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Home About Us Stock Information Market Information  Newsletters Press Releases Announcements Email	Shareholder Update October 7, 2002 Dear Shareholder: In what we believe will prove to be the beginning of a turnaround period for the company, I'd like to update you on the significant progress we've made during the past year. As you know, we experienced a false start this past summer when the proposed buyer of the Section 29 units exercised its option to withdraw from the signed agreement. This left Startec in the position of having no prospective sale of its interest and unable to meet capital calls by the manager of the three companies formed to hold the units. Fortunately, a new buyer has been located and once again a sale is on track. Pending Transaction The Managing Member of the Section 29 limited liability companies executed a letter of intent for the purchase and sale of three units in August, with the goal of these units being monetized by an outside entity. Consequently, we hope to soon announce the signing of agreements for the sale of three qualified Section 29 Tax Credit Fuel Processing Systems owned by the limited liability companies, in which our subsidiary is a member. In addition, pursuant to the letter of intent, the sum of $600,000 has been paid by the buyer to the Section 29 Limited Liability Companies for the refurbishing and preparation for eventual placement of the units. We believe that this advance payment earmarked for restoration and preventative maintenance of the units should indicate the favorable and renewed level of interest from the market. The sale of these units represents approximately 80 percent of the company's total assets as of December 31, 2001. As previously disclosed, we believe this sale will result in an income stream, which should yield cash to Startec beginning in 2003. The closing of the sale is subject to several conditions being met by the buyer, such as satisfaction of the buyer's financing conditions, and relocation and placement of the systems enabling achievement of certain minimum production levels, as well as receipt of a favorable IRS ruling. While it is important to note that while these conditions are beyond the direct control of Startec, the prospective buyer is a major, global investment bank, which, we believe, increases the likelihood of a successfully completed transaction. We anticipate that if everything goes as projected, the company will be cash flow positive at some point in fiscal year 2003. Committed to Full Disclosure In our continuing commitment to be forthright and transparent in our financial disclosures, Startec, Inc. has recently hired an accounting firm to prepare a compiled financial statement for the year ended December 31, 2001 and the nine-month period ended September 30, 2002. Proxy Solicitation Update Management does not support or endorse the proxy solicitation effort recently undertaken by Brookline Associates, Inc. Brookline was seeking to obtain an "Irrevocable Proxy Coupled with an Interest" from shareholders of the Company in order to take control of Startec. The solicitation included an Option to Purchase shares, which was tied to the Proxy, with no consideration to be paid for this option. The Company's dealings with Brookline started out as an exploration of potential financing sources for the purpose of meeting capital calls and other obligations which jeopardized the Company's interest in the Section 29 units. Management severed the relationship with Brookline, but later found that company to be going forward with a solicitation we believed was misleading to shareholders. To protect shareholders' interests, Startec recently filed an action seeking a temporary restraining order against Brookline to prevent any potential further interactions with shareholders. Brookline has agreed to stop such solicitations and settle the case. In other pending legal matters, Startec continues to work towards a trial of issues surrounding the Metropolitan Energy System, Inc. (MESI) contract, which was discussed at the 2001 annual meeting. To recap, MESI holds one of the Section 29 unit contracts and should be paying royalties to Startec. Startec has yet to receive payment. Our remedy has been to file a lawsuit and the trial date is now set for December 2002. Board Expansion In a reversal of past actions intended to reduce the size of the Board of Directors, current management plans to recommend the expansion of the Board to five members from three. As the possibility of a successful sale of the Section 29 units comes closer to reality, management is aware that input from a broader spectrum of shareholders will be helpful in determining the future path of the company. Shareholders Meeting In conclusion, we believe 2002 will be considered a defining year for Startec based on the significant progress made toward improving the company's financial health. Ultimately, we believe the activities undertaken in 2002 will enable the company to begin rewarding the patience shareholders have demonstrated in the company. As a co-founder of Startec and a fellow shareholder, I am pleased that, at last, I can share these positive developments with you. I hope to see you at the Annual Shareholders Meeting on November 26, 2002. Please note the change in the date for this meeting from November 12 to November 26, 2002. In the interim, if you have any questions, please feel free to e-mail us at startecenergy@aol.com. Very truly yours, Donald Cullen Chairman and President