Demand Drives Upgrade of FLAG Atlantic-1; Initial RFS Date For FLAG Atlantic-1 Now Expected to Be Q2 2001; RFS Date for Full Loop System Remains Early H2 2001.

Business Editors

LONDON--(BUSINESS WIRE)--March 5, 2001

FLAG Telecom (Nasdaq: FTHL; LSE: FTL), a leading global network services provider and independent carriers' carrier, announced that in response to market demand it is bringing forward the planned upgrade programme for the FLAG Atlantic-1 (FA-1) cable system with an order being placed for an additional 120Gbps of capacity.

The upgrade, which will double FLAG Telecom's own capacity on the system, is expected to be in service in the first quarter of 2002.

FA-1, a multi-terabit dual cable system connecting London, Paris and New York, is at an advanced stage of construction. However, we have experienced severe weather in the North Atlantic in the last few weeks and the initial RFS date of the system is now expected to be in the second quarter of 2001. The RFS date for the full loop system is still currently on schedule for early in the second half of 2001.

Ed McCormack, COO of FLAG Telecom, said: "Following sales commitments and indications of future demand across this high-traffic route, we have accelerated the timing of the upgrade of our capacity on FA-1. We expect the 120Gbps upgrade to be in service by the first quarter of 2002. Upgrade costs will be met out of our own cash resources and are included in our 2001 capital expenditure plans.

"We have experienced some very severe weather conditions and in these circumstances safety and the integrity of the system must take precedence and, as a result, the final lay on the Northern loop has been re-scheduled. The RFS date of the full loop system is currently unaffected and preparations for the cable laying operations on the Southern loop of the system have commenced with several ships being loaded with cable in Calais, France. The commissioning of the cross Channel inter-link is proceeding well and the backhaul links in Europe and the USA have passed acceptance testing. Landing station installations on the Northern loop have also been completed.

"The re-scheduling of the initial RFS date for FA-1 does not affect our 2001 guidance and we remain comfortable with the figures."

The FA-1 system is being built as a loop system with three self-healing, high-capacity loops. FA-1 will use laser-generated light to transmit digital information using Dense Wavelength Division Multiplexing (DWDM). Each of the two separate cables will be capable of carrying over two trillion bits of IP or data traffic per second (2.4Tbps), making the system highly resilient with no single point of failure. FA-1 will be managed on a 24 x 7 basis from the FLAG Telecom Network Operations Center (FNOC) in London.

About FLAG Telecom

FLAG Telecom is a leading global network services provider and independent carriers' carrier providing an innovative range of products and services to the international carrier community, ASPs and ISPs across an international network platform designed to support the next generation of IP over optical data networks. The FLAG Europe-Asia cable stretches from the UK to Japan and entered commercial service in November 1997. FLAG Atlantic-1, the world's first transoceanic terabit cable system, is currently under construction and is scheduled to enter service as a fully restored loop system in early H2 2001. FLAG North Asian Loop is a multi-Terabit intra-Asia system scheduled to enter service in Q2 2001. The FLAG Pacific-1 cable is the longest DWDM system announced to date and is expected to enter service in the second half of 2002. Leveraging this unique network FLAG Telecom's rapidly growing Network Services division markets a range of managed bandwidth and value added services targeted at carriers, ISPs, and ASPs worldwide. Principal shareholders are: Verizon Communications (NYSE: VZ) (USA) and Dallah Al Barakah Group (Saudi Arabia). For further information, visit www.flagtelecom.com.

Statements contained in this Press Release which are not historical facts may be forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. To identify forward-looking statements, look for words like "believes", "expects", "may", "will", "should", "seeks", "intends", "plans", "projects", "estimates" or "anticipates" and similar words and phrases. Discussions of strategy, plans or intentions often contain forward-looking statements. These, and all forward-looking statements, necessarily depend on assumptions, data or methods that may be incorrect or imprecise. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to: the Company's ability to achieve revenues from products and services that are in the early stages of development or operation, the Company's completion of FLAG Atlantic-1, FLAG Pacific-1 and FLAG North Asian Loop within budget and on time, the Company's ability to deploy sophisticated technologies on a global basis, the Company's ability to upgrade and expand its network and respond to customer demands and industry changes, regulatory enactments and changes, competition and pricing pressure, rapid technological change, adverse foreign economic or political events and other factors that are discussed in the Company's Registration Statements on Form F-1 and Form F-4 filed with the Securities and Exchange Commission.

The Company cautions readers not to rely on forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements.