FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a or 15d - 16 of
the Securities Exchange Act of 1934
For the month of November 1998
Tevecap S.A.
(Exact Name as Specified in its Charter)
Tevecap Inc.
(Translation of Name into English)
SEC FILE NUMBER: 0-22267
Rua do Rocio, 313
Sao Paulo, SP Brazil
04552-904
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [x] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under Securities Exchange Act of 1934.
Yes [ ] No [x]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with rule 12g3-2(b):82 N/A
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEVECAP S.A.
By: /s/ Jose Augusto P. Moreira
----------------------------
Jose Augusto P. Moreira
Officer
By: /s/ Claudio Cesar D'Emilio
----------------------------
Claudio Cesar D'Emilio
Officer
Date: November 30, 1998
<PAGE>
EXHIBIT LIST
1. One copy of the press release, dated November 30, 1998, containing relevant
information on Tevecap S.A. for the three-month period ended September 30,
1998, with financial information prepared in accordance with U.S. GAAP.
<PAGE>
Tevecap S.A. Page 1/28
Tevecap S.A.
Rua do Rocio, 313 - 12th floor
04552-904-Sao Paulo-SP-Brazil
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEVECAP ANNOUNCES THIRD
QUARTER 1998 RESULTS
Sao Paulo, November 30th, 1998, TEVECAP S.A., (TVA) one of Brazil's largest and
fastest growing pay television operators and programming distributors, today
announced results for the third quarter of 1998.
- -------------------------------
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<PAGE>
Contact: Page 2/28
Tevecap - Douglas Duran Telephone: 55 (11) 821-8554
Ludgate Communications - Marina Echavarria Telephone: 1 (212) 688-5144
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Tevcap S.A. Page 3/28
Index
1. Third Quarter 1998 Overview................................................3
Financial Highlights as of September 30, 1998..............................3
2. Operational Performance 3Q98...............................................5
TVA Distribuidora..........................................................5
a) Cable Operation Overview.............................................5
b) MMDS Operation Overview.............................................10
c) C-Band Operation Overview...........................................13
d) TVA Distribuidora - 3Q98 Income Statement...........................16
TVA Satelite..............................................................17
a) Ku-Band Operation Overview..........................................17
b) TVA Satelite - 3Q98 Income Statement................................20
TVA Programadora..........................................................20
a) HBO Brasil Operation Overview.......................................21
b) ESPN Brasil Operation Overview......................................21
c) TVA Channel Operation Overview......................................21
d) TVA Programadora - 3Q98 Income Statement............................23
3. Tevecap's Consolidated 3Q98 Results.......................................23
a) Consolidated Results................................................23
b) Financial Situation.................................................26
c) Consolidated Balance Sheet..........................................27
d) Tevecap - 3Q98 Income Statement.....................................28
e) Tevecap -Nine Months ended Sept 30, 1998 Income Statement...........29
f) Tevecap - 3Q98 Statement of Cash Flow...............................30
g) Tevecap -Nine Months ended Sept 30, 1998 Statement of Cash Flow.....31
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Tevcap S.A. Page 4/28
1. Third Quarter 1998 Overview
---------------------------
During 3Q98 the Pay-TV industry in Brazil continued to suffer the impact of
the global crisis that began in October 1997. Almost all operators had to deal
with high disconnection and decreasing level of sales. The exception were the
operators of Ku-Band technology, that could take advantage of the delay in the
new licenses auction promoted by ANATEL (Brazilian Telecommunications Agency),
and of the reach of their technology - most of the Brazilian footprint.
Tevecap's operations reacted swiftly to the difficult market conditions,
implementing a strict disconnection policy and credit check for new subscribers,
creating the first tiering programming package and de-emphasizing sales in the C
class. As a result of these actions, Tevecap's subscriber base has remained
relatively stable. In addition, our Cable operations continue to experience
impressive growing at 8% during this quarter.
As of September 30, 1998, Tevecap had approximately 1.3 million direct and
indirect subscribers, an increase of 0.7% over 2Q98, and a 5.7% increase over
the 4Q97 subscriber base. The table below sets forth the number of subscribers
as of September 30, 1998 and June 30, 1998.
Subscriber Base
Sep-98 Jun-98 Chg%
------ ------ -----
MMDS 195,060 201,998 -3.4%
Cable 123,344 115,528 6.8%
C Band 69,065 71,687 -3.7%
Total Owned Systems 387,469 389,213 -0.4%
TV Filme (MMDS) Total 93,273 111,090
Equity Subscribers 13,708 16,326 -16.0%
Canbras (Cable) Total 50,832 43,420
Equity Subscribers 18,300 15,631 17.1%
Total Operating Ventures (a) 32,007 31,957 0.2%
TVA Distribuidora 419,476 421,170 -0.4%
TVA Satelite (b) 200,154 176,002 13.7%
TVA Programadora 709,189 711,679 -0.3%
TVA Total Subscribers (c) 1,328,819 1,308,851 1.5%
HH receiving TVA 1,440,917 1,431,404 0.7%
- ------------------------
(a) represents equity subscriber base
(b) means Ku Band Subscribers
(c) means employed in the United States, which means that the customer must be
installed and paying on a current basis to be considered a subscriber.
Non-installed backlog and disconnected subscribers are not included in
TVA's Subscriber Base.
Financial Highlights as of September 30, 1998
o Consolidated Net Revenue for 3Q98 reached US$85.7 million, representing an
increase of 5.8% versus US$81.0 million in 2Q98.
o Subscription Revenue amounted to US$68.5 million in 3Q98, a growth of 6.5%
versus US$64.3 million in 2Q98, and an increase of 12.1% versus US$61.1
million in 3Q97. Subscription revenue represented 79.9% of Net Revenue
versus 66.1% in 3Q97.
o Installation Revenue amounted to US$15.9 million in 3Q98, an increase of
6.4% versus US$14.9 million in 2Q98. Installation revenue represented 18.5%
of net revenue for 3Q98 as compared to 29.0% in 3Q97.
o Direct Operating Expenses reached US$50.5 million in 3Q98, a 4.9% increase
versus US$48.2 million in 2Q98. When comparing 3Q98 with 3Q97 we verify
that while Subscription Revenue grew 12.1%, Direct Operating Expenses grew
only 2.8%.
o Selling, General and Administrative Expenses for 3Q98 reached US$26.9
million, an increase of 13.5% versus US$23.7 million in 2Q98. However, this
is a 16.9% decrease when compared with US$ 32.3 million in 3Q97.
o EBITDA reached US$8.3 million in 3Q98, representing a decrease of 9.2% over
the US$9.1 million reported in 2Q98. EBITDA was impacted in 3Q98 mainly due
to the decrease of Ku-Band as shown below:
% Change
3Q98 2Q98 B(W)
---- ---- --------
TVA Distribuidora 11.9 11.2 6.2%
TVA Programadora (1.0) (1.1) 8.3%
TVA Satelite 3.1 4.4 -30.0%
Corporate (5.7) (5.4) -5.4%
Tevecap 8.3 9.1 -9.2%
o Total Operating Expenses for 3Q98 amounted to US$100.4 million, a 7.7%
increase versus US$93.2 million in 2Q98.
o Net loss for 3Q98 was US$36.7 million, an increase of 10.9% compared to a
loss of US$33.1 million in 2Q98.
o Capital Expenditures (cash basis) amounted to US$23.4 million for 3Q98, a
13.4% decrease versus US$27.0 million during 2Q98.
o Capital Expenditures (book basis) for 3Q98 reached US$38.4 million, a
decrease of 7.4% versus US$41.4 million in 2Q98.
o Net Sales in 3Q98 were 71,916 against 62,213 in 2Q98 and the Activation for
3Q98 was 4.1% higher than in the previous quarter.
NEW NET SALES JUL AUG SEP TOT ACTIVATION 3Q98
- ------------- --- --- --- --- ---------- ----
Cable 6,196 6,366 6,918 19,480 Cable 18,790
MMDS 2,764 4,576 8,187 15,526 MMDS 15,343
C-Band 1,973 2,482 2,115 6,570 C-Band 5,071
Ku-Band 5,821 11,290 13,228 30,339 Ku-Band 27,709
TOTAL 16,755 24,713 30,448 71,916 TOTAL 66,913
o The Backlog as of the end of 3Q98 was 13,554 subscribers versus 10,112 in
the previous quarter.
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Tevecap S.A. Page 2/28
Complete Financial Statements are included in pages 24 - 28
-----------------------------------------------------------
2. Operational Performance 3Q98
----------------------------
TVA Distribuidora
a) Cable Operation Overview
The following table describes TVA's Cable Plant as of September 30, 1998:
<TABLE>
<CAPTION>
Total Optical
Network Fiber Homes Density Penetration
(Km) (Km) Passed (HP/Km) (Subs/HP) Subs Base
---- ---- ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
TVA SISTEMA - SP 2,044 969 580,258 284 14.6% 84,461
TVA SUL - 4 cities 1,215 117 263,999 217 14.7% 38,883
TOTAL OWNED SYSTEMS 3,259 1,086 844,257 259 14.6% 123,344
Canbras TVA - 10 cities 1,212 119 321,699 265 15.7% 50,832
TOTAL 4,471 1,205 1,165,956 261 14.9% 174,176
</TABLE>
TVA Sistema's Cable platform was built with state-of-the-art technology
which has 79% of 750 MHz bandwidth cable. Moreover, our cable plant can be
easily upgraded for telephone service and is already capable to allow the
Company to offer interactive services such as Internet and home banking.
As of September 30, 1998 TVA`s cable subscriber base, on an equity basis,
amounted to 141,644 subscribers. Comparing Tevecap's cable operations with its
main competitor's operations, considering all cable cities on an equity basis
during the last two quarters, TVA's subscriber base increased by 20.9%, while
the main competitor decreased more than 3.0% for the same period.
As mentioned before in previous press releases, our cable strategy focuses,
among other things, on the concentration of cable services in high-density
affluent areas, mainly occupied by "A" and "B" class households. Current density
statistics are approximately 261 homes per kilometer, at least 50% higher than
the major competitor's density, mainly because C class households are not
covered by the Company's cable plant. TVA's cable plant is almost 100%
addressable while the main competitor's plant has only a 30% addressability.
Subscriber Performance
As of September 30, 1998, Tevecap had 141,644 direct cable subscribers on
an equity basis, an increase of 33.9% since December 31, 1997.
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<PAGE>
Tevecap S.A. Page 3/28
The following table describes the subscriber performance between the
quarters ended June 30, 1998 and September 30, 1998:
Cable Subscriber Evolution (Jul-Sep/98)
TVA TVA Canbras
Sistema Sul TVA(a) Total
------- --- ------- -----
(+) Paying Subs - June 30, 1998 78,642 36,886 15,631 131,159
(+) New Connects 10,961 4,298 3,531 18,790
(+) Net Transferred from MMDS 2,637 353 0 2,990
(-) Disconnects 7,779 2,654 863 11,296
(=) Paying Subs - September 30, 1998 84,461 38,883 18,300 141,644
3rd Q98 Growth 7.4% 5.4% 17.1% 8.0%
Monthly Churn (b) 2.8% 2.1% 1.5% 2.5%
Annual Churn (c) 33.7% 25.6% 18.0% 29.5%
- -----------------
(a) Represents subscribers in an equity basis
(b) Disconnects/(Initial Balance + New Connects + Net Transferred) / 3
(c) Monthly Churn * 12
During 3Q98, considering not only Sao Paulo but also the operations in the
south of Brazil, the total number of new backboned buildings was 370 reaching a
total of 7,095 buildings. Each new backboned building added an average of 35 new
potential subscribers.
Tevecap has always planned to transfer subscribers from MMDS to Cable
technology in recently activated cable areas of the City of Sao Paulo. During
the last nine months, in Sao Paulo, the country's most competitive area, our
cable subscriber base grew 44% in comparison with the decrease of 14% suffered
by our competitor in this city. Even excluding the subscriber migration from
MMDS to cable, our growth was 28% over the ending balance on December 31, 1997,
and we believe that this performance will continue in the next quarter.
As illustrated in the graph below, the transfer is almost completed.
Subs transferred from MMDS
[BAR CHART]
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Tevecap S.A. Page 4/28
The graph below shows sales evolution for the first nine months of 1998.
Sales Volume per Month
[BAR CHART]
The following highlights demonstrate how the Company is facing key issues
such as competition, providing high costume service and increasing
profitability.
Tevecap's Installation Performance
- ----------------------------------
As shown below, the Company maintained its installation performance in order
to accomplish its strategy of activation-sale-installation.
% of installation as of daily sales
Jan. - 61%
Feb. - 78%
Mar. - 76%
Apr. - 94%
May - 93%
June - 99%
July - 98%
Aug. - 98%
Sept. - 99%
As a result of this strategy, backlog continues at a very low level.
Backlog (in days of installation)
Jan. - 13
Feb. - 11
Mar. - 6
Apr. - 6
May - 4
June - 2
July - 2
Aug. - 2
Sept. - 2
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Tevecap S.A. Page 5/28
Churn and bad debt level trend
- ------------------------------
Although present churn is still considered high by the Company, the action
plan implemented in 1Q98 is showing a declining trend for churn in the future.
Annualized Churn
1Q98 - 30.9%
2Q98 - 30.1%
3Q98 - 29.5%
Regarding collection procedures, we continue to enforce our 30-day past due
disconnection policy. The chart below summarizes the steps taken towards
delinquent subscribers as mentioned in our 2Q98 press release:
COLLECTIONS AND PROVISIONS
[DIAGRAM]
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Tevecap S.A. Page 6/28
Cable Strategy
- --------------
TVA Distribuidora operation has achieved its budgeted cable subscriber goals
by targeting A and B social classes combined with the implementation of
affordable programming packages.
As shown in the chart below, TVA Distribuidora's cable operation has
sustained the monthly fee throughout the first nine months of 1998. Since TVA
has already invested and almost completed the total cable plant, our strategy is
to reduce the hook-up fee. Only a symbolic amount is charged to the new
subscriber. As a result of this strategy we reduced an average of 34.5% when
compared with 2Q98 fees.
<TABLE>
<CAPTION>
(US$ per new subs)
Hook-up fee Monthly fee
------------------------------ ------------------------------
2Q98 3Q98 % Chg. 2Q98 3Q98 % Chg.
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
TVA Sistema $ 51.39 $ 35.80 -30.3% $ 44.99 $ 43.68 -2.9%
TVA Sul $ 49.37 $ 27.47 -44.4% $ 36.26 $ 36.05 -0.6%
TOTAL $ 50.86 $ 33.31 -34.5% $ 42.71 $ 41.39 -3.1%
</TABLE>
Presently, TVA offers up to 54 analog channels with capacity to offer up to
78 analog channels. The following shows Sao Paulo's tiering table with prices in
US$.
Package Channels Price(1)
------- -------- --------
Essencial 36 31.84
Especial 52 37.26
Cine Show 39 46.33
Total 55 50.72
-------------------
(1) TVA Sul's packages are cheaper than Sao Paulo's packages
The following page contains the line-up for our cable Operations as of
September 30, 1998. On November 1, 1998 we launched a new channel aiming at
teenagers, Locomotion:
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Tevecap S.A. Page 7/28
Cable Line-up
- -------------
Cable Channel Packages (1)
Essencial Package
CBI Comunitario Electronic Guide ESPN Intl.
TV Legislativa Cultura * Bravo Brasil Eurochannel
TV Senado Globo * Cartoon Fox Kids
CBS Manchete * Discovery MTV *
Bandeirantes * Record * CMT Mundo
Canal 21 * Rede Mulher * CNN Espanol Sony
Canal So Paulo Rede Vida * E! TNT
CNT * SBT * ESPN Brasil Warner
TVE Rio * CNV TV Gospel Vinde TV
Cine Show Package = Essencial plus ...
HBO HBO 2 Cinemax
Especial Package = Essencial plus ...
ART CNN Intl. Discovery Kids DW
Fox Nickelodeon RAI RTPi
TeleUno Travel Channel EV 5 TV Espana
WorldNet NHK MGM Gold America 2
Total Package = All channels listed above
- -----------------
(1) Based on Sao Paulo tiering
* Names in Bold Blue mean Broadcast TV
According to the Brazilian Cable legislation, off-air channels are a
must-carry for cable operations.
b) MMDS Operation Overview
TVA Distribuidora has four MMDS licenses and operates in the Cities of Sao
Paulo, Rio de Janeiro, Porto Alegre and Curitiba. These areas have a LOS of
almost 5 million A, B and C households, for a total population of close to 17.4
million. As of September 30, 1998, 195,176 MMDS subscribers were served in this
area. Through a tiered pricing system and 100% addressable decoder boxes, its
MMDS system offers up to 31 channels. Since customers may select the programming
packages they want and can afford, tiered pricing is expected to attract more
subscribers. This will also reduce future churn rates. Customers may select from
four packages varying from US$25 to US$46, for 19 to 31 channels.
The Company continues working on the MMDS Digitalization that could provide
an important tool to expand channel capacity up to 100 channels, with digital
signal quality. This project may be available for 1999 in Rio de Janeiro.
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<PAGE>
Tevecap S.A. Page 8/28
Subscriber Performance
----------------------
In the second quarter of 1998, TVA Distribuidora had 208,767 MMDS
subscribers on an equity basis, a decrease of 4.4% over June 30, 1998.
The following table sets forth the subscriber performance between the
quarters ended June 30, 1998 and September 30, 1998:
MMDS Subscriber Evolution (Jul-Sep/98)
TVA TVA TV
Sistema Sul Filme(a) Total
------- --- -------- -----
(+) Paying Subs - June 30, 1998 184,268 17,730 16,326 218,324
(+) New Connects 13,263 1,292 788 15,343
(-) Net Transferred to Cable 2,637 353 0 2,990
(-) Disconnects 15,630 2,873 3,407 21,910
(=) Paying Subs - September 30, 1998 179,264 15,796 13,708 208,768
3rd Q98 Growth -2.7% -10.9% -16.0% -4.4%
Monthly Churn (b) 2.6% 4.9% 6.6% 3.1%
Annual Churn (c) 31.2% 59.3% 79.6% 37.0%
- ---------------------------
(a) Represents subscribers in an equity basis
(b) Disconnects/(Initial Balance + New Connects + Net Transferred) / 3
(c) Monthly Churn * 12
The graph below shows sales evolution for the first nine months of 1998.
Sales Volume per Month
[BAR CHART]
Popular package for the C class
- -------------------------------
As mentioned in our last report, MMDS operations serve a 35 Km radius from
the main antenna, covering 2.4 million C class households, which represents a
great opportunity for the Company. Based on the premise above, the Company is
working on the implementation of a new tiered programming package to reach C
class
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Tevecap S.A. Page 9/28
MMDS Strategy
- -------------
The strong credit policy associated with our ability to disconnect
delinquent subscribers is proving that TVA has a consistent strategy. The chart
below shows that MMDS churn declined at an impressive rate and as a result the
company is presenting a Subscriber Base more reliable with this technology. The
churn for 3Q98 is slightly higher than cable churn. The company believes this
churn to be acceptable taking into account the Brazilian economic situation.
Tevecap continues to believe that when the market stabilizes, the MMDS churn
rate will decrease to a monthly average around 1.5%. While the market is
maturing, Tevecap's focus is to manage this technology using strong credit
policy. Therefore, we expect to be reporting to the market a low-growth but
better-quality MMDS subscriber base, and part of this result can already be seen
in the churn reduction during this year for this technology.
Annualized Churn
----------------
1Q98 - 63.7%
2Q98 - 50.5%
3Q98 - 34.8%
As a result of a better sales strategy focusing on the premium packages for
high quality subscribers with capacity to pay and stay in our Subscriber Base,
the Company is presenting an increase of 6.7% in the monthly fee for new
subscribers. The same policy applied for Cable, mentioned in the previous
section, was implemented for MMDS technology reducing the hook-up fee.
<TABLE>
<CAPTION>
(US$ per new subs)
Hook-up fee Monthly fee
------------------------------ ------------------------------
2Q98 3Q98 % Chg. 2Q98 3Q98 % Chg.
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
TVA Sistema $ 85.79 $ 38.24 -55.4% $ 39.21 $ 39.96 1.9%
TVA Sul $ 94.32 $ 48.74 -48.3% $ 26.80 $ 32.82 22.5%
TOTAL $ 87.37 $ 39.09 -55.3% $ 36.91 $ 39.38 6.7%
</TABLE>
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Tevecap S.A. Page 10/28
MMDS Line-up
- ------------
Currently TVA offers four different programming tiers:
MMDS Channel Package (1)
Essencial Package
Bravo Cartoon Electronic Guide Discovery
Bandeirantes * ESPN Brasil ESPN Intl. Eurochannel
Fox Kids MTV * Mundo Sony
TNT Warner Cultura * E!
SBT * CBS CMT
Cine Show Package = Essencial plus ...
HBO HBO 2 Cinemax
Especial Package = Essencial plus ...
CNN Intl Fox Discovery Kids Nickelodeon
RAI RTPi Travel Channel MGM Gold
Total Package = All channels listed above
- ----------------------
(1) Based on Sao Paulo and Rio de Janeiro tiering
* Names in Bold Blue mean Broadcast TV
In accordance with the MMDS legislation, Brazilian off-air channels do not
enjoy "must carry" status, and frequencies occupied by MMDS are being reserved
to future digital distribution of services.
At this moment, TVA offers up to 30 analog channels. See below our price
list based on the Sao Paulo and Rio de Janeiro Operations in US$.
Package Channels Price(1)
------- -------- --------
Essencial 19 25.32
Especial 27 31.76
Cine Show 22 40.82
Total 30 45.48
- ----------------------
(1) TVA Sul's packages are cheaper than Sao Paulo's packages
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Tevecap S.A. Page 11/28
c) C-Band Operation Overview
Today TVA is the only Pay-TV operator to deliver a digital C-Band signal in
Brazil. TVA has provided C-Band service since 1993. Currently TVA is the most
inexpensive DTH service in the market, being sold at US$84 for the hook-up fee
and a monthly fee of US$42, offering up to 24 Pay-TV channels, in addition to
local off-air channels. At the end of September 1998, TVA had 69,065 C-Band
subscribers representing a decrease of 3.7% as compared to 2Q98.
Subscriber Performance
During the third quarter, C-Band's subscriber base decreased 3.7% as
compared to the end of the second quarter as mentioned above.
The following table shows subscriber performance between the quarters ended
June 30, 1998 and September 30, 1998:
C-Band Subscriber Evolution
(Jul-Sep/98)
TVA
Sistema
-------
(+) Paying Subs - June 30, 1998 71,687
(+) New Connects 5,071
(+) Net Transferred from/to other Operations 0
(-) Disconnects 7,693
(=) Paying Subs - September 30, 1998 69,065
3rd Q98 Growth -3.7%
Monthly Churn (a) 3.3%
Annual Churn (b) 40.1%
- -------------------
(a) Disconnects/(Initial Balance + New Connects + Net Transferred) / 3
(b) Monthly Churn * 12
The graph below shows sales evolution for the first nine months of 1998.
Sales Volume per Month
[BAR CHART]
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Tevecap S.A. Page 12/28
C-Band Strategy and Prices
- --------------------------
Since the competition abandoned C-Band operations, TVA has been alone in
this market. In view of this and as part of the new general strategic planning
of TVA combining the four technologies, C-Band is being repositioned to be the
target technology to reach condominiums, hotels, motels and areas not covered by
Ku-Band footprint.
During this quarter, C-Band Operations continued focusing on MDU sales (bulk
installation in multiple dwelling units) reduced hook-up and monthly fee, under
specific conditions. As a result of such sales, both the hook-up and monthly fee
were reduced, as shown below:
<TABLE>
<CAPTION>
(US$ per new subs)
Hook-up fee Monthly fee
------------------------------ ------------------------------
2Q98 3Q98 % Chg. 2Q98 3Q98 % Chg.
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
TVA Sistema $ 60.38 $ 32.23 -46.6% $ 35.90 $ 25.02 -30.3%
</TABLE>
When making any comparison to the Company's major competitor in Brazil,
market analysts should add this subscriber base to DirecTV(TM)'s subscriber
base, since the competitor merged its C-Band and Ku-Band technologies in the
same legal entity.
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<PAGE>
Tevecap S.A. Page 13/28
d) TVA Distribuidora - 3Q98 Income Statement
<TABLE>
<CAPTION>
TVA DISTRIBUIDORA S.A.
Income Statement
For the Three-Month Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
3Q98 2Q98 3Q97
----------------- ---------------------------- ----------------------------
3Q98/ 3Q98/
% Net % Net 2Q98 % Net 3Q97
$000 Revenue $000 Revenue % Change %000 Revenue % Change
---- ------- ---- ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly subscriptions 42,204 104.1% 38,713 104.7% 9.0% 44,914 90.9% -6.0%
Installation (Hook-up fee) 921 2.3% 1,104 3.0% -16.6% 6,579 13.3% -86.0%
Advertising
Indirect programming
Other 847 2.1% 55 0.1% 1440.0% 1,520 3.1% -44.3%
Gross revenue 43,972 108.4% 39,872 107.8% 10.3% 53,013 107.3% -17.1%
Revenue taxes (3,424) -8.4% (2,889) -7.8% 18.5% (3,606) -7.3% -5.0%
Net revenue 40,548 100.0% 36,983 100.0% 9.6% 49,407 100.0% -17.9%
Direct operating expenses 20,928 51.6% 19,061 51.5% 9.8% 22,361 45.3% -6.4%
S,G&A expenses 7,733 19.1% 6,729 18.2% 14.9% 12,386 25.1% -37.6%
EBITDA 11,887 29.3% 11,192 30.3% 6.2% 14,660 29.7% -18.9%
</TABLE>
Highlights as of September 30, 1998
o TVA owned operations' Net Sales reached 36,223 subscribers in 3Q98
representing a 7% growth over 2Q98 Net Sale.
o EBITDA reached US$11.9 million in 3Q98, a growth of 6.2% when compared to
2Q98.
o As presented in the table below, Installation Revenue decreased 16.6% as
compared to 2Q98. The main reason was the reduction in hook-up fees for all
three technologies.
Price
Reduction Installation Revenue (US$ million)
--------- ------------------------------------
3Q98 3Q98 2Q98 % Chg
---- ---- ---- -----
Cable -34.5% 468 678 -31.0%
MMDS -55.3% 397 780 -49.1%
C-Band -46.6% 56 -354
--- ---- ------
TOTAL 921 1,104 -16.6%
o Monthly Subscription revenue grew 9.0% as compared to 2Q98. Although there
was almost no variation in the comparison of the average monthly fee and
subscriber base evolution in 3Q98, this performance can be explained by
unusual high write-off concerning non-receivable account in the previous
quarter. Performance on a technology-per-technology basis is as follows:
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<PAGE>
Tevecap S.A. Page 14/28
(US$ million)
3Q98 2Q98 % Chg
---- ---- -----
Cable 13,396 10,419 28.6%
MMDS 21,960 22,627 -2.9%
C-Band 6,848 5,667 20.8%
----- ----- -----
TOTAL 1 42,204 38,713 9.0%
Write-off 1,633 5,134 -68.2%
----- ----- ------
TOTAL 2 43,837 43,847 0.0%
o Direct Operating Expenses grew 9.8% when compared to 2Q98, almost the same
growth experienced in Monthly Subscription. As a percentage of Net Revenue,
Direct Operating Expenses remained stable at the level of 51.6%.
o Net S,G&A Expenses decreased 18.7% as shown in the table below. However,
since TVA's policy is to make a 100% provision for potential bad debt,
there was a 14.9% growth in the Total S,G&A Expenses as compared to 2Q98 by
virtue of an increase in Allowance for Doubtful Accounts.
(US$ million)
3Q98 2Q98 % Chg
----- ----- ------
Net S,G&A 4,956 6,094 -18.7%
Allowance for Doubtful Accounts 2,777 636 336.6%
----- --- ------
TOTAL S,G&A 7,733 6,730 14.9%
TVA Satelite
a) Ku-Band Operation Overview
DirecTV(TM) was the first digital Ku-Band service offered in Brazil and, as
of September 30, 1998, had a little over 200 thousand subscribers, an increase
of 13.7% over the 176 thousand subscribers in 2Q98.
In order to make a comparison of our subscriber base with our major
competitor's subscriber base, it is necessary to add our C-Band subscribers to
DirecTV's base, resulting in a total subscriber base of 270 thousand against the
competition's 249 thousand, since our major competitor merged its C-Band into
its Ku-Band operation.
As of September 30, 1998, the entrance cost for a new subscriber was US$337
as a hook-up fee plus a monthly fee of US$11 as a decoder rental to the
customer. The US$11 is built in the total monthly subscription fee of US$56.This
operation has been funded with a long-term lease finance facility not requiring
subsidies in subscribers acquisition.
Next year Galaxy may count on new equipment that will allow the operation to
increase the number of channels, changing the compression rate from 7:1 to 12:1.
Consequently, the number of video channels may be increased from the current 94
to up to 161 channels. This additional capacity could be filled with the
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<PAGE>
Tevecap S.A. Page 15/28
following channels, which are still under negotiation: USA Network (Brazilian
channel), Telecine channels, Turner Classic Movies, a second Japanese channel
and a pay-per-view sports channel with the Spanish and Italian soccer
championships plus NFL (USA football) and NBA (USA basketball).
Subscriber Performance
In the third quarter of 1998, DirecTV(TM) had approximately 200,000 direct
Ku-Band subscribers, an increase of 13.7% over June, 1998.
The following table shows subscriber performance between June 30, 1998 and
September 30, 1998 and previous months:
KU-Band Subscriber Evolution
(Jul-Sep/98)
Galaxy
Brasil
------
(+) Paying Subs - June 30, 1998 176,002
(+) New Connects 27,709
(+) Net Transferred from/to other Operations 0
(-) Disconnects 3,557
(=) Paying Subs - September 30, 1998 200,154
3rd Q98 Growth 13.7%
Monthly Churn (a) 0.6%
Annual Churn (b) 7.0%
- ------------------
(a) Disconnects/(Initial Balance + New Connects + Net Transferred) / 3
(b) Monthly Churn * 12
Although DirecTV(TM) had an overall disconnection rate of 0.6% for 3Q98, the
monthly churn rate has been stable since last May, when it declined from 1.3% to
0.7%, which was the average rate maintained for the past five months. We expect
this rate to remain stable for the remainder of 1998.
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<PAGE>
Tevecap S.A. Page 16/28
Strong sales increase as foreseen in our latest report.
- -------------------------------------------------------
Sales increased 31%, from 23,114 new net sales during 2Q98 to 30,339 in
3Q98, while growth from 1Q98 to 2Q98 was 7.3%.
Sales Volume per Month
[BAR CHART]
This strong performance was due to the sales force in-housing as mentioned
in the 2Q98 earnings report. Notwithstanding the quality of the sales force, the
Company reinforced all sales channels as follows:
o Increased number of sales kiosks in shopping centers, malls and
supermarkets in large cities;
o 10% increase in Direct Sales team (door-to-door);
o Better productivity in Active Sales Telemarketing, by increasing number of
sales per call.
o Regional Sales Team continued to work very close to dealers, coaching and
assisting them to achieve more sales.
Average hook-up fee had a small decrease due to the promotional price for
MDU while the monthly fee remained almost unchanged. For next quarter we expect
a higher reduction in hook-up fees due to the October price reduction.
<TABLE>
<CAPTION>
(US$ per new subs)
Hook-up fee Monthly fee
------------------------------- -----------------------------
2Q98 3Q98 % Chg. 2Q98 3Q98 % Chg.
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Galaxy Brasil $ 324.47 $ 316.34 -2.5% $ 48.52 $ 49.00 1.0%
</TABLE>
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<PAGE>
Tevecap S.A. Page 17/28
b) TVA Satelite - 3Q98 Income Statement
<TABLE>
<CAPTION>
TVA SATELITE LTDA.
Income Statement
For the Three-Month Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
3Q98 2Q98 3Q97
--------------------- --------------------------------- -------------------------------
3Q98/ 3Q98/
% Net % Net 2Q98 % Net 3Q97
$000 Revenue $000 Revenue % Change $000 Revenue % Change
---- ------- ---- ------- -------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly subscriptions 26,298 69.1% 25,615 70.0% 2.7% 16,182 48.1% 62.5%
Installation (Hook-up fee) 14,964 39.3% 13,821 37.8% 8.3% 20,223 60.1% -26.0%
Advertising
Indirect programming
Other
Gross revenue 41,262 108.4% 39,436 107.8% 4.6% 36,405 108.1% 13.3%
Revenue taxes (3,213) -8.4% (2,852) -7.8% 12.7% (2,733) -8.1% 17.6%
Net revenue 38,049 100.0% 36,584 100.0% 4.0% 33,672 100.0% 13.0%
Direct operating expenses 24,209 63.6% 22,591 61.8% 7.2% 18,377 54.6% 31.7%
S,G&A expenses 10,733 28.2% 9,552 26.1% 12.4% 12,493 37.1% -14.1%
EBITDA 3,107 8.2% 4,441 12.1% -30.0 2,802 8.3% 10.9%
</TABLE>
Highlights as of September 30, 1998
o Monthly Subscriptions amounted to US$26.3 million in 3Q98, an increase of
2.7% versus US$25.6 million in 2Q98, due to the growth in the subscriber
base.
o Installation Revenue also increased 8.3% as a result of the 13.7% increase
in the subscriber base, offset by the 2.5% hook-up fee decrease.
o Direct Operating Expenses increased from 61.8% in 2Q98 to 63.6% in 3Q98,
due to the additional structure to manage installation and customer
service.
o S,G&A, as a percentage of Net Revenue, increased from 26.1% in 2Q98 to
28.2% in 3Q98 due to higher investment in marketing and new points of sales
in shopping centers and higher commissions due to increased sales volume.
o EBITDA decreased 30.0% as compared to 2Q98, and increased 10.9% when
compared to 3Q97. The decrease in EBITDA was due to up-front operational
investments, mentioned above, to guarantee the continuous growth of the
Company.
TVA Programadora
TVA's programming is distributed by TVA to its owned and operated Multiple
System Operator (MSOs), its affiliated MSOs and to independent operators. By the
end of 3Q98, programming was distributed to almost 1.5 million households. Among
its proprietary channels, TVA Programadora includes ESPN Brasil, HBO Brasil
channels - HBO 1, HBO 2 (multiplexed) and Cinemax - Bravo Brasil and
Eurochannel.
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<PAGE>
Tevecap S.A. Page 18/28
a) HBO Brasil Operation Overview
On September 30, 1998, HBO Brasil had 801,178 subscribers, distributed by 73
Pay-TV operators throughout the Country.
Thus far, 1998 continues to be a solid year for HBO in terms of programming
content. The partner studio providers (Disney, Warner, Sony) have been supplying
a significantly superior product than those offered by direct competitors.
Recently launched movies include, "Jerry Maguire", "StripTease", "Scream",
"People Versus Larry Flint", "Jack", "The Devil's Own" and many others.
In July, HBO Brasil released the biggest TV Production ever, HBO's own "From
Earth to the Moon". The mini series was fully backed by a strong advertising
campaign, which contributed to establishing a new threshold of awareness to the
channel. Recent consumer research results show that HBO is the highest rated TV
channel, including the broadcast networks, in terms of satisfaction.
b) ESPN Brasil Operation Overview
On September 30, 1998, ESPN Brasil had 880,810 subscribers, distributed by
71 Pay-TV operators. The channel continues to reinforce its programming content,
including rights to the most important Brazilian, European and South American
soccer leagues, and other relevant Brazilian sports, such as volleyball and
basketball, plus an exclusive license agreement with ESPN2 for Brazil.
c) TVA Channel Operation Overview
TVA has been working on the development of a new package of channels that
addresses the needs of the C social class, which represents the highest
potential in terms of households in the Brazilian market. This social class
penetration is almost non-existant to date.
Extensive market research has been conducted to better understand the
factors that limit these potential consumers from acquiring the service.
A new strategy is being finalized to launch a new service in the near future
that could significantly improve sales performance in this social class, while
ensuring high loyalty levels, so that a consistent new stream of revenues can be
achieved.
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<PAGE>
Tevecap S.A. Page 19/28
Subscriber Performance
In 3Q98, TVA Programadora had approximately 709,000 indirect subscribers, a
decrease of 0.3% over June 30, 1998, as described in the following table:
TVA Programadora Subscriber Evolution
(Jul/Sep/98)
Indirects
---------
(+) Paying Subs - June 30, 1998 711,679
(+) New Connects 24,067
(+) Net Transferred from/to other Operations 0
(-) Disconnects 26,557
(=) Paying Subs - September 30, 1998 709,189
3rd Q98 Growth -0.3%
Monthly Churn (a) 1.2%
Annual Churn (b) 14.4%
- --------------
(a) Disconnects/(Initial Balance + New Connects + Net Transferred) / 3
(b) Monthly Churn * 12
Economic situation affects independent operators
- ------------------------------------------------
During 3Q98 TVA Programadora faced past-due bills from some of the
independent operators that purchased programming from the Company.
The current Brazilian economic situation, with an increasing unemployment
level and consumption reduction that has affected industries across the board,
has led to some independent operators facing problems in their paying capacity.
As a result, the Company suffered an increase in delinquency in this operation
forcing it to take measures to press the operators to pay the overdue amounts or
be disconnected.
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<PAGE>
Tevecap S.A. Page 20/28
d) TVA Programadora - 3Q98 Income Statement
<TABLE>
<CAPTION>
TVA PROGRAMADORA LTDA.
Income Statement
For the Three-Month Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
3Q98 2Q98 3Q97
-------------------- ---------------------------- -----------------------------
3Q98/ 3Q98/
% Net 2Q98 % Net 3Q97
$000 Revenue $000 Revenue % Change %000 Revenue % Change
---- ------- ---- ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly subscriptions
Installation (Hook-up fee)
Advertising 774 11.2% 1,265 17.6% -38.8% 973 10.5% -20.5%
Indirect programming 4,199 60.9% 4,527 62.9% -7.2% 6,459 69.7% -35.0%
Other 2,360 34.2% 1,776 24.7% 32.9% 2,244 24.2% 5.2%
Gross revenue 7,333 106.3% 7,568 105.2% -3.1% 9,676 104.4% -24.2%
Revenue taxes (433) -6.3% (376) -5.2% 15.0% (403) -4.4% 7.2%
Net revenue 6,901 100.0% 7,192 100.0% -4.1% 9,273 100.0% -25.6%
Direct operating expenses 4,900 71.0% 6,512 90.5% -24.7% 8,427 90.9% -41.9%
S,G&A expenses 3,021 43.8% 1,794 24.9% 68.4% 3,893 42.0% -22.4%
EBITDA (1,021) -14.8% (1,113) -15.5% -8.3% (3,046) -32.9% -66.5%
</TABLE>
Highlights as of September 30, 1998
o Advertising Revenue decreased 38.8% as compared to 2Q98 since previous
quarter reflected unusual revenue from coverage of the World Cup coverage.
o Indirect Programming Revenue decreased 7.2% as a result of the change in
the billing process between the programming suppliers and our affiliates
started in 2Q98.
o Direct Operating Expenses decreased 24.7% as a result of the end of World
Cup expenses incurred during 2Q98.
o S,G&A Expenses increased 24.9% due to seasonal expenses with the 1998 ABTA
(International Pay-TV Congress and Fair), and high marketing expenses.
3. Tevecap's Consolidated 3Q98 Results
a) Consolidated Results
Monthly Subscription Revenue
3Q98 2Q98 3Q97
---- ---- ----
US$ million 68,502 64,328 61,096
% of Gross Revenue 73.8% 73.9% 61.6%
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<PAGE>
Tevecap S.A. Page 21/28
During 3Q98, Monthly Subscription Revenue increased 6.5% as compared to
2Q98. This performance was due mainly to the write-off impact, as explained in
TVA Distribuidora's Income Statement Highlights, that was unusually high in
2Q98.
Installation Revenue
--------------------
3Q98 2Q98 3Q97
---- ---- ----
US$ million 15,885 14,925 26,802
% of Gross Revenue 17.1% 17.1% 27.0%
During 3Q98, Installation Revenue increased 6.4% as compared to 2Q98. It is
important to note that this performance was due to the 13.7% increase in
Ku-Band's subscriber base, partially offset by the decrease in hook-up fee for
all technologies.
The chart below shows the performance of sales in 3Q98 and 2Q98:
3Q98 2Q98 Chg. %
---- ---- ------
MMDS 14,691 11,281 30.2%
Cable 14,962 14,946 0.1%
C Band 6,570 7,612 -13.7%
Ku Band 30,339 23,114 31.3%
------ ------ -----
Total O&O 66,562 56,953 16.9%
Ventures 5,354 5,260 1.8%
------ ------ -----
Total 71,916 62,213 15.6%
Indirect Programming Revenue
----------------------------
3Q98 2Q98 3Q97
---- ---- ----
US$ million 4,199 4,527 6,459
% of Gross Revenue 4.5% 5.2% 6.5%
The decrease of Indirect Programming Revenue is due to a change in the
billing process between the programming suppliers and our affiliates started in
2Q98.
Direct Operating Expenses
-------------------------
3Q98 2Q98 3Q97
---- ---- ----
(+) Direct Operating Expenses 26,205 21,205 25,302
(excluding programming)
% of Net Revenue 30.6% 26.2% 27.4%
(+) Programming 24,340 26,959 23,863
% of Net Revenue 28.4% 33.3% 25.8%
(=) Direct Operating Expenses 50,545 48,164 49,165
% of Net Revenue 59.0% 59.5% 53.2%
Overall, the Direct Operating Expenses as a percentage of Net Revenue
continue under control and are declining. During this quarter, programming costs
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<PAGE>
Tevecap S.A. Page 22/28
decreased 9.7% due to negotiation finalized during 3Q98. This gain was offset by
additional changes to manage installation and customer service in the Ku-Band
operation.
Selling, General and Administrative expenses
--------------------------------------------
3Q98 2Q98 3Q97
---- ---- ----
Selling Expenses 7,782 5,117 9,935
% of Net Revenue 9.1% 6.3% 10.8%
Allowance for doubtful accounts 3,835 2,062 1,850
% of Net Revenue 4.5% 2.5% 2.0%
G&A 15,246 16,491 20,526
% of Net Revenue 17.8% 20.4% 22.2%
SG&A 26,863 23,670 32,312
% of Net Revenue 31.3% 29.2% 35.0%
During 3Q98, S,G&A increased by 13.5% over 2Q98. This increase was due to
higher investment in marketing and new points of sales in shopping centers and
higher commissions related to increased sales volume in the DirecTV operation,
this was also due to a 14.9% increase in Allowance for Doubtful Accounts in TVA
Distribuidora since the Company's policy is to make a 100% provision for
potential bad debt. As of September 30, 1998, the Company had a provision of
US$18.4 million for doubtful accounts, 21.2% higher when compared to June 30,
1998.
EBITDA 3Q98 2Q98 3Q97
------ ---- ---- ----
US$ million 8,299 9,138 10,905
% of Net Revenue 9.7% 11.3% 11.8%
EBITDA Margin in 3Q98, as a percentage of Net Revenue, decreased from 11.3%
in 2Q98 to 9.7% in 3Q98. When comparing 3Q98 with 1Q98 there was an increase
from 8.9%. On an operation-per-operation basis, TVA Distribuidora experienced a
consistent EBITDA as shown below
3Q98 2Q98 3Q97
---- ---- ----
TVA Distribuidora 29.3% 30.3% 29.7%
TVA Programadora -14.8% -15.5% -32.9%
TVA Satelite 8.2% 12.1% 8.3%
Operating Loss
--------------
During 3Q98 Operating Loss was US$14.7 million, an increase of 19.9% over
the US$12.3 million loss reported for 2Q98.
Interest Income/Expense
-----------------------
Net Interest Income/Expense was US$15.7 million for 3Q98, an 8.2% decrease
when compared with US$17.1 reported for 2Q98.
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<PAGE>
Tevecap S.A. Page 23/28
Equity losses of affiliates
---------------------------
This item amounted to a loss of US$1.9 million in 3Q98 versus US$3.3
million in 2Q98. This loss was comprised of ESPN Brasil (US$1.6 million), HBO
Brasil (US$0.2 million) and Canbras TVA (US$0.1 million).
b) Financial Situation
The following table sets forth Tevecap's Debt breakdown and Capitalization
for 3Q98, 2Q98 and 3Q97:
3Q98 2Q98 3Q97
---- ---- ----
Short Term Debt 73,470 69,317 59,570
Long Term Debt 408,492 385,174 353,051
------- ------- -------
Total Debt 481,962 454,491 412,621
Shareholders' Equity 848 37,518 28,427
------- ------- -------
Capitalization 482,810 492,009 441,048
During 3Q98, Total Debt increased US$27.5 million, which means that Tevecap
accrued US$15.7 million of interest expense and increased net new debt by
US$11.8 million used to finance expansion, a US$5.1 million less than the
US$16.9 million in 2Q98.
The following table shows the debt breakdown for the end of 3Q98, and the
subsequent graph shows an estimated debt cash flow for the remaining period of
1998 up to the year 2004, when Senior Notes become due.
Debt balance as of September 30, 1998 (US$000)
----------------------------------------------
<TABLE>
<CAPTION>
High
Yield Trade Box Loans
(12-5/8% P.Y.) Eximbank financing Finame Leasing from Abril TOTAL
------------- -------- --------- ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM 10,872 6,446 45,905 267 9,980 0 73,470
LONG TERM 250,000 14,976 3,312 0 25,998 114,205 408,491
TOTAL 260,872 21,422 49,217 267 35,978 114,205 481,961
Remaining Term (years) 6.3 3.6 0.8 2.5 3.7 4.2
</TABLE>
Debt Cash Flow (US$MM)
----------------------
[BAR CHART]
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<PAGE>
Tevecap S.A. Page 24/28
c) Consolidated Balance Sheet
<TABLE>
<CAPTION>
TEVECAP S.A.
Consolidated Balance Sheet
For the Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
(in thousands of US dollars)
Sep 30, Jun 30, % Sep 30, %
1998 1998 Chg. 1997 Chg.
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 3,639 1,270 187% 8,574 -58%
Accounts receivable, net 46,759 46,999 -1% 48,151 -3%
Inventories 16,930 19,106 -11% 24,583 -31%
Film exhibition rights 1,898 1,551 22% 503 277%
Prepaid and other assets 6,577 15,228 -57% 15,170 -57%
Other accounts receivable 15,010 13,967 7% 9,781 53%
-------- -------- -------- -------- ---------
Total current assets 90,813 98,121 -7% 106,762 -15%
-------- -------- -------- -------- ---------
Property, plant and equipment 470,414 454,502 4% 377,818 25%
Investments
- Equity affiliates 1,612 2,992 -46% 8,867 -82%
- Cost basis investees 48,905 44,905 9% 27,735 76%
- Concessions, net 12,496 12,922 -3% 14,202 -12%
Loans to related companies 29,562 29,387 1% 20,688 43%
Prepaid expenses 6,437 6,985 -8% 8,269 -22%
Other 2,595 2,253 15% 2,537 2%
-------- -------- -------- -------- ---------
Total assets 662,834 652,067 2% 566,878 17%
======== ======== ======== ======== =========
--------
Short-term bank loans 73,470 69,317 6% 59,570 23%
Film suppliers 34,073 30,167 13% 24,491 39%
Other suppliers 86,247 74,806 15% 44,663 93%
Taxes payable other than income taxes 17,380 14,679 18% 10,785 61%
Accrued payroll and related liabilities 7,941 7,057 13% 8,204 -3%
Advance payments received from 3,112 3,110 0% 5,514 -44%
subscribers
Other accounts payable 10,307 8,638 19% 7,333 41%
-------- -------- -------- -------- ---------
Total current liabilities 232,530 207,774 12% 160,560 45%
-------- -------- -------- -------- ---------
Long term bank loans 294,287 296,305 -1% 308,237 -5%
Loans from related companies 114,205 88,869 29% 40,861 179%
Loans from shareholders 3,953 -100%
Provision for claims 7,668 7,285 5% 5,220 47%
Liability to fund joint venture 158 51 877 -82%
and equity investee
Deferred hook up fee revenue 9,373 10,281 -9% 17,455 -46%
-------- -------- -------- -------- ---------
Total long-term liabilities 425,691 402,791 6% 376,603 13%
-------- -------- -------- -------- ---------
Minority interest 3,765 3,984 -5% 1,288 192%
Paid-in-capital 387,803 387,803 0% 287,962 35%
Accumulated deficit (386,955) (350,285) 10% (259,535) 49%
-------- -------- -------- -------- --------
Total shareholders' equity 848 37,518 -98% 28,427 -97%
-------- -------- -------- -------- --------
Total liabilities and shareholders' 662,834 652,067 2% 566,878 17%
equity ======== ======== ======== ======== ========
</TABLE>
<PAGE>
d) Tevecap - 3Q98 Income Statement
<TABLE>
<CAPTION>
TEVECAP S.A.
Income Statement
For the Three-Month Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
3Q98 2Q98 3Q97
------------------ ---------------------------- ----------------------------
3Q98/ 3Q98/
% Net % Net 2Q98 % Net 3Q97
$000 Revenue $000 Revenue % Change $000 Revenue % Change
---- ------- ---- ------- -------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly subscriptions 68,502 79.9% 64,328 79.4% 6.5% 61,096 66.1% 12.1%
Installation (Hook-up fee) 15,885 18.5% 14,925 18.4% 6.4% 26,802 29.0% -40.7%
Advertising 774 0.9% 1,265 1.6% -38.8% 973 1.1% -20.5%
Indirect programming 4,199 4.9% 4,527 5.6% -7.2% 6,459 7.0% -35.0%
Other 3,421 4.0% 2,048 2.5% 67.0% 3,791 4.1% -9.8%
Gross revenue 92,781 108.3% 87,093 107.6% 6.5% 99,121 107.3% -6.4%
Revenue taxes (7,074) -8.3% (6,121) -7.6% 15.6% (6,740) -7.3% 5.0%
Net revenue 85,707 100.0% 80,972 100.0% 5.8% 92,381 100.0% -7.2%
Direct operating expenses 50,545 59.0% 48,164 59.5% 4.9% 49,165 53.2% 2.8%
S,G&A expenses 26,863 31.3% 23,670 29.2% 13.5% 32,312 35.0% -16.9%
EBITDA 8,299 9.7% 9,138 11.3% -9.2% 10,905 11.8% -23.9%
Allowance for obsolescence of 31 0.0% 49 0.1% -36.4% (96) -0.1% -132.7%
material
Depreciation and amortization 22,983 26.8% 21,365 26.4% 7.6% 15,283 16.5% 50.4%
Operating loss (14,715) -17.2% (12,276) -15.2% 19.9% (4,282) -4.6% 243.7%
Interest income 432 0.5% 771 1.0% -44.0% 1,777 1.9% -75.7%
Interest expenses (16,088) -18.8% (17,830) -22.0% -9.8% (15,019) -16.3% 7.1%
Translation (loss) gain (2,352) -2.7% 229 0.3% -1127.1% 815 0.9% -388.6%
Equity in losses of affiliates (1,904) -2.2% (3,322) -4.1% -42.7% (1,733) -1.9% 9.9%
Other nonoperating (expenses) (2,261) -2.6% (1,230) -1.5% 83.8% (310) -0.3% 629.4%
income, net
Loss before income taxes and minority (36,888) -43.0% (33,658) -41.6% 9.6% (18,752) -20.3% 96.7%
interest
Income taxes
Minority interest 217 0.3% 598 0.7% -63.7% 151 0.2% 43.7%
Net income (loss) (36,671) -42.8% (33,060) -40.8% 10.9% (18,601) -20.1% 97.2%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
e) Tevecap - Nine Months ended Sept. 30, 1998 Income Statement
TEVECAP S.A.
Income Statement
For the Nine-Month Periods Ended September 30, 1998 and September 30, 1997
Nine Months ended Nine Months ended
Sept. 30, 1998 Sept. 30, 1997
--------------------------- ---------------------------------
% Net % Net
$000 Revenue $000 Revenue % Change
-------------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Monthly subscriptions 195,708 78.6% 159,046 65.6% 23.1%
Installation (Hook-up fee) 46,110 18.5% 69,230 28.6% -33.4%
Advertising 3,242 1.3% 3,919 1.6% -17.3%
Indirect programming 14,455 5.8% 18,032 7.4% -19.8%
Other 8,484 3.4% 10,351 4.3% -18.0%
Gross revenue 267,999 107.7% 260,578 107.5% 2.8%
Revenue taxes (19,159) -7.7% (18,247) -7.5% 5.0%
Net revenue 248,840 100.0% 242,331 100.0% 2.7%
Direct operating expenses 148,260 59.6% 128,889 53.2% 15.0%
S,G&A expenses 75,853 30.5% 89,720 37.0% -15.5%
EBITDA 24,727 9.9% 23,722 9.8% 4.2%
Allowance for obsolescence of material 80 0.0% 941 0.4% -91.5%
Depreciation and amortization 63,898 25.7% 38,227 15.8% 67.2%
Operating loss (39,251) -15.8% (15,446) -6.4% 154.1%
Interest income 3,970 1.6% 8,169 3.4% -51.4%
Interest expenses (51,215) -20.6% (39,979) -16.5% 28.1%
Translation (loss) gain (2,759) -1.1% (264) -0.1% 945.1%
Equity in losses of affiliates (9,987) -4.0% (7,438) -3.1% 34.3%
Other nonoperating (expenses) income, net (2,760) -1.1% (545) -0.2% 406.4%
Loss before income taxes and minority interest (102,002) -41.0% (55,503) -22.9% 83.8%
Income taxes
Minority interest 1,038 0.4% 542 0.2% 91.5%
Net income (loss) (100,964) -40.6% (54,961) -22.7% 83.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
f) Tevecap - 3Q98 Statement of Cash Flow
TEVECAP S.A.
Statement of Cash Flow
For the Three-Month Periods Ended September 30, 1998; June 30, 1998 and September 30, 1997
(in thousands of U.S. dollars)
3Q98 2Q98 3Q97
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss (36,670) (33,060) (18,600)
Adjustment to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 22,557 20,938 14,484
Amortization 426 427 799
Allowance for doubtful accounts 3,835 2,062 1,199
Allowance for obsolescence 31 49 96
Provision for claims 383 642 131
Minority interest (220) (597) (150)
Equity in losses(earnings) of affiliates 1,904 3,321 1,733
Changes in operating assets and liabilities:
Film exhibition rights (347) 8 103
Accounts receivable (3,595) (5,958) (1,153)
Prepaid and other assets 9,199 (3,723) (12,911)
Other accounts receivable (1,043) 286 5,700
Accrued interest 12,798 11,523 10,308
Inventories 2,146 4,484 (9,097)
Legal deposits (342) 430
Suppliers 15,347 14,016 5,977
Taxes payable other than income taxes 2,701 918 1,716
Accrued payroll and related liabilities 884 775 313
Advances received from subscribers 2 65 (336)
Deferred hook up fee Revenue (908) (909) 3,701
Other accounts payable 1,550 512 (7,812)
Net cash (used in) provided by operating activities 30,638 16,209 (3,799)
Cash flows from investing activities:
Business acquisition
Purchase of fixed assets (38,350) (41,402) (53,183)
Loans to affiliated companies (3) (10,232) (1,409)
Cash received on loans to affiliated companies 28 344 993
Investments in equity and cost investments (4,417) (2,234) (1,157)
Net cash used in investing activities (42,742) (53,524) (54,756)
Cash flows from financing activities:
Loans from Banks 3,359 4,530 26,312
Capital contributions
Loans from shareholders
Loans from affiliated companies 26,108 45,019 13,045
Repayments of loans from affiliated companies (4,921) (4,615)
Repayments of loans from banks (10,073) (22,727) (4,609)
Net cash provided by financing activities 14,473 22,207 34,748
Net (decrease) increase in cash and cash equivalents 2,369 (15,108) (23,807)
Cash and cash equivalents at beginning of the period 1,270 16,378 32,381
Cash and cash equivalents at end of the period 3,639 1,270 8,574
FASB
</TABLE>
<PAGE>
<TABLE>
f) Tevecap - Nine Months ended Sept. 30, 1998 Statement of Cash Flow
TEVECAP S.A.
Statement of Cash Flow
For the Nine-Month Periods Ended September 30, 1998 and September 30, 1997
(in thousands of U.S. dollars)
Nine Months Nine Months
ended ended
Cash flows from operating activities: Sept. 30, 1998 Sept. 30, 1997
- ------------------------------------- -------------- --------------
<S> <C> <C>
Net loss (100,965) (54,961)
Adjustment to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation 62,620 36,470
Amortization 1,279 1,757
Allowance for doubtful accounts 8,588 5,588
Allowance for obsolescence 80 941
Provision for claims 1,761 5,220
Minority interest (1,038) (542)
Equity in losses(earnings) of affiliates 9,986 7,438
Changes in operating assets and liabilities:
Film exhibition rights (607) 558
Accounts receivable (8,345) (21,045)
Prepaid and other assets 15,062 (11,821)
Other accounts receivable (8,330) (6,504)
Accrued interest 27,587 27,036
Inventories 6,581 (12,390)
Legal deposits 88
Suppliers 27,387 8,837
Taxes payable other than income taxes 4,543 4,600
Accrued payroll and related liabilities 1,352 2,065
Advances received from subscribers (1,274) (9,363)
Deferred hook up fee Revenue (2,725) 12,572
Other accounts payable 5,344 (3,610)
Net cash (used in) provided by operating activities 48,974 (7,154)
Cash flows from investing activities:
Business acquisition
Purchase of fixed assets (110,943) (179,402)
Loans to affiliated companies (10,424) (6,884)
Cash received on loans to affiliated companies 811 1,520
Investments in equity and cost investments (18,276) (17,666)
Net cash used in investing activities (138,832) (202,432)
Cash flows from financing activities:
Loans from Banks 22,970 98,563
Capital contributions 99,847
Loans from shareholders 2,139
Loans from affiliated companies 109,778 36,423
Repayments of loans from affiliated companies (99,609)
Repayments of loans from banks (40,514) (23,766)
Net cash provided by financing activities 92,472 113,359
Net (decrease) increase in cash and cash equivalents 2,614 (96,227)
Cash and cash equivalents at beginning of the period 1,025 104,801
Cash and cash equivalents at end of the period 3,639 8,574
</TABLE>
