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iBasis 2001 Annual Report

D e a r f e l l o w s h a r e h o l d e r s :

For iBasis, 2001 was a year of impressive accomplishments and progress towards our goal of profitability.

Our annual revenues more than doubled, to $134 million. Minutes of use on The iBasis Network

increased 140% to 1.4 billion minutes, and our end of year run rate exceeded 2 billion minutes. This would

make us the 12th largest international carrier in the world—a remarkable indicator of the pace at which

the world’s international voice traffic is moving from traditional phone networks to VoIP.

Our customer base grew 50% year-over-year as many of the world’s leading carriers connected to

our network. The quality of our customer base also improved, with more than 60% of our VoIP traffic and

revenues now generated by Tier One carriers, the world’s largest and most demanding carriers. We were

proud to count the top 3 U.S. inter-exchange carriers—AT&T, Worldcom and Sprint—as well as Qwest,

among our 10 largest customers at the end of 2001.

Despite lengthening sales cycles for our speech recognition-based customer service solutions,

caused in large part by weakness in the U.S. market, revenues in our Speech Solutions business grew

50% year-over-year.

The well-publicized challenges that faced many telecommunications providers in 2001 had a greater

effect on our stock price than we might have liked. And while several of our customers were forced out of

business during the first half of the year, causing our business to scale more slowly than planned in the

leadershipon:

“When we began this company, VoIP was just an idea,

but one with tremendous promise. One thing we knew for

certain was that to be successful, we had to be responsive

—to the evolving market, to the very large Tier One carriers

who would become our customers, and to our terminating

partners all over the world.

Our search for the best technologies led to our deci-

sion to build our network with Cisco equipment, and we

quickly established the world’s largest international Cisco

Powered Network™ for Internet telephony. Cisco has since

become the undisputed leader in VoIP technology and

the strong relationship between our companies enables

us to quickly introduce new, more efficient technology

as the market requires.

This past year, the quality of our service and our

aggressive business development produced strong results,

as we demonstrated to Tier One carriers that iBasis delivers

PSTN quality at lower cost. To support these very large

and demanding providers, we introduced new Tier

One-focused customer service procedures and systems.

We instituted a rigorous customer report card program

to help us more quickly identify and address our

customers’ concerns. We continued to expand our

termination coverage and capacity through new partner

relationships in our high-volume destination countries.

This dedication to delivering Tier One quality service is

already paying off—with larger traffic volumes from our

largest customers and industry recognition, such as our

recent #1 ranking in Atlantic-ACM’s report on international

wholesale carriers.

In 2001, as our global reach expanded from 40

to more than 80 countries, we moved more service

and technical resources into the regions, allowing us to

interconnect with carriers more quickly and to respond

more efficiently to customer requests. In 2002, as we

scale our business beyond the 2 billion minute run rate,

we will continue to further enhance the quality and

customer focus that have made iBasis the preferred

wholesale provider of the world’s Tier One carriers.” �

responsiveness

Gordon VanderBrug

E x e c u t i v e V i c e P r e s i d e n t

C o - F o u n d e r

Prior to co-founding iBasis, Mr. VanderBrug

held senior management positions with

software tools developer Language

Technology, vision systems pioneer

Automatix, and Polaroid. He holds a Ph.D.

in Computer Science from the University

of Maryland and an M.A. in Mathematics

from Wayne State University.

“We’ve built a Tier One quality business.”

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