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JV will build and market the world's first terabit transoceanic cable
direct city-to-city connection between New York City, London and

13 January 1999

Media contact:  

Jane Windsor
FLAG Telecom Limited
+44 171 317 0811
F: +44 171 317 0808

Dave Scott
GTS Carrier Services and HER
T: +32-2-658-54-62
F: +32-2-658-51-08

London -- FLAG Telecom and Global TeleSystems Group, Inc. (GTS) (Nasdaq
and Easdaq: GTSG) today announced an
agreement to establish a 50:50 joint venture (JV) to build and operate the
world's first transoceanic dual cable system designed to carry voice, high-
speed data and video traffic at speeds up to 1.28 terabit/s. The high-
capacity fibreoptic link between Europe and the United States, to be
known as FLAG Atlantic-1, is expected to offer service in year 2000, or in
approximately 21 months. The JV plans to offer a direct link between
London, Paris and New York, with seamless connections to numerous
other cities in the US, Europe and other countries in the Middle East and
Asia Pacific. The project is subject to financing, the execution of related
agreements and other conditions.

Construction of the initial 160 Gbps portion of FLAG Atlantic-1 will cost
$1 billion. Financing will be provided by a combination of equity
contributions by the parties, customer sales and non-recourse bank debt.
A contract to build the cable has been awarded to Alcatel Submarine
Networks (ASN), as prime supplier. The system's design allows for
160Gbit/s increment upgrades as demand warrants.

FLAG Atlantic-1 will be a loop system, connecting the East Coast of the
United States, with two nodes in midtown and downtown Manhattan, to
two landings in Europe - one in Brittany, France and the other in
Cornwall, UK. The entire FLAG Atlantic-1 system is planned to consist
of three self-healing, high capacity loops with twin terrestrial access
points connecting to the HER (Hermes Europe Railtel) European network
as well as to the existing FLAG cable system, stretching over 27,000
kilometres from the UK to Japan. Customers on FLAG Atlantic-1 will be
able to add traffic either at the Landing Stations or at the city nodes.

The two subsea sections of the cable are approximately 5,900 kilometres
and 6,350 kilometres respectively, with an overall system length of
approximately 12,500 kilometres. The JV will provide backhaul links from
the European landings to the cities of Paris and London, respectively,
where plans are for customers to be able to interconnect seamlessly to
GTS Carrier Services and its GTS network and to other networks of
customers' choice.

Andres Bande, chairman and chief executive officer, FLAG Telecom, said
"A transatlantic link is the natural next step for FLAG Telecom.
FLAG Atlantic-1 is designed to operate at 1.28 terabit/s, or about 25
times the capacity of current transatlantic cable technology. It will be
highly resilient, with great reliability throughout the system. The network
has been designed specifically to meet the level and speed of service
demanded in today's marketplace and the needs of the Internet. The
cable system is privately financed so operators get all the benefits of
cost-effective pricing and flexibility. We see a complimentary fit for FLAG
Telecom with GTS Carrier Services and are pleased to have concluded
this joint venture."

"The interconnection with FLAG Atlantic-1 is designed to allow GTS
Carrier Services to provide its customers with high-capacity cable access
from all major European cities to New York," said Jan Loeber,
president, GTS Carrier Services and managing director HER. "This
is the first transoceanic partnership for GTS Carrier Services. Importantly
for our carrier and ISP customers, it is designed to provide an extension
of HER's proven high-level quality of service."

FLAG Atlantic-1 will use laser-generated light to transmit digital
information over four fibre pairs and is capable of carrying over one
million million bits of information per second. This equates to one
hundred hours of digital video per second, a 25-fold increase on the
current transatlantic cable systems. The cable system will be based on
SDH (Synchronous Digital Hierarchy), and use Dense WDM (Wave
Division Multiplexing). The all-digital system will deliver high-speed,
clear, secure throughput, as weather conditions or electromagnetic
interference do not affect the cable. Broadband capacity accommodates
new data-rich applications such as the Internet, videoconferencing,
multimedia, medical and business imaging.

Spanning 9,200 kilometres across Europe, the HER network currently
serves telecommunications carriers and Internet Service Providers (ISPs)
in 20 cities with the ability to activate four more cities along the network
routes on short notice, depending on customer demand. The HER
network is planned to exceed 18,000 kilometres in the future.

The existing FLAG cable system entered commercial service in
November 1997 and stretches over 27,000 km from the UK to Japan.
With 14 operational landing points in 11 countries, FLAG provides high-
capacity digital services to international carriers, resellers, and Internet
Service Providers (ISPs). The cable route spans many of the world's
fastest growing economies and offers direct connectivity to 75% of the
world's population. Privately financed at a capital cost of US$1.5 billion,
FLAG was designed to meet the soaring demand for international
communications services, providing customers with a world-class
broadband superhighway. FLAG today carries traffic for over 75 of the
world's leading carriers, including more than 20 of the top 30 international
operators in the world.

Global TeleSystems Group is a leading independent owner and operator
of telecommunications companies throughout Europe. GTS has five
primary lines of business: GTS Carrier Services, which provides cross-
border transport in Europe to other telecommunications companies; GTS
Access Services, which provides facilities-based access services to
businesses throughout Europe; GTS Business Services -- Western
Europe, which offers voice, data Internet and other telecommunications
services to businesses; GTS Business Services -- Commonwealth of
independent States (CIS), where GTS is a leading alternative provider of
high quality telecommunications services in Moscow, Kiev, St Petersburg
and other cities in Russia and the CIS; and GTS Mobile Services -- CIS,
which operates cellular businesses in Russia and Ukraine.

Headquartered in the metropolitan Washington DC area, GTS's affiliates
have offices in London, Brussels, Moscow, Budapest, Kiev, Prague and

HER, which began commercial operations in late 1996, today serves
more than 50 customers representing virtually every major segment of
the telecommunications industry.

FLAG Telecom is a leading carriers' carrier, not a telecommunications
operator. The group which will undergo a corporate restructuring in
connection with this project, is privately financed and its shareholders
are: Asian Infrastructure Fund (HK), AT&T Capital (USA), Bell Atlantic
(USA), Dallah Albaraka (Saudi Arabia), General Electric Capital
Corporation (USA), Gulf Associates Inc (USA), Marubeni Corporation
(Japan) and Telecom Holding Co (Thailand). FLAG Telecom has its
headquarters in Bermuda and regional offices in Dubai, Hong Kong, New
York and London. The existing FLAG network operation centre is located
in Fujairah, UAE, which is responsible for system performance
monitoring, isolating and handling incidents along the cable route,
proactive maintenance of the system and activating capacity. With the
addition of the interest in FLAG Atlantic-1, the FLAG Telecom cable
system networks will cover nearly 40,000 kilometres and provide direct
access to the two largest telecommunications and Internet markets on
earth, the USA and Japan. With its blend of traditional and competitive
market characteristics, tailored to both the established and emerging
operators, FLAG Telecom is the carriers' carrier for the 21st century.

This press release includes forward-looking statements that involve risk and uncertainty.
Although the companies believe their expectations reflected in such forward-looking
statements are based on reasonable assumptions, no assurance can be given that such
projections will be fulfilled. Any such forward-looking statement must be considered
along with knowledge that actual events or results may vary materially from such
predictions due to, among other things, political, economic or legal changes and
regulatory approvals in the markets in which GTS does business, competitive
developments, technological developments and risks inherent in the company's business
plan. Readers are referred to the documents filed by GTS with the SEC, specifically the
most recent reports filed under the Securities and Exchange Act of 1934, which identify
important risk factors.


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