TV FILME INC, S-1/A, 1996-07-25

TV FILME INC
S-1/A, 1996-07-25
CABLE & OTHER PAY TELEVISION SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1996
REGISTRATION NO. 333-4512
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TV FILME, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 4841 98-0160214
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

C/O ITSA-INTERCONTINENTAL
TELECOMUNICACOES LTDA.
SCS, QUADRA 07-BL.A
ED. EXECUTIVE TOWER-SALA 601
70.300-911 BRASILIA-DF
BRAZIL

011-55-61-314-9999
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
SCHULTE ROTH & ZABEL
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 758-0404
ATTENTION: MARC WEINGARTEN, ESQ.
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES OF ALL COMMUNICATIONS TO:
MARC WEINGARTEN, ESQ. STEVEN J. GARTNER, ESQ.
SCHULTE ROTH & ZABEL WILLKIE FARR & GALLAGHER
900 THIRD AVENUE ONE CITICORP CENTER
NEW YORK, NEW YORK 10022 153 EAST 53RD STREET
(212) 758-0404 NEW YORK, NEW YORK 10022
(212) 821-8000
---------------
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.

---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [_]

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

TV FILME, INC.

CROSS REFERENCE SHEET

PURSUANT TO RULE 501 (B) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND
CAPTION LOCATION IN PROSPECTUS
--------------------- ----------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus... Facing Sheet; Outside Front Cover Page
2. Inside Front Cover and
Outside Back Cover Pages of
Prospectus................. Inside Front Cover and Outside Back Cover
Pages
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges.. Outside Front Cover Page; Prospectus
Summary; Risk Factors
4. Use of Proceeds............. Use of Proceeds
5. Determination of Offering
Price...................... Outside Front Cover Page; Underwriting
6. Dilution.................... Dilution
7. Selling Security Holders.... Not Applicable
8. Plan of Distribution........ Outside Front Cover Page; Underwriting
9. Description of Securities to Outside Front Cover Page; Prospectus
be Registered.............. Summary; Capitalization; Description of
Capital Stock

10. Interests of Named Experts
and Counsel................ Legal Matters; Experts
11. Information with Respect to
the Registrant............. Outside Front Cover Page; Prospectus
Summary; Risk Factors; Dividend Policy;
Capitalization; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Management;
Certain Transactions; Principal
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale;
Consolidated Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ Not Applicable
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

JULY 25, 1996

2,500,000 Shares

[LOGO OF TV FILME] TV FILME, INC.

Common Stock

--------

All of the 2,500,000 shares of Common Stock offered hereby are being sold by
TV Filme, Inc. (the "Company"). The Company is a Delaware holding company and
its subsidiaries and all of their operations are located in Brazil. See
"Business" and "Risk Factors."

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price of the Common Stock will be between $10.00 and $12.00 per share. See
"Underwriting" for the factors considered in determining the initial public
offering price. The Common Stock of the Company has been approved for quotation
on the Nasdaq National Market under the symbol "PYTV."

--------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.

--------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
- --------------------------------------------------------------------------------
Total(3)......................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses of this offering payable by the Company estimated
at $1.5 million.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares of Common Stock solely to cover over-
allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."

--------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.

Alex. Brown & Sons
INCORPORATED
Gerard Klauer Mattison & Co., llc
Robert Fleming Inc.

THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>

TV FILME, INC.

[MAP OF BRAZIL SHOWING LOCATIONS OF THE COMPANY'S OPERATING MARKETS AND PENDING
APPLICATION MARKETS]

- --------
1--There can be no assurance as to the grant of any such licenses or as to the
timing of grants, if any.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>

PROSPECTUS SUMMARY

This following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and notes thereto of the
Company (the "Consolidated Financial Statements") appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option and (ii) gives
effect to the Restructuring referred to below. Except as otherwise noted,
financial information has been presented in U.S. dollars throughout this
Prospectus. The Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles in the United States
("United States GAAP") in U.S. dollars. For this purpose, and for purposes of
the presentation of other financial data in this Prospectus, amounts in
Brazilian currency have been remeasured into U.S. dollars in accordance with
the methodology set forth in Statement of Financial Accounting Standards No. 52
("SFAS No. 52"), as it applies to entities operating in highly inflationary
economies.

Unless the context otherwise requires, references to the "Company" (i) mean
for all periods prior to the Restructuring TV Filme, Inc., ITSA--
Intercontinental Telecomunicacoes S.A. ("ITSA"), TV Filme Goiania Servicos de
Telecomunicacoes Ltda. ("TV Filme Goiania"), TV Filme Belem Servicos de
Telecomunicacoes Ltda. ("TV Filme Belem") and TV Filme Servicos de
Telecomunicacoes S.A. ("TV Filme Servicos"), and their predecessors as though
they had been part of the Company for all such periods presented and (ii) mean
as of the Restructuring TV Filme, Inc., ITSA, TV Filme Goiania, TV Filme Belem,
TV Filme Brasilia Servicos de Telecomunicacoes Ltda. ("TV Filme Brasilia") and
their predecessors and successors. See "Business--Restructuring." Unless the
context otherwise requires, references to "ITSA" (i) mean for all periods prior
to the Restructuring ITSA--Intercontinental Telecomunicacoes S.A. and (ii) mean
as of the Restructuring ITSA--Intercontinental Telecomunicacoes Ltda. Unless
the context otherwise requires, references to "TV Filme Servicos" (i) mean for
all periods prior to the Restructuring TV Filme Servicos de Telecomunicacoes
S.A. and (ii) mean as of the Restructuring TV Filme Servicos de
Telecomunicacoes Ltda. Certain terms used in this Prospectus are defined under
"Glossary."

Pursuant to the Restructuring, the stockholders of ITSA will exchange their
outstanding equity interests in ITSA for proportionate interests in the Common
Stock of the Company and will exchange their warrants in ITSA for proportionate
amounts of warrants in the Company, following which transactions ITSA will be a
wholly-owned subsidiary of the Company. In addition, a majority voting interest
in TV Filme Servicos, the subsidiary of the Company which holds the Company's
wireless cable licenses, will be transferred to a newly-formed Brazilian
entity, all of which will be owned by certain stockholders of ITSA who are
Brazilian nationals. See "Business--Restructuring."

THE COMPANY

OVERVIEW

3
<PAGE>

Company to operate wireless cable systems in an additional 19 markets in Brazil
having an aggregate population of approximately 9,000,000 and encompassing
approximately 2,000,000 households, although there can be no assurance as to
the grant of any such licenses or as to the timing thereof. Since 1993, the
Company has experienced substantial subscriber growth, increasing from 135
subscribers at the beginning of 1993 to 47,066 subscribers as of March 31, 1996
and more than 55,000 subscribers as of May 31, 1996. For the first quarter of
1996, average monthly revenue per subscriber was $40.45 and average monthly
churn was less than 1%. For the first quarter of 1996, the Company generated
revenues of $5,852,000, an operating loss of $139,000, a net loss of $459,000
and EBITDA (operating income plus depreciation, amortization and non-cash
compensation) of $959,000. The Company's largest operating system, the Brasilia
System, generated revenues of $3,910,000, operating income of $747,000 and
EBITDA of $1,410,000 during this period.

The Company targets mid-sized markets with demographics, competitive
environments and topographies that it believes offer the Company the
opportunity to become the leading provider of subscription television services
in those markets. Significant portions of the Company's current and targeted
markets are not served by hardwire cable providers. The Company estimates that
the percentage of homes unpassed by traditional hardwire cable as of March 31,
1996 is approximately 70% in each of Brasilia and Goiania. There is no hardwire
cable provider in Belem. Of the approximately 1,215,000 households in Brasilia,
Goiania and Belem, the Company estimates that 985,000 households, or
approximately 80% of such households, are currently unpassed by hardwire cable.

The Brazilian hardwire cable industry and wireless cable industry both began
developing in 1989. As of December 1994, Brazil had an estimated 34,500,000
television households, making it the largest television market in South
America, representing approximately 50% of total South American television
households. The Company believes that as of March 1996, Brazil had
approximately 1,250,000 subscription television subscribers, representing less
than 5% penetration of total television households in Brazil. The Ministry of
Communications of Brazil (the "Ministry of Communications") has forecast that
there will be 16,500,000 subscription television subscribers in Brazil by the
year 2003.

The Company believes that wireless cable technology is well suited to its
current and targeted markets and is an attractive alternative to existing
television choices. Wireless cable transmission provides immediate coverage of
entire markets to locations that are in the unobstructed path of the
transmission tower. Wireless cable service can be deployed at a significantly
lower system capital cost per installed subscriber than alternative
technologies. The Company believes that subscribers to television services in
Brazil are concerned with such features as programming, service, reliability
and price and are generally indifferent to the delivery methodology. See
"Business--Company Overview" and "--Brazilian Subscription Television
Industry."

The Company may in the future offer additional communications services,
although it has no current plan or proposal to do so. See "Business--Company
Overview."

4
<PAGE>

The table below provides information regarding the Company's markets as of
March 31, 1996:

<TABLE>
<CAPTION>
ESTIMATED
TOTAL
HOUSEHOLDS
ESTIMATED ESTIMATED ESTIMATED NUMBER UNPASSED BY
TOTAL TOTAL LOS OF NUMBER OF LAUNCH HARDWIRE
POPULATION HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3) SUBSCRIBERS DATE CABLE
---------- ------------- ------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING MARKETS:
Brasilia................ 1,800,000 431,000 401,000 22 32,139 Feb. 1994(4) 70%
Goiania(5).............. 1,600,000 414,000 320,000 21 6,686 Jan. 1995 70%
Belem................... 1,800,000 370,000 333,000 21 8,241 Feb. 1995 100%
--------- --------- --------- ------
Total in Operating
Markets:.............. 5,200,000 1,215,000 1,054,000 47,066 80%
========= ========= ========= ======
19 APPLICATION
MARKETS:(6)............ 9,000,000 2,000,000
========= =========
</TABLE>
- --------
(1) Represents the Company's estimate of the number of total households within
a 25 kilometer radius in the particular signal coverage area (subject to
Note (5)). The Company's exclusive coverage territory is a 25 kilometer
radius in its operating markets. The Company's estimates are based on data
from the 1991 Census conducted by the Brazilian Institute of Geography and
Statistics ("IBGE") as adjusted to reflect total household growth of 3.13%
per year in Brasilia, 2.33% per year in Goiania and 2.65% per year in Belem
based on IBGE data.
(2) Represents the Company's estimate of the number of Estimated Total
Households that can receive an adequate signal from the Company
(eliminating from the Estimated Total Households those homes that the
Company estimates are unable to receive service due to certain physical
characteristics of the particular signal coverage area, such as terrain and
foliage, although some of these households can be served with the aid of
signal repeaters).
(3) Includes six local off-air VHF/UHF channels in Brasilia and five local off-
air VHF/UHF channels in each of Goiania and Belem which are offered to the
Company's subscribers in addition to the subscription channels.
(4) Date when the Brasilia System increased its channel offering from four
channels to eight channels. The Brasilia System began service with one
channel in 1990.
(5) Includes 6,600 Estimated LOS Households of the 66,000 Estimated Total
Households in the City of Anapolis, all of which fall outside the Company's
25 kilometer exclusive coverage territory, but within the Goiania signal
coverage area. See "Business--Regulatory Environment--License Procedures."
(6) Represents markets for which the Company has applied for licenses with the
Ministry of Communications. There can be no assurance as to the grant of
any such licenses or as to the timing of grants, if any.

BACKGROUND

The Company's predecessor was founded in 1989 by members of the Company's
current senior management team. In September 1989, the Company was granted a
license to operate a wireless cable system in Brasilia, the capital of Brazil,
and commenced operations in 1990 with a one channel offering. The Company
raised an aggregate of $16,751,000 through a series of private equity
placements in 1993, 1994, 1995 and 1996 in the respective amounts of
$1,300,000, $5,000,000, $3,300,000 and $7,151,000, to Tevecap S.A. ("Tevecap")
(a subsidiary of Abril S.A., one of Brazil's two largest media companies),
Warburg, Pincus Investors, L.P. ("Warburg, Pincus") and certain other
investors.

With the proceeds from such private placements, the Company expanded its
subscriber base, increased the channel offerings in Brasilia and launched new
wireless cable systems in Goiania and Belem. Licenses to operate the Goiania
and Belem systems were acquired in 1994 from TVA Sistema de Televisao S.A.
("TVA"), a subsidiary of Tevecap, one of the largest subscription television
operators and program suppliers in Brazil, and these systems commenced
operations in early 1995. The Company has exclusive rights to TVA programming
via wireless and hardwire cable in areas where the Company currently operates.
See "Business--Company Background."

OPERATING STRATEGY

The Company's objective is to become a leading provider of subscription
television services in mid-sized markets in Brazil and to become the largest
provider of subscription television services in each of its markets. The
Company believes Brazil offers significant opportunities for subscription
television providers because (i) there is significant demand among television
viewers in Brazil for additional programming choices, (ii) there is limited
competition among subscription television providers and (iii) the penetration
rate for subscription television services is less than 5% of the television
households. As demonstrated by the Company's experience in rapidly growing its
subscriber base, the Company believes it is well

5
<PAGE>

positioned to take advantage of these opportunities. As part of its strategy,
the Company focuses on (i) targeting mid-sized markets for expansion, (ii)
developing TV Filme brand name recognition through exclusive programming, (iii)
increasing penetration of existing markets, (iv) providing superior customer
service, (v) minimizing the rate of subscriber turnover ("churn") and (vi)
implementing a consistent operating model. These elements of the Company's
strategy are discussed below:

Target Mid-sized Markets for Expansion. The Company targets markets with
populations from approximately 100,000 to 2,500,000, and with demographics,
competitive environments and topographies favorable for the Company's
subscription television services. The Company believes that these markets are
currently underserved by subscription television service providers. In addition
to its three operating markets, applications have been made for the Company to
operate wireless cable systems in an additional 19 markets in Brazil
representing a total of approximately 2,000,000 households and an aggregate
population of approximately 9,000,000.

Develop TV Filme Brand Name Recognition through Exclusive Programming. The
Company offers exclusive programming which it believes is superior to that of
its competitors. In its current operating markets, the Company has exclusive
rights to transmit, via wireless and hardwire cable, programming offered by
Tevecap and its subsidiaries which, in turn, are the exclusive providers of
certain channels, including HBO Brazil, ESPN Brazil and Country Music
Television. In addition to such programming, the Company seeks to secure
exclusive television rights to important regional events. For example, the
Company owns the right to broadcast the Goias State Soccer Championship
matches, which the Company offers to its subscribers in Goiania. The Company
emphasizes its exclusive programming in its marketing activities and believes
that its programming line-up, including its local content, gives the Company a
competitive advantage in its markets and enhances the TV Filme brand name.

Increase Penetration of Existing Markets. The Company builds its subscriber
base by (i) extensive marketing tied to regional events such as soccer matches,
(ii) neighborhood promotional events featuring large screen broadcasts of its
channel offerings, (iii) direct mailings, (iv) telemarketing, (v) television
and newspaper advertisements, (vi) prewiring arrangements with residential
housing developers and (vii) other promotional marketing activities, including
referral programs and gifts.

Provide Superior Customer Service. The Company believes that it delivers high
levels of customer service to its subscribers. Customer satisfaction is
emphasized for all employees, including the telemarketing, installation and
customer service teams. The Company's proprietary management information
systems greatly facilitate customer service by providing customer service
representatives immediate access to relevant customer records, including
correspondence history. The Company seeks to install service promptly in a
customer's home or business, and service calls are typically responded to in
less than 48 hours.

Minimize Subscriber Churn. The Company focuses on minimizing churn, and its
average monthly churn rate has been less than 1% for the last two years. The
Company has developed proprietary management information systems which enable
it to provide superior customer service to its clients while monitoring
customer payment patterns. The Company also provides customer service through a
"call-back unit" that attempts to resolve any individual customer concerns. In
addition, the Company identifies and targets areas underserved by hardwire
cable. The Company also charges installation fees ranging from $80 to $250 per
subscriber to discourage subscribers from disconnecting.

Implement Consistent Operating Model. The Company believes that its
implementation of consistent processes supported by proprietary systems, such
as the Company's automated installation scheduling and billing systems,
facilitates the effective development of new markets and rapid subscriber
growth. The Company implements specific marketing plans, conducts employee
training programs and uses a sophisticated intra-company telecommunications
network and proprietary management information systems to implement best
practices across its marketing, customer service, operations and control
functions. See "Business--Operating Strategy."

6
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered
hereby................. 2,500,000 shares
Common Stock to be
outstanding after this
offering............... 9,791,176 shares(1)
Use of proceeds......... Of the estimated $24,075,000 of net proceeds to be
received by the Company in connection with the sale of
the shares of Common Stock offered hereby, the Company
intends to use approximately $16 million of such net
proceeds to finance the expansion of the Company's
current operating systems, approximately 75% of which
is expected to be used to fund installation costs and
the purchase of decoders and related equipment. The
Company intends to use the remaining net proceeds to
fund working capital needs, including the repayment of
certain short-term borrowings of approximately $2.5
million from Abril S.A. and certain of its affiliates,
and the launching or acquisition of new operating
systems to the extent the Company obtains the right to
operate or acquire such new systems. Such short-term
borrowings, the proceeds of which are used for working
capital purposes, are payable on demand and bear
interest at the Brazilian interbank rate ("CDI") or at
CDI plus 0.8%. On July 15, 1996, the CDI rate was 2.47%
per month. The Company has no pending or probable
acquisitions, and in the event that the Company does
not obtain the right to operate or acquire new systems,
the Company intends to use the remaining net proceeds
to fund working capital needs and for other general
corporate purposes. See "Use of Proceeds."
Nasdaq National Market
symbol................. PYTV
</TABLE>
- --------
(1) Excludes (i) 936,432 shares of Common Stock reserved for issuance upon the
exercise of stock options available for grant under the Company's 1996
Stock Option Plan pursuant to which options to purchase 407,000 shares of
Common Stock shall be granted upon the consummation of this offering,
297,000 of which shall be exercisable at the initial public offering price
and 110,000 of which shall be exercisable at $11.00 per share, and which
generally shall vest 20% per year for five years beginning on the first
anniversary of consummation of this offering and (ii) 794,764 shares of
Common Stock issuable upon the exercise of warrants (the "1996 Warrants"),
all of which are currently exercisable. See "Management--Stock Options--
1996 Stock Option Plan" and "Description of Capital Stock--Warrants."

RISK FACTORS

In addition to the other information contained in this Prospectus, risk
factors should be considered carefully in evaluating an investment in the
Common Stock. The risks of investing in the Common Stock relating to Brazil
generally include the following factors: Economic Uncertainty; Political
Uncertainty; Restrictions on Conversion and Remittances Abroad; and Potential
Unenforceability of Civil Liabilities and Judgments. The risks of investing in
the Common Stock relating to the Company include: Limited Operating History and
Lack of Profitable Operations; Risks Associated with New Markets; Management of
Growth; Government Regulation; Potential Conflicts of Interest; Minority Voting
Position in License Company; Wireless Cable Transmission Issues; Competition;
Dependence on Suppliers; Holding Company Structure and Dependence on
Subsidiaries; Dependence on Key Personnel; Control by Principal Stockholders;
Absence of Public Market; Shares Eligible for Future Sale; Dilution; and
Antitakeover Provisions of the Company's Certificate of Incorporation and By-
laws and the Delaware General Corporation Law. See "Risk Factors."

7
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND MONTHLY REVENUE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------
1993 1994 1995 1995 1996
------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 287 $ 2,438 $ 11,404 $1,364 $5,852
Operating costs and expenses:
System operating.................. 196 773 2,957 413 1,583
Selling, general and
administrative................... 558 2,394 8,975 1,589 3,310
Depreciation and amortization..... 43 365 2,049 236 1,098
------- ------- -------- ------ ------
Total operating costs and
expenses........................ 797 3,532 13,981 2,238 5,991
------- ------- -------- ------ ------
Operating income (loss)............ (510) (1,094) (2,577) (874) (139)
Other income (expense)............. (6) 1,612 360 218 (320)
------- ------- -------- ------ ------
Net income (loss).................. $ (516) $ 518 $ (2,217) $ (656) $ (459)
======= ======= ======== ====== ======
Net income (loss) per share (2).... $ (0.10) $ 0.08 $ (0.27) $(0.08) $(0.06)
Shares and share equivalents, in
thousands (2)..................... 5,295 6,885 8,086 8,086 8,086
OTHER DATA:
EBITDA (3)......................... $ (467) $ (729) $ (216) $ (638) $ 959
Number of subscribers at end of
period............................ 1,864 7,641 36,594 11,924 47,066
Average monthly revenue per
subscriber (4).................... $ 30.43 $34.13 $ 40.00 $39.86 $40.45
Average monthly churn rate (5)..... 0.37% 0.62% 0.63% 0.66% 0.62%
Number of operating systems at end
of period......................... 1 1 3 3 3
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED(6)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................... $(2,720) $21,355
Property, plant and equipment, net...................... 22,802 22,802
Total assets............................................ 29,355 53,430
Payables to affiliates--long-term....................... 200 200
Stockholders' equity.................................... 14,587 38,662
</TABLE>

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(1) The Consolidated Financial Data includes (i) TV Filme Servicos on a
historical basis and (ii) ITSA and its subsidiaries since May 1994 and the
predecessor of ITSA on a historical basis, as though they have been a part
of TV Filme, Inc. for all periods presented. See Note 1a to the
Consolidated Financial Statements and "Business--Restructuring."
(2) Net income (loss) per share (after giving effect to the Restructuring) is
calculated using the weighted average number of shares of stock outstanding
during the period together with the number of shares issuable upon the
exercise of options and warrants issued during the twelve months prior to
the filing of this offering. The Company did not use the treasury stock
method in computing the dilutive effect of the 1996 Warrants. See
"Description of Capital Stock--Warrants."
(3) EBITDA is defined as operating income (loss) plus depreciation,
amortization and non-cash compensation. While EBITDA should not be
construed as a substitute for operating income (loss) or a better measure
of liquidity than cash flow from operating activities, which are determined
in accordance with United States GAAP, it is included herein to provide
additional information regarding the ability of the Company to meet its
capital expenditures, working capital requirements and any future debt
service. EBITDA is not necessarily a measure of the Company's ability to
fund its cash needs, because it does not include capital expenditures,
which the Company expects to continue to be significant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
(4) Average monthly revenue per subscriber is calculated by dividing
subscription revenue for the month by the average number of subscribers for
the month.
(5) Churn equals the ratio of disconnected subscribers to average monthly
subscribers. The average monthly churn rate is the average of the churn
rates for each month related to the periods presented.
(6) As adjusted to give effect to this offering, assuming an initial public
offering price of $11.00 per share. See "Use of Proceeds."

TV Filme, Inc. was incorporated in April 1996 in Delaware as a holding
company for ITSA and its operating subsidiaries.

The Company's principal executive offices are at c/o ITSA-Intercontinental
Telecomunicacoes Ltda., SCS, Quadra 07-Bl.A, Ed. Executive Tower, Sala 601,
70.300-911 Brasilia-DF, Brazil, and its telephone number is 011-55-61-314-9999.

8
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock being offered hereby.

RISK FACTORS RELATING TO BRAZIL GENERALLY

Economic Uncertainty. Brazil has experienced extremely high rates of
inflation for many years. Inflation, as measured by the Getulio Vargas
Foundation's General Index of Market Prices (the "IGPM Index"), was
approximately 458% in 1991, 1,175% in 1992, 2,567% in 1993, 870% in 1994, 15%
in 1995 and 3% in the first three months of 1996. Inflation, government
actions to combat inflation and public speculation about future actions have
had significant negative effects on the Brazilian economy in general and have
also contributed materially to economic uncertainty in Brazil. In periods of
inflation, many of the Company's expenses tend to increase. Generally, in
periods of inflation, a company is able to raise its prices to offset the rise
in its expenses and may set prices for customers without government
regulation. However, under Brazilian law designed to reduce inflation, the
rates which the Company may charge to a particular subscriber may not be
increased until the next 12-month anniversary of his subscription. Thus, the
Company is less able to offset expense increases with revenue increases.
Accordingly, inflation may have a material adverse effect on the Company's
results of operations and financial condition.

Beginning in 1994, the Brazilian government commenced the "Real Plan," an
economic stabilization plan designed to reduce inflation by, among other
things, reducing certain public expenditures, collecting debts owed to the
Brazilian government, increasing tax revenues and continuing the national
program of privatizing certain state-owned enterprises. On July 1, 1994, as
part of the Real Plan, the Brazilian government introduced a new currency, the
Real. There can be no assurance that the Real Plan will continue to be
successful in controlling the level of inflation, that future governmental
actions will not trigger an increase in inflation or that inflation will not
have a material adverse effect on the Company's results of operations and
financial condition.

Brazil's rate of inflation and the government's actions to combat inflation
have also affected the relationship of the value of Brazil's currency to the
value of the U.S. dollar. Historically, Brazil's currency frequently had been
devalued in relation to the U.S. dollar. However, after its introduction, the
Real initially appreciated against the U.S. dollar. In an effort to address
concerns about the possible overvaluation of the Real relative to the U.S.
dollar, and in light of the economic upheaval in Mexico that resulted from the
rapid devaluation of the Mexican peso, the Brazilian government in March 1995
introduced new exchange rate policies which establish a trading band for the
Real against the U.S. dollar. This band has been adjusted frequently, and, as
of March 31, 1996, was between .97 Real and 1.06 Real per U.S. dollar. From
March 31, 1995 to March 31, 1996, the Real declined in value relative to the
U.S. dollar by approximately 10%. There can be no assurance that the Real will
not again be devalued relative to the U.S. dollar, or that the Real will not
fluctuate significantly relative to the U.S. dollar. The Company collects
substantially all of its revenues in Reals, but pays certain of its expenses,
including a significant portion of its equipment costs and a portion of its
programming costs, in U.S. dollars. In addition, equipment purchases currently
are financed by irrevocable letters of credit for up to one year, although
following consummation of this offering the Company may determine not to
utilize such financing. To the extent the Real depreciates at a rate greater
than the rate at which the Company raises prices, the value of the Company's
revenues (as expressed in U.S. dollars) may fall. As the value of the
Company's revenues fall, its ability to fund U.S. dollar-based expenditures
also would decline. The Company does not currently seek to hedge exchange rate
risks in the financial markets or otherwise, as it believes that the costs of
such hedging outweigh the related risks. Accordingly, devaluation of the Real
may have a material adverse effect on the Company's results of operations and
financial condition.

In addition, should any cash dividends and distributions with respect to
shares of Common Stock be made (which dividends and distributions are not
currently contemplated), such payments will be made in

9
<PAGE>

U.S. dollars but will be funded by dividends or other payments from the
Company's subsidiaries operating in Brazil. Consequently, the value of the
Common Stock and the ability of the Company to fund any cash dividends or
distributions may be affected by changes in the value of the Real relative to
the U.S. dollar.

Political Uncertainty. The Brazilian government often changes monetary,
credit, tariff and other policies to influence the course of Brazil's economy.
Such government actions have included wage and price controls as well as other
measures, such as freezing bank accounts, imposing capital controls and
inhibiting imports to and exports from the country. A primary objective of the
Brazilian government in recent years has been to control government spending.
Some progress has been made, but fiscal deficits remain high. Reducing the
deficit is made more difficult by Brazil's Constitution, which requires the
federal government to make substantial funds available to the state
administrations, while limiting the federal government's ability to raise
sufficient funds from taxes. Changes in policy involving, among other things,
tariffs, exchange controls, regulatory policy and taxation, as well as events
such as inflation, devaluation, social instability or other political,
economic or diplomatic developments, could adversely affect the Brazilian
economy and have a material adverse effect on the Company's results of
operations and financial condition.

The Brazilian political environment has been marked by high levels of
uncertainty since Brazil returned to civilian rule in 1985 after twenty years
of military government. The death of a President-elect in 1985 and the
resignation of another President in 1992 in the midst of his impeachment
trial, as well as frequent turnover at and immediately below the cabinet
level, have contributed to delays in the adoption of coherent and sustained
policies to confront the country's economic issues. Mr. Fernando Henrique
Cardoso, Brazil's Finance Minister at the time of the implementation of the
Real Plan, was elected President of Brazil in October 1994 and took office in
January 1995. President Cardoso was elected by a coalition of political
parties, and, as a result, his administration may be required to accept more
compromises than if his party controlled the Brazilian legislature. In
addition, the President is currently ineligible for re-election when his
current term expires in 1998. President Cardoso has supported the Real Plan,
the reduction of inflation, privatization measures and certain free-market
policies. However, many political factions oppose certain of the
administration's policies, and there can be no assurance that any of the
administration's policies, including the Real Plan, will be supported by the
legislature.

Restrictions on Conversion and Remittances Abroad. The Brazilian government
has the authority under current legislation to impose restrictions on the
remittance abroad of foreign capital when a serious deficit in Brazil's
balance of payments occurs, as it did for approximately six months in 1989 and
early 1990, and on the conversion of Reals into foreign currencies. Such
restrictions may hinder or prevent the Company's Brazilian subsidiaries from
purchasing equipment that suppliers require to be paid for in U.S. dollars and
from converting dividends or distributions paid or made by them into U.S.
dollars and remitting U.S. dollars to the Company. Such restrictions could
adversely affect the Company. The Company could be adversely affected by
delays in, or a refusal to grant, any required Brazilian governmental approval
for conversion of Real payments and remittances abroad in respect of such
dividends or distributions.

Potential Unenforceability of Civil Liabilities and Judgments. Certain of
the directors and officers of the Company and certain experts named herein are
non-residents of the United States, and all or a substantial portion of the
assets of such persons are located outside of the United States. The Company's
subsidiaries and substantially all of the Company's assets are located in
Brazil. As a result, it may not be possible for investors to effect service of
process within the United States upon such persons (unless an agent for
service of process is duly appointed by them, in which case service of process
effected under United States laws would be deemed valid by the Brazilian
courts in the case of the confirmation of foreign judgments described below)
or enforce in the United States against such persons or the subsidiaries
judgments obtained in United States courts, including judgments predicated
upon the civil liability provisions of United States Federal securities laws.
The Company has been advised by its Brazilian counsel, Tozzini, Freire,
Teixeira e Silva Advogados, that a judgment of a United States court for civil
liabilities

10
<PAGE>

predicated upon United States Federal securities laws may be enforced in
Brazil against the Company, its directors, its officers and the experts named
herein without reconsideration of the merits, upon confirmation of that
judgment by the Brazilian Federal Supreme Court. That confirmation will occur
if the foreign judgment (i) fulfills all formalities required for its
enforceability under the laws of the United States, (ii) is issued by a
competent court after service of process upon the Company, (iii) is not
subject to appeal, (iv) is authenticated by a Brazilian consular office in the
United States and (v) is not contrary to Brazilian national sovereignty,
public policy or good morals. In addition, the Company has been advised by
such Brazilian counsel that original actions in connection with this
Prospectus and the Registration Statement of which this Prospectus is a part
predicated solely on United States Federal securities laws may be brought in
Brazilian courts. Furthermore, no assurance can be given that the confirmation
process described above can be conducted in a timely manner or that a
Brazilian court would enforce liabilities for violation of United States
Federal securities laws.

RISK FACTORS RELATING TO THE COMPANY

Limited Operating History; Lack of Profitable Operations. The Company's
subsidiaries commenced operations in Brasilia in October 1990, in Goiania in
January 1995 and in Belem in February 1995. Prospective investors, therefore,
have limited historical financial information about the Company upon which to
base an evaluation of the Company's performance and an investment in the
Common Stock offered hereby. Since inception, the Company has sustained
substantial operating losses, due primarily to start-up costs and charges for
depreciation and amortization of capital expenditures to develop its wireless
cable systems and had an accumulated deficit of approximately $2.7 million as
of March 31, 1996. The Company may continue to experience losses as it expands
its existing systems and develops additional systems. There can be no
assurance that the Company will be profitable or will generate positive cash
flow in future years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."

Risks Associated with New Markets. Applications have been made for the
Company to operate wireless cable systems in an additional 19 markets, but
there can be no assurance as to the grant of any such licenses or as to the
timing of grants, if any. The Company also may seek to enter into operating
agreements with subscription television license holders other than TV Filme
Servicos or seek to acquire licenses granted to others, but there can be no
assurance that the Company will be able to enter into any such operating
agreements or consummate any such license acquisitions. Although the cost of
purchasing any given license cannot be substantiated, it is the Company's
belief that the cost of purchasing licenses has increased substantially in
recent years. Based on current market and operating conditions, the Company
estimates that the cost of launching any additional operating system after the
granting of a new license would range from approximately $5.0 million to $8.0
million, including construction of a headend facility, subscriber-related
capital costs and funding initial development costs and operating losses,
depending on factors particular to each such market. The Company's ability to
expand successfully through acquisitions depends on many factors, including
the successful identification and acquisition of such systems and management's
ability to integrate and operate the acquired businesses effectively. The
Company may compete for new system opportunities with other companies that
have significantly greater financial and managerial resources. The Company has
no pending or probable acquisitions and there can be no assurance that the
Company will be successful in launching or acquiring any new subscription
television systems or that the Company will be able to integrate successfully
any acquired systems into its current business and operations. The failure of
the Company to launch or acquire new systems could impede its growth. The
failure of the Company to integrate successfully acquired systems could have a
material adverse effect on the Company's results of operations and financial
condition.

In order to finance further subscriber growth, capital expenditures and
related expenses for additional system development and acquisitions, the
Company may require additional funds in the future. To the extent that any
future financing requirements are satisfied through the issuance of equity
securities, investors may experience significant dilution. Furthermore, the
amount and timing of the Company's

11
<PAGE>

future capital requirements will depend upon a number of factors, many of
which are not within the Company's control, including the grant of new
licenses, programming costs, capital costs, competitive conditions and the
costs of any necessary implementation of technological innovations or
alternative technologies. There can be no assurance that the Company's future
capital requirements will be met or will not increase as a result of future
acquisitions, if any. Failure to obtain any required additional financing
could adversely affect the growth of the Company and, ultimately, could have a
material adverse effect on the Company's results of operations and financial
condition. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

Management of Growth. The Company is experiencing rapid growth, which could
place a significant strain on its operational and personnel resources. The
Company's growth will require it to continue to improve its operational and
financial systems and to train, motivate and manage its employees. If
management is unable to manage the Company's growth effectively, or if the
productivity of its employees falls below expectations, it could have a
material adverse effect on the Company's results of operations and financial
condition.

Government Regulation. Wireless cable systems transmit programming by
wireless cable channels, the use of which is subject to licensing and
regulation by the Ministry of Communications.

The Ministry of Communications has proposed new regulations to govern the
granting of licenses and the operation of wireless cable systems in Brazil
(the "Proposed Regulations"), although there can be no assurance as to whether
the Proposed Regulations will be implemented as currently drafted or at all,
or as to the timing thereof. The effect of the Proposed Regulations on the
licenses pursuant to which the Company operates its three operating systems is
uncertain; however, the Company does not believe that the Proposed
Regulations, as currently drafted, will have a material adverse effect on the
Company's results of operations and financial condition. Under the Proposed
Regulations, all licenses will be granted pursuant to a public bidding
process. The Company is unable to predict what impact, if any, such public
bidding will have on its ability to launch and operate new systems because
many of the Company's potential competitors have greater financial resources
than the Company and thus would be in a position to outbid the Company for
additional licenses. Any new regulations could have a material adverse effect
on the subscription television industry as a whole and on the Company in
particular. See "Business--Regulatory Environment."

Potential Conflicts of Interest. Under applicable provisions of Brazilian
law currently in effect, a license to operate a wireless cable system in
Brazil must be controlled by Brazilian nationals or entities controlled by
Brazilian nationals. As a result of this offering, the Company will not be
controlled by Brazilian nationals. TV Filme Servicos, a wholly owned
subsidiary of ITSA, owns the licenses pursuant to which the Company currently
conducts its business, and has made applications for license grants in an
additional 19 markets. To comply with Brazilian law, prior to the consummation
of this offering, the Company will effect the Restructuring pursuant to which
voting control of TV Filme Servicos will be transferred to a newly formed
company which will be controlled by certain existing stockholders of the
Company, some of whom are executive officers and directors of the Company. See
"Business--Restructuring." A potential conflict of interest may be deemed to
exist by reason of the fact that these stockholders, executive officers and
directors have an ownership interest in and voting control of TV Filme
Servicos. The Company will continue to own 49% of the voting securities of TV
Filme Servicos and 83% of the economic interests in TV Filme Servicos. The
Company also will have a representative on the executive management team of TV
Filme Servicos and may prohibit the sale, transfer or impairment of any
license held by TV Filme Servicos. The Company will have the exclusive right
to operate the licenses currently owned by TV Filme Servicos, as well as any
additional licenses that TV Filme Servicos may obtain, pursuant to the terms
of certain agreements to be entered into between the Company and TV Filme
Servicos prior to the consummation of this offering. Any breach by TV Filme
Servicos of any of its material obligations to the Company under any of these
agreements could have a material adverse effect on the Company's results of
operations and financial condition.

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<PAGE>

Minority Voting Position in License Company. The Company will own 49% of the
voting stock of TV Filme Servicos, which owns the licenses pursuant to which
the Company currently conducts its business and which has made applications
for license grants in an additional 19 markets. As a result of the Company's
minority voting position in TV Filme Servicos, the Company will not be able to
control the operations of TV Filme Servicos and its relationships with ITSA
and the operating subsidiaries of the Company. The Company will enter into an
operating agreement with TV Filme Servicos which is intended to provide the
Company with substantial protections concerning the ability of the Company and
its subsidiaries to operate the licenses held by TV Filme Servicos. See
"Business--Restructuring." Any breach by TV Filme Servicos of any of its
material obligations to the Company under such operating agreement could have
a material adverse effect on the Company's results of operations and financial
condition.

Wireless Cable Transmission Issues. Reception of wireless cable programming
generally requires a direct, unobstructed LOS from the Company's headend to
the subscriber's antenna. Wireless cable service can also be received by use
of signal repeaters. If the LOS is obstructed, the Company may not be able to
supply service to certain potential subscribers or may be required to install
additional signal repeaters. In addition to limitations resulting from
terrain, in limited circumstances extremely adverse weather can damage
transmission and receive-site antennas as well as other transmission
equipment.

Interference from other wireless cable systems can limit the ability of a
wireless cable system to serve any particular point, just as interference from
one television station limits the ability of a viewer to receive another
television station signal broadcasting on the same frequency. Under current
Ministry of Communications regulations, a wireless cable license holder is
generally protected from interference within 25 kilometers, or approximately
15 miles, of the transmission site, and a prospective operator must
demonstrate that its signal will not cause interference to the reception of
other permitted channels. If it is not possible to avoid such interference, it
may be necessary to negotiate interference agreements with the license holders
of the stations. There can be no assurance that the Company will be able to
enter into any such interference agreements on terms acceptable to the
Company.

Competition. TV Filme Servicos is the only entity licensed to operate
wireless cable systems in Brasilia, Goiania and Belem. The Company provides
service via 16 wireless cable channels in each such market and applications
have been made for an additional 15 channels in such markets. There can be no
assurance that the licenses will be so granted or that such licenses will not
be granted to competitors. The Company's principal subscription television
competitor in the city of Brasilia is NET Brasilia, a hardwire cable operator,
which the Company believes had approximately 24,000 subscribers as of March
31, 1996. The Company's principal subscription television competitor in the
city of Goiania is Multicanal, a hardwire cable operator, which the Company
believes had approximately 22,000 subscribers as of March 31, 1996. There
currently is no hardwire cable provider in the city of Belem. In addition to
other wireless cable and hardwire cable operators, wireless cable systems face
or may face competition from several other sources, such as direct-to-home
satellite ("DTH") systems, direct broadcasting satellite ("DBS") systems,
local off-air VHF/UHF channels, home videocassette recorders and out-of-home
theaters. Legislative, regulatory and technological developments may result in
additional and significant competition. Many actual and potential competitors
have greater financial, marketing and other resources than the Company. No
assurance can be given that the Company will be able to compete successfully.
See "Business--Competition."

Dependence on Suppliers. The Company is dependent on certain suppliers of
its programming and equipment. The Company purchases substantially all of its
programming from Tevecap and its subsidiaries pursuant to a contract expiring
in 2004. Although the Company has no reason to believe that such contract will
be canceled or will not be renewed upon its expiration in 2004, if such
contract is canceled or not renewed, the Company will have to seek programming
from other sources. There can be no assurance that other programming will be
available to the Company on acceptable terms or at all or, if so available,
that such programming will be acceptable to the Company's subscribers.
Additionally, there can be no assurance that programming will be available to
the Company in its pending application markets on

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<PAGE>

acceptable terms. There also can be no assurance that Tevecap's and its
subsidiaries' contracts with their individual program suppliers are or will
remain exclusive, will not be canceled or will be renewed upon expiration.
There can be no assurance that if Tevecap's contracts are canceled or not
renewed, other programming will be available to Tevecap on acceptable terms or
at all. See "Business--Programming."

The Company currently purchases decoders and antennas from a limited number
of sources. The inability to obtain sufficient limited source components as
required, or to develop alternative sources if and as required in the future,
could result in delays or reductions in customer installations which, in turn,
could have a material adverse effect on the results of operations and
financial condition of the Company.

Holding Company Structure and Dependence on Subsidiaries. The Company
conducts its operations through its subsidiaries. Therefore, the primary
internal sources of cash for the Company are its subsidiaries. The Company's
ability to distribute dividends (which are not currently anticipated) will be
dependent upon the earnings of its subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those subsidiaries
to, the Company. The subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to pay any amounts owed to
creditors of the Company or to make any funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of dividends and
the making of loans and advances to the Company, if any, by its subsidiaries
(i) may be subject to statutory restrictions, pursuant to which the
subsidiaries may pay dividends only out of retained earnings, or contractual
restrictions, (ii) are dependent upon the earnings of those subsidiaries and
(iii) are subject to various business considerations. See "--Risk Factors
Relating to Brazil Generally--Restrictions on Conversion and Remittances
Abroad" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."

Dependence on Key Personnel. The success of the Company depends in large
part upon the abilities and continued service of its executive officers and
other key employees and, in particular, of Hermano Studart Lins de
Albuquerque, the Chief Executive Officer and Secretary and Carlos Andre
Studart Lins de Albuquerque, the President, Chief Operating Officer and
Treasurer. There can be no assurance that the Company will be able to retain
the services of such officers and employees. The failure of the Company to
retain the services of Messrs. Lins and other key personnel could have a
material adverse effect on the Company's results of operations and financial
condition. Prior to the consummation of this offering, the Company expects to
enter into employment agreements, containing non-competition and non-
solicitation provisions, with Messrs. Lins. The Company believes that its
future success will depend, in part, on its ability to attract and retain
highly talented managerial personnel. There can be no assurance that it will
be able to attract and retain the personnel it requires on acceptable terms.
See "Management--Executive Officers and Directors" and "--Employment
Agreements."

Control by Principal Stockholders. Upon completion of this offering, the
existing stockholders of the Company will own or control approximately 74.5%
of the Company's outstanding shares of Common Stock (approximately 71.7% if
the Underwriters' over-allotment option is exercised in full) and, if acting
in concert, will be able to continue to elect the Company's Board of Directors
and take other corporate actions requiring stockholder approval, as well as
dictate the direction and policies of the Company. Such concentration of
ownership also could have the effect of delaying, deterring or preventing a
change in control of the Company that might otherwise be beneficial to
stockholders. See "Principal Stockholders" and "Underwriting."

Absence of Public Market. Prior to this offering, there has been no public
market for the Common Stock, and there can be no assurance that an active
trading market will develop or be sustained or that shares of Common Stock can
be resold at or above the initial public offering price after this offering.
The initial public offering price of the Common Stock will be established by
negotiation between the Company and the representatives of the Underwriters
(the "Representatives"). Such price should not, however, be considered
indicative of the actual value of the Common Stock. See "Underwriting." Prices
for the

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<PAGE>

Common Stock following this offering may be influenced by many factors,
including the depth of the market for the Common Stock, investor perception of
the Company, fluctuations in the Company's operating results and market
conditions relating to Brazil and Latin America generally and conditions in
the subscription television industry in Brazil and the United States. In
addition, announcements concerning regulatory developments in Brazil and the
United States and technological innovations in the subscription television
industry may also affect the market price of the Common Stock. Period to
period fluctuations in financial results and general market conditions could
also have a significant impact on the Company's business and on the market
price of the Common Stock. Future sales of, or announcements of an intention
to sell, substantial amounts of Common Stock by existing stockholders could
also adversely affect the prevailing price of the Common Stock. In addition,
the stock market has experienced extreme price and volume fluctuations from
time to time which may adversely affect the market price of the Common Stock.
See "Description of Capital Stock," "Shares Eligible for Future Sale" and
"Underwriting."

Shares Eligible for Future Sale. Upon completion of this offering, the
Company will have a total of 9,791,176 shares of Common Stock outstanding
(10,166,176 shares, if the Underwriters' over-allotment option is exercised in
full). Of these shares, the 2,500,000 shares offered hereby (2,875,000 shares,
if the Underwriters' over-allotment option is exercised in full) will be
freely transferable by persons other than affiliates of the Company without
restriction or registration under the Securities Act. The remaining shares
will be "restricted securities" as that term is defined by Rule 144 under the
Securities Act and may not be sold other than pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from such registration requirement. Following this offering, sales of a
substantial number of shares of Common Stock in the public market under Rule
144 or otherwise, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock. The Company
has agreed not to issue any securities or file a registration statement under
the Securities Act, subject to certain exceptions, for a period of 180 days
following the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated. The Company, each of its executive officers
and directors and certain of its securityholders have agreed not to offer,
sell, pledge, contract or grant an option for the sale of or otherwise dispose
of any shares of Common Stock or interest therein for a period of 180 days
following the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated. In its discretion and at any time without
notice, Alex. Brown & Sons Incorporated may release all or any portion of the
shares subject to lock-up agreements. The Company intends to file a
registration statement on Form S-8 under the Securities Act after the closing
of this offering, covering the sale of shares reserved for issuance under the
1996 Stock Option Plan. As of the closing of this offering, there will be
outstanding options to purchase a total of 407,000 shares of Common Stock and
warrants to purchase a total of 794,764 shares of Common Stock. The Company
has granted to its stockholders registration rights with respect to 7,291,176
shares of Common Stock. The Company has granted to its warrant holders
registration rights with respect to 794,764 shares of Common Stock issuable
upon the exercise of the 1996 Warrants. If the Company were to register any
such shares, the sale of such shares or the announcement of such registration
could have a material adverse effect on the Company's ability to raise
capital. See "Shares Eligible for Future Sale," "Description of Capital
Stock--Warrants," "Description of Capital Stock--Registration Rights" and
"Underwriting."

Dilution. The initial public offering price of the Common Stock will be
substantially higher than the pro forma net tangible book value per share of
Common Stock at March 31, 1996. Investors purchasing shares of Common Stock in
this offering will incur immediate and substantial dilution. See "Dilution."

Antitakeover Provisions of the Company's Certificate of Incorporation and
By-laws and the DGCL. The Company's Certificate of Incorporation (the
"Certificate of Incorporation") and By-laws (the "By-laws") and the Delaware
General Corporation Law (the "DGCL") contain provisions which may have the
effect of delaying, deterring or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved
by the Company's Board of Directors. Such provisions may also render the
removal of directors and management more difficult. Specifically, the
Certificate of Incorporation and By-laws provide for a classified Board of
Directors serving staggered three-

15
<PAGE>

year terms, restrictions on who may call a special meeting of stockholders, a
prohibition on stockholder action by written consent and certain advance
notice requirements for stockholder nominations of candidates for election to
the Board of Directors and certain other stockholder proposals. In addition,
upon completion of this offering, the Certificate of Incorporation authorizes
the Board of Directors to issue "blank check" preferred stock, without further
action by the stockholders, on such terms and with such rights, preferences
and designations as the Board of Directors may determine. Issuance of such
preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company. While the Company has no present intention to issue
shares of preferred stock, any issuance could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. The DGCL also contains provisions preventing
certain stockholders from engaging in business combinations with the Company,
subject to certain exceptions. See "Description of Capital Stock."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby are estimated to be approximately $24,075,000,
after deducting estimated underwriting discounts and offering expenses,
assuming an initial public offering price of $11.00 per share.

The Company intends to use approximately $16 million of such net proceeds to
finance the expansion of the Company's current operating systems,
approximately 75% of which is expected to be used to fund installation costs
and the purchase of decoders and related equipment. The Company intends to use
the remaining net proceeds to fund working capital needs, including the
repayment of certain short-term borrowings of approximately $2.5 million from
Abril S.A. and certain of its affiliates, and the launching or acquisition of
new operating systems to the extent the Company obtains the right to operate
or acquire such new systems. Such short-term borrowings, the proceeds of which
are used for working capital purposes, are payable on demand and bear interest
at the CDI rate or at CDI plus 0.8%. On July 15, 1996, the CDI rate was 2.47%
per month. The Company has no pending or probable acquisitions, and in the
event the Company does not obtain the right to operate or acquire new systems,
the Company intends to use the remaining net proceeds to fund working capital
needs and for other general corporate purposes. There can be no assurance that
any of these proceeds will be available to make acquisitions.

Pending application of the net proceeds of this offering as described above,
the Company intends to invest such proceeds in United States government
securities and investment grade, interest-bearing instruments, except for
approximately $2.0 million, which will be invested in Brazilian money market
instruments.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on the Common
Stock and does not presently intend to pay cash dividends on the Common Stock
in the foreseeable future. The Company expects that earnings, if any, will be
retained for the growth and development of the Company's business. In
addition, the Company's ability to declare or pay cash dividends is affected
by the ability of the Company's present and future subsidiaries to declare and
pay dividends or otherwise transfer funds to the Company since the Company
conducts its operations entirely through its subsidiaries. See "Risk Factors--
Risk Factors Relating to Brazil Generally--Restrictions on Conversion and
Remittances Abroad."

The Company, as a holding company, depends on the receipt of dividends and
other cash payments from its operating subsidiaries in order to meet the
Company's cash requirements. Such receipts are subject to statutory
restrictions pursuant to which the subsidiaries may pay dividends only out of
retained earnings.

16
<PAGE>

CAPITALIZATION

The following table sets forth the actual and as adjusted cash and cash
equivalents and capitalization of the Company, on an unaudited basis, as of
March 31, 1996. The actual amounts give effect to the Restructuring. In
addition, as adjusted cash and cash equivalents and capitalization gives
effect to the receipt of the estimated net proceeds from the sale of 2,500,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $11.00 per share, as described in "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................. $ 24 $24,099
======= =======
Payables to affiliate--long-term.......................... $ 200 $ 200
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized;
no shares issued....................................... -- --
Common Stock, $.01 par value; 50,000,000 shares
authorized and 7,291,176 shares issued and outstanding;
9,791,176 shares issued and outstanding, as
adjusted(1)............................................ 73 98
Additional paid-in capital.............................. 17,210 41,260
Accumulated deficit..................................... (2,696) (2,696)
------- -------
Total stockholders' equity............................ 14,587 38,662
------- -------
Total capitalization................................ $14,787 $38,862
======= =======
</TABLE>
- --------
(1) Excludes (i) 936,432 shares of Common Stock reserved for issuance upon the
exercise of stock options available for grant under the Company's 1996
Stock Option Plan pursuant to which options to purchase 407,000 shares of
Common Stock shall be granted upon the consummation of this offering,
297,000 of which shall be exercisable at the initial public offering price
and 110,000 of which shall be exercisable at $11.00 per share, and which
generally shall vest 20% per year for five years beginning on the first
anniversary of consummation of this offering and (ii) 794,764 shares of
Common Stock issuable upon the exercise of the 1996 Warrants, all of which
are currently exercisable at an exercise price of $6.52 per share. See
"Management--Stock Options--1996 Stock Option Plan" and "Description of
Capital Stock--Warrants."

17
<PAGE>

DILUTION

The net tangible book value of the Common Stock (after giving effect to the
Restructuring) at March 31, 1996, was approximately $13,752,000, or $1.89 per
share. Net tangible book value per share represents the total amount of the
Company's stockholders' equity, less intangible assets, divided by 7,291,176
shares of Common Stock outstanding as of March 31, 1996.

Net tangible book value dilution per share represents the difference between
the amount per share paid by purchasers of shares of Common Stock in this
offering and the as adjusted net tangible book value per share of Common Stock
immediately after completion of this offering. After giving effect to the sale
of 2,500,000 shares of Common Stock offered hereby at an assumed offering
price of $11.00 per share and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value at March 31, 1996 would have
been $37,827,000 or $3.86 per share. This represents an immediate increase in
net tangible book value of $1.97 per share to existing stockholders and an
immediate dilution in net tangible book value of $7.14 per share to purchasers
of Common Stock in this offering, as illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed public offering price per share...................... $11.00
Net tangible book value per share at March 31, 1996........ $1.89
Increase per share attributable to new investors........... 1.97
-----
As adjusted net tangible book value per share after this of-
fering...................................................... 3.86
------
Net tangible book value dilution per share to new investors.. $ 7.14
======
</TABLE>

The following table sets forth, as of March 31, 1996, the difference between
the existing stockholders and the purchasers of shares in this offering (at an
assumed offering price of $11.00 per share) with respect to the number of
shares of Common Stock purchased from the Company, the total consideration
paid and the average consideration paid per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... 7,291,176 74.5% $17,283,000 38.6% $ 2.37
New investors(1)........... 2,500,000 25.5 27,500,000 61.4 11.00
--------- ----- ----------- -----
Total.................... 9,791,176 100.0% $44,783,000 100.0%
========= ===== =========== =====
</TABLE>

The foregoing tables exclude (i) 936,432 shares of Common Stock reserved for
issuance upon the exercise of stock options available for grant under the
Company's 1996 Stock Option Plan pursuant to which options to purchase 407,000
shares of Common Stock shall be granted upon the consummation of this
offering, 297,000 of which shall be exercisable at the initial public offering
price and 110,000 of which shall be exercisable at $11.00 per share, and which
shall generally vest 20% per year for five years beginning on the first
anniversary of consummation of this offering and (ii) 794,764 shares of Common
Stock issuable upon the exercise of the 1996 Warrants, all of which are
currently exercisable at an exercise price of $6.52 per share. See
"Management--Stock Options--1996 Stock Option Plan" and "Description of
Capital Stock--Warrants."

18
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA(1)

The selected consolidated balance sheet data as of December 31, 1994 and
December 31, 1995 and the selected consolidated statement of operations data
for each of the years ended December 31, 1993, 1994 and 1995 are derived from,
and are qualified by reference to, the Consolidated Financial Statements,
which have been audited by Ernst & Young Auditores Independents S.C.,
independent auditors, and which are included elsewhere in this Prospectus. The
selected consolidated balance sheet data as of December 31, 1991, 1992 and
1993 and as of March 31, 1996, and the selected consolidated statement of
operations data as of and for the years ended December 31, 1991 and 1992 and
the three-month periods ended March 31, 1995 and 1996, are derived from
unaudited financial statements and include all adjustments, consisting of
normal recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Results of operations for the three months ended March 31, 1996 are
not necessarily indicative of operations for the full year. The Consolidated
Financial Statements have been prepared in accordance with United States GAAP
in U.S. dollars. For this purpose, amounts in Brazilian currency for all
periods presented have been remeasured into U.S. dollars in accordance with
the methodology set forth in SFAS No. 52 as it applies to entities operating
in highly inflationary economies. Pursuant to SFAS No. 52, supplies, property,
plant and equipment, intangibles and deferred installation fees and the
related income statement accounts are remeasured at exchange rates in effect
when the assets were acquired or the liabilities were incurred. All other
assets and liabilities are remeasured at fiscal year end exchange rates, and
all other income and expense items are remeasured at average exchange rates
prevailing during the year. Remeasuring adjustments are included in net income
(loss) for the period. The data presented below should be read in conjunction
with the Consolidated Financial Statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- -------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AND MONTHLY REVENUE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 35 $ 69 $ 287 $ 2,438 $ 11,404 $ 1,364 $ 5,852
Operating costs and ex-
penses:
System operating....... 9 7 196 773 2,957 413 1,583
Selling, general and
administrative........ 24 38 558 2,394 8,975 1,589 3,310
Depreciation and amor-
tization.............. 8 11 43 365 2,049 236 1,098
--------- --------- --------- -------- ---------- --------- ---------
Total operating costs
and
expenses.............. 41 56 797 3,532 13,981 2,238 5,991
--------- --------- --------- -------- ---------- --------- ---------
Operating income
(loss)................. (6) 13 (510) (1,094) (2,577) (874) (139)
Other income (expense).. -- -- (6) 1,612 360 218 (320)
--------- --------- --------- -------- ---------- --------- ---------
Net income (loss)....... $ (6) $ 13 $ (516) $ 518 $ (2,217) $ (656) $ (459)
========= ========= ========= ======== ========== ========= =========
Net income (loss) per
share(2)............... $ 0.00 $ 0.00 $ (0.10) $ 0.08 $ (0.27) $ (0.08) $ (0.06)
Shares and share
equivalents, in
thousands(2)........... 4,516 4,516 5,295 6,885 8,086 8,086 8,086
OTHER DATA:
EBITDA(3)............... $ 2 $ 24 $ (467) $ (729) $ (216) $ (638) $ 959
Number of subscribers at
end of
period................. 50 135 1,864 7,641 36,594 11,924 47,066
Average monthly revenue
per
subscriber(4).......... $ 30.43 $ 34.13 $ 40.00 $ 39.86 $ 40.45
Average monthly churn
rate(5)................ 0.37% 0.62% 0.63% 0.66% 0.62%
Number of operating sys-
tems at end of period.. 1 1 1 1 3 3 3
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
-------- --------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (defi-
cit)................... $ 7 -- $ 279 $ 3,204 $ (6,230) $ (2,720)
Property, plant and
equipment, net......... 67 $ 86 895 4,182 18,870 22,802
Total assets............ 74 87 1,795 10,008 23,683 29,355
Payables to affiliates--
long-term.............. -- -- -- 600 400 200
Stockholders' equity.... 73 86 982 6,500 7,895 14,587
</TABLE>
- --------
(1) The Consolidated Financial Data includes (i) TV Filme Servicos on a
historical basis and (ii) ITSA and its subsidiaries since May 1994 and the
predecessor of ITSA on a historical basis, as though they have been part
of TV Filme, Inc. for all periods presented. See Note 1a to Consolidated
Financial Statements and "Business--Restructuring."
(2) Net income (loss) per share (after giving effect to the Restructuring) is
calculated using the weighted average number of shares of stock
outstanding during the period together with the number of shares issuable
upon the exercise of options and warrants issued during the twelve months
prior to the filing of this offering. The Company did not use the treasury
stock method in computing the dilutive effect of the 1996 Warrants. See
"Description of Capital Stock--Warrants."
(3) EBITDA is defined as operating income (loss) plus depreciation,
amortization and non-cash compensation. While EBITDA should not be
construed as a substitute for operating income (loss) or a better measure
of liquidity than cash flow from operating activities, which are
determined in accordance with United States GAAP, it is included herein to
provide additional information regarding the ability of the Company to
meet its capital expenditures, working capital requirements and any future
debt service. EBITDA is not necessarily a measure of the Company's ability
to fund its cash needs, because it does not include capital expenditures,
which the Company expects to continue to be significant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
(4) Average monthly revenue per subscriber is calculated by dividing
subscription revenue for the month by the average number of subscribers
for the month.
(5) Churn equals the ratio of disconnected subscribers to average monthly
subscribers. The average monthly churn rate is the average of the churn
rates for each month related to the periods presented.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. The following discussion
should be read in conjunction with the Consolidated Financial Statements
including the notes thereto included elsewhere in this Prospectus. See "Index
to Consolidated Financial Statements."

OVERVIEW

The Company develops, owns and operates subscription television systems in
mid-sized markets in Brazil. The Company has established wireless cable
operating systems in the cities of Brasilia, Goiania and Belem, which together
encompass approximately 1,215,000 households, an estimated 1,054,000 of which
can be served by the LOS transmission utilized by the Company's wireless cable
systems. Applications have been made for the Company to operate wireless cable
systems in an additional 19 markets in Brazil having an aggregate population
of approximately 9,000,000 and encompassing approximately 2,000,000
households. Since the beginning of 1993, the Company has experienced
substantial subscriber growth, increasing from 135 subscribers to 47,066
subscribers as of March 31, 1996 and more than 55,000 subscribers as of May
31, 1996.

Historically, the Company has generated operating losses, which may increase
to the extent that operations of additional systems are commenced or acquired,
although the Company has no pending or probable acquisitions. As the Company
continues to develop systems, positive EBITDA/1/ from more developed systems
is expected to be partially or completely offset by negative EBITDA from less
developed systems and from development costs associated with establishing new
systems. This trend is expected to continue until the Company has a
sufficiently large subscriber base to absorb operating and development costs
of new systems. There can be no assurance that the Company will be able to
achieve or sustain net income in the future. The Company's Brasilia System
became EBITDA positive in the third quarter of 1994, when it had approximately
5,000 subscribers, and generated EBITDA of $1,410,000 and operating income of
$747,000 for the three months ended March 31, 1996.

Each of the Company's systems has required an initial capital investment of
approximately $1,000,000 to $1,500,000 to build and install a transmission
tower, headend facilities and other equipment. These costs are generally
depreciated over ten years. In addition, each new subscriber requires an
average incremental investment of approximately $450, which includes the cost
of a decoder box, installation labor and materials, other equipment and
supplies, marketing and selling costs. The Company capitalizes installation
costs, including installation labor, decoders and other direct costs, and
depreciates these costs over five years. The Company charges new subscribers
installation fees ranging from $80 and $250, depending on factors which
include the subscriber's access to other forms of subscription television and
whether the installation is the first installation in a building. The Company
defers installation fees, net of direct selling expenses, and recognizes these
fees as revenues ratably over a five-year period.

The Company's substantial subscriber growth has resulted from the addition
of subscribers in Brasilia and from the introduction of operating systems in
Goiania and Belem. Television subscription revenues primarily consist of
monthly fees paid by subscribers for the programming package as well as
installation fees recognized for the period. System operating expenses include
programming costs, a portion of costs
- --------
/1/EBITDA is defined as operating income (loss) plus depreciation, amortization
and non-cash compensation. EBITDA is a commonly used measure of performance
in the subscription television industry. While EBITDA should not be
construed as a substitute for operating income (loss) or a better measure of
liquidity than cash flow from operating activities, which are determined in
accordance with United States GAAP, it is included herein to provide
additional information regarding the ability of the Company to meet capital
expenditures, working capital requirements and any future debt service.
EBITDA is not necessarily a measure of the Company's ability to fund its
cash needs because it does not include capital expenditures, which the
Company expects to continue to be significant.

21
<PAGE>

of compensation and benefits for the Company's employees, vehicle rental
costs, transmitter site rentals, repair and maintenance expenditures and
service call costs. Depreciation and amortization expenses consist primarily
of depreciation of decoder boxes, headend facilities and installation costs.

The development of a new system requires significant expenditures, a
substantial portion of which are incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative cash flow until an adequate revenue generating subscriber
base is established. As the subscriber base increases, revenue, as well as
certain costs such as programming costs, generally increase while other costs,
such as tower rental and related maintenance costs, remain constant or
increase at proportionately lower levels. Accordingly, although costs increase
in the aggregate as the subscriber base grows, the average costs per
subscriber generally decrease and operating margins generally increase.

The Company seeks to minimize subscriber churn, which the Company defines as
the total number of customers whose services are terminated during a period as
a percentage of the average number of subscribers for the period. For the year
ended December 31, 1995, the Company's average monthly churn was approximately
0.66%, and for the three months ended March 31, 1996, the Company's average
monthly churn was approximately 0.62%.

Although the Company's financial statements are presented pursuant to United
States GAAP in U.S. dollars, the Company's transactions are consummated in
both Reals and U.S. dollars. Inflation and devaluation in Brazil have had, and
may continue to have, substantial effects on the Company's results of
operations and financial condition. The Company does not seek to hedge
currency risks in the financial markets or otherwise. See "--Inflation and
Exchange Rates," "Risk Factors--Risk Factors Relating to Brazil Generally" and
"Brazil--Effects of Inflation and Currency Exchange Fluctuations."

22
<PAGE>

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto and the other financial information
appearing elsewhere in this Prospectus.

Selected Operating Data. The following table sets forth certain expense and
other data derived from the Consolidated Financial Statements as a percentage
of the Company's revenues for each period presented:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
-------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses:
System operating............ 68.3 31.7 25.9 30.3 27.0
Selling, general and admin-
istrative.................. 194.4 98.2 78.7 116.5 56.6
Depreciation and amortiza-
tion....................... 15.0 15.0 18.0 17.3 18.8
-------- ------- ------- ------ ------
Total operating costs and
expenses................. 277.7 144.9 122.6 164.1 102.4
-------- ------- ------- ------ ------
Operating income (loss)....... (177.7) (44.9) (22.6) (64.1) (2.4)
Other income (expense)........ (2.1) 66.1 3.2 16.0 (5.4)
-------- ------- ------- ------ ------
Net income (loss)............. (179.8)% 21.2% (19.4)% (48.1)% (7.8)%
======== ======= ======= ====== ======
</TABLE>

Revenues. The revenue increase from 1993 to 1994 of $2.2 million was
primarily due to an increase in the number of subscribers in the Brasilia
System, from 1,864 at the end of 1993 to 7,641 at the end of 1994. In
addition, the average monthly revenue per subscriber increased from $30.43 in
1993 to $34.13 in 1994. The increase in revenues from 1994 to 1995 of $9.0
million was primarily due to an increase in the number of subscribers in the
Brasilia System, from 7,641 at the end of 1994 to 25,385 at the end of 1995,
and to the launch of two new operating systems in Goiania and Belem, which had
an aggregate of 11,209 subscribers at the end of 1995. Additionally, aggregate
installation fees recognized increased by $1.4 million from 1994 to 1995. The
average monthly revenue per subscriber increased due to an increase in
subscription fees implemented during 1995. Revenues increased by $4.5 million
from the three months ended March 31, 1995 to the three months ended March 31,
1996, primarily due to an aggregate increase of 35,142 in the number of
subscribers in the Brasilia, Goiania and Belem Systems. The average monthly
revenue per subscriber increased to $40.45 for the three months ended March
31, 1996.

System Operating Expenses. The increase in system operating expenses from
1993 to 1994 of $0.6 million was primarily due to an increase of approximately
$0.3 million in compensation and benefits, primarily to employees in the
customer service and engineering departments, net of capitalized installation
costs, and to an increase in programming expenses of $0.2 million. The
increase in system operating expenses from 1994 to 1995 of $2.2 million was
due to an increase in programming expenses of $1.2 million and to an increase
in compensation and benefits, primarily to employees in the customer service
and engineering departments, net of capitalized installation costs, of $0.5
million. The increase in system operating expenses from the three months ended
March 31, 1995 to the three months ended March 31, 1996 of $1.2 million was
primarily due to an increase in programming expenses of $1.1 million and an
increase in compensation and benefits of $0.1 million, primarily to employees
in the customer service and engineering departments. From 1993 through the
three months ended March 31, 1996, programming expenses were affected by the
increase in the number of subscribers over the period, since programming
expenses are charged on a per subscriber basis, but this increase was
mitigated by decreasing costs per subscriber due to volume discounts.
Additionally, the Company received discounts from list prices on TVA
programming from July 1993 through October 1995 which amounted to $28,000,
$340,000 and $539,000 in 1993, 1994 and 1995, respectively. Such discounts are
not expected to recur.

23
<PAGE>

Selling, General and Administrative Costs. From 1993 to 1994, selling,
general and administrative expenses ("SG&A") increased by $1.8 million,
including an increase in compensation and benefits of $0.8 million, primarily
to employees in the sales department, and an increase in advertising expenses
of $0.2 million. However, from 1993 to 1994, SG&A decreased as a percentage of
revenues from 194.4% to 98.2%. From 1994 to 1995, SG&A increased by $6.6
million, but decreased to 78.7% of 1995 revenues. During 1995, compensation
and benefits increased by $3.6 million, primarily to employees in the sales
department and senior management, advertising increased by $0.5 million and
there was non-cash compensation expense in 1995 of $0.3 million in connection
with a grant of stock options. SG&A increased by $1.7 million from the three
months ended March 31, 1995 to the three months ended March 31, 1996, but as a
percentage of revenues decreased to 56.6%. The Company believes that as
revenues rise, SG&A as a percentage of revenues should generally decrease in
the future. Compensation and benefits increased by $1.0 million, primarily to
employees in the sales department, and advertising increased by $0.2 million
from the three months ended March 31, 1995 to the three months ended March 31,
1996. From 1993 through the three months ended March 31, 1996, compensation
and benefits increases were primarily the result of an increased number of
employees, primarily in the sales department, to service the Company's
expanded subscriber base, including the expansion into the Goiania and Belem
markets, and to a lesser extent, an increase in average wages.

Depreciation and Amortization. Since inception, the Company's direct costs
of obtaining subscribers generally have exceeded installation revenue. These
costs are capitalized and depreciated over a five year period. Depreciation
and amortization expense increased from 1993 to 1994 by $0.3 million due to an
increase in the number of subscribers in the Brasilia System. The increase in
depreciation and amortization expense from 1994 to 1995 of $1.7 million was
primarily due to an increase in the number of subscribers in the Brasilia
System and the launch of two new operating systems in Goiania and Belem. The
increase in depreciation and amortization expense from the three month period
ended March 31, 1995 to the three month period ended March 31, 1996 of $0.9
million was due to increases in the number of subscribers in each of the three
operating systems.

Operating Income (Loss). Operating loss increased from 1993 to 1994 and from
1994 to 1995 primarily due to increases in expenses in connection with the
development of the Company's business, as explained above. For the three month
period ended March 31, 1996, the Company generated an operating loss of $0.1
million. The Company expects to generate operating losses as it expands its
existing systems and develops additional systems.

Other Income (Expense). Interest expense for 1993 and 1994 was
insignificant. Interest expense increased in 1995 as a result of short-term
borrowings from Abril S.A. and certain of its affiliates of approximately $1.7
million incurred by the Company to finance the development and launch of the
Goiania System and the Belem System and to support an increase in the number
of subscribers. Interest income for 1993 was insignificant. Interest income
during 1994 was generated by the short-term investment of the proceeds of a
$5.0 million private placement in 1994. In 1995, interest income was generated
by cash on hand at the beginning of 1995 and the short-term investment of the
proceeds of a $3.3 million private placement in 1995. Interest expense
increased from the three month period ended March 31, 1995 to the three month
period ended March 31, 1996 because the Company entered into a short-term
borrowing arrangement with Abril S.A. and certain of its affiliates in the
first quarter of 1996 at an interest rate of the Brazilian interbank rate plus
0.8%, which ranged from 2.18% to 3.16% per month during such quarter. The
Company does not expect such borrowing arrangements to continue upon
consummation of this offering.

Exchange and translation gains have arisen primarily as a result of short-
term investments denominated in Reals, and to a lesser extent from the
translation of financial statements from Reals to U.S. dollars in accordance
with SFAS 52, with the U.S. dollar as the functional currency. These amounts
can fluctuate significantly as a result of changes in the exchange rate of the
Real relative to the U.S. dollar. Such gain (loss) was insignificant in fiscal
1995. In fiscal 1994, the Company realized a currency gain of

24
<PAGE>

$0.6 million attributable, in part, to implementation of the Real Plan. See
"Risk Factors--Risk Factors Relating to Brazil Generally--Economic
Uncertainty" and "Brazil--Brazilian Economic Environment."

Income Taxes. At December 31, 1995, the Company had $5.2 million of net
operating loss carryforwards, of which approximately $1.3 million were
attributable to TV Filme Servicos. After the Restructuring, the net operating
loss carryforwards of TV Filme Servicos, which will then no longer be a
wholly-owned subsidiary of the Company, will be available only to offset its
own income and will not be available to offset any profits generated by the
Operating Systems. Under Brazilian law, the carryforward period for net
operating losses is unlimited. Use of these losses, however, is limited to 30%
of taxable income in a tax period. The Company has not recorded a tax benefit
for any period. The Company's net deferred tax assets have been entirely
offset by a valuation allowance, and the Company expects to generate operating
losses for the foreseeable future. Effective January 1, 1996, Brazilian
effective tax rates declined from approximately 48% to approximately 30.5%.

Net Income (Loss). As explained above, net loss in the periods presented,
other than 1994, is primarily attributable to the significant expenses
incurred in connection with the development of the Company's business. Net
income in 1994 was due to interest income and exchange gains which were
greater than operating losses.

Quarterly Results. The following table sets forth summary historical
information on a quarterly basis for the Company as a whole and for the
Brasilia System for the respective periods presented below. Summary
information for the Brasilia System is presented because it represents the
Company's largest operation at the time of this offering.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96
------- ------- ------- -------- ------- ------- ------- -------- -------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPANY
Subscribers............. 3,223 4,480 5,796 7,641 11,924 19,009 27,024 36,594 47,066
Revenues................ $ 249 $ 457 $ 732 $1,000 $1,364 $2,149 $3,222 $4,669 $5,852
Operating Income
(Loss)................. $(161) $(176) $(217) $ (540) $ (874) $ (668) $ (523) $ (512) $ (139)
EBITDA.................. $(107) $(109) $(109) $ (404) $ (638) $ (306) $ 388 $ 340 $ 959
Net income.............. $(154) $(131) $ 768 $ 35 $ (656) $ (619) $ (531) $ (411) $ (459)
BRASILIA SYSTEM
Subscribers............. 3,223 4,480 5,796 7,641 10,300 14,357 19,331 25,385 32,139
Revenues................ $ 249 $ 457 $ 732 $1,000 $1,202 $1,614 $2,323 $3,167 $3,910
Operating Income
(Loss)................. $(161) $(146) $ (93) $ (23) $ 105 $ 43 $ 518 $ 411 $ 747
EBITDA.................. $(107) $ (83) $ 12 $ 114 $ 300 $ 307 $ 889 $ 935 $1,410
</TABLE>

The Company's growth has resulted from expansion of the Brasilia System's
subscriber base, the launch of the Goiania System and Belem System in January
1995 and February 1995, respectively, and the expansion of such systems. The
Brasilia System has grown substantially since its full launch and associated
expansion of programming offerings from four to eight channels in February
1994 and the subsequent expansion to 16 channels in November 1994. The
Brasilia System's growth accelerated with the introduction of additional
channels, with its quarterly revenues increasing from approximately $249,000
in the quarter ended March 31, 1994 to approximately $3,910,000 in the quarter
ended March 31, 1996. On August 19, 1995, the Company increased its monthly
subscription fees from approximately $40 to $45. This price increase was
effective for (i) all subscribers who began subscribing for the Company's
services after such date and (ii) all existing subscribers on the next 12-
month anniversary of their respective subscriptions. See "Risk Factors--Risk
Factors Relating to Brazil Generally--Economic Uncertainty" for a discussion
of rate increases within a 12 month period. The Company's relatively fixed
transmission costs, declining marginal costs per subscriber and subscriber
growth were the primary factors causing (i) EBITDA in the Brasilia System to
increase from a negative EBITDA of approximately $107,000 to a positive

25
<PAGE>

EBITDA of approximately $1,410,000 during these same periods and (ii)
operating income (loss) in the Brasilia System to increase from an operating
loss of approximately $161,000 to operating income of approximately $747,000
during these same periods.

LIQUIDITY AND CAPITAL RESOURCES

The subscription television business is a capital intensive business. The
Company made capital expenditures of approximately $3.6 million in 1994, $16.6
million in 1995 and $5.0 million in the three months ended March 31, 1996.
Such expenditures were financed principally through equity offerings. The
Company raised an aggregate of $16,751,000 through a series of private equity
placements in 1993, 1994, 1995 and 1996 in the respective amounts of
$1,300,000, $5,000,000, $3,300,000 and $7,151,000, to Tevecap, Warburg, Pincus
and certain other investors. See "Business--Background." To a lesser extent,
working capital requirements have been met by vendor financing, some of which
has been supported by irrevocable letters of credit guaranteed by Abril S.A.
(the majority shareholder of Tevecap, a shareholder of the Company) and
certain of its affiliates. The Company purchases a majority of its customer
service equipment on terms which require payment within 360 days of shipment,
which financing arrangements are supported by irrevocable letters of credit.
Such vendor financing allows the Company to finance many of its capital needs
and has reduced the Company's need for additional equity or debt capital. The
Company believes that its reliance on vendor financing will be reduced after
consummation of this offering. Working capital requirements have also been met
by borrowings from Abril S.A. and certain of its affiliates. No such
borrowings were outstanding as of March 31, 1996. As of March 31, 1996, $6.4
million was outstanding under letters of credit with maturities ranging from
30 days to 360 days, of which $5.3 million was guaranteed by Abril S.A. and
certain of its affiliates. As of March 31, 1996, the Company had a $2.0
million line of credit with a commercial bank, of which $1.9 million was
available on such date. The Company has since increased this line of credit
facility to $5.0 million. The Company believes that lines of credit,
additional vendor financing and other credit facilities will be available on
terms acceptable to it upon completion of this offering. The Company had
negative working capital at December 31, 1995 and March 31, 1996 in the
amounts of $6,230,000 and $2,720,000, respectively, primarily as a result of
capital expenditures. Net cash provided by operating activities for the years
ended December 31, 1994 and 1995 was $1,817,000 and $8,201,000, respectively.
Net cash provided by operating activities for the three months ended March 31,
1996 declined to $9,000 primarily as a result of increases in accounts
receivable and supplies.

For the last three quarters of 1996, the Company anticipates that its
aggregate capital expenditures in its existing operating markets will be
approximately $16 million, comprised primarily of subscriber installation
equipment. The Company believes that the proceeds of this offering, together
with internally generated funds and vendor financing, will be sufficient to
fund its cash requirements and anticipated capital expenditures in its
existing operating markets for at least the next 12 months. In the longer
term, the Company's liquidity needs are subject to a variety of factors,
including launching or acquiring new systems, increasing existing channel
offerings, implementing alternative technologies and offering additional
communications services. There can be no assurance that the Company will be
able to meet its liquidity needs in the longer term. See "Risk Factors--Risk
Factors Relating to the Company--Risks Associated with New Markets."

In addition to expanding its subscriber base in its existing systems, the
Company is seeking to launch additional systems, and applications have been
made for the Company to operate wireless cable systems in an additional 19
markets. From January 1, 1994 to March 31, 1996, the Company expended
approximately $25 million to construct and operate its three operating
systems. Based on current market and operating conditions, the Company
estimates that the cost of launching any additional operating system after the
granting of a new license would range from approximately $5.0 million to $8.0
million, including construction of a headend facility, subscriber-related
capital costs and funding initial development costs and operating losses,
depending on factors particular to each such market. The Company's operation
of new systems will require substantial amounts of capital for the
construction of

26
<PAGE>

additional transmission and headend facilities, signal repeaters and related
equipment purchases, marketing, the installation of equipment at subscribers'
locations, the development and establishment of administrative and regional
offices, the funding of start-up losses and other working capital
requirements. The Company also from time to time may selectively pursue the
acquisition of additional subscription television systems, although it
currently has no plan or proposal with respect to any acquisitions. In
addition, applications have been made to expand the licenses in Brasilia,
Goiania and Belem by adding 15 additional channels in each market. Finally,
the Company may implement alternative technologies in the future, although it
has no current plan or intention to do so. If such new systems are launched,
acquisitions are consummated, existing channel offerings are increased or
alternative technologies are implemented, substantial additional funds may be
required. The Company intends to fund such future cash requirements through
the issuance of additional debt and/or equity capital, joint ventures or other
arrangements. There can be no assurance that the Company will be able to
obtain such debt or equity capital on satisfactory terms, or at all, to meet
its future financing needs. See "Risk Factors--Risk Factors Relating to the
Company--Risks Associated with New Markets."

INFLATION AND EXCHANGE RATES

Inflation and exchange rate variations have had, and may continue to have,
substantial effects on the Company's results of operations and financial
condition. In periods of inflation, many of the Company's expenses will tend
to increase. Generally, in periods of inflation, a company is able to raise
its prices to offset the rise in its expenses and may set prices for customers
without government regulation. However, under Brazilian law designed to reduce
inflation, the rates which the Company may charge to a particular subscriber
may not be increased until the next 12-month anniversary of his subscription.
Thus, the Company is less able to offset expense increases with revenue
increases. Accordingly, inflation may have a material adverse effect on the
Company's results of operations and financial condition.

Generally, the effects of inflation in Brazil have been offset in part by
devaluation of the Brazilian currency relative to the U.S. dollar. Devaluation
of the Real may also have an adverse effect on the Company. The Company
collects substantially all of its revenues in Reals, but pays certain of its
expenses, including a significant portion of its equipment costs and a portion
of its programming costs, in U.S. dollars. In addition, equipment purchases
currently are financed by irrevocable letters of credit for up to one year,
although following consummation of this offering the Company may determine not
to utilize such financing. To the extent the Real depreciates at a rate
greater than the rate at which the Company raises prices, the value of the
Company's revenues (as expressed in U.S. dollars) may fall. As the value of
the Company's revenues fall, its ability to fund U.S. dollar-based
expenditures also will decline. The Company does not currently seek to hedge
exchange rate risks in the financial markets or otherwise, as it believes that
the costs of such hedging outweigh the related risks. Accordingly, devaluation
of the Real may have a material adverse effect on the Company's results of
operations and financial condition.

27
<PAGE>

BUSINESS

BRAZILIAN SUBSCRIPTION TELEVISION INDUSTRY

The subscription television industry in Brazil began in 1989. In contrast to
the United States, the Brazilian hardwire cable industry and wireless cable
industry began developing concurrently. By March 31, 1996, 103 hardwire cable
licenses and 12 wireless cable licenses had been issued by the Ministry of
Communications. The Company believes that as of March 31, 1996, fewer than 10%
of Brazilian homes were passed by hardwire cable as compared to over 90% in
the United States. As of December 1994, Brazil had an estimated 34,500,000
television households, making it the largest television market in South
America, representing approximately 50% of total South American television
households. The Company believes that as of March 1996, Brazil had
approximately 1,250,000 subscription television subscribers, representing less
than 5% penetration of total television households in Brazil. The Ministry of
Communications has forecast that there will be 16,500,000 subscription
television subscribers in Brazil by the year 2003.

Brazilian households watch an average of 6.5 hours of television per day, as
compared to 6.9 hours watched by the average United States household. Viewing
preferences range from Portuguese language "novelas" (soap operas) to United
States movies and sports. The second language of many Brazilians is English,
and United States culture generally, and United States films, shows and sports
in particular, are popular with Brazilians. The program market for
subscription television is dominated by Brazil's two largest media
conglomerates, Abril S.A. and the Globo Organization. Both groups offer
program packages including a movie channel, a sports channel, a news channel,
United States prime time network shows and cartoons. In general, much of the
Brazilian programming transmitted by subscription television systems, such as
HBO Brazil, ESPN International and MTV Latino, is based on formats found in
the United States. In addition, there are programming packages which include
channels directly from the United States, such as Warner, Sony and
Superstation, as well as packages from Europe and South America.

COMPANY BACKGROUND

The Company's predecessor was founded in 1989 by members of the Company's
senior management team. In September 1989, the Company was granted a license
to operate a wireless cable system in Brasilia, the capital of Brazil, and
commenced operations in 1990 with a one channel offering. The Company raised
an aggregate of $16,751,000 through a series of private equity placements in
1993, 1994, 1995 and 1996 in the respective amounts of $1,300,000, $5,000,000
$3,300,000 and $7,151,000, with Tevecap (a subsidiary of Abril S.A.), Warburg,
Pincus and certain other investors. With the proceeds from the private
placements, the Company expanded its subscriber base, increased the channel
offerings in Brasilia and launched new wireless cable systems in Goiania and
Belem. Licenses to operate the Goiania and Belem Systems were acquired in 1994
from TVA. The Company has exclusive rights to TVA programming via wireless and
hardwire cable in areas where the Company currently operates.

Abril S.A. is Brazil's largest magazine publishing company in terms of
circulation. As of October 1995, it had one of the largest printing and
binding plants in Latin America, was a leading publisher of telephone
directories in Brazil and was one of the largest distributors of magazines in
the country. Abril S.A. also distributes Disney, Touchstone and 20th Century
Fox videotape cassette movies in Brazil, in addition to producing its own
video cassette movies.

TV Filme Servicos is the only entity licensed to operate a wireless cable
system in Brasilia, Goiania and Belem. The Company provides service via 16
wireless cable channels in each such market. The Brasilia System also offers
six local off-air VHF/UHF channels, and the Goiania and Belem Systems offer
five such channels. Additionally, applications have been made for an
additional 15 wireless cable channels in such markets. There can be no
assurance that the licenses will be so granted or that such licenses will not
be granted to competitors. In addition, applications have been made for the
Company to operate licenses in an additional 19 markets in Brazil. There can
be no assurance that the Company will be granted any license expansions or
will be able to operate any new systems through new licenses.

28
<PAGE>

RESTRUCTURING

As of the date hereof, all of the outstanding stock of ITSA is owned by
investors in the United States and Brazil (the "Existing Stockholders"),
including those persons owning proportionately the equity interests listed
under "Principal Stockholders" herein. Such equity interests are currently held
in the form of common and preferred stock, together with warrants, in ITSA.
Prior to consummation of this offering, the Existing Stockholders will exchange
their outstanding shares of common stock of ITSA for proportionate interests in
the Common Stock of TV Filme, Inc., and will exchange their warrants in ITSA
for proportionate amounts of warrants in TV Filme, Inc. The information set
forth in "Principal Stockholders" gives effect to such exchange. As a result of
the foregoing, upon consummation of this offering, ITSA will be a wholly-owned
subsidiary of TV Filme, Inc.

ITSA currently has three wholly-owned subsidiaries: TV Filme Servicos, TV
Filme Goiania and TV Filme Belem. TV Filme Servicos currently owns and operates
the Brasilia System and holds the licenses granted by the Ministry of
Communications to operate the Company's wireless cable systems in Brasilia,
Goiania and Belem. Brazilian law (the "Ownership Law") requires that a majority
of the voting stock of an entity which holds a wireless cable license must be
owned by Brazilians, and in order to comply with such requirement, prior to
consummation of this offering, 51% of the voting stock of TV Filme Servicos
will be transferred to an entity organized in Brazil, which will be owned by
those Existing Stockholders who are Brazilian nationals, namely Tevecap S.A.,
Mrs. Maria Nise Lins, Mr. Hermano Lins, Mr. Carlos Andre Lins and Ms. Maria
Veronica Lins. ITSA will retain 49% of the voting stock and 83% of the economic
interests in TV Filme Servicos. In connection with such transfer, the operating
assets of the Brasilia System will be transferred from TV Filme Servicos to TV
Filme Brasilia, which, when formed, will be a wholly-owned subsidiary of ITSA.
TV Filme Servicos will enter in various agreements with ITSA and its
subsidiaries pursuant to which, among other things, TV Filme Servicos will (i)
authorize ITSA's subsidiaries to operate the existing wireless cable systems on
an exclusive basis under its current licenses, (ii) agree to diligently pursue
the pending applications for licenses in an additional 19 markets and the
expansion of the licensed number of channels in the Company's existing
operating systems for the benefit (and at the expense) of ITSA, (iii) agree to
file and diligently pursue additional license applications in the future at the
request (and expense) of ITSA and (iv) agree to various safeguards for the
unimpaired continuation and renewal of the licenses for the exclusive benefit
of ITSA and for compliance with applicable law. In consideration of the
foregoing, ITSA's operating subsidiaries will pay to TV Filme Servicos a
royalty equal to 10% of subscriber installation fees. To further assure the
continuing unimpaired right of ITSA and its subsidiaries to operate
subscription television systems under licenses granted to TV Filme Servicos,
ITSA will have the rights, among other things, to repurchase the 51% of the
voting stock of TV Filme Servicos to the extent allowed in connection with a
change in the Ownership Law and to veto the sale or transfer of the licenses by
TV Filme Servicos. See "Business--Regulatory Environment" and "Risk Factors--
Risk Factors Relating to the Company--Potential Conflicts of Interest and "Risk
Factors--Risk Factors Relating to the Company--Minority Voting Position in
License Company."

29
<PAGE>

[CHART -- PRIOR TO THE RESTRUCTURING]

[CHART -- AFTER THE RESTRUCTURING]

30
<PAGE>

COMPANY OVERVIEW

The Company develops, owns and operates subscription television systems in
mid-sized markets in Brazil. The Company has established wireless cable
operating systems in the cities of Brasilia, Goiania and Belem, which together
have a total population of approximately 5,200,000 and encompass approximately
1,215,000 households, an estimated 1,054,000 of which can be served by the LOS
transmission utilized by the Company's wireless cable systems. The 10-year
renewable licenses to operate such systems are granted on an exclusive basis
within a 25 kilometer radius of the Company's transmission sites, although the
Company serves customers beyond this range. Applications have been made for
the Company to operate wireless cable systems in an additional 19 markets in
Brazil having an aggregate population of approximately 9,000,000 and
encompassing approximately 2,000,000 households, although there can be no
assurance as to the grant of any such licenses or as to the timing thereof.
Since 1993, the Company has experienced substantial subscriber growth,
increasing from 135 subscribers at the beginning of 1993 to 47,066 subscribers
as of March 31, 1996 and more than 55,000 subscribers as of May 31, 1996. For
the first quarter of 1996, average monthly revenue per subscriber was $40.45
and average monthly churn was less than 1%. For the first quarter of 1996, the
Company generated revenues of $5,852,000, an operating loss of $139,000, a net
loss of $459,000 and EBITDA of $959,000. The Company's largest operating
system, the Brasilia System, generated revenues of $3,910,000, operating
income of $747,000 and EBITDA of $1,410,000 during this period.

The Company targets mid-sized markets with demographics, competitive
environments and topographies that it believes offer the Company the
opportunity to become the leading provider of subscription television services
in those markets. Significant portions of the Company's current and targeted
mid-sized markets are not served by hardwire cable providers. The Company
estimates that the percentage of homes unpassed by traditional hardwire cable
as of March 31, 1996 is approximately 70% in each of Brasilia and Goiania.
There is no hardwire cable provider in Belem. Of the approximately 1,215,000
households in Brasilia, Goiania and Belem, the Company estimates 985,000
households, or approximately 80% of such households, are currently unpassed by
hardwire cable.

The Company may in the future offer additional communications services,
although it has no current plan or proposal to do so. The Company believes
that other communications services, such as Internet access, paging and direct
mail, could be marketed to the Company's subscriber base. Offering such
additional services would be subject to, among other things, the availability
of capital and the employment of appropriate management.

OPERATING STRATEGY

31
<PAGE>

exclusive programming, (iii) increasing penetration of existing markets, (iv)
providing superior customer service, (v) minimizing the rate of subscriber
turnover ("churn") and (vi) implementing a consistent operating model. These
elements of the Company's strategy are discussed below:

Target Mid-sized Markets for Expansion. The Company targets markets with
populations from approximately 100,000 to 2,500,000, and with demographics,
competitive environments and topographies favorable for the Company's
subscription television services. The Company believes that these markets are
currently underserved by subscription television service providers. In
addition to its three operating markets, applications have been made for the
Company to operate wireless cable systems in an additional 19 markets in
Brazil representing a total of approximately 2,000,000 households and an
aggregate population of approximately 9,000,000.

Increase Penetration of Existing Markets. The Company builds its subscriber
base by (i) extensive marketing tied to regional events such as soccer
matches, (ii) neighborhood promotional events featuring large screen
broadcasts of its channel offerings, (iii) direct mailings, (iv)
telemarketing, (v) television and newspaper advertisements, (vi) prewiring
arrangements with residential housing developers and (vii) other promotional
marketing activities, including referral programs and gifts.

Provide Superior Customer Service. The Company believes that it delivers
high levels of customer service to its subscribers. Customer satisfaction is
emphasized for all employees, including the telemarketing, installation and
customer service teams. The Company's proprietary management information
systems greatly facilitate customer service by providing customer service
representatives immediate access to relevant customer records, including
correspondence history. The Company seeks to install service promptly in a
customer's home or business, and service calls are typically responded to in
less than 48 hours.

Minimize Subscriber Churn. The Company focuses on minimizing churn, and its
average monthly churn rate has been less than 1% for the last two years. The
Company has developed proprietary management information systems which enable
it to provide superior customer service to its clients while monitoring
customer payment patterns. The Company also provides customer service through
a "call-back unit" that attempts to resolve any individual customer concerns.
In addition, the Company identifies and targets areas underserved by hardwire
cable. The Company also charges installation fees ranging from $80 to $250 per
subscriber to discourage subscribers from disconnecting.

Implement Consistent Operating Model. The Company believes that its
implementation of consistent processes supported by proprietary systems, such
as the Company's automated installation and billing systems, facilitates the
effective development of new markets and rapid subscriber growth. The Company
implements specific marketing plans, conducts employee training programs and
uses a sophisticated intra-company telecommunications network and proprietary
management information systems to implement best practices across its
marketing, customer service, operations and control functions.

32
<PAGE>

OPERATING SYSTEMS AND THE COMPANY'S MARKETS

The table below provides information regarding the Company's markets as of
March 31, 1996:

<TABLE>
<CAPTION>
ESTIMATED
TOTAL
HOUSEHOLDS
ESTIMATED ESTIMATED ESTIMATED NUMBER UNPASSED BY
TOTAL TOTAL LOS OF NUMBER OF LAUNCH HARDWIRE
POPULATION HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3) SUBSCRIBERS DATE CABLE
---------- ------------- ------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING MARKETS:
Brasilia................ 1,800,000 431,000 401,000 22 32,139 Feb. 1994(4) 70%
Goiania(5).............. 1,600,000 414,000 320,000 21 6,686 Jan. 1995 70%
Belem................... 1,800,000 370,000 333,000 21 8,241 Feb. 1995 100%
--------- --------- --------- ------
Total in Operating
Markets:.............. 5,200,000 1,215,000 1,054,000 47,066 80%
========= ========= ========= ======
19 APPLICATION
MARKETS:(6)............ 9,000,000 2,000,000
========= =========
</TABLE>
- --------
(1) Represents the Company's estimate of the number of total households within
a 25 kilometer radius in the particular signal coverage area (subject to
Note (5)). The Company's exclusive coverage territory is a 25 kilometer
radius in its operating markets. The Company's estimates are based on data
from the 1991 Census conducted by the Brazilian Institute of Geography and
Statistics ("IBGE") as adjusted to reflect total household growth of 3.13%
per year in Brasilia, 2.33% per year in Goiania and 2.65% per year in
Belem based on IBGE data.
(2) Represents the Company's estimate of the number of Estimated Total
Households that can receive an adequate signal from the Company
(eliminating from the Estimated Total Households those homes that the
Company estimates are unable to receive service due to certain physical
characteristics of the particular signal coverage area, such as terrain
and foliage, although some of these households can be served with the aid
of signal repeaters).
(3) Includes six local off-air VHF/UHF channels in Brasilia and five local
off-air VHF/UHF channels in each of Goiania and Belem which are offered to
the Company's subscribers in addition to the subscription channels.
(4) Date when the Brasilia System increased its channel offering from four
channels to eight channels. The Brasilia System began service with one
channel in 1990.
(5) Includes 6,600 Estimated LOS Households of the 66,000 Estimated Total
Households in the City of Anapolis, all of which fall outside the
Company's 25 kilometer exclusive coverage territory, but within the
Goiania signal coverage area. See "Business--Regulatory Environment--
License Procedures."
(6) Represents markets for which the Company has applied for licenses with the
Ministry of Communications. There can be no assurance as to the grant of
any such licenses or as to the timing of grants, if any.

Operating Systems

Brasilia System. Brasilia, the capital of Brazil, had an estimated
population of approximately 1,800,000 as of March 31, 1996. Brasilia, which is
located in the interior of Brazil, was established in the early 1960's as a
planned city when the capital of Brazil was moved from Rio de Janeiro.
Brasilia's generally flat topography is advantageous for LOS transmission of
wireless cable. In addition, Brasilia's zoning provisions favor LOS
transmission by requiring that in certain areas residential buildings be of a
similar height and located together. The Brasilia System's signal pattern
covers a radius of up to 25 miles, encompassing approximately 431,000
households, of which the Company believes approximately 401,000 can be served
by LOS transmissions. The Brasilia System had approximately 32,000 subscribers
as of March 31, 1996, an increase of over 200% from March 31, 1995,
representing a market penetration of approximately 8%.

The Brasilia System currently offers a 22 channel package, consisting of 16
wireless cable channels and six local off-air VHF/UHF channels, for
approximately $45 per month. The Company is seeking a license expansion from
the Ministry of Communications for 15 additional wireless cable channels,
although there can be no assurance that the Company will be granted such
additional channels. The Brasilia System, launched in 1990 with one channel,
increased to three channels in July 1992, to four channels in September 1992,
to eight channels in February 1994 and to 16 channels in November 1994. The
Brasilia System became EBITDA positive in the third quarter of 1994 when it
had approximately 5,000 subscribers. In addition to monthly subscriber
revenue, the Brasilia system recently began generating advertising revenues.
The Brasilia System transmits at 50 watts of power per channel from a
transmission

33
<PAGE>

tower which is 300 feet above average terrain. The principal subscription
television competitor in the city of Brasilia is NET Brasilia, a hardwire
cable operator, which the Company believes had approximately 24,000
subscribers as of March 31, 1996.

Goiania System. Goiania is located approximately 100 miles southwest of
Brasilia and, together with the City of Anapolis (which can be reached by the
Company's signal), had a population of approximately 1,600,000 as of March 31,
1996. Goiania is the capital of the state of Goias and, like Brasilia, its
topography is favorable to LOS transmission because the city is relatively
flat. The Company launched service in Goiania in January 1995. The Goiania
signal pattern covers a radius up to 25 miles, encompassing approximately
414,000 households, of which the Company believes approximately 320,000 can be
served by LOS transmissions. The Goiania System had approximately 6,600
subscribers as of March 31, 1996, with a market penetration of approximately
2%.

The Goiania System currently offers a 21 channel package, consisting of 16
wireless cable channels and five local off-air VHF/UHF channels, for
approximately $45 per month. The Company is seeking a license expansion from
the Ministry of Communications for 15 additional wireless cable channels,
although there can be no assurance that the Company will be granted such
additional channels. The Goiania System transmits at 50 watts of power per
channel from a transmission tower which is 350 feet above average terrain. The
principal subscription television competitor in the city of Goiania is
Multicanal, a hardwire cable operator, which the Company believes had
approximately 22,000 subscribers as of March 31, 1996.

Belem System. Belem, with a population of approximately 1,800,000 as of
March 31, 1996, lies at the mouth of the Amazon River and is a major trading
port for the rich natural resources of the Amazon rain forest. The Company
launched service in Belem in February 1995. Although the city is relatively
flat, the increased number of trees block wireless cable transmission more
often than in Brasilia and Goiania and, thus, requires increased utilization
of signal repeaters in Belem. The Belem System reaches the greater Belem area,
including the cities of Mosqueiro, Ananindeua, Icoaraci and Marituba and the
islands of Outeiro and Barcarena. The Belem System's signal pattern covers a
radius of up to 25 miles, encompassing approximately 370,000 households, of
which the Company believes approximately 333,000 can be served by LOS
transmissions. The Belem System had approximately 8,000 subscribers as of
March 31, 1996, with a market penetration of approximately 3%.

The Belem System currently offers a 21 channel package, consisting of 16
wireless cable channels and five local off-air VHF/UHF channels, for
approximately $45 per month. The Company is seeking a license expansion from
the Ministry of Communications for 15 additional wireless cable channels,
although there can be no assurance that the Company will be granted such
additional channels. The Belem System transmits at 50 watts of power per
channel from a transmission tower which is 300 feet above average terrain.
There is no hardwire cable provider in the city of Belem.

Application Markets

Applications have been made for the Company to operate wireless cable
systems in an additional 19 mid-sized markets in Brazil (encompassing an
aggregate population of approximately 9,000,000 and a total of approximately
2,000,000 households). No assurance can be given as to the number of licenses
that will be granted, if any, or as to the timing thereof. See "Risk Factors--
Risk Factors Relating to the Company--Risks Associated with New Markets."

PROGRAMMING

The Company currently purchases programming from Tevecap and its
subsidiaries pursuant to an exclusive license agreement with Tevecap. Upon the
consummation of this offering, the Company will continue to have an exclusive
license to transmit programming available from Tevecap or its subsidiaries

34
<PAGE>

via wireless and hardwire cable in the Company's current operating markets
pursuant to a new agreement with Tevecap (the "Programming Agreement"). If
Tevecap obtains a license to operate hardwire cable systems in any of the
Company's current operating markets, Tevecap may only develop such hardwire
cable systems in a partnership or joint venture with the Company on mutually
agreeable terms. The Company also has certain rights with respect to (i) TVA
programming in the Company's pending application markets and (ii) marketing
satellite television services in the Company's current operating markets. The
Company has agreed that it shall use 50% of its total channel capacity in its
operating markets where it has a programming license from Tevecap or its
subsidiaries to broadcast TVA programming, with certain exceptions, and the
Company has a right of first refusal to carry any new programming channel that
is offered by Tevecap or its subsidiaries. Tevecap may not charge the Company
an amount greater than the minimum rates charged by Tevecap to other
subscription television operators, nor may such charges exceed comparable
rates for other programming of a similar nature. The terms of the Programming
Agreement terminate on July 20, 2004, with certain limited exceptions with
respect to the Company's application markets.

From time to time, in connection with the aforementioned agreement, the
Company enters into agreements with Tevecap and its subsidiaries regarding
specified channels. The agreements typically have a two year term and
determine the monthly fees which the Company pays for such channels.

The Company also offers selected local programming to supplement its channel
line-up. For example, the Company owns the rights to televise annually through
1998 all of the games of the Goias State Soccer Championship matches, which it
offers to its subscribers in the Goiania market. In addition, the Company
offers certain exclusive sports programming, including ESPN Brazil on which it
offers selected games of the Sao Paulo Soccer Championship and the Rio de
Janeiro Soccer Championship matches. The Company is exploring other local
programming, including local news, cultural events, home shopping and other
sporting events, although there can be no assurance that such programming will
be offered.

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<PAGE>

The Company's channel offerings as of March 31, 1996 are as follows:

<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- ------- -----------
<S> <C>
HBO Brazil.............. Brazilian version of HBO
HBO2.................... HBO Brazil with a time delay
ESPN Brazil............. Brazilian version of ESPN
Eurochannel............. Package of programming from free TV in Europe
Superstation............ Package of programming from ABC, CBS and NBC
CMT..................... Brazilian version of Country Music Television
MTV Brazil.............. Brazilian version of MTV
MTV Latino.............. Spanish language version of MTV
RTPi.................... Radio and Television Portugal, a free broadcast channel
from Portugal
CNN International....... International version of CNN
TNT..................... Brazilian version of TNT
Cartoon Network......... Cartoon Network produced in the United States
Fox..................... Movie channel
Discovery Channel....... Brazilian version of Discovery Channel
ESPN International...... International version of ESPN
Warner.................. Warner channel produced in the United States
Sony.................... Sony channel produced in the United States
Globo................... Local off-air channel
SBT..................... Local off-air channel
Bandeirantes............ Local off-air channel
Record.................. Local off-air channel
Nacional................ Local off-air channel
Manchete................ Local off-air channel
Cultura................. Local off-air channel
</TABLE>

The following channels are expected to be offered by Tevecap and its
subsidiaries in the Brazilian subscription television marketplace in the third
quarter of 1996:

<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- ------- -----------
<S> <C>
Bravo.................................. Brazilian version of Bravo
CNBC................................... CNBC plus Brazilian business programming
CNA.................................... Brazilian news channel
History................................ Brazilian version of the History Channel
</TABLE>

OPERATIONS

Marketing. Prior to commencing operations in a potential new market, the
Company conducts pre-marketing surveys to evaluate the demographics and
terrain of such market. The Company then develops a plan designed to manage
subscriber growth by maintaining a manageable backlog of installations. Such
backlog is maintained at a manageable level by adjusting installation capacity
to correspond with sales

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<PAGE>

levels. The amount of time a subscriber waits for the commencement of service
depends on several factors, including whether the subscriber has access to
hardwire cable and whether the subscriber is in a single family home or
multiple dwelling unit. This development plan ensures that the quality of
installations and customer service remains high. In each market, the Company's
marketing staff typically applies the following programs to attract
subscribers: (i) extensive marketing tied to regional events such as soccer
matches, (ii) neighborhood promotional events featuring large screen
broadcasts of its channel offerings, (iii) direct mailings, (iv)
telemarketing, (v) television and newspaper advertisements, (vi) prewiring
arrangements with residential housing developers and (vii) other promotional
marketing activities, including referral programs and promotional gifts.

Installation. The Company's installation package features a standard rooftop
mount linked to a small antenna and related equipment, including a decoder,
located at the subscriber's location. Installations at single-family homes
require an entire installation package, while installations at multiple
dwelling units in which drop lines already have been installed require less
time and, accordingly, are less costly. The Company charges its subscribers an
installation fee ranging from $80 to $250.

Customer Service. The Company believes that delivering high levels of
customer service in installation and maintenance enables it to maintain high
levels of customer satisfaction and to minimize churn. To this end, the
Company (i) schedules installations promptly, (ii) provides a customer service
hotline, (iii) provides quick response repair service and (iv) makes follow-up
calls to new subscribers shortly after installation to ensure customer
satisfaction. The Company seeks to instill a customer service focus in all its
employees through ongoing training and has established an intra-company
electronic mail system to provide a forum for employees to exchange ideas
concerning means to increase customer satisfaction. The Company also has
various employee bonus programs linked to measures of customer satisfaction.

Management Information Systems and Billing. The Company believes that its
proprietary management information systems enable it to deliver superior
customer service, monitor customer payment patterns and facilitate the
efficient management of each of its operating systems. The Company has 10
employees dedicated to the development, enhancement and integration of the
Company's management information systems. The Company believes that its
billing procedures are an integral part of its strategy to maintain high
levels of customer satisfaction and to minimize churn. Subscribers select the
day of the month on which payment for that month's service is due and pay
their bills at a bank through direct transfers, which is the standard payment
method in Brazil. If a customer does not pay his bill within 20 days after the
due date, the customer's service is automatically disconnected and his account
receivable is sent to a collection agency. If he does not pay within another
30 days, the collection agency forwards his name to a private credit agency.
After disconnection of service to a subscriber, a Company installer is sent to
the subscriber's location to recover installed equipment. The Company
corresponds with the subscribers to encourage the payment of delinquent
accounts so as to avoid disconnection.

EMPLOYEES

As of March 31, 1996, the Company had a total of 543 employees, all of whom
are employed by the Company's subsidiaries. All of the Company's employees,
except for Messrs. Hermano Lins, Carlos Andre Lins and Aguirre, are subject to
collective bargaining agreements which expire from September 1996 to December
1996. The collective bargaining agreements are with the Union for the
Employees of Radio and TV Broadcasting Companies. The Company has experienced
no work stoppages. The Company provides its employees with health insurance
(which is not required by law in Brazil) and certain other benefits which it
believes enable it to attract and retain qualified and motivated employees.
The Company believes that its relationships with its employees are good.

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<PAGE>

FACILITIES AND EQUIPMENT

Administrative Facilities. A centralized administrative facility is located
in Brasilia to handle training, engineering, computer systems development,
controller services and strategic planning. In addition, the Company has
established regional offices in Brasilia, Goiania and Belem to coordinate
sales, billing, telemarketing, general marketing, customer service and certain
other administrative functions on a regional level. Each facility is connected
to the Company's computer telecommunications network.

Transmission Facilities. The Company's headend and transmitter facilities
are located in leased buildings at the Company's transmission tower sites in
Brasilia, Goiania and Belem. The transmitting antennas generally serve areas
within a 25 mile radius of the respective transmitters. In certain areas
within the Company's markets that are otherwise terrain-blocked, the Company
utilizes low power signal repeaters to enhance signal coverage. Subscriber
premises equipment is comprised of rooftop antennas, decoder boxes and related
equipment. In multiple dwelling units, the Company installs a single rooftop
antenna and connects many subscriber lines to the single antenna, thereby
substantially reducing the Company's capital cost per subscriber. See "Risk
Factors--Risk Factors Relating to Brazil Generally--Economic Uncertainty," and
"Risk Factors--Risk Factors Relating to the Company--Dependence on Suppliers,"
and "--Wireless Cable Transmission Issues."

Digital Technology. The Company currently transmits in analog format. Should
competitive conditions require or if the Company deems such technology to be
cost effective and practical to provide, it may implement digital technology.

COMPETITION

TV Filme Servicos is the only entity licensed to operate a wireless cable
system in Brasilia, Goiania and Belem. The Company provides service via 16
wireless cable channels in each such market and applications have been made
for an additional 15 channels in such markets. There can be no assurance that
the licenses will be so granted or that such licenses will not be granted to
competitors. The Company's principal subscription television competitor in the
city of Brasilia is NET Brasilia, a hardwire cable operator, which the Company
believes had approximately 24,000 subscribers as of March 31, 1996. The
Company's principal subscription television competitor in the city of Goiania
is Multicanal, a hardwire cable operator, which the Company believes had
approximately 22,000 subscribers as of March 31, 1996. There currently is no
hardwire cable provider in the city of Belem.

In addition to other wireless cable and hardwire cable operators, wireless
cable television operators in Brazil face or may face competition from several
other sources, such as DTH systems, DBS, local off-air VHF/UHF channels, home
videocassette recorders and out-of-home theaters. The principal methods of
competition in the subscription television industry are providing desirable
programming, superior customer service, reliability and affordable prices.
Many actual and potential competitors have greater financial, marketing and
other resources than the Company. No assurance can be given that the Company
will be able to compete successfully. See "Risk Factors--Risk Factors Relating
to the Company--Competition," "Business--Brazilian Subscription Television
Industry" and "Business--Operating Systems and the Company's Markets."

REGULATORY ENVIRONMENT

General. The subscription television industry is subject to regulation by
the Ministry of Communications pursuant to the Brazilian Telecommunications
Code of 1962, as amended (the "Telecommunications Code"). The licensing and
operation of wireless cable channels are currently governed by Rule No.
002/94, adopted by Administrative Rule No. 43/94, of the Ministry of
Communications. The Telecommunications Code empowers the Ministry of
Communications, among other things, to issue, revoke, modify and renew
licenses within the spectrum available to wireless cable,

38
<PAGE>

to approve the assignments and transfer of control of such licenses, to
approve the location of channels that comprise wireless cable systems, to
regulate the kind, configuration and operation of equipment used by wireless
cable systems, and to impose certain other reporting requirements on channel
license holders and wireless cable operators.

Under Rule 002/94, wireless cable or "MMDS" (Multi-Point, Multi-Channel
Distribution Service) is defined as the special service of telecommunication
which uses microwaves to transmit codified signals to be received in pre-
established points on a contractual basis. Any company in which nationals of
Brazil own at least 51% of the voting capital is eligible to be granted a
license to operate an MMDS service. The license is granted for a renewable
period of ten years. The application for renewal of a license must be filed
with the Ministry of Communications during the period from 180 to 120 days
before the end of the license term. To renew the license, the license holder
must (i) meet applicable legal and regulatory requirements, (ii) have complied
with all legal and contractual obligations during the term of such license,
(iii) meet certain technical and financial requirements and (iv) provide
educational and cultural programming.

Each license holder and its affiliates may be granted permission to operate
MMDS systems in different areas of Brazil, provided that no holder may be
granted licenses for (i) more than seven municipalities with a population
exceeding 1,000,000 inhabitants or (ii) more than 21 municipalities with a
population between 300,000 and 1,000,000 inhabitants. Accordingly, if all of
the 19 additional markets for which applications have been made for the
Company to operate wireless cable systems are granted, no more than seven of
the Company's total markets would have populations exceeding 1,000,000
inhabitants and no more than 21 of the Company's total markets would have
populations between 300,000 and 1,000,000 inhabitants. No assurance can be
given as to the number of licenses that will be granted, if any. Prices for
the services may be freely established by the system operator, although the
Ministry of Communications may interfere in the event of abusive pricing. The
Ministry of Communications may impose penalties including fines, suspension or
revocation of the license if the license holder fails to comply with
applicable regulations or becomes legally, technically or financially unable
to provide MMDS service. The Ministry of Communications also may intervene to
the extent operators engage in unfair practices intended to eliminate
competition.

Channels Available for Wireless Cable. The Ministry of Communications grants
licenses and regulates the use of channels by wireless cable operators to
transmit video programming, entertainment services and other information. A
maximum of 31 wireless cable channels (constituting a spectrum bandwidth of
186 MHz) may be authorized for use in a wireless cable market. While licenses
are usually granted for the use of up to 16 channels, depending on technical
feasibility and the existence of competition, the Ministry of Communications
can grant a license for all 31 channels available in one specific area. If the
license is for 16 or more channels, at least two channels must be reserved for
educational and cultural programming. If the license involves less than 16
channels, only one channel must be reserved for educational and cultural
purposes. In each of the Company's operating or targeted markets, up to 31
wireless cable channels are available for wireless cable (in addition to any
local off-air VHF/UHF channels which are offered).

License Procedures. The Ministry of Communications awards licenses to use
MMDS channels based upon applications demonstrating that the applicant is
qualified to hold the license, that the proposed market is viable and that the
operation of the proposed channels will not cause impermissible interference
to other permitted channels. After the Ministry of Communications determines
that an application has met these requirements, it publishes a notice
requesting comments from all parties interested in providing the same services
in the same or a near area. Depending on the comments received, the Ministry
of Communications may decide to open a public bid for the service in that
area, although it has not done so in the past. In the case of a public bid,
applicants would be evaluated based on factors including the applicant's
proposed schedule for implementing service and aspects of the applicant's
community

39
<PAGE>

relations, such as involvement of local residents as stockholders of the
applicant, the applicant's commitment to local programming and the extent to
which the applicant provides free programming to local cultural and
educational institutions. Once an MMDS license application is granted by the
Ministry of Communications, the license holder must finalize construction and
begin operations within 12 months, which period may be extended by an
additional 12 months.

In addition to qualifying under the application process described above, a
license holder must also demonstrate that its proposed signal does not violate
interference standards in the area of another wireless cable channel license
holder. The area covered by the services is exclusive to a radius of 25
kilometers, or approximately 15 miles, around the transmission site. If a
license holder's proposed service would cause interference in the area of
another wireless cable channel license holder, the proposed operator would be
required to obtain the consent of such other license holder.

On November 28, 1995, the President of Brazil enacted Decree No. 1719, which
provides that all granting of concessions and licenses for the rendering of
commercial telecommunications services in Brazil shall be made through bidding
procedures. As of March 31, 1996, the Ministry of Communications had not
granted any new licenses for the operation of MMDS systems pursuant to such
Decree.

The Proposed Regulations. In February 1996, the Ministry of Communications
released for public hearing the Proposed Regulations, Rule No. 002/94-REV/95,
which is designed to replace the current regulation governing the licensing
procedure and operation of MMDS systems in Brazil. The Proposed Regulation is
aimed at conforming the procedure adopted by the Ministry of Communications
for the granting of MMDS licenses to the provisions of Decree No. 1719. The
most significant change in the Proposed Regulation from the current
regulations involves the procedure for the granting of licenses. Under the
Proposed Regulation, all licenses will be granted pursuant to a public bidding
process, whereby a number of criteria relating to each applicant will be
reviewed by the Ministry of Communications to enable it to make its choice
among the applicants. Each relevant request for proposals ("RFP") issued by
the Ministry of Communications will have to contain, among others, the
following criteria: (i) price or minimum price for the license, (ii) payment
conditions, (iii) technical characteristics of the system, (iv) the relevant
area for the rendering of the services, (v) term of the license and (vi) other
requirements related to the actual bid process, such as terms for the
submission and judgment of the proposals, documentation and other relevant
information. According to the Proposed Regulation, the following matters shall
be taken into consideration by the Ministry of Communications in evaluating
proposals: (i) participation of local residents as stockholders of the
applicant, (ii) the number of days for the installation of the transmission
system, (iii) the schedule for the implementation of the programs (including
the number of programs available at the start of operations, and one and two
years thereafter), (iv) the time reserved for local programs, (v) the number
of cultural or educational programs, (vi) the number of local community
establishments that will receive cultural and educational programs free of
charge and (vii) the subscription price. These items will be rated according
to certain criteria established in the Proposed Regulation. After the rating
process described above, the licenses will be granted: (i) in the case of
areas with less than 300,000 inhabitants, to the applicant that receives the
highest score, (ii) in the case of areas with more than 300,000 and less than
700,000 inhabitants, to the applicant whose score multiplied by a number based
on the offered price of the license is the highest, and (iii) in the case of
areas with more than 700,000 inhabitants, to the applicant that offers the
highest price for the license. Many of the Company's potential competitors
have greater financial resources than the Company and thus would be in a
position to outbid the Company for additional licenses.

Other Regulations. Wireless cable license holders are subject to regulation
with respect to the construction, marking and lighting of transmission towers
pursuant to the Brazilian Aviation Code and certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. The subscription television
industry also is subject to the

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<PAGE>

Brazilian Consumer Code. The Consumer Code entitles the purchasers of goods or
services to certain rights, including the right to discontinue a service and
obtain a refund if the services are deemed to be of low quality or not
rendered adequately. For instance, in case of a suspension of the transmission
for a given period, the subscriber shall be entitled to a discount on the
monthly fees. Rule No. 002/94 and the Proposed Regulation have certain
provisions relating to consumer rights, including a provision for mandatory
discounts in the event of interruption of service. Due to the regulated nature
of the subscription television industry, the adoption of new, or changes to
existing, laws or regulations or the interpretations thereof may impede the
Company's growth and may otherwise have a material adverse effect on the
Company's results of operations and financial condition. See "Risk Factors--
Risk Factors Relating to the Company--Government Regulation."

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings that would have a
material adverse effect on results of operations and financial condition.

PROPERTIES

The Company leases approximately 32,000 square feet of office space for its
corporate headquarters and the Brasilia System in Brasilia under leases that
expire between December 1996 and April 1997. The Company leases additional
office space for the Goiania System and Belem System of approximately 40,000
and 35,000 square feet, respectively. In addition to leased office space, the
Company also owns less than 1,500 square feet of office space in Goiania and
leases space for transmission towers located in Brasilia, Goiania and Belem.
The Company believes that office space and space for transmission towers is
readily available on acceptable terms in the markets where the Company
operates wireless cable systems.

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<PAGE>

SUBSCRIPTION TELEVISION INDUSTRY

INTRODUCTION

The subscription television industry began in the late 1940's in the United
States. The subscription television industry did not begin in Brazil until
1989. As of March 31, 1996, the Company estimates that there were
approximately 1,250,000 Brazilian subscription television customers.

TRADITIONAL HARDWIRE CABLE TECHNOLOGY

Traditional hardwire cable systems use coaxial cable to transmit television
signals. Traditional hardwire cable operators receive, at a headend, signals
for programming services, which have been either broadcast or transmitted to
such operators by satellite. A headend consists of signal reception,
encryption, transmission, decryption and related equipment. The signal is then
delivered from the headend to customers via a cable plant. Traditional
hardwire cable systems are susceptible to signal quality problems because
signals can be transmitted via coaxial cable only a relatively short distance
without amplification; each time a television signal passes through an
amplifier, some measure of noise is added. A series or "cascade" of amplifiers
between the headend and a customer leads to progressively greater noise and
for some viewers, a degraded picture. Regular system maintenance is required
due to water ingress, temperature changes and other equipment problems, all of
which may affect the quality of a signal. Hardwire cable companies have begun
installing fiber optic networks, which will substantially reduce the
transmission and reception problems currently experienced by traditional
hardwire cable systems and will expand the channel capacity of their systems.
However, the installation of such networks will require a substantial
investment by hardwire cable operators. In the Company's existing markets, the
Company estimates that approximately 80% of homes are unpassed by hardwire
cable.

WIRELESS CABLE TECHNOLOGY

Wireless cable can provide subscribers the same or superior video television
signal as that provided by traditional hardwire cable. Like a traditional
hardwire cable system, a wireless cable system receives programming at a
headend. Unlike traditional hardwire cable systems, however, the programming
is then retransmitted via microwave transmission from an antenna located on a
tower associated with the headend to a small antenna located at a subscriber's
premises. At the subscriber's premises, the signals are converted to
frequencies that can pass through conventional coaxial cable into a
descrambling converter located on top of a television set. Wireless cable
requires a clear LOS because the microwave frequencies used will not pass
through dense foliage, hills, buildings or other obstructions. Some of these
obstructions can be overcome with the use of signal repeaters which retransmit
an otherwise blocked signal over a limited area. Because wireless cable
systems do not require an extensive cable plant, wireless cable operators can
provide subscribers with a high quality picture with few transmission
disruptions at a significantly lower system capital cost per installed
subscriber than traditional hardwire cable systems.

DIRECT-TO-HOME

DTH satellite television services are available via satellite receivers
which are 7-to-12 foot dishes mounted in the yards of homes to receive
television signals from orbiting satellites. Until the implementation of
encryption, these dishes enabled reception of any and all signals without
payment of fees. Having to purchase decoders and pay for programming has
reduced their popularity, although the Company to some degree competes with
DTH systems in marketing its services. The Company estimates there were
approximately 100,000 DTH subscribers in Brazil as of March 31, 1996.

DIRECT BROADCASTING SATELLITE

DBS involves the transmission of a compressed encoded signal directly from a
satellite to the customer's home. Because the signal is at a higher power
level and frequency than most satellite-transmitted signals, its reception can
be accomplished with an 18-inch dish mounted on a rooftop or in

42
<PAGE>

the yard. DBS currently cannot, for practical reasons, provide local off-air
VHF/UHF channels as part of its service, although many DBS subscribers receive
such channels via standard over-the-air receive antennas. Both TVA and the
Globo Group have recently begun to advertise alternative DBS services in
Brazil. In the United States, the cost to a DBS subscriber for equipment is
generally substantially higher than such cost to wireless cable subscribers
and the Company expects such costs will be higher in Brazil, as well.

PROGRAMMING

Currently, with the exception of the retransmission of local off-air VHF/UHF
channels, programming is made available to wireless cable operators in
accordance with contracts with program suppliers under which the system
operator generally pays a fee based on the number of subscribers receiving
service each month. Individual program pricing varies from supplier to
supplier. Under Brazilian copyright law, license from the copyright holder
generally must be secured before any video program may be retransmitted.

BRAZIL

GENERALLY

The Federative Republic of Brazil, a nation consisting of 26 States and the
Federal District of Brasilia, is the fifth largest country in the world, with
an area of approximately 3,300,000 square miles. It is the largest country in
South America and occupies nearly 50% of the land mass of South America.
Formerly a Portuguese possession, Brazil became an independent monarchy in
1822, and a republic in 1889. The capital of Brazil is Brasilia and the
official language is Portuguese. With a population estimated at approximately
159,000,000 at December 31, 1995, Brazil is the sixth most populous country in
the world, with a per capita income estimated to be approximately $4,500 at
December 31, 1995. Approximately 77% of the population lives in urban areas
spread along Brazil's coast.

Brazil is located in central and north-eastern South America, and has a long
coastline on the Atlantic Ocean. Brazil is bordered on its north by Colombia,
Venezuela, Guiana, Suriname and French Guiana, on its south by Paraguay,
Argentina and Uruguay, and on its west by Peru and Bolivia. Its climatic
conditions vary from hot and wet in the tropical rain forest of the Amazon
basin to temperate in the savannah grasslands of the central and southern
uplands, which have warm summers and mild winters.

The population is concentrated in the coastal regions and large cities. Over
the past 60 years there has been a marked shift from rural to urban areas,
with the latter accounting for 74% of the total population in 1991, a
significant increase from 46% in 1960. Brazil has 12 cities with over 1
million inhabitants.

Form of Government. Brazil is a federative republic with a representative
form of government. A new constitution was enacted in October 1988 confirming
a presidential form of government with three independent branches: executive,
legislative and judicial. The executive power is vested in the President, who
is elected by direct vote for a term of four years (with the next Presidential
election to be held in October 1998) and is not currently eligible for re-
election. The President has a broad range of powers including the right to
appoint ministers and key executives in selected administrative and political
posts. The legislative branch consists of a bicameral National Congress
composed of the Senate and the Chamber of Deputies. The Senate's 81 Senators
are each elected for staggered eight-year terms, while the Chamber of Deputies
has 513 deputies, each elected for concurrent four-year terms. The judicial
power is headed by the Federal Supreme Court composed of 11 Justices who are
appointed for life by the President. The Federal Supreme Court has ultimate
jurisdiction over decisions rendered by lower federal and state courts on
constitutional matters.

At the state level, the executive power is exercised by governors who are
elected for four-year terms with no eligibility for re-election. The
legislative power is exercised by state deputies who are also elected

43
<PAGE>

for four years. Judicial power at the state level is vested in state courts,
with state Courts of Appeals as the highest state judicial authority. Appeals
of state court judgments may be taken to the Federal Supreme Court when they
involve issues of constitutional law. Otherwise, they may be appealed to the
Superior Court of Justice.

The Federal government has proposed constitutional reforms in an effort to
reduce public sector involvement in the economy and to allow certain
industries, especially those that require extensive capital investment, to
gain access to foreign capital. Pursuant to the proposed amendments, matters
currently within the ambit of constitutional law would be transferred to and
regulated by ordinary law, thereby granting Congress more regulatory control
over the economy.

Recent Political History. The Brazilian military ruled the country from 1964
to 1985. In 1985, a series of political reforms were enacted, including the
reintroduction of direct elections for the President, and the calling of a
Constitutional Assembly to adopt a new Brazilian Constitution. A new
constitution was promulgated in 1988.

In December 1989, Fernando Collor de Mello became the first President to be
elected by popular vote since 1960. In December 1992, following allegations
and a subsequent investigation of charges of corruption involving the
President, President Collor resigned from the Presidency in the midst of his
impeachment trial. Itamar Franco, the Vice President under Collor, then
assumed the Presidency for the balance of the term ending December 31, 1994.
In October 1994, Fernando Henrique Cardoso was elected President for a four-
year term. He assumed the Presidency on January 1, 1995. Mr. Cardoso had
previously served as Minister of Foreign Affairs and in May 1993 had been
appointed Finance Minister, in which capacity he proposed a new program of
macroeconomic policies designed to control Brazilian inflation and to
stabilize the Brazilian currency. That program evolved into the Real Plan. See
"--Brazilian Economic Environment."

Foreign Relations and International Organizations. Brazil maintains
diplomatic relations with almost all countries in the world and trade ties
with many of them. It is a member of the United Nations, the Organization of
American States, the Inter-American Development Bank, the World Bank, the
International Development Association, the International Finance Corporation,
the International Monetary Fund, the General Agreement on Tariffs and Trade,
the World Trade Organization and the Latin American Integration Association.
Brazil is also a member of the South American Common Market ("Mercosul").
Mercosul was established in March 1991, when Argentina, Brazil, Paraguay and
Uruguay signed the Treaty of Asuncion. Chile recently became a member of
Mercosul and Bolivia is negotiating to become a member of Mercosul. The Treaty
and subsequent agreements provide for the gradual economic integration of the
member countries and the reduction of tariff barriers and non-tariff
restrictions on trade. In June 1991, the countries constituting Mercosul
signed an agreement with the United States which laid the foundation for
negotiating a trade agreement with the United States. In addition,
negotiations have begun between Mercosul and the European Union for a free-
trade agreement.

Commerce. Services and industries account for approximately 49% and 37%,
respectively, of Brazilian Gross Domestic Product (the "GDP"). Brazil's
manufacturing sector, the largest in Latin America, is well developed, with
industrial goods accounting for more than 60% of exports. Production is
focused on capital goods, construction materials, chemicals and
petrochemicals, smelting (steel and non-ferrous metals), rubber, motor
vehicles, sugar and wood processing. In the automotive sector, Brazil produced
over 1.6 million vehicles in 1995. Recently, technologically-based industries
have seen rapid growth, particularly in the electronics and information
processing sectors. Traditional industries such as textiles and clothing,
beverages and food processing remain important and continue to account for
approximately 50% of output.

While Brazil remains the world's leading producer and exporter of coffee and
sugar and has important crops including soya, orange juice, tobacco, cocoa and
cotton, agriculture, which currently employs

44
<PAGE>

approximately 30% of the population, accounts for only 12% of GDP. Brazil has
significant mineral resources. Its iron reserves are believed to be equivalent
to one third of the world's total, while its bauxite reserves are the largest
in Latin America. Brazil accounts for approximately 30% of the world's iron
exports. Other major deposits include manganese, coal, zinc, chrome, gold and
tin. In hydrocarbons, the national petroleum products industry supplies
approximately 39% of the domestic market. The state-owned oil company,
Petrobras, maintains control over exploration and extraction and operates the
majority of oil refineries.

The media and communications sector in Brazil has enjoyed rapid growth and
is a focal point of government investment policy. The Ministry of
Communications has indicated that its telecommunications plan for 1996-2003
will require investment of no less than $75 billion across all subsectors
including public telephone service, television, cable and radio operations and
satellite and cellular operations. There are approximately 14.3 million fixed
telephone lines and approximately 1.9 million cellular telephone users in
Brazil. In particular, the Brazilian government has set out specific goals to
expand the telecommunications sector and has issued new rules to encourage
significant private capital participation across all subsectors. In the
broadcasting arena there are over 1,000 radio stations and 127 television
stations.

BRAZILIAN ECONOMIC ENVIRONMENT

Historical Background. From the late 1960's through 1982, Brazil implemented
an import-substitution, high growth development strategy financed in large
part by foreign borrowing. Foreign debt grew at an accelerated pace in
response to the oil shocks of the 1970's and, when international interest
rates rose sharply in 1979-80, the resulting accumulated external debt became
one of Brazil's most pressing problems in the decade that followed. The debt
crisis of the 1980's and high inflation substantially depressed real growth in
the GDP, which averaged 2.3% per year from 1981 to 1989. The public sector's
role in the economy also expanded sharply and significant structural
distortions were introduced through high tariffs and the creation of subsidies
and tax credit incentives. Significant pressures in the money supply to
finance a large and growing fiscal deficit further fueled inflationary
pressures.

Efforts to address these problems during the late 1980's and early 1990's
were largely unsuccessful. High inflation and the recurrent threat of
hyperinflation during this period prompted the Federal government to pursue a
series of stabilization plans, but these plans were undermined by a variety of
factors, including political difficulty in implementing planned fiscal
adjustments and the slowness of institutional reforms. The practice of
inflation indexation in the economy, which made prices downwardly rigid, also
helped to undermine the stabilization measures. Moreover, these attempts at
stabilization relied on mechanisms, such as price and wage freezes and
unilateral modifications of the terms of financial contracts, that were not
supported by fiscal and monetary reform. A problem during this period was that
the public sector ran operational deficits averaging more than 5% of GDP
during the five-year period from 1985-1989, while monetary policy was
compromised by the short-term refinancing of public sector debt. In addition,
the 1988 Constitution reallocated public resources, in particular tax
revenues, from the Federal government to the states and municipalities without
a proportional shift of responsibilities to them, thereby further constraining
the effectiveness of the Federal government's fiscal policy, and also limiting
the ability of the Federal government to dismiss public sector employees.

The Real Plan. In December 1993, the Federal government announced a
stabilization program, known as the Real Plan, aimed at curtailing inflation
and building a foundation for sustained economic growth. The Real Plan was
designed to address persistent deficits in the Federal government's accounts,
expansive credit policies and widespread, backward-looking indexation.

The Real Plan has three stages: the first stage included a fiscal adjustment
proposal for 1994, consisting of a combination of spending cuts and an
increase in tax rates and collections intended to

45
<PAGE>

eliminate a budget deficit originally projected at $22.0 billion. Elements of
the proposal included (i) cuts in current expenditures and investment through
the transfer of some activities from the Federal government to the states and
municipalities, (ii) establishment of the Fundo Social de Emergencia (the
Emergency Social Fund or "ESF"), financed by reductions in constitutionally
mandated transfers of Federal government revenues to the states and
municipalities, to ensure financing of social welfare spending by the Federal
government, (iii) a prohibition on sales of public bonds by the Federal
government, except to refinance existing debt and for certain expenditures and
investments, (iv) new taxes, including a new levy on financial transactions
and (v) recovery of mandatory social security contributions, due to judicial
acknowledgment that such contributions were permissible under the 1988
Constitution.

The centerpiece of the first stage of the Real Plan was the creation of the
ESF by constitutional amendment in 1994. The ESF enabled the Federal
government temporarily to break certain of the constitutionally mandated links
between revenue and expenditure. Pursuant to this amendment, 20% of Federal
government revenues otherwise earmarked for specific purposes were released
and deposited into the ESF to ensure financing of social welfare spending by
the Federal government for 1994 and 1995. In adopting this constitutional
amendment, however, the Federal Congress did not modify the existing
provisions requiring the Federal government to share a significant portion of
its revenues with states and municipalities.

The second stage of the Real Plan, initiated March 1, 1994, began the
process of reform of the Brazilian monetary system. Brazil's long history of
high inflation had led to the continuous and systematic deterioration of the
domestic currency, which no longer served as a store of value and had lost its
utility as a unit of account. Because inflation had reduced dramatically the
information content of prices quoted in local currency, economic agents had
included in their contracts a number of mechanisms for indexation and
denomination of obligations in indexed units of accounts. The process of
rehabilitation of the national currency began with the creation and
dissemination of the URV as a unit of account. The second stage of the Real
Plan was designed to eliminate the indexation of prices to prior inflation and
link indexation to the URV, a unit of account.

The introduction of the URV was premised on the theory that a reference unit
with a nominal value corrected frequently and based on the best estimate of
current inflation would express values more realistically than traditional
indexing methods. The URV, therefore, was calculated daily based on estimates
drawn from three price indices and was designed to track the loss in the
purchasing power of the cruzeiro real, the legal currency at the time.

The third stage of the Real Plan began on July 1, 1994, with the
introduction of the Real as Brazil's currency. All contracts denominated in
URVs were automatically converted into Reals at a conversion rate of one to
one, and the URV, together with the cruzeiro real, ceased to exist. In the
effort to maintain the initial success of the Real Plan, the Federal
government and the Central Bank have taken several additional measures,
including institution of strict control of monetary aggregates through the
regulation of credit and the flow of capital into Brazil, the implementation
of a new exchange rate policy which permits market participants (including the
Central Bank) to set exchange rates for the Real and the implementation of
certain fiscal measures.

Effects of Inflation and Currency Exchange Fluctuations. Brazil had for many
years experienced high and generally unpredictable rates of inflation and
steady devaluation of its currency relative to the U.S. dollar. The following
table sets forth Brazilian inflation as measured by the IGPM Index and the
devaluation of Brazilian currency against the U.S. dollar for the periods
shown:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, THREE MONTHS
------------------------------------ ENDED
1992 1993 1994 1995 MARCH 31, 1996
--------- --------- ------------------------------
<S> <C> <C> <C> <C> <C>
Inflation (IGPM)............... 1,175% 2,567% 870% 15% 3%
Devaluation...................... 1,059% 2,533% 613% 15% 2%
</TABLE>

46
<PAGE>

As a result of the Real Plan, the rate of inflation and the rate of
devaluation have been reduced considerably since July 1, 1994. As measured by
the IGPM Index, the rate of inflation for the second six months of 1994 was
38%, as compared to 763% for the first six months of 1994. For the year ended
December 31, 1995, the rate of inflation was 15%, and in the first three
months of 1996, the rate of inflation was 3%.

On July 1, 1994, the Real was introduced with an exchange rate initially set
at R$1.00 to U.S. $1.00. In March 1995, the Brazilian government introduced
new exchange rate policies which established a trading band for the Real
against the U.S. dollar and, since then, the Real has devalued relative to the
U.S. dollar. The commercial exchange rates for the Real as quoted on Reuters
Screen Page BRBY at the close of market at the end of, and the range of such
exchange rates during, the periods indicated below were as follows:

<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED DECEMBER
31, 1995
---------------
AT DECEMBER 31, 1995 HIGH LOW
-------------------- ------- -------
<S> <C> <C> <C>
Real equivalent of $1.00................ R$0.973 R$0.973 R$0.834
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1996
---------------
AT MARCH 31, 1996 HIGH LOW
-------------------- ------- -------
<S> <C> <C> <C>
Real equivalent of $1.00................ R$0.988 R$0.988 R$0.973
</TABLE>

For further information regarding the potential material adverse effect on
the Company's results of operations and financial condition from inflation and
devaluation, see "Risk Factors--Risk Factors Relating to Brazil Generally--
Economic Uncertainty" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Inflation and Exchange Rates."

47
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company and the general managers of the three operating systems:

<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Douglas M. Karp(1)................... Chairman of the Board
Hermano Studart Lins de Albuquerque.. Chief Executive Officer, Secretary and Director
Carlos Andre Studart Lins de
Albuquerque......................... President, Chief Operating Officer, Treasurer and Director
Alvaro J. Aguirre.................... Chief Financial Officer and Director
Gary D. Nusbaum(1)................... Vice President and Director
Jose Augusto Pinto Moreira (1) ...... Director
Claudio Dascal....................... Director
Adriano Nascimento Barbosa........... General Manager of Brasilia System
Ivan Alexandre Barcellos............. General Manager of Goiania System
Rafael Augusto Colino................ General Manager of Belem System
</TABLE>
- --------
(1) Member of the Compensation Committee and Audit Committee.

DOUGLAS M. KARP has served as Chairman of the Board of TV Filme, Inc. since
its incorporation. Mr. Karp has been a Managing Director of E.M. Warburg,
Pincus & Co., Inc. since May 1991. Prior to joining E. M. Warburg, Pincus &
Co., Inc., Mr. Karp held several positions with Salomon Inc, including
Managing Director from January 1990 to May 1991, Director from January 1989 to
December 1989 and Vice President from October 1986 to December 1988. Mr. Karp
is a director of LCI International, Inc., TresCom International, Inc. and
several privately held companies. Mr. Karp is 41 years old.

HERMANO STUDART LINS DE ALBUQUERQUE, one of the co-founders of the Company,
has served as Chief Executive Officer, Secretary and a director of TV Filme,
Inc. since its incorporation. Mr. Lins received a Master's degree in
Artificial Intelligence from the University of Sussex, England and a Bachelor
of Science degree in Electronic Engineering from the University of Brasilia.
Mr. Lins is a member of the MMDS Regulation Commission, a Brazilian government
advisory board and is a member of the Technical Advisory Board for National
Satellite Publishing Inc. Mr. Lins is 33 years old.

CARLOS ANDRE STUDART LINS DE ALBUQUERQUE, one of the co-founders of the
Company, has served as President, Chief Operating Officer, Treasurer and a
director of TV Filme, Inc. since its incorporation. Mr. Lins received a
Bachelor of Science degree in Physics from the University of Brasilia and a
Bachelor of Science degree in Mathematics from the University of Ceub. Mr.
Lins is 32 years old.

ALVARO J. AGUIRRE has served as Chief Financial Officer and a director of TV
Filme, Inc. since June 1996. Prior to joining TV Filme, Inc., Mr. Aguirre was
a member of the Latin America Corporate Finance Group of Morgan Stanley & Co.,
Inc. from 1994 to 1996 and a securities attorney at the law firm of Sullivan &
Cromwell from 1991 to 1994. Mr. Aguirre is 30 years old.

GARY D. NUSBAUM has served as Vice President and a director of TV Filme,
Inc. since its incorporation. Mr. Nusbaum has been a Vice President of
Warburg, Pincus Ventures, Inc. since January 1995. From September 1989 to
December 1994, Mr. Nusbaum was an associate at Warburg, Pincus Ventures, Inc.
Mr. Nusbaum is a director of TresCom International, Inc. and several privately
held companies. Mr. Nusbaum is 29 years old.

48
<PAGE>

JOSE AUGUSTO PINTO MOREIRA has served as a director of TV Filme, Inc. since
its incorporation. Mr. Moreira has been the Executive Vice-President of Finance
and Administration of Abril S.A. since 1982. Mr. Moreira is a director of
several privately held companies. Mr. Moreira is 52 years old.

CLAUDIO DASCAL has served as a director of TV Filme, Inc. since July 1996.
Mr. Dascal has been a Vice President of Tevecap S.A. since April 1996. Prior to
joining Tevecap S.A., Mr. Dascal held several senior management positions at
Alcatel Standard Electrica, S.A. and its affiliates from 1991 to 1996. Mr.
Dascal is 52 years old.

ADRIANO NASCIMENTO BARBOSA has served as the General Manager of the Brasilia
System since November 1995. Prior to joining the Company, Mr. Barbosa served as
Commercial Director of Down Tec Engenharia Sameamento e Servicos, Ltda., an
engineering company, from 1993 to 1995 and held several positions with Badius
Engenharia Ltda., an engineering company, from 1988 to 1993, including
Director, Head Office Manager and Information Manager. Mr. Barbosa is 32 years
old.

IVAN ALEXANDRE BARCELLOS has served as the General Manager of the Goiania
System since its inception in late 1994. Prior to joining the Company, Mr.
Barcellos served as National Commercial Manager for Industrias Reunidas Sao
Jorge, a food manufacturing and processing company, from 1985 to 1994. Mr.
Barcellos is 44 years old.

RAFAEL AUGUSTO COLINO has served as the General Manager of the Belem System
since its inception in late 1994. Prior to joining the Company, Mr. Colino
served as Regional Manager of Listel, a subsidiary of Abril S.A. in the
telephone directory printing business, from 1987 to 1994. Mr. Colino is 50
years old.

At present, the Board of Directors of the Company (the "Board of Directors")
is composed of seven directors. Prior to the consummation of this offering,
Warburg, Pincus, Tevecap, Mrs. Maria Nise Lins, Mr. Hermano Lins, Mr. Carlos
Andre Lins and Ms. Maria Veronica Lins (with Mrs. Maria Nise Lins, Mr. Hermano
Lins and Mr. Carlos Andre Lins, the "Lins Family") will enter into a
Stockholders Agreement (the "Warburg Stockholders Agreement"), pursuant to
which, among other things, Warburg, Pincus and the Lins Family will agree to
vote for (i) two designees of Tevecap to the Board of Directors, as long as
Tevecap and its affiliates own at least 13% of the outstanding shares of Common
Stock of the Company and (ii) one designee of Tevecap to the Board of
Directors, as long as Tevecap and its affiliates own at least 5% of the
outstanding shares of Common Stock of the Company. Jose Augusto Pinto Moreira
and Claudio Dascal are Tevecap's two designees to the Board of Directors.
Pursuant to the Warburg Stockholders Agreement, Warburg, Pincus also will agree
to provide Tevecap with certain rights of first offer in the event Warburg,
Pincus proposes to sell shares of the Common Stock of the Company. See
"Principal Stockholders." Following completion of this offering, the Board of
Directors intends to appoint two additional persons, each of whom will be an
independent director, to the Board of Directors.

The Board of Directors is divided into three classes serving staggered three-
year terms. At each annual meeting of stockholders of the Company, successors
to the class of directors whose term expires at such meeting will be elected to
serve for three-year terms and until their successors are elected and
qualified. Messrs. Hermano Lins and Nusbaum are Class I directors and their
terms expire at the first annual meeting after the date hereof; Messrs. Karp,
Carlos Andre Lins and Dascal are Class II directors and their terms expire at
the second annual meeting after the date hereof; and Messrs. Moreira and
Aguirre are Class III directors and their terms expire at the third annual
meeting after the date hereof. Executive officers hold office until their
successors are chosen and qualified, subject to earlier removal by the Board of
Directors. Mr. Hermano Lins and Mr. Carlos Andre Lins are brothers. There are
no other family relationships among any of the directors or executive officers
of the Company.

The Board of Directors has established two committees, a Compensation
Committee and an Audit Committee. The Compensation Committee reviews general
policy matters relating to compensation and benefits of employees and officers
of the Company and administers the 1996 Stock Option Plan. The Audit Committee
recommends the firm to be appointed as independent accountants to audit the
Company's

49
<PAGE>

financial statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results, considers the
adequacy of the internal controls and audit procedures of the Company and
reviews the non-audit services to be performed by the independent accountants.

Following the completion of this offering, independent directors will receive
an annual fee of $10,000, a meeting fee of $1,000 for every board meeting
attended and each committee meeting held separately and a $500 fee for each
board meeting or committee meeting participated in by telephone. All directors
will be reimbursed for out-of-pocket expenses. Under the 1996 Stock Option
Plan, the Company may, from time to time and in the sole discretion of the
Board of Directors, grant options to directors other than members of the
Compensation Committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company did not have a Compensation Committee during 1995. As a result,
Messrs. Karp, Nusbaum, Hermano Lins, Carlos Andre Lins and Moreira participated
in deliberations concerning executive officer compensation. The Board of
Directors will establish a Compensation Committee comprised of Messrs. Karp,
Nusbaum and Moreira prior to the consummation of this offering. Mr. Karp is a
general partner of Warburg, Pincus & Co., a New York general partnership which
is the sole general partner of Warburg, Pincus. Mr. Moreira is the Executive
Vice-President of Finance and Administration of Abril S.A.

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation paid or accrued
by the Company for services rendered to the Company in all capacities for the
fiscal year ended December 31, 1995 by its Chief Executive Officer and each of
the Company's other executive officers whose total salary and bonus exceeded
$100,000 during the last fiscal year (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------- -------------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- --------------------------- ---- ------- -------- ---------------------
<S> <C> <C> <C> <C>
Hermano Studart Lins de
Albuquerque 1995 $98,463 $111,500 49,788
Chief Executive Officer
Carlos Andre Studart Lins de
Albuquerque 1995 98,463 111,500 49,788
Chief Financial Officer
</TABLE>

EMPLOYMENT AGREEMENTS

Prior to consummation of this offering, the Company and ITSA will enter into
employment agreements with each of Messrs. Hermano Lins and Carlos Andre Lins,
pursuant to which Mr. Hermano Lins will agree to serve full time as Chief
Executive Officer and Secretary of the Company, Mr. Carlos Andre Lins will
agree to serve full time as President, Chief Operating Officer and Treasurer of
the Company, and each will agree to serve in comparable executive positions at
ITSA. The annual base salary under such agreements for each of Messrs. Lins
will be $125,000. Such salaries are to be reviewed at least annually by the
Board of Directors of the Company and may be increased but may not be
decreased. In addition, each of Messrs. Lins will be eligible to receive an
annual bonus, payable by ITSA, in amounts to be determined by the Board of
Directors of the Company, taking into consideration, among other things, the
financial and operating performance of the Company. Pursuant to each of Messrs.
Lins's employment agreements, if the Company terminates the executive's
employment either without "cause" (as defined therein) or because of the death
of the executive, ITSA is required to pay the executive any unpaid base salary
accrued through the date of termination, plus an amount equal to an additional
12 months' base salary. Although Brazilian law does not permit employment
agreements of this type to be for a fixed term,

50
<PAGE>

each agreement does include a non-competition provision and a prohibition on
the solicitation of clients and employees.

Prior to consummation of this offering, the Company also will enter into an
employment agreement with Mr. Aguirre, pursuant to which Mr. Aguirre will
agree to serve full time as Chief Financial Officer of the Company until
December 31, 1998, unless earlier terminated in accordance with the terms of
such agreement. The annual base salary under such agreement will be $125,000.
Such salary is to be reviewed at least annually by the Board of Directors of
the Company and may be increased but may not be decreased. In addition, Mr.
Aguirre will be eligible to receive an annual bonus. Such annual bonus will be
$125,000 for the period ending December 31, 1996, with amounts for subsequent
years to be determined by the Board of Directors of the Company, taking into
consideration, among other things, the financial and operating performance of
the Company. Upon executing his employment agreement, Mr. Aguirre is to
receive a one-time bonus of $50,000. Pursuant to Mr. Aguirre's employment
agreement, if the Company terminates Mr. Aguirre's employment because of the
death or disability of Mr. Aguirre, the Company is required to pay Mr. Aguirre
or his estate any unpaid base salary accrued through the date of termination,
plus an amount equal to an additional 12 months' base salary. If the Company
terminates Mr. Aguirre without "cause" (as defined therein), the Company is
required to pay Mr. Aguirre any unpaid base salary accrued through the date of
termination, plus an amount equal to the unpaid base salary for the balance of
the term and the pro rata portion of any agreed annual bonus. The agreement
includes a non-competition provision and a prohibition on the solicitation of
clients and employees.

STOCK OPTIONS

1996 Stock Option Plan

Prior to the consummation of this offering, the Board of Directors will
adopt and the stockholders of the Company will approve the 1996 Stock Option
Plan (the "1996 Stock Option Plan"), which will provide for the grant to
officers, key employees and consultants of the Company of both "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and stock options that are
non-qualified for United States Federal income tax purposes. The total number
of shares of Common Stock for which options may be granted pursuant to the
1996 Stock Option Plan will be 936,432, subject to certain adjustments
reflecting changes in the Company's capitalization. In addition, no employee
may receive options for more than 200,000 shares of Common Stock in the
aggregate in any fiscal year. The 1996 Stock Option Plan will be administered
by the Compensation Committee. The Compensation Committee will determine,
among other things, which officers, employees and consultants will receive
options under the plan, the time when options will be granted, the type of
option (incentive stock options or non-qualified stock options, or both) to be
granted, the number of shares subject to each option, the time or times when
the options will become exercisable, and, subject to certain conditions
discussed below, the option price and duration of the options. Members of the
Compensation Committee will not be eligible to receive options under the plan.

The exercise price of incentive stock options will be determined by the
Compensation Committee, but may not be less than the fair market value on the
date of grant and the term of any such option may not exceed ten years from
the date of grant. With respect to any participant in the 1996 Stock Option
Plan who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock option may not be less than 110% of the fair market value of such shares
on the date of grant and the term of such option may not exceed five years
from the date of grant.

The exercise price of non-qualified stock options will be determined by the
Compensation Committee on the date of grant, but may not be less than the par
value of the Common Stock on the date of grant, and the term of such option
may not exceed ten years from the date of grant.

51
<PAGE>

Payment of the option price may be made by certified or bank cashier's
check, by tender of shares of Common Stock then owned by the optionee or by
any other means acceptable to the Company. Options granted pursuant to the
1996 Stock Option Plan will not be transferable, except by will or the laws of
descent and distribution in the event of death. During an optionee's lifetime,
the option will be exercisable only by the optionee.

The Board of Directors will have the right at any time and from time to time
to amend or modify the 1996 Stock Option Plan, without the consent of the
Company's stockholders or optionees; provided that no such action may
adversely affect options previously granted without the optionee's consent,
and provided further that no such action, without the approval of the
stockholders of the Company, may increase the total number of shares of Common
Stock which may be purchased pursuant to options under the plan, expand the
class of persons eligible to receive grants of options under the plan,
decrease the minimum option price, extend the maximum term of options granted
under the plan or extend the term of the plan. The expiration date of the 1996
Stock Option Plan after which no option may be granted thereunder will be ten
years from the effective date of the Plan.

Concurrently with this offering, the Company intends to grant options to
purchase 407,000 shares under the 1996 Stock Option Plan pursuant to which
options to purchase 297,000 shares of Common Stock will be exercisable at a
price per share equal to the public offering price set forth on the cover page
hereof and options to purchase 110,000 shares of Common Stock will be
exercisable at $11.00 per share. Such options generally will vest and become
exercisable at the rate of 20% per year for five years beginning on the first
anniversary of consummation of this offering.

After the completion of this offering, the Company expects to file with the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form S-8 covering the shares of Common Stock underlying options granted
under the 1996 Stock Option Plan.

Option Grants

The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1995 by the Company to the Named
Executive Officers, all of which options were exercised immediately upon
issuance.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------- --------------------------
% OF TOTAL
OPTIONS
SECURITIES GRANTED TO EXERCISE OR MARKET
UNDERLYING EMPLOYEES BASE PRICE ON
OPTIONS IN PRICE DATE OF EXPIRATION
NAME GRANTED (#) FISCAL 1995 ($/SHARE) GRANT DATE 0% 5% 10%
---- ----------- ----------- ----------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hermano Studart Lins de
Albuquerque............ 49,788 50% -- (2) $3.13 None $156,015 $254,149 $404,706
Carlos Andre Studart
Lins de Albuquerque.... 49,788 50 -- (2) 3.13 None 156,015 254,149 404,706
</TABLE>
- --------
(1) Options had no expiration date, but calculations assume a 10-year
expiration date in accordance with the 1996 Stock Option Plan.
(2) Nominal.

52
<PAGE>

The following table sets forth certain information concerning each exercise
of stock options during the fiscal year ended December 31, 1995 by the Named
Executive Officers. There were no unexercised stock options held by the Named
Executive Officers at the end of the fiscal year.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
SHARES AGGREGATE
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED
---- ------------ ---------
<S> <C> <C>
Hermano Studart Lins de Albuquerque................. 49,788 $156,015
Carlos Andre Studart Lins de Albuquerque............ 49,788 156,015
</TABLE>

CERTAIN TRANSACTIONS

The Company has been a party to the following transactions with its
executive officers, directors and five percent stockholders:

In May 1993, the Company issued and sold 1,169,096 shares of Common Stock
(after giving effect to the Restructuring) to Tevecap for a purchase price of
$1,300,000.

In July 1994, the Company effected a recapitalization pursuant to which Mrs.
Maria Nise Lins, Mr. Hermano Lins, Mr. Carlos Andre Lins and Tevecap exchanged
all of their shares of common stock of TV Filme Servicos de Telecomunicacoes
S.A. (the predecessor company to ITSA) on a one-for-one basis for shares of
common stock of ITSA (the predecessor company of TV Filme, Inc.).

In July 1994, the Company issued and sold 2,126,132 shares of Common Stock
(after giving effect to the Restructuring) to Warburg, Pincus for an aggregate
purchase price of $5,000,000.

In August 1995, the Company issued and sold 1,052,924 shares of Common Stock
(after giving effect to the Restructuring) to Warburg, Pincus for an aggregate
purchase price of $3,300,000.

In March 1996, the Company issued and sold 783,700 shares of Common Stock
and warrants to purchase an additional 567,952 shares of Common Stock (after
giving effect to the Restructuring) to Warburg, Pincus for approximately
$5,100,000, and issued and sold 287,664 shares of Common Stock and warrants to
purchase an additional 208,372 shares of Common Stock (after giving effect to
the Restructuring) to Tevecap for approximately $1,875,000. Such warrants are
exercisable at $6.52 per share.

Immediately prior to the consummation of this offering, in connection with
the Restructuring the Company will issue 3,962,756, 1,456,760, 254,472,
254,472 and 1,069,520 shares of Common Stock to Warburg, Pincus, Tevecap, Mr.
Hermano Lins, Mr. Carlos Andre Lins and Mrs. Maria Nise Lins, respectively,
with a value at an assumed initial public offering price of $11.00 per share
of $43,590,316, $16,024,360, $2,799,192, $2,799,192 and $11,764,720,
respectively. Such shares will be issued in exchange for all of their shares
of common stock of ITSA, which have the same value as the shares of Common
Stock to be received in the exchange.

Immediately prior to the consummation of this offering, in connection with
the Restructuring the Company will issue warrants to purchase 567,952 shares
of Common Stock to Warburg, Pincus and warrants to purchase 208,372 shares of
Common Stock to Tevecap in exchange for all of their warrants to purchase
shares of common stock of ITSA.

From time to time during January 1994 to March 1996, Tevecap and certain of
its affiliates made short-term loans to the Company for working capital
purposes. During this period, the maximum amount outstanding pursuant to such
loans was approximately $6,400,000. As of March 31, 1996, the Company

53
<PAGE>

had no outstanding indebtedness to Tevecap or such affiliates. During April
1996, the Company resumed borrowing from Tevecap and its affiliates for
working capital purposes, none of which borrowings will remain outstanding
upon consummation of this offering.

From December 1993 to April 2, 1996, certain members of the Lins family,
including Mr. Hermano Lins, Chief Executive Officer and Secretary of the
Company, Mr. Carlos Andre Lins, the President, Chief Operating Officer and
Treasurer of the Company, their mother Mrs. Maria Nise Lins and several of her
other children, owned in the aggregate 100% of Prava Sistemas de Comunicacoes
Ltda. ("Prava"), which provides wireless cable installation services to
hotels, hospitals and single-family houses, among other services. Messrs. Lins
each owned approximately 7% of Prava and Mrs. Maria Nise Lins owned
approximately 40% of Prava during such period. In the years ended December 31,
1995, 1994 and 1993, respectively, Prava's revenues from the Company were
approximately $260,000, $70,000, and $0 representing, respectively,
approximately 65%, 37% and 0% of Prava's total revenues for such year. On
April 2, 1996, the Lins family sold all of their interests in Prava to
unrelated third parties.

In July 1994, the Company, Tevecap and certain other parties thereto entered
into an agreement pursuant to which Tevecap agreed to provide exclusive
programming to the Company. In June 1996, the Company and Tevecap entered into
the Programing Agreement pursuant to which the terms of the aforementioned
programming arrangement will be amended upon consummation of this offering.
See "Business--Programming." From time to time, in connection with the
aforementioned agreement, the Company enters into agreements with TVA and
certain of its affiliates regarding specified channels. The agreements
typically have a two year term and determine the monthly fees which the
Company pays for such channels. In the years ended December 31, 1995, 1994 and
1993, TVA's and its affiliates' revenues from the Company aggregated
approximately $1.3 million, $0.2 million and $.01 million, respectively, net
of discounts on programming fees, compared to list prices. Such discounts
received by the Company in 1995, 1994 and 1993 were $539,000, $340,000 and
$28,000, respectively.

In late 1994, TV Filme Servicos purchased licenses to operate the Company's
wireless cable systems in Goiania and Belem from an affiliate of TVA for
purchase prices of $400,000 each. The Company believes such prices were below
fair market value. Such purchase prices were payable in equal annual
installments of $100,000 per license, due in February of each of the years
1995, 1996, 1997 and 1998. Such installment payments do not bear interest. As
of March 31, 1996, $400,000 remained outstanding.

Prior to consummation of this offering, the Company will effect the
Restructuring pursuant to which 51% of the voting stock of TV Filme Servicos
and 17% of the economic interests in TV Filme Servicos, the subsidiary of the
Company that holds all three licenses to operate the Company's wireless cable
systems in Brasilia, Goiania and Belem, will be transferred to an entity
organized in Brazil, all of which will be owned by certain of those Existing
Stockholders who are Brazilian nationals, namely Tevecap S.A., Mrs. Maria Nise
Lins, Messrs. Hermano Lins and Carlos Andre Lins and Ms. Maria Veronica Lins.
Messrs. Lins are also executive officers and directors of the Company. The
Company will retain 49% of the voting securities of TV Filme Servicos and 83%
of the economic interests in TV Filme Servicos. The Company will also have a
representative on the executive management team of TV Filme Servicos and
prohibitions over any sale or transfer of any current or future license held
by TV Filme Servicos. The Company will enter into various agreements with TV
Filme Servicos which will authorize ITSA's subsidiaries to operate the
existing wireless cable systems under its current licenses and all other
subscription television systems under future licenses. See "Business--
Restructuring."

The Company believes that the above transactions were or are on terms no
less favorable to the Company than could have been obtained in transactions
with independent third parties. All future transactions between the Company
and its officers, directors, principal stockholders or their respective
affiliates, will be on terms no less favorable to the Company than can be
obtained from unaffiliated third parties.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 24, 1996, unless otherwise stated, after
giving effect to the Restructuring and as adjusted to reflect the sale of the
shares of Common Stock offered hereby with respect to (i) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each of the Company's directors, (iii) each of the Named Executive
Officers and (iv) all directors and officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL(2)
-----------------
NUMBER BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF SHARES(2) OFFERING OFFERING
- --------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017(3)(4)................. 4,530,708 57.6% 43.7%
Tevecap S.A.
Rua do Rocio, 313
Suite 101
Sao Paulo, Brazil(5)........................... 1,665,132 22.2 16.7
Maria Nise Studart Lins de Albuquerque.......... 1,069,520 14.7 10.9
Hermano Studart Lins de Albuquerque............. 254,472 3.5 2.6
Carlos Andre Studart Lins de Albuquerque........ 254,472 3.5 2.6
Douglas M. Karp(4)(6)........................... 4,530,708 57.6 43.7
Jose Augusto Pinto Moreira(5)(7)................ 1,665,132 22.2 16.7
Claudio Dascal(5)(7)............................ 1,665,132 22.2 16.7
Gary D. Nusbaum................................. -- -- --
Alvaro J. Aguirre............................... -- -- --
All executive officers and directors as a group
(7 persons).................................... 6,704,784 83.1 63.4
</TABLE>
- --------
(1) Unless otherwise indicated above, the address for each stockholder
identified above is c/o the Company, SCS, Quadra 07-Bl.A, Ed. Executive
Tower, Sala 601, 70.300-911 Brasilia-DF, Brazil.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common
Stock subject to options and warrants held by that person that are
currently exercisable or exercisable within 60 days of June 1, 1996 are
deemed outstanding. Such shares, however, are not deemed outstanding for
the purposes of computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table, each stockholder
named in the table has sole voting and investment power with respect to
the shares set forth opposite such stockholder's name. Beneficial
ownership computations assume no exercise of the Underwriters' over-
allotment option.
(3) The sole general partner of Warburg, Pincus is Warburg, Pincus & Co., a
New York general partnership ("WP"). Lionel I. Pincus is the managing
partner of WP and may be deemed to control it. E.M. Warburg, Pincus &
Company, a New York general partnership ("E.M. Warburg"), manages
Warburg, Pincus. WP has a 20% interest in the profits of Warburg, Pincus
and through its wholly owned subsidiary, E.M. Warburg, Pincus & Co., Inc.
("EMW"), owns 1.13% of the limited partnership interests in Warburg,
Pincus.
(4) Includes 567,952 shares of Common Stock which Warburg, Pincus has the
right to acquire through exercise of a warrant issued by the Company in
March 1996. See "Description of Capital Stock--Warrants."

55
<PAGE>

(5) Includes 208,372 shares of Common Stock which Tevecap has the right to
acquire through exercise of a warrant issued by the Company in March
1996. See "Description of Capital Stock--Warrants."
(6) All of the shares indicated as owned by Mr. Karp are owned directly by
Warburg, Pincus and are included because of Mr. Karp's affiliation with
Warburg, Pincus. Mr. Karp, the Chairman of the Board of the Company, is a
Managing Director of EMW and a general partner of WP and E.M. Warburg. As
such, Mr. Karp may be deemed to have an indirect pecuniary interest,
within the meaning of Rule 16a-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in an indeterminate portion of the
shares of Common Stock beneficially owned by Warburg, Pincus, EMW and WP.
Mr. Karp disclaims "beneficial ownership" of these shares within the
meaning of Rule 13d-3 under the Exchange Act.

(7) All of the shares indicated as owned by Mr. Moreira and Mr. Dascal,
respectively, are owned directly by Tevecap and are included because of
Mr. Moreira's and Mr. Dascal's respective affiliations with Tevecap. Mr.
Moreira and Mr. Dascal each disclaim "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act.

Pursuant to the Warburg Stockholders Agreement, (i) Warburg, Pincus will
grant Tevecap a right of first offer until July 1999 whenever Warburg, Pincus
proposes to sell its shares of Common Stock in a private sale in an amount at
least equal to 20% of the Company's then outstanding shares of Common Stock to
a single purchaser (or group of related purchasers) in one transaction (or a
series of related transactions) and (ii) the Lins Family will be entitled to
certain "tag-along" rights. Pursuant to the Warburg Stockholders Agreement,
Warburg, Pincus and the Lins Family also have agreed to vote for up to two
Tevecap designees to the Board of Directors. See "Management--Executive
Officers and Directors."

Pursuant to a stockholders agreement between Tevecap and the Lins Family,
the Lins Family will grant Tevecap a right of first offer until July 1999
whenever the Lins Family proposes to sell its shares of Common Stock in a
private sale in an amount at least equal to 5% of the Company's then
outstanding shares of Common Stock to a single purchaser (or group of related
purchasers) in one transaction (or a series of related transactions).

DESCRIPTION OF CAPITAL STOCK

At March 31, 1996, the authorized capital stock of the Company consisted of
50,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $.01 par value. At March 31, 1996, there were 7,291,176
shares of Common Stock outstanding (after giving effect to the Restructuring)
held by eight stockholders. See "Capitalization," "Business--Restructuring"
and "Principal Stockholders."

The following summary description relating to the capital stock does not
purport to be complete. Reference is made to the Certificate of Incorporation
and the By-laws which are filed as exhibits to the Registration Statement of
which this Prospectus is a part for a detailed description of the provisions
thereof summarized below.

COMMON STOCK

Holders of shares of Common Stock are entitled to one vote per share on all
matters on which the holders of Common Stock are entitled to vote and do not
have any cumulative voting rights. This means that the holders of more than
50% of the shares voting for the election of directors can elect all of the
directors if they choose to do so; and, in such event, the holders of the
remaining shares of Common Stock will not be able to elect any person to the
Board of Directors. Subject to the rights of the holders of shares of any
series of preferred stock, holders of Common Stock are entitled to receive
such dividends as may from time to time be declared by the Board of Directors
of the Company out of funds legally available therefor. Holders of shares of
Common Stock have no preemptive, conversion, redemption, subscription or
similar rights. In the event of a liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, holders of shares of Common
Stock are entitled to share ratably in the assets of the Company which are
legally available for distribution, if any, remaining after the payment or
provision for the payment of all debts and other liabilities of the Company
and the payment and setting aside for payment of any preferential amount due
to the holders of shares of any series of preferred stock. All

56
<PAGE>

outstanding shares of Common Stock are, and all shares of Common Stock offered
hereby when issued will be, upon receipt of payment therefor, validly issued,
fully paid and non assessable.

At present there is no established trading market for the Common Stock. The
Common Stock of the Company has been approved for quotation on the Nasdaq
National Market under the symbol "PYTV."

PREFERRED STOCK

The Board of Directors is authorized to issue from time to time up to an
aggregate of 1,000,000 shares of preferred stock in one or more series and to
fix the rights, designations, preferences, qualifications, limitations and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series, without any
further action by the stockholders of the Company. The issuance of preferred
stock with voting rights could have an adverse affect on the voting power of
holders of Common Stock by increasing the number of outstanding shares having
voting rights. In addition, if the Board of Directors authorizes preferred
stock with conversion rights, the number of shares of Common Stock outstanding
could potentially be increased up to the authorized amount. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock. Any such issuance could also have the
effect of delaying, deterring or preventing a change in control of the Company
and may adversely affect the rights of holders of Common Stock. The Board of
Directors has no current plan to issue any shares of preferred stock.

DELAWARE LAW, CHARTER AND BY-LAW PROVISIONS

Section 203 of the DGCL prevents an "interested stockholder" (defined in
Section 203, generally, as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (as
defined in Section 203, generally, to include mergers or consolidations
between a Delaware corporation and an "interested stockholder," transactions
with an "interested stockholder" involving the assets or stock of the
corporation or its majority-owned subsidiaries and transactions which increase
an interested stockholder's percentage ownership of stock) with a publicly-
held Delaware corporation for three years following the date such person
became an interested stockholder unless (i) before such person became an
interested stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested
stockholder or approved the business combination, (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding voting stock held by directors who are also officers of
the corporation and by employee benefit plans that do not provide employees
with the right to determine confidentially whether shares held by the plan
will be voted or tendered in a tender or exchange offer) or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and ratified at a meeting of stockholders by the affirmative vote of the
holders of two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder.

The Certificate of Incorporation provides that the Company shall indemnify
any officer or director of the Company or any person who was serving at the
request of the Company as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted under and in accordance with the laws of the State of Delaware. The
Certificate of Incorporation also eliminates in certain circumstances the
liability of directors of the Company for monetary damages for breach of their
fiduciary duty as directors. This provision does not eliminate the liability
of a director (i) for breach of the director's duty of loyalty to the Company
or its stockholders; (ii) for acts or omissions by the director not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for willful or negligent declaration of an unlawful dividend, stock
purchase or redemption; or (iv) for

57
<PAGE>

transactions from which the director derived an improper personal benefit.
Such limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission.

The By-laws require the Company to indemnify any director or officer of the
Company, or any person who is or was serving at the request of the Company as
a director or officer of any other corporation, partnership, joint venture,
trust or other enterprise, to the fullest extent permitted by law. Prior to
the consummation of this offering, the Company expects to obtain officers' and
directors' liability insurance for members of its Board of Directors and
executive officers. In addition to the indemnification provided in the
Certificate of Incorporation and By-laws, the Company expects to enter into
agreements to indemnify its directors and officers.

The Certificate of Incorporation and By-laws include certain provisions
which are intended to enhance the likelihood of continuity and stability in
the composition of the Board of Directors and which may have the effect of
delaying, deterring or preventing a future takeover or change in control of
the Company unless such takeover or change in control is approved by the Board
of Directors. Such provisions may also render the removal of the directors and
management more difficult. The Certificate of Incorporation provides that the
Board of Directors of the Company be divided into three classes serving
staggered three-year terms. The Certificate of Incorporation and By-laws also
include restrictions on who may call a special meeting of stockholders,
provide that stockholders may act only at an annual or special meeting and
provide that stockholders may not act by written consent. The By-laws contain
an advance notice procedure with regard to the nomination, other than by or at
the direction of the Board of Directors, of candidates for election as
directors and with regard to certain matters to be brought before an annual
meeting of stockholders of the Company. In general, notice must be received by
the Company not less than 60 days prior to the meeting and must contain
certain specified information concerning the person to be nominated or the
matter to be brought before the meeting and concerning the stockholder
submitting the proposal.

WARRANTS

In March 1996 in connection with its private equity placement, the Company
granted to Warburg, Pincus, Tevecap, Mr. Pearson and Mr. Wallach the 1996
Warrants to purchase 567,952, 208,372, 9,220, and 9,220 shares of Common
Stock, respectively, at an exercise price of $6.52 per share, all of which are
currently exercisable and will remain outstanding after completion of this
offering.

The exercise price and the number of shares of Common Stock subject to the
1996 Warrants may, under certain circumstances, be subject to adjustment
pursuant to anti-dilution provisions contained therein. In addition, the
warrant holders have certain registration rights with respect to shares of
Common Stock issuable upon exercise of the 1996 Warrants. See "--Registration
Rights."

REGISTRATION RIGHTS

Under the terms of the Registration Rights Agreement to be entered into upon
consummation of this offering, the Company has granted Tevecap, Warburg,
Pincus, the Lins Family, Mr. Wallach and Mr. Pearson (the "Rights Holders")
registration rights, covering an aggregate of 7,071,740 shares of Common
Stock. If the Company proposes to register any of its securities under the
Securities Act, the Rights Holders are entitled to notice of such registration
and to include their Registrable Shares (as defined therein) in such
registration, subject to certain limitations. In addition, Warburg, Pincus,
Tevecap or the Lins Family may require the Company to register any or all of
their Registrable Shares, provided that the Company will only be required to
effect the following registrations: (i) two (2) such registrations requested
by Warburg, Pincus, (ii) two (2) such registrations requested by Tevecap and
(iii) two (2) such registrations requested by the Lins Family, subject to
certain limitations. Each of the Rights Holders is entitled to notice of such
request for registration and to have all or any portion of their Registrable
Shares included in such registration, subject to certain limitations. All
expenses relating to the filing of such registration

58
<PAGE>

statements, excluding underwriting discounts and selling commissions
attributable to the Registrable Shares and the fees and expenses of such
Rights Holder's own counsel, will be paid by the Company. The Company is
required to use its diligent best efforts to effect such registrations,
subject to certain conditions and limitations.

Under the terms of the 1996 Warrants, if the Company proposes to register
any of its securities under the Securities Act, the holders of the 1996
Warrants are entitled to notice of such registration and to include the shares
underlying the 1996 Warrants in such registration, subject to certain
limitations. All expenses relating to the filing of such registration
statements, excluding underwriting discounts and selling commissions
attributable to the underlying shares and the fees and expenses of such
warrant holder's own counsel, shall be paid by the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.

TAX CONSIDERATIONS

BRAZILIAN TAX CONSIDERATIONS

The following discussion summarizes the principal Brazilian tax consequences
of the acquisition, ownership and disposition of ITSA's stock by the Company.
It is based on the assumption that the investment by the Company in ITSA's
stock will be registered with the Central Bank of Brazil. The summary is based
on Brazilian laws as currently in effect and, therefore, any change in such
law may affect the consequences described below.

Registered Capital. The amount the Company invests in ITSA's stock must be
registered (the "Registered Capital") with the Central Bank of Brazil to
permit the remittance outside Brazil of foreign currency acquired with
distributions on such stock or amounts realized with respect to dispositions
of such stock. The Central Bank of Brazil officially records the amount of
such investment in a Certificate of Registered Capital.

Capital Contributions; Dividend Distributions; Capital Repatriation. The
Company is permitted to make capital contributions to ITSA without prior
approval by the Central Bank of Brazil. The Company must register a capital
contribution with the Central Bank of Brazil, however, within 30 days after
the date on which the capital contribution is converted into Reals (which
conversion date would normally be the date on which the capital contribution
occurs). Capital contributions made by the Company to ITSA are not subject to
any taxation in Brazil. Conversion into Reals of any capital contribution made
in the form of foreign currency also is not subject to Brazilian tax.

As a general matter, dividends distributed by a Brazilian corporation are
subject to taxation only to the extent such dividends are declared out of
profits generated by the corporation prior to January 1, 1996. ITSA did not
generate any profits before January 1, 1996, so dividends distributed by it
should not be subject to Brazilian tax. A 15% Brazilian capital gains tax
could be imposed, however, with respect to transactions treated as capital
gain repatriations. One type of capital gain repatriation would be a
distribution by ITSA that is derived neither from its profits nor its
Registered Capital. (Accordingly, ITSA can make distributions from its profits
and its Registered Capital without incurring any Brazilian capital gains tax.)
The second type of capital gain repatriation would be the Company's sale of
ITSA stock to a Brazilian resident. In that case, capital gains tax would be
imposed to the extent the amount realized on such sale exceeds the amount of
ITSA's Registered Capital. (Accordingly, sales by the Company of its ITSA
stock to non-residents of Brazil will not be subject to Brazilian capital
gains tax, and sales to Brazilian residents will be subject to such tax only
to the extent the amount realized from the sale exceeds ITSA's Registered
Capital.) Remittance of Registered Capital does not require prior approval by
the Central Bank of Brazil, but prior approval is required for remittance of a
capital gain.

59
<PAGE>

Stamp and Excise Taxes. There are no stamp, transfer, estate, gift or other
similar taxes in Brazil applicable to the ITSA stock.

Tax on Financial Transactions ("IOF"). Recent Brazilian tax changes (Decree
No. 1,815 and Administrative Rule No. 28, both dated as of February 8, 1996)
provide that IOF tax will be levied on certain transactions in which foreign
currency enters Brazil. Under the new rules, IOF tax will not be imposed on
foreign currency used to make equity investments. As a result, contributions
to ITSA's capital (or purchases of ITSA's stock) by the Company will not be
subject to IOF tax. The tax will be imposed, however, on any loan made by the
Company to ITSA that has an average maturity of less than six years. The tax,
which is imposed at one time at the inception of the loan, is imposed at rates
varying from 5% (for loans with average maturities of less than three years)
to 1% (for loans with average maturities of at least five but less than six
years).

UNITED STATES TAX CONSIDERATIONS

United States Tax Considerations for Holders of Common Stock. The following
discussion summarizes the principal United States Federal income tax
consequences of the acquisition, ownership and disposition of Common Stock by
United States Holders (as such term is defined below) that hold such stock as
capital assets. The summary is based on United States law in effect on the
date of this Prospectus. Changes to such law after the date of this prospectus
could affect the tax considerations described herein. In addition, the summary
does not attempt to describe all the tax considerations that may be relevant
to a particular holder. Accordingly, each holder should consult his own tax
adviser concerning the tax consequences of the ownership of Common Stock to
him, including the consequences under state and local tax laws. For purposes
of this summary, the term "United States Holder" means a holder that is (i) a
citizen or resident of the United States, (ii) a corporation organized under
the laws of the United States or any state thereof, or (iii) otherwise subject
to United States Federal income taxation on a net basis with respect to the
Common Stock.

Taxation of Dividends. The Company does not expect to pay dividends. If the
Company's dividend policy changes, however, a United States Holder will
recognize ordinary income for United States Federal income tax purposes in an
amount equal to the amount of any cash or the value of any property
distributed by the Company to the extent that such distribution is paid out of
current or accumulated earnings and profits of the Company. To the extent that
any such distribution exceeds the Company's earnings and profits, it will be
treated as a nontaxable return of capital to the extent of the United States
Holder's basis in his Common Stock and thereafter as capital gain. Dividends
received by United States Holders that are corporations will be eligible for
the dividends-received deduction available to such corporations. Any dividends
paid by the Company will be subject to the information reporting and backup
withholding requirements of the Internal Revenue Code. Backup withholding will
not apply, however, to any United States holder that (i) is a corporation or
other exempt holder or (ii) provides a taxpayer identification number on a
properly completed Internal Revenue Service Form W-9 and certifies that it has
not lost its exemption from backup withholding.

Taxation of Disposition Proceeds. A United States Holder's tax basis in his
Common Stock will generally equal the cost of such stock to such holder,
reduced by the amount of any distributions to such holder that were treated as
non-taxable returns of capital. A United States Holder that is (i) an
individual who owns (directly or through the application of attribution rules)
less than 10 percent of the total combined voting power of all the Company's
voting stock or (ii) a corporation, will recognize capital gain with respect
to any disposition of his or its Common Stock in an amount equal to the
difference between the amount realized on the disposition and such holder's
tax basis in such Common Stock. An individual United States Holder who has
owned 10 percent or more of the voting power of the Company's stock for at
least one year at the time of disposition will be subject to special rules
under which a portion of the proceeds of any dispositions of his shares could
be treated as a dividend for United States Federal income

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<PAGE>

tax purposes. The portion treated as a dividend would be taxable as ordinary
income rather than capital gain. The portion of the proceeds that would be
treated as a dividend would generally be equal to the earnings and profits of
ITSA attributable (under rules contained in United States Treasury Department
regulations) to the stock held by such holder.

United States Taxation of the Company. The following discussion summarizes
certain United States Federal income tax consequences that result from the
creation of the Company to hold the stock of ITSA. The discussion does not
attempt to address all the tax consequences that may result from the adoption
of the United States holding company structure. Rather, the discussion focuses
on the United States Federal income tax consequences of the structure that are
most significant.

The Company is a United States corporation and is therefore subject to
United States Federal income tax on its income from all sources. The only
asset of the Company (and accordingly its only potential source of income) is
expected to be the stock of ITSA. ITSA does not expect to pay any dividends
and, therefore, the Company should not have any income for United States
Federal income tax purposes unless it is subject to certain United States tax
rules under which it could be required to include amounts in its income
despite the fact that it has not received any actual distributions from ITSA.
It is possible, however, that the Company may own other assets (such as
temporary investment assets) that produce income. The income earned with
respect to any such assets owned by the Company will be subject to United
States Federal income tax.

The Company could be required to include amounts in its income in the
absence of its receipt of any actual distributions from ITSA if ITSA (or one
of its subsidiaries) constitutes a "controlled foreign corporation" (a "CFC"),
a "foreign personal holding company" (a "FPHC") or a "passive foreign
investment company" (a "PFIC") for United States Federal income tax purposes.
If the Company is required to include any amounts in income under the CFC,
FPHC or PFIC rules, it will incur some United States Federal income tax
liability in the year of such inclusion.

To constitute a FPHC, at least 60 percent of a corporation's income must
constitute "foreign personal holding company income" ("FPHCI") in any taxable
year (the "FPHCI Test") and five or fewer United States individuals must own
(directly or indirectly) more than 50 percent of the voting power or value of
the corporation's stock (the "Ownership Test"). FPHCI generally includes
interest, dividends, royalties and other types of "passive" income. For
purposes of the FPHCI Test, dividends received by ITSA from its three
operating subsidiaries generally would be treated as FPHCI only to the extent
the dividends were attributable to FPHCI earned by the subsidiaries. Also,
royalties earned by TV Filme Servicos will constitute FPHCI. For purposes of
the Ownership Test, Warburg, Pincus will generally be treated as an indirect
owner of stock in ITSA and each of its subsidiaries and all such stock owned
will be treated as being owned by a single United States individual.

It is possible that the Ownership Test will be satisfied with respect to
ITSA and its subsidiaries, primarily because the indirect stock interest owned
by Warburg, Pincus in ITSA and its subsidiaries will be treated as owned by a
single U.S. individual. Nevertheless, the Company does not expect that ITSA,
TV Filme Brasilia, TV Filme Goiania or TV Filme Belem will constitute a FPHC
because less than 60 percent of each such entity's income should constitute
FPHCI. There can be no assurance, however, that ITSA or one or more of those
subsidiaries will not become a FPHC in the future. In addition, if the
Ownership Test is satisfied with respect to TV Filme Servicos in any taxable
year, it is expected that TV Filme Servicos would constitute a FPHC for such
year. In that case, a portion of the taxable income of TV Filme Servicos in
such taxable year (after certain adjustments) would be included in the taxable
income of the Company on the last day of such year. Accordingly, the Company
would owe United States Federal income tax with respect to such income to the
extent it is unable to use foreign tax credits to offset such tax. The ability
of the Company to use foreign tax credits to reduce its United States Federal
income tax liability would depend on many factors, including the rate of tax
imposed in Brazil on TV Filme Servicos' income. In any event, however, the
United States Federal taxable income of TV Filme Servicos is not expected to
be material in any taxable year, although no assurance can be given in that
regard.

61
<PAGE>

To constitute a PFIC, either (i) at least 75 percent of a corporation's
income in any taxable year must constitute dividends, interest or other
"passive" income (the "income test") or (ii) at least 50 percent of the
average assets of the corporation (determined by reference to the adjusted tax
basis of the corporation's assets for United States earnings and profits
purposes) during any taxable year must constitute assets that give rise to
"passive" income (the "asset test"). For purposes of the income test, (a) ITSA
will be treated as if it received directly its proportionate share of the
income of each of its subsidiaries and (b) royalties received by TV Filme
Servicos should constitute passive income only to the extent such royalties
are allocable to passive income earned by ITSA's other subsidiaries. For
purposes of the asset test, ITSA will be treated as owning directly all the
assets held by its subsidiaries.

Based on its projections, the Company does not expect that ITSA or any of
its subsidiaries will satisfy either the income or the asset test and,
accordingly, does not expect that ITSA or any subsidiary will constitute a
PFIC. It is conceivable, however, that if the proceeds of this offering are
not deployed to expand existing wireless cable systems or launch or purchase
additional systems in accordance with the Company's plans, ITSA or one of its
subsidiaries could constitute a PFIC for some period of time. If ITSA or the
relevant subsidiary also had earnings and profits (as determined under United
States Federal income tax rules) during such period, the Company could be
subject to United States Federal income tax with respect to such income. (The
Company plans to make a protective election to treat ITSA and each of its
subsidiaries as "qualified electing funds" so that any such income will be
treated as currently included in the Company's United States Federal taxable
income. Making such election should also avoid the application of rules that
would impose additional United States Federal income taxes on the receipt of
distributions from ITSA in the event ITSA or one of its subsidiaries were to
qualify as a PFIC.) In that case, the Company may be able to use foreign tax
credits to reduce its United States Federal income tax liability. Certain
factors that will affect the Company's ability to use foreign tax credits to
reduce its United States Federal income tax liability are described below (in
the discussion regarding ITSA's status as a CFC).

The Company expects that ITSA and each of its subsidiaries will constitute
CFCs. Under the CFC rules, the Company could be required to recognize taxable
income notwithstanding the fact that it has not received any distributions
from ITSA if more than a de minimis amount of income earned by ITSA (or any
subsidiary) during a taxable year is characterized as "subpart F" income under
the Internal Revenue Code and ITSA (or such subsidiary) has earnings and
profits (determined under United States Federal income tax rules) for such
year. "Subpart F" income generally includes passive income and certain income
received from related parties. ITSA does not expect that it or any of its
subsidiaries will recognize significant amounts of "subpart F" income in any
year in which it (or the relevant subsidiary) also has earnings and profits at
any time in the near future. In the longer term, ITSA and its subsidiaries
could recognize "subpart F" income if they are not able to use excess cash
flow to expand existing systems or purchase or develop new systems. If ITSA or
one of its subsidiaries does earn "subpart F" income in excess of the de
minimis threshold in a taxable year in which it also has earnings and profits,
however, the Company will be required to include in its income for United
States Federal income tax purposes an amount equal to the lesser of such
"subpart F" income and the amount of such earnings and profits.

In the event that the Company is required to include amounts in its income
under the CFC rules, the Company expects that it will be able to use foreign
tax credits to reduce its United States Federal income tax liability. The
extent to which the Company is able to reduce its United States Federal tax
liability through the use of foreign tax credits will depend on the level of
Brazilian tax incurred by ITSA and its subsidiaries. In general, the Company's
ability to use foreign tax credits to reduce its United States Federal income
tax liability increases as Brazilian tax rates increase. Under the United
States Federal alternative minimum tax rules, however, the Company will not be
able to completely eliminate its United States Federal income tax liability
regardless of the amount of foreign tax credits available to it. The general
effect of the alternative minimum tax rules is to subject any "subpart F"
income deemed to be received by the Company to tax at an effective tax rate of
two percent.

62
<PAGE>

If the Company is required to include an amount in its United States Federal
taxable income under the CFC rules, it will not be required to include the
same amount in income under the FPHC or PFIC rules. If the Company is required
to include an amount in its income under the FPHC rules (but not the CFC
rules), it will not be required to include the same amount in its income under
the PFIC rules. Otherwise, however, the CFC, FPHC and PFIC rules generally
each operate independently.

If the Company does incur United States Federal income tax liability under
the rules described above, it will require funds to pay such tax. Any
dividends paid by ITSA to fund the payment of such tax generally will not be
subject to any Brazilian withholding tax under current Brazilian law. There
can be no assurance, however, that Brazilian withholding tax will not be
imposed in the future. See "--Brazilian Tax Considerations" above.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
9,791,176 shares of Common Stock (10,166,176 shares, if the Underwriters'
over-allotment option is exercised in full). All of the shares of Common Stock
sold in this offering will be freely transferable as of the date of this
Prospectus by persons other than "affiliates" of the Company without
restriction or further registration under the Securities Act. The remaining
7,291,176 shares of Common Stock to be outstanding (the "Restricted Shares")
are held by officers, directors and other stockholders of the Company. The
Restricted Shares were issued by the Company in reliance on exemptions from
the registration requirements of the Securities Act, are "restricted
securities" within the meaning of Rule 144 under the Securities Act and may
not be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including an exemption contained in
Rule 144 or Rule 701 under the Securities Act.

Beginning 180 days after the date of this Prospectus, 4,875,536 additional
Restricted Shares will be or will become eligible for sale in the public
market, subject to the provisions of Rule 144 (all of which shares are subject
to the agreements not to sell described below). The officers, directors and
certain stockholders of the Company have agreed not to sell their shares
without the consent of Alex. Brown & Sons Incorporated, subject to certain
limited exceptions, for a period of 180 days from the date of this Prospectus.
The remainder of the shares held by existing stockholders will become eligible
for sale at various times thereafter, subject to the provisions of Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, is entitled to sell within any three-month period
a number of restricted securities that does not exceed the greater of 1% of
the then outstanding shares of Common Stock and the average weekly trading
volume in the over-the-counter market during the four calendar weeks preceding
such sale, provided that at least two years have elapsed since such shares
were acquired from the Company and certain manner of sale, notice requirements
and requirements as to the availability of current public information about
the Company are satisfied. Any person who is deemed to be an affiliate of the
Company must comply with the provisions of Rule 144 (other than the two-year
holding period requirement) in order to sell shares of Common Stock which are
not restricted securities (such as shares acquired by affiliates in this
offering).

The Commission has proposed certain amendments to Rule 144 that would reduce
by one year the holding period required for shares subject to Rule 144 to
become eligible for resale in the public markets. This proposal, if adopted,
would accelerate by one year the date on which shares of Common Stock will
become eligible for resale following expiration of the lock-up agreements
described above. No assurance can be given concerning whether or when the
proposal will be adopted by the Commission.

The Company intends to file a registration statement on Form S-8 under the
Securities Act after completion of this offering to register approximately
936,432 shares of Common Stock subject to the 1996 Stock Option Plan. Such
registration statement will automatically become effective upon filing.

63
<PAGE>

Accordingly, shares registered under such registration statement will be
available for sale in the open market, subject to vesting conditions contained
in the agreements pursuant to which they are acquired and, in certain cases,
to the lock-up agreements referred to above. There are no options currently
outstanding under the 1996 Stock Option Plan, and upon consummation of this
offering, options to purchase 407,000 shares of Common Stock will be
outstanding under the 1996 Stock Option Plan, none of which will be
exercisable at such time. In addition, the Existing Stockholders and warrant
holders have registration rights in certain events in respect of the Company's
securities held by them. See "Description of Capital Stock--Warrants" and "--
Registration Rights."

Prior to this offering, there has been no public market for the Common Stock
and no predictions can be made as to the effect, if any, that public sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
the Common Stock in the public market, or the perception that such sales could
occur, could have an adverse impact on the market price.

64
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Gerard Klauer Mattison & Co., LLC and Robert
Fleming Inc., have severally agreed to purchase from the Company the following
respective numbers of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Alex. Brown & Sons Incorporated................................
Gerard Klauer Mattison & Co., LLC..............................
Robert Fleming Inc. ...........................................

---------
Total........................................................ 2,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.

The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to 2,500,000, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of the Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on
the same terms as those on which the 2,500,000 shares are being offered.

The Company has agreed to indemnify the Underwriters and certain controlling
persons against certain liabilities, including liabilities under the
Securities Act.

The Company and each of its directors and executive officers and all of its
security holders have agreed not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated, except certain limited exceptions including that the Company may
issue, and grant options to purchase, shares of Common Stock under the 1996
Stock Option Plan and may issue shares of Common Stock upon the exercise of
the 1996 Warrants. See "Shares Eligible for Future Sale."

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

65
<PAGE>

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price of the Common
Stock will be determined by negotiations between the Company and the
Representatives of the Underwriters. Among the factors to be considered in
such negotiations are prevailing market conditions, the results of operations
of the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives of
the Underwriters believe to be comparable to the Company, estimates of the
business potential of the Company, the present stage of the Company's
development and other factors deemed relevant.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed upon for the Company by Schulte Roth & Zabel, New York,
New York. Certain Brazilian legal matters will be passed upon for the Company
by Tozzini, Freire, Teixeira e Silva Advogados, Sao Paulo, Brazil. Schulte
Roth & Zabel will rely, without independent investigation, upon Tozzini,
Freire, Teixeira e Silva Advogados with respect to all matters of Brazilian
law. Willkie Farr & Gallagher, New York, New York and Barbosa & Mussnich, Rio
de Janeiro, Brazil, have acted as counsel for the Underwriters in connection
with this offering.

EXPERTS

The financial statements of the Company appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young Auditores
Independents S.C., independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and such
financial statements are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto, certain items of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is hereby made to the
Registration Statement and such exhibits and schedules filed as a part
thereof, which may be inspected, without charge, at the Public Reference
Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048 and its Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission
upon payment of prescribed fees. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of the Commission's Web site is http://www.sec.gov.

Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each
fiscal year of the Company following the end of such quarter.

66
<PAGE>

GLOSSARY

<TABLE>
<S> <C>
1996 Stock Option Plan................................ as defined on page 51.
1996 Warrants......................................... as defined on page 7.
Asset Test............................................ as defined on page 62.
Average Monthly Churn Rate............................ as defined on page 8.
Average Monthly Revenue per Subscriber................ as defined on page 8.
Board of Directors.................................... as defined on page 49.
By-Laws............................................... as defined on page 15.
CDI................................................... as defined on page 7.
Certificate of Incorporation.......................... as defined on page 15.
CFC................................................... as defined on page 61.
Churn................................................. as defined on page 6.
</TABLE>

Coaxial Cable means cable consisting of a central conductor surrounded by
and insulated from another conductor. It is the standard material used in
traditional cable systems.

<TABLE>
<S> <C>
Commission............................................ as defined on page 52.
Company............................................... as defined on page 1.
Consolidated Financial Statements..................... as defined on page 3.
DGCL.................................................. as defined on page 15.
Direct Broadcast Satellite or DBS..................... as defined on page 42.
Direct-To-Home or DTH................................. as defined on page 42.
EBITDA................................................ as defined on page 8.
Emergency Social Fund or ESF.......................... as defined on page 46.
EMW................................................... as defined on page 55.
E.M. Warburg.......................................... as defined on page 55.
Exchange Act.......................................... as defined on page 56.
Existing Stockholders................................. as defined on page 29.
FPHC.................................................. as defined on page 61.
FPHCI................................................. as defined on page 61.
FPHCI Test............................................ as defined on page 61.
GDP................................................... as defined on page 44.
Hardwire Cable........................................ as defined on page 42.
</TABLE>

Headend means a collection of hardware, typically including satellite
dishes, satellite receivers, modulators, amplifiers and video cassette
playback machines. Signals, when processed, are then combined for
distribution.

Households Passed is the expression in common usage as the measurement of
the size of a cabled area, meaning the total number of premises which have the
current ability to be connected to a hardwire cable system.

<TABLE>
<S> <C>
IBGE................................................. as defined on page 5.
IOF.................................................. as defined on page 60.
IGPM Index........................................... as defined on page 9.
Income Test.......................................... as defined on page 62.
Interested Stockholder............................... as defined on page 57.
Internal Revenue Code................................ as defined on page 51.
ITSA................................................. as defined on page 3.
</TABLE>

Line-of-Sight or LOS Transmission is transmission to antennas that can be
"seen" by the headend transmitter of a wireless cable operator and that are
able to receive a commercially acceptable wireless signal from the
transmission point.

67
<PAGE>

<TABLE>
<S> <C>
Lins Family........................................... as defined on page 49.
</TABLE>

Local Off-Air VHF/UHF Channels mean over-the-air broadcast television
channels that are available to viewers free of charge.

<TABLE>
<S> <C>
Mercosul.............................................. as defined on page 44.
</TABLE>

MHz refers to a unit of frequency equal to one million hertz.

<TABLE>
<S> <C>
Ministry of Communications.......................... as defined on page 4.
MMDS (Multi-point multi-channel distribution serv-
ice)............................................... as defined on page 39.
</TABLE>

Multiple Dwelling Unit means an apartment complex or similar structure which
contains a number of television households.

<TABLE>
<S> <C>
Named Executive Officers.............................. as defined on page 50.
Ownership Law......................................... as defined on page 29.
Ownership Test........................................ as defined on page 61.
</TABLE>

Penetration Rate means the measurement of the take-up of subscription
television services. The penetration rate as of a given date is calculated by
dividing the number of subscribers connected to a system on such a date by the
total number of households passed in such system.

<TABLE>
<S> <C>
PFIC.................................................. as defined on page 61.
Prava................................................. as defined on page 54.
Proposed Regulations.................................. as defined on page 12.
Registered Capital.................................... as defined on page 59.
Representatives....................................... as defined on page 14.
Restricted Shares..................................... as defined on page 63.
Restructuring......................................... as defined on page 29.
RFP................................................... as defined on page 40.
Rights Holders........................................ as defined on page 58.
SFAS No. 52........................................... as defined on page 3.
SG&A.................................................. as defined on page 24.
Telecommunications Code............................... as defined on page 38.
Tevecap............................................... as defined on page 5.
TV Filme Belem........................................ as defined on page 3.
TV Filme Brasilia..................................... as defined on page 3.
TV Filme Goiania...................................... as defined on page 3.
TV Filme Servicos..................................... as defined on page 3.
TVA................................................... as defined on page 5.
TVA programming means programming provided by Tevecap and its subsidiaries.
Underwriters.......................................... as defined on page 65.
United States GAAP.................................... as defined on page 3.
Warburg, Pincus....................................... as defined on page 5.
Wireless Cable........................................ as defined on page 42.
Warburg Stockholders Agreement........................ as defined on page 49.
WP.................................................... as defined on page 55.
</TABLE>

68
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1994 and 1995................. F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995...................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31,
1993, 1994 and 1995...................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Consolidated Balance Sheet at March 31, 1996 (Unaudited).................. F-12
Consolidated Statements of Operations for the three months ended March 31,
1995 and 1996 (Unaudited)................................................ F-13
Consolidated Statement of Changes in Stockholders' Equity for the three
months
ended March 31, 1996 (Unaudited)......................................... F-14
Consolidated Statements of Cash Flows for the three months ended March 31,
1995 and 1996 (Unaudited)................................................ F-15
Notes to Consolidated Financial Statements (Unaudited).................... F-16
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
TV Filme, Inc.

We have audited the accompanying consolidated balance sheets of TV Filme,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the three years ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of TV Filme, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the
three years ended December 31, 1995, in conformity with generally accepted
accounting principles in the United States.

Ernst & Young
Auditores Independents S.C.

Sao Paulo, Brazil

January 18, 1996, except as to Note 1, as to
which the date is July 24, 1996

F-2
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------- -------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 1,659 $ 43
Accounts receivable, net................................... 505 2,278
Supplies................................................... 652 1,632
Receivables from affiliates................................ 2,111 --
------- -------
Total current assets..................................... 4,927 3,953
Property, plant and equipment, net........................... 4,182 18,870
Intangible assets, net....................................... 899 860
------- -------
Total assets............................................. $10,008 $23,683
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 1,055 $ 7,037
Payroll and other benefits payable......................... 468 1,283
Payables to affiliates--current............................ 200 1,863
------- -------
Total current liabilities................................ 1,723 10,183
Payables to affiliates--long term............................ 600 400
Deferred installation fees................................... 1,185 5,205
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued..............................
Common stock, $.01 par value, 50,000,000 shares authorized,
4,997,240 and 6,193,996 shares issued and outstanding in
1994 and 1995............................................. 50 62
Additional paid-in capital................................. 6,470 10,070
Deficit.................................................... (20) (2,237)
------- -------
Total stockholders' equity............................... 6,500 7,895
------- -------
Total liabilities and stockholders' equity............... $10,008 $23,683
======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
------------------------
1993 1994 1995
------ ------- -------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................................. $ 287 $ 2,438 $11,404
------ ------- -------
Operating costs and expenses:
System operating--Note 3........................... 196 773 2,957
Selling, general and administrative................ 558 2,394 8,975
Depreciation and amortization...................... 43 365 2,049
------ ------- -------
Total operating costs and expenses............... 797 3,532 13,981
------ ------- -------
Operating loss................................... (510) (1,094) (2,577)
------ ------- -------
Other income (expense):
Interest expense--Note 3........................... (17) (2) (49)
Interest and other income--Note 3.................. 11 932 475
Exchange and translation gains (losses)............ -- 682 (66)
------ ------- -------
Net income (loss).................................... $ (516) $ 518 $(2,217)
====== ======= =======
Net income (loss) per share.......................... $(0.10) $ 0.08 $ (0.27)
====== ======= =======
Shares and share equivalents......................... 5,295 6,885 8,086
====== ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE YEARS ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
COMMON STOCK
-------------------
ADDITIONAL
PAID-IN
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
--------- --------- ---------- ------- -------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARES)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1992................... 1,427,256 $14 $ 94 $ (22) $ 86
Capital contribution.... 112 112
Issuance of Common
Stock.................. 1,169,096 12 1,288 1,300
Net loss for the year... (516) (516)
--------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1993................... 2,596,352 26 1,494 (538) 982
--------- --- ------- ------- -------
Issuance of Common
Stock.................. 2,126,132 21 4,979 5,000
Exercise of stock op-
tions.................. 274,756 3 (3)
Net income for the
year................... 518 518
--------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1994................... 4,997,240 50 6,470 (20) 6,500
--------- --- ------- ------- -------
Issuance of Common
Stock.................. 1,052,924 11 3,289 3,300
Non-cash compensation... 312 312
Exercise of stock op-
tions.................. 143,832 1 (1)
Net loss for the year... (2,217) (2,217)
--------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1995................... 6,193,996 $62 $10,070 $(2,237) $ 7,895
========= === ======= ======= =======
</TABLE>

See accompanying notes.

F-5
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
------------------------
1993 1994 1995
----- ------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................... $(516) $ 518 $ (2,217)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 43 365 2,049
Non-cash compensation............................. -- -- 312
Changes in assets and liabilities:
Increase in accounts receivable................. (60) (445) (1,773)
Increase in supplies............................ (135) (517) (980)
Increase in accounts payable.................... 555 499 5,982
Increase in payroll and other benefits payable.. 65 403 815
Increase in deferred installation fees.......... 191 994 4,020
----- ------- --------
Net cash provided by operating activities........... 143 1,817 8,201
----- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
Property, plant and equipment..................... (852) (3,637) (16,621)
Intangible assets................................. -- (914) (77)
----- ------- --------
Net cash used in investing activities............... (852) (4,551) (16,698)
----- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock............................ 1,300 5,000 3,300
Capital contribution................................ 112 -- --
Payables to affiliates.............................. -- 800 1,463
(Increase) decrease in receivables from affiliates.. (685) (1,426) 2,111
----- ------- --------
Net cash provided by financing activities........... 727 4,374 6,874
----- ------- --------
Net increase (decrease) in cash and cash
equivalents........................................ 18 1,640 (1,616)
Cash and cash equivalents at beginning of year...... 1 19 1,659
----- ------- --------
Cash and cash equivalents at end of year............ $ 19 $ 1,659 $ 43
===== ======= ========
</TABLE>

See accompanying notes.

F-6
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Company Background

In connection with an initial public offering of its Common Stock (the
"Offering"), TV Filme, Inc. (the "Company") was formed in April 1996 to become
the holding company of and successor to ITSA-- Intercontinental
Telecomunicacoes S.A. and its subsidiaries ("ITSA"). The transfer of ITSA to
the Company will be accounted for in a manner similar to a pooling of
interests. ITSA was formed in May 1994 as a holding company for and successor
to TV Filme Servicos de Telecomunicacoes S.A. ("TVFSA"). The transfer of TVFSA
to ITSA has been accounted for in a manner similar to a pooling of interests.

In connection with the Offering, the Company has entered into a
restructuring (the "Restructuring") pursuant to which all of the preferred
stock of ITSA was converted into common stock of ITSA, based on the conversion
rates at the date of issuance of the preferred stock. Each share of common
stock of ITSA was exchanged for 1,844 shares of Common Stock of the Company.
As all of the preferred stock of ITSA has been converted and there were no
preferred dividends paid or due as a result of the conversion, all preferred
and common stock issuances of the predecessor companies have been reflected as
issuances of Common Stock of the Company. Prior to the consummation of the
Offering and the Restructuring, TVFSA operated the Company's wireless cable
system in Brasilia, and held the licenses to operate the Company's wireless
cable systems in Brasilia, Goiania and Belem. ITSA owned substantially all of
TVFSA, TV Filme Goiania Servicos de Telecomunicacoes Ltda. ("TV Filme
Goiania") and TV Filme Belem Servicos de Telecomunicacoes Ltda. ("TV Filme
Belem"). Pursuant to the Restructuring, (i) 51% of the voting stock of TVFSA
was transferred to an entity, all of which is owned by certain existing
shareholders of ITSA who are Brazilian nationals, with ITSA retaining 49% of
the voting stock and 83% of the economic interests in TVFSA; (ii) the
operating assets of the wireless cable system of Brasilia were transferred
from TVFSA to TV Filme Brasilia Servicos de Telecomunicacoes Ltda. ("TV Filme
Brasilia"), which is substantially owned by ITSA; and (iii) TVFSA has entered
into various agreements with ITSA and its subsidiaries pursuant to which,
among other things, TVFSA has authorized ITSA to operate the existing wireless
cable systems under its current licenses. Subsequent to the Restructuring and
the Offering, the Company owns 100% of ITSA, which holds 49% of the voting
stock and 83% of the economic interests of TVFSA and 100% of TV Filme
Brasilia, TV Filme Goiania and TV Filme Belem.

Accordingly, the consolidated financial statements of the Company include
(i) TVFSA on a historical basis from inception through May 1994 and (ii) ITSA
and its subsidiaries on a historical basis since May 1994 as though they have
been part of the Company for all periods presented. All significant
intercompany transactions and balances have been eliminated in consolidation.

The Company develops, owns and operates subscription television systems in
mid-sized markets in Brazil. The Company has established wireless cable
operating systems in the cities of Brasilia, Goiania and Belem. Applications
have been made for the Company to operate systems in an additional 19 markets
in Brazil. Although the economic situation in Brazil has improved since July
1994, when the government introduced the Real Plan, a return to high levels of
inflation and currency fluctuations could adversely affect the Company's
operations.

b. Method of Presentation

The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States
in U. S. dollars. Amounts in Brazilian currency have been remeasured into U.
S. dollars in accordance with the methodology set forth in Statement of
Financial Accounting Standards No. 52 as it applies to entities operating in
highly inflationary

F-7
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
economies. Supplies, property, plant and equipment, intangibles and deferred
installation fees and the related income statement accounts are remeasured at
exchange rates in effect when the assets were acquired or the liabilities were
incurred. All other assets and liabilities are remeasured at year end exchange
rates, and all other income and expense items are remeasured at average
exchange rates prevailing during the year. Remeasurement adjustments are
included in exchange and translation gains (losses).

c. Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

d. Supplies

Supplies are recorded at the lower of cost or market.

e. Property, Plant and Equipment

Property, plant and equipment are stated at cost. The Company capitalizes
materials, subcontractor costs, labor and overhead incurred associated with
initial subscriber installations. The Company continues to depreciate the full
installation cost subsequent to any subscriber disconnections.

Depreciation is computed on the straight-line basis using estimated useful
lives ranging from 5 to 10 years for buildings and leasehold improvements, 5
years for machinery and equipment, furniture and fixtures and installation
costs.

f. Intangible Assets

Intangible assets are comprised primarily of subscription television
licenses, which are amortized on a straight-line basis over a period of 10
years. Accumulated amortization at December 31, 1994 and 1995 was $15,000 and
$131,000, respectively.

g. Revenue Recognition

Revenues from subscribers are recognized in the period service is rendered.
Installation fees are recognized as revenue to the extent of direct selling
costs incurred, with the remainder deferred and amortized to income over a
five year period.

h. Allowance for Doubtful Accounts

The Company had an allowance for doubtful accounts of $16,000 and $315,000
at December 31, 1994 and 1995, respectively. There were no charges to the
allowance during 1994 and 1995.

i. Stock Options

The Company accounts for stock options granted to employees in accordance
with the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees." In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 provides for
an alternative to APB 25 and is effective for fiscal years beginning after
December 15, 1995. The Company expects to continue to account for stock
options granted to employees in accordance with the provisions of APB 25.
Accordingly, SFAS 123 is not expected to have any material impact on the
results of operations or the financial position of the Company.

F-8
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
j. Interest Expense

Interest expense approximates the amount of cash interest paid.

k. Net income (loss) per share

Net income (loss) per share is calculated using the weighted average number
of shares of stock outstanding during the period together with the number of
shares issuable upon the exercise of options and warrants issued during the
twelve months prior to the filing of the Offering. The Company has not used
the treasury stock method in computing the dilutive effect of the warrants.

l. Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is comprised of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
------ -------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
Building and leasehold improvements............................ $ 152 $ 597
Machinery and equipment........................................ 2,581 10,288
Furniture and fixtures......................................... 120 308
Installation costs............................................. 1,667 9,948
------ -------
4,520 21,141
Accumulated depreciation....................................... (338) (2,271)
------ -------
$4,182 $18,870
====== =======
</TABLE>

Depreciation expense of $43,000, $350,000, and $1,933,000 is included in the
statements of operations for the years ended December 31, 1993, 1994 and 1995,
respectively.

3. RELATED PARTY TRANSACTIONS

Substantially all programming is supplied by a subsidiary of Tevecap S.A.
("Tevecap"), a stockholder of the Company, pursuant to a programming contract.
Amounts paid to such affiliate in 1993, 1994 and 1995 were $13,000, $178,000
and $1,334,000, respectively, net of discounts on programming fees compared to
list prices. Such discounts were received from August 1993 through October
1995, and in 1993, 1994 and 1995 were $28,000, $340,000 and $539,000,
respectively. Such discounts are not expected to continue.

Receivables from Tevecap and Abril S.A. ("Abril"), the majority stockholder
of Tevecap, bear interest at the Brazilian interbank rate ("CDI") then in
effect or at CDI plus 0.8%. The rate in effect during the periods ranged from
3.64% to 4.16% per month during 1994 and 3.48% to 4.27% per month during 1995.
Interest income from such affiliates was $599,000 and $433,000 in 1994 and
1995, respectively.

In 1994, the Company purchased two licenses to operate wireless cable
systems from Abril for $400,000 each, payable in four equal annual
installments, which do not bear interest. Included in payables to affiliates
at December 31, 1994 and 1995 is $800,000 and $600,000, respectively, related
to this purchase. Other payables to Abril (and its affiliates) bear interest
at the CDI plus 0.8%, which ranged from 3.33% to 4.66% per month. Interest
expense to Abril (and its affiliates) was $50,000 in 1995.

F-9
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company purchases equipment and supplies from vendors under irrevocable
letters of credit. Total issued and outstanding letters of credit at December
31, 1994 and 1995 were $966,000 and $6,683,000. Abril and a subsidiary of
Tevecap guarantee such obligations from time to time. At December 31, 1994 and
1995, issued and outstanding letters of credit secured by affiliates were
$590,000 and $4,155,000, respectively. The maturity date of such letters of
credit range from 30 days to 360 days.

4. STOCKHOLDERS' EQUITY

At December 31, 1995, 704,408 shares of Common Stock were non-voting. In
connection with the Restructuring, non-voting shares will be converted into
voting shares.

Between January and April 1993, certain shareholders made capital
contributions to the Company in an aggregate amount of $112,000.

In May 1993, the Company issued and sold 1,169,096 shares of Common Stock to
Tevecap for a purchase price of $1,300,000.

In July 1994, the Company issued and sold 2,126,132 shares of Common Stock
to Warburg, Pincus Investors, L.P. for a purchase price of $5,000,000.

In August 1995, the Company issued and sold 1,052,924 shares of Common Stock
to Warburg, Pincus Investors, L.P. for purchase price of $3,300,000.

In 1994 and 1995, the Company issued options to purchase 125,392 and 99,576
shares of Common Stock, respectively, to officers of the Company. All options
were vested at the date of grant. The fair value of the stock at the date of
the 1995 grant was deemed to be $312,000 and, therefore, a charge for non-cash
compensation of $312,000 was recorded in 1995 and included in selling, general
and administrative expenses. All options were exercised in the year of grant.

As a finders' fee in connection with the equity offerings in 1994 and 1995,
the Company granted options to purchase 193,620 shares of Common Stock to two
advisers at a nominal exercise price. In 1994 and 1995, such options for
149,364 and 44,256 shares, respectively, were exercised.

5. INCOME TAXES

The reasons for the difference between total tax expense (benefit) and the
amount computed by applying the effective Brazilian tax rate to income before
income taxes are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Income taxes (benefit) at effective Brazilian
rate.......................................... $ (248) $ 249 $ (1,064)
Effect of monetary adjustments under Brazilian
tax law....................................... (709) 765
Nondeductible compensation expense............. 150
Effect of change in tax rate................... 267
Other.......................................... 198
Increase (decrease) in valuation allowance .... 248 460 (316)
-------- ------- ----------
Tax expense (benefit).......................... -- -- --
======== ======= ==========
</TABLE>

The Company has not recognized any future income tax benefit for its net
operating loss carryforwards in excess of net deferred tax liabilities as it
is not assured that it will be able to realize a benefit for such losses in
the future. The net operating loss carryforwards amounted to $5,232,000 at
December 31, 1995. Under Brazilian law, net operating losses may be carried
forward for an unlimited period of time. Use of these losses, however, is
restricted to 30% of taxable income of a period.

F-10
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The approximate effect
of temporary differences as of December 31, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
1994 1995
------ ------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards........................... $ 501 $1,596
Deferred installation fees................................. 538 1,526
Other...................................................... 343 309
------ ------
1,382 3,431
Valuation allowance........................................ (729) (413)
------ ------
$ 653 $3,018
====== ======
Deferred tax liabilities
Fixed assets............................................... $ 653 $2,670
Other...................................................... -- 348
------ ------
$ 653 $3,018
====== ======
</TABLE>

Effective January 1, 1996, the effective Brazilian tax rate declined from
48% to 30.5%. This has been reflected in the deferred tax assets and
liabilities at December 31, 1995.

6. COMMITMENTS

The Company leases office space and vehicles and has entered into various
transmission tower rental agreements. Rent expense amounted to approximately
$19,000, $128,000 and $472,000 for the years ended December 31, 1993, 1994,
and 1995, respectively. A substantial number of these rental agreements are
renewed on a continuous basis. The Company also has entered into various
contracts to secure programming. These agreements are readjusted periodically.

Lease commitments at December 31, 1995 are as follows:

At December 31, 1995, payables to affiliates include $600,000 related to the
purchase by the Company of two licenses to operate wireless cable systems (see
Note 3). Payments for such licenses of $200,000 are required in each of 1996,
1997 and 1998.

F-11
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31,
1996
-------------
(IN THOUSANDS
OF DOLLARS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 24
Accounts receivable, net....................................... 2,959
Supplies....................................................... 2,424
Receivables from affiliates.................................... 311
-------
Total current assets......................................... 5,718
Property, plant and equipment, net............................... 22,802
Intangible assets, net........................................... 835
-------
Total assets................................................. $29,355
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 7,009
Payroll and other benefits payable............................. 1,229
Payables to affiliates--current................................ 200
-------
Total current liabilities.................................... 8,438
Payables to affiliates--long term................................ 200
Deferred installation fees....................................... 6,130
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued..............................................
Common stock, $.01 par value, 50,000,000 shares authorized,
7,291,176 shares issued and outstanding....................... 73
Additional paid-in capital..................................... 17,210
Deficit........................................................ (2,696)
-------
Total stockholders' equity................................... 14,587
-------
Total liabilities and stockholders' equity................... $29,355
=======
</TABLE>

See accompanying notes.

F-12
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
--------------
1995 1996
------ ------
(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C> <C>
Revenues....................................................... $1,364 $5,852
------ ------
Operating costs and expenses:
System operating--Note 2..................................... 413 1,583
Selling, general and administrative.......................... 1,589 3,310
Depreciation and amortization................................ 236 1,098
------ ------
Total operating costs and expenses......................... 2,238 5,991
------ ------
Operating loss............................................. (874) (139)
------ ------
Other income (expense):
Interest expense--Note 2..................................... -- (374)
Interest and other income--Note 2............................ 247 10
Exchange and translation gains (losses)...................... (29) 44
------ ------
Net loss....................................................... $ (656) $ (459)
====== ======
Net loss per share............................................. $(0.08) $(0.06)
====== ======
Shares and share equivalents................................... 8,086 8,086
====== ======
</TABLE>

See accompanying notes.

F-13
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 1996

See accompanying notes.

F-14
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1995 1996
------- -------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $ (656) $ (459)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 236 1,098
Changes in assets and liabilities:
Increase in accounts receivable......................... (37) (681)
Increase in supplies.................................... (105) (792)
Increase (decrease) in accounts payable................. 269 (28)
Increase (decrease) in payroll and other benefits
payable................................................ 252 (54)
Increase in deferred installation fees.................. 689 925
------- -------
Net cash provided by operating activities................... 648 9
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
Property, plant and equipment............................. (2,655) (4,980)
Intangible assets......................................... 6 (25)
------- -------
Net cash used in investing activities....................... (2,649) (5,005)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock and warrants....................... -- 7,151
Payables to affiliates...................................... (200) (1,863)
Decrease (increase) in receivables from affiliates.......... 727 (311)
------- -------
Net cash provided by financing activities................... 527 4,977
------- -------
Net decrease in cash and cash equivalents................... (1,474) (19)
Cash and cash equivalents at beginning of year.............. 1,659 43
------- -------
Cash and cash equivalents at end of the period.............. $ 185 $ 24
======= =======
</TABLE>

See accompanying notes.

F-15
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Company Background

In connection with the Offering, the Company has entered into a
Restructuring (the "Restructuring") pursuant to which all of the preferred
stock of ITSA was converted into common stock of ITSA, based on the conversion
rates at the date of issuance of the preferred stock. Each share of common
stock of ITSA was exchanged for 1,844 shares of Common Stock of the Company.
As all of the Preferred Stock of ITSA has been converted and there were no
preferred dividends paid or due as a result of the conversion, all preferred
and common stock issuances of the predecessor companies have been reflected as
issuances of Common Stock of the Company. Prior to the consummation of the
Offering and the Restructuring, TVFSA operated the Company's wireless cable
system in Brasilia, and held the licenses to operate the Company's wireless
cable systems in Brasilia, Goiania and Belem. ITSA owned substantially all of
TVFSA, TV Filme Goiania Servicos de Telecomunicacoes Ltda. ("TV Filme
Goiania") and TV Filme Belem Servicos de Telecomunicacoes Ltda. ("TV Filme
Belem"). Pursuant to the Restructuring, (i) 51% of the voting stock of TVFSA
was transferred to an entity, all of which is owned by certain existing
shareholders of ITSA who are Brazilian nationals, with ITSA retaining 49% of
the voting stock and 83% of the economic interests in TVFSA; (ii) the
operating assets of the wireless cable system of Brasilia were transferred
from TVFSA to TV Filme Brasilia Servicos de Telecomunicacoes Ltda. ("TV Filme
Brasilia"), which is substantially owned by ITSA; and (iii) TVFSA has entered
into various agreements with ITSA and its subsidiaries pursuant to which,
among other things, TVFSA has authorized ITSA to operate the existing wireless
cable systems under its current licenses. Subsequent to the Restructuring and
the Offering, the Company owns 100% of ITSA, which holds 49% of the voting
stock and 83% of the economic interests of TVFSA and 100% of TV Filme
Brasilia, TV Filme Goiania and TV Filme Belem.

b. Method of Presentation

F-16
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
economies. Supplies, property, plant and equipment, intangibles and deferred
installation fees and the related income statement accounts are remeasured at
exchange rates in effect when the assets were acquired or the liabilities were
incurred. All other assets and liabilities are remeasured at year end exchange
rates, and all other income and expense items are remeasured at average
exchange rates prevailing during the year. Remeasurement adjustments are
included in exchange and translation gains (losses).

In management's opinion, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the first three months are not necessarily
indicative of the results that may be expected for a full year.

c. Net income (loss) per share

2. RELATED PARTY TRANSACTIONS

Receivables from Tevecap and Abril S.A. ("Abril"), the majority shareholder
of Tevecap, bear interest at the Brazilian interbank rate ("CDI") then in
effect or at CDI plus 0.8%. The rate in effect during the periods ranged from
3.24% to 4.41% per month during 1995. Interest income from such affiliates was
$220,000 for the three months ended March 31, 1995.

Included in payables to affiliates at March 31, 1996 is $400,000 payable to
Abril which does not bear interest. Payments on this payable are required at
the rate of $200,000 per year. Other payables to Tevecap bear interest at the
CDI plus 0.8%, which ranged from 2.18% to 3.16% per month during 1996.
Interest expense to Tevecap was $374,000 for the three months ended March 31,
1996.

The Company purchases equipment and supplies from vendors under irrevocable
letters of credit. Abril and a subsidiary of Tevecap guarantee such
obligations from time to time. Total issued and outstanding letters of credit
at March 31, 1996 were $6,384,000. At March 31, 1996, issued and outstanding
letters of credit secured by affiliates were $5,295,000. The maturity date of
such letters of credit range from 30 days to 360 days.

3. STOCKHOLDERS' EQUITY

In March 1996, the Company issued and sold (i) 783,700 shares of Common
Stock and warrants to purchase an additional 567,952 shares of Common Stock to
Warburg, Pincus Investors, L.P. for approximately $5,100,000, (ii) 287,664
shares of Common Stock and warrants to purchase an additional 208,372 shares
of Common Stock to Tevecap for approximately $1,875,000 and (iii) 25,816
shares of Common Stock and warrants to purchase an additional 18,440 shares of
Common Stock to two other shareholders of the Company for approximately
$176,000. The warrants have an exercise price of $6.52 per share.

F-17
<PAGE>

TV FILME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. SUBSEQUENT EVENT

In connection with the Offering, the Board of Directors of the Company will
adopt and the stockholders of the Company will approve the 1996 Stock Option
Plan (the "Plan"). The Plan provides for the grant of stock options to
officers, key employees, consultants and directors of the Company. The Plan
will be administered by the Compensation Committee and the total number of
shares of Common Stock for which options may be granted pursuant to the Plan
will be 936,432, subject to certain adjustments reflecting changes in the
Company's capitalization. Options to purchase 407,000 shares of Common Stock
shall be granted upon the consummation of the Offering, 297,000 of which shall
be exercisable at the initial public offering price and 110,000 of which shall
be exercisable at $11.00 per share, and which generally shall vest 20% per
year for five years beginning on the first anniversary of consummation of the
Offering.

F-18
<PAGE>

[Page containing logos of selected providers of
programming carried by the Company]

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 28
Subscription Television Industry......................................... 42
Brazil................................................................... 43
Management............................................................... 48
Certain Transactions..................................................... 53
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 56
Tax Considerations....................................................... 59
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 65
Legal Matters............................................................ 66
Experts.................................................................. 66
Additional Information................................................... 66
Glossary................................................................. 67
Index to Consolidated Financial Statements............................... F-1
</TABLE>

-----------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

2,500,000 Shares

[LOGO of TV Filme]

Common Stock

-----------

PROSPECTUS

-----------

Alex. Brown & Sons
INCORPORATED

Gerard Klauer Mattison & Co., llc

Robert Fleming Inc.

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is an itemized list of the estimated expenses to be incurred
in connection with this offering of the securities being offered hereunder
other than underwriting discounts and commissions. All of these expenses will
be borne by the Company.

<TABLE>
<S> <C>
SEC registration fee.......................................... $ 11,896.55
NASD filing fee............................................... $ 3,950.00
NASDAQ National Market System listing fee..................... $ 41,977.94
Blue sky fees and expenses.................................... $ 6,500.00
Printing and engraving expenses............................... $ 200,000.00
Legal fees and expenses....................................... $1,000,000.00
Accounting fees and expenses.................................. $ 135,000.00
Transfer agent and registrar fees............................. $ 2,500.00
Miscellaneous fees and expenses............................... $ 98,175.51
-------------
Total....................................................... $1,500,000.00
=============
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article VII of the Certificate of Incorporation filed as an
exhibit to this Registration Statement eliminates in certain circumstances the
liability of directors of the Company for monetary damages for breach of their
fiduciary duty as directors. This provision does not eliminate the liability
of a director (i) for breach of the director's duty of loyalty to the Company
or its stockholders; (ii) for acts or omissions by the director not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for willful or negligent declaration of an unlawful dividend, stock
purchase or redemption; or (iv) for transactions from which the director
derived an improper personal benefit. Such limitation of liability does not
affect the availability of equitable remedies such as injunctive relief or
rescission.

Subsection (a) of Section 145 of the DGCL empowers a corporation to
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, officer, employee, or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, 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.

Subsection (b) of Section 145 of the DGCL empowers a corporation to
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
such person acted in any of the capacities set forth above, 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

II-1
<PAGE>

of the corporation except that no indemnification may 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 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 shall deem proper.

Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the
defense of any action, suit, or proceeding referred to in subsections (a) and
(b) or in the 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; that indemnification
provided for by Section 145 of the DGCL shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of any person acting
in any of the capacities set forth in the second preceding paragraph against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have
the power to indemnify him against such liabilities under Section 145 of the
DGCL.

The By-laws filed as an exhibit to this Registration Statement require the
Company, under certain circumstances, to indemnify any person who is, was or
has agreed to become a director or officer against expenses, liability and
loss actually and reasonably incurred by him. The By-laws of the Company also
provide that expenses incurred in connection with a civil, criminal,
administrative or investigative action, suit or proceeding, or threat thereof,
shall be paid by the Company in advance of the final disposition of such
action, suit or proceeding upon receipt of any undertaking by or on behalf of
the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in the By-laws.

The Company will indemnify its officers and directors pursuant to the
Indemnification Agreements it expects to enter into with each such officer and
director against any and all expenses, losses, claims, damages and liabilities
incurred by each such officer and director for or as a result of actions taken
or not taken while each such officer or director was acting in his or her
capacity as a director or officer of the Company, a form of which is filed as
an exhibit to this Registration Statement.

In addition, the Registrant currently expects to obtain directors' and
officers' reimbursements and liability insurance which insures against
liabilities that directors and officers of the Registrant may incur in such
capacities. The risks covered by such policies do not exclude liabilities
under the Securities Act. Pursuant to the Form of Underwriting Agreement filed
as an exhibit to this Registration Statement, the Underwriters will agree,
subject to certain conditions, to indemnify the Registrant, its directors,
certain of its officers and persons who control the Registrant within the
meaning of the Securities Act against certain liabilities, including those
arising under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since January 1, 1993, the Company has issued and sold the following
securities:

1. In May 1993, the Company issued and sold 1,169,096 shares of Common Stock
(after giving effect to the Restructuring) to Tevecap for a purchase
price of approximately $1,300,000 in cash.

2. In July 1994, the Company effected a recapitalization pursuant to which
Mrs. Maria Nise Lins, Mr. Hermano Lins, Mr. Carlos Andre Lins and Tevecap
exchanged all of their shares of common stock of TV Filme Servicos de
Telecomunicacoes S.A. (the predecessor company to ITSA) on a one-for-one
basis for shares of common stock of ITSA (the predecessor company of TV
Filme, Inc.).

3. In July 1994, the Company issued and sold 2,126,132 shares of Common Stock
(after giving effect to the Restructuring) to Warburg, Pincus for an
aggregate purchase price of $5,000,000 in cash.

II-2
<PAGE>

4. In July 1994, the Company granted to each of Messrs. Lins options to
purchase 62,696 shares of its Common Stock (after giving effect to the
Restructuring) at a nominal exercise price, which they each exercised
immediately.

5. In July 1994, the Company granted to Mr. Wallach and Mr. Pearson options
to purchase a total of 153,052 shares of its Common Stock (after giving
effect to the Restructuring) at a nominal exercise price, which they each
exercised immediately. Mr. Wallach purchased 77,448 of such shares and Mr.
Pearson purchased 75,604 of such shares.

6. In August 1995, the Company issued and sold 1,052,924 shares of Common
Stock (after giving effect to the Restructuring) to Warburg, Pincus for an
aggregate purchase price of $3,300,000 in cash.

7. In August 1995, the Company granted to each of Messrs. Lins options to
purchase 49,788 shares of Common Stock (after giving effect to the
Restructuring) at a nominal exercise price, which they each exercised
immediately.

8. In August 1995, the Company granted to each of Mr. Wallach and Mr. Pearson
options to purchase 20,284 shares of Common Stock (after giving effect to
the Restructuring) at a nominal exercise price, which they each exercised
immediately.

9. In March 1996, the Company issued and sold a total of 1,097,180 shares of
Common Stock (after giving effect to the Restructuring) for an aggregate
purchase price of approximately $7,151,000 in cash and granted warrants to
purchase an additional 794,764 shares of Common Stock (after giving effect
to the Restructuring). Of these shares, 783,700 were purchased by Warburg,
Pincus (which received a warrant to purchase an additional 567,952
shares), 287,664 were purchased by Tevecap (which received a warrant to
purchase an additional 208,372 shares), 12,908 were purchased by Mr.
Wallach (who received a warrant to purchase an additional 9,220 shares)
and 12,908 were purchased by Mr. Pearson (who received a warrant to
purchase an additional 9,220 shares). Such warrants are exercisable at
$6.52 per share.

10. Immediately prior to the consummation of this offering, in connection with
the Restructuring the Company will issue a total of 7,291,176 shares of
Common Stock in exchange for 3,954 shares of common stock of ITSA. Of
these shares, 3,962,756 will be received by Warburg, Pincus, 1,456,760
will be received by Tevecap, 254,472 will be received by Mr. Hermano Lins,
254,472 will be received by Mr. Carlos Andre Lins, 1,069,520 will be
received by Mrs. Maria Nise Lins, 73,760 will be received by Ms. Maria
Veronica Lins, 110,640 will be received by Mr. Pearson and 108,796 will be
received by Mr. Wallach.

11. Immediately prior to the consummation of this offering, in connection with
the Restructuring the Company will issue warrants to purchase a total of
794,764 shares of Common Stock in exchange for warrants to purchase a
total of 431 shares of common stock of ITSA. Of these, warrants to
purchase 567,952 shares will be received by Warburg Pincus, warrants to
purchase 208,372 shares will be received by Tevecap, warrants to purchase
9,220 shares will be received by Mr. Wallach and warrants to purchase
9,220 shares will be received by Mr. Pearson.

Except as set forth above, neither the Company nor ITSA has made any offers
or sales of its securities since January 1, 1993.

There were no underwriters employed in connection with any of the
transactions set forth above.

The transactions described above in paragraphs 1, 2, 4, 5, 7, 8 and 9 (other
than with respect to sales to Warburg, Pincus) were not subject to
registration requirements pursuant to United States securities laws because
the offers and sales took place in Brazil and were therefore not subject to
United States jurisdiction.

The transactions described above in paragraphs 3, 6, 9 (with respect to
sales to Warburg, Pincus), 10 and 11 were effected in reliance upon the
exemption from the registration requirements provided by Section 4(2) of the
Securities Act on the basis that such transactions did not involve any public
offering.

II-3
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Certificate of Incorporation of the Registrant
*3.2 By-Laws of the Registrant
*4 Specimen of Certificate of Common Stock of the Registrant
*5 Opinion of Schulte Roth & Zabel (including the consent of such firm)
regarding the legality of the securities being offered
*10.1 Form of 1996 Stock Option Plan
*10.2 Form of Stock Option Agreement
*10.3 Form of Registration Rights Agreement to be entered into by and among
Warburg, Pincus, Tevecap, Mrs. Maria Nise Lins, Mr. Hermano Lins, Mr.
Carlos Andre Lins, Ms. Maria Veronica Lins, Mr. Wallach, Mr. Pearson
and the Registrant
*10.4 Form of Employment Agreement to be entered into by and among the
Registrant, ITSA and Mr. Hermano Lins (exhibits hereto are
incorporated by reference to Exhibits 10.1, 10.2 and 10.10)
*10.5 Form of Employment Agreement to be entered into by and among the
Registrant, ITSA and Mr. Carlos Andre Lins (exhibits hereto are
incorporated by reference to Exhibits 10.1, 10.2 and 10.10)
*10.6 Form of Employment Agreement to be entered into by and between the
Registrant and Mr. Aguirre (exhibits hereto are incorporated by
reference to Exhibits 10.1, 10.2 and 10.10)
*10.7 Form of Warrant Agreements to be entered into by and between the
Registrant and certain investors parties thereto
*10.8 Programming Agreement by and between the Registrant and Tevecap
*10.9 Form of Master Operating Agreement to be entered into by and between
ITSA and TV Filme Servicos de Telecomunicacoes Ltda.
*10.10 Form of Indemnification Agreements between the Registrant and the
directors and officers parties thereto
*11 Statement Regarding Computation of Per Share Earnings (Loss)
*21 Subsidiaries of the Registrant
*23.1 Consent of Schulte Roth & Zabel (included as part of Exhibit 5 hereto)
*23.2 Consent of Tozzini, Freire, Teixeira e Silva Advogados
23.3 Consent of Ernst & Young Auditores Independents S.C., independent
auditors
24 Power of Attorney
</TABLE>
- --------
*Previously filed.

(b) Supplemental Financial Statement Schedules:

The Supplemental Financial Statement Schedules have been intentionally
omitted because they are either not required or the information has been
included in the Notes to the Consolidated Financial Statements included as part
of this Registration Statement.

II-4
<PAGE>

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes as follows:

1. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

2. The undersigned Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.

(b) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time will
be deemed to be the initial bona fide offering thereof.

(c) It will provide to the Underwriters at the closing specified in
the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on July 25, 1996.

TV FILME, INC.

/s/ Douglas M. Karp
By: _________________________________
Name: Douglas M. Karp
Title: Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ Douglas M. Karp Chairman of the
- ------------------------------------- Board and Director July 25, 1996
Douglas M. Karp

* Chief Executive
- ------------------------------------- Officer, Secretary July 25, 1996
Hermano Studart Lins de Albuquerque and Director

* President, Chief
- ------------------------------------- Operating Officer, July 25, 1996
Carlos Andre Studart Lins de Treasurer and
Albuquerque Director

* Director
- ------------------------------------- July 25, 1996
Gary D. Nusbaum

* Chief Financial
- ------------------------------------- Officer (Principal July 25, 1996
Alvaro J. Aguirre Financial and
Accounting Officer)
and Director

* Director
- ------------------------------------- July 25, 1996
Jose Augusto Pinto Moreira

* Director July 25, 1996
- -------------------------------------

Claudio Dascal

/s/ Douglas M. Karp
*By: ________________________________
Name: Douglas M. Karp
Title: Attorney-in-Fact

S-1
<PAGE>

INDEX TO EXHIBITS
(ITEM 16(A))

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
------- ----------------------- ------
<C> <S> <C>
*1.1 Form of Underwriting Agreement...............................
*3.1 Certificate of Incorporation of the Registrant...............
*3.2 By-Laws of the Registrant....................................
*4 Specimen of Certificate of Common Stock of the Registrant....
*5 Opinion of Schulte Roth & Zabel (including the consent of
such firm) regarding the legality of the securities being
offered.....................................................
*10.1 Form of 1996 Stock Option Plan...............................
*10.2 Form of Stock Option Agreement...............................
*10.3 Form of Registration Rights Agreement to be entered into by
and among Warburg, Pincus, Tevecap, Mrs. Maria Nise Lins,
Mr. Hermano Lins, Mr. Carlos Andre Lins, Ms. Maria Veronica
Lins, Mr. Wallach, Mr. Pearson and the Registrant...........
*10.4 Form of Employment Agreement to be entered into by and among
the Registrant, ITSA and Mr. Hermano Lins (exhibits hereto
are incorporated by reference to Exhibits 10.1, 10.2 and
10.10)......................................................
*10.5 Form of Employment Agreement to be entered into by and among
the Registrant, ITSA and Mr. Carlos Andre Lins (exhibits
hereto are incorporated by reference to Exhibits 10.1, 10.2
and 10.10)..................................................
*10.6 Form of Employment Agreement to be entered into by and
between the Registrant and Mr. Aguirre (exhibits hereto are
incorporated by reference to Exhibits 10.1, 10.2 and
10.10)......................................................
*10.7 Form of Warrant Agreements to be entered into by and between
the Registrant and certain investors parties thereto........
*10.8 Programming Agreement by and between the Registrant and
Tevecap.....................................................
*10.9 Form of Master Operating Agreement to be entered into by and
between ITSA and TV Filme Servicos de Telecomunicacoes
Ltda. ......................................................
*10.10 Form of Indemnification Agreements between the Registrant and
the directors and officers parties thereto..................
*11 Statement Regarding Computation of Per Share Earnings
(Loss)......................................................
*21 Subsidiaries of the Registrant...............................
*23.1 Consent of Schulte Roth & Zabel (included as part of Exhibit
5 hereto)...................................................
*23.2 Consent of Tozzini, Freire, Teixeira e Silva Advogados.......
23.3 Consent of Ernst & Young Auditores Independents S.C.,
independent auditors........................................
24 Power of Attorney............................................
</TABLE>
- --------
*Previously filed.

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the heading "Selected
Consolidated Financial Data" and under the caption "Experts" and to the use of
our report dated January 18, 1996 (except Note 1, as to which the date is July
24, 1996), in the Registration Statement (Form S-1 No. 333-4512) and related
Prospectus of TV Filme, Inc. for the registration of 2,875,000 shares of its
Common Stock.

/s/ Ernst & Young
Auditores Independents S.C.

Sao Paulo, Brazil
July 25, 1996

<PAGE>
EXHIBIT 24

POWER OF ATTORNEY

CLAUDIO DASCAL

KNOW ALL MEN BY THESE PRESENTS that the individual whose signature appears
below hereby constitutes and appoints Douglas M. Karp and Gary D. Nusbaum and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre- or post-effective amendments to a
Registration Statement on Form S-1 for the registration of common stock of the
Company, Commission File No. 333-4512 (the "Registration Statement"), any
subsequent Registration Statement for the same offering which may be filed under
Rule 462(b) (a "Rule 462(b) Registration Statement") and any and all pre- or
post-effective amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
which they, or any of them, may deem necessary or advisable to be done in
connection with the Registration Statement or any Rule 462(b) Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or any substitute or substitutes for any or all of them,
may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 24th
day of July, 1996.

/S/ Claudio Dascal
__________________________________
Claudio Dascal