Certificate Of Designations, Preferences And Rights 10% Series A Cumulative Convertible Preferred Stock - ATSI COMMUNICATIONS INC/DE - 10-26-1999 by ATSX-Agreements

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									Exhibit 10.43 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK OF AMERICAN TELESOURCE INTERNATIONAL, INC. PURSUANT TO SECTIOxN 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE We, the undersigned, Arthur L. Smith and H. Douglas Saathoff, the Chief Executive Officer and Secretary, respectively, of American TeleSource International, Inc., a Delaware corporation (the "Corporation"), do hereby certify that by unanimous written consent of the Board of Directors of the Corporation pursuant to Section 141(f) of the General Corporation Law of the State of Delaware (the "DGCL"), on March 25, 1999, the following resolutions were duly approved and adopted, and such resolutions remain in full force and effect as of the date hereof: WHEREAS, pursuant to Article III of said Certificate of Incorporation of the Corporation, 10,000,000 shares of the Corporation's authorized capital stock are classified as preferred stock with a par value of $0.001 per share; WHEREAS, pursuant to Article III of said Certificate of Incorporation of the Corporation, authority was expressly vested in the Board of Directors pursuant to Section 151 of the General Corporation Law of the State of Delaware to authorize preferred stock with such powers, preference and relative participation, optional or other special rights, classifications, limitations or restrictions thereof as the Board of Directors may deem appropriate; and WHEREAS, the Board of Directors now desires to fix and deem such matters with respect to the Corporation's capital stock classified as preferred stock. NOW, THEREFORE BE IT RESOLVED, that pursuant to the authority vested in the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors does hereby designate, vest, authorize and provide for the issuance of 50,000 shares of preferred stock, each share having a par value of $0.001 per share, all of which shall be designated "10% Series A Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"); and FURTHER RESOLVED, that all shares of Series A Preferred Stock shall be identical with each other in all respects. DIVIDENDS ON SERIES A PREFERRED STOCK General Dividend Obligation. The Corporation shall pay to the holders of the Series A Preferred Stock, out of funds of the Corporation at anytime available for the payment of dividends under the provisions of the DGCL, preferential dividends at the times and in the amounts provided for in this Article 1.

Accrual of Dividends. Dividends on each share of Series A Preferred Stock shall be cumulative from the date of issuance of such share, whether or not at the time such dividend shall accrue or become due or at any other time there shall be profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends shall accrue on each share of Series A Preferred Stock at the rate and in the manner prescribed by this Article 1 from and including the date of issuance of such share to and including the date on which such share is redeemed, converted or is otherwise deemed no longer outstanding in accordance with this Certificate of Designation. For purposes of this Section 1.02, the date on which the Corporation shall initially issue a share Series A Preferred Stock shall be deemed to be the "date of issuance" of such share. Payment of Dividends. Dividends shall accrue on each share of Series A Preferred Stock at the rate of ten percent (10%) per annum of the Liquidation Value (as defined in Section 3.01). Dividends shall be payable on Series A Preferred Stock on the first day of each June, September, December, and March beginning June 1, 1999 and each such day is herein referred to as a "Dividend Payment Date." On each Dividend Payment Date all dividends which shall have accrued on each share of Series A Preferred Stock then outstanding during the calendar quarter ending upon such Dividend Payment Date shall be deemed to become "due" for all purposes of this Article 1, regardless of whether the Corporation shall be able or legally permitted to pay such dividend on such Dividend Payment Date. If any dividend on any share of Series A Preferred Stock shall for any reason not be paid at the time such dividend shall become due, then such dividend in arrears shall be paid as soon as payments of same shall be permissible under the provisions of the DGCL. Until such dividend in arrears is paid, dividends shall continue to accrue, but not compound, on each share of Series A Preferred Stock. Distribution of Partial Dividends Payments. If at any time the Corporation shall pay less than the total amount of dividends due on all outstanding shares of Series A Preferred Stock at the time of such payment, such payment shall be distributed among the holders of Series A Preferred Stock so that an equal amount shall be paid with respect to each outstanding share of Series A Preferred Stock. Participating Dividends. In the event the Corporation pays a dividend or other distribution (other than a distribution pursuant to Article 3 or a distribution constituting an Extraordinary Common Stock Event (as defined in Section 6.03)) to the holders of Common Stock (as defined in Section 6.01), each holder of Series A Preferred Stock shall fully participate in any such dividend or other distribution based on the largest number of whole shares of Common Stock into which such shares of Series A Preferred Stock could be converted under Article 6 on the record date of such dividend or other distribution. REDEMPTION Redemption. If at any time the Market Price (as defined in Section 6.02) is 200% or more of the then effective Conversion Price (as defined in Section 6.02) for 20 consecutive trading days, all or any part of the Series A Preferred Stock may be redeemed by the Corporation at its election, at any time and from time to time, in the manner prescribed in this Article 2; provided, however, the Corporation shall not redeem any shares of Series A Preferred Stock prior to the first anniversary of the date on which the first shares of Series A Preferred Stock is issued.

Redemption Notice. Before causing any redemption pursuant to this Article 2, the Corporation shall mail by certified or registered mail, return receipt requested, or via confirmed facsimile to each record holder of any Series A Preferred Stock at the address or the facsimile number (as applicable) shown on the Corporation's records, a written notice (a "Redemption Notice") stating (a) the number of shares of Series A Preferred Stock held of record by such holder which the Corporation proposes to redeem, (b) the date (the "Redemption Date") on which the Corporation proposes to cause the redemption and pay the Redemption Price (as defined in Section 2.04(a)) for the shares to be redeemed, (c) the Redemption Price to be paid for each share to be redeemed, and (d) the place at which the shares to be redeemed may be surrendered in exchange for the Redemption Price. Each Redemption Notice under this Section 2.02 shall be mailed or transmitted (as applicable) at least ten (10) days before the Redemption Date; provided, however, if the Corporation fails to pay the Redemption Price on the Redemption Date (for a reason other than a holder's failure to deposit the Series A Preferred Stock certificates pursuant to section 2.04(b)), the Redemption Date shall be the date on which the Corporation actually pays the Redemption Price. Determination of Number of Each Holder's Shares to be Redeemed. The number of shares of Series A Preferred Stock to be redeemed from each holder thereof shall be determined by multiplying the total number of shares of Series A Preferred Stock to be redeemed times a fraction, the numerator of which shall be the total number of shares of Series A Preferred Stock held by such holder and the denominator of which shall be the total number of shares of Series A Preferred Stock outstanding. No fractional shares may be redeemed. Redemption Price. For each share of Series A Preferred Stock which shall be redeemed by the Corporation pursuant to this Article 2, the Corporation shall be obligated to pay the holder of such share an amount (the "Redemption Price") equal to the Liquidation Value, plus any accrued but unpaid dividends. Such payments which the Corporation shall be obligated to make on any Redemption Date shall be deemed to become "due" for purposes of this Article 2, regardless of whether the Corporation shall be able or legally permitted to make such payments on such Redemption Date. Each holder of Series A Preferred Stock shall be entitled to receive on the Redemption Date the full Redemption Price for each share of Series A Preferred Stock held by such holder which the Corporation redeems on such Redemption Date upon surrender by such holder at the Corporation's principal office of the certificate representing each such share duly endorsed in blank or accompanied by an appropriate form of assignment duly endorsed in blank. After the payment by the Corporation of the full Redemption Price, all rights of the holder of such shares of Series A Preferred Stock shall cease and terminate. Unless all of the shares of the Series A Preferred Stock evidenced by the certificate or certificates delivered shall have been redeemed, the Corporation shall prepare a new certificate, substantially identical to that surrendered, representing the balance of the Series A Preferred Stock formerly represented by the certificate or certificates that are not redeemed and shall deliver such certificate to the person designated as the holder thereof. Redeemed Series A Preferred Stock to be Cancelled. In the event any shares of Series A Preferred Stock are redeemed pursuant to this Article 2, the shares so redeemed shall be

canceled, shall return to the status of unauthorized, but unissued preferred stock of no designated series, and shall not be issuable by the Corporation as Series A Preferred Stock. LIQUIDATION Rights of Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, an amount in cash equal to the sum of $100 per share (the "Liquidation Value"), plus all accrued but unpaid dividends thereon to the date of final distribution. Except as provided herein, the holders of Series A Preferred Stock shall not be entitled to receive any further distribution upon such liquidation, dissolution or winding up of the Corporation. Allocation of Liquidation Payments Among Holders of Series A Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to holders of Series A Preferred Stock (the "Total Amount Available") shall be insufficient to pay the holders of outstanding Series A Preferred Stock, the full amounts to which they shall be entitled under Section 3.01, each holder of Series A Preferred Stock shall be entitled to receive an amount equal to the product derived by multiplying the Total Amount Available times a fraction, the numerator of which shall be the number of shares of Series A Preferred Stock held by such holder and the denominator of which shall be the total number of shares of Series A Preferred Stock then outstanding. Effect of Consolidation, Mergers and Sales of Assets. A consolidation or merger of the Corporation into or with another corporation or entity or the sale of all or substantially all of the assets of the Corporation shall not be deemed a liquidation, dissolution or winding up of the Corporation within the meaning of this Article 3. DISTRIBUTIONS OTHER THAN CASH Whenever the distribution provided for in this Certificate of Designation shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors. VOTING POWER General. Except as required by law, each holder of Series A Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder's shares of Series A Preferred Stock could be converted under Article 6, on the record date for the determination of stockholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Except as required by law or this Article 5, the holders of shares of Series A Preferred Stock and Common Stock shall vote together as a single class on all matters. Protective Provisions. So long as there is outstanding 50% or more of the total number of shares of Series A Preferred Stock issued from time to time by the Corporation, the Corporation shall not, without first obtaining the approval by vote or written consent of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, take or cause to be taken any of the following actions: (a) any consolidation or merger of the Corporation with or into another

corporation or entity in which the Corporation will not be the surviving entity, (b) the sale of all or substantially all of the assets of the Corporation to a corporation or entity that is not an affiliate of the Corporation, (c) any voluntary liquidation, dissolution or winding up of the Corporation or (d) any amendment of this Certificate of Designation. CONVERSION RIGHTS Description and Conversion Procedure. The Series A Preferred Stock shall be convertible into shares of the common stock, par value $0.001 per share (the "Common Stock"), of the Corporation as follows: except as expressly herein provided otherwise, at the option of the holder, each share of the Series A Preferred Stock may be converted at any time or from time to time after the date of issuance and prior to February 28, 2005 (the "Mandatory Conversion Date"); any Series A Preferred Stock shall be deemed to have been converted (the "Conversion Date") when the Corporation shall have received the certificate or certificates evidencing such shares appropriately endorsed to reflect conversion thereof, and upon conversion as provided in this Article 6, the Corporation shall issue as soon as reasonably practical that number of shares of Common Stock ("Conversion Stock") as is equal to the Liquidation Value, plus all accrued but unpaid dividends through the Conversion Date, divided by the effective Conversion Price; on the Mandatory Conversion Date, all of the then outstanding shares of Series A Preferred Stock will be deemed automatically converted in accordance with the this Article 6; provided, however, the Corporation shall not be obligated to issue a certificate evidencing the Conversion Stock to the holder of Series A Preferred Stock, unless and until the Corporation receives from such holder the certificate or certificates evidencing such shares of Series A Preferred Stock; and unless all of the Series A Preferred Stock evidenced by the certificate or certificates delivered shall have been converted, the Corporation shall prepare a new certificate, substantially identical to that surrendered, representing the balance of the Series A Preferred Stock formerly represented by the certificate or certificates that are not converted and shall deliver such certificate to the person designated as the holder thereof. Conversion Price. For purposes of this Certificate of Designation, the "Conversion Price" of each share of Series A Preferred Stock shall initially mean the Average Market Price (as defined below) of the Common Stock on the date of issuance of the share of Preferred Stock. On each of the first five anniversary dates of the date of issuance, the Conversion Price of each share of Series A Preferred Stock will be reset to an amount equal to the greater of (a) 75% of the Average Market Price as of such anniversary of the date of issuance or (b) 75% of the initial Conversion Price. For purposes of this Certificate of Designation, the "Average Market Price" of the Common Stock on any date shall mean the average Market Price (as defined below) of the Common Stock for the 20 trading days immediately preceding such date. For purposes of this Certificate of Designation, the "Market Price" of the Common Stock on any date shall mean the closing sale price of the Common Stock on such date on the principal national securities exchange on which the shares are listed or admitted to trading, or, if the Common Stock is not so listed or admitted to trading, or the average of the highest closing bid price and lowest closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to the Common Stock on such date, the Market Price shall be the fair market value per share of Common Stock as established by the

Board of Directors in good faith. The Conversion Price, as reset from time to time as provided herein, is subject to further adjustment as provided in Sections 6.03 and 6.04. Adjustments to Conversion Price Upon Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common Stock Event (as defined below) after the date of issuance, the Conversion Price shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted by multiplying the then effective Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such Extraordinary Common Stock Event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the product so obtained shall thereafter be the Conversion Price. The Conversion Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events. For purposes of this Certificate of Designation, "Extraordinary Common Stock Event" shall mean (i) the issue of additional shares of Common Stock as a dividend or other distribution on outstanding stock of this Corporation, (ii) a subdivision of outstanding shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination of outstanding shares of Common Stock into a smaller number of shares of Common Stock. Capital Reorganization or Reclassification. If the shares of Common Stock issuable upon the conversion of shares of Series A Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Section 6.03), then and in each such event the holder of each share of Series A Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of Common Stock into which such share of Series A Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein. Cash in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of shares of Series A Preferred Stock. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Series A Preferred Stock, this Corporation shall make, to the holder of the shares of Series A Preferred Stock which were converted, a cash payment in respect of such fractional shares based on the then effective Market Price of the Common Stock. Reservation of Common Stock. This Corporation shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

Converted Series A Preferred Stock to be Cancelled. In the event any shares of Series A Preferred Stock shall be converted pursuant to this Article 6, the shares so converted shall be canceled, shall return to the status of unauthorized, but unissued preferred stock of no designated series, and shall not be issuable by the Corporation as Series A Preferred Stock. IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly executed by its Chief Executive Officer and Secretary this 25th day of March 1999. AMERICAN TELESOURCE INTERNATIONAL, INC.
/s/ Arthur L. Smith ---------------------------------------Arthur L. Smith, Chief Executive Officer

/s/ H. Douglas Saathoff ---------------------------------------H. Douglas Saathoff, Secretary

Exhibit 10.44 MASTER AGREEMENT FOR THE PROVISION OF TELECOMMUNICATION SERVICES EXECUTED BETWEEN "American TeleSource International, Inc." and BESTEL USA, Inc. Master Agreement for the provision of Telecommunication Services executed between BESTEL USA, Inc., represented by Ing. Manuel Vazquez Arroyo Aldrete, ("BESTEL") and "American TeleSource International, Inc." represented by Charles R. Poole, (the "Customer") in accordance with the following Recitals and Clauses. AGREEMENT NUMBER: 100948-0011 The telecommunication Services that BESTEL shall provide to the Customer will be those shown in the following table and the parties agree that the provision of said services are governed by the terms and conditions of this Master Agreement for the Provision of Telecommunication Services and by that established in the Addenda corresponding to those Services and/or Promotional Programs selected:
SERVICES AND ADDENDA OF THIS PRESENT AGREEMENT LONG DISTANCE OPERATOR SERVICES 800 SERVICES PRIVATE LINE SERVICES DATA SERVICES LIT FIBER DARK FIBER COLLOCATION INTERNET SERVICES OTHER SERVICES (SPECIFY) CONTRACT DATE CUSTOMER'S SIGNATURE

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx October 15, 1998 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx (Signature) xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx

CONDITIONS THE CUSTOMER accepts and acknowledges that once the Addenda corresponding to the Services and/or Promotional Programs selected are executed, these shall form an integral part of this Master Agreement for the Provision of Telecommunication Services. The Addenda corresponding to the Services and/or Promotional Programs selected at a later date than the date of execution of this Master Agreement, shall have an effective date as of the date of execution and acceptance and shall become an integral part of this Agreement. RECITALS I. BESTEL states through its legal representative: That it represents a Corporation duly incorporated under the laws of the State of Nevada under the name of "Bestel USA, Inc.". That the personality and capacity of its legal representative as of this date has not been modified nor limited in any way. That it has executed with Bestel, S.A. de C.V. an interconnection agreement since said company has a concession dated January 8, 1996 granted by the Federal Government through the Ministry of Communications

and

Transportation ("Ministry") to install, operate and exploit a Public Telecommunications Network and therefore has the ability to provide the Services under this Agreement. That it desires to provide the Services under this Agreement to the Customer. That its address is 1890 N. Shoreline Drive, Mountain View, CA 94643 That it has the personnel and technical capacity, as well as its own infrastructure or that of a third party necessary to provide the Services under this Agreement. II. THE CUSTOMER states through its legal representative: That it represents a Corporation duly incorporated under the laws of the State of Texas under the name of "American TeleSource International, Inc.". That the personality and capacity of its legal representative as of this date has not been modified nor limited in any way. That its address is 12500 Network Boulevard, Suite 407, San Antonio, TX 78249. That its telecommunications terminal equipment to be utilized by the CUSTOMER is duly homologated before the competent authorities and can be interconnected to a public telecommunications network without causing interferences or any damages to said network and complies with the authorized signaling. That its objective, among others, is to provide long distance services, provided in the United States and has authorization granted by the government through the Federal Communications Commission (FCC). That it desires to contract with BESTEL the Services shown on the First Page of this Agreement which after its execution forms an integral part. That it desires to commit to the traffic corresponding to the Services under this Agreement in the percentages shown hereunder or in its Addenda. Based on the above, the parties agree to the following: CLAUSES 1. OBJECTIVE. .1 BESTEL shall provide to the CUSTOMER the Services shown on the First page of this Agreement (the "Services") and THE CUSTOMER agrees to pay the consideration for such Services as established in the corresponding Addenda. .1 In the event THE CUSTOMER receives the Services or opts for any of the Promotional Programs (modified from time to time) it is understood that THE CUSTOMER has accepted the applicable terms and conditions for those Services and/or Promotional Programs registered with the competent authorities. 2. CONSIDERATION. 2.1 THE CUSTOMER agrees to pay BESTEL for the Services provided by BESTEL the total value of the consideration specified in the corresponding Addenda for the Contracted Services (the "Price") by no later than the date agreed upon. 2.2 The Price for the Services agreed to by the parties shall be subject to modifications in accordance with the changes that could arise under the terms and conditions of the Promotional Program under which the Customer has subscribed. Such Promotional Program as established under this Agreement, shall form part of this Agreement. In the event of conflict between the terms and conditions of this Agreement and those of the Promotional Program selected by the CUSTOMER, those contained in the Promotional Program shall prevail.

2.3 The rates can be modified at any time by BESTEL with a thirty (30) day advance notice to the CUSTOMER and the CUSTOMER's acceptance. Such adjustments or discounts shall be given in BESTEL's invoices

presented to the CUSTOMER on the effective date of such rates. BESTEL shall be able to apply any adjustments or discounts against any outstanding amounts that the CUSTOMER has. 2. FORM AND PLACE OF PAYMENT. 3.1 BESTEL shall send on a monthly basis an invoice to the CUSTOMER for the Services provided to the address shown in this Agreement. 3.2 Payment for the invoice(s) for the Services provided can be made in cash at the locations provided by BESTEL on such invoices or by check payable to BESTEL USA, Inc., by wire transfer or any other payment form specified by BESTEL. 3.3 Any differences that the CUSTOMER should have with the charges billed on the invoice should be directed to the Customer Service Center established by BESTEL .In the event the CUSTOMER wishes to dispute, CUSTOMER shall do so in writing by no later than the payment date shown on the invoice. 3.4 The invoices should be received by the CUSTOMER within the corresponding delivery time set for such CUSTOMER and can be modified by BESTEL from time to time. If the CUSTOMER does not receive the invoice, the CUSTOMER shall notify BESTEL so that a copy can be sent. Notwithstanding the above, the CUSTOMER shall pay immediately any outstanding amounts. 3.5 The CUSTOMER shall pay to BESTEL the amounts specified on the corresponding invoice by no later than the date established on the invoice which shall always be ten (10) days after the close of the billing period. 3.6 THE CUSTOMER agrees that BESTEL may apply the payment for one of more of the Services under this Agreement to any outstanding amount generated by the provision of any of the Services for an amount or in any invoice order established by BESTEL. 3.7 BESTEL shall be able to partially or totally suspend the provision of the Services under this Agreement upon previous notice to the CUSTOMER, in the event the CUSTOMER pays late or does not completely pay its outstanding amounts. In the event of suspension and in order to reestablish the Services, the CUSTOMER shall pay any outstanding amounts as well as pay any reconnection charges. As well, in the event BESTEL so determines, the CUSTOMER shall provide BESTEL any security requested. 3.8 The amounts owed by the CUSTOMER after the payment date of the invoice shall generate late payment fees calculated by multiplying the 30 day Libor Rate (or substituted rate) in use on the date of payment times 2.0. 3.9 BESTEL shall be able to request total payment of any amount owed by the CUSTOMER before continuing to provide the Services under this Agreement. In the event that BESTEL should omit in any invoice amounts referred to in this Paragraph, such charges can be invoiced in any subsequent invoice in order for the CUSTOMER to cover its outstanding amounts. Such omission does not constitute a waiver by BESTEL to collect any amounts nor shall it be interpreted as the CUSTOMER'S right to not pay such amounts. 4.0 TERM. 4.1 Except for the Promotional Program contracted by the CUSTOMER, or that established in the Addenda of the Services, this Agreement shall be indefinite for both parties and any party may terminate with ninety (90) days advance noticeto the other party its desire to terminate. However, BESTEL may terminate this Agreement at any time due to a justified cause at BESTEL's discretion. 4.2 In the event the CUSTOMER stops receiving BESTEL's services for any cause and receives them from another vendor or has terminated this Agreement, the parties agree that in the event the CUSTOMER desires to receive the SERVICES again and receive the Promotional Programs, it shall be understood that the CUSTOMER has accepted the terms and conditions established hereunder. 5. TERMINATION. 5.1 In the event the CUSTOMER does not fulfill any of its obligations under this Agreement, BESTEL shall

terminate this Agreement without any liability. If this occurs, all amounts owed by the CUSTOMER to BESTEL at that time shall be due immediately.

5.2 BESTEL shall notify the CUSTOMER the termination of this Agreement indicating the amount owed and the due date in which such amount is to be paid. Those amounts owed by the CUSTOMER as of the termination date shall cause late fees as mentioned in 3.8 above. 5.3 In the event of default by BESTEL, the CUSTOMER shall notify BESTEL the cause(s) of such default so that BESTEL may correct to the CUSTOMER's satisfaction. After thirty (30) days and if such default persists, the CUSTOMER shall be able to terminate this Agreement, after paying any amounts owed to BESTEL without any liability. 6 SERVICE INTERRUPTIONS. 6.1 BESTEL shall not be responsible for the suspension or interruption of the Services because of force majeure or fortuitous cause or because of unforeseen circumstances including transmission failures as well as the suspension or interruption of communication by other networks through which the signals or traffic runs through. 6.2 BESTEL shall be able to interrupt for any necessary time the provision of the Services under this Agreement when an inspection or maintenance is needed for their facilities and/or equipment. BESTEL shall try to program such inspection or maintenance at hours that do not result inconvenient for the CUSTOMER. 6.3 Except for the stipulated in this Agreement, the CUSTOMER acknowledges that the equipment and the lines through which the switched or dedicated local service is to be provided are not owned by BESTEL; therefore BESTEL shall not be responsible for any failures attributable to such equipment or lines. BESTEL shall only be responsible for the Services provided through circuits, equipment and fiber optic network owned by BESTEL or affiliates. 6.4 Except for the stipulated in this Agreement, neither party shall be responsible for any damages, including indirect and/or consequential or for the loss of income derived or related with the provision of the Services under this Agreement. 7 LIABILITY. 7.1 BESTEL shall not be responsible for any wrong use, negligence, fraudulent use, use contrary to specifications and/or unauthorized use that the CUSTOMER makes of its facilities, line(s) and/or telecommunications equipment by any of its executives, or employees or any third party that could have direct or indirect access; as well, BESTEL shall not be responsible for calls and/or transmission or reception of information unrecognized by the CUSTOMER from such circumstances. The CUSTOMER shall adopt the necessary means to prevent such acts and shall be responsible for any claims against BESTEL. 7.2 BESTEL shall not be responsible for the contents of the information that the CUSTOMER transmits through its telecommunications network. 8 RELATIONSHIP OF PARTIES. 8.1 The nature of this Agreement is essentially commercial since BESTEL and THE CUSTOMER are companies of everyday business activities and in addition have the necessary elements to fulfill each and every obligation with their employees. As well, between the CUSTOMER' s employees and BESTEL's employees there does not exist any relationship whatsoever; therefore there is no labor relationship. THE CUSTOMER shall be the only party responsible of the obligations that the law establishes as an employer with regards to the personnel utilized and shall be responsible for each and every individual and collective claim that the CUSTOMER's employees could present against BESTEL assuming the liability of any claim presented and reimburse immediately any legal expense or of any other nature that BESTEL could incur for such concept. In the same fashion, BESTEL shall be the only responsible party of the obligations that the law establishes as an employer with regards to the personnel utilized and shall be responsible for each and every individual and collective claim that BESTEL's employees could present against the CUSTOMER assuming the liability of any claim presented. 9 TROUBLE REPORTS/REPAIRS 9.1 The CUSTOMER shall notify its trouble reports to BESTEL and BESTEL shall make available to the

CUSTOMER a Customer Service Center that will be available 24 hours a day, 365 days per year where trouble tickets will be reported. BESTEL shall assign a confirmation number.

10 SERVICE GUARANTEES. 10.1 The guarantees offered by BESTEL are described and detailed in the Promotional Programs selected by the Customer and shall be attached to this Agreement forming an integral part of this Agreement. 11 CREDIT INVESTIGATION. 11.1 THE CUSTOMER states that the information provided regarding its solvency and payment capacity is correct and based on that information BESTEL has made the decision to provide the Services under this Agreement. THE CUSTOMER hereby authorizes BESTEL to verify such information. As well, the CUSTOMER agrees that this authorization shall continue in force during the term of this Agreement for BESTEL's benefit. 12 NOTICES. 12.1 The parties agree that all notices, communications and notifications regarding this Agreement shall be directed to the addresses mentioned in the recitals of this Agreement. Such notices shall be made in writing through certified mail or courier with a return receipt, facsimile or any other method that the other party has received such notification. In the event of address change, the parties agree to notify the other party with at least fifteen (15) days advance notice; otherwise the latest address shall prevail. In addition, the CUSTOMER agrees to send a copy of each notification to the following address: Av. Lopez Cotilla, 1976-A, Col. Obrera Centro, Guadalajara,, Mexico. 13 ASSIGNMENT; MODIFICATION. 13.1 THE CUSTOMER agrees that the rights and obligations derived under this Agreement shall not be assigned, transferred, negotiated nor modified in any way without the previous consent in writing from BESTEL. As well, BESTEL may assign its rights and obligations derived under this Agreement to any of its subsidiaries or affiliates or guarantee any obligation through notification to the CUSTOMER. 13.3 THE CUSTOMER shall notify BESTEL with sixty (60) days advance notice any modification to its corporate name, otherwise all documentation shall be generated using the previous name.

14 DISPUTE RESOLUTION. 14.1 The parties express their firm conviction that in good faith in the event there are differences or disputes because of the interpretation, fulfillment and execution of this Agreement and in unlimited form for any technical aspect, service provision, application and collection of consideration and any other that require specific technical capacity, they shall reasonably try to resolve in a friendly fashion through mediation and/or conciliation, voluntarily and previous to any other procedure that the parties could have and take place during a term of thirty (30) days in which the parties promote a mutual consulting process in order to resolve or avoid any controversy or dispute without waiving their rights. 14.2 It shall be considered that the attempts to reach a friendly solution have failed when one of the parties notifies the other party at the termination of such term that the negotiations have not been satisfactory; therefore the parties may execute their rights or effect any action as specified in this Agreement. 15. ENTIRE AGREEMENT. 15.1 The parties agree that this Agreement and its Addenda constitute the only agreement and agree that this Agreement supersedes any agreement, communication, or proposal previously related with the objective of this Agreement. The parties hereby agree and acknowledge this Agreement is subject to the terms and conditions of any applicable regulations. In the event such regulations are not followed, the responsible party shall cure such failure without terminating this Agreement unless such cure is not done in a reasonable time. The parties execute this Agreement in duplicate in San Antonio, Texas on September 28, 1998.
`THE CUSTOMER' "American TeleSource International, Inc." "BESTEL" BESTEL USA, Inc.

/s/ Charles R. Poole By: Charles R. Poole Title: President

/s/ Manuel Vazquez Arroyo By: Manuel Vazquez Arroyo Title: President

EXHIBIT 11 AMERICAN TELESOURCE INTERNATIONAL INC. AND SUBSIDIARIES COMPUTATIONS OF LOSS PER SHARE (in thousands)
For the Year Ended ------------------------------------------------July 31, 1997 July 31, 1998 July 31, 1999 ------------------------------------------------COMPUTATION OF BASIC LOSS PER SHARE Net loss

($4,695) ==========

($5,094) ==========

($7,591) ==========

WEIGHED AVERAGE NUMBER OF SHARES COMMON STOCK OUTSTANDING

26,807 ========== ($0.18) ==========

41,093 ========== ($0.12) ==========

47,467 ========== ($0.16) ==========

BASIC LOSS PER COMMON SHARE

COMPUTATION OF DILUTED LOSS PER SHARE Net loss Dividends not incurred upon assumed conversion of convertible preferred stock Interest not incurred assumed conversion of convertible note ($4,695) ($5,094) ($7,591)

0

0

70

9 ----------

0 ----------

0 ----------

Not loss applicable to common stockholders used for computation

($4,686) ==========

($5,094) ==========

($7,521) ==========

Weighted average number of shares of common stock outstanding Weighted average incremental shares outstanding upon assumed conversion of options and warrants Weighted average incremental shares outstanding upon assumed conversion of preferred stock

26,807

41,093

47,467

3,061

10,228

4,272

0

0

264

Weighted average incremental shares outstanding upon assumed conversion of convertible note 200 ---------WEIGHT AVERAGE COMMON SHARES AND COMMON SHAE EQUIVALENTS USED FOR COMPUTATION 30,068 ========== DILUTED LOSS PER COMMON SHARE AND COMMON EQUIVALENT

0 ----------

0 ----------

51,321 ==========

52,003 ==========

($0.16)

($0.10)

($0.14)

==========

==========

==========

EXHIBIT 22 The subsidiaries of American TeleSource International, Inc. are as follows:
State or other Company Jurisdiction of Incorporation -------------------------------------------------American TeleSource International, Inc. Canada American TeleSource International, Inc. Texas American TeleSource International de Mexico, S.A. de C.V. Mexico GlobalSCAPE, Inc. Delaware Sistema de Telefonia Computarizada, S.A. de C.V. ("Computel") Mexico Servicios de Infraestructura, S.A. de C.V. ("Sinfra") Mexico TeleSpan, Inc. ("TeleSpan") Texas

ATSI de CentroAmerica, S.A.

Costa Rica

Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 (File No. 333-50259).
San Antonio, Texas /s/ ARTHUR ANDERSEN LLP

October 22, 1999

ARTICLE 5 MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED

YEAR JUL 31 1999 AUG 01 1998 JUL 31 1999 379 0 5,293 1,600 0 5,059 16,669 4,713 24,154 11,969 0 0 0 49 6,088 24,154 34,518 34,518 21,312 39,558 (49) 0 1,745 (6,736) 0 (6,736) 0 0 0 (7,591) (0.16) (0.16)

Exhibit 99.2 American TeleSource International, Inc. STOCKholder Newsletter October 1999
Dear Stockholder, [PHOTO APPEARS HERE] I am pleased to present you with ATSI's first stockholder newsletter. My objective is to perio dically update you on our progress and provide current information on the Mexican telecommunications market, as well as the regulatory environment and various global trends affecting ATSI. More importantly, I wish to communicate our vision and strategy in such a way that our stockholders will be informed as to the long-term goals and objectives of the ATSI organization. ATSI has established itself as an emerging international carrier, focusing on niche, underserved telecommunication markets within and between the U.S. and Latin America, primarily Mexico. An indisputable barrier to entry for other competitors is the time required in duplicating the accomplishments of ATSI to date. Our positioning strategy has been to develop a solid corporate framework consisting of unique licenses, interconnection and service agreements, a network footprint and retail distribution not just to grow top-line revenues, but to build a

platform for supporting a stronger telecommunications company of tomorrow. Through the utilization of this valuable framework, we are ahead in the race to penetrate lucrative Latino markets. Why Mexico? Of all the countries in the world, Mexico is the second leading producer of long distance traffic with the U.S. The numbers of telephone and access lines are increasing. Mexico is expected to surpass Canada and become the number one international route with the U.S. for long distance traffic within the next few years. As a result of NAFTA, the U.S. and Mexico enjoy even stronger cultural and trade ties, with a significant flow of immigrants coming north primarily for work. Another factor is Mexico's popularity among U.S. tourists looking for an exotic getaway on a tight budget. Thirty-eight years ago, my mom was one of those northbound immigrants seeking work and a new lifestyle in the U.S. She eventually settled in South Texas. Due to family ties in Mexico, she calls south of the border on a regular basis. I have often said that my mom typifies the ATSI customer profile; she reads Spanish newspapers and magazines, watches Spanish television, listens to Spanish radio and stays on the telephone for extended periods of time. More importantly, she is underserved when it comes to basic telephone services. Like most Latinos north and south of the border, my mom is seeking convenient, accessible and high-quality communication services at competitive rates. The uniqueness of our borderless strategy is that ATSI's targeted customer profile exists on both sides of the border. Whether in Los Angeles, California, San Antonio, Texas, or Morelia, Michoacan, Mexico, Spanishspeaking consumers seek the same basic communication services and, in most cases, prepay for quality, affordability and convenience. With a highly recognized distribution network of 127 Communication Centers (formerly referred to as casetas) in Mexico, we are well positioned to offer our targeted niche market, highly specialized, new and innovative services. Technology also plays a key role in serving our borderless market. Although transparent to the user, technology is vital in meeting a simple consumer demand to communicate with friends and family. We

recently installed an Asynchronous Transfer Mode (ATM) transborder network, incorporating the latest in packet switching and compression technology. A state-of-the-art proprietary network allows us to transport customer calls on our own network, thereby gaining a cost advantage and giving us greater control of overall call quality. Cost management and quality control are fundamental to providing our Latino marketplace with affordable and reliable services. ATSI's retail strategy focused on the growing and underserved Latino market, combined with deployment of technology for efficient communication transport, is expected to bring about profitable growth well into the future. We believe our borderless strategy will set us apart from the competition, allowing us the opportunity to increase stockholder value that is sustainable over the long- term. In this newsletter I will discuss the emerging marketplace in which we operate, the market and regulatory environments, global trends, ATSI's retail focus, our exciting Strategic Direction, expansion plans and various current events. For additional information about the Company, please visit our web site at www.atsi.net. THE LATIN AMERICAN TELECOMMUNICATIONS MARKET The Latin American telecommunications market, with a population of 488 million strong, generated $50 billion in revenues in 1998, which are projected to grow to $113 billion by the year 2005. Pent-up and growing demand exists for telecommunication services throughout this underserved region. The average time a person must wait to acquire a telephone line ranges from three months to several years, with an average telephone line penetration of about 10 per 100 persons, and this penetration is growing. We believe the following trends in the Latin American telecommunications market will continue to drive growth: (.) Continuing deregulation and privatization of markets (.) Reduced international long distance rates driven by competition in deregulated markets (.) The increase in the availability of telephone and access lines (.) The increasing globalization of commerce, trade and travel (.) The proliferation of communication devices such as faxes, cellular telephones and pagers (.) Increasing demand for data transmission services, including the Internet (.) More cost-efficient technological methods for transporting calls such as packet switching THE MEXICAN TELECOMMUNICATIONS MARKET ATSI focuses on the international long distance market, particularly within the U.S. - Mexico corridor, the second busiest international long distance route in the world. U.S. billed revenues for international long distance [PHOTO APPEARS HERE] traffic with Mexico increased from $1.4 billion in 1993 to approximately $3.0 billion in 1997. In addition, from 1995 to 1996, call-traffic between the U.S. and Mexico increased 16% compared with 13.2% for the rest of the world. Analysts expect the market to continue outpacing the rest of the world with growth rates estimated at 15% to 20% annually. During the year 2000, Mexico is projected to increase telephone line penetration from a current level of 9 to 12.5 per 100 persons. The local and long distance telecommunications markets in Mexico had been a Telefonos de Mexico (Telmex) monopoly until January 1, 1997, when the government opened its market to competition. Since

then, the Mexican Government has licensed 16 alternative facilities-based long distance carriers or "Concessionaires" and 8 competitive local carriers. Telmex and the newly licensed operators have focused on providing additional and improved services to the residential and business markets. ATSI has focused its efforts in areas underserved by the former monopoly and other emerging competitive carriers. ATSI's services will be in greater demand as communication needs grow beyond the ability of other carriers to meet them. I believe Telmex, as well as the top tier competitive carriers (e.g., Alestra/AT&T, Avantel/MCIWorldcom), will prioritize their resources to compete in the most lucrative, yet capital intensive sectors, leaving many niche opportunities for players like ATSI. While many telecommunications service providers are capable of transporting calls between the U.S. and Mexico, only a few have the retail distribution channels needed to reach consumers and generate call volumes like ATSI. Early on, we developed a two-pronged approach designed to capture both retail and wholesale traffic: 1) The Company originates retail traffic in Mexico through its network of Communication Centers and public pay telephones. Retail traffic in the U.S. is originated through ATSI's MEXICOnnect service (a "dial around" 10-10-624 product) and One Plus long distance, both targeting the Latino community. These U.S. services are only offered in San Antonio, Texas, at this time. 2) ATSI captures wholesale traffic by offering network termination capabilities into Mexico for U.S. carriers either lacking transmission facilities or requiring additional capacity. Similarly, the Company provides these same services to Mexican carriers requiring U.S. and global network termination. Consequently, ATSI is uniquely positioned as a facilities-based carrier able to originate, transport and terminate network traffic in both the U.S. and Mexico, and ATSI is well poised to increase its retail market share within the growing telecommunications corridor between the U.S. and Mexico. THE MEXICAN REGULATORY ENVIRONMENT Mexico is considered one of the Latin American leaders in telecommunications. Development in Mexico's communications industry began in the 1940's, as there was tremendous growth in radio broadcasting and an expansion in telephone service. In the 1970's, large manufacturing facilities (maquiladoras) were constructed throughout the country, creating a significant demand for more cost- effective and reliable communications. On August 9, 1996, President Zedillo's administration issued a decree creating the Comision Federal the Telecomunicaciones (COFETEL), the Mexican Government's regulator responsible for overseeing the liberalization of the telecommunications industry. COFETEL's primary objectives include:

(.) Promoting competition in all sectors of telecommunications (.) Providing a judicially secure environment for private investment (.) Ensuring end users non-discriminatory access to all types of telecommunication services Until August 1996, the Secretaria de Comunicaciones y Transportes (SCT) was the exclusive authority for regulation of the Mexican telecommunications industry. COFETEL operates under the SCT; however, since inception, COFETEL has taken increased responsibility in both the reform and regulatory processes. Mexico's Regulatory Structure [FLOW CHART OF REGULATORY STRUCTURE APPEARS HERE] Although Mexico leads most of its Latin American peers in creating a competitive market, the telephone infrastructure is still "catching up" to other countries such as the U.S. It is anticipated that telecommunications sector will continue contributing a larger percentage of the Mexican GDP as the government implements new laws and regulations. We believe that the recent and planned privatization of many of the region's major telephone companies together with the overall trend toward deregulation, particularly in Mexico where the majority of our efforts have

been focused, present significant opportunities to provide specialized services to, from, and within this fastgrowing market. GLOBAL TRENDS Carrier Opportunity Estimates indicate that worldwide telecommunications deregulation is creating a $600 billion revenue opportunity for international carriers. Emerging international carriers, like ATSI, are expected to capture 40% of this revenue over the next 10-year period. Technological Advancements Improvements in technology used in the transmission of telecommunication services continues to occur rapidly; newer and better switches, fiber optic cables with enormous capacity to move traffic at a fraction of historical costs, and a variety of methods for consumers to access carrier networks, such as prepaid and Voice over Internet Protocol (VoIP). Investment Community The investment community is searching for companies that possess both plans to differentiate themselves from others in the international long distance group, and a viable strategy to compete with the incumbent or former government owned Telephone Company. The investment community prefers companies striving for a balance favoring retail over wholesale traffic. While wholesale is an effective method for utilizing a company's network, and for obtaining volume discounts from other carriers, an over-reliance on wholesale produces long-term risks due to declining margins and a lack of customer loyalty. ATSI'S RETAIL SERVICES WITHIN MEXICO ATSI entered the Mexican markets by establishing retail distribution channels (Communication Centers and public pay telephones) offering local calling, domestic and international long distance, facsimile and in some cases, Internet connectivity. [PICTURE APPEARS HERE]

Communication Centers The Communication Center market segment is generally fragmented with dozens of small operators. Currently, we are aware of 12 multi-location caseta operators competing with ATSI. Location and brand recognition are key factors for competing effectively. ATSI maintains a market leadership position, with 127 Communication Centers located in prime high-traffic areas in 66 Mexican cities. ATSI operates its Communication Centers under the name of Computel, a highly recognized brand throughout Mexico. ATSI's Communication Centers are strategically located to serve the "in- country" traveler, tourists and the predominantly large population of Mexico that does not have a telephone. ATSI Centers utilize on average four telephone lines, with six to eight telephones available to customers. Every location employs an attendant who processes calls, monitors call duration, collects fees and generates daily call activity reports. [PICTURE APPEARS HERE] Moving into fiscal year 2000, ATSI has begun the process of transitioning its retail distribution locations into "next generation" Communication Centers. As we enter the new millennium, ATSI's Communication Centers will offer a variety of enhanced telecommunication services beyond basic telephony, including prepaid services and Internet connectivity. ATSI Communication Centers will also play an important role as we expand our retail presence in the U.S. (see "Expanding the ATSI Retail Presence"). The Communication Center concept, together with the experience gained from serving target markets within Mexico, will be brought to the U.S. to serve the needs of the nearly 18 million Latino Americans of Mexican origin, the more than 350,000 new Mexican immigrants who arrive each year, and the more than 54.4 million international travelers who traverse between Mexico and the U.S. annually. Cancun, Mexico Key differentiators that keep customers coming back to ATSI: (,) Comfort, convenience and innovation - Communication Centers are air- conditioned, centrally located and staffed with operators providing new and enhanced services with personalized attention. (.) Accurate billing - aside from tive rates, ATSI's proprietary call accounting system offers higher reliability.

(.) Provision of receipts - so that business calls may be expensed for reimbursement or tax purposes. The competition does not typically offer this service, which is important to the traveling business customer. Public Pay Telephones The Company has 574 public pay telephones in targeted niche markets such as resort cities and ship ports of call. ATSI is currently the only payphone operator with network facilities capable of transporting and billing its own long distance calls originating in Mexico. Additionally, the Company's "multi- pay" telephones offer consumers a variety of convenient payment methods, including coin, credit card and collect. Telmex telephones are not as user- friendly, because they only accept hard-to-find Telmex prepaid smart-chip calling cards. [PICTURES APPEARS HERE] ATSI'S STRATEGIC DIRECTION Maintain Focus on Underserved Latino Markets While many of ATSI's competitors in the international long distance arena attempt to be "all things to all people," ATSI will maintain focus on specific retail and wholesale call-traffic generators within the U.S. - Mexico corridor, while placing a stronger emphasis on retail services. Increase Retail Distribution in the U.S. and Mexico The cornerstone of our retail services includes the expansion of Communication Centers in both the U.S. and Mexico, creating a borderless network of distribution outlets (see "Expanding the ATSI Retail Presence"). Communication Centers are an ideal platform for creating additional revenue streams from new and innovative services, thereby improving ATSI's return on invested capital. Due to the stranglehold Telmex has over providing local phone lines, and the poor quality of cellular alternatives, ATSI will not expand its public pay telephone network in Mexico. ATSI will transport traffic for other payphone operators or consider expansion through franchise programs. Efforts will be focused on increasing the productivity of our existing pay telephone assets.

Deploy Seamless Transborder Services The U.S. - Mexico border is one of the most traversed in the world, with immigrant flow between the countries continuing to increase. Borderless services will not only meet the practical needs and offer convenience to the consumer, but will allow us to differentiate our services from other providers. Increase the "Value Proposition" of the Wholesale Carrier Product The value of our wholesale carrier services will be enhanced through: (.) Termination to additional countries with an emphasis on Latin America (.) Increase points-of-presence by leveraging on the excess capacity of fiber and switching facilities that currently exist in the U.S. (.) Data transport on high capacity ATM network (e.g. virtual private networks and VoIP) Reduce Transport and Termination Costs ATSI is pursuing a long distance license in Mexico that will allow for a significant reduction in termination and origination costs within that country. Prior to building out the network under the license, we will leverage current call volumes for increased discounts from our current Mexican carrier vendors. ATSI will also execute additional interconnection and service agreements for multiple traffic routing alternatives. In the U.S., we will aggressively pursue carrier agreements that allow for profitable resale of termination services into other countries in addition to Mexico. Construct a State-of-the-Art Network Due to an over-capacity of fiber and switches in the U.S., we expect to lease and partition facilities rather than construct our own. In Mexico, ATSI has adopted a "smart-build" modular strategy, allowing us to scale up the network when customers are added, emphasizing reliability and flexibility. Our smart build approach incorporates a hybrid network, using fiber optic technology to access major metropolitan areas and satellite technology to access semi-rural and smaller metropolitan areas. In addition, we will seek strategic technological partnerships (such as those we have secured with Northern Telecom and Network Equipment Technologies) to minimize technological dependence on third parties, and extend the reach and efficiency of our network (see "ATSI Current Events - Long Distance License"). EXPANDING ATSI'S RETAIL PRESENCE (U.S. - MEXICO CORRIDOR) In order to sustain growth in revenues and improvement in margins, ATSI must meet the challenge facing emerging international carriers by migrating away from shrinking wholesale markets into more profitable retail markets. ATSI plans to invest a majority of its new resources developing retail programs targeting the

growing Latino market. In the U.S., the Latino population is growing four times faster than the general population. By the year 2010, it is estimated that Latinos in the U.S. will reach 41.5 million, with 25.6% of Mexican origin. Of particular interest is the fact that 60% of the U.S. Latino households live in 10 Metropolitan areas. It has also been reported that 80% of the U.S. long distance minutes to Mexico originate in the 6 market areas of Los Angeles-Long Beach, San Francisco-San Jose, Chicago, New York, Houston and San Antonio. The Communication Center is a widely recognized and utilized medium in Mexico. It is our belief that the Communication Center concept will find acceptance by familiar and new consumers in the U.S. A key to the successful offering of retail services must include an acceptable, easy and efficient method for consumers to purchase telecommunication services.
Our Communication Centers will serve as magnets to attract customers to services designed to meet the needs of the Latino. Through use of these services, the consumer will develop ATSI brand loyalty to which they will adhere when transitioning to more traditional applications such as residential direct dial and dial-up Internet services. Generally speaking, recent immigrants and those with economic challenges are served through "prepaid" accounts, while the more established households tend to subscribe to

[PHOTO APPEARS HERE]

"post-paid" services. ATSI CURRENT EVENTS Network Enhancements ATSI focused a great deal of its resources and efforts this past year in deploying technological enhancements to the network. With the addition of a transborder fiber optic link and a state-of-the-art Northern Telecom gateway switch, we operate a highly efficient ATM "pipe" between Dallas, Texas, and Mexico City, Mexico. The new fiber link and switch include some of the most advanced compression and packet switching technology available today. The new hardware results in lower transport costs for the Company and exceptional quality for the consumer. As we expand the network in Mexico and throughout Latin America, we will continue deploying the latest in technology for applications such as VoIP. Gerard Klauer Mattison & Co., Inc.

In July, we secured a relationship with the investment-banking firm of Gerard Klauer Mattison & Co., Inc. (GKM). GKM has successfully established a reputation as a research-driven firm serving many large institutional investors. GKM has managed over $3.5 billion of public offerings and private placements, and advised in $2.2 billion of transactions including mergers and acquisitions. Their equity division consists of 25 traders making markets in a large number of stocks. We have worked closely with GKM's high-energy team in positioning ATSI for the financial markets and potential strategic relationships. GKM is also providing us with advisory relating to certain financial strategies. Having become intimate with ATSI over the last few months, GKM supports both the management team and our Strategic Direction. We are excited about the future opportunities that exist to utilize GKM's full service capabilities. Long Distance License In November 1998, ATSI applied to the Mexican Government for a long distance license. We are in the final stages of the process and remain confident that a license will be obtained. This particular license will enable the Company to expand its operations and services to both urban and rural locations, while simultaneously decreasing its operating costs for both wholesale and retail service offerings. [PHOTO APPEARS HERE] [LOGO APPEARS HERE]

GlobalSCAPE, Inc. The prospects are exceptional for ATSI's wholly owned e-corporation, GlobalSCAPE, Inc., an industry leader in providing Internet-based software utilities. GlobalSCAPE offers "best of breed" products in various categories, including file management, applications development and multimedia utilities. The Company's business model allows it to continually market and deliver software products to end users who want them on a "just in time" basis. To complement its own software development efforts, GlobalSCAPE also intends to seek the distribution rights of third-party authored software. The Company's products are available online and distributed as shareware, meaning, "free to download and use on a trial basis." However, GlobalSCAPE's primary source of revenue derives from product registration. Additionally, the Company generates revenue from advertising in the form of ad banners and sponsorships, which are promoted through its "live" software products and on its vertical portal web site. For more information, please visit the GlobalSCAPE web site at www.globalscape.com. GlobalSCAPE's programs are consistently touted on leading shareware sites' top download lists. CNET's Download.com currently ranks Company products as the "Top 10 Most Frequently Downloaded Programs" within their respective categories. On a monthly basis, the Company receives approximately 1.2 million unique visitors and displays more than 15 million in-product and web site ad banners. Because of this exposure, GlobalSCAPE is diligently working to leverage its name brand recognition into a full suite of "Cute" products. The Company's flagship product, CuteFTP, is a Windows/(R)/ [PHOTO APPEARS HERE] -based file transfer protocol (FTP) utility that allows users the ability to transfer and manage files via the Internet, including files such as MP3's, web pages, software, videos and graphics. CuteFTP/TM/ is a market leader, with an estimated 30% of the U.S. market share as reported by Media Metrix. The Company's portfolio of products also includes CuteHTML/TM/, an advanced HTML editor for developing web sites, and CuteMAP/TM/, an image mapping utility for graphic navigation through web sites, as well as products in various stages of alpha and beta testing.

GlobalSCAPE's goal is to accelerate the growth of its revenue streams from software registrations and advertising. To accomplish this goal, the strategy is to (i) grow the user base and, (ii) maximize the value of the user base. Certain components of the Company's strategy include accelerating core product development, distributing complementary third-party authored products, offering complementary products to users based on product category, implementing aggressive marketing plans, and continually improving the support infrastructure. GlobalSCAPE's market essentially includes all computer users on the Internet. In July 1999, GlobalSCAPE engaged the investment-banking firm of SunTrust Equitable Securities, Inc. to determine the best path for unleashing value for ATSI stockholders. Since its engagement, SunTrust has assisted GlobalSCAPE in refining its Strategic Plan, corporate marketing materials, and financial model for the best possible representation in executing a financing strategy. ATSI PEER GROUP COMPARISON ATSI monitors the peer group shown on the following table for measuring corporate performance and identifying trends within our sector of the telecommunications industry. I encourage each of our stockholders to follow this peer group of companies for accomplishing these same objectives.
Closing Price 52 Week Symbol (10-5-99) High/Low ATSI.OB $ 1.00 $1.84/$0.44 FCLX 9.38 21.58 2.40 12.75/0.84 35.00/9.50 2.78/0.69 Shares Outstanding/ 1998 Market Cap Revenues (millions) (millions) 48.4/345 $ 34.5 22.6/212 23.9/615 45.4/109 19.1 335.4 27.6 Recent Quarter Revenues (millions) $ 8.7 11.6 191.8 13.2 Paid in Capital (millions) $ 25 73 277 73

Company ATSI FirstCom

YTD Return 8% 249% 41% 201%

Year Founded 1994 1997 1990 1995

IDT Corp IDTC PointeCom PCOM.OB Pacific Gateway Primus Startec Global Star Telecom Teleglobe Telscope Vistel

PGEX PRTL

16.13 18.19

50.31/13.13 25.13/6.88

-66% 15%

19.5/315 28.7/522

466.3 421.6

140.0 185.6

1991 1086

72 243

STGC STRX TGO TSCP VYTL

14.00 5.19 19.31 6.75 27.25

18.75/3.38 18.00/5.08 40.94/14.81 10.38/5.38 58.88/7.88

38% -59% -44% -9% 27% -93%

9.39/131 58.6/304 252.8/4.86 6.66/44 32.6/888 22.7/$16

161.2 696.5 3,388.9 132.2 135.2 $28.5

61.9 272.3 709.9 32.4 68.7 $24.5

1989 1994 1950 1992 1994 1997

44 364 1,240 44 129 $111 -

WorldPort WRDP.OB

$ 0.69 $12.38/$0.49

Footnotes: (1) FirstCom was previously named interAmericas Communication Corp., which was founded in 1994 (2) Paid in Capital is calculated through most recently reported quarter (3) YTD Return utilizing closing price as of 1/1/99

LOOKING TO THE FUTURE The liberalization of a telecom market typically begins with the privatization of the government owned Telephone Company. Privatization is followed by a demonopolization process, which strips the former monopoly of its status, and allows competitive carriers to enter the marketplace. Subsequent to demonopolization, markets typically migrate through three stages of development. The first is the protective stage, where the former monopoly vigorously protects its market share and revenue streams to the extent allowed under the newly established regulations. This particular stage is the most difficult for emerging carriers, as the former Phone Company continues operating as a de facto monopoly, exercising its significant market power. During the second stage, the competitive stage, newly licensed carriers attempt to establish themselves and capture market share. The third stage is the consolidation stage, where carriers seek alliances, joint ventures or mergers with former competitors to create critical mass. Due to the market power exhibited in Mexico by Telmex over the past few years, I believe we just recently entered the competitive stage. We have developed clear advantages over our competition, as a result of the proper licensing, execution of

carrier interconnection and service agreements, investment in and deployment of network facilities and retail

distribution channels - a solid corporate framework. These advantages enhance ATSI's ability to compete in the long-term by ensuring our ability to be a low-cost provider of services. While the competition acquires the tools to effectively compete, ATSI expects to have acquired significant market share. ATSI has assembled an experienced management team that understands the markets in which we operate, is bilingual and bicultural, has a focused vision, is entrepreneurial, and has successful career histories. The management team has thoroughly positioned the Company to capitalize on the opportunities by having established a solid corporate framework during the difficult protective stage. As a result, our Company is transitioning into a retail-oriented, growth opportunity, beginning to capitalize on the competitive stage. Make no mistake about it...our vision is big. Over the next several years, ATSI intends to expand its network under the long distance license to consist of nearly 1,400 miles of fiber optics and 101 satellite terminals, covering 115 Mexican cities. Our retail distribution in Mexico will more than double, and "next generation" Communication Centers will appear in select U.S. communities. Peering even further into the future, ATSI will duplicate its strategy in other Latin American countries as regulatory environments permit. This is an incredible opportunity when considering that two-thirds of the Western Hemisphere's population is Latino. As we continue to penetrate the underserved and underdeveloped telecommunications marketplace of Latinos, I remain confident that our commitment to further strengthen the corporate framework will lead to a greater return on investment. I expect value to be realized as more and more competitors attempt market entry, undoubtedly facing a multitude of barriers and challenges that ATSI has already overcome. Our future looks bright and we maintain focused on creating value for you, the ATSI stockholder. STOCKHOLDER CONTACT Karen R. Mella Director, Investor Relations American TeleSource International, Inc. [ATSI LOGO APPEARS HERE] 12500 Network Blvd., Suite 407 San Antonio, Texas 78249 Voice: (210) 558-6090, ext. 1161 Fax: (210) 558-6095 E-mail: kmella@atsi.net STOCK SYMBOL OTCBB: AMTI This Newsletter contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. "Forward looking statements" are those statements, which describe management's beliefs and expectations about the future. We have identified forward-looking statements by using words such as "anticipate," "believe," "could," "estimate," "may," "could," "expect," and "intend." Although we believe these expectations are reasonable, our operations involve a number of risks and uncertainties, including those described in our Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission. Therefore, these types of statements may prove to be incorrect. We

do not promise to update any forward-looking statements, even if new information or future events indicate that these statements will prove to be incorrect.

[PICTURE APPEARS HERE] ATSI's teleport facility in San Antonio, Texas, provides satelitte-based communication services within and between the U.S. and Latin America. 18


								
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