, 2004, shall equal £2.9 million; (ii) for 2005 shall equal £11.6 million; and (iii) for each fiscal year thereafter is equal to the product of (x) the service fees paid by us under the agreement (excluding the amount of any management bonus) for the preceding fiscal year and (y) 1.50; provided, however, that the amount determined under clause (iii) may not exceed £23.2 million.

Amounts due pursuant to this agreement will be estimated and paid quarterly, with an annual make-whole payment for any amounts outstanding. The corporate services provided for in the agreement cost us approximately £8.0 million, £8.9 million and £9.7 million for the years ended December 31, 2006, 2007 and 2008, respectively.

Shared Resources Agreement

We have entered into a shared resources agreement with GCL pursuant to which we will provide to GCL’s other subsidiaries, on a non exclusive basis, the use of certain of our assets and pursuant to which GCL’s other subsidiaries will provide to us the use of certain of their assets, on a non exclusive basis. The agreement was effective as of October 1, 2004.

The assets provided for under the agreement include staffing and administrative assets, fiber, leased circuits, network equipment, racking space, real estate and such other assets as are reasonably deemed necessary for the relevant network’s efficient operation. Neither GCUK nor GCL’s other subsidiaries are obligated to use any assets provided for in the agreement. The parties to the agreement will be charged based on:

• the market price for fiber, leased circuits, racking space, and network equipment;

• with respect to staffing and administrative assets, pro rata allocation will be based on either (i) a reasonable estimate of resources committed; or (ii) a reasonable estimate of time spent on such services to GCUK, plus a reasonable markup based on the OECD guidelines;

• real estate will be charged based on their share of lease or carrying costs based on a percentage of square meter use of such real estate by GCUK to use by other GCL subsidiaries (except that the costs of leasing the premises located at Centennium House, 100 Lower Thames Street, London EC3R 6DL, England, will be allocated in full to GCUK); and

• intellectual property costs will be allocated in full to GCL, or alternatively, in each case, on such basis as may reasonably be considered to be within the OECD guidelines.

Fees due pursuant to this agreement will be estimated and paid quarterly, with an annual make-whole payment for any amounts outstanding. The use of assets provided for in the agreement cost us approximately £0.6 million, £0.5 million and £0.4 million for the years ended December 31, 2006, 2007 and 2008, respectively.

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Voice Termination Agreement

We have entered into a voice termination agreement with GCL and Global Crossing Services Europe Ltd (“GCSEL”), a GCL subsidiary, to allocate the costs of voice and data transport and termination services among the parties. The agreement was effective as of October 1, 2004. To the extent that each of GCL’s subsidiaries and us carry voice or data traffic over our respective networks for third parties, we agreed to also do so for other subsidiaries of GCL to the extent necessary to gain access to a third-party carrier’s network.

Termination fees will be charged based on a formula taking into account GCUK’s international long distance voice revenue, multiplied by the gross margin of international activity for GCL’s subsidiary carriers in Europe after deducting GCUK’s third-party costs for international voice termination, or, alternatively, on such basis as may reasonably be considered to be within the OECD guidelines.

GCUK’s portion of the operating expenses relating to its use of international voice over GCL’s sub-sea network, or applicable sub-sea costs, will be based on our international long distance voice revenue as a percentage of GCL subsidiaries’ consolidated total international revenue multiplied by GCL’s consolidated cost of operating sub-sea cable or, alternatively, on such basis as may reasonably be considered to be within the OECD guidelines. Pursuant to the agreement’s terms, GCSEL will obtain sub-sea voice transport and termination services for us from GCL’s other subsidiaries and voice transport and termination services for GCL’s other subsidiaries from us, administer billings between us and GCL’s other subsidiaries for fees incurred in connection with voice transport and termination services, and provide related administrative tasks and services. Fees due pursuant to this agreement will be estimated and paid quarterly, with an annual make-whole payment for any amounts outstanding. The services provided for in the agreement provided income for us of approximately £1.6 million and £0.4 million for the years ended December 31, 2006 and 2007 respectively. In the year ended December 31, 2008, the Company recorded a charge of £0.1 million.

Tax Agreement

We have entered into a tax agreement with GCL that establishes the basis upon which certain tax matters in the UK, including the surrender of tax losses and the re-allocation of income or gain where permitted by UK tax law, between us and other GCL subsidiaries subject to tax in the UK, will be conducted.

Insurance Proceeds Agreement

Our parent company generally maintains property, business interruption, general liability and related insurance coverage for the GCL group of companies for which we are named insureds. We have entered into an insurance proceeds agreement under which all proceeds from any insurance policy held by GCL or any of its subsidiaries, to the extent such results resulted from an event or occurrence at GCUK or resulted from the property or assets of GCUK, shall be paid to us.

Agreement to Acquire Fibernet from GC Acquisitions

On December 28, 2006, we entered into a share purchase agreement with GC Acquisitions under which we purchased the entire issued share capital of Fibernet Group Limited from GC Acquisitions for a purchase price of approximately £53.1 million. See Item 4.A.—“Information on the Company—The Fibernet Acquisition”.

Agreement to Sell German Business by Fibernet Group Limited

Concurrently with our acquisition of Fibernet, Fibernet Group Limited entered into a share purchase agreement with GCI. Under this agreement, Fibernet Group Limited transferred its German business operation to GCI by way of the sale of the entire issued share capital of Fibernet Holdings Limited to GCI for a consideration of £1 and the assumption, by GCI, of £3.6 million of debt outstanding to Fibernet Group Limited from Fibernet Holdings Limited. See Item 4.A. “Information on the Company—History and development of the Company”.

Intercompany Loans

On April 12, 2006, the Company entered into a credit agreement with GCE. As at December 31, 2008, there were loans of US$50.4 million (equivalent to £34.9 million as at December 31, 2008) due under the credit agreement. The terms of the credit agreement include a parent guarantee from GCL. The loan balances currently outstanding relate to loans made using (i) 50% of the Operating Cash Flow, as permitted and defined under the

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Indenture; and (ii) GCUK’s Eligible Excess Cash, defined in the Indenture as excess cash remaining after the consummation of the Annual Repurchase Offer, and have an effective interest rate of 13.5%. The full principal amount of the indebtedness under the credit agreement is due and payable on the earlier of (i) five business days prior to December 15, 2014, which is the date of maturity of our Senior Secured Notes; and (ii) upon notice to GCE by us in the event of an early repayment of the Senior Secured Notes attributable to an event of default under the Indenture. GCUK also made loans to other Group Companies of US$30.4 million in April 2006 which were repaid in May 2006.

On April 11, 2007, the Company entered into a US$15.0 million commitment to GCE in accordance with the Indenture and under the same terms and conditions set forth in the intercompany credit agreement. On May 2, 2007 the Company made a loan to GCE pursuant to this commitment in the amount of US$5.0 million, which was repaid in full on June 30, 2007. In the year ended December 31, 2007, total finance revenue of £0.1 million has been recognized in the consolidated income statements in respect of this loan. This commitment lapsed in 2007.

There were no loan balances due to Group Companies as at December 31, 2008. We have agreed the terms of a loan of up to $15.0 million from GC Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

The Security Arrangement Agreement

Concurrently with the completion of the offering of the Initial Notes, GCL issued $250.0 million aggregate principal amount of the mandatory convertible notes. STT Crossing Ltd. was the holder of all the mandatory convertible notes. On December 23, 2004, we entered into a security arrangement agreement that governed the relationship between us, the Issuer, the holders of the Notes and the holders of the mandatory convertible notes.

The security arrangement agreement substantially limited the rights of the trustee, the collateral agent and the noteholders to exercise their remedies under the security documents for the Notes. The security arrangement agreement provides that, until the earlier of (i) repayment in full of the mandatory convertible notes; and (ii) the disposal by STT Communications Ltd. and its affiliates of any and all of their interest in the mandatory convertible notes, the trustee, the collateral agent and the noteholders may not sell or dispose of any of the assets of GCUK or any of its subsidiaries pursuant to an enforcement action under the security documents, with certain specified exceptions.

See Item 3.D. “Risk Factors—Risks Related to the Notes and our Organizational Structure—The ability of the collateral agent to foreclose on the secured property may be limited.” The security arrangement agreement expressly states that, except as expressly set out therein, nothing in the security arrangement agreement shall affect the rights and remedies of the trustee and the noteholders as unsecured creditors under the Notes and the guarantee.

The security arrangement agreement also provided that without the consent of the holders of the mandatory convertible notes (i) the Indenture may not be amended; and (ii) subject to certain exceptions, the noteholders may not take, accept or receive the benefit of any guarantee or lien in respect of the notes from our parent company or any of its subsidiaries (other than GCUK and its subsidiaries).

On August 27, 2007, STT Crossing Ltd. converted the mandatory convertible notes into shares of GCL common stock. Upon such conversion, the debt interests of STT Crossing Ltd. were terminated. Following the conversion this agreement ceased to apply.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See Item 18.

A.7. Legal Proceedings

None.

B. Significant Changes

None.

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ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Not applicable.

B. Plan of Distribution

Not applicable.

C. Markets

The Notes are listed on the Irish Stock Exchange.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Pursuant to GCUK’s memorandum of association, GCUK’s objects include (i) to carry on business as a general commercial company; (ii) to carry on the business of designing, manufacturing, developing, promoting, selling, marketing, facility managing, dealing in, repairing, importing and exporting telecommunications of every kind and description, data communications and computer based equipment, networks, software and systems of every kind and description, security, industrial control, energy management, process control systems of every kind and description, all electronic, aeronautical, electrical or other equipment, apparatus, systems, devices and instruments of every kind and description, plant and machinery of every kind and description; (iii) to invest and deal with moneys of the company not immediately required in any manner whatsoever; (iv) to lend any monies or assets of the company to such persons, firms or companies and on such terms as may be considered expedient, and either with or without security, and to invest and deal with monies and assets of the company not immediately required in any manner and to receive money and securities on deposit, at interest or otherwise; and (v) to borrow or raise money and to secure or discharge any debt or obligation of or binding on the company in such manner as may be thought fit.

GCUK’s articles of association include the following provision: (i) in certain circumstances, preemption rights conferred on existing members and any other restrictions on transfer of shares are (in each case) disapplied, and the directors are forbidden from declining to register, or suspending registration of, any such transfer of shares; and (ii) the consent of the holders of not less than three-fourths in nominal value of the issued share capital of the company is required for any resolution to wind-up the company as a result of any bankruptcy or insolvency proceedings applied to other group members incorporated outside the United Kingdom, including without limitation any proceedings under chapter 11 of the United States Bankruptcy Code or any statutory modification or re-enactment thereof. Subject to the requirements of the Companies Act 1985, as amended by the Companies Act 2006, the members shall not pass a special resolution to wind up the company voluntarily pursuant to section 84 of the Insolvency Act 1986 or any statutory modification or re-enactment thereof solely as a result of the existence of insolvency or bankruptcy proceedings affecting other group members incorporated outside the United Kingdom, including without limitation any proceedings under chapter 11 of the United States Bankruptcy Code or any statutory modification or re-enactment thereof.

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GCUK’s articles of association do not prevent a director who has properly disclosed his interest in any contract or arrangement from counting towards the quorum in any meeting or voting in connection with such contract or arrangement. Subject to the requirements of the Companies Act 1985, as amended by the Companies Act 2006, the memorandum of association and the articles of association, the directors may exercise all powers of the Company (including the right to borrow) other than as may be specifically prescribed by the shareholders by special resolution. The directors are not required to retire annually and the 70-year age limit for directors does not apply to the Company. The articles of association may be altered by a special resolution of the shareholders.

For further information, see GCUK’s Memorandum and Articles of Association filed as Exhibit 3.2 to the registration statement on Form F-4 filed on June 8, 2005.

C. Material Contracts

Indenture

The Issuer has issued $200 million in aggregate principal amount of 10.75% US Dollar-denominated senior secured notes due 2014 and £157 million (consisting of £105 million in aggregate principal amount of Initial Notes and £52 million in aggregate principal of Additional Notes) in aggregate principal amount of 11.75% pound sterling-denominated senior secured notes due 2014 under the Indenture, dated as of December 23, 2004, among the Issuer, GCUK as the guarantor, certain other guarantors and The Bank of New York as trustee.

The Notes mature on December 15, 2014, and interest on the Notes is due each June 15 and December 15. The Notes are senior secured obligations of the Issuer and rank equal in right of payment with all of its future debt. The Guarantors have guaranteed the Notes as a senior obligation ranking equal in right of payment with all of their existing and future senior debt.

The Notes are secured by certain of the Guarantors’ and the Issuer’s assets, including the capital stock of the Issuer and Fibernet, but a significant portion of our assets do not serve as collateral for the Notes. See “—Debenture” below. The Notes are secured by a security assignment of the intercompany loans from the Issuer to us of the proceeds of the offerings of the Initial Notes and the Additional Notes. The Issuer and we are permitted to incur certain liens on the collateral pursuant to the Indenture’s terms and these permitted liens have priority over the liens in favor of the Notes and the Guarantees.

The Issuer may redeem the Notes in whole or in part, at any time on or after December 15, 2009, at redemption prices decreasing from 105.375% (for the US Dollar-denominated notes) or 105.875% (for the pound sterling-denominated notes) in 2009 to 100% of the principal amount in 2012 and thereafter. At any time before December 15, 2009, the Issuer may redeem either or both series of Notes, in whole or in part, by paying a “make-whole” premium, calculated in accordance with the Indenture. The Issuer may also redeem either or both series of Notes, in whole but not in part, upon certain changes in tax laws and regulations.

If we experience a change of control (as such term is defined in the Indenture), the holders of our Notes will have the right to require the Issuer to purchase some or all of their Notes at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, if any, and additional amounts, if any, to the date of repurchase.

The Indenture contains certain covenants which, among other things, restrict our ability to (i) incur or guarantee additional indebtedness; (ii) pay dividends or make other distributions to repurchase or redeem our stock; (iii) make investments or other restricted payments; (iv) create liens; (v) enter into certain transactions with affiliates; (vi) enter into agreements that restrict the ability of our material subsidiaries to pay dividends; and (vii) consolidate, merge or sell all or substantially all of our assets.

We agreed to file a registration statement with the US Securities and Exchange Commission relating to an offer to exchange the Initial Notes for publicly tradable notes that have identical terms (except for terms concerning additional interest and transfer restrictions). On August 3, 2005 the Issuer offered to exchange up to $200 million of the 10.75% US Dollar-denominated senior secured notes due in 2014 and up to £105 million of the 11.75% pounds sterling-denominated senior secured notes due in 2014 for like principal amounts of US Dollar-denominated Senior Secured Notes due in 2014 and pounds sterling-denominated Senior Secured Notes due in 2014 that had been registered under the Securities Act of 1933, as amended.

As of September 26, 2005 when the exchange offer closed, $199,860,000 or 99.93% of the outstanding aggregate principal amount of the original US Dollar-denominated Notes and £105,000,000 or 100% of the outstanding aggregate principal amount of the original sterling-denominated Notes had been validly tendered and accepted for exchange by the Issuer.

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In August 2007, we filed a registration statement with the US Securities and Exchange Commission in relation to an offer to exchange the £52 million Additional Notes for publicly tradable notes that have identical terms (except for terms concerning additional interest and transfer restrictions). The exchange offer was completed in September 2007. As of September 21, 2007 when the exchange offer closed, the exchange offer was taken up by 100% of the holders of the £52 million 11.75% senior secured notes.

The Committee on Uniform Securities Identification Procedures (CUSIP) and International Securities Identification Number (ISIN) numbers for the new US Dollar-denominated Notes are C37943S AB 6 and US37943SAB60, respectively. The Common Code and ISIN numbers for the new sterling-denominated Notes are 022661345 and XS0226613452, respectively.

The exchange notes together with the unregistered Notes that remain outstanding after the completion of the exchange offer are treated as a single class of debt securities under the Indenture.

Debenture

As security for our obligations under the Indenture, the Issuer and ourselves agreed to grant a charge upon certain of our assets pursuant to a debenture, dated as of December 23, 2004, among GCUK and the Issuer as chargors and The Bank of New York as collateral agent. By a supplemental indenture dated December 28, 2006, Fibernet agreed to unconditionally guarantee all of our and the Issuer’s obligations under the Indenture. By a debenture dated December 28, 2006, Fibernet granted a charge over certain assets as a security for our and the Issuer’s obligations under the Indenture.

Our obligations under the Indenture are secured by a charge over certain of our and the Issuer’s assets, including the capital stock of GCUK’s subsidiaries, the Issuer and Fibernet, but a significant portion of our assets do not serve as collateral for the Notes. Specifically, the collateral securing the Notes does not include:

• certain parts of the network leased by us, including any telecommunications cables and other equipment under a finance lease with Network Rail under which we lease approximately 20% of our lit fiber (calculated by fiber kilometers);

• any rights, title, interest or obligations under certain specified excluded contracts, including (i) any contracts in which our counterparty is a UK governmental entity; and (ii) any contract in which our counterparty is a contractor or subcontractor to a UK governmental entity (these excluded contracts include those with the FCO, OGCbuying.solutions and other important customers);

• any equipment or assets owned by us located on the premises of the parties to excluded contracts and any equipment or assets used exclusively by us in connection with the provision of services and the performance of obligations under such contracts;

• property that we have pledged to Camelot in connection to our relationship with them; or

• any contract or agreement (or rights or interests thereunder) which, if charged, would constitute a breach or default or result in the invalidation or unenforceability of any rights, title or interest of the chargor under such contract or agreement.

By a debenture dated December 28, 2006, Fibernet agree to grant a charge over certain assets as security for the Company’s and the Issuer’s obligations under the Indenture.

Security Arrangement Agreement

Concurrently with the offering of the Initial Notes, GCL issued $250.0 million aggregate principal amount of mandatory convertible notes to STT Crossing Ltd. On December 23, 2004, we entered into a security arrangement agreement with the Issuer, certain affiliates of STT and The Bank of New York as trustee and collateral agent. The agreement ceases to apply at such time as the mandatory convertible notes are converted into shares (and warrants convertible into shares) of common stock of GCL.

On December 28, 2006, Fibernet acceded to the Security Arrangement Agreement.

On August 27, 2007, STT Crossing Ltd converted the $250.0 million mandatory convertible notes into shares of GC common stock of GC at which time the Security Arrangement Agreement ceased to apply.

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Intercreditor Agreement

The Bank of New York, as trustee on behalf of the holders of the Notes, has entered into an intercreditor and collateral agency agreement, or the intercreditor agreement, with an affiliate of Goldman, Sachs & Co., or the interest hedge secured party. We have entered into an interest hedge agreement with the interest hedge secured party to minimize our exposure to any dollar/sterling currency fluctuations related to interest payments on the US Dollar-denominated Initial Notes. The intercreditor agreement grants the interest hedge secured party a security interest in the collateral securing the Notes that ranks equally with the security interests of the holders of the Notes.

Under the intercreditor agreement, the trustee, acting as collateral agent, will hold the liens and security interests in the collateral granted pursuant to the security documents for the Notes with sole authority to exercise remedies under the security documents. The collateral will secure all obligations owed to (i) the collateral agent under the intercreditor agreement and the security documents; (ii) the trustee and the holders of the Notes under the Indenture; and (iii) the interest hedge secured party under the interest hedge contract.

Any proceeds resulting from the exercise of security interests will be shared among the holders of the Notes and the interest hedge secured party on a pro rata basis based on (a) with respect to the holders of the Notes, the principal amount of the Notes then outstanding, plus accrued and unpaid interest and additional amounts, if any, thereon; and (b) with respect to the interest hedge secured party, the net value of the interest hedge contract, if positive, determined at the time of the application of proceeds.

Affiliate Subordination Agreement

GCUK, GCL and certain of its affiliates (such affiliates, together with GCUK, the GCL affiliated parties) and the trustee for the mandatory convertible notes entered into an affiliate subordination agreement, dated as of December 23, 2004. Pursuant to that agreement, the GCL affiliated parties agreed to subordinate all inter-company obligations, including inter-company indebtedness and inter-company accounts payable, between or among GCL, any of the GCL affiliated parties and any “restricted subsidiary” under the mandatory convertible notes indenture to the prior payment in full in cash of all obligations with respect to indebtedness and obligations of GCL under the mandatory convertible notes, of the guarantors under the mandatory convertible notes and of the other GCL affiliated parties that are parties to that indenture under the indenture (including post-bankruptcy interest and interest accruing after any similar proceeding or event). However, the GCL affiliated parties (including GCUK) may make or shall be entitled to receive, as the case may be, principal and interest payments on this subordinated debt as long as there is no default under the mandatory convertible notes indenture.

On August 27, 2007, STT Crossing Ltd. converted the $250.0 million mandatory convertible notes into shares of GC common stock. Following the conversion of the $250.0 million mandatory convertible notes, the Affiliate Subordination Agreement ceased to apply. Any future loans by GCUK and its subsidiaries to other Group Companies will be subordinated to the Group Companies’ obligations under the GCL $350.0 million credit agreement described below.

Term Loan Agreement

On May 9, 2007, GCL entered into a $250.0 million five-year senior secured term credit facility with certain subsidiaries of GCL under which Goldman Sachs Credit Partners L.P. acts as administrative and collateral agent for a group of lenders. The term loan was increased to $350.0 million pursuant to an amendment to the Term Loan Agreement executed on June 1, 2007.

Although we and our subsidiaries are not guarantors of our parent’s obligations under the Term Loan Agreement, all future intercompany loans from us to our parent or any of its subsidiaries which has guaranteed such facility (i.e., substantially all GCL subsidiaries other than GCUK and its subsidiaries and GCL subsidiaries doing business in Latin America) must be subordinated to the payment of obligations under the GCL Term Loan Agreement.

GCE’s and GCL’s obligations in respect of the outstanding loans under the credit agreement are not subordinated to their obligations under the GCL Term Loan Agreement since such loans were made prior to the date such facility came into effect. See Item 7.B “Major Shareholders and Related Party Transactions—Related Party Transactions—Intercompany Loans”.

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Network Rail

We lease certain telecommunications cable and related equipment from Network Rail under a finance lease agreement between GCUK (then BR Telecommunications Limited) and Network Rail (then Railtrack plc), dated June 30, 1994. The lease also covered certain copper cable and PABX equipment. In connection with its plan to modernize the signaling system on the UK railways, Network Rail issued a notice to terminate the lease of such copper cable and PABX equipment, which termination became effective March 2005. On November 10, 2004, we entered into a capacity purchase agreement with Network Rail that provides us the right to use capacity over such copper cable and the PABX equipment until March 2010. A deed of grant between GCUK (then BR Telecommunications Limited) and Network Rail (then Railtrack plc), dated February 9, 1994, grants GCUK easement rights to retain its equipment and install new equipment on Network Rail’s property. For a summary of these agreements and our relationship with Network Rail, see Item 4.B. “Information on the Company—Business Overview—Network Rail and British Railways Board.”

D. Exchange Controls

None.

E. Taxation

UK Tax

The following summary describes certain UK tax consequences of the ownership of the Notes but does not purport to be comprehensive. Except where expressly stated, the summary relates only to the position of those persons who are the absolute beneficial owners of their notes and the interest thereon and may not apply to special situations, such as those of dealers in securities. Furthermore, the discussion below is generally based upon provisions of UK tax law and HMRC practice as of the date hereof. These provisions may be repealed, revoked or modified (possibly with retrospective effect) so as to result in UK tax consequences different from those discussed below. Persons considering the purchase, ownership or disposition of the notes should consult their own tax advisers concerning UK tax consequences in the light of their particular situations as well as any consequences arising under the law of any other relevant tax jurisdiction. No representations with respect to the tax consequences to any particular holder of the Notes are made hereby.

Interest on the Global Notes

The Notes constitute “quoted Eurobonds” within the meaning of section 882 of the UK Income Tax Act 2007 (“ITA”) provided they are listed on a “recognized stock exchange” within the meaning of section 1005 of ITA. The Irish Stock Exchange is currently recognized for these purposes. Accordingly, as the Notes are listed on the Irish Stock Exchange, payments of interest on the Notes may be made without withholding on account of UK income tax.

Interest on the Notes constitutes UK source income for UK tax purposes and, as such, may be subject to income tax by direct assessment upon the noteholder even where paid without withholding except in the hands of a holder who is exempt from UK income tax under the terms of an applicable double tax treaty or otherwise. However, UK source interest received without deduction or withholding on account of UK tax will not be chargeable to UK tax in the hands of a noteholder who is not resident for tax purposes in the United Kingdom unless that noteholder carries on a trade, profession or vocation in the United Kingdom through a UK branch, agency or permanent establishment in connection with which the interest is received or to which the Notes are attributable. There are exemptions for interest received by certain categories of agents (such as brokers and investment managers).

Accrued Income Scheme—Individual Noteholders

For the purposes of the provisions known as the “Accrued Income Scheme,” a transfer of a note by a holder who is resident or ordinarily resident in the UK or a holder who carries on a trade in the UK through a branch or agency to which the Note is attributable, may give rise to a charge to tax on income in respect of an amount as represents any accrued but unpaid interest at the time of transfer.

Taxation of Chargeable Gains—Individual Noteholders

For the purposes of UK taxation of chargeable gains, Notes which are denominated in pounds sterling are expected to be treated as “qualifying corporate bonds” by HMRC. Accordingly, for UK chargeable gains tax purposes, no chargeable gain or allowable loss should arise on the disposal of Notes which are so denominated.

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Notes which are denominated in US Dollars will not be “qualifying corporate bonds” for the purposes of UK taxation of chargeable gains. Accordingly, a holder of notes which are so denominated who is resident or ordinarily resident in the UK, or who carries on a trade in the UK to which the holding of the Notes is attributable, may realize a chargeable gain or allowable loss on the disposal of their holding of Notes.

UK Corporation Tax Payers

Holders of the notes within the charge to UK corporation tax in respect of the Notes will not be subject to the methods of taxation set out in “—Accrued Income Scheme—Individual Noteholders” or “—Taxation of Chargeable Gains— Individual Noteholders.” Any profits and gains (including interest) and profits or gains arising from currency fluctuations arising from the notes in the hands of those holders will generally be charged to tax as income in each accounting period on a basis reflecting the treatment in the statutory accounts of the holders, calculated in accordance with the holder’s authorized accounting methods.

Stamp Duty and Stamp Duty Reserve Tax

No UK stamp duty or stamp duty reserve tax should be payable on the transfer of the notes.

European Directive on the Taxation of Savings Income

The EU has adopted a Directive regarding the taxation of savings income. Member States of the European Union are required to provide to the tax authorities of other Member States of the European Union details of payments of interest and other similar income paid by a person to an individual in another Member State of the European Union, except that Austria, Belgium and Luxembourg are instead imposing a withholding system for a transitional period unless during such period they elect otherwise. The transitional period will end after agreement on exchange of information is reached between the European Union and certain non-European Union states.

United States Federal Income Tax Considerations

The following is a summary of certain United States federal income tax considerations relating to the purchase, ownership and disposition of the notes. The following discussion is based upon the provisions of the United States Internal Revenue Code of 1986, as amended (the “Code”), the applicable US Treasury regulations promulgated under the Code, judicial authority and current administrative rulings and practice, all as in effect as of the date of this annual report on Form 20-F. Legislative, judicial or administrative changes or interpretations may occur in the future that may be retroactive and that could alter or modify the continued validity of the following statements and conclusions.

Except as specifically noted, this discussion is limited to the US federal income tax considerations that apply to a “US holder,” which is a beneficial owner of a note that is, for US federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for US federal income tax purposes) created or organized under the laws of the United States, any State thereof or the District of Columbia;

• an estate, the income of which is subject to US federal income tax regardless of its source; or

• a trust (i) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have authority to control all substantial decisions of the trust; or (ii) that has a valid election in effect to be treated as a US person for US federal income tax purposes.

Certain aspects of US federal income taxation relevant to a beneficial owner of a note that is an individual, a corporation, an estate or a trust other than a US holder, or a non-US holder, are also discussed below. The discussion below assumes that the notes are properly treated as debt for US federal income tax purposes. The discussion assumes that any original issue discount (“OID”) on a note is ade minimis amount, within the meaning of the US Treasury regulations relating to OID. Under these regulations, a note will have OID to the extent the principal amount of the note exceeds its issue price. Further, if a note has any OID, it generally will bede minimis if it is less than 1/4% of the principal amount of the note multiplied by the number of full years included in its term. The discussion does not address all aspects of US federal income taxation that might be

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relevant to particular holders due to their personal investment circumstances or status, nor does it discuss the consequences to investors subject to special treatment under the US federal income tax laws, such as dealers in securities or foreign currency, brokers, taxpayers that have elected mark-to-market accounting, financial institutions or “financial services entities,” insurance companies, tax-exempt organizations or private foundations, taxpayers holding notes as part of a “straddle,” “hedge,” “conversion transaction,” “constructive sale” or other integrated investment, holders who hold the notes other than as capital assets (within the meaning of section 1221 of the Code), US holders that have a “functional currency” other than the US Dollar, US expatriates or former long-term residents of the United States and persons subject to the alternative minimum tax. This discussion does not address any special rules that may apply if the holder receives principal in installment payments or if a note is called before the maturity date. This discussion also does not take into consideration any US federal income tax implications if:

• GCUK or the Issuer consolidates or merges with or into any other person or sells, assigns, transfers, leases, conveys or otherwise disposes of all or substantially all of its assets to another person; or

• GCUK or the Issuer is succeeded by a successor entity.

Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold the notes through a partnership or other pass-through entity. Moreover, the effect of any applicable state, local or non-US tax laws or the applicability of US federal gift or estate taxation is not discussed. Holders are urged to consult their own tax advisors regarding the US federal, state, local and other tax considerations of the acquisition, ownership and disposition of the notes.

The references in the discussion concerning foreign currency, exchange rates and exchange gain or loss apply only to the sterling-denominated notes.

Each holder should consult its own tax advisor concerning the application of US federal income tax laws, as well as the laws of any state, local or non-US taxing jurisdiction to its particular situation.

Stated Interest on Notes

Stated interest on a note will be taxable to a US holder as ordinary income either at the time it accrues or is received in accordance with the US holder’s method of accounting for US federal income tax purposes. Stated interest paid on a note will be includible in income by a US holder in an amount equal to the US Dollar value of the interest, regardless of whether a payment is in fact converted to US Dollars at that time. If the US holder uses the cash method of accounting for US federal income tax purposes, the US Dollar value of the interest is determined using the spot rate at the time payment is received. If a US holder uses the accrual method of accounting for US federal income tax purposes, the US Dollar value of the interest is determined using the average exchange rate during the relevant accrual period (or, with respect to an accrual period that spans two taxable years, that part of the period within the taxable year) or, if elected, the spot rate (a) on the last day of the relevant accrual period (or, with respect to an accrual period that spans two taxable years, on the last day of the part of the period within the taxable year) or (b) on the payment date, if that date is within five business days of the last day of the accrual period or taxable year. Any spot rate election will apply to all debt instruments held by the US holder at the beginning of the first taxable year to which the election applies and afterwards acquired and will be irrevocable without the consent of the US Internal Revenue Service (“IRS”). Any differences in the exchange rate between the rate at which interest on a note is included in income and the spot rate on the payment (or disposition) date for interest will result in exchange gain or loss on the related amount of interest, and will generally be treated as US source ordinary income or loss for US federal income tax purposes. Foreign currency received as interest on the notes will have a tax basis equal to its US Dollar value determined by translating the foreign currency received at the spot rate in effect on the date the interest payment is received.

Additional Amounts and Other Additional Interest

We intend to treat the possibility that we will pay additional amounts (i.e., the amount provided for in the notes to prevent any net reduction on account of certain withholding taxes) or any other amounts in excess of stated principal and interest as a remote or incidental contingency, within the meaning of applicable US Treasury regulations. Accordingly, we believe the gross amount of any such amounts should be includible in gross income by a US holder as ordinary interest income at the time that amount is received or accrued in accordance with the US holder’s method of accounting for US federal income tax purposes in the same manner as discussed above under “—Stated Interest on Notes” and the possibility of the payment of such amounts should not cause the notes to be subject to the contingent payment debt instrument rules or OID rules. However, the IRS may not agree. US holders should consult their tax advisors regarding the potential application of the contingent payment debt instrument rules and the consequences thereof.

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Pre-Issue Interest

Certain US holders may be entitled to receive a payment in respect of interest accrued for a period before the relevant notes were issued (“Pre-issue Interest”). Under applicable US Treasury regulations, the portion of the initial amount paid for a note that is allocable to such Pre-issue Interest can be considered subtracted from the purchase price for the note. Accordingly, any portion of a payment on a note allocable to Pre-issue Interest may not be included in income or accrued as interest, but it may result in recognition of foreign currency gain or loss.

Withholding Taxes

Interest income on a note generally will constitute foreign source income and generally will be considered “passive category” income or, in the case of certain US holders, “general category” income, which are treated separately in computing the foreign tax credit allowable to US holders under US federal income tax laws.

Should any foreign tax be withheld, the amount withheld and the gross amount of any additional amounts paid to a US holder will be included in such holder’s income at the time such amount is received or accrued in accordance with such holder’s method of US federal income tax accounting. Foreign withholding tax paid at the rate applicable to a US holder would, subject to limitations and conditions (including the applicability of any treaty benefits), be treated as foreign income tax eligible for credit against such holder’s US federal income tax liability or, at such holder’s election, eligible for deductions in computing US federal taxable income. US holders should consult their tax advisors regarding the creditability or deductibility of any withholding taxes. Any additional amounts generally would constitute foreign source income, generally will be considered “passive category” income or, in the case of certain US holders, “general category” income and should be translated into the US Dollar value in accordance with the rules governing interest as described above.

Amortizable Bond Premium

The amount equal to the excess of a US holder’s initial tax basis in a note over the amount payable at maturity on the note will be considered “amortizable bond premium.” A US holder generally may elect (with respect to the note and all other obligations of such US holder with amortizable bond premium) to amortize such premium using a constant yield method over the remaining term of the note and may offset interest income otherwise required to be included in US federal taxable income in respect of a note during any taxable year by the amortized amount of such excess for the taxable year. The notes are subject to call provisions at our option at various times. A US holder will calculate the amount of amortizable bond premium based on the amount payable at the call date, but only if use of the call date (in lieu of the maturity date) results in a smaller amortizable bond premium for the period ending on the call date. For a note denominated in foreign currency, the amount of amortizable bond premium that will reduce a US holder’s interest income with respect to such note is determined each year in such foreign currency. At the time amortizable bond premium offsets the holder’s interest income, exchange gain or loss (which will be taxable as ordinary income or loss) generally will be realized with respect to such amortizable bond premium based on the difference between the spot rates of exchange on the date the premium is returned (or recovered) and the date the note was acquired.

An electing US holder must reduce its tax basis in the notes by the amount of the aggregate amortized bond premium. Once the election to amortize bond premium is made, it will apply to all debt obligations held or acquired by a US holder on or after the first day of the first taxable year to which the election applies and can only be revoked with the consent of the IRS.

Market Discount

A note will generally be treated as purchased at a market discount if the amount for which a US holder purchased the note is less than the note’s principal amount at maturity and such difference is greater than or equal to 0.25% of such note’s principal amount multiplied by the number of complete years remaining to the note’s maturity. Any gain recognized on the maturity or disposition of a note purchased at a market discount will be treated as ordinary income to the extent that such gain does not exceed the accrued market discount on such note. Alternatively, a US holder may elect to include market discount in income currently over the life of the note. Such election will apply to all debt instruments purchased at a market discount on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. Market discount accrues on a straight-line basis unless you elect to accrue on a constant yield basis. If a US holder does not elect to include market discount on a note in income currently, the holder generally will be required to defer deductions for interest in borrowings allocable to such note in an amount not exceeding the accrued market

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discount on the note until the maturity or disposition of or partial payment of principal on such note. There may be foreign exchange gain or loss realized with respect to accrued market discount currently includable in income computed under rules similar to those applicable to interest (discussed above).

Sale, Exchange, Redemption or Other Taxable Disposition

Unless a non-recognition provision applies, the sale, exchange, redemption (including under an offer by us) or other taxable disposition of a note will be a taxable event for US federal income tax purposes. In that event, a US holder will recognize gain or loss equal to the difference between:

• the US Dollar value of the amount of cash plus the fair market value of any property received upon that sale, exchange, redemption or other taxable disposition (other than amounts attributable to accrued but unpaid interest, which will be taxable as such); and

• the US holder’s adjusted tax basis in the note.

A US holder’s adjusted tax basis in a note generally will equal the cost of the note (excluding the portion allocable to Pre-issue Interest, if any, increased by any accrued market discount and reduced by any amortized bond premium) to the US holder, which is the US Dollar value of the foreign currency purchase price of the note translated at the spot rate for the date of purchase or, in some cases, the settlement date. The conversion of US Dollars into foreign currency and the immediate use of that foreign currency to purchase a note generally will not result in a taxable gain or loss for a US holder. A US holder will have a tax basis in any foreign currency received on the sale, exchange, redemption or other taxable disposition of a note equal to the US Dollar value of that foreign currency on the date of receipt.

Except to the extent of exchange gain or loss discussed below and subject to the market discount rules discussed above, gain or loss recognized by a US holder of a note will be capital gain or loss and will be long-term capital gain or loss if the note has been held, or treated as held, by the US holder for more than one year at the time of sale, exchange, redemption or other taxable disposition. If the US holder is an individual or other non-corporate holder, any capital gain generally will be subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to limitations.

Upon the sale, exchange, redemption or other taxable disposition of a note, a US holder will recognize exchange gain or loss equal to the difference between the US Dollar value of the US holder’s purchase price of the note translated at the spot rate on the date of the disposition, and the US Dollar value of the US holder’s purchase price of the note translated at the spot rate on the date the US holder acquired or is deemed to have acquired the note. Exchange gain or loss is recognized, however, only to the extent of total gain or loss on the transaction. Exchange gain or loss recognized by a US holder will generally be treated as US source ordinary income or loss.

Any gain realized by a US holder on the sale, exchange, redemption or other taxable disposition of a note generally will be treated as US source income for US foreign tax credit purposes. Any loss realized upon a sale, exchange, redemption or other disposition of a note generally will be allocated against US source income for US foreign tax credit purposes.

Information Reporting and Back-up Withholding

Payments of interest (including for these purposes any additional amounts) and principal on a note and the proceeds from the sale or redemption or other disposition of a note paid to a US holder, other than a corporation or other exempt recipient that, when required, demonstrates this fact, will be reported to the IRS. A US holder may be subject to US back-up withholding on interest and principal paid on a note and proceeds from the sale or redemption or other disposition of a note unless the US holder:

• is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or

• provides a correct taxpayer identification number certified under penalties of perjury, certifies as to no loss of exemption from back-up withholding and otherwise complies with the applicable requirements of the back-up withholding rules.

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Interest and principal on a note paid to a non-US holder and the proceeds from the sale or other disposition of a note by a non-US holder paid through the US office of any broker, US or foreign, or paid outside the United States to a non-US holder through a US person, or a person with certain enumerated US relationships (or a US-related person) is subject to information reporting and possible back-up withholding unless documentation and other requirements are satisfied.

The back-up withholding tax rate is currently at a rate of 28%. Any amount withheld under the back-up withholding rules will be creditable against the holder’s US federal income tax liability, subject to satisfaction of certain procedural requirements. Holders of notes are urged to consult their tax advisors to determine whether they qualify for exemption from US withholding and the procedure for obtaining an exemption, if applicable.

THE PRECEDING DISCUSSION OF CERTAIN US FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF HOLDING AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

Since the registration statement of the exchange offer of the Initial Notes became effective, we have been subject to the informational requirements of the Exchange Act, applicable to foreign private issuers and will fulfill the obligation by filing with or furnishing reports to the SEC. You may read and copy any document we file with or furnish to the SEC without charge at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of this material may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates. Please call the SEC at l-800-SEC-0330 for further information on the public reference room.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit-recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as US companies whose securities are registered under the Exchange Act. A copy of each report submitted in accordance with applicable US securities laws is available for public review at our principal executive offices.

I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks arising from adverse changes in market rates and prices, such as foreign currency rates and interest rates. Our treasury activities, including an assessment of our market risks, are controlled by our treasury function and are based on policies and procedures approved by our Board of Directors. We do not enter into derivatives or other financial instruments for trading or speculative purposes. In December 2004, we entered into a hedging arrangement in respect of the amount of the coupon payments of our US Dollar-denominated Notes in order to hedge the effect of dollar/sterling currency fluctuations with respect to the first five years’ interest payments due on those Notes. In May 2006 we designated a loan to an associate company in US Dollars, in order to create a partial economic hedge against principal repayment of the US Dollar-denominated Notes. In addition, we may enter into derivative financial instruments in future periods if we believe that it is an appropriate way to manage our market risks. See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources” for additional disclosure related to market risks.

78

Foreign Exchange Risk

We operate primarily in the United Kingdom and more than 90% of our invoices are denominated in our functional currency. Approximately a third of our debt is denominated in US Dollars. Substantially all of our remaining assets and liabilities, excluding our obligations to other Group Companies and short-term financing, are denominated in our functional currency.

At December 31, 2008, we had £137.8 million ($198.9 million) of obligations outstanding under the US Dollar-denominated Notes, partially offset by a £34.9 million ($50.4 million) US Dollar loan receivable due from GCE (see Item 7.B. “Major Shareholders and Related Party Transactions—Intercompany loans”). A 10% weakening in sterling, from the balance sheet date, against the US Dollar would result in a foreign currency loss of £11.4 million. A 25% weakening in sterling, from the balance sheet date, against the US Dollar would result in a foreign currency loss of £34.3 million.

We entered into a five year cross-currency interest rate swap transaction with an affiliate of Goldman, Sachs & Co. to minimize exposure to any dollar/sterling currency fluctuations related to interest payments on the US Dollar-denominated Notes. The swap transaction converts the US Dollar currency rate on interest payments to a specified pound sterling amount.

As of December 31, 2007 and 2008, we had net payables, excluding indebtedness, of £11.8 million and £13.9 million, respectively, in currencies other than pounds sterling. A 10% weakening in the rate of pounds sterling, from the balance sheet date, against the US Dollar and other currencies would result in a foreign currency loss of £1.5 million. A 25% weakening in the rate of pounds sterling, from the balance sheet date, against the US Dollar and other currencies would result in a foreign currency loss of £4.6 million. In the years ended December 31, 2007 and 2008, we recognized a foreign currency gain of £1.4 million and a foreign currency loss of £30.7 million, respectively, on our non-functional currency net payables and loans.

Interest Rate Risk

Interest on the Notes is fixed and payable semi-annually. The US Dollar-denominated Notes bear interest at 10.75% and the sterling-denominated Notes bear interest at a rate of 11.75%. If market interest rates were to decrease substantially below the fixed rates, we would be incurring above-market interest expense.

As at December 31, 2008, a 1% movement in market interest rates would have an insignificant impact on the Company’s results.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

79

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company carried out a review, under the supervision and with the participation of the Company’s management, including the Managing Director (the principal executive officer) and the Chief Financial Officer (the principal financial officer), of the effectiveness of the design and operation of these disclosure controls and procedures at December 31, 2008.

As part of this review, we considered (i) the evaluation by our parent company of the disclosure controls and procedures of the GCL Group Companies, including ourselves, as discussed in GCL’s 2008 annual report filed on Form 10-K on March 4, 2009; and (ii) matters pertaining to our financial reporting on a standalone basis under IFRS, as a foreign private issuer for SEC reporting purposes.

Based upon this review, we have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2008.

Management’s Annual Report on Internal Control over Financial Reporting

Management of GCUK is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of, our Managing Director and Chief Financial officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Effective commencing with the year ended December 31, 2007, under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”) and Item 308 of the SEC’s Regulation S-K, our management has been required to assess the effectiveness of the Company’s internal control over financial reporting. GCL, our parent company, has been required to adhere to the requirements of SOX 404 and Item 308 of Regulation S-K since 2004.

80

Accordingly, with the participation of our Managing Director and Chief Financial Officer, GCUK management conducted an evaluation of the effectiveness of internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Criteria”). We also participated in GCL’s evaluation, conducted on the same basis, insofar as such evaluation encompassed the operations of GCUK. Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2008.

As part of our review, we consider matters pertaining to our financial reporting on a standalone basis, as a foreign private issuer for SEC reporting purposes. Such standalone financial reporting has been undertaken in IFRS for the consolidated financial statements included elsewhere in this report.

This annual report does not include an attestation report of the Company’s independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent public accounting firm pursuant to temporary rules of the Securities Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There were no material changes in our internal control over financial reporting during the year ended December 31, 2008.

ITEM 16. [RESERVED]

ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT

On July 6, 2005, the Company established an audit committee. This committee currently comprises Richard Atkins (non-executive/independent), Ed McCormack (non-executive/independent) and John McShane. Richard Atkins has been designated as the audit committee financial expert. The responsibilities of the audit committee are to:

• monitor the integrity of the companies’ financial statements, reviewing significant financial reporting judgments contained within them;

• to review the companies’ internal financial controls and internal control and risk management systems;

• to monitor and review the effectiveness of the companies internal audit function;

• to decide upon the external auditors’ appointment, removal and remuneration;

• to monitor and review the external auditors’ independence and objectivity and the effectiveness of the audit process; and

• to develop and implement policy on the engagement of the external auditor to supply non-audit services.

ITEM 16.B. CODE OF ETHICS

GCL, our parent company, has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principle accounting officer, or persons performing similar functions. Our Board of Directors has adopted our parent company’s code of ethics as our own. This code of ethics is available on our parent company’s website (www.globalcrossing.com).

ITEM 16.C. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

The following fees were paid or are payable to the Company’s and the Issuer’s auditors for the years ended December 31, 2007 and 2008.

	2007		2008
	(£ thousands)
Audit Fees	£	619	£	647
All Other Fees(1)		—		50
Aggregate fees for professional services	£	619	£	697

⁽¹⁾ There were no other fees paid or payable to the Company’s and Issuer’s auditors in the year ended December 31, 2007. The other fees paid or payable to the Company’s and Issuer’s auditors for the year ended December 31, 2008 were in respect of a feasibility study.

81

ITEM 16.D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16.G CORPORATE GOVERNANCE

Not applicable.

82

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18. “Financial Statements” in lieu of this item.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements filed as part of this annual report on Form 20-F may be found beginning on page F-1.

83

ITEM 19. EXHIBITS

1.1	Memorandum and Articles of Association of Global Crossing (UK) Finance Plc (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form F-4 filed on June 8, 2005).
1.2	Memorandum and Articles of Association of Global Crossing (UK) Telecommunications Limited (incorporated by reference to Exhibit 3.2 Registration Statement on Form F-4 filed on June 8, 2005).
2.1	Indenture, dated December 23, 2004, among Global Crossing (UK) Finance Plc, Global Crossing (UK) Telecommunications Limited, as Guarantor, the other Guarantors defined therein and the Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-4 filed on June 8, 2005).
2.2	Supplemental Indenture, dated December 28, 2006, among Global Crossing (UK) Finance Plc, Global Crossing (UK) Telecommunications Limited, as Guarantor, Fibernet Group Limited, Fibernet UK Limited and Fibernet Limited, as Subsidiary Guarantors, and the Bank of New York, as Trustee. (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 20-F filed on April 20, 2007).
4.1	Security Arrangement Agreement, dated December 23, 2004, among the Bank of New York as Trustee and Collateral Agent, Global Crossing (UK) Finance Plc, Global Crossing (UK) Telecommunications Limited, STT Communications Ltd, STT Crossing Ltd and STT Hungary Liquidity Management Limited Liability Company. (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form F-4 filed on June 8, 2005, lapsed on August 27, 2007).
4.2	Intercreditor and Collateral Agency Agreement, dated December 23, 2004, among the Interest Hedge Secured Parties defined therein and the Bank of New York as Collateral Agent (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.3	Debenture, dated December 23, 2004, among Global Crossing (UK) Telecommunications Limited, Global Crossing (UK) Finance Plc and the Bank of New York as Collateral Agent (incorporated by reference to Exhibit 4.10 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.4	Affiliate Subordination Agreement, dated December 23, 2004, among Global Crossing Limited, Global Crossing (UK) Telecommunications Limited, certain affiliates of Global Crossing Limited named therein and Wells Fargo Bank, National Association, as Trustee and Agent (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form F-4 filed on June 8, 2005, lapsed on August 27, 2007).
4.5	Finance Lease Agreement between Railtrack Plc and BR Telecommunications Limited, dated June 20, 2004 (incorporated by reference to Exhibit 1.1 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.6	Capacity Purchase Agreement between Network Rail Infrastructure Limited and Global Crossing (UK) Telecommunications Limited, dated November 10, 2004 (incorporated by reference to Exhibit 1.1 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.7	Deed of Grant from Railtrack Plc to BR Telecommunications Limited, dated March 31, 1995 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.8	Deed of Grant from British Railways Board to BR Telecommunications Limited, dated March 31, 1995 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.9	Agreement in respect of Telecommunications Apparatus between Railtrack Plc and BR Telecommunications Limited, dated April 21, 1995 (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.10	Agreement in respect of Telecommunications Apparatus between British Railways Board and BR Telecommunications Limited, dated June 19, 1995 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form F-4 filed on June 8, 2005).
4.11	Debenture, dated December 28, 2006, among Fibernet Group Limited, Fibernet UK Limited and Fibernet Limited, as Chargors, and the Bank of New York, as Collateral Agent. (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form 20-F filed on April 20, 2007).

84

4.12	Purchase Agreement, dated December 20, 2006, among Global Crossing (UK) Finance Plc, Global Crossing (UK) Telecommunications Limited, and ABN AMRO Bank N.V. (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form 20-F filed on April 20, 2007).
4.13	Share Purchase Agreement, dated December 28, 2006, among GC Acquisitions UK Limited, as Vendor, and Global Crossing (UK) Telecommunications Limited, as Purchaser. (incorporated by reference to Exhibit 4.13 to the Registration Statement on Form 20-F filed on April 20, 2007).
4.14	Accession Deed to the Security Arrangement Agreement, dated December 28, 2006, among Fibernet Group Limited, Fibernet UK Limited and Fibernet Limited. (incorporated by reference to Exhibit 4.14 to the Registration Statement on Form 20-F filed on April 20, 2007).
4.15	Exchange and Registration Rights Agreement, dated December 28, 2006, among Global Crossing (UK) Finance Plc, Global Crossing (UK) Telecommunications Limited, and ABN AMRO Bank N.V. (incorporated by reference to Exhibit 4.15 to the Registration Statement on Form 20-F filed on April 20, 2007).
4.16	Share Purchase Agreement, dated December 27, 2006, among Fibernet Group Limited, as Vendor, and Global Crossing International, Ltd, as Purchaser. (incorporated by reference to Exhibit 4.16 to the Registration Statement on Form 20-F filed on April 20, 2007).
12.1	Certification of Anthony Christie filed pursuant to 17 CFR 240.13a-14(a).
12.2	Certification of George McDevitt filed pursuant to 17 CFR 240.13a-14(a).
13.1	Certification of Anthony Christie furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350.
13.2	Certification of George McDevitt furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C. §1350.

85

Global Crossing (UK) Telecommunications Limited

Consolidated Financial Statements for the year ended December 31, 2008

F-1

Global Crossing (UK) Telecommunications Limited

Contents

Independent auditors’ report to the shareholders’ of Global Crossing (UK) Telecommunications Limited	F-3
Consolidated Income Statements	F-4
Consolidated Statement of Changes in Equity	F-5
Consolidated Balance Sheets	F-6
Consolidated Cash Flow Statements	F-7
Notes to the Consolidated Financial Statements	F-8

F-2

Global Crossing (UK) Telecommunications Limited

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Global Crossing (UK) Telecommunications Limited

We have audited the accompanying consolidated balance sheets of Global Crossing (UK) Telecommunications Limited as of December 31, 2008 and 2007, and the related consolidated income statements, consolidated statements of changes in equity, and consolidated cash flow statements for each of the three years in the period ended December 31, 2008. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global Crossing (UK) Telecommunications Limited at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the European Union.

As discussed in note 4 to the consolidated financial statements, after the finalization of the acquisition accounting for Fibernet during the year ended December 31, 2007, the consolidated financial statements for the year ended December 31, 2006 have been adjusted thereon in accordance with IFRS 3 Business Combinations.

Ernst & Young LLP

London, England

April 15, 2009

F-3

Global Crossing (UK) Telecommunications Limited

Consolidated Income Statements

(in thousands)

		Year ended December 31,
	Note	2006			2007			2008
Revenue	3	£	240,612		£	296,620		£	322,832
Cost of sales			(147,481	)		(177,665	)		(200,487	)
Gross profit			93,131			118,955			122,345
Distribution costs			(10,385	)		(15,710	)		(18,361	)
Administrative expenses			(53,683	)		(69,468	)		(75,037	)
Net gain arising from acquisition of Fibernet			7,755			—			—
Operating profit	5		36,818			33,777			28,947
Finance revenue	7		1,503			4,527			14,056
Finance charges	8		(16,191	)		(33,548	)		(72,416	)
Profit/(loss) before tax			22,130			4,756			(29,413	)
Tax charge	9		(9,377	)		(6,297	)		(432	)
Profit/(loss) for the year		£	12,753		£	(1,541	)	£	(29,845	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Global Crossing (UK) Telecommunications Limited

Consolidated Statement of Changes in Equity

(in thousands)

	Note	Share Capital		Capital Reserve		Hedging Reserve			Accumulated Deficit			Total
At January 1, 2006		£	101	£	25,151	£	1,908		£	(231,878	)	£	(204,718	)
Loss on cash flow hedge taken to equity			—		—		(4,343	)		—			(4,343	)
Total income and expense recognized directly in equity			—		—		(4,343	)		—			(4,343	)
Transfers to consolidated income statement (finance costs) on cash flow hedge			—		—		(181	)		—			(181	)
Profit for the year			—		—		—			13,451			13,451
Total income and expense for the period			—		—		(4,524	)		13,451			8,927
Share-based payment	23		—		217		—			—			217
At December 31, 2006 (as previously reported)		£	101	£	25,368	£	(2,616	)	£	(218,427	)	£	(195,574	)
Purchase accounting adjustment			—		—		—			(698	)		(698	)
At December 31, 2006 (as restated)			101		25,368		(2,616	)		(219,125	)		(196,272	)
Gain on cash flow hedge taken to equity			—		—		587			—			587
Total income and expense recognized directly in equity			—		—		587			—			587
Transfers to consolidated income statement (finance costs) on cash flow hedge			—		—		(6	)		—			(6	)
Loss for the year			—		—		—			(1,541	)		(1,541	)
Total income and expense for the period			—		—		581			(1,541	)		(960	)
Share-based payment	23		—		2,280		—			—			2,280
At December 31, 2007		£	101	£	27,648	£	(2,035	)	£	(220,666	)	£	(194,952	)
Gain on cash flow hedge taken to equity			—		—		4,883			—			4,883
Total income and expense recognized directly in equity			—		—		4,883			—			4,883
Transfers to consolidated income statement (finance costs) on cash flow hedge			—		—		(154	)		—			(154	)
Loss for the year			—		—		—			(29,845	)		(29,845	)
Total income and expense for the period			—		—		4,729			(29,845	)		(25,116	)
Share-based payment	23		—		2,856		—			—			2,856
At December 31, 2008		£	101	£	30,504	£	2,694		£	(250,511	)	£	(217,212	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Global Crossing (UK) Telecommunications Limited

Consolidated Balance Sheets

(in thousands)

	Note	December 31,
		2007			2008
Non current assets
Intangible assets, net	11	£	13,351		£	11,955
Property, plant and equipment, net	12		185,719			179,544
Investment in associate	13		200			178
Retirement benefit asset	24		961			1,020
Trade and other receivables (including amounts receivable from related parties of £25,277 and £34,897, respectively)	14		28,511			37,006
			228,742			229,703
Current assets
Trade and other receivables, net (including amounts receivable from related parties of £2,659 and £2,540, respectively)	14		66,237			56,276
Derivative financial instrument	18,19		—			2,787
Cash and cash equivalents	14		23,954			36,100
			90,191			95,163
Total assets		£	318,933		£	324,866
Current liabilities
Trade and other payables (including amounts payable to related parties of £7,832 and £10,588, respectively)	16	£	(65,619	)	£	(81,909	)
Senior secured notes	19		(1,158	)		(7,382	)
Deferred revenue			(47,126	)		(38,751	)
Provisions	17		(2,137	)		(1,590	)
Obligations under finance leases	15		(11,945	)		(10,182	)
Other debt obligations	19		(463	)		(740	)
Derivative financial instrument	18,19		(1,048	)		—
			(129,496	)		(140,554	)
Non current liabilities
Trade and other payables	16		(650	)		(335	)
Senior secured notes	19		(247,788	)		(279,546	)
Deferred revenue			(106,961	)		(100,694	)
Retirement benefit obligation	24		(3,110	)		(2,880	)
Provisions	17		(4,160	)		(3,786	)
Obligations under finance leases	15		(20,242	)		(14,043	)
Other debt obligations	19		(430	)		(240	)
Derivative financial instrument	18,19		(1,048	)		—
			(384,389	)		(401,524	)
Total liabilities			(513,885	)		(542,078	)
Net liabilities		£	(194,952	)	£	(217,212	)
Capital and reserves
Equity share capital (101,000 shares outstanding at £1 each)	20	£	101		£	101
Capital reserve			27,648			30,504
Hedging reserve			(2,035	)		2,694
Accumulated deficit			(220,666	)		(250,511	)
Total equity		£	(194,952	)	£	(217,212	)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Global Crossing (UK) Telecommunications Limited

Consolidated Cash Flow Statements

(in thousands)

	Year ended December 31,
	2006			2007			2008
Operating activities:
Profit/(loss) for the year	£	12,753		£	(1,541	)	£	(29,845	)
Adjustments for:
Finance costs, net		14,688			29,021			58,360
Income tax		9,377			6,297			432
Depreciation of property, plant and equipment		21,817			34,491			35,466
Amortization of intangible assets		1,120			2,883			2,201
Share based payment expense		217			2,280			2,856
Gain on settlement of contracts due to Fibernet acquisition		(8,411	)		—			—
Gain on recognition of negative goodwill		(1,050	)		—			—
Loss/(gain) on disposal of property, plant and equipment		168			306			(11	)
Equity (income)/loss from associate		(159	)		(37	)		22
Change in provisions		(6,582	)		(2,468	)		(1,181	)
Change in operating working capital		8,805			(21,302	)		10,193
Change in other assets and liabilities		8,231			(1,934	)		(4,562	)
Cash generated from operations		60,974			47,996			73,931
Interest paid		(26,463	)		(33,543	)		(33,062	)
Net cash provided by operating activities	£	34,511		£	14,453		£	40,869
Investing activities:
Interest received	£	3,740		£	4,651		£	4,438
Proceeds from disposal of property, plant and equipment		8			—			12
Purchase of property, plant and equipment and intangible assets		(20,435	)		(32,531	)		(21,860	)
Acquisition of subsidiary, net of cash acquired		(45,013	)		—			—
Net cash used in investing activities	£	(61,700	)	£	(27,880	)	£	(17,410	)
Financing activities:
Loans provided to group companies	£	(43,835	)	£	(2,500	)	£	—
Loans repaid by group companies		16,114			6,100			—
Proceeds from issuance of Senior Secured notes		56,812			—			—
Repayment of Senior Secured notes		—			—			(1,158	)
Payment of deferred financing fees		(1,418	)		—			—
Proceeds from new finance leases		—			2,020			—
Repayment of capital elements under finance leases		(5,421	)		(9,073	)		(10,108	)
Proceeds from debt obligations		514			774			474
Repayment of capital element of other debt obligations		(115	)		(249	)		(521	)
Net cash provided by/(used in) financing activities	£	22,651		£	(2,928	)	£	(11,313	)
Net (decrease)/increase in cash and cash equivalents	£	(4,538	)	£	(16,355	)	£	12,146
Cash and cash equivalents at the beginning of year		44,847			40,309			23,954
Cash and cash equivalents at the end of year	£	40,309		£	23,954		£	36,100
Non cash investing activities:
Finance lease and debt obligations incurred	£	5,072		£	10,994		£	4,917

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

1. Description of business

Global Crossing (UK) Telecommunications Limited (“GCUK”) is a company registered in England and Wales at 1 London Bridge, London, SE1 9BG. GCUK is one of the leading providers in the United Kingdom (“UK”) of managed network communications services offering a suite of Internet Protocol (“IP”) and legacy telecommunications services, to a range of government and public sector organizations, participants in the rail industry, major corporations and other communications companies, providing a full range of managed data and voice products and services that support a migration path to a fully converged IP environment. The Company markets these services through channels based on our target market and sales structure (i) enterprise; (ii) carrier data; and (iii) carrier voice. Enterprise services include the provision of voice, data, managed and collaboration services. GCUK’s carrier customers include leading communications service providers. GCUK also provides to their carrier customers indefeasible rights to use (“IRU”) dark fiber and empty ducts.

GCUK is an indirect, wholly owned subsidiary of, the principal UK business of, and part of a group of companies (the “Group Companies” or the “GC Group”) owned by Global Crossing Limited (“GCL”), a company organized under the laws of Bermuda. GCUK’s immediate parent company is Global Crossing (Bidco) Limited (“GC Bidco”), an indirect wholly owned subsidiary of GCL.

In 2004, Global Crossing (UK) Finance Plc (“GC Finance” or the “Issuer”) was created as a wholly owned special purpose financing subsidiary of GCUK. This entity was formed for the sole purpose of acting as a financing company for the issuance of debt securities and other financing arrangements and has no separate operations.

On December 28, 2006, GCUK acquired the UK operations (“Fibernet”) of Fibernet Group Limited (previously Fibernet Group plc) and its subsidiaries (“Fibernet Group”) from GC Acquisitions UK Limited (“GC Acquisitions”), an affiliated acquisition vehicle that acquired Fibernet pursuant to an offer that was declared wholly unconditional on October 11, 2006.

GCUK, together with its subsidiaries are collectively referred to as the “Company”.

2. Accounting policies

Basis of preparation

The consolidated financial statements of Global Crossing (UK) Telecommunications Limited for the year ended December 31, 2008, were authorized for issue by its Board of Directors on April 7, 2009.

The consolidated financial statements incorporate the financial statements of GCUK and its wholly owned subsidiaries, made up to December 31, each year, and are prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and IFRS as adopted by the European Union (“EU”). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB, however, the differences have no impact on the Company’s consolidated financial statements for the years presented. References to “IFRS” hereafter should be construed as reference to IFRSs as issued by the IASB.

All intra-Company transactions, balances, income and expenses are eliminated on consolidation.

These consolidated financial statements have been prepared on the historical cost basis, except for (i) certain financial instruments which are recorded at fair value; and (ii) property, plant and equipment and intangible assets which have been adjusted to fair value at the date of transition from UK Generally Accepted Accounting Principles to IFRS on January 1, 2004 (the “transition date”), and thereafter at cost.

Going concern

Based on our current level of operations and anticipated cost management and operating improvements, we believe our expected cash flow from operations, available cash and other sources of available financing including intercompany loans, will be adequate to meet our future liquidity needs for at least the next twelve months.

F-8

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

In the short and medium term, we expect cash provided by operating activities to exceed purchases of property and equipment. This expectation is based in part on raising financing for such property and equipment from vendors and others comparable to those arranged in 2008. Our ability to arrange such financings is subject to negotiating acceptable terms from equipment vendors and financing parties. This could prove more difficult given current adverse conditions in the credit markets. Our short-term liquidity expectations are subject to considerable variability due to the factors noted below:

• The continuing adverse conditions in global credit markets and general economic conditions could cause customer buying patterns with us to change as a result of their cash conservation efforts, which could have an adverse impact on our cash flows. These adverse conditions could also adversely impact our working capital to the extent suppliers seek more timely payment from us or customers pay us on a less timely basis have an adverse impact on our cash flows. These adverse conditions could also adversely impact our working capital to the extent suppliers seek more timely payment from us or customers pay us on a less timely basis;

• Our liquidity may also be adversely affected if we are found liable in respect of contingent legal, tax and other liabilities, and the amount and timing of the resolution of these contingencies remain uncertain;

• Within 120 days after each calendar year, we must offer to purchase a portion of the Senior Secured Notes at 100% of their principal amount with 50% of the Operating Cash Flow (as defined in the Indenture governing the Notes) for that year. In respect of 2008, we anticipate offering to purchase £7.4 million of the Notes, excluding accrued interest; and

• On April 8, 2009, the Board of Directors of the Company agreed the terms of a loan of up to $15.0 million from GC Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

After making enquiries, the directors have formed a judgment that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt going concern basis in preparing these financial statements.

A summary of the principal accounting policies is set out below, all of which have been applied consistently throughout all years presented.

Reclassifications and adjustments

Certain amounts in the prior year consolidated financial statements and accompanying notes have been reclassified to conform to current year presentation.

Use of estimates

The preparation of the consolidated financial statements in conformity with IFRS 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 consolidated financial statements and the reported revenue and expenses during the year. Such estimates include the valuation of accounts receivable, intangible assets and property, plant and equipment, cost of access accruals, the restructuring provision, legal contingencies, guarantee obligations and retirement benefit schemes. The estimates are based on historical factors, current circumstances and experience and judgment of the Company’s management. The Company evaluates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in the evaluation. As future events and their effects cannot be determined with precision, actual results could differ from those estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in respect of network and other services, long term IRU agreements and installation services, net of discounts, VAT and other sales-related taxes.

F-9

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Network and other services

Network service revenues are generated from the sale of transmission of voice and data traffic and short term network capacity and are recognized in the period the services are utilized by the customer. Other service revenues are generated from design and deployment of Customer Premise Equipment, maintenance and network management for enterprise customers. Revenue from the provision of other services which are contracted to be performed continuously over the contract term is recognized evenly over the period of each contract. For services invoiced in advance, amounts are deferred until the provision of the service.

Long term IRU agreements

Revenue from the lease of network capacity and dark fiber to third parties pursuant to long term IRU agreements are recognized on a straight line basis over the life of the contract. Non-refundable payments received from customers before relevant criteria are satisfied for revenue recognition are included in deferred revenue in the accompanying consolidated balance sheets.

Installation services

The Company amortizes revenue related to installation services on a straight line basis over the life of the contracted customer relationship. In situations where the contracted period is significantly longer than the average, the actual contract term is used.

Gross versus net revenue recognition

In determining its presentation of revenue and cost of sales, the Company assesses whether it acts as a principal in the transaction or as an agent acting on behalf of others. Where the Company is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded as gross in the consolidated income statements. If the Company does not act as principal in the transaction, the transactions are recorded on a net basis in the consolidated income statements.

Arrangements with multiple elements

Under IFRS, in the absence of a standard or interpretation that specifically applies to a transaction, guidance issued by other standard setting bodies or an IFRS standard or interpretation that relates to a similar issue may be referred to. Therefore, in the absence of specific IFRS guidance with respect to arrangements with multiple elements, the Company follows the guidance of EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables”, issued by the Financial Accounting Standards Board in the United States of America, in its presentation of revenue and costs of revenue. Pursuant to this guidance, revenues from contracts with multiple-element arrangements are recognized as the revenue for each unit of accounting is earned based on the relative fair value of each unit of accounting as determined by internal or third-party analyses of market based prices. A delivered element is considered a separate unit of accounting if it has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of undelivered elements in the arrangement, and delivery or performance of undelivered elements is considered probable and substantially under our control. Revenue is generally recognized when services are performed provided that all other revenue recognition criteria are met.

Cost of access

Cost of access primarily comprises usage-based voice charges paid to other carriers to originate and/or terminate switched voice traffic charges and for leased lines for dedicated facilities. Access costs are expensed as the services are received from the Company’s access providers and are determined based on volume of access received as measured by the Company’s network, and the access rates determined by the applicable contract or regulatory authority. At the close of each reporting period, the Company records a provision for its best estimate of access costs.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases.

F-10

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Where significant, initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying value of the leased asset and recognized on a straight line basis over the term of the lease.

There are no finance leases to which the company is party as lessor.

The Company as lessee

Assets held under finance leases are recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability of the Company is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the consolidated income statement in accordance with the Company’s general policy on borrowing costs (see below).

Rental expenses payable under operating leases are recognized on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also included in the consolidated income statement on a straight line basis over the term of the lease.

Connection costs

The Company is charged initial connection fees when taking on new Integrated Service Digital Network/Public Switch Telephone Network circuits from local loop suppliers. These circuits are purchased by the Company solely and specifically for the purposes of providing connectivity over the final leg of the connection between customer premises and the Company’s network. Such initial connection costs are treated as deferred costs within trade and other receivables, and are amortized as an expense within cost of sales on a straight-line basis over the average expected customer relationship (typically 24 months).

Foreign currencies

The individual financial statements of GCUK and its subsidiary undertakings are presented in the currency of the primary economic environment in which they operate (their functional currency) which is pounds sterling. This is also the reporting currency for the consolidated financial statements.

In order to hedge its exposure to certain foreign exchange risks, the Company has entered into swap agreements. See “Derivative financial instruments and hedge accounting” below for details of the Company’s accounting policies in respect of such swap agreements.

Transactions in currencies other than the functional currency (foreign currencies) are recorded at rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing at the balance sheet date.

Goodwill and business combinations

In accordance with the provisions of IFRS 3 “Business Combinations” (“IFRS 3”), business combinations are recorded using the purchase method. Under this method, upon initial consolidation of an entity over which the Company has acquired exclusive control, the assets acquired and the liabilities and contingent liabilities assumed are recognized at their fair value at acquisition date. At this date, goodwill is initially measured at the excess of the cost of the business combination over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Excess of the fair value of identifiable net assets acquired over total consideration (“negative goodwill”) is recognized directly in the consolidated income statement within administrative expenses.

Intangible assets

Computer software is stated at cost, being purchase price together with any directly attributable costs incurred in preparing the software for its intended use, net of amortization and provisions for impairment.

F-11

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Costs directly associated with the production of internally generated software for internal use, where it is probable that they will generate future economic benefits exceeding costs, are recognized in intangible assets and amortized over their estimated useful lives from the date the software is ready for use. Subsequent additions, modifications or upgrades to internally generated software are capitalized only to the extent that they allow the software to perform a task it did not previously perform.

Acquired intangible assets comprise customer contracts and relationships and internally developed software. Acquired intangible assets with finite lives are amortized over their estimated useful lives.

Amortization is provided on all intangible assets, so as to write off the cost, less estimated residual value, over their estimated lives using the straight line method as follows:

Computer software	3 to 5 years
Acquired intangible assets (see note 11)	1 to 10 years

Property, plant and equipment

Property, plant and equipment, which include assets held under finance lease, are stated at deemed cost, at the date of transition, net of depreciation and any provision for impairment. Assets acquired subsequent to the transition date are recorded at historical cost, net of depreciation and provision for impairment. Expenditure on enhancements is capitalized whilst expenditure for repairs and maintenance is expensed as incurred.

Costs recorded prior to a network segment’s completion are reflected as construction in progress, which are reclassified to network assets at the date that each segment of the applicable system becomes operational. Construction in process includes direct expenditures for the construction of network systems and is stated at cost. Capitalized costs include costs incurred under the construction contract: advisory, consulting and legal fees, direct internal costs (including labor) and operating costs incurred during the construction and installation phase.

Once it is probable that a network system will be constructed, costs directly identifiable with the cable system under development are capitalized. Costs relating to the evaluation of new projects incurred prior to the date the development of the network system becomes probable are expensed as incurred.

The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal.

Where the carrying value of an item of property, plant and equipment includes the cost of replacement for part of the item, then the carrying value of the replaced part is derecognized regardless of whether the replacement part had been depreciated separately. Where it is not practicable to determine the carrying amount of the replaced part, the Company may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.

Depreciation is provided on all plant, property and equipment except construction in progress, so as to write off the cost less estimated residual value of each asset, over their estimated useful lives, using the straight-line method, on the following basis:

Buildings	10 to 40 years
Leasehold improvements	Lesser of the lease term or 20 years
Fixtures, fittings, tools and equipment	3 to 7 years
Network assets	3 to 25 years

Land is valued at acquisition cost except if held under long-term lease arrangements, when it is amortized over the life of the lease.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in administrative expenses in the consolidated income statement.

F-12

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Impairment of intangible and tangible assets

At each annual balance sheet date, the Company reviews the carrying amounts of its intangible and tangible assets, and any assets that have yet to be brought into use, to determine whether there is any indication that those assets have suffered impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the consolidated income statement.

Based on our assessment of recoverability, we have no such impairments during the years under review.

Investment in associates

Investments in associates are accounted for using the equity method of accounting. An associated undertaking is an entity in which the Company has a participating interest and, in the opinion of directors, can exercise significant influence over its operating and financial policies. The consolidated income statement includes the Company’s share of the operating result and the consolidated balance sheet shows the Company’s share of the net assets or liabilities of those entities.

Financial instruments

Financial assets and financial liabilities are recognized on the Company’s balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables do not carry any interest and are recognized and carried at the lower of their original invoiced value and recoverable amount.

Provisions for doubtful debts are charged to administrative expenses whilst provisions for sales credits are charged against revenue, both contained within the consolidated income statement. The adequacy of provisions is evaluated periodically by the Company utilizing several factors including the length of time the receivables are past due, changes in the customer’s creditworthiness, the customer’s payment history, the length of the customer’s relationship with the Company, the current economic climate, current industry trends and other relevant factors. Service level requirements are assessed to determine sales credit requirements where necessary.

Changes in these estimates are charged or credited to the consolidated income statement in the period of the change. If circumstances occur, such as changes in the financial viability of significant customers, and economic downturn, or changes in the Company’s ability to meet service level requirements, the estimate of the recoverability of the Company’s receivables could be reduced by a material amount.

F-13

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Cash and cash equivalents

Cash and cash equivalents include cash held by the company and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

For the purposes of consolidated cash flow statements, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Financial liabilities

Financial liabilities issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Trade payables

Trade payables are not interest-bearing and are stated at their nominal value.

Derivative financial instruments and hedge accounting

Derivative financial instruments are recorded at fair value as either assets or liabilities contained within the consolidated balance sheets. For the purposes of hedge accounting, hedges are classified as:

• fair value hedges when hedging the exposure to changes in the fair value of a recognized asset of liability; or

• cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a probable forecast transaction.

Hedge accounting is only used where, at the inception of the hedge, there is formal designation and documentation of the hedging relationship and it meets the Company’s risk management objective strategy for undertaking the hedge.

Changes in the fair value of derivative financial instruments that are not designated as hedges and/or ineffective portions of hedges are recognized in the consolidated income statement in the current period. Changes in the fair value of the effective portions of cash flow hedges are recognized in the hedging reserve in equity. Changes in the fair value of the effective portions of fair value hedges are recognized in the consolidated income statements with the change in value of the hedged item.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transaction is recorded in the consolidated income statement. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to the consolidated income statement for the period.

Retirement benefit costs

The Company’s employees participate in two occupational pension schemes:

• The Global Crossing Pension Scheme (the “Global scheme”); and

• The Global Crossing Shared Cost Section of the Railways Pension Scheme (the “Railways scheme”).

The Global scheme is an occupational pension scheme with defined contribution and defined benefit elements. The Railways scheme is a defined benefit scheme.

Costs associated with the defined contribution element of the Company’s retirement benefit schemes are charged to the consolidated income statement as they fall due and represent the amounts payable in the year. Differences between contributions payable in the year and contributions actually paid are treated as either a prepayment or accrual.

F-14

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Costs associated with the defined benefit element of the Company’s retirement benefit schemes, which are periodically calculated by professionally qualified actuaries, are calculated using the Projected Unit Credit Method, with actuarial valuations (either interim or full) being carried out at each balance sheet date. Actuarial gains and losses that exceed 10% of the greater of the present value of the Company’s defined benefit obligation and the fair value of the plan assets are amortized over the expected average remaining working lives of the participating employees. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the consolidated balance sheet represents the present value of the defined benefit obligation as adjusted for actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of the plan assets out of which obligations are to be settled directly. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit/(loss) as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be paid or recovered on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is more likely than not that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is measured at the rates that are expected to apply in the periods in which timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer more likely than not that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current assets against current tax liabilities and when they relate to taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that there will be an outflow of economic benefits. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

F-15

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Restructuring costs

Provisions for restructuring costs are recognized once the criteria for recognizing a provision, as described above, are met. For severance costs, this is when the Company has demonstrated a constructive obligation to implement a termination and has a detailed formal plan for the terminations that it has started to implement or has announced the main features to those affected by it in a sufficiently specific manner to raise a valid expectation in them that they will carry out the restructuring. For property costs, a constructive obligation is demonstrated when the Company vacates the property. Such amounts are recognized in the consolidated income statement utilizing an appropriate risk free discount rate.

Changes in assumptions, especially as they relate to anticipated third-party sub-lease payments, could have a material effect on the restructuring provision.

Dilapidation provision

At the inception of each lease, the Company records a provision of the estimated costs required to return leased properties to their original state in accordance with the respective third party lease agreements. The provision is based on the estimated present value of the obligation utilizing an appropriate risk free discount rate.

Borrowing costs

Borrowing costs, with the exception of deferred finance fees, are expensed as incurred. Deferred finance fees are expensed over the life of the related debt obligation.

Share-based payments

The Company follows IFRS 2 “Share-based Payment” to account for share based payments. The Company issues equity-settled share-based payments in GCL stock to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on an accelerated basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

The fair value of awards are measured by use of the Black-Scholes option pricing model for stock option awards and the current market price for restricted stock unit and performance based awards. There were no stock options granted in 2007 and 2008.

The movement in cumulative expense since the previous balance sheet date is recognized in administrative expenses within the consolidated income statement, with a corresponding entry in equity.

Recently issued accounting pronouncements and interpretations not applied

During the year and subsequent to the year end, the IASB and International Financial Reporting Interpretations Committee (“IFRIC”) have issued the following standards and interpretations with an effective date after the date of these financial statements:

IAS/IFRIC interpretations		Effective date
IFRS 3 (Revised)	Business Combinations	July 1, 2009
IAS 27 (Amendment)	Consolidated and Separate Financial Statements	July 1, 2009

Issued on January 10, 2008, the revised and amended standards (both IFRS 3 and IAS 27) apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual financial reporting period beginning on or after July 1, 2009. Adoption of these standards is not expected to materially affect the results of the Company or its operations.

IAS 39 (Amendment) Financial Instruments: Recognition and Measurement July 1, 2009

Issued on July 31, 2008, this amendment to IAS 39 clarifies how the existing principles underlying hedge accounting should be applied in certain situations. Adoption of this amendment is not expected to materially affect the results of the Company or its operations.

F-16

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

IFRIC 17 Distributions of Non-cash Assets to Owners July 1, 2009

Issued on November 27, 2008, this interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to shareholders. Adoption of this interpretation is not expected to affect the results of the Company or its operations.

IFRIC 18 Transfers of Assets from Customers July 1, 2009

Issued on January 29, 2009, this interpretation clarifies the treatment of IFRS, particularly IAS 18 “Revenue” for agreements in which an entity receives an item of property, plant and equipment from a customer to connect to an ongoing supply of goods and services. Adoption of this standard is not expected to materially affect the results of the Company or its operations.

IAS 7 (Amendment) Improving Disclosures about Financial Instruments (Amendments to IFRS 7) July 1, 2009

Issued on March 5, 2009, this amendment to IFRS 7 require enhanced disclosures about fair value measurements and liquidity risk. Adoption of this standard is not expected to materially affect the results of the Company or its operations although it may result in additional disclosure.

3. Revenue

Substantially all revenue arises from sales to customers in the UK.

An analysis by type of the Company’s revenue is as follows:

	Year ended December 31,
	2006		2007		2008
	(in thousands)
Provision of telecommunication services	£	235,112	£	291,100	£	316,682
Long term IRU agreements		5,500		5,520		6,150
Revenue from customers		240,612		296,620		322,832
Finance revenue (see note 7)		1,503		4,527		14,056
Total revenue	£	242,115	£	301,147	£	336,888

The Company operates as one reportable business segment with revenue derived from two types of third party customers, enterprise and carrier customers primarily located in the UK, and from Group Companies. Enterprise customers include public sector clients, participants in the rail industry and other commercial organizations. Carrier customers are mobile and fixed line operators with capacity requirements in the UK. The Company services these customers with assets and personnel located predominantly in the UK.

The following represents a summary of revenue by type of customer:

	Year ended December 31,
	2006		2007		2008
	(in thousands)
Enterprise	£	219,658	£	247,324	£	257,596
Carrier data		16,035		43,748		58,626
		235,693		291,072		316,222
Carrier voice		4,394		5,048		6,110
Revenue from third party customers		240,087		296,120		322,332
Revenue from group companies		525		500		500
Revenue from customers	£	240,612	£	296,620	£	322,832

F-17

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

4. Business combinations

On October 11, 2006, pursuant to an offer declared wholly unconditional, GC Acquisitions, an affiliated acquisition vehicle, acquired all of the outstanding ordinary shares of Fibernet Group plc for an aggregate purchase price of £49.8 million. In addition, £2.1 million of costs directly attributable to the acquisition were incurred, resulting in a total purchase price of £51.9 million. Fibernet is a provider of specialist telecommunications services to large enterprises and other telecommunications and internet service companies primarily located in the UK.

On December 28, 2006, we announced that our subsidiary, GC Finance, had completed its offering of 11.75 percent Senior Secured Notes due 2014 (“Additional Notes”) under the Indenture. The £52.0 million aggregate principal amount of the Additional Notes was priced at 109.25 percent of par value and raised gross proceeds of £56.8 million. The Additional Notes were issued under the indenture, dated as of December 23, 2004, (“Indenture”), pursuant to which GC Finance previously issued $200.0 million aggregate principal amount of its dollar-denominated 10.75 percent Senior Secured Notes due 2014 and £105.0 million aggregate principal amount of its sterling-denominated 11.75 percent Senior Secured Notes due 2014 (“Initial Notes”). The Initial Notes and Additional Notes are collectively referred to as the “Notes” and “Senior Secured Notes”.

At that time, proceeds from the offering were used to acquire Fibernet from GC Acquisitions. Upon completion of the acquisition by GCUK, Fibernet guaranteed the Additional Notes and all other obligations under the Indenture. Prior to the acquisition by GCUK, Fibernet Group Limited transferred its German business operations to Global Crossing International Ltd (“GCI”) by way of a transfer of Fibernet Holdings Limited, and its wholly owned subsidiary Fibernet GmbH, for consideration of £1 and the assumption, by GCI, of £3.6 million of debt outstanding to Fibernet (see note 26).

The acquisition of Fibernet Group by GC Acquisitions gave rise to a change in control for IFRS accounting purposes. This was accounted for using the purchase method of accounting, including the settlement of existing agreements between GCUK and Fibernet. Under IFRS purchase accounting, assets and liabilities are recorded at their fair values on the date of purchase, and the total purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the purchase date. The acquisition of Fibernet by GCUK from GC Acquisitions represented a business combination involving entities under common control. Under IFRS, these types of business combinations are not included in scope of IFRS 3. Under IFRS, in the absence of a standard or interpretation that specifically applies to a transaction, guidance issued by other standard setting bodies or an IFRS standard or interpretation that relates to a similar issue may be referred to. Therefore, under IFRS an entity may choose to account for business combinations among entities under common control using the purchase or pooling of interest method. Since the Fibernet acquisition by GCUK has commercial substance, as a result of the transaction being conducted at fair value, for cash, GCUK has accounted for the business combination using the purchase method of accounting, including the recognition of a non-cash, non-taxable gain from the deemed settlement of existing IRU and telecom service agreements with Fibernet.

Initial accounting for the acquisition of Fibernet was determined only provisionally as at December 31, 2006. In accordance with IFRS 3, any adjustment to the provisional values as a result of completing the initial accounting requires adjustment of comparative financial statements. During the year ended December 31, 2007, an adjustment to increase the liabilities assumed in the acquisition was recorded which resulted in a change in the amount of negative goodwill and resulting gain recorded at acquisition date. This adjustment has been reflected in the consolidated income statement for the year ended December 31, 2006 and resulted in an increase to deferred revenue of £0.7 million, with a corresponding reduction to the gain on recognition of negative goodwill recognized in the consolidated income statement.

The following unaudited pro forma combined revenue and profit for the year ended December 31, 2006 has been prepared as if the acquisition of Fibernet had occurred at January 1, 2006.

	Year ended December 31, 2006
	(in thousands)
Revenue	£	281,098
Profit for the year		5,924

F-18

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

5. Operating profit

Operating profit has been arrived at after charging/(crediting):

	Year ended December 31,
	2006			2007			2008
	(in thousands)
Depreciation and amortization
—Depreciation of property, plant and equipment (owned)	£	18,461		£	30,085		£	31,951
—Income from lease of property, plant and equipment (owned) to related parties (see note 26)		(2,776	)		(2,761	)		(2,556	)
—Depreciation of property, plant and equipment (leased)		3,356			4,406			3,515
—Amortization of intangible assets (owned)		576			2,613			2,201
—Amortization of intangible assets (leased)		544			270			—
— Amortization of connection costs		4,390			7,548			9,588
	£	24,551		£	42,161		£	44,699
Net gain arising from acquisition of Fibernet
Gain on settlement of contracts due to Fibernet acquisition (see note 4)	£	(8,411	)	£	—		£	—
Gain on recognition of negative goodwill—as restated (see note 4)		(1,050	)		—			—
Restructuring charges (see note 17)		1,706			—			—
	£	(7,755	)	£	—		£	—
Payments under operating lease
—Hire of plant and machinery	£	16,764		£	22,827		£	27,879
—Other operating leases		8,728			10,370			11,482
Receipts under operating lease sublets		(3,504	)		(4,175	)		(4,303	)
Loss/(gain) on disposal of property, plant and equipment		168			306			(11	)
Exceptional cost—redundancy costs		—			1,453			—
Exceptional gain—rates rebate arising from reduction in agreed rateable value		—			(1,270	)		—
Share of results in associated undertaking accounted for using the equity method		(159	)		(37	)		22
Auditors remuneration for audit services (see below)		709			619			647
(Gain)/loss on foreign exchange		(564	)		(156	)		2,365

Amounts payable to Ernst & Young LLP by the Company and its subsidiary undertakings in respect of non-audit services were £50,000 (2007: £nil, 2006: £nil).

In addition to the amounts shown above, Deloitte & Touche LLP received fees of £28,000 (2007: £21,000, 2006: £26,000) for the audit of the group pension scheme.

6. Employee costs and remuneration of key management

Employee costs

	Year ended December 31,
	2006		2007		2008
	(in thousands)
Wages and salaries	£	27,004	£	40,249	£	40,849
Social security costs		3,050		4,457		4,427
Other pension costs		2,186		2,568		2,613
	£	32,240	£	47,274	£	47,889

Included in wages and salaries is a total expense of share-based payments of £2.8 million (2007: £2.3 million, 2006: £0.2 million), all of which arises from transactions accounted for as equity-settled share-based payment transactions.

F-19

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Remuneration of key management

The remuneration of key management and personnel (including directors) of the Company is set out below:

	Year ended December 31,
	2006		2007		2008
	(in thousands)
Fees and other emoluments	£	396	£	867	£	884
Termination costs		120		—		—
Share based payments		47		43		135
Company contributions to money purchase pension schemes		10		41		54
	£	573	£	951	£	1,073

In addition, 3 directors (2007: 5, 2006: 4) received total remuneration in respect of services to Group Companies of £1.2 million (2007: £2.9 million, 2006: £2.1 million) but it is not practicable to allocate this between Group Companies.

7. Finance revenue

	Year ended December 31,
	2006			2007			2008
	(in thousands)
Interest on bank deposits(1)	£	1,069		£	1,189		£	816
Interest receivable from other Group Companies(1)		2,420			3,632			3,620
Foreign exchange (loss)/gain on loans to other Group Companies		(2,049	)		(394	)		9,620
Other interest receivable		63			100			—
Total finance revenue	£	1,503		£	4,527		£	14,056

⁽¹⁾ Calculated using effective interest rate method

8. Finance charges

	Year ended December 31,
	2006			2007			2008
	(in thousands)
Interest payable on Senior Secured Notes(1)	£	24,182		£	29,964		£	30,380
Amortization of deferred finance charges(1)		1,028			1,476			1,524
Interest on obligations under finance lease		2,432			2,802			2,612
Interest payable to other Group Companies(1)		1,039			—			—
Other interest payable		894			913			26
Total borrowing costs		29,575			35,155			34,542
Unwind of discount on provisions and other long term liabilities		419			256			178
Foreign exchange (gain)/loss on Senior Secured Notes		(14,101	)		(1,566	)		37,994
Unwind of premium on Senior Secured Notes(1)		(7	)		(615	)		(604	)
Unwind of discount on Senior Secured Notes(1)		305			318			306
Total finance charges	£	16,191		£	33,548		£	72,416

⁽¹⁾ Calculated using effective interest rate method

F-20

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

9. Taxation

The major components of income tax expense for the years ended December 31, 2006, 2007 and 2008 are:

	Year ended December 31,
	2006			2007			2008
	(in thousands)
Current income tax:
Current income tax charge	£	(801	)	£	(1,035	)	£	(432	)
Deferred income tax:
Relating to origination and reversal of temporary differences		(8,576	)		(4,912	)		—
Effect of decreased tax rate		—			(350	)		—
Income tax charge reported in the consolidated income statement	£	(9,377	)	£	(6,297	)	£	(432	)

No deferred tax movements have been recognized in equity in the current or prior years.

A reconciliation between the tax expense and accounting profit multiplied by the applicable tax rate for the years ended December 31, 2006, 2007 and 2008 is as follows:

	Year ended December 31,
	2006		2007		2008
	(in thousands)
Accounting profit/(loss) before tax	£	22,130	£	4,756	£	(29,413	)
Tax at the UK corporation tax rate of 28.5% (2007: 30%, 2006: 30%)	£	6,639	£	1,427	£	(8,383	)
Factors affecting the tax charge for the year:
—Expenses/(income) not deductible for tax purposes		200		230		(130	)
—Unrecognized movements in accelerated capital allowances and other temporary differences		—		—		8,945
—Derecognition of tax losses and other temporary differences available in the foreseeable future		2,538		4,640		—
Income tax charge reported in the consolidated income statement	£	9,377	£	6,297	£	432

The current tax charge of £0.4 million (2007: £1.0 million, 2006: £0.8 million) represents an amount payable to other Group Companies for the surrender of tax relief to offset against the Company’s taxable income in the period. During 2008, no deferred tax asset or liability has been recognized (2007: a reduction to the deferred tax asset of £5.3 million, 2006: a reduction to the deferred tax asset of £8.6 million) as the Company considers that it is not more likely than not that sufficient profits will be available against which to offset a deferred tax asset in the foreseeable future.

The following is the analysis of the deferred tax asset for financial reporting purposes:

	Year ended December 31,
	2007			2008
	(in thousands)
Accelerated capital allowances	£	13,687		£	43,288
Other temporary differences		(3,890	)		(5,264	)
Tax losses available		80,549			59,056
Total deferred tax asset		90,346			97,080
Less: deferred tax asset not recognized		(90,346	)		(97,080	)
Net deferred tax asset	£	—		£	—

F-21

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

At the balance sheet date, the Company has unused gross tax losses of £211 million (2007: £288 million) available for offset against future taxable profits. For both 2007 and 2008, no deferred tax asset has been recognized in respect of tax losses and other temporary differences due to the Company considering it is not more likely than not that sufficient profits will be available in the foreseeable future against which to offset the deferred tax asset. The Company may carry forward its tax losses indefinitely.

On July 19, 2007, the UK Government fully enacted a reduction in the UK corporation tax rate from 30% to 28% with effect from April 1, 2008. The effect of the reduction to the tax rate was to decrease the future value of the Company’s unrecognized deferred tax assets by £6.0 million during 2007.

10. Dividends

The Directors do not recommend the payment of a dividend in 2008 (2007: £nil, 2006: £nil).

11. Intangible Assets

	Computer software			Customer contracts			Customer relationships			Total
	(in thousands)
Cost
At January 1, 2007	£	4,620		£	901		£	11,055		£	16,576
Reclassifications		112			—			—			112
Additions		1,882			—			—			1,882
Disposals		(1	)		—			—			(1	)
At December 31, 2007		6,613			901			11,055			18,569
Additions		805			—			—			805
At December 31, 2008	£	7,418		£	901		£	11,055		£	19,374
Accumulated amortization
At January 1, 2007	£	(2,325	)	£	(2	)	£	(8	)	£	(2,335	)
Charge for year		(1,430	)		(246	)		(1,207	)		(2,883	)
At December 31, 2007		(3,755	)		(248	)		(1,215	)		(5,218	)
Charge for year		(836	)		(238	)		(1,127	)		(2,201	)
At December 31, 2008	£	(4,591	)	£	(486	)	£	(2,342	)	£	(7,419	)
Carrying amount
At December 31, 2007	£	2,858		£	653		£	9,840		£	13,351
At December 31, 2008	£	2,827		£	415		£	8,713		£	11,955

Included within intangible assets are assets under development in progress. The cost and net book value of software in the course of development (which is not amortized) at December 31, 2007 and 2008 was £0.7 million and £1.2 million respectively.

Customer contracts (4-year weighted average useful life), customer relationships (10-year weighted average useful life) and internally developed software, included within computer software, (2-year weighted average useful life) represent intangible assets acquired in connection with the Fibernet acquisition (see note 4). The combined weighted average useful life for acquired intangible assets is 9.5 years.

The estimated amortization expense relating to acquired intangible assets for the years ending December 31, 2009, 2010, 2011 2012 and 2013 is £1.4 million, £1.3 million, £1.1million, £1.1 million and £1.1 million, respectively.

F-22

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

12. Property, plant and equipment

	Land and buildings			Leasehold improvements			Fixtures, fittings, tools and equipment			Network assets			Total
	(in thousands)
Cost
At January 1, 2007	£	496		£	5,664		£	5,543		£	227,968		£	239,671
Reclassifications		(130	)		—			(7	)		25			(112	)
Additions		—			83			1,818			36,308			38,209
Disposals		—			(144	)		(66	)		(422	)		(632	)
At December 31, 2007		366			5,603			7,288			263,879			277,136
Additions		75			130			1,210			28,019			29,434
Change in dilapidations provision (see note 17)		—			—			—			(142	)		(142	)
Disposals		—			—			—			(8	)		(8	)
At December 31, 2008	£	441		£	5,733		£	8,498		£	291,748		£	306,420
Accumulated depreciation
At January 1, 2007	£	—		£	(678	)	£	(1,974	)	£	(54,463	)	£	(57,115	)
Charge for year		(8	)		(1,212	)		(2,675	)		(30,596	)		(34,491	)
Eliminated on disposal		—			—			—			189			189
At December 31, 2007		(8	)		(1,890	)		(4,649	)		(84,870	)		(91,417	)
Charge for year		(3	)		(1,265	)		(962	)		(33,236	)		(35,466	)
Eliminated on disposal		—			—			—			7			7
At December 31, 2008	£	(11	)	£	(3,155	)	£	(5,611	)	£	(118,099	)	£	(126,876	)
Carrying amount
At December 31, 2007	£	358		£	3,713		£	2,639		£	179,009		£	185,719
At December 31, 2008	£	430		£	2,578		£	2,887		£	173,649		£	179,544

Included within network assets are assets under finance lease, and construction in progress. As at December 31, 2007 and 2008, the carrying amount of assets held under finance lease were £18.8 million and £16.8 million respectively. The cost of assets held to lease out under operating leases at December 31, 2007 and 2008 were £23.3 million and £24.0 million, respectively. The net book values of these assets were £15.3 million and £13.8 million respectively. The cost and net book value of construction in progress (which is not depreciated) at December 31, 2007 and 2008 was £7.1 million and £13.8 million respectively.

13. Investment in associate

	Associates
	(in thousands)
Cost
At January 1, 2007	£	163
Share of retained results		37
At December 31, 2007		200
Share of retained results		(22	)
At December 31, 2008	£	178

Details of significant investments (holdings greater than 20%), including the name, country of incorporation, proportion of ownership interest is given below:

Name of company	Country of incorporation	Proportion of voting rights and share held	Nature of business
Associated undertaking
Dublin London Network Limited	Republic of Ireland	45%, ordinary shares	Telecommunications services

F-23

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

14. Financial and other assets

Trade and other receivables

Trade and other receivables consist of:

	December 31,
	2007			2008
	(in thousands)
Amounts due within one year
Trade receivables	£	35,730		£	28,243
Less: provision for doubtful debts		(31	)		(331	)
Trade receivables, net		35,699			27,912
Amounts owed by Group Companies		2,659			2,540
Other receivables		2,074			529
Prepayments		17,213			14,743
Accrued income		8,592			10,552
Trade and other receivables due within one year	£	66,237		£	56,276
Amounts due after more than one year
Amounts owed by Group Companies	£	25,277		£	34,897
Prepayments		3,234			2,109
Trade and other receivables due after more than one year	£	28,511		£	37,006
Total amounts due	£	94,748		£	93,282

No interest is charged on trade receivables.

Included within trade receivables are debtors with a carrying amount of £10.6 million (2007: £7.2 million) which are overdue as at the reporting date, and for which no provision has been made due to there being no indication that the amounts are not recoverable.

The ageing of the amounts past due, against which there is no provision, is:

	Year ended December 31,
	2007		2008
	(in thousands)
31 - 60 days	£	4,298	£	3,208
61 - 90 days		1,570		3,035
over 90 days		1,321		4,426
	£	7,189	£	10,669

There were the following changes to the provision for doubtful debts:

	Year ended December 31,
	2007			2008
	(in thousands)
Balance at start of year	£	100		£	31
Provided in year		51			368
Utilized in year		(120	)		(68	)
Balance at end of year	£	31		£	331

Prepayments

Included within prepayments is £6.1 million (2007: £6.3 million) of prepaid connection costs.

F-24

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Cash and cash equivalents

Cash and cash equivalents comprises cash held by the Company. The carrying amount of these assets approximates their fair value.

15. Obligations under finance leases

	Minimum lease payments						Present value of minimum lease payments
	December 31,						December 31,
	2007			2008			2007			2008
	(in thousands)
Amounts payable under finance leases:
Within one year	£	14,616		£	12,111		£	11,945		£	10,182
In the second to fifth year inclusive		18,633			13,119			15,138			10,399
After five years		6,198			4,306			5,104			3,644
		39,447			29,536			32,187			24,225
Less: future finance charges		(7,260	)		(5,311	)		n/a			n/a
Present value of minimum lease payments	£	32,187		£	24,225		£	32,187		£	24,225
Less: Amount due for settlement within 12 months
(shown within current liabilities)								(11,945	)		(10,182	)
Amount due for settlement after 12 months							£	20,242		£	14,043

Obligations under finance leases and hire purchase contracts are secured by lessors’ charges over the leased assets and bear finance charges at rates ranging from 5.5% to 12.7% per annum. Interest rates are fixed at inception of the lease. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

All lease obligations are denominated in pounds sterling.

The fair value of the Company’s lease obligations approximates their carrying amount.

16. Financial and other liabilities

Trade and other payables

	Year ended December 31,
	2007		2008
	(in thousands)
Amounts due within one year
Trade payables	£	32,948	£	38,151
Amounts owed to Group Companies		7,832		10,588
Other creditors		3,041		3,146
Other taxes and social security		3,141		3,638
Accruals		18,657		26,386
Trade and other payables due within one year	£	65,619	£	81,909
Amounts due in more than one year
Other creditors	£	650	£	335
Total amounts due	£	66,269	£	82,244

F-25

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The amounts owed to Group Companies are non interest bearing.

17. Provisions

	Dilapidations			Restructuring			Total
	(in thousands)
At January 1, 2007	£	803		£	7,706		£	8,509
Arising during in the period		66			2,708			2,774
Reversal of unused amounts		—			(868	)		(868	)
Adjustment from unwinding of discount		36			220			256
Utilized in year		—			(4,374	)		(4,374	)
At December 31, 2007		905			5,392			6,297
Arising during in the period		—			1,668			1,668
Reversal of unused amounts		—			(255	)		(255	)
Adjustment from unwinding of discount		30			172			202
Change in estimated liability (see note 12)		(142	)		—			(142	)
Unwind of discount due to change in estimated liability		(24	)		—			(24	)
Utilized in year		—			(2,370	)		(2,370	)
At December 31, 2008	£	769		£	4,607		£	5,376
Due in less than one year	£	—		£	1,590		£	1,590
Due in more than one year		769			3,017			3,786
	£	769		£	4,607		£	5,376

Dilapidations

The dilapidations provision is the estimated costs required to return leased properties to their original state in accordance with the respective third party lease agreements based on the estimated present value of the obligation utilizing an appropriate discount rate. The Company has entered into various property leases that primarily expire between 1 and 110 years from the balance sheet date.

Restructuring

The restructuring provision comprises the following:

	Employee redundancies			Facility closings			Total restructuring
	(in thousands)
At January 1, 2007	£	396		£	7,310		£	7,706
Arising during in the period		1,453			1,255			2,708
Reversal of unused amounts		(157	)		(711	)		(868	)
Adjustment from unwinding of discount		—			220			220
Utilized in year		(1,692	)		(2,682	)		(4,374	)
At December 31, 2007		—			5,392			5,392
Arising during in the period		—			1,668			1,668
Reversal of unused amounts		—			(255	)		(255	)
Adjustment from unwinding of discount		—			172			172
Utilized in year		—			(2,370	)		(2,370	)
At December 31, 2008	£	—		£	4,607		£	4,607

Restructuring charges are included within administrative expenses in the consolidated income statement.

The discounted facilities closures provision is composed of continuing building lease obligations and broker commissions for the restructured sites (an aggregate of £31.0 million as of December 31, 2008), offset by the discounted anticipated receipts from existing and future third-party subleases. As of December 31, 2008,

F-26

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

anticipated third-party sublease receipts were £26.4 million, representing £20.6 million from subleases already entered into and £5.8 million for subleases projected to be entered into in the future. The Company continues to review the anticipated costs and third-party sublease payments on a quarterly basis and records adjustments for changes in these estimates in the period such changes become known.

2007 Restructuring Plans

On April 12, 2007 the Company approved plans to restructure a Fibernet facility lease agreement. During the third quarter of 2007, the Company physically vacated this facility and as a result, recorded a charge of £1.3 million to the restructuring provision.

On May 10, 2007, GCL implemented initiatives to generate operational savings which included organizational realignment and functional consolidation resulting in the termination of approximately 39 redundant employee positions within the Company. As a result of these efforts, during 2007 the Company recorded a charge of £1.5 million for one-time severance and related benefits. All payments were made in 2007.

2006 Restructuring Plan

In 2006, the Company adopted a restructuring plan following the Fibernet acquisition. This plan provides for the termination of a number of redundant employee positions and the termination or restructuring of certain Fibernet facility lease agreements. As at December 31, 2008, all payments pursuant to the 2006 Restructuring Plan have been made.

2003 and Prior Restructuring Plans

As a result of the slowdown in the telecommunications industry, the Board of Directors of GCL approved a restructuring plan in 2001 which resulted in the elimination of positions across the Company’s business functions and job classes and the consolidation of offices and other real estate facilities. The remaining facility closing payments are expected to be made over the life of the associated lease agreements, which terminate between the years 2010 and 2021.

In the first quarter of 2007, the Company recorded a £1.0 million restructuring credit resulting from the Company’s decision to reoccupy a building previously restructured under the 2003 and Prior Restructuring Plans. This building has been reoccupied as a result of the Company’s decision to restructure the Fibernet Facility described above.

18. Financial instruments

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily from trade receivables and amounts owed by Group Companies) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Credit risks related to receivables

Customer credit risk is managed by way of the company’s credit and risk management policies. These activities include, but are not confined to, setting credit limits on all customer accounts and regularly reviewing the customers’ payment performance as well as their financial standing on an ongoing basis.

A significant portion of the Company’s revenue comes from a limited number of customers. For the years ended December 31, 2006, 2007 and 2008, 64.9% , 52.9% and 52.9%, respectively, of revenue was derived from the top ten customers. These customers include public and rail sector clients and commercial organizations. These represented £29.1 million (81.4%) and £9.9 million (35.5 %) of trade receivables at December 31, 2007 and 2008 respectively.

F-27

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

During the year ended December 31, 2008, one customer was responsible for revenue that exceeded 10% of total revenue, accounting for £32.8 million or 10.2%. The trade receivables balances for this customer comprised £1.3 million, or 4.7% of the consolidated trade receivables balance at December 31, 2008. During the year ended December 31, 2007, two customers were each responsible for revenue that exceeded 10% of total revenue, accounting for £35.4 million or 11.9% and £32.5 million or 11.0%. The trade receivables balances for these two customers comprised £9.6 million, or 26.9 % of the consolidated trade receivables balance at December 31, 2007.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

Credit risk related to financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is conducted primarily by GCL on behalf of Group Companies. The Company’s maximum exposure to credit risk for the components of the balance sheet at December 31, 2007 and 2008 is the carrying amounts of such balances as illustrated below.

Treasury policy and risk management

The Company’s treasury management is conducted primarily by GCL on behalf of Group Companies. GCL is responsible for raising finances for operations, together with associated liquidity management, and the management of foreign exchange and interest rate risk. Treasury operations are conducted within a framework of policies and guidelines authorized and reviewed by the GCL Audit Committee, which receives regular updates of treasury activity. Financial instruments are entered into for risk management purposes only. It is the GC Group’s policy that all hedging is to cover known risks and that no trading in financial instruments is undertaken.

Interest rate management

The Company has financial exposures to interest rates, arising primarily from finance leases and the Senior Secured Notes. These exposures are primarily managed by borrowing at fixed rates of interest. At December 31, 2007 and 2008, substantially all the Company’s borrowings, excluding finance leases, are at fixed rates of interest. During the year ended December 31, 2004, the Company entered into a cross currency interest rate swap (described below) which has swapped the 10.75% US Dollar interest rate to a 11.65% pound sterling rate at an exchange rate of £1 to $1.945 for interest payments due between June 2005 and December 2009 on the US Dollar Senior Secured Notes. The majority of the swap was set to generally match the period up to the point in time that the company can redeem the Notes (see note 19).

The Company’s finance leases incur interest based on the rates inherent in the finance lease agreement.

The following table’s show the Company’s contractually agreed (undiscounted) payments in respect of its financial liabilities:

	December 31, 2007
	< 1 year		1-3 years		3-5 years		> 5 years		Total
	(in thousands)
10.75% US Dollar-denominated senior secured notes(1)	£	11,745	£	21,740	£	21,479	£	121,384	£	176,348
11.75% pounds sterling-denominated senior secured notes(1)		18,837		36,729		36,729		193,023		285,318
Other debt obligations		530		380		81		—		991
Finance lease and hire purchase obligations		14,616		14,303		4,330		6,198		39,447
Interest rate swap		926		925		—		—		1,851
Trade and other payables		32,948		—		—		—		32,948
	£	79,602	£	74,077	£	62,619	£	320,605	£	536,903

F-28

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

	December 31, 2008
	< 1 year		1-3 years		3-5 years		> 5 years		Total
	(in thousands)
10.75% US Dollar-denominated senior secured notes(1)	£	13,938	£	28,971	£	28,971	£	149,232	£	221,112
11.75% pounds sterling-denominated senior secured notes(1)		22,427		35,738		35,738		169,946		263,849
Other debt obligations		803		247		—		—		1,050
Finance lease and hire purchase obligations		12,111		9,175		3,944		4,306		29,536
Interest rate swap		920		—		—		—		920
Trade and other payables		38,151		—		—		—		38,151
	£	88,350	£	74,131	£	68,653	£	323,484	£	554,618

⁽¹⁾ The amounts presented include both principal and interest. As Operating Cash Flow will vary from period to period we have not, with the exception of the Annual Repurchase Offer (see note 19) in respect of the year ended December 31, 2008, predicted early purchase of the Notes.

Interest on the Notes is fixed and payable semi-annually. The US Dollar-denominated Notes bear interest at 10.75% and the pound sterling-denominated Notes bear interest at a rate of 11.75%.

All other derivative and non derivative instruments are set at fixed rates of interest. Therefore the exposure to interest rate risk is minimal.

Foreign exchange management

The Company operates primarily in the UK, with more than 95% of its revenue and 90% of its operating costs denominated in pounds sterling. In addition, substantially all of the Company’s assets and liabilities, excluding obligations to other Group Companies and third party financing, are denominated in pounds sterling. At December 31, 2007 and 2008, the split of aggregate borrowings, including finance leases, into their core currencies was US Dollar 34% and 43%, respectively, and pounds sterling 66% and 57%, respectively.

The Company assesses its currency exchange exposure and enters into financial instruments, as it believes necessary, to manage risk. At December 31, 2008, the Company had US Dollar-denominated debt of $199 million (December 31, 2007: $200 million), equivalent to £137.8 million as at December 31, 2008 and £100.4 million as at December 31, 2007, on which it must pay interest on a semi annual basis. In 2004, the Company entered a five year cross currency interest rate swap to minimize exposure of any US Dollars to pounds sterling currency conversion for the interest payments due on the US Dollar-denominated Senior Secured Notes. This cross currency interest rate swap converts the US Dollars to pounds sterling at a rate of £1 to $1.945 and swaps the interest rate on the associated payments from 10.75% to 11.65%.

On April 12, 2006, the Company entered into an intercompany credit agreement (the “credit agreement”). As at December 31, 2007 and 2008, there were loans of US$50.4 million (equivalent to £25.3 million as at December 31, 2007 and £34.9 million as at December 31, 2008) due from Group Companies (see notes 14 and 26).

The Company has not entered into any currency swap agreements for the balance of the principal amount of the US Dollar-denominated debt. In the year ended December 31, 2008, a foreign exchange loss of £38.0 million (2007: a gain of £1.6 million) was recognized in respect of the principal amount of the US-dollar denominated Notes. In the year ended December 31 2008, a foreign exchange gain of £9.6 million (2007: a loss of £0.4 million) was recognized in respect the US-dollar denominated intercompany loan receivable.

In 2007, the Company entered into a US$5.0 million loan agreement to provide a loan facility for partial financing of certain purchases of equipment. At December 31, 2008, the Company had $0.7 million (2007: $1.3 million) (equivalent to £0.5 million (2007: £0.6 million) as at December 31, 2008) outstanding relating to this agreement, which is included within other debt obligations.

In the years ended December 31, 2007 and 2008, the Company recognized a foreign currency gain of £1.0 million and a foreign currency loss of £30.7 million, respectively, on liabilities denominated in other currencies.

F-29

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The following table illustrates the sensitivity on the net result for the year and equity in regards to the Company’s financial assets and liabilities of possible changes in the US Dollar exchange rate. If the Sterling had strengthened/weakened against the US Dollar by 25% or 10% as at December 31, 2008 (10% as at December 31, 2007) the following effects on the financial statements would be:

	Increase/ decrease in US Dollar rate		Effect on profit before tax			Effect on equity
			(in thousands)
2008	+25	%	£	23,902		£	23,344
	-25	%		(39,837	)		(38,907	)
	+10	%	£	10,865		£	10,611
	-10	%		(13,279	)		(12,969	)
2007 *	+10	%	£	7,461		£	7,270
	-10	%		(7,258	)		(7,025	)

*The 2007 numbers have been restated to include the hedge sensitivity to ensure consistency with the 2008 numbers.

Currency risks

The Company’s currency exposures, after hedging, give rise to the net currency gains and losses recognized in the consolidated income statements. Such exposures comprise the net monetary assets and liabilities of the Company that are not denominated in the functional currency of the entity involved and principally consist of the US Dollar-denominated Senior Secured Notes and intercompany receivable with Global Crossing Europe Limited (“GCE”). The following table presents the exposure of net foreign currency monetary assets/ (liabilities).

	December 31, 2007								December 31, 2008
	US dollars			Euros		Total			US dollars			Euros		Total
	(in thousands)								(in thousands)
Functional currency of the company
Pounds sterling	£	(73,066	)	£	435	£	(72,631	)	£	(105,002	)	£	680	£	(104,322	)

The Company uses a cross currency interest rate swap to manage its exposure to interest rate movements on its US Dollar-denominated Senior Secured Notes.

The fair value of the swap entered into is estimated to be an asset of £2.8 million at December 31, 2008 (2007: a liability of £2.1 million). These amounts are based on market values of equivalent instruments at the balance sheet date.

The cross currency interest rate swap is designated as an effective cash flow hedge, therefore a portion of the movement in the fair value of the swap has been deferred in equity.

	December 31,
	2007			2008
	Liabilities			Asset
	(in thousands)
Cross currency interest rate swap	£	(2,096	)	£	2,787
	£	(2,096	)	£	2,787
Analyzed as:
Non current	£	(1,048	)	£	—
Current		(1,048	)		2,787
	£	(2,096	)	£	2,787

Capital management

The capital structure of the Company consists of debt, which includes the borrowings disclosed in note 19, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital and reserves and reduced by the accumulated deficit.

F-30

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The primary objective of the Company’s capital management is to ensure that it maintains a healthy credit in order to support its business and enable it to continue as a going concern. In addition the Indenture governing our Notes (see note 19) contains restrictions which, among other things, limit our ability to incur additional indebtedness and pay dividends.

The Company’s ability to access the credit markets to fund capital leases or other forms of equipment financing depends on market conditions, which have continued to tighten over the last year due to the ongoing crisis in global capital markets and which could make it more difficult for the Company to obtain such funding.

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all the Company’s financial instruments that are carried in the financial statements.

	Carrying amount						Fair value
	2007			2008			2007			2008
	(in thousands)
Financial assets
Trade receivables(1)	£	35,699		£	27,912		£	35,699		£	27,912
Amounts owed by group companies(1)		27,936			37,437			27,936			37,437
Other receivables(1)		2,074			529			2,074			529
Cross currency interest rate swap(3)		—			2,787			—			2,787
Cash and cash equivalents(1)		23,954			36,100			23,954			36,100
Financial liabilities
Trade payables(2)		(32,948	)		(38,151	)		(32,948	)		(38,151	)
Amounts owed to group companies(2)		(7,832	)		(10,588	)		(7,832	)		(10,588	)
Other creditors(2)		(3,041	)		(3,146	)		(3,041	)		(3,146	)
Senior Secured Notes(2)		(248,946	)		(286,928	)		(263,813	)		(173,725	)
Obligations under finance lease(2)		(32,187	)		(24,225	)		(32,187	)		(24,225	)
Other debt obligations(2)		(893	)		(980	)		(893	)		(980	)
Cross currency interest rate swap(3)		(2,096	)		—			(2,096	)		—

⁽¹⁾ Classified as loan and receivables

⁽²⁾ Classified as financial liability at amortized cost

⁽³⁾ Classified as at fair value through the income statement

The fair value of trade receivables and other receivables approximates their carrying value due to their short term nature. Amounts owed by Group Companies approximates to their carrying value due to their interest bearing or short term nature.

Given the short term duration of cash and cash equivalents the fair value approximates the carrying value.

The fair value of trade payables, amounts owed to Group Companies and other creditors (including taxation and social security) approximates their carrying value due to their short term nature.

Market values have been used to determine the fair value of the Senior Secured Notes.

The fair value of obligations under finance leases and hire purchase contracts and other debt obligations has been obtained by discounting the expected future cash flows at the prevailing interest rates. This approach was also taken in determining the fair value of the cross currency interest rate swap.

F-31

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

19. Financial assets and liabilities

Financial assets and liabilities, as of the balance sheet dates, were made up as follows:

	Year ended December 31,
	2007			2008
	(in thousands)
Financial assets
Amounts due within one year
Trade receivables	£	35,699		£	27,912
Amounts owed by group companies		2,659			2,540
Other receivables		2,074			529
Cross currency interest rate swap		—			2,787
Cash and cash equivalents		23,954			36,100
Due in less than one year	£	64,386		£	69,868
Amounts due in greater than one year
Amounts owed by group companies	£	25,277		£	34,897
Due in greater than one year	£	25,277		£	34,897
Financial liabilities
Amounts payable within one year
Trade payables	£	(32,948	)	£	(38,151	)
Amounts owed to group companies		(7,832	)		(10,588	)
Other creditors		(3,041	)		(3,146	)
10.75% US Dollar senior secured notes		(452	)		(3,057	)
11.75% Pound Sterling senior secured notes		(706	)		(4,325	)
Obligations under finance lease		(11,945	)		(10,182	)
Other debt obligations		(463	)		(740	)
Cross currency interest rate swap		(1,048	)		—
Payable within one year	£	(58,435	)	£	(70,189	)
10.75% US Dollar senior secured notes, due 2014, net of unamortized discount of £0.9 million and deferred financing costs of £3.1 million (2007: £1.0 million and £3.6 million respectively)	£	(95,249	)	£	(130,766	)
11.75% Pound Sterling senior secured notes, due 2014, net of unamortized discount of £0.9 million, amortized premium of £3.1 million and deferred financing costs of £6.0 million (2007: £1.0 million, £4.2 million and £6.9 million respectively)		(152,539	)		(148,780	)
		(247,788	)		(279,546	)
Obligations under finance lease		(20,242	)		(14,043	)
Other debt obligations		(430	)		(240	)
Cross currency interest rate swap		(1,048	)		—
Payable in greater than one year	£	(269,508	)	£	(293,829	)

Senior secured notes

On December 23, 2004, GC Finance issued $200.0 million in aggregate principal amount of 10.75% US Dollar-denominated Senior Secured Notes (“US Dollar Senior Secured Notes”) and £105.0 million in aggregate principal amount of 11.75% Pound Sterling Senior Secured Notes (collectively, “Initial Notes”). The Initial Notes were issued at a discount of approximately £3.0 million. The Initial Notes mature on the tenth anniversary of their issuance.

F-32

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

On December 28, 2006, GC Finance completed its offering of Additional Notes. The £52.0 million aggregate principal amount of Additional Notes was priced at 109.25 percent of par value and the issue raised gross proceeds of £56.8 million. The Additional Notes were issued under the Indenture, dated as of December 23, 2004, pursuant to which GC Finance previously issued the Initial Notes. The proceeds from the Additional Notes were used to refinance the Fibernet acquisition (see note 4).

Interest is payable in cash semi-annually on June 15 and December 15 of each year. The discount, premium and fees associated with the issuance of the Notes are amortized over the term of the Notes using the effective interest method.

The Notes are senior obligations of GC Finance and rank equal in right of payment with all of its future debt. GCUK and Fibernet (collectively the “Guarantor”) have guaranteed the Notes as a senior obligation ranking in equal right of payment with all of its existing and future debt.

GC Finance may redeem the Notes in whole or in part, at any time on or after December 15, 2009, at redemption prices decreasing from 105.375% (for the US Dollar-denominated Notes) or 105.875% (for the pound sterling-denominated notes) in 2009 to 100% of their principal amount in 2012 and thereafter. At any time before December 15, 2009, GC Finance may redeem either or both series of Notes, in whole or in part, by paying a “make-whole” premium, calculated in accordance with the Indenture. GC Finance may also redeem either or both series of Notes, in whole or in part, upon certain changes in tax laws and regulations that cannot reasonably be avoided.

The Notes were issued under an Indenture, which includes covenants and events of default that are customary for high-yield senior note issuances. The Indenture limits the Company and its restricted subsidiaries’ ability to, among other things (i) incur or guarantee additional indebtedness; (ii) pay dividends or make other distributions to repurchase or redeem its stock; (iii) make investments of other restricted payments; (iv) create liens; (v) enter into certain transactions with affiliates; (vi) enter into agreements that restrict the ability of its material subsidiaries to pay dividends; and (vii) consolidate, merge or sell all or substantially all of its assets.

Within 120 days after the period ending December 31, 2005 and each twelve month period thereafter, the Company must offer to purchase a portion of the Senior Secured Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the purchase date, with 50% of Operating Cash Flow (as defined in the Indenture) from that period (“Annual Repurchase Offer”). Operating Cash Flow means the Company’s consolidated net income plus non-cash charges minus capital expenditures, calculated in accordance with the terms of the Indenture. In respect of the year ended December 31, 2007, the Company made an offer for and purchased £1.2 million of Notes. In respect of the year end December 31, 2008, we anticipate offering to purchase £7.4 million of the Notes, excluding accrued interest.

A loan or dividend by the Company to GCL and its affiliates is a restricted payment under the Indenture. Under the Indenture such a payment (i) may be made only if the Company is not then in default under the Indenture and would be permitted at that time to incur additional indebtedness under the applicable debt incurrence test; (ii) may generally be made only within ten business days of consummation of each Annual Repurchase Offer; and (iii) would generally be limited to 50% of the Company’s Operating Cash Flow plus the portion, if any, of the applicable Annual Repurchase Offer that the holders of the Notes decline to accept. In addition so long as the Company is not then in default under the Indenture, it may make up to £10.0 million in the aggregate in restricted payments in excess of 50% of Operating Cash Flow for a given period; provided that any such excess payments shall reduce the amount of restricted payments permitted to be paid out of future Designated Excess Cash Flow The terms of any inter-company loan by the Company to GCL or GCL’s other subsidiaries are required by the Indenture to be at arm’s length and, if for a sum in excess of £5.0 million, must be agreed to by a majority of the disinterested members of the Company’s Board of Directors, including its independent members. In the exercise of their fiduciary duties, the Company’s directors will require the Company to maintain a minimum cash balance in an amount they deem prudent.

The Issuer may also redeem either or both series of Notes, in whole, but not in part, at a price equal to their principal amount plus accrued and unpaid interest and certain additional amounts, if any. If we undergo specific kinds of changes in control, we or the Issuer must offer to repurchase the Notes at a redemption price equal to 101% of the principal amount.

F-33

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The registration and exchange offer for the Additional Notes was completed in September 2007.

20. Equity share capital

	December 31,
	2007		2008
	(in thousands)
Authorized:
2,000,000 ordinary shares of £1 each	£	2,000	£	2,000
Called up, allotted and fully paid:
101,000 ordinary shares of £1 each	£	101	£	101

The Company has one class of ordinary shares which carry no right to fixed income.

21. Operating lease commitments

The Company as lessor

At the balance sheet date, the Company had contracted with lessees for the following future minimum lease payments for leased assets and sublet income:

	December 31,
	2007		2008
	(in thousands)
Within 1 year	£	3,121	£	3,629
In the second to fifth years inclusive		9,371		10,269
After 5 years		5,002		5,915
	£	17,494	£	19,813

Included within operating lease income earned during the year ended December 31, 2008, for which sublet income is received was £2.6 million (2007: £2.8 million) from Group Companies in respect of leased assets (see note 26). All of the properties have committed tenants for the next one to thirteen years.

The Company as lessee

The Company has entered into commercial leases on certain property, motor vehicles and equipment. These leases have an average life of between 1 and 110 years, with renewal options contained within some contracts.

The Company incurs lease costs on a property in London, although GC Pan European Crossing Networks B.V (“GC PEC Networks”) and GC Pan European Crossing UK Ltd. (“GC PEC UK”) are contractually liable for these. The directors confirm that, as the buildings beneficiary, it is the Company’s intention to continue to meet all contractual costs on this property on behalf of GC PEC UK and GC PEC Networks and, accordingly, the commitment has been treated in these accounts as if it was the Company’s lease. Any lease income associated with this property is treated as income by GCUK.

The following table presents a schedule of future minimum commitments under non cancellable operating leases as of December 31, 2008.

	December 31,
	2007		2008
	(in thousands)
Within 1 year	£	17,445	£	10,919
Between 1 to 2 years		16,245		12,294
Between 2 to 3 years		16,528		9,375
Between 3 to 4 years		12,637		9,066
Between 4 and 5 years		7,369		8,332
Greater than 5 years		55,082		68,251
Total minimum lease payments	£	125,306	£	118,237

F-34

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

22. Purchase commitments

The Company has purchase commitments with third party access vendors that require it to make payments to purchase network services and capacity through 2008. Some of these access commitments require the Company to maintain minimum monthly and/or annual billings, in certain cases based on usage. In addition, the Company has purchase commitments with third parties that require it to make payments for operations, administration and maintenance services for certain portions of its network through 2027. Further, the Company has purchase commitments with other vendors, including £14.0 million of committed, future capital expenditure which are expected to be fulfilled within one year.

	December 31, 2007
	Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
	(in thousands)
Cost of access service	£	26,193	£	21,672	£	7,922	£	248	£	56,035
Third-party maintenance services		8,259		6,068		317		1,597		16,241
Other purchase commitments		22,433		87		—		—		22,520
Total	£	56,885	£	27,827	£	8,239	£	1,845	£	94,796
	December 31, 2008
	Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
	(in thousands)
Cost of access service	£	19,577	£	13,577	£	1,671	£	—	£	34,825
Third-party maintenance services		7,598		5,738		—		—		13,336
Other purchase commitments		16,759		1		—		—		16,760
Total	£	43,934	£	19,316	£	1,671	£	—	£	64,921

23. Share based payments

The Company recognized total expenses of £0.2 million, £2.3 million and £2.8 million related to equity-settled share-based payment transactions in 2006, 2007 and 2008, respectively. Equity-settled share-based payment transactions relate to share-based awards granted under the Global Crossing Limited 2003 Stock Incentive Plan (the “Plan”) and reflect awards outstanding during such period, including awards granted both prior to and during such period. Under the Plan, GCL is authorized to issue up to 19,378,261 common shares of GCL, shared amongst any employee, director or consultant who is selected to participate in the plan. Certain employees of the Company are eligible to receive share-based payments under the Plan.

Equity-settled share option plan

Stock options issued under the Plan are exercisable over a ten year period, vest over a three year period and have an exercise price of $15.39 per share.

Information regarding options granted in the current and previous years is summarized below.

	Year ended December 31,
	2007				2008
	Options		Weighted average exercise price		Options		Weighted average exercise price
Outstanding at beginning of period	8,667		$	13.28	3,334		$	15.39
Granted during the period	—			—	—			—
Exercised during the period	(5,333	)		12.12	(667	)		15.39
Cancelled during the period	—			—	—			—
Forfeited during the period	—			—	—			—
Outstanding at the end of the period	3,334		$	15.39	2,667		$	15.39
Exercisable at end of period	3,334				2,667

F-35

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The options outstanding at December 31, 2008, had a weighted average remaining contractual life of 6 years.

There were no stock options granted in either 2007 or 2008, therefore there are no associated inputs into the Black-Scholes model.

Restricted stock units

During the year ended December 31, 2008, the Company’s employees were awarded 311,171 restricted stock units under the Plan. The restricted stock units vested and converted into common shares of GCL on March 4, 2008.

During the year ended December 31, 2007, the Company’s employees were awarded 140,220 restricted stock units under the Plan. The restricted stock units vested and converted into common shares of GCL on September 13, 2007.

The following table summarizes restricted stock units granted, forfeited and cancelled for the years ended December 31, 2007 and 2008:

	Number of restricted stock units		Weighted average issue price
Balance at January 1, 2007	19,800			—
Granted	140,220		$	26.67
Vested	(111,500	)		—
Cancelled/forfeited	(22,820	)		—
Balance at December 31, 2007	25,700			—
Granted	311,171		$	18.42
Vested	(297,271	)		—
Cancelled/forfeited	(6,700	)		—
Balance at December 31, 2008	32,900			—

Sales Equity Program

During 2008, the Company adopted the Global Crossing Sales Equity Program (“Sales Equity Program”) for the Company’s sales, sales support and sales engineering employees. This program allows management level employees to elect to receive 100% of their earned commissions in fully vested shares of common stock of GCL. Non-management employees can elect to receive 50% of their earned commissions in fully vested shares of common stock and the remaining 50% will be paid in cash. As an additional incentive for participating in the Sales Equity Program, the value of the portion to be paid in stock was increased by 5%, which was subsequently increased to 7.5% effective June 1, 2008. Included in the total 2008 non-cash stock related expenses was £0.8 million related to this program. This program was cancelled in the fourth quarter of 2008.

Performance share awards

During the year ended December 31, 2008, the Company’s employees were awarded 20,500 performance share opportunities under the Plan. The performance share opportunities vest and convert into common shares of GCL on December 31, 2010, and must be paid out by March 15, 2011, subject to continued employment through the vesting date and subject to earlier pro-rata payout in the event of death or long-term disability. Each participant’s target performance share opportunity is based on total shareholder return over a three year period as compared to two peer groups. Depending on how the Company ranks in total shareholder return as compared to the two peer groups, each performance share grantee may earn 0% to 200% of the target number of performance shares. No payout will be made if the average ranking of the Company’s total shareholder return relative to each of the two peer groups (weighted equally) is below the 30th percentile, and the maximum payout of 200% will be made if such average ranking is at or above the 80th percentile.

F-36

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

During the year ended December 31, 2007, the Company’s employees were awarded 15,800 performance share opportunities under the Plan. The performance share opportunities vest and convert into common shares of GCL on December 31, 2009, and are subject to continued employment through the vesting date and subject to earlier pro-rata payout in the event of death or long-term disability. Each performance share grantee will earn (i) 50% of his or her target award for a given opportunity if the threshold financial performance goal for that opportunity is achieved; (ii) 100% of his or her target award for a given opportunity if the target financial performance goal for that opportunity is achieved; and (iii) 150% of his or her target award for a given opportunity if the maximum financial performance goal for that opportunity is achieved or exceeded. No payout will be made for performance below threshold. Actual payouts will be calculated using interpolation between threshold and target or target and maximum, as applicable. The total performance share opportunity of each participant in this program comprises three separate award opportunities based on measures of combined 2007 and 2008 earnings, cash use, and gross margin attributable to GCL’s enterprise, carrier data, and indirect channel segment.

Annual Bonus Program

During 2008, the Board of Directors of the Company adopted the 2008 Annual Bonus Program (the “2008 Bonus Program”). The 2008 Bonus Program was an annual bonus applicable to substantially all non-sales employees of the GCL, which was intended to retain such employees and to motivate them to achieve the Company’s financial and business goals. Each participant was provided a target award under the 2008 Bonus Program expressed as a percentage of base salary. Actual awards under the 2008 Bonus Program were to be paid only if GCL achieved specified thresholds for earnings, net change in unrestricted cash and cash equivalents and/or customer satisfaction. The payout for each performance opportunity was calculated independently. Effective February 12, 2009, the GCL Compensation Committee and GCL Board of Directors certified the financial results and approved the payout which will be made primarily in restricted stock units vested no later than April 8, 2009 (see note 30). The amount of the shares to be paid was set using a 30-day average of the Company’s Common Stock. At December 31, 2008, the Company’s annual bonus program accrual was £0.1 million, including the Company’s liability for payroll tax and charges.

During the year ended December 31, 2007, the Board of Directors of GCL adopted the 2007 Annual Bonus Program (the “2007 Bonus Program”). The 2007 Bonus Program was applicable to substantially all employees of GCL, and was intended to retain such employees and to motivate them to help GCL achieve its financial goals. Each participant was provided a target award under the 2007 Bonus Program expressed as a percentage of base salary. Actual awards under the 2007 Bonus Program would be paid only if GCL achieved specified earnings and cash flow goals. After reviewing GCL’s financial performance, the GCL Compensation Committee determined that GCL achieved performance above the threshold earnings measure under the 2007 annual bonus program. GCL did not achieve the threshold performance measure relating to the cash flow goal. The payout under the 2007 bonus program was 26.9% of annual bonus target. All of the bonus was paid in GCL common shares valued at their closing price on the NASDAQ Global Select Market on March 17, 2008. At December 31, 2007, the Company’s annual bonus program accrual was £0.8 million, including the Company’s liability for payroll tax and charges.

24. Retirement benefit schemes

The Company’s employees participate in two occupational pension schemes:

• the Global Crossing Pension scheme (the “Global Scheme”); and

• the Global Crossing Shared Cost Section of the Railways Pension Scheme (the “Railways Scheme”)

The assets of these schemes are held separately from the Company in independently administered trusts. Contributions to the schemes in respect of the Company’s defined benefit obligations are charged to the consolidated income statements so as to spread the cost of the pensions over employees’ working lives with the Company. No further defined benefit entitlements are being accrued under either scheme. Pension costs for the years ended December 31, 2006, 2007 and 2008 were £2.2 million, £2.6 million and £2.6 million, respectively.

F-37

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The Global Scheme

The Global Scheme is an occupational pension scheme with two sections. The defined contribution section is used to provide ongoing pension benefits for its employees. The defined benefit section provides for each employee who was a member of a Racal pension scheme at May 24, 2000, a benefit that represents the additional pension arising from pay increases over and above the statutory revaluation that is applied to benefits earned in the relevant Racal scheme prior to that date.

The Company’s pension obligations are assessed by a qualified actuary on the basis of triennial valuations, with annual interim updates. The most recent formal valuation of the Global Scheme at March 31, 2006 was completed using the projected unit method. Calculations have been carried out by a qualified actuary for the purposes of estimating the Company’s pension charge for the year and the Global Schemes liabilities as of December 31, 2008.

The employer made annual contributions to the defined benefit section of the Global Scheme of £0.7 million, £0.5 million and £0.9 million for the years ended December 31, 2006, 2007 and 2008, respectively.

The Global scheme also provides defined contribution benefits and the cost of the years ended December 31, 2006, 2007 and 2008 were £1.1 million, £1.6 million and £1.7 million, respectively.

The Railways Scheme

The Company’s pension obligations are assessed by a qualified actuary on the basis of triennial valuations, with annual interim updates. The most recent formal valuation of the Railways Scheme was completed at December 31, 2004 using the projected unit method. Calculations have been carried out by a qualified actuary for the purposes of estimating the Company’s pension charge for the year and the Railways Scheme assets as of December 31, 2008.

The costs of the scheme are paid 60% by the Company and 40% by the employees. The sharing of the cost in this manner has been recognized when determining the net pension asset (that is, a surplus attributable to employees has been identified) and the employer’s current service cost, the expected return on plan assets and interest on pension liabilities (these items are derived by taking 60% of the full charge).

The employer made annual contributions to the defined benefit section of £0.2 million, £0.3 million and £0.3 million for the years ended December 31, 2006, 2007 and 2008, respectively.

F-38

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Recognition of gains and losses

The following disclosures are prepared on the basis that gains and losses are amortized over the expected future working life of employees.

The key assumptions used in assessing the Company’s pension plans are as follows:

	Railways Scheme				Global Scheme
	2007		2008		2007		2008
Rates and assumptions used to calculate Defined Benefit Obligations (DBO)
Weighted average discount rate (year end)	5.60	%	5.90	%	5.60	%	5.90	%
Rate of salary increase (year end)	4.00	%	3.75	%	4.00	%	3.75	%
Mortality assumptions:
Current male/female pensioners at 65 (year end)	19/22 years		22/24 years		24/28 years		22/25 years
Future male/female pensioners at 65 (year end)	19/22 years		23/26 years	*	27/31 years	*	25/29 years	*
Rates and assumptions used to calculate Net Benefit Cost (NBC)
Weighted average discount rate (start of year)	5.00	%	5.60	%	5.00	%	5.60	%
Rate of salary increase (start of year)	3.75	%	4.00	%	3.75	%	4.00	%
Expected return on plan assets (start of year)	7.50	%	7.00	%	4.20	%	5.10	%
Mortality assumptions:
Current male/female pensioners at 65 (start of year)	19/21 years		19/22 years		22/25 years		24/28 years
Future male/female pensioners at 65 (start of year)	19/21 years		19/22 years		23/26 years	*	27/31 years	*

* For members aged 50 at the year end

The expected long-term rate of return on plan assets reflects the average earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.

The following tables summarizes the components of net benefit expense recognized in the consolidated income statement within administrative expenses and the funded status and amounts recognized in the consolidated balance sheet for the respective plans.

Net benefit expense recognized in the consolidated income statement

	Railways Scheme						Global Scheme						Total
	2007			2008			2007			2008			2007			2008
	(in thousands)						(in thousands)						(in thousands)
Service cost	£	542		£	422		£	427		£	320		£	969		£	742
Interest cost on benefit obligation		1,207			1,298			473			568			1,680			1,866
Expected return on plan assets		(1,535	)		(1,521	)		(190	)		(268	)		(1,725	)		(1,789	)
Net amortisation and deferral		3			—			65			85			68			85
Net benefit expense	£	217		£	199		£	775		£	705		£	992		£	904

Benefit asset/(liability)

	Railways Scheme						Global Scheme						Total
	2007			2008			2007			2008			2007			2008
	(in thousands)						(in thousands)						(in thousands)
Funded status	£	(1,866	)	£	(8,118	)	£	(5,041	)	£	(3,663	)	£	(6,907	)	£	(11,781	)
Funded status attributable to employees		746			3,248			—			—			746			3,248
Net funded status attributable to employer		(1,120	)		(4,870	)		(5,041	)		(3,663	)		(6,161	)		(8,533	)
Unrecognized net loss		2,081			5,890			1,931			783			4,012			6,673
Prepaid/(accrued) net benefit cost	£	961		£	1,020		£	(3,110	)	£	(2,880	)	£	(2,149	)	£	(1,860	)

F-39

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Changes in the present value of the defined benefit obligation are as follows:

	Railways Scheme						Global Scheme						Total
	2007			2008			2007			2008			2007			2008
	(in thousands)						(in thousands)						(in thousands)
Benefit obligation at beginning of year	£	39,709		£	38,322		£	9,118		£	9,915		£	48,827		£	48,237
Service cost		542			422			427			320			969			742
Interest cost		1,207			1,298			473			568			1,680			1,866
Employee contributions		171			172			—			—			171			172
Actuarial loss		(2,739	)		(4,493	)		69			(1,271	)		(2,670	)		(5,764	)
Benefits paid		(1,373	)		(1,001	)		(172	)		(204	)		(1,545	)		(1,205	)
Interest cost attributable to employees		805			865			—			—			805			865
Benefit obligation at end of year	£	38,322		£	35,585		£	9,915		£	9,328		£	48,237		£	44,913

Changes in the fair value of plan assets are as follows:

	Railways Scheme						Global Scheme						Total
	2007			2008			2007			2008			2007			2008
	(in thousands)						(in thousands)						(in thousands)
Fair value of plan assets at start of year	£	34,595		£	36,456		£	4,384		£	4,874		£	38,979		£	41,330
Actual return on plan assets		2,807			(8,418	)		189			59			2,996			(8,359	)
Employer contributions		256			258			473			936			729			1,194
Employee contributions		171			172			—			—			171			172
Benefits paid		(1,373	)		(1,001	)		(172	)		(204	)		(1,545	)		(1,205	)
Fair value of plan assets at end of year	£	36,456		£	27,467		£	4,874		£	5,665		£	41,330		£	33,132

The Company expects to contribute £1.1 million to its defined benefit pension schemes in 2009.

The major categories of plan assets as a percentage of the fair value of the total plan assets are as follows:

	Railways Scheme		Global Scheme
	2007	2008	2007	2008
	(%)		(%)
Fixed interest bonds	15	14	76	85
Equities	58	56	18	15
Property	16	20	—	—
Other	11	10	6	—
	100	100	100	100

The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The Railways Scheme represents approximately 83% of the total assets of the combined plans. The current planned asset allocation strategy was determined with regard to actuarial characteristics of each scheme. It is based on the assumption that equities will outperform bonds over the long term and is consistent with the overall objective of long-term capital growth. The expected long-term rate of return on plan assets was calculated by the plan actuary and is based on historic returns of each asset class held by the plan at the beginning of the year.

F-40

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

The following table summarizes expected benefit payments from the Company’s pension plans through 2018. Actual benefit payments may differ from expected benefit payments:

	(in thousands)
2009	£	1,241
2010		1,278
2011		1,316
2012		1,364
2013		1,403
2014-2018		7,014

The amount included in the balance sheet arising from the Company’s obligations in respect of its defined benefit retirement benefit schemes is as follows:

	December 31,
	2007			2008
	(in thousands)
Fair value of scheme assets	£	41,330		£	33,132
Present value of defined benefit obligations		(48,237	)		(44,913	)
Deficit in scheme		(6,907	)		(11,781	)
Funded status attributable to employees		746			3,248
Net deficit attributable to employer		(6,161	)		(8,533	)
Unrecognized net losses		4,012			6,673
Net liability recognized in the balance sheet	£	(2,149	)	£	(1,860	)
This amount is presented in the balance sheet as follows:
Non-current assets	£	961		£	1,020
Non-current liabilities		(3,110	)		(2,880	)
	£	(2,149	)	£	(1,860	)

	2004			2005			2006			2007			2008
	(in thousands)
Present value of defined benefit obligations	£	32,133		£	43,026		£	48,827		£	48,237		£	44,913
Fair value of plan assets		29,109			34,510			38,979			41,330			33,132
Deficit in the scheme	£	(3,024	)	£	(8,516	)	£	(9,848	)	£	(6,907	)	£	(11,781	)
Experience (losses)/gains on scheme liabilities	£	(850	)	£	(5,100	)	£	(1,423	)	£	32		£	3,357

25. Ultimate parent and controlling party

At December 31, 2008, the Company’s directors regarded Temasek Holdings (Private) Limited (“Temasek”), a company incorporated in the Republic of Singapore, as the ultimate parent company and ultimate controlling party. The largest group, which includes the Company and for which financial results are prepared is that headed by Temasek, whose registered office is 60B Orchard Road, #06-18, Tower 2, Singapore 238891.

The Company’s immediate parent is GC Bidco, a company registered in England and Wales. The financial statements of GC Bidco are available to the public from Companies House.

26. Related party transactions

Transactions between GCUK and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

F-41

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Transactions with Group Companies

The following presents a summary of the total (income from)/cost of services included in revenue⁽¹⁾, cost of sales⁽²⁾ and administrative expenses⁽³⁾ in the consolidated income statements for the periods indicated.

	Year ended December 31,
	2006			2007			2008
	(in thousands)
Recognition of deferred revenue(1)	£	(525	)	£	(500	)	£	(500	)
Voice termination services(2)		(1,613	)		(353	)		70
Leased asset income(2)		(2,776	)		(2,761	)		(2,556	)
Corporate services(3)		8,024			8,931			9,733
Shared resources(3)		587			525			415
Other transactions(3)		199			427			693
	£	3,896		£	6,269		£	7,855

The Company has a number of operating and financial relationships with GCL and other Group Companies. For example, the Company benefits from a broad range of corporate functions conducted by the GC Group, including senior management activities, human resources, corporate development and other functions and services. In addition, the Company has historically assisted the GC Group in terminating voice traffic within the UK while the GC Group assists the Company with terminating international voice traffic. The Company also shares certain portions of its network with the GC Group, as well as certain personnel who may have functional responsibilities for both its business and GC Group’s European and global businesses. These functions and services are performed by various members of the GC Group and the costs are allocated using various methods.

The costs of these functions and services have historically been allocated on a basis that the GC Group believes is a reasonable reflection of the utilization of each service provided to, or the benefit received by, each of the Group Companies. The allocated costs, while reasonable, may not necessarily be indicative of the costs that would have been incurred by the Company if it had performed these functions or received these services as a stand-alone entity.

In connection with its recapitalization during 2004, the Company entered into a series of intercompany agreements with the GC Group that were effective as of October 1, 2004 to formally document the way in which these relationships are governed and formalize the method of payment for the services under these agreements. Fees for these services are generally estimated and paid quarterly, with an annual make-whole payment for any outstanding amounts. The intercompany agreements are substantially the same as those that have informally governed the relationship between the GC Group and the Company, with the exception of the payment terms. The Company’s Board of Directors approved the terms of each of the intercompany agreements. The intercompany agreements may be terminated (i) at the request of any party to such agreement with one year’s prior written notice; or (ii) immediately in the event of a change of control under the Indenture or the maturity, redemption or defeasance of the Notes, in each case pursuant to the terms of the indenture governing the Notes.

Recognition of deferred revenues

Under a signed Inland Service agreement dated April 8, 1998 the Company was obligated to provide UK backhaul telecommunication services to International Optics Network Limited (“ION”), a wholly owned subsidiary of GCL. The Company received upfront payment for these services with effect from December 31, 2007, GCE has been assigned the Inland Service Agreement by ION and replaced ION as the contracting party. All of the revenue associated with the agreement was deferred and is being recognized over the life of the contract.

Corporate services

Corporate services include costs associated with operating expenses and administrative costs. The total costs of these functions and services are allotted to the Group Companies based on a worldwide allocation. The worldwide allocation is based on a pro rata share of revenue, net tangible assets, headcount, or a combination thereof, which varies for the type of costs being allocated. The factor applied to each type of cost is based on the factor(s) most closely aligned with that cost.

F-42

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Operating expenses include office and facilities costs, depreciation and amortization of certain shared assets, and network engineering all of which are charged based on a pro rata share of net tangible fixed assets. Administrative services include tax, finance and accounting, information systems, human resources, management, legal, administrative, risk management and charitable contributions. Costs for tax, finance and accounting, mergers and acquisition services, corporate development, product development, management, legal, administrative, and risk management services are charged based on the Company’s revenue relative to the other Group Companies. Information services and human resource costs are charged based on a pro rata share of headcount. Other administrative costs are allocated based on revenue or revenue and net tangible fixed assets.

Shared resources

The Company provides Group Companies, on a non-exclusive basis, the use of certain of its assets, and the Group Companies provide the Company the use of certain of its assets, on a non-exclusive basis. Such assets include staffing and administrative assets, fiber, leased circuits, network equipment, racking space, real estate and such other assets as reasonably deemed necessary for the relevant network’s efficient operation. The parties to these intercompany shared resources agreements are charged based on (i) the market price for fiber, leased circuits, racking space, and network equipment; (ii) a pro rata allocation for staffing and administrative assets based on either a reasonable estimate of resources committed or a reasonable estimate of time spent of such services, plus a reasonable markup in accordance with the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration of the Organization for Economic Co-operation and Development; and (iii) the share of lease or carry costs based on a percentage of square meter usage for real estate. Fees for these services are estimated and paid quarterly, with an annual make-whole payment for any outstanding amounts. In addition, the Company makes payments, primarily payroll, on behalf of a Group Company, and is reimbursed for these payments. These transactions have no impact on the consolidated income statement.

Voice termination services

The Company carries international voice traffic and terminates calls on behalf of certain Group Companies. These Group Companies provide the Company with similar services. The costs of these services are incurred by the company that carries the traffic or terminates the call, while the corresponding customer contract, and therefore revenue, is held by a different entity. The Company which incurs these costs charges a corresponding amount to the Group Company which holds the customer contract.

Operating lease income

Effective December 31, 2004, the Company purchased £21.9 million of assets from GC Bidco, in exchange for 1,000 shares of the Company’s £1 par value ordinary shares. The assets were purchased at GC Bidco’s net book value and are being depreciated over the remaining useful lives. Such assets include fiber, network equipment, and certain computer software and hardware equipment. The Company leased the use of the purchased assets to other Group Companies throughout 2006, 2007 and 2008 (see note 5).

Other transactions

Tax sharing

The Company and the UK Group share tax losses as allowed by UK tax law. Under the tax sharing, losses can be utilized by any entity within the UK Group in the period in which they are generated.

Prior to 2004, there was no formal arrangement in place that provided for compensation between the entities in relation to the losses obtained or forgiven. As a result, the entity which surrendered its tax loss was not compensated by the other UK Group company that benefited.

The Company entered into a formal tax agreement with GCL, which was effective October 1, 2004, that established the basis of conduct for certain tax matters in the UK, including the surrender of tax losses and the reallocation of income or gains where permitted by UK tax law, between the Company and other Group

F-43

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

Companies subject to tax in the UK. The claimant company will pay the surrendering company an amount equal to the amount surrendered multiplied by the average corporate tax rate for the period in which relief is deemed. During the years ended December 31, 2006, 2007 and 2008 tax losses surrendered of £0.8 million, £1.0 million and £0.4 million, respectively, were utilized by GCUK.

Other

During the years ended December 31, 2006, 2007 and 2008, the Company incurred, £2.0 million, £2.1 million and £2.1 million, respectively, of lease costs for certain office space for which other members of the GC Group, specifically, GC PEC Networks and GC PEC UK, are contractually liable (see note 21).

The debtor and creditor balances as a result of the aforementioned transactions with Group Companies are as follows:

	Year ended December 31,
	2007		2008
	(in thousands)
Debtor balances due from:
Global Crossing Europe Ltd	£	851	£	1,041
GT UK Ltd		322		—
GC Pan European Crossing Ltd		530		—
GC Pan European Crossing SA		98		—
Geoconference UK Ltd		197		—
Global Crossing Services Europe Ltd		—		873
Fibernet Gmbh		—		369
Other Group Companies		661		257
	£	2,659	£	2,540
Creditor balances due to:
Global Crossing Development Co	£	1,795	£	5,559
Global Crossing Ltd		506		519
GC Acquisitions UK Ltd		599		653
Global Crossing Services Europe Ltd		136		874
GC Pan European Crossing France SARL		267		105
GC Pan European Crossing Nederland BV		309		24
GC Pan European Crossing Deutschland GmbH		211		72
Global Crossing Europe Ltd		3,728		—
Global Crossing Ireland Ltd		56		95
Global Crossing Telecommunications Inc		—		197
Global Crossing International Networks		—		1,386
Global Crossing Employee				751
Global Crossing Bandwidth Inc		—		312
Other Group Companies		225		41
	£	7,832	£	10,588

Loans from and to Group Companies

Under the terms of the indenture governing the convertible notes of GCL, any further loans from the Company made to GCL or another GC Group Company must be subordinated to the payment of obligations under GCL’s convertible notes. GCL initiated a recapitalization plan in which it borrowed $250 million on 9 May 2007 and an additional $100 million on 2 June 2007 under a newly established loan facility with third party lenders arranged by Goldman Sachs Credit Partners, L.P. and Credit Suisse Securities (USA) LLC (the “GCL Term Loan Facility”). Substantially all GC Group Companies other than GCUK and GCL subsidiaries doing business in Latin America are required to guarantee GCL’s obligations under the GCL Term Loan Facility. Pursuant to the GCL Term Loan Facility, any future loans from the Company to GCL or any other Group Company that guarantees GCL’s obligations under the GCL Term Loan Facility must be subordinated to the payment obligations under that facility.

F-44

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

On April 12, 2006, the Company entered into a credit agreement with GCE. As at December 31, 2008, there were loans of US$50.4 million (equivalent to £25.3 million and £34.9 million as at December 31, 2007 and 2008 respectively) due from GCE. The terms of the credit agreement include a parent guarantee from GCL. The loan balances currently outstanding relate to loans made using (i) 50% of the operating cash flow, as permitted and defined under the Indenture; and (ii) GCUK’s Eligible Excess Cash, defined in the Indenture as excess cash remaining after the consummation of the Annual Repurchase Offer, and have an effective interest rate of 13.5%. These loans mature five business days prior to the principal outstanding on the Senior Secured Notes. In the year ended December 31, 2007, total finance revenue of £3.2 million (being interest income of £3.6 million, less a foreign exchange loss of £0.4 million) has been recognized in the consolidated income statement in respect of these loans. In the year ended December 31, 2008, total finance revenue of £13.2 million (being interest income of £3.6 million, plus a foreign exchange gain of £9.6 million) has been recognized in the consolidated income statement in respect of these loans.

GCE’s and GCL’s obligations in respect of the outstanding loans under the credit agreement are not subordinated to their obligations under the GCL Term Loan Agreement since such loans were made prior to the date such facility came into effect.

On April 11, 2007, the Company entered into a US$15.0 million commitment to GCE in accordance with the Indenture and under the same terms and conditions set forth in the intercompany credit agreement. On May 2, 2007 the Company made a loan to GCE pursuant to this commitment in the amount of US$5.0 million, which was repaid in full on June 30, 2007. In the year ended December 31, 2007, total finance revenue of £0.1 million has been recognized in the consolidated income statements in respect of this loan. This commitment lapsed in 2007.

There were no loan balances due to Group Companies as at December 31, 2007 or 2008. On April 8, 2009, the Board of Directors of the Company agreed the terms of a loan of up to $15.0 million from Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

27. Contingent liabilities

Litigation

From time to time, the Company has been a party to various legal proceedings arising in the ordinary course of business. In the opinion of the Company’s directors there are currently no proceedings in respect of which there exists a reasonable possibility of adverse outcome that would have a material effect on the Company’s consolidated balance sheets, consolidated income statements or consolidated cash flow statements.

28. Guarantee arrangement

There is a fixed and floating charge under the terms of the Indenture over the Company’s assets. Specifically, there is a fixed and floating charge over all property, plant and equipment, intangible assets, and investment in associate except for, among other things, the following:

• all property, plant and equipment held under finance leases, which totaled £18.8 million and £16.8 million as at December 31, 2007 and December 30, 2008, respectively;

• property, plant and equipment used exclusively to provide service under (i) contracts in which the counterparty is a UK governmental customer; and (ii) contracts in which the counterparty is a contractor or subcontractor to a UK governmental entity; and

• property, plant and equipment used exclusively in connection with the Camelot contract.

Assets used exclusively in the provision of services as noted above are not segregated within the network, and are only identified in the event of default.

40.8% and 53.4% of total revenues for the year ended December 31, 2007 and 2008, respectively, were derived from government departments and our contract with Camelot. However these portions of total revenues are not necessarily indicative of the portions of total property plant and equipment used exclusively to provide such services to UK governmental customers and Camelot.

29. Condensed consolidated financial information

This supplemental condensed consolidating financial information should be read in conjunction with the Company’s consolidated financial statements.

F-45

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

On December 23, 2004, GC Finance completed its offering of initial Notes. On December 28, 2006, GC Finance completed its offering of £52.0 million in aggregate principal of Additional Notes (see note 19).

GCUK and Fibernet have guaranteed the Notes as a senior obligation ranking in equal right of payment with all of its existing and future debt.

The following condensed consolidating financial information is presented as at December 31, 2007 and 2008 and for the years ended December 31, 2006, 2007 and 2008, as required by Article 3-10(f) of Regulation S-X, has separate columns for each of GC Finance (the issuer), GCUK (as parent guarantor) and Fibernet (as subsidiary guarantor).

	December 31, 2007
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Balance sheet
Non current assets
Intangible assets, net	£	2,184		£	11,167		£	—		£	—		£	13,351
Property, plant and equipment, net		136,742			48,977			—			—			185,719
Investment in subsidiary and associated undertakings		52,150			—			—			(51,950	)		200
Retirement benefit asset		961			—			—			—			961
Trade and other receivables		26,771			12,453			260,522			(271,235	)		28,511
		218,808			72,597			260,522			(323,185	)		228,742
Current assets
Cash and cash equivalents		13,899			8,013			2,042			—			23,954
Other current assets		51,162			15,658			2,066			(2,649	)		66,237
		65,061			23,671			4,108			(2,649	)		90,191
Total assets	£	283,869		£	96,268		£	264,630		£	(325,834	)	£	318,933
Current liabilities
Trade and other payables		(330,120	)		(7,322	)		(2,062	)		273,885			(65,619	)
Deferred revenue		(33,971	)		(13,155	)		—			—			(47,126	)
Short term debt obligations		(9,870	)		(2,538	)		(1,158	)		—			(13,566	)
Other current liabilities		(1,511	)		(626	)		(1,048	)		—			(3,185	)
		(375,472	)		(23,641	)		(4,268	)		273,885			(129,496	)
Non current liabilities
Deferred revenue		(100,390	)		(6,571	)		—			—			(106,961	)
Long term debt obligations		(11,470	)		(1,659	)		(255,331	)		—			(268,460	)
Other non current liabilities		(7,403	)		(517	)		(1,048	)		—			(8,968	)
		(119,263	)		(8,747	)		(256,379	)		—			(384,389	)
Total liabilities	£	(494,735	)	£	(32,388	)	£	(260,647	)	£	273,885		£	(513,885	)
Net (liabilities)/assets	£	(210,866	)	£	63,880		£	3,983		£	(51,949	)	£	(194,952	)
Total equity	£	(210,866	)	£	63,880		£	3,983		£	(51,949	)	£	(194,952	)

F-46

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

	December 31, 2008
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Balance sheet
Non current assets
Intangible assets, net	£	2,460		£	9,495		£	—		£	—		£	11,955
Property, plant and equipment, net		137,923			41,621			—			—			179,544
Investment in subsidiary and associated undertakings		52,193			—			—			(52,015	)		178
Retirement benefit asset		1,020			—			—			—			1,020
Trade and other receivables		36,102			35,049			260,853			(294,998	)		37,006
		229,698			86,165			260,853			(347,013	)		229,703
Current assets
Derivative financial instrument		—			—			2,787			—			2,787
Cash and cash equivalents		21,681			12,932			1,487			—			36,100
Other current assets		61,884			23,720			2,315			(31,643	)		56,276
		83,565			36,652			6,589			(31,643	)		95,163
Total assets	£	313,263		£	122,817		£	267,442		£	(378,656	)	£	324,866
Current liabilities
Trade and other payables		(372,528	)		(33,745	)		(2,277	)		326,641			(81,909	)
Deferred revenue		(25,690	)		(13,061	)		—			—			(38,751	)
Short term debt obligations		(9,475	)		(1,447	)		(7,382	)		—			(18,304	)
Other current liabilities		(1,590	)		—			—			—			(1,590	)
		(409,283	)		(48,253	)		(9,659	)		326,641			(140,554	)
Non current liabilities
Deferred revenue		(97,082	)		(3,612	)		—			—			(100,694	)
Long term debt obligations		(7,625	)		(183	)		(286,021	)		—			(293,829	)
Other non current liabilities		(6,983	)		(18	)		—			—			(7,001	)
		(111,690	)		(3,813	)		(286,021	)		—			(401,524	)
Total liabilities	£	(520,973	)	£	(52,066	)	£	(295,680	)	£	326,641		£	(542,078	)
Net (liabilities)/assets	£	(207,710	)	£	70,751		£	(28,238	)	£	(52,015	)	£	(217,212	)
Total equity	£	(207,710	)	£	70,751		£	(28,238	)	£	(52,015	)	£	(217,212	)

	Year ended December 31, 2006
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Income statement
Revenue	£	240,081		£	532		£	—		£	(1	)	£	240,612
Cost of sales		(147,269	)		(213	)		—			1			(147,481	)
Gross profit		92,812			319			—			—			93,131
Distribution and administrative expenses		(63,486	)		7,462			(289	)		—			(56,313	)
Operating profit/(loss)		29,326			7,781			(289	)		—			36,818
Finance charges, net		(29,425	)		—			14,737			—			(14,688	)
(Loss)/profit before tax		(99	)		7,781			14,448			—			22,130
Tax charge		(9,377	)		—			—			—			(9,377	)
(Loss)/profit for the period	£	(9,476	)	£	7,781		£	14,448		£	—		£	12,753

F-47

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

	Year ended December 31, 2007
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)		Adjustments			Total
	(in thousands)
Income statement
Revenue	£	247,073		£	55,984		£	—	£	(6,437	)	£	296,620
Cost of sales		(149,402	)		(34,700	)		—		6,437			(177,665	)
Gross profit		97,671			21,284			—		—			118,955
Distribution and administrative expenses		(67,814	)		(17,364	)		—		—			(85,178	)
Operating profit		29,857			3,920			—		—			33,777
Finance charges, net		(32,044	)		279			2,744		—			(29,021	)
(Loss)/profit before tax		(2,187	)		4,199			2,744		—			4,756
Tax charge		(6,297	)		—			—		—			(6,297	)
(Loss)/profit for the period	£	(8,484	)	£	4,199		£	2,744	£	—		£	(1,541	)

	Year ended December 31, 2008
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Income statement
Revenue	£	266,727		£	62,694		£	—		£	(6,589	)	£	322,832
Cost of sales		(171,095	)		(35,981	)		—			6,589			(200,487	)
Gross profit		95,632			26,713			—			—			122,345
Distribution and administrative expenses		(73,613	)		(19,898	)		113			—			(93,398	)
Operating profit		22,019			6,815			113			—			28,947
Finance charges, net		(21,288	)		(9	)		(37,063	)		—			(58,360	)
Profit/(loss) before tax		731			6,806			(36,950	)		—			(29,413	)
Tax charge		(432	)		—			—			—			(432	)
Profit/(loss) for the period	£	299		£	6,806		£	(36,950	)	£	—		£	(29,845	)

F-48

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

	Year ended December 31, 2006
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)		GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Cash Flow Statement
Net cash provided by/(used in) operating activities	£	33,797		£	—	£	(24,097	)	£	24,811		£	34,511
Investing activities:
Interest received		3,740			—		24,811			(24,811	)		3,740
Proceeds from disposal of property, plant and equipment		8			—		—			—			8
Purchase of property, plant and equipment and intangible assets		(20,435	)		—		—			—			(20,435	)
Acquisition of subsidiary, net of cash acquired		(53,073	)		8,060		—			—			(45,013	)
Net cash (used in)/provided by investing activities		(69,760	)		8,060		24,811			(24,811	)		(61,700	)
Financing activities:
Loans repaid by group companies, net		25,352			—		(53,073	)		—			(27,721	)
Senior secured notes, net		—			—		55,394			—			55,394
Proceeds from debt obligations		514			—		—			—			514
Repayment of capital element of debt obligations		(5,536	)		—		—			—			(5,536	)
Net cash provided by financing activities		20,330			—		2,321			—			22,651
Net (decrease)/increase in cash and cash equivalents		(15,633	)		8,060		3,035			—			(4,538	)
Cash and cash equivalents at the beginning of period		44,337			—		510			—			44,847
Cash and cash equivalents at the end of period	£	28,704		£	8,060	£	3,545		£	—		£	40,309

	Year ended December 31, 2007
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Cash Flow Statement
Net cash provided by/(used in) operating activities	£	2,415		£	13,153		£	(31,955	)	£	30,840		£	14,453
Investing activities:
Interest received		3,911			644			30,936			(30,840	)		4,651
Purchase of property, plant and equipment and intangible assets		(28,005	)		(4,526	)		—			—			(32,531	)
Net cash (used in)/provided by investing activities		(24,094	)		(3,882	)		30,936			(30,840	)		(27,880	)
Financing activities:
Loans repaid by group companies, net		11,138			(7,054	)		(484	)		—			3,600
Proceeds from debt obligations		2,794			—			—			—			2,794
Repayment of capital element of debt obligations		(7,058	)		(2,264	)		—			—			(9,322	)
Net cash provided by/(used in) financing activities		6,874			(9,318	)		(484	)		—			(2,928	)
Net (decrease)/increase in cash and cash equivalents		(14,805	)		(47	)		(1,503	)		—			(16,355	)
Cash and cash equivalents at the beginning of period		28,704			8,060			3,545			—			40,309
Cash and cash equivalents at the end of period	£	13,899		£	8,013		£	2,042		£	—		£	23,954

F-49

Global Crossing (UK) Telecommunications Limited

Notes to the Consolidated Financial Statements

	Year ended December 31, 2008
	GCUK (Parent guarantor)			Fibernet (Subsidiary guarantors)			GC Finance (Subsidiary Issuer)			Adjustments			Total
	(in thousands)
Cash Flow Statement
Net cash provided by/(used in) operating activities	£	27,320		£	13,012		£	(30,415	)	£	30,952		£	40,869
Investing activities:
Interest received		3,940			432			31,018			(30,952	)		4,438
Purchase of property, plant and equipment and intangible assets		(17,873	)		(3,987	)		—			—			(21,860	)
Proceeds from disposal of property, plant and equipment		12			—			—			—			12
Net cash (used in)/provided by investing activities		(13,921	)		(3,555	)		31,018			(30,952	)		(17,410	)
Financing activities:
Loans repaid by group companies, net		2,000			(2,000	)		—			—			—
Senior secured notes, net		—			—			(1,158	)		—			(1,158	)
Proceeds from debt obligations		474			—			—			—			474
Repayment of capital element of debt obligations		(8,091	)		(2,538	)		—			—			(10,629	)
Net cash used in financing activities		(5,617	)		(4,538	)		(1,158	)		—			(11,313	)
Net increase/(decrease) in cash and cash equivalents		7,782			4,919			(555	)		—			12,146
Cash and cash equivalents at the beginning of period		13,899			8,013			2,042			—			23,954
Cash and cash equivalents at the end of period	£	21,681		£	12,932		£	1,487		£	—		£	36,100

30. Events after the balance sheet date

2008 Annual Bonus Grant

Effective February 12, 2009, GCL awarded 542,683 shares of restricted stock units to GCUK employees in connection with its 2008 Annual 2008 Bonus Program (see note 23). The restricted stock units vested no later than April 9, 2009 and upon vesting approximately 222,212 shares were withheld to cover tax withholding obligations resulting in 320,471 shares being distributed.

Intercompany loan facility

On April 8, 2009, the Board of Directors of the Company agreed the terms of a loan of up to $15.0 million from Impsat Holdings I Plc, a member of the GC Group. We expect to draw down on this loan during the second quarter of 2009.

F-50

SIGNATURES

Each of the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that is has duly caused and authorized the undersigned to sign this annual report on its behalf.

GLOBAL CROSSING (UK) FINANCE PLC
By:	/s/    ANTHONY D. CHRISTIE
Name:	Anthony D Christie
Title:	Managing Director
GLOBAL CROSSING (UK) TELECOMMUNICATIONS LIMITED
By:	/s/    ANTHONY D. CHRISTIE
Name:	Anthony D Christie
Title:	Managing Director

Date: April 15, 2009