10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  for the Quarterly Period Ended January 31, 2003

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-27898

IDT CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware		22-3415036
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
520 Broad Street, Newark, New Jersey		07102
(Address of principal executive offices)		(Zip Code)
	(973) 438-1000
	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Common Stock, $.01 par value – 25,138,110 shares outstanding as of March 13, 2003

Class A common stock, $.01 par value – 9,816,988 shares outstanding as of March 13, 2003

Class B common stock, $.01 par value – 54,445,566 shares outstanding as of March 13, 2003

As of March 13, 2003, 5,419,963 shares of common stock

and 4,019,163 shares of Class B common stock were held by IDT Corporation

(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date)

IDT CORPORATION

TABLE OF CONTENTS

PART I.     FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of January 31, 2003 and July 31, 2002	3
	Condensed Consolidated Statements of Operations for the three and six months ended January 31, 2003 and 2002	4
	Condensed Consolidated Statements of Cash Flows for the six months ended January 31, 2003 and 2002	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risks.	40
Item 4.	Controls and Procedures	40
PART II.     OTHER INFORMATION		41
Item 1.	Legal Proceedings	41
Item 2.	Changes in Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Submission of Matters to a Vote of Security Holders	41
Item 5.	Other Information	42
Item 6.	Exhibits and Reports on Form 8-K	42
SIGNATURES		43
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER		44
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER		45

2

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)

IDT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	January 31, 2003			July 31, 2002
	(Unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	162,010		$	351,248
Marketable securities		916,465			658,731
Trade accounts receivable, net		123,393			126,153
Other current assets		85,302			65,291
Total current assets		1,287,170			1,201,423
Property, plant and equipment, net		281,974			250,631
Goodwill		34,302			32,702
Licenses and other intangibles, net		25,974			25,503
Investments		39,194			58,903
Other assets		47,771			38,758
Total assets	$	1,716,385		$	1,607,920
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	122,335		$	121,529
Accrued expenses		142,599			132,892
Deferred revenue		122,073			112,183
Capital lease obligations—current portion		26,324			22,960
Other current liabilities		34,122			11,866
Total current liabilities		447,453			401,430
Deferred tax liabilities, net		205,420			233,518
Capital lease obligations—long-term portion		41,540			45,398
Other liabilities		6,565			3,088
Total liabilities		700,978			683,434
Minority interests		162,585			54,956
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares—10,000,000; no shares issued		—			—
Common stock, $.01 par value; authorized shares—100,000,000; 25,135,110 and 24,988,597 shares issued at January 31, 2003 and July 31, 2002, respectively		197			196
Class A common stock, $.01 par value; authorized shares—35,000,000; 9,816,988 shares issued and outstanding at January 31, 2003 and July 31, 2002		98			98
Class B common stock, $.01 par value; authorized shares—100,000,000; 54,441,283 and 54,009,844 shares issued at January 31, 2003 and July 31, 2002, respectively		504			500
Additional paid-in capital		615,250			606,387
Deferred compensation		(9,304	)		—
Treasury stock, at cost, consisting of 5,419,963 shares of common stock and 4,019,163 shares of Class B common stock		(153,713	)		(153,713	)
Accumulated other comprehensive loss		(2,397	)		(2,675	)
Retained earnings		402,187			418,737
Total stockholders’ equity		852,822			869,530
Total liabilities and stockholders’ equity	$	1,716,385		$	1,607,920

See notes to condensed consolidated financial statements.

3

IDT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended January 31,						Six Months Ended January 31,
	2003			2002			2003			2002
Revenues	$	450,767		$	374,025		$	893,938		$	713,234
Costs and expenses:
Direct cost of revenues (exclusive of items shown below)		348,988			293,998			689,055			560,605
Selling, general and administrative		109,791			92,951			219,029			160,092
Depreciation and amortization		21,644			14,850			42,930			30,095
Settlement by Net2Phone of litigation		395			—			(58,034	)		—
Restructuring, severance and impairment charges		653			—			7,326			2,781
Total costs and expenses		481,471			401,799			900,306			753,573
Loss from operations		(30,704	)		(27,774	)		(6,368	)		(40,339	)
Interest income, net		6,865			2,736			14,624			11,549
Other income (expense):
Equity in loss of affiliates		(1,615	)		(11,419	)		(3,811	)		(16,669	)
Investment and other income (expense), net		(3,834	)		8,688			(5,003	)		(5,812	)
Loss before minority interests, income taxes and cumulative effect of accounting change		(29,288	)		(27,769	)		(558	)		(51,271	)
Minority interests		(517	)		5,161			45,950			11,213
Benefit from income taxes		(16,312	)		(15,718	)		(29,958	)		(33,940	)
Loss before cumulative effect of accounting change		(12,459	)		(17,212	)		(16,550	)		(28,544	)
Cumulative effect of accounting change, net of income taxes of $3,525		—			—			—			(146,983	)
Net loss	$	(12,459	)	$	(17,212	)	$	(16,550	)	$	(175,527	)
Earnings per share:
Loss before cumulative effect of accounting change:
Basic	$	(0.16	)	$	(0.23	)	$	(0.21	)	$	(0.39	)
Diluted	$	(0.16	)	$	(0.23	)	$	(0.21	)	$	(0.39	)
Cumulative effect of accounting change, net of income taxes:
Basic	$	—		$	—		$	—		$	(2.03	)
Diluted	$	—		$	—		$	—		$	(2.03	)
Net loss:
Basic	$	(0.16	)	$	(0.23	)	$	(0.21	)	$	(2.42	)
Diluted	$	(0.16	)	$	(0.23	)	$	(0.21	)	$	(2.42	)
Weighted-average number of shares used in calculation of earnings per share:
Basic		79,725			73,382			79,581			72,396
Diluted		79,725			73,382			79,581			72,396

See notes to condensed consolidated financial statements.

4

IDT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended January 31,
	2003			2002
Net cash provided by operating activities	$	10,176		$	19,123
Investing activities
Purchases of property, plant and equipment		(26,890	)		(16,118	)
Issuance of notes receivable		(3,543	)		(1,877	)
Purchases of investments		(2,015	)		(31,837	)
Acquisitions		—			(32,698	)
Increase in cash from consolidation of Net2Phone		64,216			—
Net purchases and maturities of marketable securities		(211,529	)		(89,211	)
Net cash used in investing activities		(179,761	)		(171,741	)
Financing activities
Proceeds from exercise of stock options		4,799			31,318
Repayments of capital lease obligations		(13,408	)		(8,884	)
Repurchases of common stock and Class B common stock		—			(15,639	)
Proceeds from sale of subsidiary stock		—			30,000
Distributions to minority shareholder of a subsidiary		(11,044	)		(10,298	)
Net cash (used in) provided by financing activities		(19,653	)		26,497
Net decrease in cash and cash equivalents		(189,238	)		(126,121	)
Cash and cash equivalents, beginning of period		351,248			1,091,071
Cash and cash equivalents, end of period	$	162,010		$	964,950
Supplemental schedule of non-cash investing activities
Purchases of property, plant and equipment through capital lease obligations	$	6,990		$	16,541

See notes to condensed consolidated financial statements.

5

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of IDT Corporation and its subsidiaries (the “Company” or “IDT”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current year’s presentation. Operating results for the three-month and six-month periods ended January 31, 2003 are not necessarily indicative of the results that may be expected for the year ending July 31, 2003. The balance sheet at July 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2002, as filed with the United States Securities and Exchange Commission.

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a Fiscal Year refers to the Fiscal Year ending in the calendar year indicated (e.g., Fiscal 2002 refers to the Fiscal Year ended July 31, 2002).

Note 2—Consolidation of Net2Phone

Until August 2000, the Company provided Internet telephony services through its majority owned subsidiary Net2Phone, Inc. (“Net2Phone”). On August 11, 2000, the Company completed the sale of 14.9 million shares of Net2Phone’s Class A common stock held by it, at a price of $75 per share, to AT&T Corporation (“AT&T”). In addition, AT&T purchased four million newly-issued shares of Class A common stock from Net2Phone at a price of $75 per share. These transactions reduced the voting stake of IDT in Net2Phone from approximately 56% to 21% and its economic stake in Net2Phone from approximately 45% to 16%. In recognition of these transactions, the Company recorded a gain on sales of subsidiary stock of $1.038 billion during Fiscal 2001, and deconsolidated Net2Phone effective August 11, 2000. Accordingly, the Company accounted for its investment in Net2Phone subsequent to the deconsolidation using the equity method of accounting.

On October 23, 2001, IDT, Liberty Media Corporation (“Liberty Media”) and AT&T formed a limited liability company (“LLC”), which through a series of transactions among IDT, Liberty Media and AT&T held an aggregate of 28.9 million shares of Net2Phone’s Class A common stock, representing approximately 48% of Net2Phone’s outstanding capital stock. Because the LLC holds Class A common stock with two votes per share, the LLC has approximately 65% of the shareholder voting power in Net2Phone. IDT holds the controlling membership interest in the LLC and is the managing member of the LLC. Through July 31, 2002, the Company accounted for its investment in the LLC using the equity method because its control of the LLC was deemed to be temporary due to unilateral liquidation rights held by each of the LLC members.

In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long Lived Assets to be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations for a Disposal of a Segment of a Business. SFAS No. 144 also amends Accounting Research Bulletins (“ARB”) No. 51, Consolidated Financial Statements, as amended by SFAS No. 94,

6

Consolidation of All Majority-Owned Subsidiaries, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. IDT adopted SFAS No. 144 as of August 1, 2002, and thus no longer accounts for its investment in Net2Phone under the equity method of accounting. Therefore, effective August 1, 2002, IDT reconsolidated its investment in Net2Phone. The consolidation resulted in the inclusion by IDT of Net2Phone’s results of operations, financial position and cash flows beginning August 1, 2002. This change in accounting does not change the net income or loss that would have been reported had the Company continued to account for its investment in Net2Phone under the equity method of accounting. On a pro forma basis, the combined revenues of IDT and Net2Phone, as if the consolidation had occurred as of August 1, 2001, after giving effect to the elimination of intercompany transactions, would have been $391.9 million and $755.2 million, for the three and six months ended January 31, 2002, respectively.

Pursuant to the operating agreement of the LLC, AT&T received 29 Class A units of the LLC, and had the right to put 6 of these units to IDT and 23 of these units to Liberty Media after one year. On October 29, 2002, AT&T exercised its put rights and sold all of its Class A units to IDT and Liberty Media for a nominal amount. As a result of this transaction, AT&T is no longer a member of the LLC. IDT continues to hold the controlling membership interest in the LLC and is the managing member of the LLC. As of January 31, 2003, IDT’s effective equity investment in Net2Phone (through the LLC) was 18.8%. Accordingly, the Company recorded in minority interests the 81.2% of Net2Phone’s results attributable to the remaining shareholders of Net2Phone.

Note 3—Business Segment Information

The Company has five reportable business segments: Wholesale Telecommunications Services, Retail Telecommunications Services, IDT Solutions, Internet Telephony, and Media. The operating results of these business segments are distinguishable and are regularly reviewed by the chief operating decision maker.

The Wholesale Telecommunications Services business segment consists of wholesale carrier services provided to other long distance carriers. The Retail Telecommunications Services business segment includes domestic and international prepaid and rechargeable calling cards and consumer long distance services to individuals and businesses. The IDT Solutions business segment, which commenced operations in December 2001 upon the acquisition of assets from Winstar Communications, Inc. and certain of its subsidiaries (“Old Winstar”), operates through Winstar Holdings, LLC (“Winstar”) as a competitive local exchange carrier (“CLEC”) using fixed wireless technology to provide local and long distance phone services, and high speed Internet and data communications solutions. The Internet Telephony business segment reflects the results of the Company’s reconsolidated subsidiary, Net2Phone, effective August 1, 2002, which is a provider of voice over Internet Protocol, or VoIP, telephony products and services. The Media business segment operates several media and entertainment-related businesses, most of which are currently in the early stages of development.

The Company evaluates the performance of its business segments based primarily on operating income (loss). All corporate overhead is allocated to the business segments based on time and usage studies, except for certain specific corporate costs, such as corporate management compensation, treasury management and public relations, and corporate legal, insurance and governance costs, which are not allocated to the business segments. Operating results presented for the principal business segments of the Company are as follows (in thousands):

	Wholesale Telecommunications Services			Retail Telecommunications Services		IDT Solutions (1)			Internet Telephony			Media			Corporate			Total
Three Months Ended January 31, 2003
Revenues	$	95,571		$	308,211	$	20,661		$	21,143		$	5,181		$	—		$	450,767
Segment operating income (loss)		(6,699	)		20,950		(23,181	)		(9,964	)		(2,788	)		(9,022	)		(30,704	)

7

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Three Months Ended January 31, 2002
Revenues		74,388			274,730		19,175			—		5,732			—			374,025
Segment operating income (loss)		(8,019	)		12,014		(19,133	)		—		(5,747	)		(6,889	)		(27,774	)
	Wholesale Telecommunications Services			Retail Telecommunications Services		IDT Solutions (1)			Internet Telephony		Media			Corporate			Total
Six Months Ended January 31, 2003
Revenues	$	179,021		$	615,005	$	45,167		$	43,772	$	10,973		$	—		$	893,938
Segment operating income (loss)		(16,627	)		44,299		(47,868	)		35,502		(4,128	)		(17,546	)		(6,368	)
Six Months Ended January 31, 2002
Revenues		142,546			540,067		19,175			—		11,446			—			713,234
Segment operating income (loss)		(18,809	)		22,922		(19,133	)		—		(12,231	)		(13,088	)		(40,339	)

(1) IDT acquired the assets currently held by Winstar (through which the IDT Solutions segment operates) in December 2001. Accordingly, results of operations for the three and six months ended January 31, 2002 for the IDT Solutions segment reflect only the period that the Company owned and operated the Winstar assets.

Note 4—Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of common share and common share equivalents that are potentially dilutive. Options and contingently issuable shares to purchase 7.2 million shares and 6.8 million shares of common stock were excluded from the calculation of net loss per share for the three and six months ended January 31, 2003, respectively, as their effect would have been anti-dilutive.

Note 5—Comprehensive Loss

The Company’s comprehensive loss consists of the following (in thousands):

	Three Months Ended January 31,						Six Months Ended January 31,
	2003			2002			2003			2002
Net loss	$	(12,459	)	$	(17,212	)	$	(16,550	)	$	(175,527	)
Foreign currency translation adjustments		654			(3,995	)		(248	)		(5,447	)
Unrealized gains (losses) in available-for-sale securities		(1,214	)		(384	)		526			(434	)
Comprehensive loss	$	(13,019	)	$	(21,591	)	$	(16,272	)	$	(181,408	)

8

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 6—Winstar Acquisition

On December 19, 2001, the Company, through a subsidiary, acquired the core domestic telecommunications assets of Old Winstar in connection with Old Winstar’s bankruptcy proceedings pending before the United States Bankruptcy Court for the District of Delaware. The acquiring subsidiary was subsequently renamed Winstar Holdings, LLC. Winstar operates as a CLEC using fixed wireless technology to provide local and long distance phone services, and high speed Internet and data communications solutions. In December 2002, the Company announced that the Winstar services would begin to be offered under the name IDT Solutions.

The purchase price for the Old Winstar assets consisted of a $30.0 million cash payment, $12.5 million in newly issued shares of IDT Class B common stock and 5% of the common equity interests in Winstar (the remaining 95% of the common equity interests as well as all of the preferred equity interests in Winstar were owned by IDT). The acquisition has been accounted for under the purchase method of accounting. The results of operations of Winstar have been included in the Company’s consolidated statements of operations since the date of acquisition.

On April 16, 2002, IDT, through a subsidiary, purchased the 5% of common equity interests in Winstar that it did not own. Consideration consisted of 0.8 million shares of IDT Class B common stock, which were valued at $13.3 million.

9

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following pro forma financial information presents the combined results of operations of IDT and Winstar, as if the Old Winstar asset acquisition had occurred as of August 1, 2001, after giving effect to certain adjustments, including depreciation expense, income taxes and the issuance of IDT Class B common stock as part of the purchase price. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had IDT and Winstar been a single entity during such periods.

	Three Months Ended January 31, 2002			Six Months Ended January 31, 2002
	(in thousands, except per share data)
Revenues	$	396,787		$	797,371
Loss before cumulative effect of accounting change	$	(31,595	)	$	(69,661	)
Net loss	$	(31,595	)	$	(216,645	)
Earnings per share:
Loss before cumulative effect of accounting change
Basic	$	(0.43	)	$	(0.95	)
Diluted	$	(0.43	)	$	(0.95	)
Net loss
Basic	$	(0.43	)	$	(2.96	)
Diluted	$	(0.43	)	$	(2.96	)
Weighted-average number of shares used in calculation of earnings per share:
Basic		73,877			73,139
Diluted		73,877			73,139

Note 7—Price Guarantee of Class B Common Stock

In March 2001, the Company exercised an option to sell to AT&T approximately 2.0 million shares of its Class B common stock for approximately $74.8 million. In conjunction with the formation of the LLC referred to in Note 2 above, IDT guaranteed to AT&T the value of approximately 1.4 million shares of the IDT Class B common stock that was still being retained by AT&T. The guaranty provided that if the value of IDT Class B common stock was less than $27.5 million on October 19, 2002, and AT&T or an affiliate retained all the shares through such date, then IDT would be obligated to pay AT&T the difference between $27.5 million and the then-current market price with cash, additional shares of IDT Class B common stock, or a combination of both, at the option of IDT. In December 2002, the Company and AT&T amended the guarantee to provide that if the value of IDT Class B common stock retained by AT&T and/or certain of its affiliates is less than $29.4 million on December 31, 2003, IDT would be obligated to pay to AT&T (in cash, additional shares of Class B common stock, or a combination of both, at the option of IDT) the difference between $29.4 million and the then-current market price of such retained shares. As a result of this amendment, IDT was not required to make any payments in respect of the price guarantee to AT&T during 2002. In connection with this obligation, the Company recorded in “investment and other income (expense)” charges of $2.1 million and $3.1 million during the three and six months ended January 31, 2003, respectively. During the three and six months ended January 31, 2002, the Company recorded an $8.0 million reversal of a previously recorded charge and a $5.9 million charge, respectively. These charges and reversals were based on changes in the market value of IDT Class B common stock through January 31, 2003 and January 31, 2002, respectively. Based on the closing price of IDT Class B common stock on January 31, 2003, the Company’s total liability to AT&T for the guarantee was $8.4 million and based on the closing price of IDT Class B common stock on July 31, 2002, the Company’s total liability to AT&T for the guarantee was $5.3 million.

10

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 8—Recently Issued Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, An Amendment of FASB Statement No. 123. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of Statement No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, and the interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The Company will adopt the disclosure provisions of SFAS No. 148 beginning with the three and nine months ending April 30, 2003. The adoption of SFAS No. 148 will not have an impact on the Company’s results of operations or financial position, as the Company currently does not plan to change its method of accounting for stock-based compensation.

Note 9—Legal Proceedings

On February 15, 2000, Multi-Tech Systems, Inc. (“Multi-Tech”) filed suit against Net2Phone and other companies in the U.S. District Court for the District of Minnesota. Multi-Tech alleged that “the defendant companies are infringing because they are providing the end users with the software necessary to simultaneously transmit voice and data on their computers in the form of making a phone call over the Internet.” On August 16, 2002, following an initial hearing, called a Markman hearing, the Court issued an order construing the claims of all the patents in suit favorably to Net2Phone’s non-infringement defenses. On October 31, 2002, the Court entered a consent judgment dismissing the patent infringement claims asserted by Multi-Tech. On November 19, 2002, Multi-Tech filed an appeal with the U.S. Court of Appeals for the Federal Circuit.

Four substantially similar class-action lawsuits were filed in the U.S. District Court for the Southern District of New York on behalf of all persons who acquired Net2Phone stock between July 29, 1999 and December 6, 2000. Net2Phone, certain of Net2Phone’s executive officers, directors and underwriters involved in Net2Phone’s initial public offering are named as defendants in these complaints. The complaints allege, in part, that certain underwriters of Net2Phone’s initial public offering violated federal securities laws by failing to disclose that they had solicited and received undisclosed commissions and allocated shares in Net2Phone’s public offering to those investors in exchange for their agreement to purchase Net2Phone shares in the after-market at pre-determined prices. The complaints also allege that, whether or not Net2Phone and the named executives were aware of the underwriters’ arrangements, Net2Phone and the named executives have statutory liability under the federal securities laws for issuing a registration statement in connection with Net2Phone’s initial public offering that failed to disclose that these allegedly undisclosed arrangements existed. The allegations in the suits against Net2Phone are substantially the same as those in suits that have been filed against more than 100 other companies that conducted their initial public offerings at or about the same time. The deadline for all defendants to respond to the complaints has been extended by the court to which the various cases have been assigned. Net2Phone recently has been able to secure the voluntary dismissal from the lawsuits of those executive officers and directors named in the lawsuits. In addition, Net2Phone’s underwriting agreement with Net2Phone’s underwriters provides for indemnification of Net2Phone and its executives and directors for liabilities arising out of misstatements in Net2Phone’s registration statement attributable to material non-disclosures by the underwriters. Net2Phone intends to pursue the indemnification claims against the underwriters. In addition, Net2Phone maintains directors and officers liability insurance coverage, which is expected to substantially cover the costs of defending the various suits. However, an unfavorable decision in these areas could have a material adverse effect on Net2Phone’s business operations, financial condition, results of operations and cash flows.

On January 29, 2001, the Company filed a complaint with the U.S District Court for the District of New Jersey against Telefonica S.A., Terra Networks, S.A., Terra Networks, U.S.A., Inc. and Lycos, Inc. The complaint asserts claims against the defendants for, among other things, breaches of various contracts, breach of

11

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

fiduciary duty, securities violations, fraudulent misrepresentation, negligent misrepresentation, fraudulent concealment and tortious interference with prospective economic advantage. The Company subsequently filed an amended complaint. The defendants filed an answer to the amended complaint, and Terra Networks, S.A. filed a counterclaim for breach of contract alleging that the Company was required to pay to Terra Networks, S.A. $3.0 million, and failed to do so. In September 2002, the Company filed a Motion for Leave to File a Third Amended Complaint to include allegations of a Section 20(a) violation, which is a securities fraud claim against the defendants. The Federal Magistrate granted that application. The defendants filed objections with the District Court Judge and the Company filed opposition. The Company is awaiting the decision of the District Court Judge. Discovery is proceeding and depositions of the parties have been scheduled for March and April 2003.

On May 25, 2001, the Company filed a statement of claim with the American Arbitration Association naming Telefonica Internacional, S.A. (“Telefonica”) as the Respondent. The statement of claim asserts that the Company and Telefonica entered into a Memorandum of Understanding (“MOU”) that involved, among other things, the construction and operation of a submarine cable network around South America (“SAm-I”). The Company is claiming, among other things, that Telefonica breached the MOU by: (1) failing to negotiate SAm-I agreements; (2) refusing to comply with the equity provisions of the MOU; (3) refusing to sell capacity and backhaul capacity pursuant to the MOU; and (4) failing to follow through on a joint venture with IDT whose goal was the marketing of products in the United States and Latin America. Telefonica has responded to IDT’s statement of claim and has filed a statement of counterclaim which alleges, among other things: (1) fraud in the inducement; (2) tortious interference with prospective business relations; and (3) breach of the obligations of good faith and fair dealing and seeks declaratory and injunctive relief. The arbitration is ongoing, but testimony has concluded. The parties are preparing post-hearing briefs, which are due in April 2003.

In September 2001, Alfred West filed a complaint against the Company, in the U.S. District Court for the District of New Jersey seeking monetary damages of $25 million for alleged breach of his employment contract and wrongful termination. The Company filed counterclaims for fraud, negligent misrepresentation, breach of fiduciary duty, tortious interference and breach of contract. The parties have completed fact discovery. Expert reports have been exchanged and motions for summary judgment have been filed.

The acquisition of the core domestic telecommunications assets formerly owned by Old Winstar was approved by the U.S. Bankruptcy Court for the District of Delaware on December 19, 2001 (the “Sale Order”). Although many of the purchased assets were transferred to Winstar on the date of the Sale Order, the transfer of certain of Old Winstar’s regulated telecommunications assets, including its customer base, was subject to a number of federal and state regulatory approvals and to Winstar’s obtaining the necessary telecommunications facilities and services necessary to serve the customers it agreed to purchase from Old Winstar. Subsequently, Winstar entered into interconnection agreements with certain regional bell operating companies (“RBOCs”) and has sought to use services and facilities obtained pursuant to those agreements and pursuant to the RBOCs’ tariffs to complete its network and therefore to be able to transition the customers from service by Old Winstar to Winstar.

Although all of the regulatory approvals necessary for this transition have now been issued, the RBOCs have asserted that Winstar is nevertheless not entitled to obtain uninterrupted services under their interconnection agreements and tariffs unless the RBOCs receive payment of approximately $40 million, in the aggregate, allegedly owed by Old Winstar for access to RBOCs’ facilities and circuits. Based on the claim that Winstar must pay this “cure” amount as a condition of receiving uninterrupted service, the RBOCs have refused in certain instances to provide facilities and services to Winstar that it needs in order to serve its customers directly. As a result, Winstar is operating the business of Old Winstar pursuant to a management agreement approved by the Bankruptcy Court, and is providing services to the customers on behalf of Old Winstar.

Winstar contends that, even were it to assume the Old Winstar contracts with the RBOCs, the amounts set forth in the RBOCs’ proofs of claim greatly exceed any reasonable “cure” for facilities and services that Winstar

12

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

seeks to obtain from the RBOCs, since the claims include significant amounts that Old Winstar owed for services and facilities that Winstar has not requested, and does not need to be able to provide services to the customers following the transition. Winstar also disputes the RBOCs’ claims that they are not obligated to provide services and facilities to Winstar without an assumption or assignment of the Old Winstar contracts and a payment of “cure” amounts. In response to the RBOCs’ refusal to provide service, on April 17, 2002, Winstar filed an Emergency Petition for a Declaratory Ruling with the Federal Communications Commission (“FCC”) (Inc. Docket No. 02-80) asking that the FCC declare that the refusal of the RBOCs to provide the requested services and facilities pursuant to their interconnection agreements and tariffs, and their refusal to transition such services in a manner that does not interrupt services to the customers, is unreasonable and therefore unlawful under federal law. In response, one RBOC (Verizon Communications Inc. (“Verizon”)) filed a counter-petition asking that the FCC declare that the federal telecommunications laws do not require it to provide facilities and services to Winstar without “cure” of Old Winstar’s debts. A number of parties filed comments in the FCC proceeding on both sides of the issue and the proceeding is still pending at the FCC.

In addition, faced with likely termination of service by certain RBOCs to Old Winstar customers in violation of the Telecommunications Act of 1996 and a number of FCC regulations, Winstar sought injunctive relief (in addition to other remedies) in the U.S. District Court for the District of New Jersey against Verizon, Qwest Communications International Inc. (“Qwest”) and Qwest Communications Corp. (“QCC”) to prevent them from discontinuing underlying services which would prevent Winstar from providing service to its customers. Certain interim relief was secured, and Verizon, Qwest and QCC subsequently agreed not to terminate service without appropriate notice to Winstar. This action is ongoing.

The RBOCs further contend that the provision in the Sale Order requiring them to continue serving Old Winstar and its subsidiaries expired on or about April 18, 2002. Winstar promptly moved to enforce that provision of the Sale Order did not expire on April 18, 2002, but the Bankruptcy Court denied its motion. Winstar has appealed the denial of that motion to the U.S. District Court for the District of Delaware. In addition, Winstar asked the District Court for interim relief during the pendency of its appeal to stay the RBOCs and other service providers from cutting off service until the appeal is decided. The District Court has not yet ruled on that request, but has temporarily ordered that service providers, including the RBOCs, may not terminate service or otherwise affect Winstar’s business without permission of the Court.

During preliminary status hearings before the District Court on May 24 and June 4, 2002, the RBOCs and Winstar advised the Court of their willingness to enter into settlement discussions and/or non-binding mediation in an attempt to resolve their disputes. Settlement has been reached with Verizon, and settlement discussions are still ongoing with the other RBOCs. It is too soon to predict whether settlements will be reached with the other RBOCs or, if so, to quantify the monetary effect of such settlements, if any, on Winstar. To the extent that a settlement agreement is not reached with the other RBOCs, the Company expects that the appellate proceedings will resume. One possible outcome of an adverse ruling by the District Court on either the interim relief requested by Winstar or on the merits of the case could be to permit the other RBOCs to terminate services that are being provided to IDT Solution’s customers and therefore to prevent the uninterrupted transition of those customers to Winstar service. A status conference was held on November 8, 2002. Winstar is close to reaching a resolution with Qwest and BellSouth Corp. Formal mediation sessions with SBC Communications Inc. have taken place and that mediation remains ongoing.

Winstar believes that the RBOCs have acted unreasonably and unlawfully in denying its request for services and facilities and will continue, absent a settlement, to advocate its positions vigorously. However, adverse results in one or more of the above-described RBOCs litigations could have a material adverse effect on Winstar, including payment of the “cure” amount described above, or the inability of Winstar to access the RBOCs services and facilities, in which its business is substantially dependent.

13

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On or about July 25, 2002, PT-1 Communications, Inc. (“PT-1”) filed a summons and complaint against the Company in the U.S. Bankruptcy Court for the Eastern District of New York. PT-1 seeks (a) to recover damages for certain fraudulent transfers of property of PT-1’s bankruptcy estate, (b) to recover damages for unjust enrichment, and (c) to recover damages from breaches under the agreement between the parties for the sale of PT-1’s debit card business to the Company, including the Company’s alleged failure to remit payment for use of certain telecommunication and platform services on or through PT-1’s switches. The Company served its answer and counterclaim on September 18, 2002. The parties exchanged initial discovery. Although the litigation is in the early stages, the Company believes it has valid defenses to PT-1’s claims and will vigorously defend this action.

On or about September 16, 2002, a complaint was filed by Mark B. Aronson in the Court of Common Pleas of Allegheny County, Pennsylvania seeking certification of a class consisting of consumers who were charged a fee when the Company switched underlying carriers from Global Crossing Ltd. to AT&T. The Company removed this case to Federal District Court in the Western District of Pennsylvania. At this point no specific damages are sought in the complaint and the Company cannot yet quantify its exposure. The Court is currently contemplating a motion to remand the case to the State Court and/or to transfer the case to the FCC.

On or about September 19, 2002, a complaint was filed by Ramon Ruiz against the Company in the Supreme Court of the State of New York seeking certification of a class consisting of New York residents who allegedly purchased and used the Company’s prepaid calling cards from July 31, 2001 to the present and were charged any fee that was not specifically disclosed on the card packaging prior to purchase. The complaint seeks damages in excess of $100 million. The Company filed its answer on November 19, 2002. The plaintiff filed a motion for a preliminary injunction. The Company is in the process of providing initial responses to discovery requests.

On or about October 11, 2002, a complaint was filed by Paul Zedeck against the Company in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida, seeking certification of a class consisting of Florida residents who allegedly purchased and used the Company’s prepaid calling cards from July 31, 2001 to the present and were charged any fee that was not specifically disclosed on the card packaging prior to purchase. The damages sought have not yet been quantified. The Company filed an answer on December 6, 2002. The Company is evaluating the potential impact and its approach to contesting the claim or attempts to certify the class. The Company is in the process of providing initial responses to discovery requests.

On or about October 18, 2002, a complaint was filed by Morris Amsel against the Company in the Supreme Court of the State of New York seeking certification of a class consisting of consumers who allegedly purchased the Company’s calling cards. Plaintiff’s complaint relates to payphone charges and international rates. The complaint seeks damages of not less that $100 million. On or about November 21, 2002, the Company served an answer to the complaint. The Company also removed this case to the United States District Court for the Southern District of New York. The Company is evaluating the potential impact and its approach to contesting the claim or attempts to certify the class. The Company is also in the process of providing initial responses to discovery requests.

On or about October 24, 2002, Winstar filed suit against Superior Logistics Management Services, Inc. (“Superior”) in the U.S. District Court for the Eastern District of Virginia. The complaint alleges counts for breach of contract, conversion and detinue. Winstar is seeking approximately $50 million in damages, plus punitive damages, costs, and attorney’s fees. On or about November 15, 2002, Superior filed its answer with the Court. Discovery is ongoing, and will be completed around March 2003. A final pre-trial conference is set for March 20, 2003, at which time a trial date will be set.

On or about December 13, 2002, a complaint was filed by Ana Cardoso and Maria Calado against the Company in the Superior Court of the State of New Jersey, Union County, seeking certification of a nationwide class consisting of consumers throughout the United States who allegedly purchased the Company’s prepaid

14

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

calling cards and were charged any fee that was not specifically disclosed on the card packaging prior to purchase. The damages sought have not yet been quantified. The Company is evaluating the potential impact and its approach to contesting the claim or attempts to certify the class. On or about February 6, 2003, the Company served answers to the Complaint. IDT also removed this case to the Federal District Court for the District of New Jersey. The Company has served initial disclosures in this matter.

Univance Telecommunications, Inc. and Univance Marketing Group, Inc. (collectively “Debtors”), filed for Chapter 11 bankruptcy protection on January 23, 2003, in the United States Bankruptcy Court for the District of Colorado. On or about February 11, 2003, the Debtors filed a Notice of Motion for an Order under 11 USC § 365(a) authorizing rejection of the executory contract with Winstar Nunc Pro Tunc February 11, 2003. On or about March 3, 2003, Winstar filed an objection to the Debtors’ motion claiming, inter alia, (1) that the contract is not an executory contract, and thus, cannot be rejected; (2) that the IRU component of the contract is severable and is not executory; and (3) that rejection or termination of the contract should not be permitted until Winstar is able to secure approval for all remaining discontinuances and migration is complete for customers that Winstar opts to migrate. The discontinuance of Debtors service to Winstar will result in the loss of service to potentially one thousand end user customers serviced by Winstar. The parties are negotiating a potential resolution to this matter and discussions are ongoing.

Worldcom, Inc. and its U.S. affiliates (“Worldcom”) filed a petition for Chapter 11 bankruptcy on July 21, 2002. On January 17, 2003, Worldcom demanded that IDT pay Worldcom approximately $19.5 million, representing amounts Worldcom owed IDT and which IDT allegedly deducted by way of offset (pre- and post-petition) against amounts IDT owed to Worldcom. After some discussions between the parties, Worldcom has reduced its demand to approximately $6.0 million for amounts allegedly deducted post-petition by IDT, by way of offset, in connection with pre-petition obligations. Worldcom agreed to engage in a settlement conference with IDT in an effort to determine whether an agreement could be reached regarding IDT’s rights to offset mutual pre-petition obligations in the amount of $6.0 million and Worldcom is not demanding payment of this amount at this time.

The Company is subject to other legal proceedings and claims which have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurances in this regard, in the opinion of the Company’s management, such proceedings, as well as the aforementioned actions, will not have a material adverse effect on results of operations, cash flows or the financial condition of the Company.

Note 10—Settlement by Net2Phone of Litigation

On March 19, 2002, Net2Phone and its ADIR Technologies, Inc. (“ADIR”) subsidiary filed suit in the United States District Court for the District of New Jersey against Cisco Systems, Inc. (“Cisco”) and a Cisco executive who had been a member of ADIR’s board of directors. The suit arose out of the relationships that had been created in connection with Cisco’s and Net2Phone’s original investments in ADIR and out of ADIR’s subsequent purchase of NetSpeak, Inc. in August 2001. In July 2002, Net2Phone and ADIR agreed to settle the suit and all related claims against Cisco and the Cisco executive in exchange for: (i) the transfer, during the first quarter of fiscal 2003, to Net2Phone of Cisco’s and Softbank Asia Infrastructure Fund’s respective 11.5% and 7.0% interests in ADIR, and (ii) the payment by Cisco, during such quarter, of $19.5 million to Net2Phone and ADIR. As a result of this settlement, Net2Phone recognized for the quarter ended October 31, 2002, a gain of $58.4 million consisting of (i) a $38.9 million reduction in minority interests as a result of the transfer of the ADIR shares and (ii) the receipt of settlement proceeds of $19.5 million. During the second quarter 2003, Net2Phone approved and therefore recorded an additional $0.4 million in executive compensation directly related to the Cisco settlement.

15

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11—Restructuring, Severance and Impairment Charges

The following table summarizes the charges included in restructuring, severance and impairment charges in the condensed consolidated statements of operations:

	Three months ended January 31,					Six months ended January 31,
	2003			2002		2003			2002
	(in thousands)					(in thousands)
First quarter 2003 restructuring	$	46		$	—	$	6,039		$	—
Restructuring reserve adjustments					—		(2,158	)		—
Separation agreements		658			—		1,995			—
Asset impairment		(51	)		—		1,450			2,781
Total	$	653		$	—	$	7,326		$	2,781

First Quarter 2003 Restructuring

On October 24, 2002, Net2Phone announced that it was consolidating certain business operations. This consolidation reduced Net2Phone’s staff by approximately 20%, or about 55 employees. As a result of this restructuring, Net2Phone incurred a charge of $3.6 million related to employee termination costs, $0.9 million in exit costs related to the reduction of operations at various locations, and $1.5 million in impairment charges related to the write-off of various equipment and network build-outs. As of January 31, 2003, approximately $1.8 million of involuntary termination benefits have been paid and charged against the restructuring liability.

Restructuring Reserve Adjustments

During the three months ended April 30, 2002, Net2Phone recognized a charge of $4.7 million related to the elimination of specific connectivity and network related costs. As a result of successful settlement negotiations with vendors regarding cancellation charges, Net2Phone reversed during the six months ended January 31, 2003, $2.9 million of those previously recognized charges. During the six months ended January 31, 2003, Net2Phone also reversed approximately $0.5 million of previously recognized severance expense as a result of the subsequent retention of several individuals whose employment had been initially terminated. In addition, Net2Phone recognized approximately $1.2 million in additional costs associated with exiting certain businesses that were discontinued or sold in prior fiscal years.

Separation Agreements

As a result of separation agreements entered into in Fiscal 2002 with Net2Phone’s former Chief Executive and Chief Financial Officers, Net2Phone incurred charges of $0.7 million and $2.0 million during the three and six months ended January 31, 2003, respectively, and expects to incur future charges of approximately $1.8 million relating to these separation agreements.

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended July 31, 2002, as filed with the United States Securities and Exchange Commission.

As used below, unless the context otherwise requires, the terms “the Company,” “IDT,” “we,” “us,” and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and their subsidiaries, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the notes to the condensed consolidated financial statements, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. Such forward-looking statements include, among other things, our plans to implement our growth strategy, improve our financial performance, expand our infrastructure, develop new products and services, expand our sales force, expand our customer base and enter international markets, and the possible outcome of our litigation. Such forward-looking statements also include our expectations concerning factors affecting the markets for our products and services, such as changes in the U.S. and the international regulatory environment and the demand for long-distance telecommunications. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statements. These risks and uncertainties include, but are not limited to, those risks discussed in this report. In addition to the factors specifically noted in the forward-looking statements, other important factors that could result in those differences include: potential declines in prices for our products and services; our ability to maintain and grow our retail telecommunications services, particularly our prepaid calling card business; availability of termination capacity; financial stability of our customers; our ability to maintain carrier agreements with foreign carriers; effectiveness of our marketing and distribution efforts; increased competition, particularly from regional bell operating companies; our ability to manage our growth; competitiveness of our Winstar subsidiary; impact of government regulation; our ability to obtain telecommunications products or services required for our products and services; general economic conditions, particularly in the telecommunications markets; and the other factors set forth in our Annual Report on Form 10-K for Fiscal 2002. The forward-looking statements are made as of the date of this Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth herein and the other information set forth from time to time in our reports filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for Fiscal 2002.

Overview

General

IDT Corporation, through its IDT Telecom, Inc. (“IDT Telecom”) subsidiary, is a facilities-based, multinational carrier that provides telecommunications services and products to retail and wholesale customers worldwide, including prepaid debit and rechargeable calling cards, wholesale carrier services and consumer long distance services. Winstar Holdings, LLC (“Winstar”), a wholly owned subsidiary of IDT, is a broadband and telephony service provider to commercial and governmental customers. Through its fixed-wireless and fiber infrastructure, Winstar offers local and long distance phone services, and high-speed Internet and data communications solutions. In December 2002, we announced that the Winstar services would begin to be offered under the name IDT Solutions and, accordingly, this business segment is referred to in this report as our IDT Solutions segment. We also operate, through our IDT Media, Inc. (“IDT Media”) subsidiary, several media and entertainment-related

17

businesses, most of which are currently in the early stages of development. Effective August 1, 2002, we reconsolidated our Net2Phone subsidiary, which is a provider of voice over Internet Protocol, or VoIP, telephony products and services.

IDT Telecom services consist of retail services, including prepaid and rechargeable calling cards and domestic long distance services (the “Retail Telecommunications Services” segment), as well as wholesale carrier services (the “Wholesale Telecommunications Services” segment). IDT Telecom delivers its telecommunications services over a high-quality switch network based in the U.S. and Europe and owned and leased capacity on undersea fiber-optic cables, which connect our U.S. facilities with our international facilities and with the facilities of our foreign partners in Europe, Latin America and Asia. We monitor our network 24 hours a day, seven days a week, through an automated network operations center. In addition, we obtain transmission capacity from other carriers. IDT Telecom delivers our telecommunications services over a network consisting of more than 190 switches in the United States, Europe and South America, including nine international “gateway” switches. IDT Telecom also owns and leases capacity on 14 undersea fiber-optic cables that connect its U.S. facilities with its international facilities and with third-party facilities in Europe, Latin America and Asia.

As of January 31, 2003, we provide consumer long distance services to approximately 600,000 individual and business customers in the United States. In addition, as of January 31, 2003, we had approximately 214 wholesale carrier customers (i.e., other telecommunications companies that purchase our telecommunications services to terminate their traffic) located in the United States and Europe.

IDT Media was organized in March 2002 in order to develop and manage a portfolio of already existing and newly targeted media-related businesses. IDT Media comprises five business lines: radio, 3-D animation, brochure distribution, video-to-desktop delivery, and call center services.

Outlook

In recent years, we have derived the majority of our revenues from IDT Telecom’s businesses, consisting primarily of our Retail Telecommunications Services segment, which markets prepaid and rechargeable calling cards and consumer long distance services, and our Wholesale Telecommunications Services segment, which markets wholesale carrier services. These businesses have accounted for the bulk of our operating expenses as well (excluding impairment charges).

Throughout the remainder of Fiscal 2003, we anticipate increased growth in our wholesale carrier revenues. We anticipate growth in IDT Telecom’s Retail Telecommunications Services revenues as well, and we expect that Retail Telecommunications Services revenues will continue to account for approximately 75% to 80% of IDT Telecom’s total revenues over the fiscal year.

The worldwide telecommunications industry has been characterized in recent years by intense price competition, which has resulted in a significant decline in both our average per-minute price realizations and our average per-minute termination costs. The lower price environment has led some of our competitors to de-emphasize their retail services and/or wholesale carrier operations in order to focus on higher margin telecommunications businesses. In addition, many of our competitors in both of these market segments have ceased operations altogether. This has helped us gain some market share, particularly in the retail calling card business. However, in both the retail telecommunications services and wholesale carrier businesses, our remaining competitors, although fewer in number, have continued to aggressively price their services. This has led to continued erosion in pricing power, both in our retail and wholesale markets, and we have generally had to pass along our per-minute cost savings to our customers, in the form of lower prices. Therefore, although IDT Telecom’s minutes of use have been increasing strongly, IDT Telecom’s revenues have increased at a much slower rate. We expect to see some further price declines throughout the remainder of Fiscal 2003, as the markets in which we compete have generally remained competitive.

18

Since our acquisition of the Winstar assets in December 2001, the IDT Solutions segment has experienced working capital deficits. We have restructured Winstar’s operations by undertaking significant cost saving measures, including the downsizing of the Winstar network and a significant reduction in headcount, aimed at reducing the working capital deficit. However, at this time, we expect Winstar to continue to generate operating losses and to require funding for its capital expenditure needs for the foreseeable future. We expect Winstar to continue to reduce its operating losses throughout the remainder of Fiscal 2003, aided by a combination of increased revenues and improved cost controls.

We have also developed various new businesses within our Media segment. We anticipate that Media will continue to incur significant costs related to its existing and other new businesses. The timing and magnitude of further revenues and/or operating profits from these new businesses remains uncertain.

Critical Accounting Policies

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. Preparing condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in Note 1 to the July 31, 2002 consolidated financial statements included in our Form 10-K. Critical accounting policies are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies for us include revenue recognition, allowance for doubtful accounts, goodwill, and valuation of long-lived and intangible assets. For additional discussion of our critical accounting policies, see our Management’s Discussion & Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for Fiscal 2002.

In order to enable a straightforward comparison between the three and six months of Fiscal Year 2003 and the three and six months of Fiscal Year 2002, and to provide a better understanding of IDT’s core operating results for the three and six months of Fiscal Year 2003, this Form 10-Q presents, as additional information, some financial figures excluding the IDT Solutions segment and Net2Phone. The Winstar assets, through which our IDT Solutions segment operates, were acquired during the second quarter of Fiscal Year 2002, and contributed to revenues for only part of that quarter, and Net2Phone was not consolidated during the first or second quarter of Fiscal Year 2002.

Three Months Ended January 31, 2003 Compared to Three Months Ended January 31, 2002

Results of Operations

We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, certain adjustments are properly not reflected in the operating business segments discussions, but are only reflected in our Consolidated discussion.

Consolidated

Revenues.    Our revenues increased 20.5%, from $374.0 million in the three months ended January 31, 2002 to $450.8 million in the three months ended January 31, 2003. The increase is due primarily to the significant growth in our telecommunications minutes of use, the acquisition of the Winstar assets and the reconsolidation of Net2Phone. Excluding revenues from our IDT Solutions segment, which was acquired in December 2001, and our Internet Telephony segment, consisting of Net2Phone, which was reconsolidated effective August 1, 2002, our revenues increased 15.2%, to $409.0 million in the three months ended January 31, 2003. The increase in our consolidated revenues (excluding IDT Solutions and Internet Telephony) is mainly attributable to a 15.7% increase in IDT Telecom’s revenues. The growth in IDT Telecom’s revenues primarily resulted from a 53.8% growth in minutes of use (excluding minutes related to our consumer long distance business) from 2.6 billion in the three months ended January 31, 2002 to 4.0 billion in the three months ended January 31, 2003.

19

Direct Cost of Revenues.    Direct cost of revenues increased by 18.7%, from $294.0 million in the three months ended January 31, 2002 to $349.0 million in the three months ended January 31, 2003. The increase in absolute dollar terms is due primarily to the growth in our telecommunications minutes of use, the acquisition of the Winstar assets and the reconsolidation of Net2Phone. Excluding direct cost of revenues from our IDT Solutions and Internet Telephony segments, direct cost of revenues increased 14.9% to $314.3 million in the three months ended January 31, 2003. As a percentage of total revenues, direct costs decreased from 78.6% in the three months ended January 31, 2002 to 77.4% in the three months ended January 31, 2003 (and decreased from 77.1% to 76.8% excluding our IDT Solutions and Internet Telephony segments). The decline in direct costs as a percentage of revenues is attributable to overall higher revenues due to a growth of minutes-of-use and because of continued operating efficiency gains and lower prices from suppliers, as measured on a per-minute basis, which outweighed the decline in average revenue-per-minute, as detailed below.

Selling, General and Administrative.    Selling, general and administrative expenses increased 18.1%, from $93.0 million in the three months ended January 31, 2002 to $109.8 million in the three months ended January 31, 2003. Excluding selling, general and administrative expenses from our IDT Solutions and Internet Telephony segments, selling, general and administrative expenses decreased 1.9% to $76.8 million in the three months ended January 31, 2003. As a percentage of total revenues, selling, general and administrative expenses decreased from 24.9% in the three months ended January 31, 2002 to 24.4% in the three months ended January 31, 2003 (and decreased from 21.2% to 18.8% excluding our IDT Solutions and Internet Telephony segments). Selling, general and administrative expense declined as a percentage of revenues, due primarily to the significant growth in our revenues for the three months ended January 31, 2003.

We anticipate that selling, general and administrative expenses will increase in dollar terms in the future, and will continue to be a significant percentage to total revenues, as we expand both IDT Telecom’s businesses and our Media businesses.

Depreciation and Amortization.    Depreciation and amortization expense increased 46.0%, from $14.8 million in the three months ended January 31, 2002 to $21.6 million in the three months ended January 31, 2003. Excluding depreciation and amortization expense from our IDT Solutions and Internet Telephony segments, depreciation and amortization expense increased 6.9%, to $15.5 million in the three months ended January 31, 2003 primarily as a result of our higher fixed asset base during the three months ended January 31, 2003, reflecting the expansion of our telecommunications network infrastructure and facilities. As a percentage of revenues, depreciation and amortization expense increased from 4.0% in the three months ended January 31, 2002 to 4.8% in the three months ended January 31, 2003 (and decreased from 4.1% to 3.8% excluding our IDT Solutions and Internet Telephony segments). Depreciation and amortization expense declined as a percentage of revenues (excluding IDT Solutions and Internet Telephony), due primarily to the significant growth in our revenues for the three months ended January 31, 2003. We anticipate that depreciation expense will continue to increase in absolute dollars, as we continue to add to our asset base, particularly in IDT Telecom’s businesses, as we implement our growth strategy.

Restructuring, Severance and Impairment Charges.    Restructuring, severance and impairment charges were $0.7 million in the three months ended January 31, 2003. Refer to the respective section of the Internet Telephony segment for a full discussion on restructuring, severance and impairment charges.

Income (Loss) from Operations.    Our loss from operations was $27.8 million in the three months ended January 31, 2002 compared to $30.7 million in the three months ended January 31, 2003. Excluding $33.2 million of loss from operations from our IDT Solutions and Internet Telephony segments, our loss from operations was $8.6 million for the three months ended January 31, 2002 compared to income from operations of $2.5 million in the three months ended January 31, 2003. The growth in our income from operations (excluding our IDT Solutions and Internet Telephony segments) was due primarily to IDT Telecom’s increased revenues and gross margins.

Interest.    Net interest income was $2.7 million in the three months ended January 31, 2002, compared to net interest income of $6.9 million in the three months ended January 31, 2003.

20

Other Income (Expense).    Other income (expense) amounted to an expense of $2.7 million in the three months ended January 31, 2002, compared to an expense of $5.4 million in the three months ended January 31, 2003. Included in other expense in the three months ended January 31, 2003 were losses of $1.6 million associated with recording our pro-rata share of an affiliate’s losses, through the equity method, a charge of $2.1 million related to an obligation to guarantee to AT&T the value of 1.4 million shares of IDT Class B common stock owned by AT&T, and net losses from other investments totaling $1.7 million.

Included in other expense in the three months ended January 31, 2002 were losses of $11.4 million associated with recording our pro-rata share of Net2Phone’s net losses through the equity method of accounting, an $8.0 million reversal of a previously recorded charge related to an obligation to guarantee to AT&T the value of 1.4 million shares of IDT Class B common stock owned by AT&T, and net income from other investments totaling $0.7 million.

Minority Interests.    Minority interests were $5.2 million of expense and $0.5 million of income for the three months ended January 31, 2002 and 2003, respectively. The $5.7 million increase in minority interest income was primarily attributable to the reconsolidation of Net2Phone, of which we own 18.8% as of January 31, 2003. Accordingly, we recorded in minority interests the 81.2% of Net2Phone’s results attributable to the remaining shareholders of Net2Phone.

Income Taxes.    We recorded an income tax benefit of $15.7 million in the three months ended January 31, 2002, compared to an income tax benefit of $16.3 million in the three months ended January 31, 2003.

Net Loss.    Our consolidated net loss was $17.2 million in the three months ended January 31, 2002 compared to consolidated net loss of $12.5 million in the three months ended January 31, 2003. The recording of a net loss in the three months ended January 31, 2003 and 2002, was a result of the combined factors for each of the segments discussed below, as well as those items detailed above.

IDT Telecom—Retail Telecommunications Services and Wholesale Telecommunications Services Segments

Revenues.    IDT Telecom’s revenues increased 15.7%, from $349.1 million in the three months ended January 31, 2002 to $403.8 million in the three months ended January 31, 2003.

IDT Telecom’s revenues increased primarily as a result of a 53.8% growth in minutes of use (excluding minutes related to our consumer long distance business) from 2.6 billion in the three months ended January 31, 2002 to 4.0 billion in the three months ended January 31, 2003. IDT Telecom increased its minutes of use in both its Retail Telecommunications Services and Wholesale Telecommunications Services segments, in both the U.S. and international operations. IDT Telecom’s minutes of use grew at a faster rate than did its revenues, reflecting a decline in its average revenue-per-minute, from $0.124 during the three months ended January 31, 2002 to $0.090 in the three months ended January 31, 2003. IDT Telecom’s decrease in its average revenue-per-minute is due to a number of factors, including (i) continued competition in both retail and wholesale markets, and (ii) introduction of new calling cards. During the second quarter of Fiscal 2003, approximately 20% of IDT Telecom’s revenues originated outside the United States signifying the growing international scope of our operations.

Revenues from IDT Telecom’s Retail Telecommunications Services segment increased 12.2%, from $274.7 million in the three months ended January 31, 2002 to $308.2 million in the three months ended January 31, 2003, as a result of increased sales of IDT-branded calling cards and higher consumer long distance revenues. As a percentage of IDT Telecom’s overall revenue, Retail Telecommunications Services’ revenues decreased from 78.7% in the three months ended January 31, 2002 to 76.3% in the three months ended January 31, 2003, as revenues from our Wholesale Telecommunications Services segment grew at a faster rate than did our retail businesses revenues. IDT Telecom’s calling card sales increased 8.4%, from $247.8 million in the three months ended January 31, 2002 to $268.6 million in the three months ended January 31, 2003. This increase was primarily generated by the introduction of several new calling cards. A new card is generally introduced with attractive low per-minute pricing, which is gradually increased as the card gains acceptance and builds market share. The increase in new card introductions was part of IDT’s plan to aggressively seek market share in both

21

its traditional Northeast U.S. markets, as well as in several other key areas, such as California, Florida and Texas. In addition, the growth in our calling card revenues resulted from the expansion of our distribution network beyond our traditional Northeastern U.S. territory, as well as the continued strong growth of European operations, both in our U.K. market as well as in other markets such as Spain and the Netherlands. During Fiscal 2002, IDT Telecom launched calling card operations in Argentina. Although sales of calling cards in Latin America during the three months ended January 31, 2003 were not material, we expect sales in this region to grow at a faster rate than other regions. By the end of the second quarter of Fiscal 2003, nearly 10% of U.S. domestic calling card revenues were associated with new cards, which had the effect of reducing overall gross margins on our portfolio of calling cards. We expect gross margins to gradually improve during the remainder of Fiscal Year 2003, as these new cards begin to mature. However, this improvement will be partially offset by the continued introduction of new, attractively-priced cards in certain key markets where IDT seeks to gain market share.

In the middle of the second quarter of Fiscal Year 2003, IDT entered into an agreement with Walgreen Co. (“Walgreen”), the nation’s largest drugstore chain, to become the exclusive provider of Walgreen’s prepaid calling cards. The cards were introduced at the retail chain’s 4,000 stores during December and January. Since the program was launched towards the end of the second quarter, revenues from the sale of these cards did not represent a significant amount of revenues for the quarter. However, revenue from the Walgreen’s program has been continually increasing.

Calling card sales as a percentage of IDT Telecom’s Retail Telecommunications Services revenues decreased from 90.2% in the three months ended January 31, 2002 to 87.2% in the three months ended January 31, 2003, as revenues from consumer long distance services grew at a faster rate than did calling card revenues. Revenues from consumer long distance services, in which we act as a switchless reseller of another company’s network, experienced significant growth in minutes of use in the three months ended January 31, 2003, with revenues increasing 49.0%, from $26.3 million in the three months ended January 31, 2002 to $39.2 million in the three months ended January 31, 2003. The consumer long distance revenue increase is attributable to the continued growth of our flat-rate, $0.05 a minute long distance calling plan, which has been driven by increased marketing expenditures, resulting in a significant increase in the number of consumer long distance customers. At January 31, 2003, we had approximately 600,000 active customers for our consumer long distance services, compared to approximately 376,000 customers at January 31, 2002. Beginning in early Fiscal 2003, we significantly increased the marketing and advertising expenditures of our consumer long distance business, in an attempt to accelerate the growth of our customer base. These expenditures, while reducing consumer long distance operating profits in the near term, are expected to lead to a rise in the number of active customers, revenues and profits over the longer term. In addition, as our customer base has grown, we have begun to place an increased emphasis on customer retention initiatives. Going forward, our marketing efforts for our consumer long distance business will focus on customer retention and increasing the average revenue per customer, in addition to attracting new customers.

Revenues from IDT Telecom’s other Retail Telecommunications Services businesses, consisting primarily of call reorigination services, amounted to $0.6 million in the three months ended January 31, 2002, versus $0.4 million in the three months ended January 31, 2003.

IDT Telecom’s Wholesale Telecommunications Services revenues increased 28.5%, from $74.4 million in the three months ended January 31, 2002 to $95.6 million in the three months ended January 31, 2003. As a percentage of IDT Telecom’s total revenues, Wholesale Telecommunications Services revenues increased from 21.3% in the three months ended January 31, 2002 to 23.7% in the three months ended January 31, 2003. The increase in revenues resulted from an increase in wholesale carrier minutes, despite a significant decline in the average revenue-per-minute. In recent years, IDT Telecom’s wholesale carrier business has curtailed or ceased completely its sales to financially unstable carriers. During the three months ended January 31, 2003, IDT Telecom continued to rebuild its customer base through the addition of new customers and by increasing sales to its larger, more financially stable customers. IDT anticipates that its wholesale operations in the third quarter of Fiscal Year 2003 will show a 3%-5% increase in revenues over those of Q2 Fiscal 2003, with further revenue gains possible in Q4. Revenue gains are expected to be driven primarily by increased sales to Tier 1 telecom carriers, both in the U.S. and in Europe. IDT

22

anticipates that the fastest growing segment of its worldwide wholesale carrier business will be its South American carrier operation. However, given its size relative to IDT’s U.S.-based and Europe-based wholesale divisions, IDT does not expect its South American carrier business to represent a significant portion of its overall wholesale carrier business in Fiscal Year 2003. IDT is currently setting-up wholesale carrier operations in Asia, and anticipates generating wholesale revenues in this region before the end of Fiscal Year 2003.

Direct Cost of Revenues.    Direct cost of revenues for IDT Telecom increased 14.9%, from $273.1 million in the three months ended January 31, 2002 to $313.8 million in the three months ended January 31, 2003, due to the higher revenue base. As a percentage of total IDT Telecom’s revenues, direct costs declined to 77.7% in the three months ended January 31, 2003, from 78.2% in the three months ended January 31, 2002. The decrease in direct costs as a percentage of total revenues is attributable to overall higher revenues due to the strong growth of minutes-of-use and because of continued operating efficiency gains and lower prices from suppliers. The decrease in direct costs as a percentage of total revenues occurred despite some increases in our termination costs to key destinations, increases in our costs for toll-free “800” traffic, and network capacity constraints, due to our strong growth of minutes-of-use, which led to a small, temporary narrowing of our gross margins in Q2 2003.

Selling, General and Administrative.    IDT Telecom’s selling, general and administrative expenses increased 3.4%, from $59.0 million in the three months ended January 31, 2002 to $61.0 million in the three months ended January 31, 2003. The increase in selling, general and administrative expenses for IDT Telecom’s operations is due to increased sales and marketing efforts for our Retail Telecommunications Services segment, as well as increased salaries, facilities costs and professional fees related to the expansion of our infrastructure and bases of operation to facilitate our current and anticipated future sales growth.

As a percentage of IDT Telecom’s total revenues, selling, general and administrative expenses were 16.9% in the three months ended January 31, 2002, compared to 15.1% in the three months ended January 31, 2003. IDT anticipates that selling, general and administrative costs will remain steady, as a percentage of revenues, as IDT continues to add to its personnel base in order to accommodate the expected revenue growth during the next few quarters.

Depreciation and Amortization.    IDT Telecom’s depreciation and amortization expense rose 13.8%, from $13.0 million in the three months ended January 31, 2002, to $14.8 million in the three months ended January 31, 2003, reflecting the continued expansion of our fixed asset base, as we invest to accommodate our current and anticipated future growth. As a percentage of IDT Telecom’s total revenues, depreciation and amortization expense was 3.7% in the three months ended January 31, 2002 and 2003.

Income from Operations.    IDT Telecom recorded income from operations of $4.0 million in the three months ended January 31, 2002, compared to income from operations of $14.3 million in the three months ended January 31, 2003. The increase in income from operations resulted primarily from the revenue growth and improved gross margins.

IDT Solutions Segment

We acquired the assets currently held by Winstar on December 19, 2001. Accordingly, the results of operations for our IDT Solutions segment, which operates through Winstar, for the three months ended January 31, 2002, reflect only the results of operations during such period that we owned and operated Winstar.

Revenues.    Revenues from our IDT Solutions segment increased 7.8%, from $19.2 million in the three months ended January 31, 2002 to $20.7 million in the three months ended January 31, 2003. The increase in revenues is due to the fact that the Winstar assets were acquired in December 2001, and therefore generated revenues only for the balance of the quarter.

23

Throughout the remainder of Fiscal 2003, our IDT Solutions segment will focus on its facilities-based switched broadband and local service offerings in 22 geographic markets. Within these 22 core markets, our IDT Solutions segment has a network of over 3,000 provision-ready buildings (i.e., buildings in which its technology is currently deployed). Furthermore, our IDT Solutions segment has access rights and options to connect to its network more than 1,800 additional buildings that are not currently outfitted for operation but that have lines-of-site to existing hub buildings.

Direct Cost of Revenues.    Direct cost of revenues for our IDT Solutions segment increased 19.1%, from $20.4 million in the three months ended January 31, 2002 to $24.3 million in the three months ended January 31, 2003. The increase in direct cost of revenues is due to the fact that the Winstar assets were acquired in December 2001, and therefore generated revenues only for the balance of the quarter. Direct cost of revenues consist primarily of two components, connectivity for the network backbone and lease payments for the network of provision-ready buildings. Network backbone costs for the three months ended January 31, 2003 totaled $17.1 million, accounting for 70.4% of total direct cost of revenues. Direct cost of revenues for the three months ended January 31, 2003 associated with lease payments for the building network were $7.2 million. Winstar has various ongoing initiatives to groom its network. One in particular, involves using the Winstar wireless technology to link its hubs (which collect traffic from its wireless sites) to its switches (where the traffic is routed to its ultimate destination). The goal is to replace the traditional terrestrial wireline capacity provided by local exchange phone companies connecting the hubs to the switches with Winstar wireless technology. This initiative can reduce costs by eliminating payments to local exchange carriers for those wireline connections. This initiative can also extend IDT Solution’s control over customer traffic and can provide further redundancy for customers, by reducing the dependence on terrestrial capacity to carry their traffic.

Selling, General and Administrative.    Selling, general and administrative expenses associated with our IDT Solutions segment decreased 10.8%, from $17.6 million in the three months ended January 31, 2002 to $15.7 million in the three months ended January 31, 2003. The decrease is primarily due to the significant cost saving measures undertaken by IDT subsequent to the acquisition of the Winstar assets, which included the downsizing of the Winstar network and a significant reduction in head count. The main component of selling, general and administrative expenses for the three months ended January 31, 2003 was employee compensation and benefits, accounting for $12.0 million, or 76.4% of total selling, general and administrative expenses. Since the acquisition of the Winstar assets in December 2001, the number of employees of Winstar has been reduced from approximately 750 to approximately 500 as of January 31, 2003.

Depreciation and Amortization.    Depreciation and amortization expense was $0.4 million in the three months ended January 31, 2002 compared to $3.8 million in the three months ended January 31, 2003. As a percentage of IDT Solutions revenues, depreciation and amortization was 2.1% in the three months ended January 31, 2002 compared to 18.4% in the three months ended January 31, 2003.

Loss from Operations.    IDT Solutions loss from operations in the three months ended January 31, 2002 was $19.1 million, compared to $23.2 million in the three months ended January 31, 2003. The increase in loss from operations reflects the fact that Q2 Fiscal 2002 included IDT Solutions’ results for only a portion of the quarter as noted above.

Media Segment

Revenues.    Revenues from Media’s businesses decreased 8.8%, from $5.7 million in the three months ended January 31, 2002 to $5.2 million in the three months ended January 31, 2003. In Fiscal 2002, Media gradually exited its Digital Subscriber Line (“DSL”) business. Currently, Media’s revenues are primarily comprised of revenues from its CTM Brochure Display, Inc. (“CTM”) business, a brochure distribution company.

24

Direct Cost of Revenues.     Direct cost of revenues decreased from $0.6 million in the three months ended January 31, 2002 to $0.5 million in the three months ended January 31, 2003. As a percentage of Media’s revenues, these costs decreased from 10.5% for the three months ended January 31, 2002 to 9.6% for the three months ended January 31, 2003. Most of Media’s businesses remain in the early stages of their development. As such, we anticipate that direct costs will continue to account for a relatively small percentage of Media’s revenues, with most of the expenses associated with these businesses to be incurred in the form of selling, general, administrative and development costs.

Selling, General and Administrative.    Selling, general and administrative expenses decreased 29.7%, from 10.1 million in the three months ended January 31, 2002 to $7.1 million in the three months ended January 31, 2003. The decrease in selling, general, and administrative expenses reflect the exit from the DSL Internet access business and from the video-streaming business, as well as the general refocusing of the portfolio of businesses towards media related businesses. In addition, during Fiscal 2002, Media implemented stricter management controls over operating expenses. Partially offsetting the general reduction in costs, were additional expenses incurred with the startup of a newly created customer service outsourcing operation.

Depreciation and Amortization.     Depreciation and amortization expense was $0.8 million in the three months ended January 31, 2002, versus $0.4 million in the three months ended January 31, 2003. This decrease is due to the reduced fixed asset base resulting from our sale of our former DSL business. As a percentage of revenues, depreciation and amortization expense fell to 7.7% in the three months ended January 31, 2003, from 14.0% in the three months ended January 31, 2002.

Loss from Operations.    Loss from operations in the three months ended January 31, 2002 was $5.7 million, compared to a loss from operations of $2.8 million in the three months ended January 31, 2003, reflecting the lower level of selling, general and administrative expenses resulting from stricter management controls over operating expenses, as well as the refocusing of the segment’s business portfolio towards media related businesses.

IDT Internet Telephony Segment

The Internet Telephony business segment reflects the results of our reconsolidated subsidiary, Net2Phone, effective August 1, 2002. Accordingly, the results of operations for our Internet Telephony segment, which will be detailed below, will contain only references to the three months ended January 31, 2003. We will not make reference to the results for the three months ended January 31, 2002, as Net2Phone was not consolidated during that period. As of January 31, 2003, IDT’s ownership interest in Net2Phone was approximately 18.8%. Accordingly, IDT records approximately 81.2% of Net2Phone’s results attributed to the remainder shareholders in the minority interests line of the condensed consolidated statements of operations. Prior to August 1, 2002, we accounted for our investment in Net2Phone under the equity method of accounting and, accordingly, such results were included in equity in loss of affiliates.

Revenues.    Net2Phone’s revenues are primarily derived from per-minute charges billed to its customers on a prepaid basis and from the sale of Internet telephony equipment and services to resellers and other carriers. Revenues were $21.1 million for the three months ended January 31, 2003. In the second quarter of Fiscal 2003, Net2Phone purposefully de-emphasized seeking revenues from relatively low-margin services, such as disposable calling cards, in favor of building up activities to generate revenues in relatively high-margin services, such as international communications services, during the upcoming periods.

Direct Cost of Revenues.    Net2Phone’s direct cost of revenues consists primarily of network costs associated with carrying its customers’ traffic on its network and leased networks, routing their calls through a local telephone company to reach their final destination, the wholesale costs of Internet telephony devices, ad serving costs and e-mail box hosting fees. It also includes the cost of purchasing, storing and shipping Internet telephony equipment. Total direct cost of revenues, excluding depreciation and amortization, was $10.4 million in the three months ended January 31, 2003. As a percentage of total revenues, total direct costs was 49.3% in the three months ended January 31, 2003.

25

Selling, General and Administrative.    Selling, general and administrative expenses consist of employee salaries and associated benefits; the expenses associated with acquiring customers, including commissions paid to sales partners, advertising costs, travel, entertainment, referral fees and amounts paid to strategic partners in connection with revenue-sharing arrangements, and the costs of insurance, legal, rent, utilities, shipping, consulting and other items. Selling, general and administrative expenses were $17.3 million in the three months ended January 31, 2003. As a percentage of total revenues, these costs were 82.0% in the three months ended January 31, 2003. Net2Phone anticipates that selling, general and administrative expenses (excluding restructuring, severance, impairment and other items) will decrease in the remainder of Fiscal 2003, as it benefits from the effects of the restructuring of its operations.

Depreciation and Amortization.    Depreciation and amortization expense was $2.4 million in the three months ended January 31, 2003. As a percentage of total revenues, depreciation and amortization expense was 11.4% in the three months ended January 31, 2003. Net2Phone anticipates depreciation and amortization expense to decline through April 30, 2003 as a result of the impairment charges recorded during the first quarter of Fiscal Year 2003.

Restructuring, Severance and Impairment Charges.    Restructuring, severance and impairment charges were $0.7 million in the three months ended January 31, 2003.

The following table summarizes the charges included in restructuring, severance and impairment charges in the condensed consolidated statements of operations:

	Three months ended January 31,
	2003	2002
	(in thousands)
First quarter 2003 restructuring	$  46	$—
Separation agreements	658	—
Total	$704	$—

Separation Agreements

As a result of separation agreements entered into in Fiscal 2002 with Net2Phone’s former Chief Executive and Chief Financial Officers, Net2Phone incurred a charge of $0.7 million during the three months ended January 31, 2003, and expects to incur future charges of approximately $1.8 million relating to these separation agreements.

Loss from Operations.    Loss from Net2Phone’s operations was $10.0 million in the three months ended January 31, 2003. Excluding $0.7 million of restructuring, severance, and impairment charges and $0.4 million of settlement by Net2Phone of litigation, Net2Phone’s loss from operations in the three months ended January 31, 2003 was $8.9 million.

26

Corporate

Our Corporate costs consist of corporate services, such as treasury management costs, corporate governance costs, public relations, corporate management and legal costs, corporate insurance, and other general corporate expenses, as well as depreciation expense for corporate assets. Such corporate services are shared generally by our other operating segments, and are not allocable to any specific segment. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

Selling, General and Administrative.    We incurred $6.2 million in corporate selling, general and administrative expenses in the three months ended January 31, 2002, compared to $8.7 million incurred in the three months ended January 31, 2003. The increase is due largely to increased costs of litigation against Telefonica and Terra Networks, S.A. As a percentage of our total consolidated revenues, corporate selling, general and administrative expenses were 1.7% in the three months ended January 31, 2002, compared to 1.9% in the three months ended January 31, 2003.

Depreciation and Amortization.    Depreciation expense decreased from $0.7 million for the three months ended January 31, 2002 to $0.3 million for the three months ended January 31, 2003.

Loss from Operations.    Loss from operations was $6.9 million in the three months ended January 31, 2002, compared to $9.0 million in the three months ended January 31, 2003, as a result of the higher selling, general and administrative expenses notes above.

Six Months Ended January 31, 2003 Compared to Six Months Ended January 31, 2002

Results of Operations

We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, certain adjustments are properly not reflected in the operating business segments discussions, but are only reflected in our Consolidated discussion.

Consolidated

Revenues.    Our revenues increased 25.3%, from $713.2 million in the six months ended January 31, 2002 to $893.9 million in the six months ended January 31, 2003. The increase is due primarily to the significant growth in our telecommunications minutes of use, the acquisition of the Winstar assets and the reconsolidation of Net2Phone. Excluding revenues from our IDT Solutions, which was acquired in December 2001, and our Internet Telephony segment, consisting of Net2Phone, which was reconsolidated effective August 1, 2002, our revenues increased 16.0%, to $805.0 million in the six months ended January 31, 2003. The increase in our consolidated revenues (excluding our IDT Solutions and Internet Telephony segments) is mainly attributable to a 15.7% increase in IDT Telecom’s revenues. The growth in IDT Telecom’s revenues primarily resulted from a 56.0% growth in minutes of use (excluding minutes related to our consumer long distance business) from 5.0 billion in the six months ended January 31, 2002 to 7.8 billion in the six months ended January 31, 2003.

Direct Cost of Revenues.    Direct cost of revenues increased by 22.9%, from $560.6 million in the six months ended January 31, 2002 to $689.1 million in the six months ended January 31, 2003. This increase is due primarily to the growth in our telecommunications minutes of use, the acquisition of the Winstar assets and the reconsolidation of Net2Phone. Excluding direct costs of revenues from our IDT solutions and Internet Telephony segments, direct cost of revenues increased 13.5% to $613.3 million in the six months ended January 31, 2003. As a percentage of total revenues, direct costs decreased from 78.6% in the six months ended January 31, 2002 to 77.1% in the six months ended January 31, 2003 (and decreased from 77.8% to 76.2% excluding our IDT Solutions and Internet Telephony segments). The decline in direct costs as a percentage of revenues is attributable to overall higher revenues due to the growth of minutes-of-use and because of continued operating efficiency gains and lower prices from suppliers, as measured on a per-minute basis, which outweighed the decline in average revenue-per-minute, as detailed below.

27

Selling, General and Administrative.    Selling, general and administrative expenses increased 36.8%, from $160.1 million in the six months ended January 31, 2002 to $219.0 million in the six months ended January 31, 2003. Excluding selling, general and administrative expenses from our IDT Solutions and Internet Telephony segments, selling, general and administrative expenses increased 7.0% to $152.5 million in the six months ended January 31, 2003, due primarily to the increased sales and marketing efforts as well as increased salaries, facilities costs and professional fees related to the expansion of our infrastructure and bases of operation to facilitate our current and anticipated future growth. As a percentage of total revenues, selling, general and administrative expenses increased from 22.4% in the six months ended January 31, 2002 to 24.5% in the six months ended January 31, 2003 (and decreased from 20.5% to 18.9% excluding our IDT Solutions and Internet Telephony segments). Selling, general and administrative expense declined as a percentage of revenues (excluding IDT Solutions and Internet Telephony) due primarily to the significant growth in our revenues for the six months ended January 31, 2003.

Depreciation and Amortization.    Depreciation and amortization expense increased 42.5%, from $30.1 million in the six months ended January 31, 2002 to $42.9 million in the six months ended January 31, 2003. Excluding depreciation and amortization expense from our IDT Solutions and Internet Telephony segments, depreciation and amortization expense increased 6.9%, to $31.8 million in the six months ended January 31, 2003 primarily as a result of our higher fixed asset base during the six months ended January 31, 2003, reflecting the expansion of our telecommunications network infrastructure and facilities. As a percentage of revenues, depreciation and amortization expense increased from 4.2% in the six months ended January 31, 2002 to 4.8% in the six months ended January 31, 2003 (and decreased from 4.3% to 4.0% excluding our IDT Solutions and Internet Telephony segments). Depreciation and amortization expense declined as a percentage of revenues (excluding our IDT Solutions and Internet Telephony segments) due primarily to the significant growth in our revenues for the six months ended January 31, 2003.

Settlement by Net2Phone of Litigation.    Gain on settlement by Net2Phone of litigation was $58.0 million for the six months ended January 31, 2003. Refer to the respective section of the Internet Telephony segment for a full discussion on the gain on settlement by Net2Phone of litigation.

Restructuring, Severance and Impairment Charges.    Restructuring, severance and impairment charges increased from $2.8 million in the six months ended January 31, 2002 to $7.3 million in the six months ended January 31, 2003. Refer to the respective sections of the Internet Telephony and IDT Telecom segments for a full discussion on restructuring, severance and impairment charges.

Income (Loss) from Operations.    Our loss from operations was $40.3 million in the six months ended January 31, 2002 compared to a loss from operations of $6.4 million in the six months ended January 31, 2003. Excluding $12.4 million of loss from operations from our IDT Solutions and Internet Telephony segments, our income from operations was $6.0 million in the six months ended January 31, 2003. The growth in our income from operations (excluding our IDT Solutions and Internet Telephone segments) was due primarily to IDT Telecom’s increased revenues, gross margins and operating income.

Interest.    Net interest income was $11.5 million in the six months ended January 31, 2002, compared to net interest income of $14.6 million in the six months ended January 31, 2003.

Other Income (Expense).    Other income (expense) amounted to an expense of $22.5 million in the six months ended January 31, 2002, compared to an expense of $8.8 million in the six months ended January 31, 2003. Included in other expense in the six months ended January 31, 2003 were losses of $3.8 million associated with recording our pro-rata share of an affiliate’s losses, through the equity method, a charge of $3.1 million related to an obligation to guarantee to AT&T the value of 1.4 million shares of IDT Class B common stock owned by AT&T, and net losses from other investments totaling $1.9 million.

28

Included in other expense in the six months ended January 31, 2002 were losses of $16.7 million associated with recording our pro-rata share of Net2Phone’s net losses through the equity method of accounting, a charge of $5.9 million related to an obligation to guarantee to AT&T the value of 1.4 million shares of IDT Class B common stock owned by AT&T, and net income from other investments totaling $0.1 million.

Minority Interests.    Minority interests were $11.2 million and $45.9 million for the six months ended January 31, 2002 and 2003, respectively. The $34.7 million increase in minority interests was primarily attributable to the reconsolidation of Net2Phone, of which we own 18.8% as of January 31, 2003. Accordingly, we recorded in minority interests the 81.2% of Net2Phone’s results attributable to the remaining shareholders of Net2Phone.

Income Taxes.    We recorded an income tax benefit of $33.9 million in the six months ended January 31, 2002, compared to an income tax benefit of $30.0 million in the six months ended January 31, 2003.

Cumulative Effect of Accounting Change.    In accordance with our adoption of SFAS No. 142, as of August 1, 2001, we performed the required impairment tests of goodwill and recorded an impairment charge of $147.0 million, net of income taxes of $3.5 million, for the six months ended January 31, 2002. The impairment charge was recorded as a cumulative effect adjustment of a change in accounting principle. No such charges were recorded during the six months ended January 31, 2003.

Net Loss.    Our consolidated net loss, after the cumulative effect adjustment of a change in accounting principle detailed above, was $175.5 million in the six months ended January 31, 2002 compared to consolidated net loss of $16.5 million in the six months ended January 31, 2003. The recording of a net loss in the six months ended January 31, 2002 and 2003, was a result of the combined factors for each of the segments discussed below, as well as those items detailed above.

IDT Telecom—Retail Telecommunications Services and Wholesale Telecommunications Services Segments

Revenues.    IDT Telecom’s revenues increased 16.3%, from $682.6 million in the six months ended January 31, 2002 to $794.0 million in the six months ended January 31, 2003.

IDT Telecom’s revenues increased primarily as a result of a 56.0% growth in minutes of use (excluding minutes related to our consumer long distance business) from 5.0 billion in the six months ended January 31, 2002 to 7.8 billion in the six months ended January 31, 2003. IDT Telecom increased its minutes of use in both its Retail Telecommunications Services and Wholesale Telecommunications Services segments, in both the U.S. and international operations. IDT Telecom’s minutes of use grew at a faster rate than did its revenues, reflecting a decline in its average revenue-per-minute, from $0.125 during the six months ended January 31, 2002 to $0.090 in the six months ended January 31, 2003. IDT Telecom’s decrease in its average revenue-per-minute is due to a number of factors, including (i) continued competition in both retail and wholesale markets, and (ii) introduction of new calling cards. During the first half of Fiscal 2003, approximately 20% of IDT Telecom’s revenues originated outside the United States signifying the growing international scope of our operations.

Revenues from IDT Telecom’s Retail Telecommunications Services segment increased 13.9%, from $540.0 million in the six months ended January 31, 2002 to $615.0 million in the six months ended January 31, 2003, as a result of increased sales of IDT-branded calling cards and higher consumer long distance revenues. As a percentage of IDT Telecom’s overall revenue, Retail Telecommunications Services’ revenues decreased from 79.1% in the six months ended January 31, 2002 to 77.5% in the six months ended January 31, 2003, as revenues from our Wholesale Telecommunications Services segment grew at a faster rate than did our retail businesses revenues. IDT Telecom’s calling card sales increased 10.0%, from $490.2 million in the six months ended January 31, 2002 to $539.4 million in the six months ended January 31, 2003, fueled by the introduction of several new calling cards.

29

During the six months ended January 31, 2003, nearly 10% of U.S. domestic calling card revenues were associated with new cards, which had the effect of reducing overall gross margins on our portfolio of calling cards.

Calling card sales as a percentage of IDT Telecom’s Retail Telecommunications Services revenues decreased from 90.8% in the six months ended January 31, 2002 to 87.7% in the six months ended January 31, 2003, as revenues from consumer long distance services grew at a faster rate than did calling card revenues. Revenues from consumer long distance services, in which we act as a switchless reseller of another company’s network, experienced significant growth in minutes of use in the six months ended January 31, 2003, with revenues increasing 54.4%, from $48.5 million in the six months ended January 31, 2002 to $74.9 million in the six months ended January 31, 2003. The consumer long distance revenue increase is attributable to the continued growth of our flat-rate, $0.05 a minute long distance calling plan, which has been driven by increased marketing expenditures, resulting in a significant increase in the number of consumer long distance customers.

Revenues from IDT Telecom’s other Retail Telecommunications Services businesses, consisting primarily of call reorigination services, amounted to $1.4 million in the six months ended January 31, 2002, versus $0.8 million in the six months ended January 31, 2003.

IDT Telecom’s Wholesale Telecommunications Services revenues increased 25.6%, from $142.5 million in the six months ended January 31, 2002 to $179.0 million in the six months ended January 31, 2003. As a percentage of IDT Telecom’s total revenues, Wholesale Telecommunications Services revenues increased from 20.9% in the six months ended January 31, 2002 to 22.5% in the six months ended January 31, 2003. The increase in revenues occurred as a result of an increase in wholesale carrier minutes, despite a significant decline in the average revenue-per-minute. In recent years, IDT Telecom’s wholesale carrier business has curtailed or ceased completely its sales to financially unstable carriers.

30

Direct Cost of Revenues.    Direct cost of revenues for IDT Telecom increased 13.6%, from $539.1 million in the six months ended January 31, 2002 to $612.2 million in the six months ended January 31, 2003, due to the higher revenue base. As a percentage of total IDT Telecom’s revenues, direct costs declined to 77.1% in the six months ended January 31, 2003, from 79.0% in the six months ended January 31, 2002. The decrease in direct costs as a percentage of total revenues is attributable to overall higher revenues due to the strong growth of minutes-of-use and because of continued operating efficiency gains and lower prices from suppliers. The decrease in direct costs as a percentage of total revenues occurred despite some increases in our termination costs to key destinations, increases in our costs for toll-free “800” traffic, and network capacity constraints, due to our strong growth of minutes-of-use.

Selling, General and Administrative.    IDT Telecom’s selling, general and administrative expenses increased 11.3%, from $110.2 million in the six months ended January 31, 2002 to $122.6 million in the six months ended January 31, 2003. The increase in selling, general and administrative expenses for IDT Telecom’s operations is due to several factors, including increased sales and marketing efforts for our Retail Telecommunications Services segment, such as calling cards and consumer long distance, as well as increased salaries, facilities costs and professional fees related to the expansion of our infrastructure and bases of operation to facilitate our current and anticipated future sales growth. As a percentage of IDT Telecom’s total revenues, selling, general and administrative expenses were 16.1% in the six months ended January 31, 2002, compared to 15.4% in the six months ended January 31, 2003.

Depreciation and Amortization.    IDT Telecom’s depreciation and amortization expense rose 14.4%, from $26.4 million in the six months ended January 31, 2002, to $30.2 million in the six months ended January 31, 2003, reflecting the continued expansion of our fixed asset base, as we invest to accommodate our current and anticipated future growth. As a percentage of IDT Telecom’s total revenues, depreciation and amortization expense was 3.9% in the six months ended January 31, 2002, versus 3.8% in the six months ended January 31, 2003.

Restructuring, Severance, and Impairment Charges.    Impairment charges of $2.8 million and $1.4 million were recorded by IDT Telecom during the six months ended January 31, 2002 and 2003, respectively, resulting primarily from the write down of certain decommissioned European telecommunications switch equipment, and the write-off of a discontinued Indefeasible Right of Use (“IRU”), respectively.

Income from Operations.    IDT Telecom recorded income from operations of $4.1 million in the six months ended January 31, 2002, compared to income from operations of $27.7 million in the six months ended January 31, 2003. The increase in income from operations resulted primarily from the revenue growth and improved gross margins.

IDT Solutions Segment

We acquired the assets currently held by Winstar on December 19, 2001. Accordingly, the results of operations for our IDT Solutions segment, which operates through Winstar, for the six months ended January 31, 2002, reflect only the results of operations during such period that we owned and operated Winstar.

Revenues.    Revenues from our IDT Solutions segment increased 135.4%, from $19.2 million in the six months ended January 31, 2002 to $45.2 million in the six months ended January 31, 2003. The increase in

31

revenues is due to the fact that the Winstar assets were acquired in December 2001, and therefore generated revenues for only a portion of the six months ended January 31, 2002.

Direct Cost of Revenues.    Direct cost of revenues for our IDT Solutions segment increased 158.8%, from $20.4 million in the six months ended January 31, 2002 to $52.8 million in the six months ended January 31, 2003. The increase in direct cost of revenues is due to the fact that the Winstar assets were acquired in December 2001 and therefore generated revenues for only a portion of the six months ended January 31, 2002. Direct cost of revenues consist primarily of two components, connectivity for the network backbone and lease payments for the network of provision-ready buildings. Network backbone costs for the six months ended January 31, 2003 totaled $37.9 million, accounting for 71.8% of total direct cost of revenues. Direct cost of revenues for the six months January 31, 2003 associated with lease payments for the building network were $14.9 million.

Selling, General and Administrative.    Selling, general and administrative expenses associated with our IDT Segment increased 93.8%, from $17.6 million in the six months ended January 31, 2002 compared with $34.0 million in the six months ended January 31, 2003. The increase is due to the fact that the Winstar assets were acquired in December 2001 and therefore generated revenues and expenses for only a minor portion of the six months ended January 31, 2002. The main component of selling, general and administrative expenses was employee compensation and benefits, accounting for $23.7 million, or about 69.7% of total selling, general and administrative expenses.

Depreciation and Amortization.    Depreciation and amortization expense increased from $0.4 million in the six months ended January 31, 2002 to $6.3 million in the six months ended January 31, 2003. As a percentage of our IDT Solutions segment’s revenues, depreciation and amortization was 2.1% in the six months ended January 31, 2002 compared to 13.9% in the six months ended January 31, 2003.

Loss from Operations.    IDT Solutions loss from operations in the six months ended January 31, 2002 was $19.1 million, compared to $47.9 million in the six months ended January 31, 2003. The increase in loss from operations reflects the fact that the six months ended January 31, 2002 included IDT Solutions’ results of only a minor portion of that period, as noted above.

32

Media Segment

Revenues.    Revenues from the Media segment decreased 3.5%, from $11.4 million in the six months ended January 31, 2002 to $11.0 million in the six months ended January 31, 2003. In Fiscal 2002, Media gradually exited its DSL business. Currently, Media’s revenues are primarily comprised of revenues from CTM.

Direct Cost of Revenues.    Direct cost of revenues remained constant at $1.1 million in the six months ended January 31, 2002 and 2003. As a percentage of Media’s revenues, these costs increased from 9.6% for the six months ended January 31, 2002 to 10.0% for the six months ended January 31, 2003. Most of Media’s businesses remain in the early stages of their development. As such, we anticipate that direct costs will continue to account for a relatively small percentage of Media’s revenue, with most of the expenses associated with these businesses to be incurred in the form of selling, general, administrative and development costs.

Selling, General and Administrative.    Selling, general and administrative expenses decreased 35.1%, from $20.5 million in the six months ended January 31, 2002 to $13.3 million in the six months ended January 31, 2003. The decrease in selling, general, and administrative expenses reflect the exit from the DSL Internet access business and from video-streaming business, as well as the general refocusing of the portfolio of businesses towards media related businesses. In addition, during Fiscal 2002, Media implemented stricter management controls over operating expenses. Partially offsetting the general reduction in costs were additional expenses incurred with the startup of a newly created customer service operation.

Depreciation and Amortization.    Depreciation and amortization expense was $2.0 million in the six months ended January 31, 2002, versus $0.7 million in the six months ended January 31, 2003. This decrease is due to the reduced fixed asset base resulting from our sale of our former DSL business. As a percentage of revenues, depreciation and amortization expense fell to 6.4% in the six months ended January 31, 2003, from 17.5% in the six months ended January 31, 2002.

Loss from Operations.    Loss from operations in the six months ended January 31, 2002 was $12.2 million, compared to a loss from operations of $4.1 million in the six months ended January 31, 2003, reflecting the lower level of selling, general and administrative expenses resulting from stricter management controls over operating expenses, as well as the refocusing of the segment’s business portfolio towards media related businesses.

IDT Internet Telephony Segment

The Internet Telephony business segment reflects the results of our reconsolidated subsidiary, Net2Phone, effective August 1, 2002. Accordingly, the results of operations for our Internet Telephony segment, which will be detailed below, will contain only references to the six months ended January 31, 2003, during which we reconsolidated Net2Phone. We will not make reference to the results for the six months ended January 31, 2002, as Net2Phone was not consolidated during that period. As of January 31, 2003, IDT’s ownership interest in Net2Phone was approximately 18.8%. Accordingly, IDT records approximately 81.2% of Net2Phone’s results attributed to the remainder shareholders in the minority interests line of the condensed consolidated statements of operations. Prior to August 1, 2002, we accounted for our investment in Net2Phone under the equity method of accounting and accordingly, such results were included in equity in loss of affiliates.

Revenues.     Revenues were $43.8 million for the six months ended January 31, 2003. During the six months ended January 31, 2003, Net2Phone purposefully de-emphasized seeking revenues from relatively low-margin services, such as disposable calling cards, in favor of building up activities to generate revenues in relatively high-margin services, such as international communications services, during the upcoming periods.

33

Direct Cost of Revenues.    Net2Phone’s direct cost of revenues consists primarily of network costs associated with carrying its customers’ traffic on its network and leased networks, routing their calls through a local telephone company to reach their final destination, the wholesale costs of Internet telephony devices, ad serving costs and e-mail box hosting fees. It also includes the cost of purchasing, storing and shipping Internet telephony equipment. Total direct cost of revenues, excluding depreciation and amortization, was $23.0 million in the six months ended January 31, 2003. As a percentage of total revenues, total direct costs was 52.5% in the six months ended January 31, 2003.

Selling, General and Administrative.    Selling, general and administrative expenses consist of employee salaries and associated benefits; the expenses associated with acquiring customers, including commissions paid to sales partners, advertising costs, travel, entertainment, referral fees and amounts paid to strategic partners in connection with revenue-sharing arrangements, and the costs of insurance, legal, rent, utilities, shipping, consulting and other items. Selling, general and administrative expenses were $32.6 million in the six months ended January 31, 2003. As a percentage of total revenues, these costs were 74.4% in the six months ended January 31, 2003. Net2Phone anticipates that selling, general and administrative expenses (excluding restructuring, severance, impairment and other items) will decrease in the remainder of Fiscal 2003, as it benefits from the effects of the restructuring of its operations.

Depreciation and Amortization.    Depreciation and amortization expense was $4.9 million in the six months ended January 31, 2003. As a percentage of total revenues, depreciation and amortization expense was 11.2% in the six months ended January 31, 2003. Net2Phone anticipates depreciation and amortization expense to decline through April 30, 2003 as a result of the impairment charges recorded during the first quarter of Fiscal 2003.

Settlement by Net2Phone of Litigation.    Gain on settlement by Net2Phone of litigation was $58.0 million in the six months ended January 31, 2003. On March 19, 2002 Net2Phone and its ADIR Technologies, Inc. (“ADIR”) subsidiary filed suit in the United States District Court for the District of New Jersey against Cisco Systems, Inc. (“Cisco”) and a Cisco executive who had been a member of ADIR’s board of directors. The suit arose out of the relationships that had been created in connection with Cisco’s and Net2Phone’s original investments in ADIR and out of ADIR’s subsequent purchase of NetSpeak, Inc. in August 2001. In July 2002, Net2Phone and ADIR agreed to settle the suit. The parties settled the suit and all related claims against Cisco and the Cisco executive in exchange for: (i) the transfer, during the first quarter of Fiscal 2003, to Net2Phone of Cisco’s and Softbank Asia Infrastructure Fund’s respective 11.5% and 7.0% interests in ADIR, and (ii) the payment by Cisco, during such quarter, of $19.5 million to Net2Phone and ADIR. As a result of this settlement, Net2Phone recognized for the quarter ended October 31, 2002, a gain of $58.4 million consisting of (i) a $38.9 million reduction in Net2Phone’s minority interests in ADIR as a result of the transfer of the ADIR shares and (ii) the receipt of settlement proceeds of $19.5 million. During the second quarter 2003, Net2Phone approved and therefore recorded an additional $0.4 million in executive compensation directly related to the Cisco settlement.

Restructuring, Severance and Impairment Charges.    Restructuring, severance and impairment charges were $5.9 million in the six months ended January 31, 2003.

The following table summarizes the charges included in restructuring, severance and impairment charges in the condensed consolidated statements of operations:

	Six months ended January 31,
	2003	2002
	(in thousands)
First quarter 2003 restructuring	$  6,039	$—
Restructuring reserve adjustments	(2,158)	—
Separation agreements	1,995	—
Total	$  5,876	$—

34

First Quarter 2003 Restructuring

On October 24, 2002, Net2Phone announced that it was consolidating certain business operations. This consolidation reduced Net2Phone’s staff by approximately 20%, or about 55 employees. As a result of this restructuring, Net2Phone incurred a charge of $3.6 million related to employee termination costs, $0.9 million in exit costs related to the reduction of operations at various locations, and $1.5 million in impairment charges related to the write-off of various equipment and network build-outs. As of January 31, 2003, approximately $1.8 million of involuntary termination benefits have been paid and charged against the restructuring liability.

Restructuring Reserve Adjustments

During the three months ended April 30, 2002, Net2Phone recognized a charge of $4.7 million related to the elimination of specific connectivity and network related costs. As a result of successful settlement negotiations with vendors regarding cancellation charges, Net2Phone reversed during the six months ended January 31, 2003, $2.9 million of those previously recognized charges. During the six months ended January 31, 2003, Net2Phone also reversed approximately $0.5 million of previously recognized severance expense as a result of the subsequent retention of several individuals whose employment had been initially terminated. In addition, Net2Phone recognized approximately $1.2 million in additional costs associated with exiting certain businesses that were discontinued or sold in prior fiscal years.

Separation Agreements

As a result of separation agreements entered into in Fiscal 2002 with Net2Phone’s former Chief Executive and Chief Financial Officers, Net2Phone incurred a charge of $2.0 million during the six months ended January 31, 2003, and expects to incur future charges of approximately $1.8 million relating to these separation agreements.

Income from Operations.    Income from Net2Phone’s operations was $35.5 million in the six months ended January 31, 2003. Excluding $5.9 million of restructuring, severance and impairment charges and a $58.0 million gain from the settlement by Net2Phone of litigation, Net2Phone’s loss from operations in the six months ended January 31, 2003 was $16.6 million.

Corporate

Our Corporate costs consist of corporate services, such as treasury management costs, corporate governance costs, public relations, corporate management and legal costs, corporate insurance, and other general corporate expenses, as well as depreciation expense on corporate assets. Such corporate services are shared generally by our other operating segments, and are not allocable to any specific segment. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

Selling, General and Administrative.    We incurred $11.8 million in corporate selling, general and administrative expenses in the six months ended January 31, 2002, compared to $16.6 million incurred in the six months ended January 31, 2003. The increase is due largely to increased costs of litigation against Telefonica and Terra Networks, S.A. As a percentage of our total consolidated revenues, corporate selling, general and administrative expenses were 1.7% in the six months ended January 31, 2002, compared to 1.9% in the six months ended January 31, 2003.

Depreciation and Amortization.    Depreciation expense decreased from $1.3 million for the six months ended January 31, 2002 to $1.0 million for the six months ended January 31, 2003.

Loss from Operations.    Loss from operations was $13.0 million in the six months ended January 31, 2002, compared to $17.5 million in the six months ended January 31, 2003, as a result of the higher selling, general and administrative expenses noted above.

35

Liquidity and Capital Resources

General

Historically, we have satisfied our cash requirements through a combination of cash flow from operating activities, sales of equity and debt securities and borrowings from third parties. Additionally, we received approximately $1.0 billion from the sale of Net2Phone Class A common stock to AT&T in August 2000. Since that time, our cash requirements have been satisfied for the most part through our existing cash, cash equivalents and marketable securities balances.

As of January 31, 2003, we had cash, cash equivalents and marketable securities of approximately $1.1 billion, which includes $111.6 million held by Net2Phone, and working capital of approximately $839.7 million. We generated cash flow from operating activities of approximately $10.2 million during the six months ended January 31, 2003, compared with cash flow from operating activities of approximately $19.1 million during the six months ended January 31, 2002. Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on the timing of operating cash receipts and payments, especially trade accounts receivable and trade accounts payable. Gross trade accounts receivable, trade accounts payable and accrued expenses have generally increased from period to period as our businesses have grown.

We used approximately $179.8 million in cash to fund investing activities during the six months ended January 31, 2003. This compares to net cash flows used in investing activities of $171.7 million during the six months ended January 31, 2002. The primary use of cash used in investing activities during the six months ended January 31, 2003 was the net purchases of $211.5 million of marketable securities (primarily U.S. Government Agency Obligations). Our capital expenditure investments were approximately $26.9 million in the six months ended January 31, 2003, compared to approximately $16.1 million in the six months ended January 31, 2002, as we have continued to expand IDT Telecom’s international and domestic telecommunications network infrastructure. We have experienced a significant reduction in the cost of equipment purchases, as a result of significant decreases in the prices of telecom equipment and related assets. The future minimum payments of principal and interest on our capital lease obligations are $15.4 million, $26.0 million, $16.2 million, $12.5 million, $2.7 million, and $1.7 million for the remainder of Fiscal 2003, Fiscal 2004, Fiscal 2005, Fiscal 2006, Fiscal 2007, and thereafter, respectively. Throughout Fiscal Year 2003, we anticipate making considerable expenditures, designed to expand our global telecommunications network. Key elements of its network expansion plan for Fiscal Year 2003 include the addition of a second international gateway switch in the UK, and another two international gateway switches in the U.S. (which will bring IDT’s total to six U.S. gateway switches). During the six months ended January 31, 2003, the second international gateway switch in the UK, and one international gateway switch in the U.S. were completed. We also expect to expand our calling card platform in the U.S. In addition, IDT anticipates making additional expenditures to upgrade its network in South America. For the full 2003 fiscal year, we anticipate capital expenditures in the $50 million to $75 million range. This estimate is highly contingent upon several factors, including, but not limited to, market prices for telecommunications equipment, the availability of such equipment in the distressed asset market and the specific timing of our network expansion projects. We have generally adopted a strategy of investing in network expansion only as the need arises, as dictated by our telecommunications traffic volumes. Therefore, the timing of our network expansion, and the coincident purchases of property, plant and equipment, is highly dependent upon the timing and magnitude of the growth in our telecommunications minutes-of-use. We expect to fund our purchases of property, plant and equipment from our operating cash flows and our cash, cash equivalents and marketable securities balances. From time to time, we will also finance a portion of our capital expenditures through capital leases, with the cost of such financing the primary consideration in determining our financing activity.

Our Board of Directors has authorized the repurchase of up to 45 million shares (adjusted for the May 2001 stock dividend) of our common stock and Class B common stock. We have repurchased a total of 15.6 million (adjusted) shares under the share repurchase program through Fiscal 2002, of which 6.2 million shares were retired as of July 31, 2002. No additional shares were purchased or retired during the six months ended January 31, 2003.

36

We had $19.7 million in cash flow used in our financing activities during the six months ended January 31, 2003, compared to $26.5 million in cash flow provided by our financing activities during the six months ended January 31, 2002. We received approximately $4.8 million in proceeds from the exercise of stock options during the six months ended January 31, 2003, compared to $31.3 million received during the six months ended January 31, 2002. In addition, we received proceeds of $30.0 million during the six months ended January 31, 2002 from the sale of subsidiary stock. We also paid $15.3 million to repurchase IDT shares in the first quarter of Fiscal 2002, through our stock buyback program, mentioned above.

We experience intense price competition in our telecommunications businesses. The long distance telecommunications industry has been characterized by significant declines in both per-minute revenues and per-minute costs, as evidenced by IDT Telecom’s experience during Fiscal 2002 and the six months ended January 31, 2003. During the six months ended January 31, 2003, IDT Telecom’s average revenue-per-minute was $0.090 per minute, down 28.0% from $0.125 per minute for the six months ended January 31, 2002. However, IDT Telecom’s average termination cost per-minute dropped approximately 27.6%, to $0.076 in the six months ended January 31, 2003, from $0.105 in the six months ended January 31, 2002.

In the past, and over time, we believe that these factors tend to offset each other, with prices and costs moving in the same general direction. However, over a shorter-term, such as one quarter or one year, the drop in pricing could outpace the drop in costs, or vice versa. In addition, due to continued pricing pressure in most of the retail and wholesale markets in which we compete, we might be compelled to pass along most or all of our per-minute cost savings to our customers in the form of lower rates. We might also be unable, in the event that some of our per-minute costs rise, to immediately pass along the additional costs to our customers in the form of higher rates. Consequently, over any given period, gross margins could expand or narrow, based solely on the timing of changes in revenue-per-minute and cost-per-minute. Our long-term strategy involves terminating a larger proportion of minutes on our own network, thereby lowering costs and preserving margins even in a weaker price environment, as we become less subject to the prices charged by third-parties for terminating our minutes over their networks. In addition, as our minutes-of-use have steadily grown, we have attempted to leverage our buying power and our strong balance sheet to negotiate more favorable rates with our suppliers. However, in the short term, the incremental demand for usage might outpace the rate of deployment of additional network capacity, particularly in light of our expectation for continued growth in our minutes volume. As such, there can be no assurance that we will be able to maintain our gross margins at the current level, in the face of lower per-minute revenues.

We continued to fund our IDT Media segment throughout the first six months of Fiscal 2003, incurring significant start-up, development, marketing and promotional costs. Due to the start-up nature of many of the IDT Media businesses, the exact timing and magnitude of future revenues remains difficult to predict. As such, we anticipate that IDT Media will continue to rely on us to fund its cash needs, including operating expenses, capital expenditures and potential acquisitions. However, we may also look to outside investors in the near future to fund IDT Media’s ongoing expansion.

Since our acquisition of the Winstar assets in December 2001, the IDT Solutions segment has experienced working capital deficits. We have undertaken significant cost saving measures and restructured IDT Solution’s operations, which included the downsizing of the Winstar network and a significant reduction in headcount, aimed at reducing the working capital deficit. However, at this time, IDT foresees that it will be required to continue funding IDT Solution’s operating losses and capital expenditure needs for the foreseeable future.

Changes in Other Current Assets, Trade Accounts Receivable, Allowance for Doubtful Accounts and Deferred Revenue

Our other current assets increased from $65.3 million at July 31, 2002 to $85.3 million at January 31, 2003, due primarily to our reconsolidation of Net2Phone, as well as increases in inventories, and other receivables. Gross trade accounts receivable increased from $165.0 million at July 31, 2002 to $176.4 million at January 31, 2003, reflecting primarily the increase in revenues and our reconsolidation of Net2Phone. The average age of our

37

gross accounts receivable, as measured by number of days sales outstanding, has remained constant during the first six months of Fiscal 2003.

Due to the wide range of collection terms, future trends with respect to days sales outstanding generally depends on the proportion of total sales made to carriers, who are often offered payment terms of 30 days or more, and prepaid calling card distributors, who generally receive payment terms of less than 30 days. As such, the trends in days sales outstanding will depend, in large part, on the mix of wholesale (carrier) versus retail (prepaid calling card distributor) customers. The reduction in days sales outstanding we experienced during the six months ended January 31, 2003, was due to our demand for shorter payment terms from many of our customers. As we anticipate that in the near term we will attempt to continue to secure shorter payment terms from some of our customers, we could experience further declines in the average age of our trade accounts receivable throughout the remainder of Fiscal 2003. Conversely, as we are willing to extend longer payment terms to more credit-worthy customers, an increase in customers belonging to the highest credit classes, as a percentage of total customers, could lead to an increase in days sales outstanding. In addition, if we restricted sales to financially unstable customers, regardless of the credit terms, the proportion of higher-credit class customers will increase further, potentially leading to an increase in the average days sales outstanding. In addition, days sales outstanding for our consumer long distance customers is usually longer than 30 days, given the timing of the billing cycle. As the consumer long distance business continues to grow and to represent a larger portion of our retail telecommunications services revenues and receivables, we expect that total retail days sales outstanding should increase accordingly. Therefore, due to the conflicting nature of the above factors, future trends in days sales outstanding remain difficult to predict, and it is not possible at this time to determine whether recent trends in days sales outstanding will continue.

The allowance for doubtful accounts as a percentage of gross trade accounts receivable increased from 23.6% at July 31, 2002, to 30.1% at January 31, 2003. The increase reflects primarily the growth of the consumer long distance business, whose customers have traditionally required a larger reserve than do wholesale customers and retail calling card distributors.

Deferred revenue as a percentage of total revenues vary from period to period, depending on the mix and the timing of revenues. During the first six months of Fiscal 2003, we experienced a steady increase in sales of our calling cards due to increased marketing efforts for existing IDT calling cards and the continued strong growth of our European calling card operations. This resulted in a continued increase in deferred revenue. Deferred revenue also increased as a result of our reconsolidation of Net2Phone. We expect to experience increases in our deferred revenue throughout the remainder of Fiscal 2003, owing to a continued increase in calling card sales.

Significant Transactions

On October 23, 2001, IDT, Liberty Media Corporation (“Liberty Media”) and AT&T formed a limited liability company (“LLC”), which through a series of transactions among IDT, Liberty Media and AT&T held an aggregate of 28.9 million shares of Net2Phone’s Class A common stock, representing approximately 48% of Net2Phone’s outstanding capital stock. Because the LLC holds Class A common stock with two votes per share, the LLC has approximately 65% of the shareholder voting power in Net2Phone. IDT holds the controlling membership interest in the LLC and is the managing member of the LLC. Pursuant to the operating agreement of the LLC, AT&T received 29 Class A units of the LLC, and had a right to put 6 of these units to IDT and 23 of these units to Liberty Media after one year. On October 29, 2002, AT&T exercised its put rights and sold its Class A units to IDT and Liberty Media for a nominal amount. As a result of this transaction, AT&T is no longer a member of the LLC. IDT continues to hold the controlling membership interest in the LLC and is the managing member of the LLC. As of January 31, 2003, IDT’s effective equity investment in Net2Phone (through the LLC) was 18.8%. Accordingly, we recorded in minority interests the 81.2% of Net2Phone’s results attributable to the remaining shareholders of Net2Phone.

In March 2001, IDT exercised an option to sell to AT&T approximately 2.0 million shares of its Class B common stock for approximately $74.8 million. In conjunction with the formation of the LLC referred to above, IDT guaranteed to AT&T the value of approximately 1.4 million shares of the IDT Class B common stock that

38

was still being retained by AT&T. The guaranty provided that if the value of IDT Class B common stock was less than $27.5 million on October 19, 2002, and AT&T or an affiliate retained all the shares through such date, then IDT would be obligated to pay AT&T the difference between $27.5 million and the then-current market price with cash, additional shares of IDT Class B common stock, or a combination of both, at the option of IDT. In December 2002, the Company and AT&T amended the guarantee to provide that if the value of IDT Class B common stock retained by AT&T and/or certain of its affiliates is less than $29.4 million on December 31, 2003, IDT would be obligated to pay to AT&T (in cash, additional shares of Class B common stock, or a combination of both at the option of IDT) the difference between $29.4 million and the then current market price of such retained shares. As a result of this amendment, IDT was not required to make any payments in respect of the price guarantee to AT&T during 2002. In connection with this obligation, we recorded in “investment and other income (expense)” charges of $2.1 million and $3.1 million during the three and six months ended January 31, 2003, respectively. During the three and six months ended January 31, 2002, we recorded an $8.0 million reversal of a previously recorded charge and a $5.9 million charge, respectively. These charges and reversals were based on changes in the market value of IDT Class B common stock through January 31, 2003 and January 31, 2002, respectively. Based on the closing price of IDT Class B Common Stock on January 31, 2003, our total liability to AT&T for the guarantee as of January 31, 2003 was $8.4 million, and based on the closing price of IDT Class B Common Stock on July 31, 2002, our total liability to AT&T for the guarantee as of July 31, 2002 was $5.3 million.

Other Sources and Uses of Resources

We intend to, where appropriate, make strategic acquisitions to expand our telecommunications businesses. These acquisitions could include, but are not limited to, acquisitions of telecommunications equipment, telecommunications network capacity, customer bases or other assets. From time to time, we evaluate potential acquisitions of companies, technologies, products and customer accounts that complement our businesses, particularly in light of the financial distress currently being encountered by many telecommunications firms. These conditions have resulted in the availability for sale of numerous strategic assets and businesses. We will also consider making appropriate acquisitions that would complement our Media segment’s portfolio of businesses. Consequently, we used approximately $2.0 million of our cash during the six months ended January 31, 2003, to acquire various investments in other companies compared to $64.5 used during the six months ended January 31, 2002. We plan to continue to evaluate acquisition opportunities as they are made available to us. In considering acquisitions, we will search for opportunities to profitably grow our existing businesses, to add qualitatively to the range of businesses in the IDT portfolio, and to supplement our existing network expansion plans through the timely purchase from third parties of necessary equipment. At this time, we cannot guarantee that we will be presented with acquisition opportunities that meet our return on investment (ROI) criteria, or that our efforts to acquire such companies that meet our criteria will be successful.

We believe that, based upon our present business plan, and due to the large balance of cash, cash equivalents and marketable securities we held as of January 31, 2003, our existing cash resources will be sufficient to meet our currently anticipated working capital and capital expenditure requirements and to fund any potential operating cash flow deficits within any of our divisions for at least the next twelve months. If our growth exceeds current expectations or if we acquire the business or assets of another company, we might need to raise additional capital from equity or debt sources. There can be no assurance that we will be able to raise such capital on favorable terms or at all. If we are unable to obtain such additional capital, we may be required to reduce the scope of our anticipated expansion, which could have a material adverse effect on our business, financial condition and/or results of operations.

The following tables quantify our future contractual obligations and other commercial commitments, which consist primarily of capital and operating lease obligations as of January 31, 2003 (in millions):

Contractual Obligations

Payments Due by Period

	Total		Less than 1 year		1–3 years		4–5 years		After 5 years
Capital lease obligations	$	74.5	$	29.5	$	34.4	$	9.8	$	0.8
Operating leases		466.2		110.8		100.2		101.5		153.7

39

Total contractual obligations $ 540.7 $ 140.3 $ 134.6 $ 111.3 $ 154.5

Other Commercial Commitments

Payments Due by Period

	Total		Less than 1 year		1–3 years		4–5 years		After 5 years
Standby letters of credit	$	32.3	$	21.4	$	8.8	$	0.2	$	1.9
Guarantees		3.3		0.2		—		—		3.1
Total commercial commitments	$	35.6	$	21.6	$	8.8	$	0.2	$	5.0

Foreign Currency Risk

Revenues from our international operations accounted for approximately 23% of our consolidated revenues for the six months ended January 31, 2003. A significant portion of these revenues are in denominations other than the U.S. Dollar. Any foreign currency exchange risk that we are subject to is mitigated by our ability to offset the majority of these non dollar-denominated revenues with operating expenses that are paid in the same currencies. As such, the net amount of our exposure to foreign currency exchange rate changes is not material.

Recently Issued Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, An Amendment of FASB Statement No. 123. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of Statement No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, and the interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. We will adopt the disclosure provisions of SFAS No. 148 beginning with the three and nine months ending April 30, 2003. The adoption of SFAS No. 148 will not have an impact on our results of operations or financial position, as we currently do not plan to change our method of accounting for stock-based compensation.

Item 3.     Quantitative and Qualitative Disclosures About Market Risks.

See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risks”, of our Annual Report on Form 10-K for the fiscal year ended July 31, 2002 for a discussion of our exposure to market risks. There was no significant change in those risks during the six months ended January 31, 2003.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures.    The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective for gathering, analyzing and disclosing the information that the Company (including its consolidated subsidiaries) is required to include in the Company’s reports filed or submitted under the Exchange Act.

Changes in Internal Controls.    Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect such controls.

40

PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

Incorporated by reference from Part I, Item I, Financial Statements (Unaudited), Note 9, captioned “Legal Proceedings.”

Item 2.     Changes in Securities and Use of Proceeds

Pursuant to a resolution adopted by the Board of Directors of the Company, the Company issued 33,445 shares of its Class B common stock, par value $.01 per share, in January 2003 to an outside consultant as compensation for services rendered on behalf of the Company.

This issuance was made under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, being a transaction not involving any public offering. No underwriters were involved in the issuance of the above-described securities.

Item 3.     Defaults Upon Senior Securities

None

Item 4.     Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders (the “Meeting”) was held on December 11, 2002. The following matters were submitted to our stockholders for their vote, and the results of the vote taken at the Meeting were as follows:

1. Five of our Class I Directors were elected for a term of three years.

(a) James A. Courter	45,658,977 votes for;	4,688,965 votes against;	0 abstentions;
(b) Stephen R. Brown	45,600,036 votes for;	4,767,906 votes against;	0 abstentions;
(c) Marc E. Knoller	45,600,036 votes for;	4,767,906 votes against;	0 abstentions;
(d) J. Warren Blaker	48,403,585 votes for;	1,944,357 votes against;	0 abstentions;
(e) William F. Weld	44,172,463 votes for;	364,778 votes against;	0 abstentions;
0 broker held non-voted shares.

2. An Amendment to the Company’s 1996 Stock Option and Incentive Plan, as Amended and Restated (the “Plan”) was ratified. The Company’s stockholders approved an amendment to the Plan that increased the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 3,000,000 shares.

35,291,738 votes for;	7,992,186 votes against;	71,969 abstentions; and
6,992,051 broker held non-voted shares.

41

3. The grant of options to purchase shares of the Company’s Class B common stock to certain officers and directors of the Company. The Company’s stockholders approved the grant of options to purchase up to an aggregate of 975,000 shares of the Company’s Class B common stock granted outside of the Plan to certain officers and directors of the Company.

38,135,342 votes for;	8,319,574 votes against;	110,567 abstentions; and
4,782,459 broker held non-voted shares.

4. The appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending July 31, 2003 was ratified.

49,712,584 votes for;	574,017 votes against;	51,541 abstentions; and
0 broker held non-voted shares.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit Number		Description
3.02	*	Amended and Restated By-laws of IDT Corporation
10.61	*	Amended and Restated Value Guarantee Agreement, dated December 19, 2002, by and between IDT Corporation and AT&T Corp.
10.62	*	Assignment and Assumption Agreement, dated December 19, 2002, by and among IDT Investments, Inc., IDT Corporation and AT&T Corp.
10.63	*	Purchase Agreement, dated December 19, 2002, by and among AT&T Corp., ItelTech, LLC, IDT Corporation, IDT Investments, Inc., IDT Domestic-Union, LLC, Liberty Media Corporation, LMC Animal Planet, Inc., Liberty N2P II, Inc. and NTOP Holdings, LLC
99.1	(a)*	Certification of Chief Executive Officer
99.1	(b)*	Certification of Chief Financial Officer

*Filed herewith.

(b) Reports on Form 8-K.

On January 10, 2003, the Company filed a Current Report on Form 8-K announcing that it was changing the New York Stock Exchange ticker symbols of its common stock and its Class B common stock. As of the opening of trading on February 26, 2003, IDT’s common stock, which traded under the symbol IDT, was scheduled to trade under the symbol IDT.C. As of the opening of trading on March 19, 2003, IDT’s Class B common stock, which currently trades under the symbol IDT.B, will trade under the symbol IDT. As a result, there will be a three-week period when the ticker symbol “IDT” will not be used for either the common stock or the Class B common stock.

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IDT CORPORATION
March 14, 2003	By:	/s/    James A. Courter
		James A. Courter Chief Executive Officer and Vice-Chairman (Principal Executive Officer)
March 14, 2003	By:	/s/    Stephen R. Brown
		Stephen R. Brown Chief Financial Officer (Principal Financial Officer)

43

CERTIFICATION

of the Chief Executive Officer

I, James A. Courter, Chief Executive Officer of IDT Corporation (the “Company”), hereby certify that:

(1) I have reviewed the report of the Company on Form 10-Q for the quarterly period ended January 31, 2003, as filed with the Securities and Exchange Commission (the “Report”);

(2) Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report;

(3) Based on my knowledge, the financial statements and other financial information included in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the period presented in the Report;

(4) I, together with the other certifying officers, am responsible for establishing and maintaining disclosure controls and procedures for the Company and have:

(i) Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which the Report was being prepared;

(ii) Evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of the Report (the “Evaluation Date”); and

(iii) Presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5) I, together with the other certifying officers, have disclosed, based on our most recent evaluation, to the Company’s auditors and audit committee of the board of directors:

(i) All significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and

(ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

(6) I, together with the other certifying officers, have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003

/s/    James A. Courter

James A. Courter

Chief Executive Officer

44

CERTIFICATION

of the Chief Financial Officer

I, Stephen R. Brown, Chief Financial Officer of IDT Corporation (the “Company”), hereby certify that:

(1) I have reviewed the report of the Company on Form 10-Q for the quarterly period ended January 31, 2003, as filed with the Securities and Exchange Commission (the “Report”);

(2) Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report;

(3) Based on my knowledge, the financial statements and other financial information included in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the period presented in the Report;

(4) I, together with the other certifying officers, am responsible for establishing and maintaining disclosure controls and procedures for the Company and have:

  (i) Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which the Report was being prepared;

 (ii) Evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of the Report (the “Evaluation Date”); and

(iii) Presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5) I, together with the other certifying officers, have disclosed, based on our most recent evaluation, to the Company’s auditors and audit committee of the board of directors:

  (i) All significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and

 (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

(6) I, together with the other certifying officers, have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003

/s/    STEPHEN R. BROWN      

Stephen R. Brown

Chief Financial Officer

45

EX-3.2

EXHIBIT 3.02

AMENDED AND RESTATED

BY-LAWS

OF

IDT Corporation

(hereinafter called the “Corporation”)

ARTICLE I.

OFFICES

Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE II.

MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board

of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect, by a plurality vote, a Board of Directors, and transact such other business as may properly be brought before the meeting.

Section 3. Special Meetings. Unless otherwise prescribed by law or by the Restated Certificate of Incorporation of the Corporation (as the same has been and may be further amended from time to time, the “Certificate of Incorporation”), Special Meetings of Stockholders, for any purpose or purposes, may be called by either (i) the Chairman of the Board, (ii) the Chief Executive Officer, (iii) the President, or (iv) the Secretary, and shall be called by any such officer at the request in writing of a majority of the Board of Directors or at the request in writing of stockholders owning issued and outstanding capital stock of the Corporation representing not less than a majority of the voting power of all issued and outstanding capital stock of the Corporation. Such request shall state the purpose or purposes of the proposed meeting.

Section 4. Notice of Meetings.

Written notice of stockholders’ meetings, stating the place, date, and hour thereof, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote thereat by or at whose direction the notice is being issued. A copy of the notice of any meeting shall be delivered in accordance with the provisions of Article VI below, not less than ten days but not more than sixty days before the date of such meeting, unless a different period is prescribed by law.

2

Section 5. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of issued and outstanding capital stock of the Corporation representing not less than a majority of the voting power of all issued and outstanding capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.

Section 6. Voting. Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of issued and outstanding capital stock of the Corporation representing not less than a majority of the voting power of all issued and outstanding capital stock of the Corporation present or represented by proxy and entitled to vote thereat. Each stockholder represented at a meeting of stockholders shall be entitled, for each share of the capital stock entitled to vote thereat held by such stockholder, such number of votes as are set forth for such share in the Certificate of Incorporation as in effect from time to time. Such votes may be cast in person or by

3

proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.

Section 7. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such

4

consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission, may be otherwise delivered to the principal place of business of the Corporation or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors.

Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

Section 8. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to

5

vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number and class of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.

Section 9. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 8 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

ARTICLE III.

DIRECTORS

Section 1. Number and Election of Directors. The Board of Directors shall consist of not less than three nor more than seventeen members, the exact number of which shall be fixed from time to time by the Board of Directors. Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the expiration of the term of the Class of directors (as set forth in the Certificate of Incorporation) to which such director belongs and until his successor is duly elected and

6

qualified, or until his earlier resignation or removal. Any director may resign at any time upon notice to the Corporation. Directors need not be Stockholders.

Section 2. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the expiration of the term of the Class of directors (as set forth in the Certificate of Incorporation) to which such director belongs (which, in the case of a director appointed to fill a vacancy, shall be the same as the Class of directors to which the departed director belonged) and until their successors are duly elected and qualified, or until their earlier resignation or removal.

Section 3. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

Section 4. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, the President, the Secretary or any two directors, acting jointly. Notice thereof stating the place, date and hour of the meeting shall be given to each director

7

either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

Section 5. Quorum. Except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the members of the Board of Directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 6. Actions of Board. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

Section 7. Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone

8

or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting.

Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the members of the Board of Directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required.

Section 9. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or special or standing committee thereof, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or special or standing committee thereof or a stated salary as director, in each

9

case in cash and/or securities (including options and convertible securities) of the Corporation or any of its subsidiaries or affiliates. Except as otherwise prohibited by applicable law, no such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation for such services.

Section 10. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the Corporation’s directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer of the Corporation is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the

10

presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

Section 11. Removal. A director or the entire Board of Directors may be removed at any time, with or without cause, by the holders of issued and outstanding capital stock of the Corporation representing not less than a majority of the voting power of all issued and outstanding capital stock of the Corporation entitled to vote at an election of directors.

ARTICLE IV.

OFFICERS

Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, Chief Executive Officer, President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Vice Chairman of the Board (who shall be empowered to preside at meetings of the Board of Directors and to fulfill the duties of the Chairman of the Board if the Chairman of the Board is unavailable or unable or unwilling to serve), one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board (and the Vice Chairman of the Board, if any), need such officers be directors of the Corporation.

11

Section 2. Election. The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the members of the Board of Directors then in office. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.

Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, the Vice Chairman of the Board, the President or the Secretary and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

12

Section 4. Chairman of the Board. The Chairman of the Board shall be an officer of the Corporation, subject to the control of the Board of Directors, and shall report directly to the Board of Directors. The Chairman of the Board shall have supervisory responsibility over the strategic direction of the Corporation and shall play an active role in building and leading the Corporation, working closely with the Chief Executive Officer. Except where by law the signature of the Chief Executive Officer is required, the Chairman of the Board shall possess the same power as the Chief Executive Officer to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. The Chairman of the Board shall preside at all meetings of the stockholders and either the Chairman of the Board or the Vice Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.

Section 5. Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board of Directors and the Chairman of the Board, have general supervisory responsibility over the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall be the primary executive officer of the Corporation and shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute

13

documents when so authorized by these By-Laws, the Board of Directors, the Chairman of the Board or the Chief Executive Officer. In the absence or disability of the Chairman of the Board, if no Vice Chairman of the Board shall have been designated by the Board of Directors, the President shall preside at all meetings of the stockholders and the Board of Directors. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.

Section 6. President. The President shall be an executive officer of the Corporation, with responsibility, together with the other officers of the Corporation, for carrying out the policies of the Board of Directors, the Chairman of the Board and the Chief Executive Officer. He shall report directly to the Chief Executive Officer and the Chairman of the Board. Except where by law the signature of the Chief Executive Officer is required, the President shall possess the same power as the Chief Executive Officer to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. At the request of the Chief Executive Officer, or during the absence or disability of the Chief Executive Officer, the President shall exercise all the powers and discharge all the duties of the Chief Executive Officer. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors or the Chairman of the Board.

Section 7. Vice Presidents. The Board of Directors, the Chairman of the Board and the Chief Executive Officer shall have the power to appoint one or more Vice

14

Presidents with such powers and responsibilities as shall be designated in the resolutions or designations appointing the same, as modified from time to time by actions of the Board of Directors, the Chairman of the Board or the Chief Executive Officer. Such Vice Presidents may be given titles (e.g. Senior Vice President or Executive Vice President) to indicate their relative seniority as to one another, and/or descriptive titles to delineate their relative areas of responsibility. Each Vice President shall perform such duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the Chief Executive Officer and the President or in the event of the inability or refusal of the Chief Executive Officer and the President to act, shall perform the duties of the Chief Executive Officer or the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer and President.

Section 8. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant

15

Secretary, then any of the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.

Section 9. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer, the President and the Board of Directors, at its regular meetings, or when the Chief Executive Officer, the President or the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the

16

faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

Section 10. Assistant Secretaries. Except as may be otherwise provided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

Section 11. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board, the Chief Executive Officer the President or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all

17

books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

Section 12. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, including, without limitation, a Chief Financial Officer, a Chief Operating Officer and a Chief Accounting Officer. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

ARTICLE V.

STOCK

Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number and class of shares owned by him in the Corporation.

Section 2. Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

18

Section 3. Lost Certificates. The Board of Directors, the Chief Executive Officer, the President or any Vice President may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to, have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors, the Chief Executive Officer, the President or any Vice President may, in his or its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors, the Chief Executive Officer, the President or any Vice President shall require and/or to give the Corporation a bond in such sum as it or he may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney-in-fact or other representative lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued.

Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or

19

allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

ARTICLE VI.

NOTICES

Section 1. Notices. Except as otherwise provided in these By-Laws, whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation. If mailed, the notice shall be deemed

20

given when deposited in the United States mail, postage prepaid, directed to each stockholder at such stockholder’s address as it appears on the records of the Corporation, unless such stockholder shall have filed with the Secretary of the Corporation a written request that such notice be mailed to some other address, in which case it shall be directed to such other address. Notice of any meeting of stockholders need not be given to any stockholder who shall submit, either before or after the time stated therein, a written waiver of notice or who shall attend the meeting other than a stockholder who attends the meeting solely for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened. Unless the Board of Directors, after an adjournment is taken, shall fix a new record date for an adjourned meeting or unless the adjournment is for more than thirty days, notice of an adjourned meeting need not be given if the place, date and time to which the meeting shall be adjourned are announced at a meeting at which the adjournment is taken.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, unless excepted under Sections 164, 296, 311, 312 or 324 of the Delaware General Corporation Law, any notice to stockholders given by the Corporation under any provision of these By-Laws or the Certificate of Incorporation shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the

21

Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Notice given by a form of electronic transmission shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Electronic transmission includes any form of communication not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

22

ARTICLE VII.

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in securities or in other property. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal” and “Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

23

ARTICLE VIII.

INDEMNIFICATION

Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

24

Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of

25

conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case.

Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term “another enterprise” as used in this Section 4 shall mean any other corporation or any partnership, joint

26

venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.

Section 5. Indemnification by the Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

27

Section 6. Expenses Payable in Advance. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII.

Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise.

Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a

28

director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII.

Section 9. Certain Definitions. For purposes of this Article VIII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an

29

employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.

Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors.

Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.

30

ARTICLE IX.

AMENDMENTS

These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such meeting of stockholders or Board of Directors as the case may be. All such amendments must be approved by either the holders of issued and outstanding capital stock of the Corporation representing not less than a majority of the voting power of all issued and outstanding capital stock of the Corporation entitled to vote thereon or by a majority of the members of the Board of Directors then in office.

31

EX-10.61

EXHIBIT 10.61

AMENDED & RESTATED VALUE GUARANTEE AGREEMENT

This Amended and Restated Value Guarantee Agreement (this “Agreement”), dated December 19, 2002, by and between IDT Corporation, a Delaware corporation (“IDT”), and AT&T Corp., a New York corporation (“AT&T”), replaces and supercedes in its entirety the Value Guarantee Agreement (the “Original Agreement”), dated October 19, 2001, by and between IDT Investments, Inc., a Nevada corporation (“IDTI”), and AT&T.

W I T N E S S E T H :

WHEREAS, IDTI and AT&T have heretofore entered into the Original Agreement;

WHEREAS, pursuant to that certain Assignment and Assumption Agreement, dated December 19, 2002, by and among IDT, IDTI and AT&T, IDTI assigned to, and IDT assumed, all of the rights and obligations of IDTI under the Original Agreement; and

WHEREAS, IDT and AT&T desire to amend and restate the Original Agreement.

NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Certain Definitions.

(a) “Class B Common Stock” shall mean the Class B Common Stock, par value $.01 per share, of IDT.

(b) “Remaining Shares” shall mean the 1,360,545 shares of Class B Common Stock owned by AT&T as of the date hereof, all of which Remaining Shares were acquired by AT&T pursuant to the Option Agreement, dated as of March 3, 2000, as amended on April 5, 2000, between IDT & AT&T.

1

EXHIBIT 10.61

Section 2. Top-up.

(a) In the event that the Value Loss of the Remaining Shares (as defined below) as of December 31, 2003 is greater than zero, IDT shall compensate AT&T for such Value Loss of the Remaining Shares.

(b) IDT shall notify AT&T of the payment form in which it intends to compensate AT&T for the Value Loss of the Remaining Shares on or prior to January 9, 2004. IDT may compensate AT&T for the Value Loss of the Remaining Shares by any of the following means (at IDT’s sole discretion): (i) payment of cash in immediately available funds equal to the Value Loss of the Remaining Shares, (ii) delivery of shares of Class B Common Stock with a value equal to the Value Loss of the Remaining Shares, calculated in accordance with the Average Market Price (as defined below) of the Class B Common Stock on December 31, 2003, together with a cash payment in lieu of any fraction of a share of Class B Common Stock, or (iii) a combination of payment of cash in immediately available funds and delivery of shares of Class B Common Stock, which in the aggregate have a value equal to the Value Loss of the Remaining Shares, with the value of any such shares to be calculated in accordance with the Average Market Price of the Class B Common Stock on December 31, 2003 (which payment, irrespective of the payment option selected by IDT, is referred to herein as, a “Top-up Payment”).

(c) IDT shall deliver the Top-up Payment to AT&T no later than January 15, 2004. If all or any portion of the Top-up Payment includes shares of Class B Common Stock, AT&T may make a demand that IDT effect the registration of all or any portion of such shares, subject to the terms and conditions set forth herein and the Registration Rights Agreement (as defined below). Upon such request, IDT shall use reasonable efforts to promptly register under the Securities Act of 1933, as amended, as expeditiously as may be practicable, the shares AT&T has requested that IDT register. AT&T shall have the right to only one (1) demand registration pursuant to this Section 2(c). The obligations and procedures set forth in the Lock-up and Registration Rights Agreement, dated as of March 20, 2001 ( the “Registration Rights Agreement”), shall apply to the demand registration pursuant to this Section 2(c). If the registration has not been effected by the 90th day after AT&T’s request (the “Put Date”), AT&T may put the shares to IDT during the 10 business day period following the Put Date for the Average Market Price as of the Put Date in cash payable on the fifteenth business day following the Put Date; provided, however, that the 90-day period referred to in this sentence is subject to blackout periods as provided in Section 2.3 of the Registration Rights Agreement, pursuant to which IDT may postpone the filing of a registration statement for up to 90 days.

2

EXHIBIT 10.61

(d) In the event that the payment of any portion of such Value Loss of the Remaining Shares requires any statutory or regulatory approval, the making of any statutory or regulatory filing or notification, or the passage of any waiting period required under applicable statute or regulation, the payment of any such portion requiring such approval, filing, notification or passage of such waiting period shall be postponed until after all such approvals have been obtained, all such filings and notifications have been made, and all such waiting periods have passed. The parties agree to cooperate in good faith and use all commercially reasonable efforts to promptly obtain any such approvals, make any such filings and notifications, and secure the termination of any such waiting periods.

(e) This Agreement shall be effective only if AT&T (or a subsidiary or assignee provided for in the third sentence of Section 7 of this Agreement) owns beneficially and of record on the date hereof and at all times through December 31, 2003 at least some of the 1,360,545 Remaining Shares owned beneficially and of record by AT&T on the date hereof. If AT&T (or its permitted assignees pursuant to Section 7 below) sells any or all of the 1,360,545 Remaining Shares on or prior to December 31, 2003, this Agreement shall be effective only with respect to that portion of the 1,360,545 Remaining Shares owned beneficially and of record by AT&T (and/or its permitted assignees pursuant to Section 7 below) on December 31, 2003. If AT&T (or its permitted assignees) have sold any or all or the Remaining Shares, AT&T shall deliver a written notice to IDT by January 4, 2004 of the number of Remaining Shares that have been sold on or prior to December 31, 2003. In addition, this Agreement shall not apply to any other shares of capital stock of IDT that AT&T or any of its subsidiaries or affiliates may now hold or may hereinafter acquire or hold.

The “Value Loss of the Remaining Shares” shall equal the difference between (i) the Top-up Amount and (ii) the product of (A) the number of the Remaining Shares owned beneficially and of record by AT&T (and/or its permitted assignees pursuant to Section 7 hereof) as of December 31, 2003, which in no event may exceed 1,360,545 (subject to adjustment as provided in Section 4 below), and (B) the Average Market Price as of December 31, 2003 (the “Aggregate Market Value”). The “Top-up Amount” equals the product of (X) $29,425,000 and (Y) a fraction, the numerator of which is the number of Remaining Shares owned beneficially and of record by AT&T (and/or its permitted assignees pursuant to Section 7 below) as of December 31, 2003, and the denominator of which is 1,360,545. Notwithstanding anything to the contrary contained herein, if the Value Loss of the Remaining Shares is less than zero, then the Value Loss of the Remaining Shares shall be deemed to be zero.

3

EXHIBIT 10.61

The “Average Market Price” of a share of Class B Common Stock as of a particular date means the average (rounded to the nearest 1/10,000) of closing prices of the Class B Common Stock during regular trading hours on the principal market on which shares of Class B Common Stock are then listed or quoted (whether the New York Stock Exchange, the Nasdaq National Market or another national securities exchange or association) for the 20 consecutive trading day period ending on the trading day immediately preceding such date.

Section 3. Change in Control. If prior to December 31, 2003, all of the issued and outstanding shares of IDT’s Class B Common Stock are acquired for cash, all references herein to December 31, 2003 shall be deemed to be a reference to the date on which such cash payment for Class B Common Stock is made, and the Value Loss of the Remaining Shares shall be calculated as of such date in accordance with the other terms and provisions hereof.

Section 4. Adjustment. The number of Remaining Shares, the Aggregate Market Value, the Top-up Amount and any other related amounts shall be subject to appropriate equitable adjustment to reflect the effect of any stock split, reverse stock split, stock dividend, reclassification, extraordinary dividend or distribution or other similar event with respect to the Remaining Shares.

Section 5. Amendments and Waivers. None of the terms or provisions of this Agreement may be waived, amended or supplemented or otherwise modified except by a written instrument executed by each of the parties hereto.

Section 6. Notices. Unless otherwise provided, any notice or other communication required or permitted to be given or effected under this Agreement shall be in writing and shall be deemed effective upon personal or facsimile delivery to the party to be notified or one business day after deposit with an internationally recognized courier service, delivery fees prepaid, or three business days after the deposit with the U.S. mail, return receipt requested, postage prepaid, and in each case, addressed to the party to be notified at the following respective addresses, or at such other addresses as may be designated by written notice; provided that any notice of change of address shall be deemed effective only upon receipt.

A communication, demand or notice given pursuant to this Agreement shall be addressed:

If to IDT, to:

4

EXHIBIT 10.61

IDT Corporation

520 Broad Street

Newark, New Jersey 07102

Attn: James A. Courter

Fax: (973) 438-1503

with a copy to:

McDermott, Will & Emery

50 Rockefeller Plaza

New York, New York 10020

Attn: Mark Selinger, Esq.

Fax: (212) 547-5544

If to AT&T, to:

AT&T Corp.

One AT&T Way

Bedminster, New Jersey 07921

Attn: Corporate Secretary

Fax: (908) 234-7871

with a copy to:

AT&T Corp.

One AT&T Way

Bedminster, New Jersey 07921

Attn: Raymond Liguori

Fax: (908) 532-1824

Section 7. Assignment; Successors and Assigns. No party may assign its rights or obligations under this Agreement without the prior written consent of each other party hereto, except that AT&T may assign its rights and obligations under this Agreement to any of its subsidiaries that holds the Remaining Shares. Any purported assignment made without prior written consent, if required as provided in the immediately preceding sentence, shall be null and void. Notwithstanding the foregoing, this Agreement may be assigned to any Permitted Transferee (as that term is defined in the Second Amended and Restated Limited Liability Company Agreement of Net2Phone Holdings, L.L.C., dated as of the date hereof). This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. This Agreement and all of its provisions and conditions are for the sole and

5

EXHIBIT 10.61

exclusive benefit of the parties to this Agreement and their successors and permitted assigns.

Section 8. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS OF SUCH LAWS.

Section 10. Execution in Counterparts. This Agreement may be executed in any number of separate counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, and all the counterparts shall together constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

6

EXHIBIT 10.61

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement on the date first above written.

IDT CORPORATION
By:	/s/    MOTTI LICHTENSTEIN
	Name:	Motti Lichtenstein
	Title:	EVP
AT&T CORP.
By:	/s/    RAYMOND E. LIGUORI
	Name:	Raymond E. Liguori
	Title:	Mergers & Acquisitions Vice-President

7

EX-10.62

EXHIBIT 10.62

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made as of the 19th day of December, 2002 by and among IDT INVESTMENTS, INC., a Nevada corporation (“Assignor”), IDT CORPORATION, a Delaware corporation and the indirect parent company of Assignor (the “Assignee”), and AT&T Corp., a New York corporation.

W I T N E S S E T H:

WHEREAS, Assignor and AT&T are parties to that certain Value Guarantee Agreement, dated October 19, 2001 (the “Value Agreement”);

WHEREAS, Assignee is the indirect parent company of Assignor;

WHEREAS, Assignor desires to assign all of its rights and obligations under the Value Agreement to Assignee;

WHEREAS, pursuant to Section 6 of the Value Agreement, Assignor has the right to assign the Value Agreement to Assignee; and

WHEREAS, Assignee has agreed to assume all of Assignor’s obligations under the Value Agreement in consideration of good and valuable consideration, including shares of common stock of Assignor.

NOW, THEREFORE, in consideration of the mutual agreements set forth herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Assignment of Rights. Assignor hereby conveys, transfers and assigns to Assignee all of Assignor’s right, title and interest in, to and under the Value Agreement.

2. Assumption of Liabilities. Assignee hereby accepts assignment of Assignor’s right, title and interest in, to and under the Value Agreement and assumes and shall timely discharge, perform and satisfy any and all of Assignor’s obligations under the Value Agreement in accordance with and subject to the Value Agreement.

3. Release of Assignor. Effective upon execution of this Agreement, Assignor shall have no further right, title and interest in, to and under the Value Agreement, and AT&T shall not look to Assignor for performance of any of Assignor’s obligations under the Value Agreement.

4. Indemnification by Assignee. Assignee hereby agrees to indemnify and hold harmless Assignor from any costs, expenses and obligations of Assignor assumed by Assignee pursuant to this Agreement.

5. Consideration. In consideration for Assignee’s agreements hereunder, Assignor shall issue to Assignee shares of Class A Common Stock of Assignor with a value of approximately $6.6 million as of the date hereof.

6. Further Assurances. The parties hereto shall execute and deliver any and all additional documents, agreements and instruments that may be necessary or desirable, if any, to effectuate the transactions contemplated hereby.

7. Miscellaneous. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS OF THE STATE OF NEW YORK. This Agreement may be executed in one or more counterparts, which together shall constitute one agreement. If any provision of this Agreement is deemed invalid or unenforceable, the parties hereto agree to substitute a mutually agreed upon term and provision that is valid and enforceable.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

IDT INVESTMENTS, INC.
By:	/S/     ANTHONY S. DAVIDSON
Name:	Anthony S. Davidson
Title:	CFO

IDT CORPORATION
By:	/S/    MOTTI LICHTENSTEIN
Name:	Motti Lichtenstein
Title:	EVP

AT&T CORP.
By:	/S/    RAYMOND E. LIGUORI
Name:	Raymond E. Liguori
Title:	Mergers & Acquisitions Vice-President

3

EX-10.63

EXHIBIT 10.63

PURCHASE AGREEMENT

This Purchase Agreement (this “Agreement”) is entered into as of December 19, 2002, by and among AT&T Corp., a New York corporation (“AT&T”), ItelTech, LLC, a Delaware limited liability company (“AT&T Sub”), IDT Corporation, a Delaware corporation (“IDT”), IDT Investments, Inc., a Nevada corporation (“IDT Investments”), IDT Domestic-Union, LLC, a Delaware limited liability company (“IDT Sub”), Liberty Media Corporation, a Delaware corporation, LMC Animal Planet, Inc., a Colorado corporation, Liberty N2P II, Inc., a Delaware corporation (“Liberty Sub”), and NTOP Holdings, LLC, a Delaware limited liability company (the “Company”).

Recitals

1. AT&T, AT&T Sub, IDT, IDT Investments, IDT Sub, Liberty Media Corporation and LMC Animal Planet, Inc. are parties to the Second Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001, of the Company, as amended by Amendment No. 1 thereto, dated as of October 31, 2001, (the “LLC Agreement”; capitalized terms used and not otherwise defined in this Agreement have the meanings given to them in the LLC Agreement). Liberty Sub is a wholly-owned subsidiary of LMC Animal Planet, Inc.

2. By letter dated October 29, 2002, a copy of which is attached hereto as Exhibit A, AT&T Sub exercised the IDT Investments Put and the Liberty Sub Put.

3. This Agreement provides for the purchase by IDT Investments from AT&T Sub of six (6) Class A Membership Interests for $3,900 in cash in satisfaction of the IDT Investments Put and the purchase by Liberty Sub from AT&T Sub of twenty-three (23) Class A Membership Interests for $14,950 in cash in satisfaction of the Liberty Sub Put.

Agreement

In consideration of the premises, the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties agree as follow:

1. Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement and in reliance upon the representations, warranties and covenants set forth herein, (a) AT&T Sub shall sell to IDT Investments, and IDT Investments shall purchase from AT&T Sub, six (6) Class A Membership Interests (the “IDT Interests”) in exchange for $3,900.00 in cash (the “IDT Purchase Price”) and (b) AT&T Sub shall sell to Liberty Sub, and Liberty Sub shall purchase from AT&T Sub, twenty-three (23) Class A Membership Interests (the “LMC Interests” and, together with the IDT Interests, the “Interests”) in exchange for $14,950.00 in cash (the “LMC Purchase Price”).

2. Closing.

2.1 Date and Place. The closing of the purchase and sale of the IDT Interests and the LMC Interests (the “Closing”) shall take place on the date of this Agreement at the offices of Baker Botts L.L.P., New York, New York.

2.2 Closing Deliveries. At the Closing the parties will make the following deliveries:

(a) IDT Investments shall deliver the IDT Purchase Price by wire transfer of immediately available funds to an account designated by AT&T Sub;

(b) Liberty Sub shall deliver the LMC Purchase Price by wire transfer of immediately available funds to an account designated by AT&T Sub;

(c) AT&T Sub will deliver a receipt for the IDT Purchase Price to IDT Investments; and

(d) AT&T Sub will deliver a receipt for the LMC Purchase Price to Liberty Sub.

2.3 Recording. Promptly following the Closing, the Company shall (i) cause the transfer of the IDT Interests and the LMC Interests to be recorded in the books of the Company, (ii) amend Schedules III and IV of the LLC Agreement to reflect such transfers and (iii) deliver a copy of Schedules III and IV, as so amended, to each Person that is a Member after the Closing.

3. Satisfaction of Puts. Upon delivery of the IDT Purchase Price in accordance with Section 2.2(a), the IDT Investments Put shall have been satisfied in full. Upon delivery of the LMC Purchase Price in accordance with Section 2.2(b), the Liberty Sub Put shall have been satisfied in full.

4. Membership Matters.

4.1 Assignment and Assumption. Effective as of the delivery of the IDT Purchase Price, AT&T Sub hereby assigns to IDT Investments, and IDT Investments hereby assumes from AT&T Sub, all rights and obligations of AT&T Sub under the LLC Agreement in respect of the IDT Interests. Effective as of the delivery of the LMC Purchase Price, AT&T Sub hereby assigns to Liberty Sub, and Liberty Sub hereby assumes from AT&T Sub, all rights and obligations of AT&T Sub under the LLC Agreement in respect of the LMC Interests.

4.2 Withdrawal from Company and Agreement. Effective as of the Closing, AT&T Sub shall cease to be a Member of the Company, and, notwithstanding anything to the contrary in the LLC Agreement, the parties hereto agree that AT&T and AT&T Sub shall have no rights, obligations or liabilities under the LLC Agreement or otherwise in respect of the Company.

4.3 Admission of Members. Effective as of the Closing, IDT Investments and Liberty Sub are hereby admitted as Class A Members of the Company.

5. Representations and Warranties of AT&T Sub. AT&T Sub represents and warrants to IDT Investments and Liberty Sub as follows:

2

5.1 Organization, Good Standing and Qualification. AT&T Sub is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted.

5.2 Corporate Authority. AT&T Sub has all requisite corporate or similar power and authority and has taken all action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. AT&T Sub has duly executed and delivered this Agreement. This Agreement is a valid and binding agreement of AT&T Sub enforceable against AT&T Sub in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

5.3 Title to IDT Interests. AT&T Sub owns the IDT Interests, and is transferring the IDT Interests to IDT Investments, beneficially and of record, free and clear of any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind, except as set forth in the LLC Agreement.

5.4 Title to LMC Interests. AT&T Sub owns the LMC Interests, and is transferring the LMC Interests to Liberty Sub, beneficially and of record, free and clear of any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind, except as set forth in the LLC Agreement.

5.5 Actions and Proceedings. As of the date of this Agreement, there are no actions, suits, claims, proceedings or investigations pending or, to the knowledge of AT&T Sub, threatened against AT&T Sub, nor any outstanding judgements, orders, writs, injunctions or decrees of any governmental entity against AT&T Sub that (i) seek to prevent or materially restrict or delay the consummation of the transactions contemplated hereby or (ii) would likely have a material adverse effect on the transactions contemplated by this Agreement.

5.6 No Violation. The execution, delivery and performance of this Agreement by AT&T Sub and the transfer of the Interests by AT&T Sub hereunder do not and will not constitute or result in (i) a breach or violation of, or a default under, the certificate of formation, limited liability company agreement or other organizational document of AT&T Sub as in effect on the date hereof, or (ii) a breach or violation of, or a default under, the acceleration of any obligations or the creation of an encumbrance on the assets of AT&T Sub (with or without notice, lapse of time or both) pursuant to any contract binding upon AT&T Sub or any applicable law, except, in the case of clause (ii) above, for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, would not likely have a material adverse effect on the transactions contemplated by this Agreement. No provision of any applicable law, injunction, order or decree of any governmental entity is in effect that has the effect of making the transactions contemplated by this Agreement illegal or would likely have a material adverse effect on the transactions contemplated by this Agreement.

5.7 Consents and Approvals. All authorizations, consents, approvals, licenses, qualifications or exemptions from, or any filings, declarations or registrations with, any

3

governmental entity or any other person required to be obtained or made by AT&T Sub in connection with the execution, delivery or performance by AT&T Sub of this Agreement have been made or obtained and are in full force and effect as of the date hereof, other than authorizations, consents, approvals, licenses or qualifications the absence of which would not likely have a material adverse effect on the transactions contemplated by this Agreement.

6. Representations and Warranties of IDT Investments and Liberty Sub.

Each of IDT Investments and Liberty Sub, solely as to itself, represents and warrants to AT&T Sub as follows:

6.1 Organization, Good Standing and Qualification. It is a corporation duly organized, validly existing and in good standing under the laws of the state of its organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted.

6.2 Corporate Authority. It has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. It has duly executed and delivered this Agreement. This Agreement is its valid and binding agreement enforceable against it in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

6.3 Actions and Proceedings. As of the date of this Agreement, there are no actions, suits, claims, proceedings or investigations pending or, to its knowledge, threatened against it, nor any outstanding judgments, orders, writs, injunctions or decrees of any governmental entity against it that (i) seek to prevent or materially restrict or delay the consummation of the transactions contemplated hereby or (ii) would likely have a material adverse effect on the transactions contemplated by this Agreement.

6.4 No Violation. Its execution, delivery and performance of this Agreement do not and will not constitute or result in (i) a breach or violation of, or a default under, its certificate of incorporation, by-laws or other organizational documents, or (ii) a breach or violation of, or a default under, the acceleration of any obligations or the creation of an encumbrance on its assets (with or without notice, lapse of time or both) pursuant to any contract binding upon it or any applicable law, except, in the case of clause (ii) above, for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, would not likely have a material adverse effect on the transactions contemplated by this Agreement. No provision of any applicable law, injunction, order or decree of any governmental entity is in effect that has the effect of making the transactions contemplated by this Agreement illegal or would likely have a material adverse effect on the transactions contemplated by this Agreement.

6.5 Consents and Approvals. All authorizations, consents, approvals, licenses, qualifications or exemptions from, or any filings, declarations or registrations with, any governmental entity or any other person required to be obtained or made by it in connection with its execution, delivery or performance of this Agreement have been made or obtained and are in

4

full force and effect as of the date hereof, other than authorizations, consents, approvals, licenses or qualifications the absence of which would not likely have a material adverse effect on the transactions contemplated by this Agreement.

6.6 No Registration of Interests. It acknowledges that the Interests have not been registered under the Securities Act of 1993, as amended (the “Securities Act”), that the offer and sale of the Interests is intended to be exempt from registration under the Securities Act and the rules and regulations promulgated thereunder by the Securities and Exchange Commission, and that the Interests cannot be offered, sold, assigned, transferred, or otherwise disposed of unless it is subsequently registered under the Securities Act or an exemption from such registration is available. It is also aware that the sale or transfer of the Interests is further restricted by state securities laws.

7. Miscellaneous.

7.1 Veracity of Representations and Warranties. The representations and warranties contained in this Agreement shall be true and correct on the date hereof. All representations and warranties in this Agreement shall survive the Closing indefinitely. The maximum liability of AT&T Sub to IDT Investments and Liberty Sub for breaches of representations and warranties hereunder by AT&T Sub shall be limited to the IDT Purchase Price and the LMC Purchase Price, respectively. The maximum liability of IDT Investments to AT&T Sub for breaches of representations and warranties hereunder by IDT Investments shall be limited to the IDT Purchase Price. The maximum liability of Liberty Sub to AT&T Sub for breaches of representations and warranties hereunder by Liberty Sub shall be limited to the LMC Purchase Price.

7.2 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

7.3 Parties in Interest; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their heirs, successors and assigns.

7.4 Expenses. Each party shall pay its own expenses relating to the transaction contemplated by this Agreement.

7.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall be deemed to constitute one and the same instrument.

7.7 Captions and Headings. The captions and headings used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

5

7.8 Amendments and Waivers. Any term of this Agreement may be amended only with the written consent of each of the parties hereto. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party or parties against whom such waiver is sought.

7.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

7.10 Rules of Construction. The parties hereto agree that each of them has been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

7.11 Further Assurances. Subject to the terms and conditions of this Agreement, each party hereto shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations or otherwise to consummate the transactions contemplated by this Agreement, and to execute and deliver such documents as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated hereby.

[Signature Pages Follow]

6

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement to be effective as of the date first set forth above.

AT&T CORP.
By:	/s/    RAYMOND E. LIGUORI
Name:	Raymond E. Liguori
Title:	Mergers & Acquisitions Vice-President
ITELTECH, LLC
By:	/s/    DAVID J. PESTER
Name:	David J. Pester
Title:	President

NTOP HOLDINGS, LLC
By:	/s/    ANTHONY S. DAVIDSON
Name:	Anthony S. Davidson
Title:	Manager

IDT CORPORATION
By:	/s/    MOTTI LICHTENSTEIN
Name:	Motti Lichtenstein
Title:	EVP

IDT DOMESTIC-UNION, LLC
By:	IDT DOMESTIC TELECOM, INC., its
	Managing Member
By:	/s/    NORMAN ROSENBERG
Name:	Norman Rosenberg
Title:	CFO

IDT INVESTMENTS, INC.
By:	/s/    ANTHONY S. DAVIDSON
Name:	Anthony S. Davidson
Title:	CFO

LIBERTY MEDIA CORPORATION
By:	/s/    CHARLES Y. TANABE
Name:	Charles Y. Tanabe
Title:	Senior Vice President

LMC ANIMAL PLANET, INC.
By:	/s/    CHARLES Y. TANABE
Name:	Charles Y. Tanabe
Title:	Senior Vice President

LIBERTY N2P II, INC.
By:	/s/    CHARLES Y. TANABE
Name:	Charles Y. Tanabe
Title:	Senior Vice President

EX-99.1(A)

EXHIBIT 99.1(a)—CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Certification Pursuant to

18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of IDT Corporation (the “Company”), on Form 10-Q for the quarter ending January 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, James A. Courter, Chief Executive Officer of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 14, 2003

/s/    JAMES A. COURTER        

James A. Courter

1

EX-99.1(B)

EXHIBIT 99.1(b)—CERTIFICATION OF CHIEF FINANCIAL OFFICER

Certification Pursuant to

18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of IDT Corporation (the “Company”), on Form 10-Q for the quarter ending January 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, Stephen R. Brown, Chief Financial Officer of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 14, 2003

/s/    STEPHEN R. BROWN        

Stephen R. Brown