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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 approximately $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 Paris.

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.

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