FORM 6-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                    Pursuant to Rule 13a-16 or 15d-16 of the
                             Securities Act of 1934

                         For the month of February 2003

                                 MULTICANAL S.A.
             (Exact name of Registrant as specified in its charter)

                                MULTICHANNEL S.A.
                 (Translation of Registrant's name into English)

                                   Avalos 2057
                         (1431) Buenos Aires, Argentina
                    (Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports
under cover of 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 12g-3-2(b) under the 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 - ______________________.

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                                Table of Contents

EXHIBIT                                                                     PAGE

A     Risk Factors.........................................................   1

B     Summary of Financial and Other Information...........................  17

C     Exchange Rates.......................................................  21

D     Management's Discussion and Analysis.................................  23

E     The Company..........................................................  49

F     Major Shareholders...................................................  71

G     Management...........................................................  74

H     Legal Matters........................................................  78

I     Unaudited Interim Consolidated Financial Statements..................  84

J     Consolidated Financial Statements at December 31, 2001 and 2000
      and for the Three Years in the Period Ended December 31, 2001..........85



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                                  RISK FACTORS

Risks Relating to Argentina

Overview

         We are an Argentine sociedad anonima (a corporation with limited
liability) and substantially all of our facilities and approximately 87% of our
subscribers are presently located in Argentina. Accordingly, our financial
condition and results of operations depend to a significant extent on
macroeconomic and political conditions prevailing from time to time in
Argentina. Argentine government actions concerning the economy, including with
respect to inflation, interest rates, price controls, foreign exchange controls
and taxes, have had and could continue to have a material adverse effect on
private sector entities, including us. We cannot provide any assurance that
future economic, social and political developments in Argentina, over which we
have no control, will not impair our business, financial condition, or results
of operations.

Recent economic and political instability has paralyzed commercial and financial
activities

         In the fourth quarter of 1998, the Argentine economy entered into a
recession that caused the gross domestic product to decrease by 3.4% in 1999.
Following his election in October 1999, President Fernando de la Rua was
confronted with the challenges of dealing with Argentina's enduring economic
recession and obtaining political consensus on critical issues related to the
economy, public sector spending, legal reforms and social programs. The de la
Rua administration failed to address adequately the growing public sector
deficit, both at the federal and at the provincial level. Gross domestic product
contracted by 0.8% in 2000 and by 4.4% in 2001. As the recession caused tax
revenues to drop, the public sector relied increasingly on financing from local
and, to a lesser extent, foreign banks, effectively foreclosing private sector
companies from bank financing. As the public sector's creditworthiness
deteriorated, interest rates reached record highs, bringing the economy to a
virtual standstill. The lack of confidence in the country's economic future and
its ability to sustain the peso's parity with the U.S. dollar led to massive
withdrawals of deposits and capital flight.

         On December 1, 2001, the Argentine government effectively froze bank
deposits and introduced exchange controls restricting capital outflows. The
measures were perceived as further paralyzing the economy for the benefit of the
banking sector and caused a sharp rise in social discontent, ultimately
triggering public protests, outbreaks of violence and the looting of stores
throughout Argentina. On December 20, 2001, after declaring a state of emergency
and suspending civil liberties, President Fernando de la Rua tendered his
resignation to Congress, which was accepted in the midst of an escalating
political, social and economic crisis.

         The absence of a Vice-President required that the presidency be assumed
temporarily by Mr. Ramon Puerta, the president of the Senate and a member of the
opposition Peronist party. In a joint meeting of the Senate and the Chamber of
Deputies on December 22, 2001, Congress called for new presidential elections on
March 3, 2002 and appointed Mr. Adolfo Rodriguez Saa, governor of the province
of San Luis and also a member of the opposition Peronist party, president of
Argentina through the elections. However, on December 30, 2001, with
middle-class protesters threatening further demonstrations and being unable to
retain the support of the Peronist party, President Rodriguez Saa resigned.

         On January 1, 2002 at a joint session of Congress, Eduardo Duhalde, a
Peronist senator who had lost the presidential election to Mr. de la Rua in
1999, was appointed by Congress to complete the remaining term of former
President de la Rua until December 2003.

         Since his appointment on January 1, 2002, President Duhalde and the
current Argentine government have undertaken a number of far-reaching
initiatives including:

          o    ratifying the suspension of payment of certain of Argentina's
               sovereign debt declared by interim President Rodriguez Saa;

          o    amending the Convertibility Law, with the resulting devaluation
               and volatility of the peso;

          o    converting certain U.S. dollar-denominated debts into
               peso-denominated debts at a one-to-one exchange rate and U.S.
               dollar-denominated bank deposits into peso-denominated bank
               deposits at an exchange rate of Ps.1.4 per U.S.$1.00;

          o    restructuring bank deposits and maintaining restrictions on bank
               withdrawals;

          o    enacting an amendment to the Central Bank's charter to (i) allow
               it to print currency in excess of the amount of the foreign
               reserves it holds, (ii) make short-term advances to the federal
               government and (iii) provide financial assistance to financial
               institutions with liquidity constraints or solvency problems;

          o    imposing restrictions on transfers of funds abroad subject to
               certain exceptions, and payments on financial transactions
               approved by the Argentine Central Bank on a case-by-case basis;

          o    requiring the deposit into the banking system of foreign currency
               earned from exports, subject to certain exceptions.

         An increase in the level of protests and violence in June 2002 led
President Duhalde to announce his intention to request of Congress that
presidential elections be held in March 2003. The elected president would take
office in May 2003. As of the date hereof, presidential elections are scheduled
to take place on April 27, 2003, with a run-off election, if necessary, on May
13, 2003. However, uncertainty continues with respect to the nomination of
presidential candidates by the main political parties and there is very limited
discussion or information regarding policies that would be implemented or
promoted by the potential candidates. This uncertainty in turn translates into a
delay in the adoption of numerous decisions affecting the country's economic
performance. Further, this lack of agreement and uncertainty as to the future
president appears to have complicated the prospects of overcoming the current
economic situation.

         The rapid and radical nature of the changes in the Argentine social,
political, economic and legal environment since 1998, and the absence of a clear
political consensus in favor of the Duhalde administration or any particular set
of economic policies, have created an atmosphere of great uncertainty and lack
of confidence of the population in the financial sector and politicians
generally. As a result, commercial and financial activities have been virtually
paralyzed, further aggravating the economic recession which precipitated the
current crisis. Moreover, due to the ongoing social and political crisis,
Argentina continues to face risks including (i) civil unrest, rioting, looting,
nation-wide protests, widespread social unrest and strikes, (ii) expropriation,
nationalization and forced renegotiation or modification of existing contracts,
and (iii) changes in taxation policies, including royalty and tax increases and
retroactive tax claims.

Exchange rate risks

         We realize substantially all of our earnings in Argentina through sales
denominated in pesos and most of our financial liabilities, including the
Existing Notes, are denominated in U.S. dollars.

         On January 6, 2002, Congress enacted Law No. 25,561, Ley de Emergencia
Publica y Reforma del Regimen Cambiario (the "Public Emergency Law"),
eliminating the requirement that the U.S. dollar/peso exchange rate remain fixed
at 1 to 1. Since February 11, 2002, the peso has floated freely and devalued
sharply to Ps.3.79 per U.S.$1 on July 1, 2002. During the last quarter of 2002,
the peso/U.S. dollar exchange rate remained stable and in recent weeks, the peso
has strengthened, as exporters remitted significant amounts of export proceeds
to the Central Bank in compliance with current regulations. As of February 6,
2003, the peso/U.S. dollar exchange rate was Ps.3.15 per U.S.$1.00, as quoted by
Banco de la Nacion Argentina. See "Exchange Rates".

         The devaluation of the peso has adversely affected the U.S. dollar
value of our earnings and, thus, impaired our financial condition. As of
September 30, 2002, our total consolidated bank and financial debt amounted to
U.S.$568.4 million (including accrued interest and seller debt) and Ps.63.6
million (including accrued interest). Any depreciation of the peso against the
U.S. dollar will correspondingly increase the amount of our debt in pesos, with
further adverse effects on our results of operation and financial condition.
Given the continuing economic crisis in Argentina and the economic and political
uncertainties, it is impossible to predict whether, and to what extent, the
value of the peso may further depreciate against the dollar. Moreover, we cannot
predict whether the Argentine government will further modify its monetary
policy, and if so, what impact these changes will have on our financial
condition and results of operations.

         The Argentine government is facing severe fiscal problems as a result
of the devaluation of the peso. Peso-denominated tax revenues constitute the
primary source of its earnings, but most of its financial liabilities are U.S.
dollar-denominated. Therefore, the government's ability to honor its foreign
debt obligations has been materially and adversely affected by the devaluation
of the peso. The adoption of austere fiscal measures which would be required to
repay the Argentine government's debt and to balance its budget after the
devaluation will likely lead to further social unrest and political instability.

The stability of the Argentine financial system is at risk

         Although deposits in the Argentine banking system had grown in 1999 and
2000, in 2001, especially in the fourth quarter, a very significant amount of
deposits were withdrawn from financial institutions as a result of increasing
political instability and uncertainty. This run on deposits had a material
adverse effect on the Argentine financial system as a whole. Since the fourth
quarter of 2001, banks have focused on collection activities to be able to pay
their depositors. The magnitude of deposit withdrawals, the general
unavailability of external or local credit, together with the restructuring of
the public-sector debt with local holders (a substantial portion of which was
placed with banks) created a liquidity crisis which undermined the ability of
Argentine banks to pay their depositors.

         To prevent a run on the U.S. dollar reserves of local banks, on
December 1, 2001, the government of President de la Rua restricted the amount of
money that account holders could withdraw from banks and introduced exchange
controls restricting capital outflows. Although these restrictions known as
"corralito" are no longer in place, subsequently, President Duhalde imposed new
restrictions known as "corralon" and released a schedule stating how and when
deposits would become available.

         On February 3, 2002, the Argentine government issued Emergency Decree
No. 214, which required conversion of all debts to financial institutions into
pesos at a rate of Ps.1.00 per U.S.$1.00. After a six-month grace period, debts
were adjusted pursuant to an index based on consumer price variations in the
preceding month. This decree also provided for: (i) the conversion of all
foreign-denominated deposits into peso-denominated deposits at an exchange rate
of Ps.1.40 per U.S.$1.00 and (ii) the issuance by the government of bonds
intended to compensate banks for the losses incurred as a result of the
"asymmetric" conversion of loans and deposits into pesos. The different exchange
rates applied to the conversion of foreign currency denominated deposits and
loans had a material and adverse effect on the financial system.

         The corralito and certain other measures have, to a significant extent,
shielded banks from a further massive withdrawal of deposits, but they have also
led to the paralysis of virtually all commercial and financial activities,
diminished spending and greatly increased social unrest. As a result, there has
been widespread public repudiation of, and protests directed against, financial
institutions, which has had a material adverse effect on the Argentine financial
system.

         On June 1, 2002, the Argentine government enacted Decree No. 905/2002,
which gave owners of rescheduled foreign and peso-denominated bank deposits the
option, during a period of 30 banking business days starting on June 1, 2002, to
receive certain bonds issued by the Argentine government in lieu of payment of
such deposits. These bonds were applied to the payment of certain loans under
certain conditions. Deposits not exchanged for bonds were considered securities
that, under the conditions established by the CNV, were applied to the
subscription of shares and notes and to the cancellation of certain loans. On
September 17, 2002, Decree No. 1836/02 established another exchange option.
Depositors, however, showed little interest in the first or second stages of the
voluntary exchange of deposits for bonds. The Argentine government has continued
to indicate that it is committed to providing depositors the option to exchange
their money for bonds, rather than forcing them to do so through an obligatory
exchange.

         The financial system needs to be restructured for the economy to be
able to grow. Certain foreign controlled banks have closed down operations and,
generally, foreign shareholders have not made additional capital contributions.
Given the loss of confidence of depositors in the financial system, the
elimination of the corralon would likely result in an attempt by such depositors
to withdraw all of their deposits and convert such pesos into U.S. dollars. If
amounts so withdrawn flow to the foreign exchange market, the recent increase in
the level of bank deposits would most likely be quickly reversed, causing a
sharp increase in the exchange rate and inflation. Moreover, due to the
liquidity problems of Argentine banks, such attempt would likely result in the
collapse of the financial system and could exacerbate the depreciation of the
peso. In the event that the Central Bank provides financial assistance to
financial institutions in order to avoid such collapse, liberated funds would
likely flow into the foreign exchange market. As of the date hereof, there are
numerous cases pending before the Argentine Supreme Court challenging the
constitutionality of several of the measures adopted by the government to
protect the financial system. Even if the Argentine Supreme Court is yet to
render a final judgment it has indicated that it is considering the possibility
of imposing a re-dollarization of previously pesified bank deposits. A judgment
to this effect will have a material adverse effect on the Argentine financial
system.

         The banking system's collapse, or the collapse of one or more of the
largest banks in the system, would have a material and adverse effect on the
prospects for economic recovery and political stability and most likely, a
material adverse affect on us.

Inflation may continue to escalate and further undermine economic recovery

         On January 24, 2002 the Argentine government amended the Central Bank's
charter to allow the monetary authority to print currency (without having to
maintain a fixed and direct ratio with the foreign currency and gold reserves),
to make advances to the federal government to cover its anticipated budget
deficit, and to provide financial assistance to financial institutions with
liquidity problems. There is considerable concern that, if the Central Bank
prints currency to finance public-sector spending or financial institutions in
distress, significant inflation will result. Past history raises serious doubts
as to the ability of the Argentine government to maintain a strict monetary
policy and control inflation. In the past, inflation materially undermined the
Argentine economy and the government's ability to create conditions that would
permit growth.

         Furthermore, the devaluation of the peso has created pressures on the
domestic price system that generated inflation in 2002, after several years of
price stability, and, in recent years, price deflation. Through September 30,
2002, the WPI and the consumer price index exhibited cumulative increases of
121% and 41%, respectively. If the value of the peso cannot be stabilized by
positive expectations for Argentina's economic future, as well as by strict
fiscal and monetary policies, an increase in inflation rates can be expected.
Very high inflation and hyperinflation episodes cannot be ruled out. High
inflation would likely deepen Argentina's current economic recession.

         The devaluation of the peso and accompanying economic policy measures
implemented by the Argentine government were intended primarily to remedy the
effects of unemployment and to stimulate economic growth. To date, it is not
apparent that the objectives pursued have been achieved. The success of such
measures, however, is conditional upon the ability of the Argentine government
to elicit confidence among the local and international financial and business
communities. Without such confidence, inflation rates are likely to increase
significantly investment is likely to retract and economic activity to contract
further, unemployment could increase beyond current levels, tax revenue could
drop and the fiscal deficit could widen.

Argentina's insolvency and default on its public debt has deepened the current
financial crisis

         On December 23, 2001, interim President Rodriguez Saa declared the
suspension of payments on most of Argentina's sovereign debt, which totaled
approximately U.S.$140.5 billion as of December 31, 2001. President Duhalde
ratified this measure on January 2, 2002.

         As a result of its growing fiscal deficit, Argentina's ability in the
short term to stimulate economic growth, appease social unrest and repay its
debt is likely to depend on external financial assistance. In December 2000,
Argentina obtained a conditional U.S.$39.7 billion assistance package from the
IMF, other multilaterals, foreign governments, local banks and institutional
investors. The IMF conditioned the availability of a significant portion of the
package on the ability of the Argentine government to reduce its fiscal deficit
and implement a sustainable economic program. Argentina failed to meet the IMF's
conditions in March 2001 and failed to comply with a new fiscal deficit target
for the fourth quarter of 2001. Such failure triggered the suspension, on
December 5, 2001, of further IMF disbursements. The IMF's decision deepened the
economic and political crisis. In January 2002, President Duhalde resumed talks
with the IMF, and, although the IMF agreed to refinance certain debts owed by
the Argentine government, the IMF has announced that it will not provide new
funds to Argentina. Widespread political protests and social disturbances are
continuing regularly, and to date the IMF and other multilateral and official
sector lenders have indicated an unwillingness to provide any significant amount
of financial aid until a sustainable economic program has been presented. The
IMF, through repeated pronouncements, indicated that such program should include
improving methods of tax collection, forcefully reforming the tax
revenue-sharing method between the federal government and the provinces, and
restructuring the foreign indebtedness on which Argentina has defaulted.

         The Argentine government's insolvency and inability to obtain financing
can be expected to significantly affect its ability to implement any reforms.
This will further undermine the private sector's ability to restore economic
growth, and may result in a deeper recession, higher inflation and unemployment
and greater social unrest. As a result, our business, financial condition and
results of operations will likely be materially and adversely affected.

Exchange controls may prevent us from servicing our external debt obligations

         The Argentine foreign exchange market was subject to exchange controls
until December 1989, when a freely floating exchange rate was established for
all foreign currency transactions. From 1989 to December 3, 2001, there were no
foreign exchange controls preventing or restricting the conversion of pesos into
U.S. dollars or the transfer of U.S. dollars abroad. From December 3, 2001 until
January 2, 2003, the transfer of foreign currency, except for certain
transactions, was subject to prior authorization by the Central Bank, including
for the payment by Argentine debtors of principal on financial indebtedness and
for the distribution of dividends. Effective January 2, 2003, the Central Bank's
prior authorization for the transfer of funds abroad in order to make payments
of principal and/or interest is no longer required provided that certain
conditions are met, as set out in Communique "A" 3843 dated December 26, 2002,
as amended by Communique "A" 3866 dated January 16, 2003.

         Communique "A" 3843, as amended, establishes that the Central Bank's
prior authorization for the transfer of funds abroad in order to make the
payments of principal and/or interest, as the case may be, will not be required
when the following conditions are complied with:

         (1) For payments of principal under outstanding and past due financial
debt, all of the following conditions must be met:

               (A)  Payments of principal shall be made pursuant to a
                    refinancing agreement entered into between the debtor and
                    the creditor after January 2, 2003.

               (B)  Such refinancing agreement must provide for payments of
                    principal not to exceed: (a) 10% paid as of the date of
                    entering into such refinancing agreement; (b) 5% paid within
                    the following six months; and (c) 5% paid within 12 months
                    as from the date of entering into such refinancing
                    agreement.

               (C)  The refinancing of the principal outstanding (excluding the
                    10% paid upon entering into the refinancing agreement) must
                    have an average life that is at least 5 years more than the
                    original principal amount outstanding.

               (D)  The financial debt must relate to: (a) notes, bonds and
                    commercial paper; (b) syndicated loans with foreign banks;
                    (c) financial loans with foreign banks which are neither
                    secured by assets of the debtor located outside of Argentina
                    nor by similar assets or persons domiciled in Argentina; and
                    (d) intercompany loans.

         If, prior to the repayment of principal under exiting facilities, the
local debtor obtains new financing which enters Argentina on or after December
26, 2002 through the foreign exchange market and this new financing (a) has an
average life of not less than 5 years and (b) is for an amount at least equal to
the amount of the debt that will be cancelled, the conditions of Communique "A"
3843 will be deemed to have been met and therefore no prior authorization of the
Central Bank will be necessary to make the payment of principal under the
existing facility.

         (2) For payments of principal under past due financial debt,
irrespective of whether the conditions described in (1) above have been met, the
Central Bank's prior authorization will not be required if the following
conditions are met:

               (A)  The principal amount to be repaid must not exceed
                    U.S.$150,000 per month.

               (B)  The debtor must make a sworn statement that the repayment
                    complies with the conditions set forth herein.

         Moreover, according to the provisions of Communique "A" 3859, dated
January 7, 2003, Argentine companies may freely transfer corporate profits and
dividends corresponding to audited financial statements of local companies
without prior Central Bank approval, and transfers of funds abroad in order to
pay reinsurance premiums will be subject only to the issuance of a statement
from the Superintendencia de Seguros de la Nacion, or the Argentine
Superintendency of Insurance Board (the regulatory authority on insurance
matters) with respect to the reason and amount to be transferred.

         The Central Bank has also issued Communique "A" 3845, dated December
26, 2002, which states that Argentine individuals and companies are authorized
to buy up to U.S.$150,000 per month for the purposes of, among other things, (i)
real estate investments outside of Argentina; (ii) loans granted to persons not
domiciled in Argentina; (iii) direct investments outside of Argentina of persons
domiciled in Argentina; (iv) portfolio investments outside of Argentina; and (v)
payments outside of Argentina of corporate dividends and profits.

         Under the prior regulations, the Central Bank had authorized on a case
by case basis the making of interest payments but not, to our knowledge,
payments of principal other than in connection with certain restructurings. If
we cannot comply with the conditions set forth in Communique "A" 3843, as
amended, or any subsequent conditions that the Central Bank may impose on the
transfer of U.S. dollars abroad, we will be unable to pay principal and may be
unable to pay interest to foreign creditors. Also, even in the absence of
exchange controls due to the scarcity of U.S. dollars, we may find it difficult
to convert large amounts of pesos into U.S. dollars to make principal or
interest payments on our U.S. dollar-denominated debts.

You may not be able to enforce your claims against us in Argentina

         We are a corporation organized under the laws of Argentina. All of our
directors, members of the supervisory committee and officers reside in
Argentina. Substantially all of our assets are located in Argentina.

         Under Argentine law, enforcement of foreign judgments is recognized
provided that the requirements of Articles 517 through 519 of the Federal Code
of Civil and Commercial Procedure are met. The foreign judgment cannot violate
principles of public policy of Argentine law, as determined by the Argentine
court. We cannot assure you that an Argentine court would not deem the
enforcement of foreign judgments ordering us to make a payment under our
indebtedness in a foreign currency outside of Argentina to be contrary to
Argentine public policy if at that time there are legal restrictions prohibiting
Argentine debtors from transferring foreign currency outside of Argentina.

Risks Relating to Multicanal

Auditor's doubt as to our ability to operate as a going concern

         The consolidated financial statements as of December 31, 2001 and
September 30, 2002, have been prepared on the assumption that we will continue
to operate as a going concern. However, as a result of the continued
deterioration of the Argentine economy and the devaluation of the peso, as
further described in these "Risk Factors," we cannot assure that we will be able
to obtain the necessary financial resources to repay or refinance our debt and
that the restrictions imposed by the Central Bank on the transfer of funds
abroad will not prevent us from paying principal and interest on our U.S. dollar
denominated debt as it comes due. Accordingly, we cannot assure you that these
conditions will not have a material adverse effect on our financial condition or
results of operations or that we will be able to continue to operate as a going
concern.

         On November 14, 2002, our Independent Auditors issued a report stating
that we have suffered recurring losses from operations and have a net capital
deficiency. The report also states that we have been negatively impacted by the
Argentine government's adoption of various economic measures and by the
devaluation of the peso, matters which raise substantial doubt as to our ability
to continue to operate as a going concern. Investors in our securities should
review carefully the report of our independent auditors attached to our
financial statements that are part of this Form 6-K. The consolidated financial
statements do not include any adjustments to reflect the possible negative
effect that the current uncertain situation may have on us.

         As a result of the devaluation of the Argentine currency, at September
30, 2002, we recognized net loss in the amount of Ps.692 million in accordance
with Argentine GAAP and a shortfall in consolidated working capital amounting to
Ps.2.146 million. As indicated in Note 13 to the unaudited interim financial
statements that are part of this Form 6-K, our losses have absorbed over 50% of
capital and reserves. Although section 206 of the Argentine Companies Law
establishes mandatory capital reduction in such situations, by means of Decree
No. 1269/02 dated July 17, 2002, the Argentine government suspended enforcement
of this provision until December 10, 2003. We cannot assure you that in the
future, section 206 of the Argentine Companies Law or any other pertinent law or
regulation will not force us to effect mandatory capital reduction.

Recent changes to Argentine GAAP

         Effective for fiscal years beginning on January 1, 2003, the CNV
adopted new accounting standards for the preparation of financial statements.
The principal differences from the prior standards which are relevant to our
financial information are the following: (1) the use of the deferred tax method
for the recognition of income taxes, and (2) the method to determine the
recoverability of long-lived assets, according to which an entity estimates the
undiscounted future cash flow to determine whether an impairment loss should be
recognized, and if so, conducts a second comparison with the discounted future
cash flow. Consequently, the accounting standards applicable to the preparation
of financial information to be reported in future periods will differ from the
standards used in the preparation of financial information included herein, and
this may effect comparability from period to period.

Recent losses and default

         As a result of Argentina's severe economic recession and the
restrictions affecting our ability to refinance our debts, we have dedicated all
of our cash flow from operations and any other source of liquidity available to
us to fund our operations. We have defaulted on payments on all our Existing
Notes and all principal payments and a substantial portion of our interest
payments on our Bank Loans (affected by the mandatory conversion into pesos at
the exchange rate of one peso per dollar pursuant to Decree No. 214/02 decreed
by the Government) since February 2002.

         Our ability to make payments on our foreign currency-denominated
indebtedness was further curtailed by the exchange controls introduced on
December 1, 2001. All of our Existing Debt is in default and our creditors could
accelerate the maturity thereof. We do not have the ability to meet our
obligations as currently scheduled without additional financial assistance,
which we do not expect to receive.

Our liquidity is severely constrained and we are relying on cash generated from
operations as our only significant source of liquidity

         We are and will continue to be severely cash constrained and expect
that our only source of liquidity in the short term will be cash flows generated
from operations. As of September 30, 2002, assuming that our principal
shareholders had made an irrevocable capital contribution of U.S.$10 million
which they are expected to make in connection with our announced restructuring
and we repurchased U.S.$100 million aggregate principal amount of Existing Debt
pursuant to our recently announced cash tender offer, we would have had
approximately U.S.$5.5 million of cash remaining. Such remaining cash amount
does not reflect an adjustment for the expenses related to the consummation of
our restructuring that we will need to pay, which we estimate at U.S.$8.1
million. We cannot assure you that we will generate sufficient cash flows from
operations to sufficiently increase our cash on hand to pay the expenses
relating to our restructuring when such expenses become due and to maintain
sufficient liquidity to conduct our operations.

Some of our suppliers are affiliated with our controlling shareholder, who may
take actions that do not reflect the will or best interest of other shareholders

         Grupo Clarin has interests in companies that provide us with one of the
highest-rated channels of sports-oriented programming in Argentina and in other
media companies. The interests of those companies will not always necessarily be
aligned with our interests, and may even in certain cases be adverse to our
interests. In such a circumstance, it is possible that Grupo Clarin may take
actions that are in the interests of such a programming company and adverse to
us. We cannot assure you that, if presented with a conflict of interest between
different companies in which it has investments, Grupo Clarin will take actions
that are not adverse to us.

Risks Relating Specifically to Our Argentine Cable Television Business

We face substantial and increasing competition in the Argentine pay television
industry

         The pay television business in Argentina is very competitive, as cable
operators are not given exclusive territorial broadcast licenses. We face
competition from other cable television operators which have built networks in
the areas we operate, providers of other television services, including direct
broadcasting, direct-to-home satellite ("DTH") and multi-channel multi-point
distribution system ("MMDS") services and licensed suppliers of basic telephone
services. We expect this competition to increase in the future due to a number
of factors, including the development of new technologies. In addition, free
broadcasting services are currently available to the Argentine population from
four privately-owned television networks and their local affiliates and one
state-owned national public television network.

         The consolidation of the cable television industry increases the level
of competition that we face, and will reinforce the need to undertake frequent
investments to remain competitive. We are currently keeping annual capital
expenditures to the minimum level necessary to continue providing the current
level of services to our customers. Furthermore, our competitiveness will depend
on our ability to attract and retain customers through vigorous consumer service
policies and by providing new programming services on an exclusive basis for an
initial period of time. In light of the foregoing factors, we cannot assure you
that we will be able to undertake the investments necessary to remain
competitive, or that we will be able to retain customers through consumer
service policies or new programming services.

         A loss of customers to competitors or because of the current
macro-economic situation has a direct material and adverse effect on our results
of operation.

Our revenues may be adversely affected by subscriber termination

         Our revenues depend heavily on our ability to retain customers by
limiting our churn rates (churn means subscriber termination). We determine our
churn rate by calculating the total number of disconnected cable television
customers over a given period as a percentage of the initial number of cable
television customers for the same period. Our annual gross churn rate averaged
32.4% in 2001, and 47.8% in the nine-month period ended September 30, 2002. To
reduce our churn rate and to address associated risks, such as the difficulty in
collecting receivables, we pursue a vigorous customer service and retention
policy. From our inception through December 31, 2001, we had a net internal
growth of 59,100 subscribers. However, in the nine-month period ended September
30, 2002, we lost approximately, 297,400 subscribers. The current macro-economic
crisis severely affects our subscribers' purchasing power and has led to and may
continue to lead to increased loss of subscribers.

We may not be able to provide additional premium services

         We have targeted the enhanced revenue opportunities associated with
premium service and have been working with other cable operators and cable
programming providers to create additional premium tiers by adding new premium
channels. We cannot assure you that this type of tiering will be accomplished,
since creating additional premium tiers requires industry-wide cooperation and
agreement.

We may not be able to renew programming contracts

         We purchase basic and premium programming from more than 20 program
suppliers. Several programming suppliers have agreed to provide us volume
discount pricing structures because of our growth and market share. Due to the
current macro-economic situation of Argentina, growing inflation beginning in
January 2002, and higher gross churn rates, the terms of our programming
contracts, which in the past generally ranged from 24 to 36 months and were
typically based on a flat fee, are now being renewed for an average period of
six months with varying fees. Most of these contracts are subject to negotiated
renewal in the event that the Argentine peso is devalued below a certain level
against the U.S. dollar. As a consequence of the recent changes imposed by the
Public Emergency Law, many of the contracts are being renegotiated. On April 25,
2002, we resumed transmission of Cable News Network ("CNN"), which had been
temporarily suspended while the programming contract was renegotiated in light
of the recent macro-economic situation in Argentina. We and the programming
supplier, Turner Broadcasting Systems ("TBS"), reached an agreement that is
subject to amendment or termination in the event that devaluation or the
cumulative official inflation rate increases by a certain percentage.
Accordingly, we cannot assure you that we will be able to continue providing TBS
content such as CNN if the macro-economic situation in Argentina worsens
significantly. We cannot assure you that we will be able to negotiate renewals
of our programming contracts under the current volatile macro-economic
situation, due to the fact that many of our suppliers have U.S. dollar-based
costs and are reluctant to accept contracts denominated in pesos. We also cannot
assure you that we will be able to obtain volume discounts in the future.

We depend on third parties for the development of and access to new technologies
and we cannot predict the effect of technological changes on our business

         The cable television industry is subject to rapid and significant
changes in technology and the related introduction of new products and services.
We do not have significant intellectual property rights with respect to the
technologies we use, and we depend on third parties for the development of and
access to new technologies. We believe that in the foreseeable future,
technological changes will not affect the continued use of coaxial, fiber optic
or other currently available technologies and that we will be able to obtain
access to appropriate technologies on a timely basis. However, we cannot predict
the effect of unforeseen technological changes on our business. The cost of
implementing emerging technologies or expanding capacity could be significant
and our ability to fund such implementation may be dependent on our ability to
obtain additional financing.

We may not be able to build and upgrade our networks in accordance with our
anticipated schedule or to comply with regulatory requirements

         While in past years we have upgraded a significant part of our networks
to maintain the highest technological standards throughout our cable systems and
to expand programming alternatives and services, we are currently keeping annual
capital expenditures to the minimum level necessary to continue providing the
current level of services to our customers. The deployment of the fiber to
service area ("FSA") network architecture throughout our systems will enable us
to introduce new services and expand the services we provide to include
pay-per-view programming utilizing addressable technology and access to the
Internet through high-speed cable modems. We cannot assure you that we will be
able to obtain the financing necessary to fully deploy FSA. If we cannot
satisfactorily complete the deployment of FSA network architecture, or do so in
a timely manner, we could lose current and potential customers to competitors
and our revenues will be adversely affected. Furthermore, we may not be able to
make investments needed to comply with existing and future regulatory
requirements such as municipal rules regarding the use of air space. Our failure
to make those investments may result in fines and further adversely affect our
financial condition.

Risks Relating to Our Subsidiaries and Foreign Operations

Our ability to meet our financial obligations is in part dependent upon the cash
flow and earnings of our subsidiaries

         We conduct our cable television business directly and through
subsidiaries. Our ability to meet our financial obligations is in part dependent
upon the cash flow and earnings of our subsidiaries and in some cases the
distribution of such earnings to us in the form of dividends, loans or other
advances, payment or reimbursement for management fees and expenses, and
repayment of loans or other advances from us. The payment of dividends or the
making of loans or advances by our subsidiaries to us may be subject to
statutory, regulatory or contractual restrictions. Moreover, we may not have
voting control over certain entities in which we have ownership interests and
such entities will have no obligation, contingent or otherwise, to make any
funds available to us, whether by dividends, advances, loans or other payments.

Our foreign operations expose us to economic, social, and political instability
in foreign countries

         We have operations in Uruguay and Paraguay. The construction and
operation of systems in these markets involve regulatory and governmental
requirements that may be different from those in Argentina. Economic, social,
and political instability in foreign countries could have a material adverse
effect on our revenues and profitability. We may also be adversely affected by
foreign governmental regulations, fluctuations in foreign currency rates,
confiscatory taxation, and difficulties in managing international operations.

Our results of operations and financial condition may be adversely affected by
movements in exchange rates

         We have primarily revenues in local currency and a significant portion
of our costs are U.S. dollar-denominated. As a result, movements in the exchange
rate of the U.S. dollar against the respective local currencies in countries
where we have operations can have a significant impact on our revenue, results
and financial condition. A rise in the value of the U.S. dollar relative to
local currencies will increase our programming costs, thereby adversely
affecting the margins of our foreign operations.

We face substantial competition in foreign markets

         We face substantial competition in foreign markets. In Uruguay, for
example, we own Telemas S.A., a company that provides programming and management
to UHF, an over-the-air broadcast frequency, systems and to another seven cable
operators in Uruguay. In the city of Montevideo, the UHF system served by
Telemas offers eight channels and competes with other cable systems offering
more than 30 channels. We cannot assure you that the UHF system will be able to
compete with the cable systems successfully in the future. We also cannot assure
you that we will be successful in obtaining required licenses and expanding our
multi-channel television operations into other countries or that we can operate
profitably in those countries.



Risks Relating to the Cable Television Industry Generally

Our ability to operate effectively depends on obtaining regulatory approvals

         The installation and operation of cable television service in Argentina
is governed by the Broadcasting Law and related regulations. The cable
television industry is principally regulated and supervised by Comfer but also
falls under the jurisdiction of the Comision Nacional de Comunicaciones (the
National Communications Commission or "CNC"), for matters related to
installation of cable services and compliance with technical regulations. The
Secretaria de Prensa y Difusion (the Department of Press and Transmission, which
we refer to as the "Secretaria de Prensa") supervises Comfer and reports
directly to the Executive Branch. It also supervises the general enforcement of
the Broadcasting Law and the regulatory framework for the industry.

         Cable television companies in Argentina are required to obtain a
non-exclusive broadcasting license from Comfer in order to carry and distribute
programming over their cable networks. Comfer licenses have an initial 15-year
term. At the end of this term, the licensee may apply for a one time ten-year
extension. Comfer must approve any license extension. To do so, Comfer
determines whether the licensee complies with the terms and conditions set forth
in the Broadcasting Law.

         We have applied for an extension of the initial term of some licenses.
Although some of these extensions were not timely filed, we nevertheless expect
to be granted these extensions. We plan to timely file for the extension of the
rest of the licenses 30 months prior to their expiration, in accordance with the
Broadcasting Law. We can give no assurance that we will receive any of these
extensions. In addition, the Broadcasting Law provides only for a one time
ten-year extension and does not provide for subsequent renewals when such term
expires. As a result, once the additional ten-year expiration term elapses we
may be forced to apply for new licenses, and we cannot assure you that such
licenses will be granted. At December 31, 2002 the weighted average remaining
life of our licenses was 10.55 years, based on the number of subscribers and the
assumption that a ten-year extension will be granted in all cases. The weighted
average remaining life of our licenses based on the number of subscribers
assuming that no ten-year extensions will be granted was 0.55 years at December
31, 2002. In the event that Comfer denies us an extension of a license in a
specific area, we must cease operations in such area, seek to acquire a company
that has a valid broadcasting license for the area or apply for a new license in
our own name. We cannot assure you that there will be a cable company with a
valid license operating in such area, that we will be able to acquire such a
cable company, or that if we apply for a new license in our name, that such
licenses will be granted.

         Please note that due to an injunction imposed by a federal judge
investigating the Comfer's practices, including with respect to the granting of
cable television licenses in recent years, Comfer is currently prevented from
issuing resolutions authorizing the transfer of shares of certain licensees,
including us; we cannot tell you if or when that Comfer will be allowed to issue
these resolutions.

         Pursuant to Section 53 of the Broadcasting Law, licenses may be
cancelled in the event of a licensee's filing of a concurso. Although such
Section does not contemplate the cancellation of licenses in the event of a
filing of an acuerdo preventivo extrajudicial (an "APE") as the one proposed
with proposed in connection with our announced restructuring, because the
effects of an APE are similar to those of a concurso, it is possible that the
Broadcasting Law could be interpreted as allowing the cancellation of licenses
when filing an APE. If we obtain sufficient support for the APE, we intend to
file for injunctive relief with the Bankruptcy Court to avoid any declaration
that our licenses have been or will be cancelled solely as a result of the
filing of the APE. However, we cannot assure you that the Bankruptcy Court will
grant any injunctive relief that we may request.

         Section 45 of the Broadcasting Law requires Comfer approval for any
transfer of shares in a licensee company. In the event that a stockholder or
partner of a licensee company is another company according to Section 45 of the
Broadcasting Law, Comfer has the authority to review that company's stockholders
and determine whether they comply with the requirements set forth in such
Section 45. Comfer has authorized the Grupo Clarin shareholders as our
shareholders and of several licensed companies that were merged into us.
However, Comfer has not yet authorized Arte Grafico Editorial Argentino S.A.
(AGEA), Grupo Clarin S.A. and Multicanal Holding LLC, each a corporation
controlled by the Grupo Clarin shareholders, as our shareholders. We have given
notice but not yet obtained the required approvals from Comfer in connection
with some of our acquisitions of shares in companies which hold licenses and the
transfer of licenses to us by certain of the subsidiaries merged into us.

         Failure to obtain Comfer's approval of the transfer of an ownership
interest in a licensed company may result in the unwinding of the transfer.
Violation of Comfer regulations regarding the transfer in an ownership interest
in a licensed company can result in the imposition of fines, the suspension of
advertising or the revocation of the license of the licensee that violated
Comfer regulations.

         Additionally, Comfer must approve any elimination of "headends", the
collection of hardware that processes and combines signals for distribution
within a cable network. We are awaiting approvals for several headend
eliminations resulting from the acquisition and division of the VCC Group.
Although we expect to receive all of the required approvals, it is not certain
that Comfer or any successor agency will grant all of the approvals.

We may not be in compliance with local ordinances

We were required to bring our cable systems fully into compliance with municipal
regulations relating to the installation of cables in several areas of the City
of Buenos Aires Region by late 2002, and were required to do so in the City of
Mar del Plata by November 2001. We are not in compliance with the City of Buenos
Aires and the City of Mar del Plata regulations as of the date hereof. Both the
City of Buenos Aires and the City of Mar del Plata are considering whether to
extend the term granted by their ordinances. Although such ordinances generally
do not provide for penalties to be imposed on non-compliant cable systems, the
Justicia Municipal de Faltas (the "Municipal Claims Court") may impose fines on
us. If we have sufficient cash flow and financing is available at commercially
attractive rates, we will upgrade our existing cable systems, including any
network upgrades or modifications required by regulatory or local authorities.
However, we cannot assure you that the term granted by the ordinance of the City
of Mar del Plata will be extended to allow us to bring our cable system in that
city fully into compliance.


<PAGE>

                     SUMMARY FINANCIAL AND OTHER INFORMATION

         The following summary consolidated financial data has been derived from
our consolidated financial statements as of the dates and for each of the
periods indicated below. This information should be read in conjunction with and
is qualified in its entirety by reference to our consolidated financial
statements and the discussion in "Management's Discussion and Analysis". The
summary consolidated financial data as of December 31, 2001 and 2000 and for the
years ended December 31, 2001, 2000 and 1999 derive from our audited
consolidated financial statements that are filed as part of this Form 6-K (the
"Audited Consolidated Financial Statements"), which have been audited by our
Independent Auditors. The summary consolidated financial data as of December 31,
1999, 1998 and 1997 and for the years ended December 31, 1998 and 1997 have been
derived from our Audited Consolidated Financial Statements. The summary
financial data for the nine-month periods ending September 30, 2002 and 2001
derive from the Unaudited Consolidated Interim Financial Statements.

         Our consolidated financial statements as of and for the nine-month
period ended September 30, 2002 and as of and for the year ended December 31,
2001 have been prepared on the assumption that we will continue as a going
concern. Our Independent Auditors have issued reports stating that we have
suffered recurring losses from operations and have a net capital deficiency. The
reports also state that we have been negatively impacted by the Argentine
government's adoption of various economic measures and by the devaluation of the
peso, matters which raise substantial doubt as to our ability to continue as a
going concern. Our consolidated financial statements as of and for the
nine-month period ended September 30, 2002 and as of and for the year ended
December 31, 2001 do not include any adjustments that might result from the
outcome of this uncertainty. See "Risk Factors--Risks Relating to Multicanal."

         Our financial statements are presented in pesos. We prepare our
financial statements in accordance with Argentine GAAP, which differ in certain
significant respects from U.S. GAAP. Note 18 to our Audited Consolidated
Financial Statements provides a description of the principal differences between
Argentine GAAP and U.S. GAAP affecting our net income (loss) and shareholders'
equity and Note 19 provides a reconciliation to U.S. GAAP of net income (loss)
and shareholders' equity reported under Argentine GAAP.

         Our consolidated financial statements include the effects of inflation
through August 31, 1995, utilizing the inflation restatement methodology
established in Technical Resolution N(degree)6 of the FACPCE. Effective
September 1, 1995, as required by rules issued by the CNV, we discontinued the
restatement methodology, maintaining the effects of inflation accounted for in
prior periods. The discontinuance of inflation accounting is in compliance with
Argentine GAAP, provided that the annual variation in the general level WPI does
not exceed 8% per annum. Audited Consolidated Financial Statements for the years
ended December 31, 2001, 2000 and 1999 are presented on a historical basis,
except for non-monetary assets and their related consumption and shareholders'
equity accounts, which have been restated through August 31, 1995. The effect of
inflation on the financial statements that has been restated has not been
reversed in the reconciliation to U.S. GAAP. On August 22, 1995 the Argentine
government published Decree No. 316/95 eliminating the requirement that
financial information at any date for any period after August 31, 1995 be
restated for inflation. On July 7, 2002 the Argentine government published
Decree No. 269/02, which repealed Decree No. 216/95 and reestablished the
restatement of financial information to account for inflation for periods
beginning on or after January 1, 2002.

         Since the beginning of 2002, Argentina has experienced a high rate of
inflation with the WPI increase through September 30, 2002 estimated at 121%).
As the change in the WPI since January 1, 2002 has exceeded 8%, financial
statements prepared in accordance with Argentine GAAP were required to be
adjusted for inflation since that date. Accordingly, our Unaudited Consolidated
Interim Financial Statements are adjusted for inflation and restated in constant
Argentine pesos as of September 30, 2002. In addition, for comparative purposes,
we have also restated in constant Argentine pesos as of September 30, 2002, all
other financial statements filed with this Form 6-K and all other financial data
included herein. Such translation should not be construed as a representation
that the peso amounts represent, or have been or could be converted into, U.S.
dollars (at that or any other rate).

         The results of operations for the nine-month period ended September 30,
2002 are not necessarily indicative of the results that may be expected for the
full year ending December 31, 2002. The interim financial data as of September
30, 2002 and 2001 and for the nine months ended September 30, 2002 and 2001 are
unaudited. In management's opinion, the interim data include all adjustments
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods. Our Unaudited Consolidated Financial
Statements do not contain a reconciliation to U.S. GAAP of our shareholders'
equity or net loss as of and for the nine months ended September 30, 2002. We
can give you no assurance that our financial information as of and for the
nine-month period ended September 30, 2002, if reconciled to U.S. GAAP, will not
reveal material differences with such information as presented under Argentine
GAAP.

         Acquisitions of cable companies during the periods for which the
summary data are presented below affect the comparability of the data from one
period to another, as do differences in the classification by acquired companies
of revenues and expenses, although these differences in classification are not
material for the Audited Consolidated Financial Statements taken as a whole.

         The exchange rate between the dollar and the peso as of December 31,
2001 was U.S.$1.00 = Ps.1.00. However, as a result of the elimination of the
fixed exchange rate and the devaluation of the peso, the exchange rate between
the peso and the dollar has decreased substantially. As of September 30, 2002,
the exchange rate between the dollar and the peso was U.S.$1.00 = Ps.3.74, and
as of February 6, 2003 the exchange rate was U.S.$1.00 = Ps.3.15. The U.S.
dollar convenience translation provided in the tables below is based on the
exchange rate between the U.S. dollar and the peso as of September 30, 2002.

<TABLE>
<CAPTION>
                                                  At or for the     At or for the     At or for the
                                                   period ended      period ended     period ended       At or for the year ended
                                                  September 30,     September 30,     September 30,             December 31,
                                                 -------------------------------------------------------------------------------
                                                     2002(16)            2002             2001             2001          2000
                                                 -------------------------------------------------------------------------------
                                                  (In thousands    (In thousands     (In thousands
                                                     of U.S.       of pesos)(17)     of pesos)(17) (In thousands  (In thousands
                                                   dollars)(17)                                     of pesos)(17)  of pesos)(17)
                                                   (unaudited)      (unaudited)     (unaudited)

Amounts in Accordance with Argentine GAAP
Statement of Operations Data:
<S>                                                 <C>              <C>             <C>           <C>             <C>
   Net revenues(3) ...........................      $123,873     Ps. 463,285     Ps. 792,403   Ps. 1,029,403   Ps. 1,054,439
   Direct operating expenses .................       (66,714)       (249,509)       (383,062)       (505,370)       (499,056)
   Selling, general, administrative and
      marketing expenses .....................       (27,823)       (104,056)       (155,196)       (197,228)       (224,295)
   Depreciation and amortization .............       (63,876)       (238,895)       (252,561)       (336,745)       (339,539)
   Operating (loss) income ...................       (34,539)       (129,175)          1,583          (9,940)         (8,451)
   Financial income (expenses) and holding
      gains, net(4) ..........................      (152,893)       (571,819)       (180,156)       (225,503)       (247,656)
   Other non-operating income
     (expenses), net .........................           386           1,444         (23,905)       (361,021)        (34,757)
   Loss before taxes and minority interest ...      (187,045)       (699,549)       (202,477)       (596,464)       (290,864)
   Gain (loss) on sales of investees .........             -               -         326,939         326,939               -
   Income taxes and/or tax on minimum notional
      income .................................        (1,143)         (4,273)        (10,477)        (11,483)        (21,951)
   Minority interest .........................        (2,428)         (9,081)         (3,497)         (3,020)         (2,512)
   Equity in the (losses) gains of affiliated
      companies ..............................         5,713          21,366          (3,126)         (3,822)         (8,532)
   Net loss ..................................      (184,903)       (691,537)        107,362        (287,851)       (323,859)
                                                    ========        ========         =======        ========        ========
Balance Sheet Data (at year end):
   Current assets ............................        49,867         186,503         426,058         375,698         247,746
   Property and equipment, (net) .............       179,434         671,083         849,208         808,694         962,873
   Goodwill and intangible assets ............       416,531       1,557,826       1,998,818       1,644,110       2,092,459
   Other non-current assets(5) ...............        12,394          46,352          69,732          51,766          52,679
   Total assets ..............................       658,226       2,461,765       3,343,817       2,880,268       3,355,757
                                                    ========       =========       =========       =========       =========
   Short-term debt(6) ........................       583,896       2,183,772         447,994       1,695,477         632,953
   Long-term debt(7) .........................         1,480           5,532       1,314,965             464       1,279,171
                                                    --------       ---------       ---------       ---------       ---------
   Total financial debt ......................       585,376       2,189,304       1,762,959       1,695,941       1,912,124
   Other liabilities .........................        52,461         196,206         422,439         421,734         397,294
   Total liabilities .........................       637,837       2,385,509       2,185,398       2,117,675       2,309,418
                                                    ========       =========       =========       =========       =========
   Minority interest .........................         8,903          33,296          28,618          28,006          26,320
   Shareholders' equity ......................        11,487          42,960       1,129,800         734,587       1,020,019
Cash Flow Data:
   Cash provided by (used in) operations .....        46,168         172,669          17,084          44,068          50,991
   Acquisition of cable systems and
      subscribers and decrease (increase) in
      goodwill and intangible assets .........          (272)         (1,016)        326,996         317,510          (7,456)
   Purchases of property and equipment net of
      proceeds from sales ....................        (2,153)         (8,052)        (37,189)        (46,854)        (86,542)
   Cash provided by (used in) financing
      activities .............................       (68,949)       (257,868)        150,363        (208,179)        (38,339)
Other Financial Information (unaudited):
   EBITDA(8) .................................        29,337         109,720         254,145         326,805         331,088
   EBITDA margin(9) ..........................          23.7%           23.7%           32.1%           31.7%           31.4%
   Ratio of EBITDA-to-interest expense .......           0.6x            0.6x            1.7x            1.6x            1.6x
   Ratio of financial debt-to-EBITDA (10) ....          19.9x           19.9x            6.9x            5.2x            5.8x
Amounts in Accordance with U.S. GAAP:
   Net assets(11) ............................                                                      (561,145)        987,961
   Revenues ..................................                                                     1,077,364       1,151,104
   Operating (loss) income ...................                                                       (22,729)        (12,308)
   Financial income (expenses) and holding
   gains, net(4) .............................                                                    (1,248,613)       (248,193)
   Net loss ..................................                                                    (1,566,003)       (390,688)
   Shareholders' equity ......................                                                      (582,862)        964,497
   EBITDA(8) .................................                                                       327,745         331,598
   EBITDA margin(9) ..........................                                                          31.8%           31.4%
   Ratio of EBITDA-to-interest expense .......                                                           1.7x            1.6x
   Ratio of financial debt-to-EBITDA(10) .....                                                           9.3x            5.8x

Selected Argentine Operating Data (unaudited):
   Total households(12) ......................     5,092,900       5,092,900       5,092,900       5,092,900       5,092,900
   Multicanal homes passed(12)(13) ...........     4,475,600       4,475,600       4,512,300       4,522,700       4,364,400
   Multicanal homes passed/Total households ..          87.9%           87.9%           88.6%           88.8%           85.7%
   Total cable subscribers(12) ...............     1,853,200       1,853,200       2,154,100       2,131,300       2,202,400
   Multicanal subscribers(12) ................       870,800         870,800       1,171,700       1,148,900       1,220,000
   Multicanal penetration(14)(15) ............          19.5%           19.5%           26.0%           25.4%           28.0%
   Multicanal market share(15) ...............          47.0%           47.0%           54.4%           53.9%           55.4%







                                                                     At or for the year
                                                                     ended  December 31,
                                                 -------------------------------------------------------
                                                     1999                1998(1)           1997(2)
                                                 -------------------------------------------------------

                                                     (In thousands    (In thousands    (In thousands
                                                      of pesos)(17)    of pesos)(17)    of pesos)(17)


Amounts in Accordance with Argentine GAAP
Statement of Operations Data:
   Net revenues(3) ...........................    Ps.1,049,101    Ps.1,131,095     Ps. 723,522
   Direct operating expenses .................        (465,619)       (518,166)       (324,018)
   Selling, general, administrative and
      marketing expenses .....................        (232,868)       (256,312)       (180,583)
   Depreciation and amortization .............        (310,324)       (299,089)       (164,712)
   Operating (loss) income ...................          40,290          57,528          54,209
   Financial income (expenses) and holding
      gains, net(4) ..........................        (223,271)       (167,539)        (97,989)
   Other non-operating income
     (expenses), net .........................         (96,893)        (49,808)         20,132
   Loss before taxes and minority interest ...        (279,874)       (159,819)        (23,648)
   Gain (loss) on sales of investees .........            (863)              -               -
   Income taxes and/or tax on minimum notional
      income .................................         (38,564)        (24,005)        (28,285)
   Minority interest .........................          (6,714)         (4,583)         (4,269)
   Equity in the (losses) gains of affiliated
      companies ..............................          (2,448)        (13,301)         (4,493)
   Net loss ..................................        (328,463)       (201,708)        (60,695)
                                                     =========       =========       =========
Balance Sheet Data (at year end):
   Current assets ............................         335,734         297,476         226,426
   Property and equipment, (net) .............       1,080,915       1,142,277         750,794
   Goodwill and intangible assets ............       2,226,881       2,368,509       2,289,836
   Other non-current assets(5) ...............          60,065          62,087         537,968
   Total assets ..............................       3,703,595       3,870,349       3,805,024
                                                     =========       =========       =========
   Short-term debt(6) ........................         582,418         507,612         794,139
   Long-term debt(7) .........................       1,364,807       1,269,918         865,109
                                                     =========       =========       =========
   Total financial debt ......................       1,947,225       1,777,530       1,659,248
   Other liabilities .........................         385,446         398,457         252,709
   Total liabilities .........................       2,332,671       2,175,987       1,911,959
                                                     =========       =========       =========
Minority interest .........................          27,046          22,021          19,015
   Shareholders' equity ......................       1,343,878       1,672,341       1,874,047
Cash Flow Data:
   Cash provided by (used in) operations .....          74,964         136,834         245,918
   Acquisition of cable systems and
      subscribers and decrease (increase) in
      goodwill and intangible assets .........         (13,547)        (37,386)     (1,874,186)
   Purchases of property and equipment net of
      proceeds from sales ....................        (153,118)       (212,269)       (279,618)
   Cash provided by (used in) financing
      activities .............................         168,003         115,457       1,945,519
Other Financial Information (unaudited):
   EBITDA(8) .................................         350,614         356,617         218,920
   EBITDA margin(9) ..........................            33.4%           31.5%         30.3%
   Ratio of EBITDA-to-interest expense .......             1.8x            2.2x          2.2x
   Ratio of financial debt-to-EBITDA (10) ....             5.6x            5.0x          7.6x
Amounts in Accordance with U.S. GAAP:
   Net assets(11) ............................       1,378,793       1,677,830       1,888,544
   Revenues ..................................       1,160,676       1,285,815         860,156
   Operating (loss) income ...................          30,655          50,859          49,291
   Financial income (expenses) and holding
   gains, net(4) .............................        (219,885)       (174,653)       (112,588)
   Net loss ..................................        (301,000)       (213,906)        (84,292)
   Shareholders' equity ......................       1,354,348       1,656,537       1,870,442
   EBITDA(8) .................................         350,510         357,531         217,830
   EBITDA margin(9) ..........................            33.4%           31.6%           30.1%
   Ratio of EBITDA-to-interest expense .......             1.8x            2.1x            1.9x
   Ratio of financial debt-to-EBITDA(10) .....             5.6x            5.0x            7.7x

Selected Argentine Operating Data (unaudited):
   Total households(12) ......................       5,092,900       5,092,900       4,430,000
   Multicanal homes passed(12)(13) ...........       4,074,900       3,881,000       3,101,000
   Multicanal homes passed/Total households ..              80%           76.2%           70.0%
   Total cable subscribers(12) ...............       2,223,500       2,291,600       1,936,000
   Multicanal subscribers(12) ................       1,241,100       1,309,200         928,000
   Multicanal penetration(14)(15) ............            30.5%           33.7%           29.9%
   Multicanal market share(15) ...............            55.8%           57.1%           47.9%

</TABLE>

================================================================================

(1)  The results of operations for the year ended December 31, 1998 include
     proportional consolidation of the results of our operations in Bahia Blanca
     Systems and in Santa Fe Systems for the six-month period ended June 30,
     1998. The VCC Group was proportionally consolidated for the seven-month
     period from November 30, 1997 to June 30, 1998 in the audited financial
     statements. As of July 1, 1998, the subscribers, assets and liabilities of
     the VCC Group, the Bahia Blanca Systems and the Santa Fe Systems were
     divided between us and Cablevision S.A. and we integrated such subscribers,
     assets and liabilities into our operations. Consequently, consolidation in
     proportion to the equity holding in Fintelco S.A. was discontinued and the
     results of operations of Fintelco S.A., which continued operating with its
     remaining assets and liabilities for the five-month period ended November
     30, 1998 (related to immaterial operations), have been valued by the equity
     method of accounting. See "The Company--Acquisitions of Cable Networks".

(2)  Commencing with the month ending on November 30, 1997, we proportionately
     consolidated our equity share in income and expenses in the VCC Group, the
     Bahia Blanca Systems and the Santa Fe Systems with similar items in our
     financial statements. As the fiscal year of the VCC Group ends on November
     30, however, we have only proportionately consolidated our share in the
     income and expenses of the VCC Group for the month ended November 30, 1997
     in the Audited Consolidated Financial Statements.

(3)  Net revenues represent gross sales net of charges for the allowance for
     doubtful accounts and direct sales taxes.

(4)  Financial expenses and holding gains, net, comprises financial charges,
     including interest income, interest expense and commissions, exchange
     differences, taxes on interest, taxes on debits and credits to bank current
     accounts, and savings generated by open market repurchases of the Existing
     Notes. The financial statements until December 31, 2001 do not include the
     effects of price-level restatement after August 31, 1995, as inflation
     accounting was no longer permitted from September 1, 1995. The Unaudited
     Consolidated Interim Financial Statements as of September 30, 2002 include
     the result of exposure to inflation and exchange differences.

(5)  Includes investments in affiliated companies and investments carried at
     cost.

(6)  Includes (i) Bank Loans, overdrafts, debt with related parties and current
     portion of acquisition related debt, and (ii) as from December 31, 2001,
     the principal amount of all our other financial debt, which following
     failure to pay on maturity our 9 1/4% Notes due 2002 has been classified in
     its entirety as short term debt, although to date the holders thereof have
     not, to our knowledge, elected to accelerate such debt. At December 31,
     2001, such debt was denominated in U.S. dollars. At September 30, 2002
     U.S.$568.4 million were denominated in U.S. dollars.

(7)  Includes long-term acquisition related debt. At December 31, 2001, all of
     our long-term debt was denominated in U.S. dollars.

(8)  EBITDA represents the sum of (i) operating income (loss) and (ii)
     depreciation and amortization. EBITDA is presented because we believe it is
     a standard financial statistic commonly reported and widely used by
     analysts and other parties in the cable television industry. We believe
     that EBITDA, while providing useful information, should not be considered
     in isolation or as a substitute for net income or loss, as an indicator of
     operating performance or as an alternative to cash flow as a measure of
     liquidity. EBITDA also does not represent funds available for dividends,
     reinvestment or other discretionary uses. You should not construe EBITDA as
     an alternative to (a) net income as an indicator of our operating
     performance or (b) cash flow from our operating activities as a measure of
     liquidity.

(9)  EBITDA divided by net revenues.

(10) Ratio of financial debt to EBITDA is the sum of short-term and long-term
     bank borrowings and short-term and long-term acquisition related debt
     divided by EBITDA.

(11) Net assets represents assets less liabilities determined in accordance with
     U.S. GAAP.

(12) Includes only Argentine regions where we offer service.

(13) Homes passed by our cable networks.

(14) Includes only Argentine regions where we offer service. Our subscribers as
     a percentage of Multicanal homes passed.

(15) Includes only Argentine regions where we offer service. Our subscribers as
     a percentage of total cable subscribers.

(16) Argentine peso amounts have been translated into U.S. dollars at the rate
     of Ps.3.74=U.S.$1.00, the exchange rate on September 30, 2002. Such
     translation should not be construed as a representation that the peso
     amounts represent, or have been or could be converted into, U.S. dollars
     (at that or any other rate).

(17) Except operating data, margins and ratios.


<PAGE>


                                 EXCHANGE RATES

         From April 1, 1991 until the beginning of 2002, the Convertibility Law
was applicable in Argentina. The convertibility Law established a fixed exchange
rate under which the Central Bank was obliged to sell U.S. dollars at a fixed
rate of one peso per U.S. dollar. Under the Convertibility Law, all foreign
exchange controls were eliminated and no restrictions were placed on capital
flows.

         On December 1, 2001, the government placed severe restrictions on the
withdrawal of bank deposits and introduced exchange controls subjecting
transfers of foreign currency abroad to Central Bank approval. The
reintroduction of foreign exchange controls had a significant impact on the
foreign exchange market, and the peso began to trade at less than parity with
the U.S. dollar, despite the fact that the Convertibility Law remained in
effect.

         On January 6, 2002, Congress enacted the Public Emergency Law putting
an end to the regime of the Convertibility Law thus abandoning over ten years of
the U.S. dollar-peso parity and eliminating the requirement that the Central
Bank's reserves in gold and foreign currency be at all times equivalent to not
less than 100% of the monetary base. The Public Emergency Law granted the
Executive Branch the power to set the exchange rate between the peso and foreign
currencies and to issue regulations related to the foreign exchange market. On
January 6, 2002, the Executive Branch established a temporary dual exchange rate
system. One exchange rate, applicable to exports and essential imports was set
at a rate of Ps.1.40 per U.S. dollar. The other, which was applicable to all
other transactions, was a floating rate to be freely determined by the market.
On February 3, 2002 the Executive Branch repealed the dual exchange system and
since February 11, 2002, there has been only one freely floating exchange rate
for all transactions. See "Risk Factors--Risks Related to Argentina--Exchange
Rate Risks."

         On January 11, 2002, the Central Bank ended a banking holiday imposed
on December 21, 2001. The exchange rate began to float freely for the first time
in 11 years at Ps.1.40 per U.S. dollar. The shortage of U.S. dollars and its
heightened demand has caused the peso to devalue significantly. As a result, the
Central Bank has intervened on several occasions by selling U.S. dollars in
order to lower the exchange rate. On February 3, 2002, another banking holiday
was imposed and no exchange operations were resumed until February 11, 2002,
following the repeal of the temporary dual exchange system established January
2002. Heightened demand for scarce U.S. dollars, caused by uncertainty and by
the lack of any other investment alternatives within the corralito, led the peso
to trade well below the Ps.1.40 per U.S. dollar exchange rate used by the
Argentine government in the official market. During June 2002, the peso lost
significant ground, trading as low as Ps.3.90 per U.S.$1.00. On February 6,
2003, the U.S. dollar-peso exchange rate was approximately Ps.3.15 per U.S.
dollar.

         The following table set forth the annual high, low, average and
period-end exchange rates for U.S. dollars for the period indicated, expressed
in nominal pesos per U.S. dollar. The Federal Reserve Bank of New York does not
report a noon buying rate for pesos.

<TABLE>
<CAPTION>
                                                                    Exchange Rate of Pesos per U.S.$1.00
                                                       ---------------------------------------------------------
Year Ended December 31                                   Low             High         Average(1)      Period-end
----------------------                                   ---             ----         ----------      ----------
<S>         <C> <C>                                    <C>             <C>             <C>             <C>
    1997-2001(2)                                       1.00            1.00            1.00            1.00

Month Ended
    January 31, 2002                                   1.40            2.05            1.46            2.05
    February 28, 2002                                  1.70            2.15            1.99            2.15
    March 31, 2002                                     2.05            3.15            2.45            3.00
    April 30, 2002                                     2.68            3.15            2.86            2.98
    May 30, 2002                                       3.10            3.60            3.33            3.60
    June 30, 2002                                      3.50            3.90            3.65            3.80
    July 31, 2002                                      3.55            3.79            3.63            3.70
    August 31, 2002                                    3.59            3.65            3.63            3.63
    September 30, 2002                                 3.62            3.75            3.65            3.74
    October 31, 2002                                   3.52            3.75            3.66            3.52
    November 30, 2002                                  3.48            3.64            3.54            3.64
    December 31, 2002                                  3.37            3.58            3.49            3.37
    January 31, 2003                                   3.10            3.35            3.26            3.21
    February 2003(3)                                   3.15            3.18            3.16            3.15
     --------------------------------
</TABLE>

     Source:  Banco de la Nacion Argentina
(1)  Represents the daily average exchange rate during each of the relevant
     periods.
(2)  Our assets and liabilities denominated in foreign currency as of December
     31, 2001 were valued at the exchange rate of Ps.1.00 to each U.S. dollar,
     as required by Resolution MD No. 01/02 of the Consejo Profesional de
     Ciencias Economicas de la Ciudad Autonoma de Buenos Aires
     (CPCECABA-Professional Council in Economic Sciences of Buenos Aires
     Autonomous City), by BCRA Communiques "A" 3439 and "A" 3574, by CNV
     Resolution No. 392 and IGJ Resolution No. 2/02.
(3)  Period through February 6, 2003.


<PAGE>




                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

         The following discussion should be read in conjunction with the audited
and unaudited financial statements and related notes. The financial information
included in the discussion below as at December 31, 2001 and 2000 and September
30, 2002 and 2001 and for the three years ended December 31, 2001 and for the
nine-month periods ended September 30, 2002 and 2001 is from the financial
statements that are filed as part of this Form 6-K. The financial statements
have been prepared in accordance with Argentine GAAP, which differ in certain
respects from U.S. GAAP. See Note 18 to the Audited Consolidated Financial
Statements, describing the principal significant differences between Argentine
GAAP and U.S. GAAP, as they relate to us. Note 19 to the Audited Consolidated
Financial Statements provides a reconciliation to U.S. GAAP of net income (loss)
for the years ended December 31, 2001, 2000, and 1999 and shareholders' equity
as of December 31, 2001 and 2000 and Note 20 to the Audited Consolidated
Financial Statements provides certain additional disclosures required under U.S.
GAAP.

         Our audited financial statements included the effects of inflation
through August 31, 1995, utilizing the inflation restatement methodology
established in Technical Resolution N(degree)6 of the Professional Council in
Economic Sciences of the Autonomous City of Buenos Aires (CPCECABA). Effective
September 1, 1995, as required by rules issued by the CNV, we discontinued the
restatement methodology, maintaining the effects of inflation accounted for in
prior periods. The discontinuance of inflation accounting is in compliance with
Argentine GAAP, provided that the annual variation in the WPI does not exceed 8%
per annum. During the years ended December 31, 1999, 2000 and 2001 the WPI
increased by 1.2%, increased by 2.5% and decreased by 5.6%, respectively.
Beginning in January 2002, the inflation rate in Argentina began to increase
significantly.

         To counter both the high inflation rates brought about by the end of
the convertibility monetary system in Argentina at the beginning of 2002 and the
distortion this caused in Argentine companies' financial statements, the
Argentine government issued Decree N(0) 1269/02 on July 17, 2002. This decree
provides for the reestablishment of the restatement of financial information to
account for inflation and instructed the CNV to issue specific regulations
regarding its application to companies such as us subject to the CNV's
jurisdiction. Consequently, on July 25, 2002, the CNV issued Resolution
415/2002, providing that financial statements filed subsequent to the date of
the Resolution be restated to recognize changes in the purchasing power of the
peso, starting January 1, 2002. Accordingly, our results have been restated as
follows:

     o    results accumulating monetary transactions, such as net sales,
          operating costs, and administrative and selling expenses, have been
          restated in constant Argentine pesos, applying to the original value
          the conversion factor referenced in the WPI from the month in which
          the transaction took place to the date of the next succeeding fiscal
          quarter.

     o    results related to non-monetary assets valued at restated costs, such
          as amortization and depreciation, have been computed based on the
          restated amounts of such assets.

         Financial results have been valued net of general inflation on the
related assets and liabilities. The effect of inflation on the remaining
monetary assets and liabilities has been disclosed as "Results of exposure to
inflation."

         Additionally, amounts for the nine-month period ended September 30,
2001, and for the years ended December 31, 2001, 2000, 1999, 1998 and 1997,
presented herein for comparative purposes, are presented in comparable monetary
terms at September 30, 2002 using a conversion factor equal to 2.2120, which
represents the inflation index rate during the nine-month period ended September
30, 2002.

         The restatement for wholesale-price level changes recorded in the
income statement reflects the effects of inflation on our net holdings of
monetary assets and liabilities during a period of inflation. Assets and
liabilities are considered "monetary" for purposes of restatement for
wholesale-price level changes if their values are fixed by contract or otherwise
in terms of number of currency units, regardless of changes in specific prices
or in the WPI. Examples of "monetary" assets and liabilities include accounts
receivable, accounts payable and cash stated in pesos. The restatement merely
reflects the effects of inflation, and does not imply either a generation or use
of funds.

         Our Audited Consolidated Financial Statements have been audited by our
Independent Auditors, whose report is included herein. Our financial statements
as of and for the nine-month period ended September 30, 2002 and as of and for
the year ended December 31, 2001 have been prepared on the assumption that we
will continue to operate as a going concern. Our Independent Auditors have
issued reports stating that we have suffered recurring losses from operations
and have a net capital deficiency. The reports also state that we have been
negatively impacted by the Argentine government's adoption of various economic
measures and by the devaluation of the peso. These matters raise substantial
doubt as to our ability to continue to operate as a going concern. The financial
statements as of and for the nine-month period ended September 30, 2001 and as
of and for the year ended December 31, 2001 do not include any adjustments that
might result from the outcome of this uncertainty. See "Risk Factors--Risks
Relating to Multicanal."

         At December 31, 2001, our foreign currency consolidated balance
financial debt including accrued interest and seller debt was U.S.$766.7
million. On that date, the exchange rate of the peso to the U.S. dollar had
remained unchanged since the adoption in 1991 of the Convertibility Law.

         As of February 11, 2002, the government had established a single market
for all exchange transactions at a single free-floating exchange rate, although
foreign exchange controls remained in place for numerous transactions. Under a
new policy effective January 2, 2003, the Central Bank's prior authorization for
the transfer of funds abroad in order to may payments of principal and/or
interest will not be required provided that certain conditions are met, as set
out in Communique "A" 3843 dated December 26, 2002.

         Assets and liabilities in currencies other than Argentine peso as of
December 31, 2001 were valued at the exchange rate of Ps.1.00 per U.S.$1.00, or
the equivalent in the currency of denomination, as of the date of the suspension
of the foreign exchange market in accordance with General Resolution No. 392 of
the CNV. See Note 1 to the Audited Consolidated Financial Statements. Our assets
and liabilities denominated in currencies other than the Argentine peso, which
were not "pesified", amounted to approximately U.S.$671.9 million net
(liability) as of December 31, 2001. Our total consolidated bank and financial
debt, including accrued interest and seller debt, in foreign currency as of
December 31, 2001 amounted to U.S.$766.7 million. As of September 30, 2002, our
total consolidated bank and financial debt amounted to U.S.$568.4 million
(including accrued interest and seller debt) and Ps.63.6 million (including
accrued interest). The effects of the devaluation of the Argentine peso was
reflected in the 2002 consolidated financial statements in accordance with
Argentine GAAP. Net losses originating from the application of foreign exchange
rates to foreign currency-denominated assets and liabilities as of the effective
date of the Public Emergency Law are only deductible for income tax purposes up
to 20% per annum in each of the first five fiscal years ended after the
effective date of the Public Emergency Law.

         Our revenues are realized principally through monthly fees charged to
our subscribers payable in pesos. Although substantially all of our financial
expenses are denominated in U.S. dollars, we have not used financial instruments
to hedge our currency risk. The significant devaluation of the peso beginning in
January 2002 has resulted in an increase in the cost of servicing our debt and,
therefore, has had a material adverse effect on our results of operations. We
have defaulted on all payments on our Existing Notes and on all principal
payments and a significant portion of our interest payments on our Bank Loans
since February 2002. We understand that at least 23 quiebra petitions have been
filed against us, and we have received service of process for 18, for claims
totaling approximately U.S$1.2 million.

The Argentine Economy

         We are an Argentine sociedad anonima (a corporation with limited
liability) and substantially all of our facilities and approximately 87% of our
subscribers are presently located within Argentina. In the fourth quarter of
1998, the Argentine economy entered into a recession that caused the gross
domestic product to decrease by 3.0% in 1999, 0.5% in 2000 and an estimated 4.9%
in 2001 (with a 10% drop in the fourth quarter compared to the third quarter)
led by large declines in the construction and automotive sectors, according to
the Argentine Economy Ministry. The unemployment rate increased from 14.5% in
May 1999 to 15.4 % in May 2000 and 16.4% in May 2001 and 18.3% in October 2001.

         Measures taken by the Argentine government during 2001 were
insufficient to restore investor confidence, and spreads on Argentine government
securities reached record highs, as speculation increased that Argentina would
cease honoring its debt obligations. The government responded to the lack of
investor confidence by adopting additional measures designed to further control
public sector spending, such as the Zero Deficit Law No. 25,453 passed on July
30, 2001, which provided that the government's monthly expenditures could not
exceed the revenues of such month (excluding the proceeds of any financing) and
empowered the Secretary of the Treasury to eliminate dispensable expenditures to
meet the balanced budget requirement. In addition, in December 2001, the
Argentine government adopted severe measures to safeguard the viability of the
banking system in light of increasing withdrawals of deposits in the second half
of 2001. These measures barred transfers of funds outside Argentina, except (i)
trade related payments, (ii) payments or withdrawals through credit or debit
cards issued in Argentina, and (iii) payments on financial transactions approved
by the Central Bank.

         On December 1, 2001, in the face of increasing withdrawals of deposits
from the financial system, the Argentine government imposed restrictions on the
amount of money holders could withdraw from banks and introduced exchange
controls restricting capital outflows. As of December 3, 2001, remittances of
foreign exchange, including for the payment of debt obligations, were subject to
Central Bank approval with certain exceptions.

         On December 19, 2001, President de la Rua and his entire cabinet
resigned (which was accepted on December 20, 2001) amidst continued economic
turmoil and social unrest. After a series of interim presidents, in January 1,
2002 at a joint session of Congress, Eduardo Duhalde, a Peronist senator who had
been defeated by former President de la Rua in 1999, was elected to complete Mr.
de la Rua's term through the end of 2003.

         On January 6, 2002 Congress enacted the Public Emergency Law, which
amended certain provisions of the Convertibility Law and eliminated the
requirement that the Central Bank's reserves in gold and foreign currency be at
all times equivalent to at least 100% of the monetary base. The Public Emergency
Law abolished the U.S. dollar to peso parity regime and granted the executive
branch the power to set the exchange rate between the peso and foreign
currencies and to issue regulations related to the foreign exchange market. The
peso now floats freely and on February 5, 2003 traded at an exchange rate
Ps.3.16 per U.S.$1.00.

         Since January 6, 2002, additional regulations were approved by the
Argentine government, including:

     o    ending the Convertibility Law, with the resulting devaluation of the
          peso;

     o    converting U.S. dollar-denominated debts into peso-denominated debts
          at a one-to-one exchange rate;

     o    converting U.S. dollar-denominated bank deposits into peso-denominated
          bank deposits at an exchange rate of Ps.1.40 per U.S. dollar;

     o    restructuring bank deposits and continuing restrictions on bank
          withdrawals and transfers abroad;

     o    amending the Central Bank's charter to allow it to print currency in
          excess of the amount of the foreign reserves it holds, make short-term
          advances to the federal government and provide financial assistance to
          financial institutions with liquidity constraints or solvency
          problems; and

     o    requiring the obligatory sale, currently suspended, by all banks of
          all their foreign currency within Argentina to the Central Bank at an
          exchange rate of Ps.1.40 per U.S. dollar.

         Although the long-term effect of the current crisis and the new
governmental measures remains uncertain, they have had an immediate and
materially adverse effect on our liquidity, financial condition, anticipated
results of operations and business prospects, including:

     o    eliminating expectations that we may be able to raise in the capital
          or banking markets the funds needed to refinance significant
          maturities that became due in 2002 and coming due in 2003; and

     o    giving rise to a significant decline in the value of our assets and
          anticipated revenues. As explained in Note 17 to the Audited
          Consolidated Financial Statements, the recent developments described
          above has caused us to revise our strategy and, based on our current
          projections of future cash flows, impair the carrying value of the
          goodwill related to past acquisitions as of December 31, 2001 by
          Ps.330.5 million.

         The Argentine government is expected to face severe fiscal problems due
to the devaluation of the Argentine currency. Peso-denominated tax revenues
constitute the primary source of its earnings, but most of its financial
liabilities are U.S. dollar-denominated. The adoption of austere fiscal measures
which would be required to repay the Argentine government's debt and to balance
its budget may lead to further social unrest and political instability.

         Past history prior to the adoption of the Convertibility Law raises
serious doubts as to the ability of the Argentine government to maintain a
strict monetary policy and control inflation. In the past, inflation materially
undermined the Argentine economy and the government's ability to create
conditions that would permit growth. High inflation would likely deepen
Argentina's current economic recession.

         It is premature to predict how the government will ultimately address
the crisis that continues to affect the Argentine economy. At this time the
degree of internal and external support for the Duhalde administration remains
unclear. Widespread political protests and social disturbances are continuing on
a near-daily basis. The rapid and radical nature of the recent changes in the
Argentine social, political, economic and legal environment (including tax
regulations), and the absence of a clear political consensus in favor of the
Duhalde government or any particular set of economic policies, have created an
atmosphere of great uncertainty. As a result, virtually all commercial and
financial activities were paralyzed in 2002, further aggravating the economic
recession which precipitated the current crisis.

         The Argentine government has historically exercised significant
influence over the economy. Due to the current Argentine crisis, the Argentine
government has recently promulgated numerous, far-reaching and not always
consistent laws and regulations affecting the economy. We cannot assure you that
laws and regulations currently governing the economy will not continue to change
in the future, particularly in light of the continuing economic crisis, or that
any changes will not adversely affect our business, financial condition or
results of operations as well as our ability to honor our debt obligations.

Other Factors Affecting our Results and Financial Condition

         Source of Revenues. Since our formation in 1991, we have generated
approximately 90% of our revenues from monthly customer charges for basic cable
service and the balance from connection fees and advertising. More recently, we
have also generated revenues from premium and pay-per-view fees. A decrease in
the number of subscribers has a direct impact on net revenues, although it also
causes a reduction in certain of our operating expenses. During 2001, and in the
nine-month period ended September 30, 2002, our subscriber base decreased by
approximately 70,000 and 297,400 subscribers, respectively. We believe that this
decrease is primarily attributable to the continued slow-down of the Argentine
economy and an increase in the value-added taxes imposed on cable television
services.

         Effects of Inflation. For almost ten years, Argentina experienced very
low levels of inflation and in certain years, deflation. During several of these
years, the purchasing power of a large segment of the population increased,
together with consumer confidence. We initiated our business during that period,
and our growth internally and through acquisitions reflects the overall increase
in the level of economic activity. The recession which affected the country
since 1998 gradually undermined the purchasing power of many of our customers,
induced an increase in our churn and adversely affected our results of
operations. These adverse trends accelerated with the significant devaluation
and the inflation that followed. During the first nine months of 2002 the WPI
increased by 121%, compared to slight deflation during the same period in 2001.
During periods of high inflation, effective wages and salaries tend to fall and
consumers adjust their consumption patterns to eliminate unnecessary expenses,
including cable television services. Our subscriber base contracted by 22.9%
during the first nine months of 2002. Our ability to compensate for the decrease
in revenues resulting from such a drop in our subscriber base through increases
in monthly fees were limited and inadequate to compensate us for our increasing
costs. Our financial condition and results of operations may continue to
deteriorate if the rates of inflation experienced in 2002 continue.

         Acquisition and Internal Growth. We operate primarily in Argentina. A
principal element of our strategy was to increase our subscriber base through
the acquisition of cable television companies and the expansion of our existing
systems. We acquired 121 companies between 1991 and 2001, with approximately
1,242,400 subscribers at acquisition.

         We expanded our subscriber base through internal net growth by
approximately 59,100 subscribers from our formation through December 31, 2001,
after taking into account the decrease in our subscriber base over the same
period, including approximately 70,000 subscribers that left our cable systems
during 2001. This figure excludes subscribers corresponding to the Brazilian
operations we sold in December 1996, with 35,700 subscribers. It also excludes
the 38,000 subscribers of the Mendoza Operations, which we sold in October 1997.

         We seek to improve operating performance and cash flow through the
consolidation of acquired systems. Our consolidation effort has intensified
since 1995 through the implementation of an administrative structure that
facilitated the consolidation and centralization process. These efforts resulted
in a significant improvement in our results of operations since 1996. In
addition, we have absorbed 71 of our wholly-owned subsidiaries and have further
consolidated our operations through the elimination of duplicative
administrative functions. At September 30, 2002, we served directly
approximately 80% of the combined subscriber base of ourselves and our
subsidiaries.

         We do not expect any significant increase in our subscriber base
whether through internal growth or acquisitions, unless the economy stabilizes
and conditions for growth in the service sectors of the economy are restored.

         Factors Affecting Period-to-Period Comparability. Period-to-period
comparisons of our financial results for prior periods are affected by the
acquisitions we completed and by differences in the classification of certain
revenues and expenses by acquired companies. These classification differences do
not affect the calculation of EBITDA and are eliminated on a going forward basis
as acquired businesses are integrated into our system. In the opinion of
management, these classification differences are not material within the context
of our financial statements, taken as a whole. The difference between the book
value of the assets of companies we acquired and the price paid for those
companies is recorded as goodwill and intangible assets. At December 31, 2001,
these assets amounted to Ps.1,644.1 million and represented 57.1% of our total
assets and 223.8% of our shareholders' equity. As of the date hereof Comfer has
not approved some of our new acquisitions. Comfer's approval of our acquisition
of companies for which goodwill and intangible assets have been recorded in the
amount of Ps.1,548.2 million, or 78.4% of the total amount of this asset, is
pending.

         Period-to-period comparisons of financial results for future periods
are likely to be affected by inflation. While inflation accounting improves the
comparability of financial statements, it does not eliminate or correct many of
the distortions created by inflation, that will affect period-to-period
comparisons of our financial results.

         EBITDA. We define EBITDA as operating income (loss) plus depreciation
and amortization. We believe that EBITDA is a meaningful measure of performance
because it is commonly used in the cable television industry to analyze and
compare cable television companies on the basis of operating performance,
leverage and liquidity. Nonetheless, EBITDA is not a measure of net income or
cash flow from operations and should not be considered as an alternative to net
income, an indication of our operating performance, an alternative to cash flow
from operating activities or a measure of liquidity. Because EBITDA is not
determined in accordance with U.S. GAAP, other companies may compute EBITDA in a
different manner. Therefore, EBITDA as reported by other companies may not be
comparable to EBITDA as we report it.

         Consolidation of the Industry. The consolidation of the cable
television industry increases the level of competition that we face. In October
1997, a further consolidation of the Argentine cable television industry
resulted from the joint acquisition by us and Cablevision of 100% of the shares
of the VCC Group. Before its acquisition by us and Cablevision, the VCC Group
constituted Argentina's second largest MSO. We and Cablevision divided the
subscribers, assets and liabilities of the VCC Group effective as of July 1,
1998. See "The Company--Acquisitions of Cable Networks--Recent Acquisitions." We
believe that the consolidation of the cable television industry in Argentina has
reinforced the need to undertake frequent investments to remain competitive.

         Tax Reform. Since 1998, the Argentine government has approved a series
of revisions to the Argentine taxation system. It has:

     o    extended the scope of value-added tax ("VAT") to amounts we charge for
          advertising and for cable television services at a rate of 21%;

     o    increased the general corporate income tax from 33% to 35%;

     o    established a minimum notional income tax at a rate of 1% of total
          assets for Argentine companies, which tax is creditable against income
          taxes;

     o    limited the deductibility of interest payments on debt obligations and
          created a new tax on interest paid by issuers of obligaciones
          negociables at a rate of 15% (to be phased out by July 2002) for
          interest paid to non-Argentine residents and Argentine licensed banks
          and 35% for interest paid to Argentine residents, both of which impact
          the cost of debt securities issued and other borrowings undertaken by
          Argentine companies and increase our cost of borrowing funds;

     o    increased the rate of the withholding tax to 35% on interest payments
          we make on loans extended by banks not established or located in
          countries where the central bank has adopted the international
          standards approved by the Basle Committee on Banking Regulations and
          Supervisory Practices; and

     o    establishing a tax on credits and debits to checking accounts.

         In addition, in May 2001, the cable television industry signed an
agreement with the Argentine Federal Government to improve the competitiveness
of the sector. Under its terms, companies who acceded to the agreement could:

     o    credit payments made to SADAIC, Fondo Nacional de las Artes,
          Argentores, and AADI-CAPIF against VAT; and

     o    be exempted from the minimum notional income tax.

         We acceded to the agreement and became eligible for its benefits as of
August 2001, and the benefits will apply until March 2003. Also on August 13,
2001, the Argentine government issued Decree No. 1008/01 allowing us to reduce
our payment obligations on account of VAT by the amounts previously paid to
Comfer that were not previously applied to reduce our payment obligations on
account of VAT. The amounts paid to Comfer that are not applied in a given
fiscal period can be transferred to any future fiscal period. In March 2003 the
"competition tax regime" created in 2001 will expire along with the tax benefits
arising under that regime. In our case, this will result in (1) the
re-imposition of the minimum notional income tax, and (2) the inability to
credit payments made SADAIC, Fondo Nacional de las Artes, Argentores, and
AADI-CAPIF against VAT.

         In June 2001, the social security tax rate was made uniform at 16%.
Prior to June 2001, we had been subject to a rate of approximately 14%. However,
amounts payable as a result of the increase in the rate are creditable against
amounts due by us on account of VAT. The resulting increase can be calculated as
a VAT fiscal credit. Subsequently, in July 2001, Congress increased the rate to
20%. Finally, under the Argentine budget law for 2002, the rate was increased
again to 21%.

         The Argentine public sector has been running an overall deficit since
1994. For several years, it relied on local and foreign sources of financing as
well as tax revenues to cover its funding needs. The default on the government's
external debt in December 2001 makes it unlikely that sources of foreign
financing will be available in the future to cover the needs of the Argentine
public sector. Furthermore, if and when the government restores payment on its
foreign debt, even assuming that such debt is restructured, it will need to
dedicate a significant portion of its revenues to debt service. Unless the
government is able to pair down its expenses as a percentage of GDP
substantially, we cannot exclude that the historic trend to develop new sources
of tax revenues at the federal, state and municipal level will continue, putting
additional strains on our financial condition. If our overall tax burden (or a
percentage of our revenues) continues to increase and we are not able to
increase subscriber fees, our financial condition will deteriorate.

Critical Accounting Policies

         In connection with the preparation of the financial statements included
herein, we have relied on variables and assumptions derived from historical
experience and various other factors that we deemed reasonable and relevant.
Although we review these estimates and assumptions in the ordinary course of
business, the portrayal of our financial condition and results of operations
often requires our management to make judgments regarding the effects of matters
that are inherently uncertain on the carrying value of our assets and
liabilities. Actual results may differ from those estimated under different
variables, assumptions or conditions. In order to provide an understanding about
how management forms its judgments about future events, including the variables
and assumptions underlying the estimates, and the sensitivity of those judgments
to different variables and conditions, we have included the following comments
related to each critical accounting policy described below.

Impairment of Long Lived Assets

         Our accounting policies require that we test long-lived assets for
impairment whenever indicators of impairment exist. If any impairment is
indicated as a result of such reviews, we would measure it using techniques such
as comparing the discounted cash flows of the business to our book value or by
obtaining appraisals of the related business. We follow the provisions of FASB
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. That accounting standard requires that if
the sum of the future undiscounted cash flows expected to result from the
assets, without interest charges, is less than a company's reported value of the
assets, then the asset is not recoverable and the company must recognize an
impairment. The amount of impairment to be recognized is the excess of the
reported value of the assets over the fair value of those assets.

         As discussed in Note 17 to the Audited Consolidated Financial
Statements, management has reviewed our long-lived assets, primarily property
and equipment to be held and used in the business, long-term investments and
goodwill for the purposes of determining and measuring impairment. Given the
significant negative impact that is expected on our operating results as a
result of the devaluation, the pesification and the continued macro-economic
slowdown in Argentina, and as management's best estimate of discounted future
cash flows is below the carrying value of goodwill, under Argentine GAAP we
recorded a Ps.330.5 million impairment charge during the year ended December
2001. Under U.S. GAAP, assets were grouped and evaluated for possible impairment
at the level of cable television system by region. As a result of different
basis of goodwill determined on acquisition, as described in Note 18(c) to the
Audited Consolidated Financial Statements, the impairment recognized under
Argentine GAAP differs from the one recognized under U.S. GAAP by Ps.78.1
million. In this connection, under U.S. GAAP we recorded a Ps.252.4 million
impairment charge during the year ended December 31, 2001.

         We believe that the accounting estimate related to this asset
impairment is a "critical accounting estimate" because: (1) it is highly
susceptible to change from period to period because it requires management to
make assumptions about future revenues and costs over the life of property and
equipment, long-term investments and goodwill; and (2) the impact that
recognizing an impairment has on the assets reported on our balance sheet as
well as our net loss is material. Management's assumptions about future
revenues, as well as future number of subscribers, operating costs and selling,
general and administrative costs require significant judgment because actual
revenues and subscribers have been seriously affected by the continued
macro-economic slowdown in Argentina and are expected to continue to be so
affected. Management has discussed the development and selection of this
critical accounting estimate with the audit committee of our board of directors
and the audit committee has reviewed the company's disclosure relating to it
herein.

         In estimating future revenues, as well as future number of subscribers,
operating costs and selling, general and administrative costs, we used our
internal projections.

Allowances for Doubtful Accounts

         Management makes estimates of the uncollectability of its accounts
receivable and maintains allowances for doubtful accounts for estimated losses
resulting from customers' failure to make required payments. If the future
payments by our customers were to differ from the estimates, we may need to
increase or decrease the allowances for doubtful accounts, which could affect
the reported results of operations.

Provision for Obsolescence of Materials

         Provision for potentially obsolescent or slow-moving materials is made
based on management's assumptions about their future consumption.

Loss Contingencies

         Loss contingencies are accrued when it is reasonably certain that the
loss will be incurred, but uncertainty exists relating to the amount or the date
on which they will arise. Accruals for such contingencies reflect a reasonable
estimate of the losses to be incurred based on information available as of the
date of preparation of the financial statements.

Deferred Income Taxes

         Deferred income taxes are provided to reflect the net tax effects of
temporary differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the currently enacted tax rates
and laws in each of the relevant jurisdictions. Deferred income taxes reflect
management's assessment of actual future taxes to be paid on items reflected in
the financial statements, giving consideration to both timing and probability of
realization.

         Deferred tax assets are reduced by a valuation allowance if, based on
the weight of available evidence, it is reasonably certain that some portion or
all of the deferred tax assets will not be realized. Actual income taxes could
vary from these estimates due to future changes in income tax law or results
from final review of our and our subsidiaries' tax returns by taxing
authorities.

         We have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance. However, in the event management were to determine that it would be
able to realize its deferred tax assets in the future in excess of its net
recorded amount, an adjustment to the deferred tax asset would increase income
in the period such determination was made. Likewise, should management determine
that it would not be able to realize all or part of its net deferred tax asset
in the future, an adjustment to the deferred tax asset would be charged to
income in the period such determination was made.


                              Results of Operations

         The following table sets forth, for the periods indicated, certain
statement of operations data and EBITDA in thousands of pesos and as a
percentage of net revenues:

<TABLE>
<CAPTION>
                                                  Nine Month       Nine Month
                                                 Period Ended     Period Ended
                                                 September 30,    September 30,                 Year Ended December 31,
                                                 -------------    -------------                 -----------------------
                                                     2002             2001             2001            2000             1999
                                                     ----             ----             ----            ----             ----
                                                          (unaudited)                         (thousands of pesos)

<S>                                                 <C>               <C>             <C>               <C>               <C>
Net revenues                                        463,285           792,403         1,029,403         1,054,439         1,049,101
Direct operating expenses                          (249,509)         (383,062)         (505,370)         (499,056)         (465,619)
Selling, general,
administrative and marketing                       (104,056)         (155,196)         (197,228)         (224,295)         (232,868)
Depreciation and amortization                      (238,895)         (252,561)         (336,745)         (339,539)         (310,324)
Operating (loss) income                            (129,175)            1,583            (9,940)           (8,451)           40,290
Financial income (expenses)
and holding gains, net                             (571,819)         (180,156)         (225,503)         (247,656)         (223,271)
Other non-operating
income(expenses), net                                 1,444           (23,905)         (361,021)          (34,757)          (96,893)
Gain (loss) on sale of
investees                                                 -           326,939           326,939                 -              (863)
Income taxes and/or tax on
minimum notional income                              (4,273)          (10,477)          (11,483)          (21,951)          (38,564)
Net loss                                           (691,537)          107,362          (287,851)         (323,859)         (328,463)
EBITDA (unaudited)                                  109,720           254,145           326,805           331,088           350,614


                                                  Nine Month       Nine Month
                                                 Period Ended     Period Ended
                                                 September 30,    September 30,                 Year Ended December 31,
                                                 -------------    -------------                 -----------------------
                                                     2002             2001             2001            2000             1999
                                                     ----             ----             ----            ----             ----
                                                          (unaudited)                     (as a percentage of net revenues)

Net revenues                                        100.0%          100.0%           100.0%           100.0%          100.0%
Direct operating expenses                           (53.9)          (48.3)           (49.1)           (47.3)          (44.4)
Selling, general,
administrative and marketing                        (22.5)          (19.6)           (19.2)           (21.3)          (22.2)
Depreciation and amortization                       (51.6)          (31.9)           (32.7)           (32.2)          (29.6)
Operating (loss) income                             (27.9)            0.2             (1.0)            (0.8)            3.8
Financial income (expenses) and
holding gains, net                                 (123.4)          (22.7)           (21.9)           (23.5)          (21.3)
Other non-operating
income(expenses), net                                 0.3              (3)             (35.1)            (3.3)           (9.2)
Gain (loss) on sale of investees                        -            41.3               31.8                -            (0.1)
Income taxes and/or tax on
minimum notional income                              (0.9)           (1.3)            (1.1)            (2.1)           (3.7)
Net loss                                           (149.3)           13.5            (28.0)           (30.7)          (31.3)
EBITDA (unaudited)                                   23.7            32.1             31.7             31.4            33.4

</TABLE>

         Set forth below is a discussion and analysis of our results of
operations for the years ended December 31, 2001, 2000, and 1999 and the
nine-month periods ended September 30, 2002 and 2001.

Recent Developments

         According to our unaudited financial data for October and November
2002, net revenues for that period were Ps.78 million. Our net revenues for the
same period last year were Ps.155 million. Our losses from operations during
October and November 2002 were Ps.31 million in comparison to Ps.11 million for
the same period last year. According to our unaudited financial data for the
period from October 1, 2002 through February 3, 2003, our net revenues during
that period were Ps.162 million. Our net revenues from October 1, 2001 through
February 3, 2002 were Ps.301 million.

Nine-month Periods Ended September 30, 2002 and 2001

         Net Revenues. Net revenues were Ps.463.3 million in the nine-month
period ended September 30, 2002. This figure represents a decrease of 41.5%
compared to net revenues of Ps.792.4 million in the nine-month period ended
September 30, 2001. The decrease in net revenues in this period as compared to
the nine-month period ended September 30, 2001 is attributable to our inability
to increase the basic fees for our services at a rate equal to or greater than
the general rate of inflation (during the nine-month period ended September 30,
2002 we increased prices approximately 42%, compared with an increase in the WPI
of 121%) the continued loss of subscribers (297,400 over the nine-month period
ended September 30, 2002) and a reduction in advertising sales. The decrease in
Argentine net revenues was partially offset by an increase in revenues (in peso
terms) from our international operations (Uruguay and Paraguay), a decrease of
charges for the allowance for doubtful accounts, an increase in other sales and
a reduction in direct taxes.

         Our revenues are presented net of various direct taxes that are charged
on our gross revenues and which represent on average approximately 0.6% of gross
revenues. These taxes, which are levied on billed amounts excluding amounts
charged off, include several direct taxes and a tax on gross revenues generated
in La Pampa, Chaco and Corrientes. From January 1, 1999 through August 12, 2001,
we were allowed to reduce our payment obligations on account of VAT at the end
of each month by the amounts paid to Comfer during that month. From August 13,
2001 to December 2002 we were also allowed to reduce our payment obligations on
account of VAT by the amounts previously paid to Comfer that were not previously
applied to reduce our payment obligations on account of value-added taxes. In
December 2002, the government eliminated the right granted to cable television
operators to reduce their payment obligations on VAT by the amounts paid to
Comfer. As a result of losing the right to offset payment obligations on account
of VAT by the amounts paid to Comfer, we anticipate that in the future our
EBITDA may be lower. Our revenues are also presented net of charges for the
allowance for doubtful accounts.

         Direct Operating Expenses. Our direct operating expenses were Ps.249.5
million in the nine-month period ended September 30, 2002. This figure
represents a decrease of 34.9% over our direct operating expenses of Ps.383.1
million in the nine-month period ended September 30, 2001, which is mainly
attributable to a decrease in programming expenses, payroll and social security,
printing and distribution of magazines, rentals and sundry.

         Direct operating expenses consist principally of:

          o    signal delivery fees paid to programming suppliers,

          o    wages, benefits and fees paid to employees and subcontracted
               service firms for the repair and maintenance of cable networks
               owned by us and customer disconnections, and

          o    to a lesser extent, the costs of related materials consumed in
               these repair and maintenance activities (primarily in foreign
               currency, since these inputs are imported), costs associated with
               pole rental and the printing cost for our monthly publication.

         Selling, General, Administrative and Marketing Expenses. Our selling,
general, administrative and marketing expenses were Ps.104.1 million in the
nine-month period ended September 30, 2002. This figure represents a decrease of
33.0% from Ps.155.2 million in the nine-month period ended September 30, 2001,
which is attributable principally to a decrease in payroll and social security,
sales commissions, personnel expenses and sundry, and was partially offset by an
increase in employee dismissals.

         Our selling, general, administrative and marketing expenses consist of:

          o    professional fees,

          o    wages and benefits of non-technical employees,

          o    sales commissions,

          o    advertising,

          o    insurance,

          o    rental of office space, and

          o    other office related expenses.

         Depreciation and Amortization. Depreciation and amortization expenses
were Ps.238.9 million in the nine-month period ended September 30, 2002. This
figure represents a decrease of 5.4% compared to depreciation and amortization
expenses of Ps.252.6 million in the nine-month period ended September 30, 2001.
This decrease in our depreciation and amortization expenses was mainly due to
the decrease in the value of intangible assets as a result of the impairment
charge recorded as of December 31, 2001. See Note 14 to the Audited Consolidated
Financial Statements.

         Financial (Income) Expenses and Holding Gains Net. Our net financial
expenses and holding losses were Ps.571.8 million in the nine-month period ended
September 30, 2002. This figure represents an increase of 217.4% from financial
expenses and holding losses, net, of Ps.180.2 million in the nine-month period
ended September 30, 2001. This increase is attributable principally to the
impact of the devaluation of the peso in relation to the U.S. dollar on our U.S.
dollar-denominated debt (Ps.1,009.9 million) and was partially offset by the
cancellation of Existing Debt acquired in the open market (Ps.423.5 million) and
the net gains resulting from the impact of inflation on our monetary assets and
liabilities (Ps.236.6 million).

         Other Non-Operating Income (Expenses), Net. Other non-operating income
net, was Ps.1.4 million in the nine-month period ended September 30, 2002,
compared to other non-operating expenses, net, of Ps.23.9 million in the
nine-month period ended September 30, 2001. Other non-operating income, net,
during the nine-month period ended September 30, 2002 increased mainly due to a
lower provision for employee dismissals and in provisions made on account of
contingent liabilities, and a decrease in sundry, and was partially offset by
the impairment charge recorded in our international operations (Uruguay).

         Gain (Loss) on Sale of Investees. Gains on sale of investees were
Ps.326.9 in the 9 month period ended September 30, 2001 as a result of a net
gain from the sale of our interest in DirecTV Latin America, LLC.

         Income Taxes and/or Tax on Minimum Notional Income. Income taxes were
Ps.4.3 million in the nine-month period ended September 30, 2002, compared to
Ps.10.5 million in the nine-month period ended September 30, 2001. In October
2001 we were added to the register of beneficiaries of the agreements to improve
competitiveness and employment and as a result, we were exempted from the tax on
minimum notional income for fiscal year 2001 and future years. That exemption as
originally contemplated in the competitiveness law expires on March 31, 2003. In
our case, this will result in the reimposition of the minimum notional income
tax.

         Net Loss. We had a net loss of Ps.691.5 million in the nine-month
period ended September 30, 2002, as compared to a net gain of Ps.107.4 million
in the nine-month period ended September 30, 2001, as a result of the factors
described above.

         EBITDA. Our EBITDA in the nine-month period ended September 30, 2002
was Ps.109.7 million. This figure represents a decrease of 56.8% compared to our
EBITDA of Ps.254.1 million in the nine-month period ended September 30, 2001.
Our EBITDA margin (EBITDA/net revenues) decreased to 23.7% compared to 32.1%,
due primarily to a decrease in revenues at a faster pace than our reduction of
costs.

Years Ended December 31, 2001 and 2000

         Net Revenues. Net revenues were Ps.1,029.4 million for the year ended
December 31, 2001. This figure represents a decrease of 2.4% over net revenues
of Ps.1,054.4 million in the year ended December 31, 2000. The decrease in net
revenues in this period was mainly attributable to the loss of approximately
70,000 subscribers over the year ended December 31, 2001 due to the continued
slowdown of the Argentine economy, as well as a decrease in advertising sales
and an increase in the charges for the allowance for doubtful accounts, which
was partially offset by an increase in other sales, a reduction in direct taxes
and the authorization to apply Comfer taxes paid in previous months (and not
previously applied) to reduce our value-added tax liabilities.

         Our revenues are presented net of various direct taxes that are charged
on our gross revenues and which represent on average approximately 1.4% of gross
revenues for 2001. These taxes, which were levied on billed amounts excluding
amounts charged off, included several direct taxes and a tax on gross revenues
generated in La Pampa, Chaco and Corrientes. From January 1, 1999, through
August 12, 2001, we were allowed to reduce our payment obligations on account of
value-added taxes at the end of each month by the amounts paid to Comfer during
that month. Since August 13, 2001, we have also been allowed to reduce our
payment obligations on account of value-added taxes by the amounts previously
paid to Comfer that were not previously applied to reduce our payment
obligations on account of value-added taxes. Our revenues are also presented net
of charge for the allowance for doubtful accounts.

         Direct Operating Expenses. Our direct operating expenses were Ps.505.4
million in the year ended December 31, 2001. This figure represents an increase
of 1.3% over our direct operating expenses of Ps.499.1 million in the year ended
December 31, 2000. This increase was primarily due to a higher cost in
programming rights and increased provisions for various contingent obligations,
and was partially offset by a reduction in payroll and social security and in
sundry.

         Selling, General, Administrative and Marketing Expenses. Our selling,
general, administrative and marketing expenses were Ps.197.2 million in the year
ended December 31, 2001. This figure represents a decrease of 12.1% from
Ps.224.3 million in the year ended December 31, 2000. The decrease was
principally due to savings in publicity and advertising and in payroll and
social security, and to a lesser extent, to the decrease in building expenses,
security and surveillance services, rentals, office expenses and representation
and travel expenses, and was partially offset by an increase in fees and
compensation for services, and increased provisions for various contingent
obligations.

         Depreciation and Amortization. Depreciation and amortization expenses
were Ps.336.7 million in the year ended December 31, 2001. This figure
represents a decrease of 0.8% over depreciation and amortization expenses of
Ps.339.5 million in year ended December 31, 2000. Depreciation and amortization
expenses consist of depreciation of property and equipment and amortization of
goodwill, deferred charges and other intangible assets.

         Financial (Income) Expenses and Holding Losses, Net. Our net financial
expenses and holding losses were Ps.225.5 million in the year ended December 31,
2001. This figure represents a decrease of 8.9% from financial expenses and
holding losses, net, of Ps.247.7 million in the year ended December 31, 2000.
The lower financial expenses are attributable to a decrease in the outstanding
principal amount of our debt as a result of amortizations and the cancellation
of notes acquired in open market repurchases, and a lower charge for tax on
interest. Such savings were partially offset by an increase in bank expenses, a
tax on debits and credits to bank accounts and a higher level of commissions.

         Other Non-Operating Income (Expenses), Net. Other non-operating
expenses, net, were Ps.361.0 million in the year ended December 31, 2001,
compared to other non-operating expenses, net, of Ps.34.8 million in the year
ended December 31, 2000. Other non-operating expenses, net, during the year
ended December 31, 2001 consisted primarily of an allowance for impairment of
goodwill of Ps.330.5 million related to past acquisitions made in light of our
current projections of future cash flows. The balance is attributable mainly to
severance payments made in connection with the reorganization of our personnel
structure and reserves made on account of contingent liabilities.

         Gain (Loss) on Sale of Investees. Gains on sale of investees were
Ps.326.9 million in the year ended December 31, 2001 as a result of a net gain
from the sale of our interest in DirecTV Latin America, LLC.

         Income Taxes and/or Tax on Minimum Notional Income. Income taxes were
Ps.11.5 million in the year ended December 31, 2001, compared to Ps.22.0 million
in the year ended December 31, 2000. This decrease was principally due to the
effect of a lower minimum notional income tax charge as a result of the minimum
notional income tax allowance generated in the year ended December 31, 2001 as
compared to the year ended December 31, 2000. In October 2001, we became a
beneficiary of a special regime granting us an exemption from the tax on minimum
notional income for fiscal year 2001.

         Net Loss. We had a net loss of Ps.287.9 million in the year ended
December 31, 2001, as compared to a net loss of Ps.323.9 million in the year
ended December 31, 2000. The non-recurrent net gain from the sale of our
interest in DirecTV Latin America, LLC described above practically offset the
loss resulting from the impairment by Ps.330.5 million of the carrying value of
goodwill related to past acquisitions.

         EBITDA. Our EBITDA in the year ended December 31, 2001 was Ps.326.8
million. This figure represents a decrease of 1.3% over our EBITDA of Ps.331.1
million in the year ended December 31, 2000. Our EBITDA margin (EBITDA/net
revenues) increased slightly to 31.7% compared to 31.4%.

Years Ended December 31, 2000 and 1999

         Net Revenues. Net revenues were Ps.1,054.4 million in the year ended
December 31, 2000. This figure represents an increase of 0.5% over net revenues
of Ps.1,049.1 million in the year ended December 31, 1999. While our gross
revenues decreased slightly in 2000 compared to 1999 as a result of reduced
advertising revenues, we were able to increase net revenues for the year ended
December 31, 2000 as compared to the year ended December 31, 1999 by reducing
our liabilities for direct taxes as well as the annual charge for allowance for
doubtful accounts.

         Our revenues are presented net of various direct taxes charged on our
gross revenues and which represent on average approximately 3.7% of gross
revenues for 2000. These taxes, which are levied on billed amounts excluding
amounts charged off, included a tax payable to Comfer (net of amounts that could
be applied to reduce our payment obligations on account of value-added tax),
several programming taxes and royalties and a tax (at a rate between 2.5% and
3.0%) on gross revenues generated in La Pampa, Chaco and Corrientes, where, as
of December 31, 2000, 5.6% of our subscribers resided. During the year ended
December 31, 2000, direct taxes amounted to Ps.43.1 million, representing a
decrease of 17.5% over direct taxes of Ps.52.2 million in the year ended
December 31, 1999, which partially offset the decrease in net revenues. Our
revenues are also presented net of charges for the allowance for doubtful
accounts.

         Direct Operating Expenses. Our direct operating expenses were Ps.499.1
million in the year ended December 31, 2000. This figure represents an increase
of 7.2% over our direct operating expenses of Ps.465.6 million in the year ended
December 31, 1999. Direct operating expenses consist principally of:

         The increase was primarily due to additional expenses incurred in
connection with or as a result of:

          o    assuming direct responsibility for investigating thefts of our
               cable television signals and the blocking of such signals,
               instead of third party service providers, to improve the quality
               of such services;

          o    payroll and social security;

          o    programming rights;

          o    taxes, rates and contributions;

          o    personnel expenses; and

          o    overhead,

which more than offset savings in fees and compensation for services, security
and surveillance representation and travel expenses, and office expenses.

         Selling, General, Administrative and Marketing Expenses. Our selling,
general, administrative and marketing expenses were Ps.224.3 million in the year
ended December 31, 2000. This figure represents a decrease of 3.7% from Ps.232.9
million in the year ended December 31, 1999.

         The decrease was principally due to savings in publicity and
advertising, representation and travel expenses and personnel expenses.

         Depreciation and Amortization. Depreciation and amortization expenses
were Ps.339.5 million in the year ended December 31, 2000. This figure
represents an increase of 9.4% over depreciation and amortization expenses of
Ps.310.3 million in year ended December 31, 1999, attributable primarily to an
increase in our installations, external wiring and transmission equipment.
Depreciation and amortization expenses consist of depreciation of property and
equipment and amortization of goodwill, deferred charges and other intangible
assets.

         Financial (Income) Expenses and Holding Losses, Net. Our net financial
expenses and holding losses were Ps.247.7 million in the year ended December 31,
2000. This figure represents an increase of 10.9% from expenses and losses of
Ps.223.3 million in the year ended December 31, 1999. This increase was
principally due to:

          o    higher interest expense, which in the year ended December 31,
               2000 was Ps.210.6 million, a 9.9% increase from interest expense
               of Ps.191.6 million in the year ended December 31, 1999, and

          o    an increase in our liability for taxes on interest paid on debt
               securities and other borrowings from Ps.25.6 million for the year
               ended December 31, 1999 to Ps.28.3 million for the year ended
               December 31, 2000, as a result of the increase in our interest
               expense.

         The rise in interest expense was primarily caused by an increase in the
average outstanding amount of financial debt during this period and, to a lesser
extent, in the average cost of financing.

         Other Non-Operating Income (Expenses), Net. Other non-operating
expenses, net, totaled Ps.34.8 million in the year ended December 31, 2000,
compared to other non-operating expenses, net, of Ps.96.9 million in the year
ended December 31, 1999. Other non-operating expenses, net, during the year
ended December 31, 2000 consisted primarily of reserves made on account of
contingent liabilities (primarily from pending litigation) totaling Ps.12.8
million, and recorded expenses of Ps.7.3 million for severance payments incurred
in connection with the reorganization of our personnel structure. Additionally,
the disposal of fixed assets totaled Ps.1.8 million, and the write-off of other
assets totaled Ps.3.8 million.

         Income Taxes and/or Tax on Minimum Notional Income. Income taxes were
Ps.22.0 million in the year ended December 31, 2000, compared to Ps.38.6 million
in the year ended December 31, 1999. This decrease was principally due to the
effect of lower minimum notional income tax allowances in 2000 as compared to
1999.

         Net Loss. We had a net loss of Ps.323.9 million in the year ended
December 31, 2000, as compared to a net loss of Ps.328.5 million in the year
ended December 31, 1999, as a result of the factors described above.

         EBITDA. Our EBITDA in the year ended December 31, 2000 was Ps.331.1
million. This figure represents a decrease of 5.6% over our EBITDA of Ps.350.6
million in the year ended December 31, 1999. Our EBITDA margin (EBITDA/net
revenues) decreased to 31.4% from 33.4%, as costs increased more than revenues.

U.S. GAAP Reconciliation

         Net loss determined in accordance with U.S. GAAP would have been
Ps.(1,566.0) million, Ps.(390.7) million, and Ps.(301.0) million for the years
ended December 31, 2001, 2000, and 1999 respectively, as compared with net loss
of Ps.(287.9) million, Ps.(323.9) million, and Ps.(328.5) million determined
under Argentine GAAP for the same periods. The principal differences affecting
the determination of net loss are (i) organizational and preoperating costs have
been written off for U.S. GAAP purposes and, accordingly, the amortization
charge is reversed, (ii) the effects on depreciation and amortization of the
different bases for determination of the underlying net asset acquired and the
goodwill on the combination of businesses which have been treated on the
purchase method, (iii) vacation accrual, (iv) effect on the amortization of
goodwill of the discounting of non-interest bearing acquisition related debt,
(v) the recognition of deferred income tax effects, (vi) the discounting of
non-interest bearing acquisition-related debt, (vii) interest capitalization,
(viii) foreign currency translation adjustment, (ix) the reversal of the
provision for severance indemnities, (x) foreign exchange differences, (xi)
transfer of financial assets, (xii) impairment adjustment, and (xiii) the
effects on deferred taxes, investments carried under the equity method and
minority interest of the above reconciling items. Shareholders' equity
determined in accordance with U.S. GAAP would have been Ps.(582.9) million and
Ps.964.5 million as of December 31, 2001 and 2000, respectively. The principal
differences affecting the determination of shareholders' equity are those
described above. For a discussion of the principal differences between Argentine
and U.S. GAAP as they relate to our consolidated net loss and shareholders'
equity, see Note 18 to the Audited Financial Statements and for a quantitative
reconciliation of such differences, see Note 19 to the Audited Financial
Statements.

Continuation of Operations

         In the context of Argentina's severe economic recession, we must devote
our resources and revenues to ensure the continuity of its operations. To this
end, we have undertaken various measures, including suspending payments on our
outstanding indebtedness, and renegotiating various contracts, including our
contracts with programming suppliers, to convert substantially all U.S.
dollar-denominated costs to peso-denominated costs for 2002, subject to
adjustment to reflect changes in our subscriber base and our ability to increase
subscription fees.

Ability to Operate as a Going Concern

         In their report accompanying our Unaudited Interim Consolidated
Financial Statements for the period ended September 30, 2002, our Independent
Auditors have noted that although we have prepared such financial statements
following accounting principles applicable to a going concern, the recurring
losses from operations, the reporting of a net capital deficiency, the changes
in economic conditions in Argentina and the impact of those changes on us create
substantial doubt as to our ability to continue to operate as a going concern.

Liquidity and Capital Resources

         We operate in a capital intensive industry which requires significant
investments. In the past, our growth strategy has involved the acquisition of
other cable television companies and the active improvement and expansion of our
existing and acquired networks and equipment. We have historically relied on
four main sources of funds:

          (1)  equity contributions from our shareholders,

          (2)  borrowings under bank facilities or debt security issuances,

          (3)  cash flow from operations; and

          (4)  financing by sellers of cable systems we acquire.

         The conditions affecting the Argentine economy since 1998 and the
uncertainties as to future developments have prevented us from raising the funds
required to discharge our debt obligations as they became due in 2002 and 2003.
As a result, we have defaulted on all payments on our Existing Notes, and all
principal payments and a substantial portion of our interest payments on our
Bank Loans since February 2002. As a result of these payment defaults, all of
our Existing Notes that have not yet matured could be declared immediately due
and payable by the holders. Since February 2002, we have devoted our cash flow
from operations primarily to ensure the continuation of our operations. We have
been informed that at least 23 quiebra petitions have been filed against us, and
we have received service of process for 18, for claims totaling approximately
U.S$1.2 million. If we are served with process on those petitions, given
economic conditions in Argentina and their impact on our financial condition, we
will likely commence concurso proceedings. The filing of a concurso proceeding
may result in a partial or total loss of your investment in our Existing Debt.

         From our formation through September 30, 2002, we received U.S.$875.1
million in equity contributions. During October 1997, we received a U.S.$500
million contribution as an advance on future share issues from a company
controlled by the Grupo Clarin shareholders. The U.S.$500 million contribution
was applied to the payment of the purchase price for interests in various cable
companies, including the 50% interest in the VCC Group, the Bahia Blanca Systems
and the Santa Fe Systems. This capital contribution from the Grupo Clarin
shareholders was capitalized on April 7, 1998.

         Fintelco S.A. and its wholly-owned subsidiaries continue to be jointly
owned by us and Cablevision and will continue operations with their remaining
assets, Ps.5.6 million, and liabilities, Ps.84.9 million, at November 30, 2001,
until the residual liabilities have been paid off. We and Cablevision have
agreed to make capital contributions in Fintelco S.A., in proportion to our
equity interests in that company, to enable VCC to discharge its remaining
liabilities. Fintelco S.A. had a negative shareholders' equity as of November
30, 2001. Although until December 2003 there is an exemption, under the
Argentine Commercial Companies Law, this could result thereafter in its
dissolution, unless its capital is restored to the level required by the
Argentine Companies Law. We and Cablevision S.A. each hold 50% of the equity of
Fintelco S.A. and, in that proportion, we have undertaken to make the
contributions required to pay the liabilities of Fintelco S.A. and its
subsidiaries when due.

         Net cash (used in) provided by financing activities (excluding
shareholders' contributions) amounted to Ps.(208.2) million for the year ended
December 31, 2001, Ps.(38.3) million for the year ended December 31, 2000, and
Ps.168.0 million for the year ended December 31, 1999, and Ps.(257.9) million
for the nine-month period ended September 30, 2002. Cash provided by financing
activities were proceeds from the issuance of our negotiable obligations, bank
debt and seller financing, several of which remain outstanding.

         At September 30, 2002, our consolidated indebtedness was Ps.2,189.3
million (U.S.$568.4 million and Ps.63.6 million, including in each case accrued
interest, and in the case of U.S.$ 568.4 million, seller debt). This
indebtedness was comprised of:

          o    U.S.$37.6 million to holders of our 10 1/2% Series C Notes due
               2018,

          o    U.S.$195.5 million to holders of our 9 1/4% Notes due 2002 and 10
               1/2% Notes due 2007,

          o    U.S.$130.8 million to holders of our 13.125% Series E Notes due
               2009,

          o    U.S.$144.0 million to holders of our Series J Floating Rate Notes
               due 2003,

          o    U.S.$56.9 million of accrued interest on our Existing Notes.

          o    Ps.63.6 million under bank debt, including accrued interest, and

          o    U.S.$3.6 million of seller financing.

         During the last quarter of 2001 and in January 2002, using the funds
provided by the sale of our participation in DirecTV Latin America, LLC in
August 2001, we applied U.S.$80.1 million to repurchase Existing Notes issued by
us having face value of U.S.$211,148,000, obtaining a discount of
U.S.$130,995,548.

         Between January 1, 1998 and December 31, 2001 we issued several series
of negotiable obligations (including several of our Existing Notes), raising
aggregate net proceeds of approximately U.S.$897.3 million. The difference
between this figure and our current outstanding debt is due to the fact that
certain of the issuances during that period came due and were paid in full at
maturity. The net proceeds raised were applied primarily to repay debt incurred
in connection with the purchase of cable television systems, other short-term
bank debt and related costs and expenses.

         On February 1, 2002, we defaulted on the payment of principal and
interest on our 9 1/4% Notes due 2002 and interest payments on our 10 1/2% Notes
due 2007 due to the situation of the Argentine economy and the political and
social crisis that resulted from the economic, exchange, and regulatory
measures. For the same reasons, on February 26, 2002, we defaulted on interest
payments on our Series J Floating Rate Notes due 2003, and on April 15, 2002,
defaulted on interest payments on its Series C 10 1/2% Notes due 2018 and its
Series E 13.125% Notes due 2009. See "Risk Factors--Risks Relating to
Multicanal."

         We generated cash flows from operating activities of Ps.44.1 million
for the year ended December 31, 2001, Ps.51.0 million for the year ended
December 31, 2000, Ps.75.0 million for the year ended December 31, 1999 and
Ps.172.7 million for the nine month period ended September 30, 2002. This
increase in cash flows from operating activities for the nine-month period ended
September 30, 2002 is primarily due to the non-payment of interest on the
Existing Notes. We generated cash in sales of investments, net of cash used in
acquisitions of cable systems, of Ps.317.5 million for the year ended December
31, 2001, and we used cash in acquisitions of cable systems and increase in
goodwill and intangible assets of Ps.(7.5) million for the year ended December
31, 2000, Ps.(13.5) million for the year ended December 31, 1999 and Ps.(1.0)
million for the nine month period ended September 30, 2002. This cash was used
principally in capital expenditures in 1999, 2000 and 2001, and also to repay
bank loans in 2001.

         Purchase of property and equipment (net of proceeds from sales) of
Ps.46.9 million for the year ended December 31, 2001, Ps.86.5 million for year
ended December 31, 2000, Ps.153.1 million for the year ended December 31, 1999
and Ps.8.1 million for the nine month period ended September 30, 2002, have been
related to the continued construction, expansion and upgrading of our existing
systems. From our formation through December 31, 2001, we increased our
subscriber base through internal growth, by expanding our existing systems and
increasing penetration of these systems. We have only minimal commitments to
capital expenditures required by the terms of our operating licenses. We were
required to bring our cable systems fully into compliance with municipal
regulations relating to the installation of cables in several areas of the City
of Buenos Aires Region by late 2002, and were required to do so in the City of
Mar del Plata by November 2001. We are not in compliance with the City of Mar
del Plata regulations as of the date hereof; the City of Mar del Plata is
considering whether to extend the term granted by its ordinance. Although such
ordinance does not provide for penalties to be imposed on non-compliant cable
systems, the Justicia Municipal de Faltas (the Municipal Claims Court) may
impose fines on us. If we have sufficient cash flow and financing is available
at commercially attractive rates, we will upgrade our existing cable systems,
including any network upgrades or modifications required by regulatory or local
authorities. However, we cannot assure you that the term granted by the
ordinance of the City of Mar del Plata will be extended to allow us to bring our
cable system in that city fully into compliance.

         We have often financed acquisitions of cable systems directly with the
sellers of the acquired companies. As of September 30, 2002, we owed an
aggregate amount of U.S.$3.6 million in connection with these seller financings.
All outstanding seller financing obligations that originally matured no later
than June 30, 2002 have been renegotiated and will be paid 24 months from July
2002. In addition, as per an addendum to agreement related to the Uruguayan
acquisition, dated November 2002, we renegotiated the financing obligations due
in October 2002 through March 2003. See "The Company--Acquisitions of Cable
Networks."

         As a result of the devaluation of the Argentine currency, at September
30, 2002, we recognized net loss in the amount of Ps.692 million in accordance
with Argentine GAAP and a shortfall in consolidated working capital amounting to
Ps.2,146 million. As indicated in Note 13 to the Unaudited Interim Financial
Statements, losses by us have absorbed over 50% of capital and reserves.
Although section 206 of the Argentine Companies Law establishes mandatory
capital reduction in such situations, by means of Decree No. 1269/02 dated July
17, 2002, the Argentine government suspended enforcement of this regulation
until December 10, 2003.

         At September 30, 2002, our cash position totaled Ps.95.3 million
(U.S.$25.5 million). During the fourth quarter of 2002 we applied our cash flows
from operating activities to working capital to ensure the continuity of our
operations. During the fourth quarter of 2002, net revenues continued to
decrease as compared to the same quarter of 2001, mainly due to a decrease in
our subscriber base. Our Independent Auditors have indicated to us that,
although no financial statements for the period subsequent to September 30,
2002, have been prepared as of the date hereof, we can expect that our net
revenues for the months of October and November 2002 will decrease as compared
to the same months in 2001, and our loss from operations for the months of
October and November 2002 will increase as compared to the same months in 2001.
See "-Recent Developments."

         We estimate our expenses related to the restructuring we have recently
announced at approximately U.S.$8.1 million. We will also need to use
approximately U.S.$20 million of the cash currently available to us to pay the
purchase price in the cash tender offer we have recently announced if it is
successful. We cannot assure you that we will generate sufficient cash flows
from operations to sufficiently increase our cash on hand to pay the expenses
relating to the restructuring when such expenses become due and to maintain
sufficient liquidity to conduct our operations.

         The following table provides information on our bank and financial debt
outstanding at September 30, 2002. Variable interest rates are based on
effective rates at September 30, 2002. All amounts are presented in thousands.

         Bank and financial debt:

                                                      Currently
                                                         due          2003
                                                      ---------       ----

         U.S. dollars                                  420,792         --
         Fixed rate (average)                            11.1%         --
         U.S. dollars                                  144,000         --
         Pesos                                          63,329        241
         Variable rate (average)                          7.4%        14%

         We have not used financial instruments to hedge its exposure to
fluctuations in foreign currency exchange or interest rates.

Income Taxes

         In accordance with previous Argentine tax regulations, the income tax
was applied at a statutory rate of 33% on taxable income for each fiscal year.
Effective December 31, 1998, the statutory corporate income tax rate in
Argentina was increased by the tax reform enacted by the Argentine Congress from
33% to 35%, retroactive to January 1, 1998. See "Management's Discussion and
Analysis--Other Factors Affecting our Results and Financial Condition--Tax
Reform."

         Under Argentine law, each corporation within a group is independently
liable for income taxes and, although we presented pre-tax accounting losses on
a consolidated basis (net loss before income taxes) of Ps.276.4 million,
Ps.301.9 million and Ps.289.9 million for the years ended December 31, 2001,
2000, and 1999, and Ps.687.3 million for the nine-month period ended September
30, 2002, some of our subsidiaries generated taxable income and paid income
taxes. Under Argentine GAAP, income tax expense is generally recognized based
upon the estimate of the current income tax liability. When income and expense
recognition for financial statement purposes does not accrue in the same period
as income and expense recognition for tax purposes, the resulting temporary
differences are not considered in the computation of income tax expense for the
period. Similarly, under Argentine GAAP, no deferred tax assets are recorded to
reflect net operating loss carryforwards. Tax loss carryforwards in Argentina
may be used for five years. In our case, Ps.6.5 million expire in 2002, Ps.99.3
million in 2003, Ps.117.7 million in 2004, Ps.141.1 million in 2005, and Ps.2.7
million in 2006. See Note 20(a) to the Audited Financial Statements included
herein.

         In June 1998, the Argentine tax authorities notified VCC that it had
failed to maintain adequate collateral with respect to certain deferred tax
obligations generated by its investments in Sierras de Mazan S.A. under an
industrial promotion regime. In consequence, the tax authorities demanded
payment of approximately Ps.6.9 million and fines and interest accrued thereon.
We and Cablevision caused VCC to institute administrative proceedings to
challenge such decision. On April 8, 1999, the Administracion Federal de
Ingresos Publicos ("Federal Administration of Public Revenues") reversed the
decision previously rendered by the Argentine tax authorities confirming that
the deferred tax obligations are properly collateralized.


                                   THE COMPANY

History and Development of the Company

         We are a corporation (sociedad anonima) organized under the laws of
Argentina. Our business began in 1991 with the incorporation of Multicanal S.A.
which offered basic cable services to the City of Buenos Aires. We were acquired
by Clarin shareholders in October of 1992. Since then, we have become a leader
in Argentina's cable television industry, through an acquisition policy that has
allowed us to diversify the programming we offer and increase our market share.
We have established foreign operations in Paraguay and Uruguay. Our charter
documents provide that our corporate existence will continue until 2090, but
this date may be extended by a resolution of our shareholders. Our registered
office is located at Avalos 2057, (1431) Buenos Aires, Argentina, telephone
011-54-11-4-524-4700.

Business Overview

         We are a multiple system operator or MSO with operations in Argentina,
Paraguay and Uruguay. A multiple system operator or MSO is a cable company that
owns multiple cable systems in different locations under the control and
management of a single, common organization. As of September 30, 2002, we served
approximately 1,004,000 subscribers, of which approximately 870,800 reside in
Argentina and the balance reside in neighboring countries. We own cable
television systems in many of Argentina's most important regions and operate
them through three regional clusters.

         We derive revenues primarily from monthly subscription fees for basic
cable service. To a lesser extent, we also derive revenues from connection fees
and advertising and from fees for premium and pay-per-view programming services
and Internet services. See "The Company--Programming and Other Services."

         Substantially all of our operations, property and customers are located
in Argentina. Accordingly, our revenues are primarily in pesos and our financial
conditions and results of operation depends primarily on macroeconomic and
political conditions prevailing in Argentina. Substantially all of our debt,
however, is denominated in U.S. dollars. As a result of the severe economic
crisis affecting Argentina since the fourth quarter of 2001, our debt burden
became unsustainable. In February 2002 we suspended payment of our U.S. dollar
denominated debt and focused our efforts on preserving the ongoing viability of
our operations. Our first priority was to align our operating costs, to a large
extent denominated in U.S. dollars, with our peso revenues. During 2002 we
renegotiated various contracts to convert substantially all of our U.S. dollar
denominated costs into pesos.

Business Strategy

         Our business strategy focuses on maintaining our position as one of the
leading cable television companies in Argentina and, in the long-term, to
position ourselves to become a provider of other cable-based services. As a
cable television company, our goal is to continue offering high quality services
and programming. In light of the deteriorating Argentine macro-economic
environment, we have emphasized customer service and retention in our efforts to
maintain our subscriber base.

         While in past years we have upgraded a significant part of our networks
to maintain the highest technological standards throughout our cable systems and
to expand programming alternatives and services, we are currently limiting the
amount of annual capital expenditures to the minimum level required to continue
providing the current level of services to our customers.

         We are continuously negotiating arrangements with programming providers
to reduce programming expenses in line with lower revenues.

         We seek to differentiate ourselves from our competitors and reduce
subscriber termination rates by focusing on the quality of our customer service,
the strength of our brand name and the development of new cable products and
services. Each of our operating regions is managed by a regional manager who is
responsible for customer and technical service and who reports directly to our
Chief Executive Officer. We believe that our flat operating structure enables us
to respond effectively to our customers' needs.

         Our strategy has been consistently based on the premise that the
continuation of our operations offers our creditors the best prospects for a
recovery. To this end, our management has focused on the following measures:

         o  continuing to provide services to our customers;

         o  maintaining access to suppliers of programming;

         o  reducing expenses;

         o  renegotiating programming and other contracts;

         o  deferring non-essential capital expenditures; and

         o  reducing labor costs.

         Measures implemented in 2002 to further rationalize our operations and
protect our operating margins included:

         o  minimizing cable/network overlap and reusing equipment in other
            parts of the network,

         o  implementing incentives to retain and/or recover customers, and

         o  requiring payment of a sign-up fee aimed at dissuading customers
            with insufficient financial means from subscribing to our services.

         Consistent with our focus on improving operating efficiency, we have
consolidated our City of Buenos Aires Region, Greater Buenos Aires Southern
Region and most of the Greater Buenos Aires Northwestern Region networks through
the installation of fiber optic loops. This installation eliminated ten headends
and allows us to serve all three regions through one headend. We have kept an
additional headend in the region to ensure redundant capability in the event of
a network impairment. See "Risk Factors--Risks Relating to the Cable Television
Industry Generally."

Cable Networks

         Overview. We currently operate our cable systems in Argentina through
three regional clusters. The following table shows subscriber and related data
for all three operating regions as of September 30, 2002 and is based on
information published by third parties and our internally generated market
information:

<TABLE>
                                                City of       Atlantic
                                                Buenos         Coast &
                                                 Aires         Central      Litoral
                                                Region         Region        Region       Total
                                             -----------    -----------    ---------    ---------
<S>                                          <C>            <C>            <C>          <C>
Total Households(1)                           3,294,220      1,070,280      728,400     5,092,900
Multicanal Homes Passed(1)(2)(3)              3,022,400      1,031,900      421,300     4,475,600
Multicanal Homes Passed/Total Households          91.7%          96.4%        57.8%         87.9%
Total Cable Subscribers(1)(2)                 1,179,700        398,100      275,400     1,853,200
Multicanal Subscribers(4)                       467,000        276,900      126,900       870,800
Multicanal Penetration(5)                         15.5%          26.8%        30.1%         19.5%
Multicanal Market Share(6)                        39.6%          69.6%        46.1%         47.0%
(1)  In areas where we operate.
(2)  Numbers rounded to nearest hundred. (3) Homes passed by our cable networks.
(4)  During the last quarter of 2002 the pace at which we have been losing
     subscribers appears to have decreased. We estimate subscribers lost during
     the period at approximately 30,000.
(5)  Our subscribers as a percentage of total homes passed.
(6)  Our subscribers as a percentage of total cable subscribers.
</TABLE>

         City of Buenos Aires Region. This region consists of cable systems in
the city of Buenos Aires, the greater Buenos Aires Southern and Northwestern
Regions and the cities of La Plata, Berisso and Ensenada. Buenos Aires is the
federal capital of Argentina and, together with the Buenos Aires metropolitan
area, accounts for approximately 12 million inhabitants, representing
approximately 35% of the total Argentine population. La Plata is the capital of
the province of Buenos Aires, and Berisso and Ensenada are neighboring cities of
La Plata. We serve approximately 467,000 subscribers in this region, with
3,022,400 homes passed and 10,800 miles of trunk and feeder cable. We have
consolidated the City of Buenos Aires with the Greater Buenos Aires Southern
Region, using fiber optic loops, and our systems have a capacity ranging from
450 MHz to 750 MHz, with approximately 60.4% of our systems in this region
having 750 MHz capacity.

         Atlantic Coast and Central Region. This region consists of cable
systems in ten major cities of the province of Buenos Aires, eight of which are
on the Atlantic coast, including Mar del Plata and Bahia Blanca, seven of the
largest cities in the province of Cordoba, the second largest province of
Argentina in number of inhabitants, and two cities in the province of La Pampa.
Our systems serve approximately 276,900 subscribers in this region, with
approximately 1,031,900 homes passed and 4,900 miles of trunk and feeder cable.
Approximately 52% of our systems have a capacity of 450 MHz in this region.

         Litoral Region. This region consists of cable systems in five cities in
the province of Santa Fe, the third largest province of Argentina in number of
inhabitants, one city in the province of Entre Rios, the city of Corrientes in
the province of Corrientes, two cities in the province of Chaco and the city of
Formosa in the province of Formosa. Our systems serve approximately 126,900
subscribers in this region, with 421,300 homes passed and 2,200 miles of trunk
and feeder cable. Our systems have a capacity ranging from 350 to 750 MHz in
this region.

         Network Architecture. Our strategy emphasizes high technological
standards for our cable television systems. While in the past we have upgraded a
significant part of our networks to maintain the highest technological standards
throughout our cable systems and to expand programming alternatives and
services, we are currently limiting the amount of annual capital expenditures to
the minimum level in order to continue providing the current level of services
to our customers. We use a FSA design to upgrade or rebuild our network because
it permits bidirectional transmission. FSA network architecture is a design of
cable network fiber trunks and coaxial cable extensions which connect
programming headends to the distribution network and allow signals to flow both
to and from headends and the distribution network.

         Our FSA network is made up of five levels.

         o  Level 1. The first level consists of a principal headend and the
            fiber optic cable used to link it with the secondary or back up
            headends. This link has redundant capacity and enhances the
            reliability of our service.

         o  Level 2. The second level, Optical Transition Node ("OTN"), consists
            of buildings equipped with the technology necessary to provide the
            different services we offer or plan to offer, as well as the fiber
            optic ring that links each of these buildings between themselves and
            with the principal headend.

            Each first level is composed of several second levels or OTNs. These
            two levels together form the backbone of our network. The VCC Group
            network was also built following this design in the City of Buenos
            Aires, Greater Buenos Aires and the City of Cordoba. This similarity
            has allowed us to integrate the acquired subscribers and network by
            linking the OTNs received in the division to our principal headend
            in each region.

         o  Level 3. The third level consists of the fiber optic cable that
            links the OTNs with "nodes." These nodes are equipped with optical
            signal receivers. Each node converts optical signals to electrical
            codes which are transmitted by coaxial cable to subscribers' homes.
            The design of our nodes permit each node to be further subdivided
            into four, increasing the number of homes that may be passed without
            significant additional investment.

         o  Level 4. The fourth level consists of a coaxial cable network that
            covers the serving area. The serving area includes the cable network
            to, but does not include the connection with, the homes passed. This
            network is fed by the fiber optic cable and the optical signal
            receiver of the third level. The coaxial cable used in the upgrade
            or rebuilding of our network is mostly 750 MHz.

         o  Level 5. The fifth level consists of taps into the coaxial cable
            network for the direct connection to the subscribers.

         Our network architecture creates a flexible network that can be used as
a platform for additional services and products, including cable modems for
Internet access and telephony services. It allows us to:

         o  monitor our networks,

         o  offer approximately 80 analog channels,

         o  offer approximately 100 digital channels (assuming a 6-to-1 ratio),
            and

         o  offer additional premium and pay-per-view services.

         Currently, approximately 31.7% of our network has a capacity of 750
MHz. As a result of the economic instability and cash flow restrictions
affecting our business, we have limited our capital expenditures to the minimum
required to continue providing services to our customers.

Acquisitions of Cable Networks

         At the time we began operations in 1991, the Argentine cable television
industry was highly fragmented and comprised of two large operators, Cablevision
and VCC, and more than 1,500 small and medium-size operators. Since our
creation, we have followed a systematic approach in acquiring, consolidating and
operating cable television systems, selected on the basis of their subscriber
base, location, operational characteristics and growth prospects. Since our
inception through December 31, 2001, we completed 121 acquisitions, adding
approximately 1,242,400 subscribers to our subscriber base.

         We have improved the operating performance and cash flow of the
acquired cable television systems by:

         o  consolidating them into regional clusters,

         o  eliminating duplicative personnel and office locations,

         o  creating regional customer service centers and headends, and

         o  centralizing corporate support functions.

         In addition to our acquisition strategy, we have sought to increase our
subscriber base by extending the number of homes passed by our systems. We have
also sought to increase our penetration rates by promoting a distinct image of
high quality programming and superior customer service. Since the beginning of
our operations in 1991 through December 31, 2001, we have added approximately
59,100 new subscribers to our existing cable systems through internal growth
after taking into account the decrease in our subscriber base over the same
period. In 2001, approximately 70,000 subscribers left our cable systems, while
during the nine-month period ended September 30, 2002, we lost approximately
297,400 subscribers, mainly due to the continued slowdown of the Argentine
economy.

         We have restructured our corporate organization on six occasions to
rationalize and streamline our operations. Several regulatory approvals required
in connection with these corporate reorganizations are currently pending. See
"The Company--Regulatory Overview".

         On June 22, 2001 our shareholders approved the merger agreement entered
into with Plataforma Digital S.A., Red Argentina S.A., Radio Satel Sociedad
Anonima, Cable Espacio del Buen Ayre S.A., Video Cable Norte S.A., Television
por Cable S.A. and Cablevision Corrientes Sociedad Anonima. This corporate
reorganization, once approved, will be effective as of January 1, 2001. We have
complied with all necessary legal requirements and have submitted the agreement
to the CNV for its approval. We expect the CNV to grant its approval and to
submit the merger agreement to the IGJ, for its approval and registration. The
CNV has not yet granted its approval because it is awaiting the IGJ's
registration of the previous mergers.

         Finally, although we have completed all legal requirements necessary to
finalize all merger processes, we have yet to receive the approval for some of
the mergers from the IGJ.

Recent Acquisitions

         As a result of acquisitions during 1997, Fintelco S.A. and VCC continue
to be jointly owned by us and Cablevision and will continue operations with
their remaining assets, Ps.5.6 million, at November 30, 2001, and liabilities,
Ps.84.9 million, at November 30, 2001, until the residual liabilities have been
paid off. We and Cablevision agreed to make capital contributions in Fintelco
S.A. in proportion to each of our respective equity interests in Fintelco S.A.
to enable VCC to discharge its remaining liabilities, including any contingent
liabilities arising from court actions or claims initiated or filed before July
1, 1998, which remain in VCC. In an April 30, 1998 agreement, we and Cablevision
agreed to assume any contingent liabilities arising out of court actions or
claims initiated or filed after June 30, 1998 relating to employees, assets or
operations allocated to either of them, except for administrative and criminal
proceedings and personal injury claims arising from events that occurred before
July 1, 1998 and initiated after June 30, 1998. These claims will be assumed by
us and Cablevision in equal parts.

         We divided the subscribers, assets and liabilities of the VCC Group and
the Santa Fe Systems as of July 1, 1998. As a result, we have effected the
physical division of the assets of those systems and, since July 1, 1998, we
have had effective control of the operations and assets transferred to us. All
legal requirements to cause our division of the subscribers, assets and
liabilities of the VCC Group and the Santa Fe Systems to become effective under
Argentine law have been completed. The approvals from Comfer and the IGJ are
still pending. We expect Comfer and the IGJ to grant their approvals during
2003. See "--Regulatory Overview."

         On October 27, 2000, we acquired 49% of the capital stock of Dorrego
Television S.A. and of Cable Video Sur S.R.L. (two systems in Coronel Dorrego,
Province of Buenos Aires) for a total price of U.S.$1,312,000, of which
U.S.$1,150,000 was paid in cash on such date and the balance, U.S.$162,000 on
October 26, 2001. On December 15, 2000, we acquired the remaining 51% of Dorrego
Television S.A. and Cable Video Sur S.R.L. The price of such transaction was
U.S.$1,292,500, of which U.S.$220,000 was paid in cash and the balance in 13
installments of U.S.$82,500 each, the last of which was paid on December 17,
2001. The interests we acquired in Cable Video Sur S.R.L. were subject to
certain liens as security for amounts due by the seller to the former owners.
Pursuant to an agreement dated October 15, 2002, we assumed from the seller the
outstanding liabilities amounting to Ps.250,000 to former shareholders of
Dorrego Television S.A. and we agreed to discharge this debt in 30 monthly
installments determined by reference to a formula based on the basic
subscription fee charged in Coronel Dorrego. On December 15, 2002, we entered
into an agreement whereby we assumed from the seller liabilities owed to former
co-owners of Cable Video Sur S.R.L. The seller's liabilities were guaranteed
with a pledge of 99% of the quotas of Cable Video Sur S.R.L. In connection with
this agreement, we agreed to pledge the shares of Dorrego Television S.A. in
exchange for a release of the pledge of the quotas of Cable Video Sur S.R.L.
This is intended to facilitate the conversion of Video Cable Sur S.R.L. into a
sociedad anonima and the contribution of its shares into Dorrego Television S.A.
We also agreed to pay Ps.829,641 in 39 monthly installments and six semi-annual
installments.

         On November 10, 2000, Plataforma Digital S.A. ("Plataforma"), a company
merged with us effective January 1, 2001, and Grupo Clarin S.A. entered into a
share sale agreement with DirecTV Latin America, LLC, one of the shareholders of
Galaxy Entertainment Argentina S.A. ("GEA"), whereby Plataforma was entitled to
sell its 51% participation in GEA in exchange for approximately 4% investment in
DirecTV Latin America, LLC and a purchase option (the "Operation"). The
consummation of the Operation was subject to the satisfaction of certain
conditions precedent. The Operation was consummated on April 30, 2001 and
consequently we transferred to DirecTV Latin America, LLC our entire
participation in the capital stock of GEA in exchange for a 3.97% interest in
DirecTV Latin America, LLC. In August 2001, we transferred our interests in
DirecTV Latin America, LLC to an affiliate for U.S.$150 million. See
"Management's Discussion and Analysis--Liquidity and Capital Resources" and
"Major Shareholders--Related Party Transactions."

         On September 7, 2001, pursuant to a Trust Agreement the minority
shareholders in Tres Arroyos Televisora Color S.A., transferred all of their
equity interests representing 38.58% of the capital stock, in favor of the
trustee, Mr. Jose Maria Saenz Valiente (h). During the life of the trust, the
trustee is required to vote the shares assigned in trust in accordance with our
instructions, as beneficiary of the trust. The stock being held in trust is
gradually transferred to us as trust beneficiary provided it pays Ps.42,876 per
month to the trustee over a ten-year period. Amounts paid to the trust are
distributed to the former minority shareholders of Tres Arroyos Televisora Color
S.A., in accordance with the terms of the Trust Agreement. The trust will be
revoked if we were to fail to pay any installment.

         As of September 30, 2002, the trustee transferred 926 shares to us
under the Trust Agreement. The share ownership after the transfer is as follows:
we own 15,666 shares representing 65.28% of the capital stock and Fideicomiso
Tres Arroyos Televisora Color S.A. owns 8,334 shares representing 34.72% of the
capital stock.

Foreign Operations

         Uruguay. On May 2, 1997, through our wholly-owned subsidiary Adesol
S.A., we acquired 75% of Telemas S.A., a company that provides programming and
management services to UHF systems and to another seven cable operators in
Uruguay. Telemas S.A. receives a fee for its programming and management
services. This fee accounts for approximately 90% of the monthly billing
generated by each cable operator. On July 15, 1999, we caused Adesol S.A. to
acquire the remaining 25% of Telemas S.A. and we agreed to pay U.S.$12.4 million
in six semiannual installments, the first four of which were due and paid on
December 15, 1999, June 15 and December 15, 2000, and June 15, 2001 (the
December 31, 2001 payment had been made in advance). We have not yet paid the
final installment due June 15, 2002. This installment has been renegotiated and
will be paid 24 months from July, 2002. As per an addendum dated November 2002,
we have partially renegotiated the financing obligations due in October 2002
through March 2003. Until this installment has been paid, we are restricted from
selling Adesol S.A. and Telemas S.A. As a result of the acquisition, the
aggregate number of subscribers served by us in Uruguay is approximately 83,600
as of September 30, 2002. In the city of Montevideo, the UHF system served by
Telemas offers eight channels and competes with other cable systems offering
more than 30 channels. There is no exclusivity. We cannot assure you that the
UHF system will be able to compete with the cable systems successfully in the
future.

         Paraguay. We own the following Paraguayan companies:

         o  Cablevision Comunicaciones, which provides cable television services
            in Paraguay;

         o  TVD, which provides UHF services in Paraguay and, together with
            Cablevision Comunicaciones, served approximately 50,000 subscribers
            and had an estimated market share of 76.8% as of September 30, 2002;
            and

         o  two companies that conduct operations related to television services
            in Paraguay.

         Brazil. In 1997, we participated through a special purpose joint
venture with Dagaba Participacoes Ltda., a member of Grupo Bozano Simonsen, in
the auction of several cable television licenses in Brazil. The joint venture
was awarded licenses in Brasilia, Recife and Santa Barbara de Oeste, but only
retained the license in Recife. Effective April 5, 1999, we sold our interest in
the joint venture to Dagaba Participacoes Ltda. The transfer remains subject to
the approval of the Brazilian telecommunications agency. The transfer request
has not been presented to Anatel (the Brazilian regulatory authority) as of the
date hereof because the license requires a minimum operating period of 18 months
prior to presentation. Therefore, the sale of our interest to Dagaba
Participacoes Ltda. has not been approved as of the date hereof. The joint
venture began deploying its network in Recife during June 2001, starting the
running of the 18-month period, after having won approval for the use of pole
space from the local power company.

         The following table is based on information published by third parties
and our internally generated market information and sets forth certain
information relating to our cable television systems within Paraguay and Uruguay
as of September 30, 2002:

                                                       Paraguay        Uruguay
                                                       --------        -------
Total Households(1)(2)                                  341,000        527,000
Multicanal Homes Passed(1)(2)(3)                        327,300        520,000
Homes Passed/Total Households                             96.0%          98.7%
Total Cable Subscribers(1)(2)                            64,600        207,600
Multicanal Subscribers(1)                                49,600         83,600
Multicanal Penetration(4)                                 15.2%          16.1%
Multicanal Market Share(5)                                76.8%          40.3%
(1) Numbers rounded to nearest thousand.
(2) In areas where we operate. (3) Homes passed by our cable networks.
(4) Our subscribers as a percentage of total Multicanal homes passed.
(5) Our subscribers as a percentage of total subscribers.

Programming and Other Services

Programming

         We purchase basic and premium programming from more than 20 program
suppliers, including Grupo Clarin. Several programming suppliers have agreed to
provide us volume discount pricing structures because of our growth and market
share. Due to the current macro-economic situation in Argentina, growing
inflation beginning in January 2002, and higher gross churn rates, the terms of
our programming contracts, which in the past generally ranged from 24 to 36
months and were typically based on a flat fee, are now being renewed for an
average period of six months with varying fees. On April 25, 2002, we resumed
transmission of CNN, which had been temporarily suspended while the programming
contract was renegotiated in light of the recent macro-economic situation in
Argentina. We and the programming supplier, TBS, reached an agreement which is
subject to amendment or termination in the event that devaluation or the
cumulative official inflation rate increase by a certain percentage.
Accordingly, we cannot assure you that we will be able to continue providing TBS
content such as CNN if the macro-economic situation in Argentina worsens
significantly. Some of our programming arrangements are with affiliates of our
parent company, Grupo Clarin S.A. Most of the programming contracts are subject
to negotiated renewal in the event that the Argentine peso is devalued to a
certain level against the U.S. dollar. As a consequence of the recent changes
imposed by the Public Emergency Law, many of the contracts are being
renegotiated. Our programming costs expressed as a percentage of net revenues
were 32.5% for the nine month period ended September 30, 2002, as compared to
28.3% for 2001, 26.5% for 2000 and 25.3% for 1999. Total programming costs are
largely comprised of costs of programming in key categories like sports and
movie channels. Programming costs for sports channels (including payments made
to a joint venture in which our shareholder Grupo Clarin owns a 50% interest)
are approximately 40% of total programming costs. Programming costs for movie
channels are approximately 30% of total programming costs.

Basic Service

         Throughout most of Argentina, we offer subscribers a uniform basic
service plan at an average monthly fee of Ps.37.6 at September 30, 2002. The
basic service provides between 42 and 68 channels to our subscribers, depending
on the capacity of the local networks. We divide our programming services into
categories, including movies and television series, news, sports, children's
programming, women's programming, music, over the air and general
interest/other.

         The following table sets forth information regarding the programming we
offer customers through many of our systems:

<TABLE>

      Programming Service         Origin     Language       Programming Service        Origin      Language
-----------------------------   ---------    --------    -------------------------    ---------    ---------
<S>                             <C>          <C>         <C>                          <C>          <C>
MOVIES AND TELEVISION SERIES                             MUSIC COUNTRY                U.S.A.       Spanish
CINE CLICK                      Argentina    Spanish*    OVER THE AIR
I-SAT                           Argentina    Spanish     ARTEAR                       Argentina    Spanish
SPACE                           Argentina    Spanish     AMERICA                      Argentina    Spanish
FILM & ARTS                     Argentina    Spanish     ATC                          Argentina    Spanish
UNISERIES                       Argentina    Spanish     AZUL TELEVISION              Argentina    Spanish
VOLVER                          Argentina    Spanish     TELEFE                       Argentina    Spanish
CINECANAL                       U.S.A.       Spanish*    GENERAL INTEREST/OTHER
FOX                             U.S.A.       Spanish     PLUS SATELITAL               Argentina    Spanish
HALLMARK                        U.S.A.       Spanish*    METRO                        Argentina    Spanish
SONY ENTERTAINMENT              U.S.A.       Spanish*    GOURMET.COM                  Argentina    Spanish
ACTION ZONE                     U.S.A.       Spanish     CANAL RURAL                  Argentina    Spanish
TNT                             U.S.A.       Spanish     INFINITO                     Argentina    Spanish
USA NETWORK                     U.S.A.       Spanish     MAGAZINE                     Argentina    Spanish
THE FILM ZONE                   U.S.A.       Spanish*    GUIA EN PANTALLA             Argentina    Spanish
THE WARNER CHANNEL              U.S.A.       Spanish*    THE HISTORY CHANNEL          U.S.A.       Spanish
EUROPA-EUROPA                   Argentina    Spanish     TV 5                         France       French
MGM                             U.S.A.       Spanish     DEUSTCHE WELLE               Germany      German
AXN                             U.S.A.       Spanish     ANTENA 3                     Spain        Spanish
NEWS                                                     ALEF NETWORK                 Israel       Hebrew
CVN                             Argentina    Spanish     RAI                          Italy        Italian
TODO NOTICIAS                   Argentina    Spanish     EL CANAL DE LAS ESTRELLAS    Mexico       Spanish
CNN INTERNACIONAL               U.S.A.       English     TVE ESPANA                   Spain        Spanish
CNN SPANISH                     U.S.A.       Spanish     DISCOVERY                    U.S.A.       Spanish
CANAL 26                        Argentina    Spanish     MUNDO OLE                    U.S.A.       English
CRONICA TV                      Argentina    Spanish     E! ENTERTAINMENT TELEVISION  U.S.A.       Spanish*
SPORTS                                                   ARGENTINISIMA                Argentina    Spanish
TYC SPORTS                      Argentina    Spanish     ANIMAL PLANET                U.S.A.       Spanish
MULTIDEPORTES                   Argentina    Spanish     NUEVA IMAGEN                 U.S.A.       Spanish
ESPN                            U.S.A.       Spanish     LOCOMOTION                   U.S.A.       Spanish
FOX SPORTS                      U.S.A.       Spanish     BLOOMBERG TV                 U.S.A.       Spanish
ESPN INTERNACIONAL              U.S.A.       Spanish     GALICIA TV                   Spain        Spanish
CHILDREN'S PROGRAMMING                                   EDU CABLE                    Argentina    Spanish
FOX KIDS                        U.S.A.       Spanish     PEOPLE & ARTS                U.S.A.       Spanish
BOOMERANG                       U.S.A.       Spanish     CANAL A                      Argentina    Spanish
MAGIC KIDS                      Argentina    Spanish     DISCOVERY HEALTH             U.S.A.       Spanish
CARTOON NETWORK                 U.S.A.       Spanish     NATIONAL GEOGRAPHIC          U.S.A.       Spanish
NICKELODEON                     U.S.A.       Spanish     BBC WORLDWIDE                U.K.         English
DISCOVERY KIDS                  U.S.A.       Spanish     PREMIUM CHANNELS
WOMEN'S PROGRAMMING                                      MOVIE CITY                   U.S.A.       English
FASHION TV                      Argentina    Spanish     CINE CANAL 2                 U.S.A.       English
UTILISIMA SATELITAL             Argentina    Spanish     HBO                          U.S.A.       English
GEMS TELEVISION                 U.S.A.       Spanish     CINEMAX                      U.S.A.       English
MUSIC                                                    TURF                         Argentina    Spanish
MUCH MUSIC                      Canada       Spanish     VENUS                        Argentina    Spanish
SOLO TANGO                      Argentina    Spanish     PLAYBOY                      U.S.A.       Spanish
MTV                             U.S.A.       Spanish

-----------------
* Includes programming in English with Spanish subtitles.
</TABLE>

Premium and Pay-Per-View Services

         We were the first Argentine cable operator to develop and offer premium
channels in Argentina. Currently we offer premium services in all the regions in
which we operate. Our premium services include programming dedicated to live
soccer, movies and adult programming. As of September 30, 2002, the penetration
rate of the movie and adult programming premium service was approximately 10.5%.

         To receive premium programming, subscribers pay an incremental monthly
fee which ranges from Ps.5 to Ps.70. To receive the service, premium subscribers
must either rent or purchase from us an addressable set top unit or utilize
readily available low quality decoding devices known as traps. Approximately
95,200 set tops are currently in use by our subscribers. We purchase addressable
set top units with the capability of decoding audio and video signals, and we
are implementing a plan to aggressively market these units to our subscribers.

         Set top units also have the capacity for pay-per-view service. We have
introduced pay-per-view programming to subscribers with set top units, including
sports events and movies. Subscribers can elect to receive both individual
events and a series of events through the pay-per-view service.

         We were the first to launch a weekly live soccer program, El Clasico
del Domingo, which is now available in all of our systems either as a premium
channel at an average monthly premium fee of Ps.13.72, or as a pay-per-view
service in the regions where we have introduced addressable technology. Since
August 2001, we have also offered El Quinto Partido, a second weekly live soccer
program. El Quinto Partido is offered together with El Clasico del Domingo in a
single premium package called Super Domingo. It is offered either as a premium
service at an average monthly premium fee of Ps.21.32 at September 30, 2002, or
as a pay-per-view service in those regions where addressable technology has
already been implemented. We estimate that the soccer premium service has
achieved a 5.7% penetration rate within our subscriber base.

         We have targeted the enhanced revenue opportunities associated with
premium service and have been working with other cable operators and cable
programming providers to create additional premium tiers by adding new premium
channels. We can give no assurance that this type of tiering will be
accomplished, since creating additional premium tiers requires industry-wide
cooperation and agreement.

Other Services

         We currently provide Internet high-speed access through one-way and
two-way cable modems, testing the service with approximately 2,800 subscribers
in areas where we have deployed our FSA network. We charge an up-front fee of
Ps.50.0 or Ps.130.0 for the installation of cable modems (depending on the
service) and Primera Red Interactiva de Medios Argentinos (Prima) S.A., a
company owned and controlled by our shareholders, provides Internet service to
our subscribers for a monthly fee of Ps.49.9 (plus value-added tax) for Internet
access through one-way cable modems and Ps.79.9 (plus value-added tax) for
Internet access through two-way cable modems at September 30, 2002. We have
entered into a revenue-sharing agreement with Prima pursuant to which we
currently receive 50% of the monthly fees charged by Prima to our subscribers
for Internet services.

         Additionally, we are offering, together with Prima, a dial-up Internet
package for a monthly fee of Ps.13.7 (plus value-added tax) at September 30,
2002.

Advertising Revenue

         We also provide advertising services. These services accounted for 1.8%
of our net revenues in the nine-month period ended September 30, 2002, 2.6% of
our net revenues in 2001, 2.7% of our net revenues in 2000, and 3.6% of our net
revenues in 1999. We develop cable television advertising services as a means to
increase our net revenues.

Marketing and Customer Service

         We seek to differentiate ourselves from our competitors on the basis of
the strength of our brand name, and our focus on the quality of our customer
service.

The Multicanal Brand Name

         We have taken and continue to take action to promote our corporate
image with the public and increase consumer awareness of our brand name. We
began trademarking the names of our cable television operations in 1994. Most of
our operations, except for those in Paraguay, Uruguay and certain areas in the
Province of Buenos Aires, operate under our brand name. We continued to expand
the use of our brand name throughout Argentina during 2002, except in several
regions in the interior where we utilize shared branding between well-regarded
local trademarks and our trademark.

         We employ advertising in a variety of forms to increase our brand
awareness and customer recognition. These forms include:

         o  advertising in print media including both national and local
            newspapers and magazines,

         o  publishing a monthly programming guide for our subscribers,

         o  advertising on national and local radio stations,

         o  advertising on our cable systems,

         o  advertising on billboards,

         o  sending mailings to subscribers and non-subscribers offering special
            promotions,

         o  our "Attention Centers" which are designed to be both sales centers
            and customer service centers, and

         o  other advertising campaigns.

         Since 1996, we have maintained a website, http://www.multicanal.com.ar,
to provide programming news and financial information on us.

Superior Customer Service

         We have licensed a subscriber management software system from CableData
International Ltd., a software company specializing in subscriber management
applications for cable system operators. We have fully implemented this system
in most regions of Argentina where we operate, and believe that this technology
enabled us to centralize subscriber data and manage account information more
efficiently, respond more quickly to customers' needs and measure the
effectiveness of customer service and retention initiatives.

Billing and Subscriber Management

         Our billing system was centralized in the regions and cities where we
have deployed the subscriber management software system licensed from Cable Data
International Ltd. In all other regions where we operate, our billing systems
are decentralized. Subscribers receive a bill issued by our regional
administrative office in their home area. We bill all of our subscribers in
advance for monthly basic cable service. Subscribers are given 30 days from the
date of issuance to pay their bills without penalty. As of September 30, 2002,
an average of 79% of our subscribers pay their bills within this period. We seek
to enforce a strict disconnection policy. If subscribers do not pay their bills
within the first 30 days, they receive a letter and, in most cases, a telephone
call indicating that their account is overdue. We repeat this process if we do
not receive payment after the expiration of the next monthly billing cycle. In
the third month, we no longer mail either a bill or the monthly programming
magazine to the subscriber and, if payment is not received within this period,
we disconnect the subscriber as soon as practicable after the expiration of this
period. Our efforts to improve customer retention and collections in 2002 have
resulted in a reduction in the lag between invoicing and collection and,
accordingly, a decrease in our charges for doubtful accounts.

Management of Churn

         Churn means subscriber termination. We determine our churn rate by
calculating the total number of disconnected cable television customers over a
given period as a percentage of the initial number of cable television customers
for the same period. We experienced a favorable trend in our churn rates from
1997 to 2000, with our annual gross churn rates averaging approximately 29.7% in
2000, 30.9% in 1999, 30% in 1998, and 37% in 1997. However, our annual gross
churn rate averaged 32.4% in 2001 and 47.8% in the nine-month period ended
September 30, 2002, with a net loss of approximately 297,400 subscribers during
the nine-month period ended September 30, 2002.

         The historical average annual gross churn rate for U.S. cable operators
has been between 25% and 30%. We believe that our higher churn rates in
comparison with U.S. cable operators have been principally due to the continued
slowdown of the Argentine economy that started in 1998, an increase in the
value-added taxes imposed on cable television services and the loss in the
purchasing power of the Argentine peso generated by high inflation rates during
2002, together with the increase in prices of basic and premium services.

         Despite high gross churn rates, in the past our subscriber base grew,
resulting in a net internal growth of 59,100 subscribers since our inception
through December 31, 2001, after taking into account the decrease in our
subscriber base over the same period, including approximately 70,000 net
subscribers that left our cable systems in 2001. This figure does not include
35,700 subscribers corresponding to our Brazilian operations sold in December
1996 and 38,000 of our operations in Mendoza sold in October 1997.

         To reduce our churn rate and to address associated risks, such as the
difficulty in collecting receivables, we pursue a vigorous customer service and
retention policy. This policy contributed to our reduction of our annual gross
churn rate between 1995 and 2000. In addition, in April 2002, we instituted an
initial activation fee for new subscribers in an effort to reduce churn.
However, we cannot assure you that we will be able to maintain the prior
reduction in churn in light of the macro-economic situation that continues to
affect Argentina. See "The Company--Marketing and Customer Service."

Competition

         The pay television business in Argentina is very competitive. We face
competition from other cable television operators and providers of other
television services, including direct broadcasting, DTH and MMDS services. As a
result of the non-exclusive nature of our licenses, many of our cable systems
have been overbuilt by one or more competing cable networks. This has led to
aggressive price competition and marketing programs to encourage subscribers to
switch networks. Free broadcasting services are currently available to the
Argentine population from four privately-owned television networks and their
local affiliates and one state-owned national public television network.

         Although the Argentine cable industry, with over 700 operators, is
highly fragmented, it is dominated by two MSOs, us and Cablevision, which
compete primarily on the basis of customer service and brand recognition. A
third MSO, Telecentro, S.A., entered the market in 1999 in the City of Buenos
Aires region, using an aggressive pricing policy. We believe that for the time
being the adverse impact of this competitor has been less significant for us
than for the other MSO. As of September 30, 2002, our penetration rate in the
Argentine cable market (measured by subscribers) was approximately 19.5%. Among
the cable systems, competition is based primarily on:

         o  price,

         o  programming services offered,

         o  customer satisfaction, and

         o  quality of the system.

         We believe that we are able to compete efficiently against other
providers of pay television services on each of these counts. We also seek to
attract and retain customers through our vigorous customer service policies. See
"The Company--Marketing and Customer Service."

         MMDS. MMDS, often referred to as wireless cable, is a cable
distribution technology based upon a microwave transmission system which
operates from a headend, consisting of a satellite receiver or other equipment.
Programming is then transmitted by microwave transmitters from an antenna
located on a tower or on top of a building to a small receiving antenna located
at a subscriber's premises, where the encoded microwave signals are decoded.
Although establishing an MMDS network is less capital intensive than
constructing a cable television network, we believe that cable television has a
number of competitive advantages over MMDS:

         o  MMDS transmissions cannot be received in "shadowed" areas where
            microwave transmission is blocked by terrain, buildings or other
            physical objects. In some cases, however, signal blockages may be
            overcome through the use of low power signal repeaters which
            retransmit an otherwise blocked signal over a limited area.

         o  MMDS has limited channel capacity, lower reliability and lower
            quality of signal.

         We provide MMDS service in the cities of Mar del Plata and Tres Arroyos
and serve approximately 2,000 MMDS subscribers in these areas. There are
presently approximately 200 MMDS operators serving approximately 60,000
subscribers in Argentina.

         DTH. DTH systems use high power satellites to deliver signals to
satellite dish antennae at homes, hotels and apartment buildings. In comparison
to MMDS signals which are locally transmitted, a DTH satellite footprint can
cover large land areas. High frequency Ku-Band DTH technology, which permits the
use of a smaller satellite receiver dish of 60 centimeters, offers more channels
and better picture quality than C-Band DTH technology. DTH Service in Argentina
is regulated by the Broadcasting Law 22,285 of September 15, 1980 .

         At present, only two companies, TDH S.A. and DirecTV Latin America, LLC
provide DTH services in Argentina. A third company that formerly provided such
services, Sky Latin America, announced on June 10, 2002, that it would cease
operations in Argentina as of July 10, 2002 due to the economic crisis in
Argentina. The first of the two companies presently providing such services, TDH
S.A., offers approximately 24 video channels to its approximately 6,000
subscribers. On March 26, 2000, TDH S.A. initiated proceedings to determine the
composition of creditors prior to an adjudication in bankruptcy. The second,
DirecTV Latin America, LLC, is a consortium comprised of Hughes Communications,
Inc., a division of the Hughes Electronics subsidiary of General Motors
Corporation and the Cisneros Group. DirecTV Latin America, LLC began offering
services in Argentina in June 1998 through an affiliate, Galaxy Entertainment
Argentina S.A., in which Grupo Clarin S.A. had a majority interest of 51%
through its wholly-owned subsidiary Plataforma Digital S.A. Plataforma Digital
S.A. was merged into us on January 1, 2001, and on April 30, 2001 we transferred
to DirecTV Latin America, LLC its interest in Galaxy Entertainment Argentina
S.A. in exchange for a 3.97% investment in DirecTV Latin America, LLC. On August
24, 2001, we transferred all of our interests in DirecTV Latin America, LLC and
certain contractual rights related thereto to Raven Media Investments, LLC, a
company organized under the laws of the state of Delaware and wholly-owned by
Grupo Clarin S.A., for U.S.$150,000,000.

         DTH service in Argentina may grow throughout the country over the next
five years, primarily in rural areas where there are no cable networks. Although
we believe that cable television has advantages over DTH because cable
television does not require the subscriber to bear the up-front cost for the
purchase of an outdoor reception dish and related hardware necessary for DTH, we
cannot assure you that DTH will not in the future, become a significant
competitor in Argentina's pay television market.

Regulatory Overview

         The installation and operation of cable television service in Argentina
is governed by the Broadcasting Law as amended and related regulations. The
cable television industry is principally regulated and supervised by Comfer but
also falls under the jurisdiction of the CNC, for matters related to
installation of cable services and compliance with technical regulations. The
Secretaria de Prensa supervises Comfer and reports directly to the Executive
Branch. It also supervises the general enforcement of the Broadcasting Law and
the regulatory framework for the industry.

         Comfer has the authority to:

         o  grant operating licenses on a non-exclusive basis and extend the
            term of these licenses,

         o  approve the shareholders of licensed companies and the transfer of
            shares or other ownership interests in licensed companies,

         o  supervise the cultural, artistic and legal content of programming,

         o  approve amendments to the by-laws of licensed companies, and

         o  impose penalties on licensed companies in the form of fines,
            suspension of advertising and the revocation of licenses (see "Legal
            Matters--Regulatory Proceedings" below).

         Rates charged by cable television companies are not presently
regulated.

         As a condition to obtaining a broadcast license, a cable operator must
demonstrate that it has received permission to utilize municipal airspace from
the relevant municipality and that it has obtained the rights to install poles
that will carry the cable. The CNC must then approve the operator's technical
plans for installation of cable service.

         The CNC monitors compliance with technical regulations related to
installation of the cable service through its surveillance of the use of the
broadcasting spectrum and the granting of frequencies.

         Cable television companies in Argentina are required to obtain a
non-exclusive broadcasting license from Comfer in order to carry and distribute
programming over their cable networks. Comfer licenses have an initial 15-year
term. At the end of this term, the licensee may apply for a one time ten-year
extension. Comfer must approve any license extension. To do so, Comfer
determines whether the licensee complied with the terms and conditions set forth
in the Broadcasting Law.

         We have applied for an extension of the initial term of some licenses.
Although some of these extensions were not timely filed, we nevertheless expect
to be granted these extensions. The extension of the rest of the licenses will
be timely filed thirty months prior to their expiration, in accordance with the
Broadcasting Law. We can give no assurance that we will receive any of these
extensions. In addition, the Broadcasting Law provides only for a one time
ten-year extension and does not provide for subsequent renewals when such term
expires. As a result, once the additional ten-year term elapses we may be forced
to apply for new licenses, and we cannot assure you that such licenses will be
granted. At December 31, 2002 the weighted average remaining life of our
licenses was 10.55 years, based on the number of subscribers and the assumption
that a ten-year extension will be granted in all cases. The weighted average
remaining life of our licenses based on the number of subscribers assuming that
no ten-year extensions will be granted was 0.55 years at December 31, 2002. In
the event that Comfer denies us an extension of a license in a specific area, we
must cease operations in such area, seek to acquire a company that has a valid
broadcasting license for the area or apply for a new license in our own name. We
cannot assure you that there will be a cable company with a valid license
operating in such area, that we will be able to acquire such a cable company, or
that if we apply for a new license in our name, that such licenses will be
granted.

         Please note that due to an injunction imposed by a federal judge
investigating the Comfer's practices, including with respect to the granting of
cable television licenses in recent years, the Comfer is currently prevented
from granting new licenses or extensions; we cannot assure you if or when the
Comfer will reinitiate these activities.

         In addition, due to the various corporate reorganizations we have
undergone, several licensee operating companies have been merged into us. In
cases where operating companies merged into us hold licenses for areas where we
already hold a license and we are not legally allowed to keep both licenses.
Thus, we have elected in most cases to keep in force the license with the
longest remaining period of life, but we cannot guarantee that Comfer will
approve our choice to do so. Broadcasting licenses are transferable upon
approval by Comfer and subject to compliance with the regulatory conditions set
forth in Resolution No. 870/93.

         Comfer issues broadcasting licenses upon a review of several
qualifications of the applicant and its shareholders and partners. Under Section
45 of the Broadcasting Law, a licensee's shareholders and partners must:

         o  be Argentine nationals that do not have corporate, legal or other
            affiliations with foreign media or broadcasting entities,

         o  have good moral qualifications and no criminal record,

         o  possess financial capabilities of which evidence is presented, and

         o  not be a judge, legislator, public official or a member of the Armed
            Forces.

         In addition, in the event one or more of the licensee's shareholders is
a corporation, the corporate shareholder must be duly organized and the members
of its board of directors must meet the conditions set forth above, except that
the directors of the corporate shareholder are not required to show financial
capability.

         Section 46 of the Broadcasting Law establishes that licensed companies
may not be affiliates, subsidiaries or under the control of foreign persons. An
exception to the nationality requirement set forth in Section 45 exists for
U.S., Italian and French corporations and persons under bilateral treaties
between Argentina and each of these countries. Resolutions 350/95, 0008/96 and
1323/96 provide the qualifications and conditions these U.S., Italian and French
corporations and companies must fulfill. These treaties grant persons of other
nationalities non-discriminatory treatment with Argentine nationals with respect
to investments in Argentina.

         Finally, Section 45 requires Comfer approval for any transfer of shares
in a licensee company, including the roll up transaction discussed in "Major
Shareholders--Overview of Grupo Clarin." In the event that a stockholder or
partner of a licensee company is another company, Comfer has the authority to
review that company's stockholders and determine whether they comply with the
requirements set forth in the Broadcasting Law. The Grupo Clarin shareholders
have been authorized by Comfer as our shareholders and of several licensed
companies that were merged into us. However, Comfer has not yet authorized Arte
Grafico Editorial Argentino S.A. (AGEA), Grupo Clarin S.A. and Multicanal
Holding LLC, each a corporation controlled by the Grupo Clarin shareholders, as
our shareholders. We have given notice but not yet obtained the required
approvals from Comfer in connection with all of our acquisitions of shares in
companies which hold licenses and the transfer of licenses to us by certain of
the subsidiaries merged into us.



         Failure to obtain Comfer's approval of the transfer of an ownership
interest in a licensed company may result in the unwinding of the transfer.
Violation of Comfer regulations regarding the transfer of an ownership interest
in a licensed company can result in the imposition of fines, the suspension of
advertising or the revocation of the license of the licensee that violated the
Comfer regulations.

         We have notified Comfer of the following transactions, among others,
but Comfer has not yet approved them:

         o  our acquisition of the Megacable Group,

         o  the subscription of shares in us by AGEA on April 7, 1998,

         o  our acquisition of an interest in the VCC Group, the Bahia Blanca
            Systems and the Santa Fe Systems,

         o  the transfer of shares resulting from the division of the
            subscribers, assets and liabilities of the VCC Group, the Bahia
            Blanca Systems and the Santa Fe Systems with Cablevision,

         o  the Grupo Clarin shareholders' transfer to Grupo Clarin S.A. and
            Multicanal Holding LLC of 94% of our capital in December 1999 and of
            the remaining 6% in February 2000.

         The division of the operations of the VCC Group resulted in the
transfer of several broadcasting licenses of the VCC Group's companies to us.
Comfer Resolution 870/93 establishes regulatory procedures for the transfer of a
license. We have followed these procedures. On July 16, 2001 Comfer issued
Resolution 1110/2001 which establishes the procedure and documentation necessary
for the transfer of shares, interests and licenses. Such resolution granted
petitioners a term of 90 days to complete the documentation required to be filed
with Comfer. The 90-day term expired on December 4, 2001. Although we have
completed the documentation in accordance with the new procedure, there are
documents that we were not able to file because we could not obtain them from
previous license holders. Nevertheless, as of the date hereof we are not aware
of the suspension of any transfers.

         On July 17, 2001, Comfer issued Resolution 1111/2001 requiring all
licensees of cable systems in Argentina to register by October 15, 2001 by
filing a sworn affidavit. Any licensee that failed to register before the
deadline would be subject to penalties. We filed the required affidavit for each
of the licenses we had either absorbed or acquired on October 15, 2001.

         Additionally, Comfer must approve any elimination of headends. We are
awaiting approvals for several headend eliminations resulting from the
acquisition and division of the VCC Group. Although we expect to receive all of
the required approvals, we cannot assure you that Comfer or any successor agency
will grant all of the approvals.

         The Broadcasting Law provides that Comfer may cancel licenses because
of, among other things:

         o  fraud regarding ownership of the licenses,

         o  approval by the competent corporate authority of a licensed company
            of any transfer of ownership interests without Comfer's approval,
            and

         o  any false statement made by the licensee in connection with the
            assets affected to the service being provided under the license.

         In the past, the application of the regulatory framework by Comfer has
resulted in numerous and in the aggregate substantial fines. At the same time,
Comfer periodically agreed to "payment programs" that resulted in material
discounts from the face value of the fines imposed and deferrals of payment
dates. On November 20, 2002, Comfer issued Resolution No. 830/02, adopting a new
regime for imposing sanctions for violations of the Broadcasting Law. Such
Resolution classifies each violation as a falta grave (severe violation) or as a
falta leve (minor violation). Minor violations are sanctioned by llamados de
atencion (reprimands), apercibimientos (warnings). Severe violations, such as
the broadcast of obscene programs or the illegal installation and operation of a
cable system, are subject to incremental fines, which may, in the case of
numerous severe violations, eventually lead to the revocation of the license. We
can give no assurance that we will not be sanctioned or have any of our licenses
revoked under this Resolution.

Antitrust Considerations

         Our operations are subject to the Argentine antitrust law (Law No.
22,262, enacted in 1980, as amended in 1995 by the Law No. 24,481) which
provides that certain acts, including:

         o  fixing, establishing or altering market prices, directly or
            indirectly, through concerted actions,

         o  limiting or controlling, by means of concerted action, technical
            developments or investments in the production, distribution or
            marketing of goods or services, and

         o  entering into agreements or undertaking concerted actions to
            distribute zones, markets, clientele or sources of supply, in each
            case that limit, restrict or distort competition or which constitute
            an abuse of a dominant position in the market,

may give rise to penalties. Penalties include fines payable by the entity
engaged in the prohibited practice and its directors, legal representatives,
attorneys-in-fact, managers, statutory auditors or members of the supervisory
committee, all of which are jointly and severally liable. In addition, Argentine
antitrust law vests the National Commission for the Defense of Competition with
the power to order a party to abstain from or cease any anti-competitive
activities, and to request the relevant court to liquidate or dissolve companies
violating the law. See "Legal Matters."


                            Organizational Structure

         The following table sets forth our significant subsidiaries, as of
September 30, 2002, including the country of incorporation, ownership interest
and percentage of voting power held.

                                                                         Voting
                                          Country of       Ownership     Power
            Subsidiary                   Incorporation      Interest      Held
            ----------                   -------------      --------      ----

AVC Continente Audiovisual S.A.            Argentina          90%          90%
CV Berazategui S.A.                        Argentina          70%          70%
Delta Cable S.A.                           Argentina          84%          84%
San Lorenzo TV Cable S.A.                  Argentina          100%        100%
TV Cable San Francisco S.A.                Argentina          100%        100%
Telesur Teledifusora Rio Cuarto S.A.       Argentina          100%        100%
Televisora Privada del Oeste S.A.          Argentina          51%          51%
Bridge Management Holdings Corp.           Panama             100%        100%
La Capital Cable S.A.                      Argentina          50%          50%
Chaco Cable Color S.R.L.                   Argentina          100%        100%
Teledifusora San Miguel Arcangel S.A.      Argentina          50%          50%
Tevemundo S.A.                             Argentina          100%        100%
Cable Imagen S.R.L.                        Argentina          100%        100%
Television Dirigida S.A.E.C.A.             Paraguay           89%          89%
Orange Television Productions S.A.         Paraguay           100%        100%
Cablepar S.A.                              Paraguay           100%        100%
Cablevision Communicaciones S.A.E.C.A.     Paraguay           90%          90%
Tres Arroyos Televisora Color S.A.         Argentina          65%          65%
Wolves Television S.A.                     Argentina          100%        100%
Adesol S.A.                                Uruguay            100%        100%
Cable Video Sociedad Anonima.              Argentina          100%        100%
Pem S.A.                                   Argentina          100%        100%
Dorrego Television S.A.                    Argentina          100%        100%
Cable Video Sur S.R.L.                     Argentina          100%        100%

All of our subsidiaries are cable television operators except for Pem S.A.,
Cablepar S.A., Orange Television Productions S.A., Bridge Management Holdings
Corp. and Adesol S.A.

                         Property, Plants, and Equipment

         We own most of our principal physical assets, which consist of:

         o  cable television operating plants and equipment, including signal
            receiving devices, such as satellite and terrestrial antennae,
            antennae towers and related equipment,

         o  headends, consisting of associated electronic equipment necessary
            for the reception and processing of signals,

         o  distribution systems, consisting primarily of coaxial and fiber
            optic cable, and

         o  customer home drop cables and equipment.

         Our cable distribution system is generally attached to utility poles,
and we either own or lease space on these poles from local public utilities. In
addition, some of our distribution systems are located on building rooftops
under arrangements with the owners of the buildings, or are located in
underground ducts under lease arrangements with local subway authorities. We
have entered into an agreement with Autopistas del Sol S.A. pursuant to which we
have the ability to place distribution systems under certain highways serving
Buenos Aires and can thereby avoid locating a significant portion of these
systems in underground conducts, which are less readily accessible. The physical
components of our cable systems require maintenance and periodic upgrading to
keep pace with technological change. We own our service vehicles, data
processing facilities and test equipment and either own or lease our business
offices and customer service center locations.

         We lease roof rights and space on utility poles and in underground
ducts for the placement of our cable and certain equipment from third parties.

         We believe that our properties, both owned or leased, are in good
operating condition and are suitable and adequate for our business purposes.
Despite the adverse economic conditions affecting our market and our company,
the book value of our assets reflects our current plans and cash-flow
projections, based on information available to us. These plans and projections
assume that we continue to operate and that the economy recovers. We cannot
assure you that the current book value of our assets can or will be recovered.

Capital Expenditures

During 1999, we invested Ps.153.1 million in purchases of property and
equipment, and Ps.13.5 million was invested in our acquisition of cable systems.
During 2000, our investment in purchases of property and equipment was Ps.86.5
million, and our investment in acquisition of cable systems was Ps.7.5 million.
In 2001, we invested Ps.46.9 million in purchases of property and equipment and
generated Ps.317.5 million from sales of investments, net of acquisitions.
During the nine-month period ended September 30, 2002 we invested Ps.8.1 million
in purchases of property and equipment, and Ps.1 million in our acquisition of
cable systems. These capital expenditures were made with funds generated by our
operations and financings.

                               MAJOR SHAREHOLDERS

         We currently have two classes of shares of common stock issued and
outstanding:

         o  Class A Shares, which are entitled to five votes and have a par
            value of Ps.1 per share, and

         o  Class B Shares which are entitled to one vote and have a par value
            of Ps.1 per share.

         The following table sets forth the ownership of our share capital as of
the date hereof:

 Title of Class       Identity of Owner          Amount Owned      % of Class
----------------    ----------------------     ----------------    ----------
 Class A Shares     Grupo Clarin S.A.           80,679,409(5)        40.27%
 Class A Shares     Multicanal Holding LLC     119,655,068(1)        59.72%
 Class B Shares     Grupo Clarin S.A.          138,577,088(2)(4)     83.24%
 Class B Shares     Multicanal Holding LLC      27,909,472(3)        16.76%

------------
(1)  Includes 40,094,948 shares that were pledged by the Grupo Clarin
     shareholders in favor of T.I. Telefonica Internacional de Espana S.A. as
     collateral for their payment obligations under the assignment agreement
     dated April 8, 1998. On November 10, 2000 TI Telefonica Internacional de
     Espana S.A. informed us that it assigned its rights in the pledged shares
     to Telefonica Media S.A.
(2)  Includes 116,619,894 Class B shares owned by Arte Grafico Editorial
     Argentino S.A. (AGEA) as a result of our April 7, 1998 capital increase.
     AGEA is an Argentine sociedad anonima wholly-owned by Grupo Clarin, S.A.
     and the Grupo Clarin shareholders.
(3)  Includes 22,238,385 shares that were pledged by the Grupo Clarin
     shareholders in favor of T.I. Telefonica Internacional de Espana S.A. as
     collateral for their payment obligations under the assignment agreement
     dated April 8, 1998. On November 21, 2000 T.I. Telefonica Internacional de
     Espana S.A. notified us of the assignment to Telefonica Media S.A. of their
     right to payment on the pledged shares. It is expected that all shares of
     Multicanal held by Multicanal Holding LLC will be contributed to Grupo
     Clarin S.A., effective as of December 27, 2002.
(4)  On March 30, 2001, our Board of Directors authorized the granting and
     registering of a pledge on 4,791,503 Class B shares owned by Grupo Clarin
     S.A., as collateral for Video Cable Comunicacion S.A.'s deferred taxes in
     the amount of Ps.2,982,126 and Ps.3,055,166 corresponding to investments
     made in Sierras de Mazan S.A. In addition, in line with the Administracion
     Federal de Ingresos Publicos (Tax Authority, or the "AFIP") General
     Resolution No. 846, we pledged 4,791,503 Class B shares as collateral with
     BankBoston N.A. in favor of the AFIP. On January 24, 2002, our Board of
     Directors authorized the creation and registration of a security interest
     on (i) 367,954 ordinary book entry Class B shares held by Grupo Clarin S.A.
     to secure tax deferrals in the amount of Ps.463,620 by Video Cable
     Comunicacion S.A. in Sierras de Mazan S.A.; (ii) 2,146,107 ordinary book
     entry Class B shares held by Grupo Clarin S.A. to secure tax deferrals in
     the amount of Ps.2,704,095 by Enequis S.A. in Sierras de Mazan S.A.; and
     (iii) 1,299,489 ordinary book entry Class B shares held by Grupo Clarin
     S.A. to secure Ps.1,637,355 (the total amount of the debt deferred by Cable
     Video Sociedad Anonima in Valle del Tulum). The shares listed in (i), (ii),
     and (iii) above were pledged as collateral in favor of the AFIP through
     BankBoston N.A.
(5)  Includes 867,810 shares that have not been registered with the IGJ due to
     its pending approval of our merger with, among others, Plataforma Digital
     S.A.


                            Overview of Grupo Clarin

         We were acquired by the Grupo Clarin shareholders (Mrs. Ernestina L.H.
de Noble, Mr. Hector Horacio Magnetto, Mr. Jose Antonio Aranda and Mr. Lucio
Rafael Pagliaro) in October 1992. Grupo Clarin is Argentina's leading media
group and produces programming content, including sports, entertainment and
news.

         In the second half of 1999, the Grupo Clarin shareholders effected a
roll up transaction pursuant to which they contributed their shares of
Multicanal to Grupo Clarin S.A., an Argentine holding company, and Multicanal
Holding L.L.C., a Delaware limited liability company. In December 1999, the
Grupo Clarin shareholders sold a minority interest in each of Grupo Clarin S.A.
and Multicanal Holding L.L.C. to affiliates of The Goldman Sachs Group, Inc. and
other investors. As a result of these and other related transactions, the Grupo
Clarin shareholders, through Grupo Clarin S.A. and Multicanal Holding L.L.C.,
currently beneficially own 82% of our capital stock. In connection with and as a
condition to the sale of the minority interest in each of Grupo Clarin S.A. and
Multicanal Holding L.L.C., our corporate charter was amended to require among
other things, that a number of corporate actions (including the incurrence of
net debt in excess of U.S.$899 million) be approved by a shareholders'
resolution. The approval of a shareholders' resolution on these matters
requires, in turn, the approval by the board of directors of Grupo Clarin S.A.,
where directors appointed by The Goldman Sachs Group, Inc. hold certain veto
rights. This amendment was approved by the IGJ on March 23, 2000.

         The Grupo Clarin shareholders also own:

         o  Diario Clarin, the Spanish language newspaper with the largest
            circulation in the world,

         o  television and radio broadcast groups in Argentina,

         o  printing and newsprint production plants,

         o  Prima, an Internet service provider, and

         o  Clarin Digital, an integrated Internet business that provides an
            Internet portal for multimedia service providers, Internet content,
            e-commerce, a search engine (Clarin Buscador), and other
            Internet-related activities.

                           Related Party Transactions

         In the ordinary course of business, we purchase programming from Grupo
Clarin at market prices. The amounts invoiced by Grupo Clarin to us for
programming were approximately Ps.59.4 million for the nine month period ended
September 30, 2002 and Ps.84.5 million for the nine-month period ended September
30, 2001. In addition, also in the ordinary course of business, we place
advertising in media owned by Grupo Clarin, such as newspapers, and television
and radio stations, at market prices. Grupo Clarin also purchases advertising
time from us, and we and Grupo Clarin occasionally exchange advertising space
and air time with each other. In the nine month period ended September 30, 2002,
the aggregate amount invoiced by us to Grupo Clarin for advertising was
approximately Ps.1.6 million. This amount was approximately Ps.3.7 million for
the nine-month period ended September 30, 2001. The aggregate amounts invoiced
by Grupo Clarin to us for advertising were approximately Ps.0.3 million for the
nine-month period ended September 30, 2002 and Ps.0.4 million for the nine-month
period ended September 30, 2001. Our monthly subscriber magazine is also
published by Grupo Clarin. The amounts invoiced by Grupo Clarin to us were
approximately Ps.9.9 million for the nine month period ended September 30, 2002
and Ps.14.9 million for the nine-month period ended September 30, 2001. In the
nine month period ended September 30, 2002, the aggregate amounts invoiced by us
to such related parties for new business were approximately Ps.0.6 million and
Ps.1.0 million for the nine-month period ended September 30, 2001. Related
parties balances at September 30, 2002 and 2001 were as follows: accounts
receivable of Ps.4.8 million and accounts payable of Ps.16.8 million at
September 30, 2002 and accounts receivable of Ps.9.7 million and accounts
payable of Ps.48.5 million at September 30, 2001.

         Additionally, during the nine-month period ended September 30, 2002,
Grupo Clarin invoiced to us the aggregate amount of Ps.3.9 million for fees for
financial and administrative services, human resources, information technology
and purchasing logistical services.

         In 2001, we bought property owned by Grupo Clarin for a total of Ps.1.1
million. Additionally, we transferred all of our interests in DirecTV Latin
America, LLC and certain contractual rights related thereto to Raven Media
Investments, LLC, a company organized under the laws of the state of Delaware
and wholly-owned by Grupo Clarin S.A., for U.S.$150,000,000 recording a gain of
U.S.$147,743,108. We have retained through November 2003 a right to repurchase
the asset under certain circumstances and subject to certain conditions.


                                   MANAGEMENT

Directors and Senior Management

         We are managed by our Directorio, or Board of Directors. In accordance
with our charter, the shareholders elect each director for a term of one year.
As of the date hereof, the current term expired on December 31, 2002, but the
directors continue to serve until the next shareholders meeting designates new
directors. The shareholders also elect alternate directors for one-year terms
who replace principal directors during absences. Executive officers serve at the
discretion of the board of directors. We also have a Comision Fiscalizadora, or
Supervisory Board, which is in charge of the supervision of our legal matters.
The Supervisory Board consists of three members, sindicos or syndics, and three
alternate syndics appointed annually by the shareholders.

         Listed below is selected information concerning our directors and
executive officers:

          Name                                 Position                      Age
----------------------------     ------------------------------------        ---
Saturnino L. Herrero Mitjans     President of the Board                       69
Alejandro Alberto Urricelqui     Director of Multicanal and Alternate
                                 President of the Board                       43
Vicente Gabriel Di Loreto        Director of Multicanal                       36
Ignacio Jorge Rosner             Director of Multicanal                       44
Jorge Carlos Rendo               Director of Multicanal                       49
Ignacio Rolando Driollet         Director of Multicanal                       40
Horacio Eduardo Quiros           Director of Multicanal                       53
Carlos Alberto Moltini           Chief Executive Officer                      42
Adrian Jorge Meszaros            Chief Financial and Administrative
                                 Officer                                      37
Antonio Jose Alvarez             Programming Manager                          38
Angel Luis Cadelli               Regional Manager                             43

         Listed below is selected information concerning the members of our
Supervisory Board:

          Name                                 Position                      Age
----------------------------     ------------------------------------        ---
Carlos A.P. di Candia            President of the Supervisory Board           54
Raul Antonio Moran               Syndic                                       57
Hugo Ernesto Lopez               Syndic                                       46
Eduardo German Padilla Fox       Alternate Syndic                             61
Juan Maria de la Vega            Alternate Syndic                             40
Horacio Marcelo Silva            Alternate Syndic                             36

Biographical Information

         Saturnino L. Herrero Mitjans has been the President of our board of
directors since 2000. Mr. Herrero is the President of several Argentine
companies including AGEA, Radio Mitre S.A. (Mitre), Primera Red Interactiva de
Medios Argentinos (Prima) S.A., and Editorial La Razon S.A. (La Razon), among
others. Mr. Herrero holds a degree in Business Administration from the
Universidad Argentina de la Empresa.

         Alejandro Alberto Urricelqui has been a member of the board of
directors as both an alternate director since February 1996 and a director since
September 1997. He joined Grupo Clarin in 1990, and held the position of CFO of
Grupo Clarin until 1994. From 1994 to date, he has been Corporate Chief
Financial Officer of Grupo Clarin. Before joining Grupo Clarin, Mr. Urricelqui
was Chief Financial Officer of Grupo Juncal.

         Vicente Gabriel di Loreto has been a member of the board of directors
since 2000. Mr. Di Loreto also serves on the boards of several Argentine
companies including various subsidiaries of Grupo Clarin, such as La Razon, Arte
Radiotelevisivo Argentino S.A. (Artear), Teledifusora Bahiense S.A., Mitre, Pem
S.A., Prima, Clarin Global S.A., GC Gestion Compartida S.A., Unir S.A., and
Diario Los Andes Calle S.A.. He has been with Grupo Clarin since 1998. Mr. Di
Loreto has held positions at Molinos Rio de la Plata, Bunge y Born, Pepsi Co.
and Arthur Andersen. Mr. Di Loreto graduated as a Certified Public Accountant
from the Universidad de Buenos Aires and later obtained a Master Degree in
Business Administration from I.A.E. Management and Business School.

         Ignacio Jorge Rosner was appointed director in September 1997. He
joined Grupo Clarin in August 1997 and is currently the Director of New Business
in Grupo Clarin.

         Jorge Carlos Rendo has been a member of the board of directors since
2001. He joined Grupo Clarin in 1998, and is currently the Director of External
Relations of Grupo Clarin. He graduated with a law degree from Universidad de
Buenos Aires and later obtained a Master's degree from the Wharton School of the
University of Pennsylvania. Mr. Rendo also serves on the boards of several
Argentine companies, including: Papel Prensa y de Mandatos S.A.C.I.F., Prima,
Clarin Global S.A., Artear, Artes Graficas Rioplatense S.A. and Mitre.

         Ignacio Rolando Driollet has been a member of the board of directors
since 2002. He joined Grupo Clarin in 1992, and served until 1994 as Deputy of
Institutional Relations. Until December 1997, Mr. Driollet led Grupo Clarin's
New Development Projects Group and during 1997, also served as Manager of
Strategic Analysis. From 1998 to date, he has been the Director of Corporate
Strategy. Mr. Driollet graduated with a law degree from Universidad Catolica
Argentina.

         Horacio Eduardo Quiros has been a member of the board of directors
since 2002. Since 1997, Mr. Quiros has served as Director of Corporate Human
Resources at Grupo Clarin. Previously he has worked in the human resources area
at various businesses in the automotive, industrial agriculture, and
communications media sectors. He has also served as President to the AMCham
Commission on Industrial Relations and is currently President of the Argentina
Association of Human Resources (ADRHA) and regional Vice President of the
Inter-American Federation of Professional Associations for Human Resources. Mr.
Quiros graduated from the Universidad Argentina de la Empresa in 1992 with a
degree in Industrial Relations.

         Carlos Alberto Moltini was appointed our Chief Executive Officer in
October 2001 after one year as Vice Chief Executive Officer. Mr. Moltini joined
us after seven years as the Chief Financial Officer of Artear, a leading
broadcasting channel in the City of Buenos Aires, owned by Group Clarin since
1990. Previously Mr. Moltini worked at Bagley and other companies in the
broadcasting sector.

         Adrian Jorge Meszaros joined us as Chief Financial Officer in 1994.
Previously, he was senior business officer in the media and communications
division of corporate banking for The Bank of Boston in Buenos Aires. Before his
career with The Bank of Boston, Mr. Meszaros worked as head of financial
operations at IMAR S.A., a metallurgy products company.

         Antonio Jose Alvarez joined us in 1992 and was appointed programming
manager in 1999. Prior to joining us, he worked as relationship manager at Banco
Rio, from 1989 to 1992, and head of investments at Financiera Bullrich, from
1986 to 1989.

         Angel Luis Cadelli joined us in May 1999 as regional manager of the
City of Buenos Aires Region. Mr. Cadelli reports directly to our CEO. Prior to
joining us, Mr. Cadelli was regional manager of Citibank Argentina and of Correo
Argentino S.A.

Duties and Liabilities of Directors

         Under Argentine law, directors have the obligation to perform their
duties with the loyalty and the diligence of a prudent business person.
Directors are jointly and severally liable to us, the shareholders and third
parties for the improper performance of their duties, for violating the law, our
Bylaws or regulations, if any, and for any damage caused by fraud, abuse of
authority or gross negligence. Under Argentine law, specific duties may be
assigned to a director by our Bylaws or by a resolution of a shareholders' or
board meeting. In such cases, a director's liability will be determined with
reference to the performance of such duties, provided that certain recording
requirements are met. Under Argentine law, directors are prohibited from
engaging in activities that are against the interest of the company on whose
board they serve. Certain transactions between directors and us are subject to
ratification procedures established by Argentine law; these procedures do not
apply in connection with transactions between affiliates of directors and us or
between shareholders and us. A director must inform the Board of any conflicting
interest he may have in a proposed transaction and must abstain from voting
thereon.

         In general, a director will not be liable if, notwithstanding his
presence at the meeting at which a resolution was adopted or his knowledge of
such resolution, a written record exists of his objection thereto and he reports
his objection to the Supervisory Board before any complaint against him is
brought to the Board, the Supervisory Committee, a shareholders' meeting, the
competent governmental agency or the courts. Except in the event of our
mandatory liquidation or bankruptcy, shareholder approval of a director's
performance terminates any liability of a director vis-a-vis us, provided that
shareholders representing at least 5% of our capital stock do not object and
provided further that such liability does not result from a violation of the law
or the Bylaws.

         Causes of action against directors may be initiated by us upon a
majority vote of shareholders. If a cause of action has not been initiated
within three months of a shareholders' resolution approving its initiation, any
shareholder may start the action on behalf and on our account. A cause of action
against the directors may be also initiated by shareholders who object to the
approval of the performance of such directors if such shareholders represent,
individually or in the aggregate, at least 5% of our capital stock.

Compensation

         Each of the executive officers referred to above receives annual
remuneration from us exceeding Ps.80,000. For the year ended December 31, 2001,
the aggregate compensation of all executive officers was Ps.2.4 million,
expressed in constant pesos as of September 30, 2002. There are no labor
contracts between us and our directors or members of our Supervisory Board.
There are no contracts between us and our directors, members of our Supervisory
Board or executive officers in violation of Section 271 of the Argentine
Corporation Law.

Employees

As of September 30, 2002, we had approximately 2,746 employees. Approximately
71% of our employees are unionized and are represented by the Sindicato
Argentino de la Television. A 1975 collective bargaining agreement with the
Sindicato Argentino de la Television governs relations with the television
industry. The bargaining agreement was amended on August 9, 2002, and the
amended bargaining agreement now governs our labor relationships with our
unionized employees. This latest amendment has not yet been confirmed by the
Labor Ministry. In addition to the 1975 bargaining agreement, our labor
relations with employees are also subject to various agreements with the
Sociedad Argentina de Locutores based on the particular duties of the employee.
We believe that our relations with our employees are good.


                                  LEGAL MATTERS

Antitrust Litigation

         We are a party to the following administrative proceedings initiated
against us under the Argentine Antitrust Law:

         o  On August 24, 1998, the Interior Trade and Consumer Defense Bureau
            of the Province of Entre Rios filed a complaint with the Comision
            Nacional de Defensa de la Competencia, National Commission for the
            Defense of Competition, known as CNDC alleging division of areas
            between us and our competitors. On May 4, 1999, we requested that
            the claim be rejected pursuant to section 20 of the Competition
            Defense law. We cannot provide assurance that the final ruling will
            be in our favor.

         o  In September 1998, the Santa Fe branch of Asociacion del Consumidor,
            Consumer Association, filed with the CNDC, a complaint against us
            and Cablevision for alleged anticompetitive practices in the city of
            Santa Fe, in connection with the division of the subscribers, assets
            and liabilities of the VCC Group and the Santa Fe Systems. We filed
            an answer to the complaint requesting that the CNDC dismiss the
            action. We cannot guarantee that the final decision will be
            favorable to us.

         o  On January 13, 1999, the CNDC notified us that a complaint had been
            filed by the Santa Fe commerce department, alleging that VCC had
            engaged in anticompetitive practices in the city of Rosario,
            Province of Santa Fe prior to its acquisition. Although we have
            responded to the complaint, we cannot assure you that our arguments
            will prevail or that we will not be fined.

         o  On February 18, 1999, the CNDC commenced a formal proceeding
            investigating an alleged price fixing agreement for soccer programs
            from 1995 onwards involving us, Cablevision, VCC and other cable
            signal providers. On August 30, 1999 the CNDC notified us and the
            other cable companies and cable signal providers that it had
            completed its summary investigation and granted us 30 days to submit
            either our reply to the findings of the CNDC or our settlement
            offer. On October 12, 1999 we filed an answer to the complaint. As
            of the date hereof, although the discovery period has ended no final
            ruling has yet been issued. We can give no assurance that the final
            outcome will be favorable to us.

         o  On March 12, 1999, the owner of a cable television company in the
            city of Roldan, Province of Santa Fe, filed a complaint against us
            for alleged anticompetitive practices in this city. Although we
            filed an answer to the complaint with the CNDC, we cannot assure you
            that the final decision will be favorable to us or that we will not
            be fined.

         o  On November 29, 1999, the CNDC notified us that a complaint had been
            filed against us and Cablevision by Empresa Surcor T.V. S.A., a
            cable television operator in the city of Cordoba, for alleged
            concerted actions to distribute the Cordoba market among ourselves.
            In addition, the CNDC notified us on the same date that Empresa
            Surcor T.V. S.A. also filed a complaint against us for alleged
            anticompetitive practices in the Cordoba market, including
            discriminatory pricing and abuse of a dominant market position. We
            filed an answer to the complaints on December 22, 1999, and the
            actions are currently in discovery. We cannot guarantee that the
            final decision will be favorable to us or that we will not be fined.

         o  In December 2001 a cable television operator in Santa Fe and
            Corrientes, Gigacable S.A., filed a complaint against us for alleged
            division of markets with Cablevision and for discriminatory pricing.
            On December 6, 2001, we filed an answer to the complaint. As of the
            date hereof, the CNDC is analyzing the answer filed by us. We cannot
            provide assurance that the dispute will be settled or that we will
            not be fined if no agreement is reached.

         o  The Interior Trade and Consumer Defense Bureau of the Province of
            Entre Rios filed a complaint against the CNDC for the presumed
            division of areas between us and our competitors. On May 4, 1999, we
            requested that the claim be rejected in its filing in accordance
            with section 20 of the Competition Defense Law. We cannot provide
            assurance that the final ruling will be in our favor.

         Please note that, pursuant to Section 85 of the Broadcasting Law, cable
licenses may be terminated based on violations of the Antitrust Law.

Paraguay Acquisitions

         We are also involved in a lawsuit filed by the seller of several cable
television companies located in Asuncion, the Greater Asuncion area and several
interior regions of Paraguay. On June 30, 1997, we signed two agreements
granting us the option to acquire 100% of the subscribers, assets and
liabilities of these cable television companies. We paid an initial sum of
U.S.$0.3 million on June 30, 1997 and exercised our options on October 24, 1997.
The closing was scheduled to occur November 15, 1997, and was subject to the
satisfaction of certain conditions by the seller, including the granting of
several regulatory approvals by the Paraguayan government, which did not occur.
We subsequently agreed with the seller to reschedule the payments and postpone
the closing to April 30, 1998. On the date of this agreement we paid a first
installment of U.S.$2.0 million, leaving a balance of U.S.$16.7 million on the
purchase price. The seller delivered a promissory note for U.S.$2.3 million and
pledged the shares of some of the Paraguayan companies in our favor as security
if the seller failed to meet the closing conditions. The closing was not
completed because the seller failed to satisfy the closing conditions. We
demanded payment on the U.S.$2.3 million promissory note, but the seller
initiated an action for damages and/or specific performance before the
Paraguayan courts and obtained a preliminary injunction. The seller filed a
motion with the Argentine courts seeking an order to compel us to furnish the
seller a number of documents and information in connection with the action
before the Paraguayan courts, but we obtained an order from the Paraguayan court
requesting the Argentine courts to suspend the proceedings on the grounds that
the seller had not paid the required Paraguayan court tax with respect to the
Paraguayan action.

         On June 19, 2001 the seller communicated to the court the assignment of
rights and lawsuits in favor of Lisker S.A., for which court fees were paid.
When we were informed of this assignment, we filed an appeal challenging the
court's decision pursuant to which Lisker S.A. was assigned seller's rights, on
the grounds that the agreement had an intuitu personae nature, and that the
seller was restricted from assigning rights, according to the agreement. Through
a resolution dated August 17, 2001, the court approved the appeal and revoked
the rights assigned to Lisker S.A. That ruling was appealed by Lisker S.A.,
which filed an appeal of the dismissal. This appeal was also dismissed.
Subsequently, Lisker S.A. filed an appeal with the Supreme Court of Justice of
Paraguay claiming unconstitutionality. This action is pending. On September 17,
2001, we requested the lifting of the provisional remedy, which restrains us
from collecting the promissory note for U.S.$2,300,000 drawn in the name of the
seller. The court has ruled in our favor. Although the court has ruled in our
favor, we cannot assure you that we will be able to collect on the promissory
note.

Supercanal Proceedings

         We have commenced several judicial actions against Supercanal Holding
S.A. in which we hold a 1.5% interest. These actions seek to annul several
shareholders' resolutions adopted without our consent and to obtain a judicial
declaration of dissolution and liquidation of Supercanal Holding S.A. and the
removal and replacement of the entire board of directors and the supervisory
board with a court-appointed administrator.

         On December 12, 2001, we were notified of the filing of a claim of
Ps.$83,000,000 by Supercanal Holding S.A. for damages caused by the granting of
a preliminary court injunction requested by us. We had sought the injunction in
connection with our action to declare null and void resolutions adopted in the
extraordinary shareholders' meeting of Supercanal Holding S.A. on January 25,
2000 that reduced the capital stock of and increased the capital of Supercanal
Holding S.A. with the purpose of canceling stock subject to call options. The
preliminary injunction was subsequently revoked. It has been claimed that the
suspension of the implementation of the shareholders' resolution of the meeting
held on January 25, 2000 resulted in the insolvency of Supercanal Holding S.A.
due to alleged inability to increase capital. We answered the complaint arguing
that we were already insolvent and there were no funds available for a capital
increase. Based on the record of the case, we consider that the filed claim
should be rejected in its entirety, and the legal costs should be borne by the
plaintiff. However, we cannot assure you that the court will reject the claim or
that it will be resolved in our favor.

         We cannot guarantee that the outcome of any of the judicial actions
initiated by us or by the Supercanal Group will be favorable to our interests,
or that the Supercanal Group or its shareholders will not bring any other
judicial actions against us.

Regulatory Proceedings

         Administrative Proceedings. From November 1, 2002 through the date
hereof, Comfer has notified us that it commenced summary proceedings against us
for the following violations of Argentina's Broadcasting Law:

         o  46 violations of minority age protection and content regulations.

         As of the date hereof, Comfer has notified us of the imposition of
fines for alleged violations incurred during January and February 2001. On
November 21, 2002 the Executive Branch issued Decree 2365/02 which established
the Regime of Payment (Regimen de Facilidades de Pago) for fines imposed for
violations of the Broadcasting Law that occurred between January 1, 2001 and
October 31, 2002. Therefore, fines that have been or may be imposed on us during
such period could be paid in accordance with such regime. Licensees need to file
a request to obtain a payment plan by detailing the administrative records,
resolutions imposing the sanctions and, in cases where there is no resolution
regarding the administrative proceedings, a summary of the pending proceedings.
The filing of the request must expressly provide for a waiver of any
administrative or judicial appeal that has been filed against the resolutions
that imposed such fines.

         Fines may be paid in cash or by providing advertising time for issues
of general interest to the Secretaria de Medios de Comunicacion of the Executive
Branch and COMFER. Payment of the fines through the Regimen de Facilidades de
Pago may be made over a period of up to 60 months.

         On December 13, 2002 we and some of our subsidiaries filed the
requisite documents required by such Decree and have elected to pay the fines by
providing advertising time. We cannot provide any assurance that our application
will be accepted or that we will not be subject to further fines in the future.

         The Executive Branch has, by various decrees, granted us a
compensation-based moratorium with respect to any monetary penalties imposed
against us in summary proceedings commenced by Comfer. In some cases, the
amounts owed under the moratorium could be offset against the broadcast value of
any advertising of public interest campaigns by the Argentine government to be
purchased from us by Telam S.A., a state-owned news agency. The moratorium also
provided for a reduction in the amount of any monetary fines assessed against
us.

         Demand for payment from Vidycom S.A. Comfer filed a claim whereby it
demanded payment from Vidycom S.A. ("Vidycom"), a company we absorbed in 1995,
of all the differences in its favor as a result of its participation in the tax
exemption established by Resolution No. 393/93. The tax authorities based their
rejection of the aforementioned tax exemption on the following grounds: (a)
Vidycom was asked to make payment on several occasions, but did not comply with
Comfer's requirements, (b) no documentation supporting the investments committed
by the company was provided and (c) no evidence was provided of the weather
phenomenon as a result of which the previous shareholders had requested the tax
exemption. The amount of the claim, which would be equivalent to 30% of the rate
paid in 1994, 20% of the rate paid in 1995 and 10% of the rate paid in 1996,
plus the corresponding interest, has not yet been determined.

         We believe that there are questions of fact and of law in our favor
that would lead Comfer to reassess its position. Consequently, no amount has
been recorded in the financial statements at December 31, 2001. The grounds are
as follows: (a) Comfer did not take into account that the notices had to be
served at our legal address, as we have absorbed Vidycom, a circumstance of
which Comfer was aware, (b) although the administrative procedures had not been
concluded, investments were made by us, and (c) we provided evidence of the
contingency giving rise to the request for exemption.

         Claims against Intercable S.A., Parana Television por Cable S.A. and
Canaco S.A. Comfer has issued resolutions notifying Intercable S.A., Parana
Television por Cable S.A. and Canaco S.A., companies we absorbed, of the
rejection of the request for exemption made under the terms of Resolution No.
393/93 and claiming payment of the unpaid amount plus compensatory interest. The
amount payable has not yet been determined, except in the case of Parana
Television por Cable S.A., which amount was Ps.55,862. We, as in the case of
Vidycom, believe that there are questions of fact and of law in favor of those
companies which would lead Comfer to reassess its position, but we cannot
provide any assurance that our appeal will be successful.

         Claims against Difusora S.A. On April 25, 2001 Comfer notified Difusora
S.A., a company we absorbed, of the amount it must pay as a result of its
participation in the payment facilities regime. The amount is Ps.107,106, which
will be paid with advertising time according to the option elected by us.

         In addition, on February 8, 2002, Comfer notified Difusora S.A. that
the amount to be settled corresponding to an action brought due to infringements
that allegedly occurred between May 1 and December 9, 1999 is Ps.17,054. An
application to inspect the file was presented in order to challenge that
assessment.

Tax Matters

         VAT

         Pursuant to Resolution No. 18/2001, AFIP set the amounts due for VAT on
revenue derived from advertising included in our monthly subscriber magazine for
the fiscal period from and including September 1996 through September 1998.
Resolution No. 18/2001 imposed the following:

         o  Ps.1,861,705 on account of VAT on revenue derived from advertising,

         o  Ps.2,161,971 in interest, and

         o  a fine of Ps.1,489,364, an amount equivalent to 80% of the VAT on
            advertising revenue that AFIP claimed we owed.

         We timely filed an appeal with the Tribunal Fiscal contesting the
imposition of Resolution No. 18/2001, and requesting that the VAT, interest, and
fine determined by the AFIP be declared null and void. We cannot assure you that
our appeal will be resolved in our favor.

Labor

         We are presently being sued by our contractors' former employees, based
on joint liability grounds, for the non-compliance of labor laws by contractors.

Other

         We are also involved in other litigation, including tort litigation,
from time to time in the ordinary course of business. Tort litigation typically
includes claims or tort actions, for damages resulting from our equipment and
installations, for which we are properly insured. In management's opinion, the
litigation in which we are currently involved, individually and in the
aggregate, is not material to our financial condition or results of operations.

         We are also involved, as successor to Video Cable Privado, S.A., known
as VCPSA, in two lawsuits filed by: (i) a concessionaire of VCPSA in connection
with an eight year concession agreement dated December 1990 between VCPSA and
that concessionaire, and (ii) an assignee of 50% of that concessionaire's rights
under the concession agreement.

         We acquired VCPSA in October 1992 and later merged it into us. The
plaintiffs seek damages for lost profits from us, allegedly arising from VCPSA's
rescission of the concession agreement without cause in August 1991. We
requested that both lawsuits be dismissed. The expert appraiser appointed by the
court in both lawsuits reported damages of approximately Ps.13 million. Both
lawsuits were subsequently joined into one proceeding. On July 20, 2001 the
judge issued a decision in which he awarded damages in the amount of Ps.107,000
and lost profits to be determined in accordance with a complex formula to be
applied by the expert appraiser. Both parties challenged the decision. On
October 18, 2002, the appeals court upheld the ruling against us and awarded
money damages to the plaintiffs in the amount of Ps.750,000, plus court
expenses. The plaintiffs appealed this ruling to the Supreme Court. Although we
can not assure you that the Court of Appeals will reject such appeal, we view
the chances that the plaintiffs will succeed in their appeal to be remote, and
we have not made special accounting reserves for this contingency.


<PAGE>

               UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

        INDEX TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                 MULTICANAL S.A.


UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                               <C>
Report of independent accountants ..............................................   F-2
Unaudited interim consolidated balance sheet....................................   F-4
Unaudited interim consolidated statement of operations..........................   F-5
Unaudited interim consolidated statement of changes in shareholders' equity.....   F-6
Unaudited interim consolidated statement of cash flows..........................   F-7
Notes to the unaudited interim consolidated financial statements................   F-8
Exhibit.........................................................................  F-34
</TABLE>



<PAGE>


       REPORT OF INDEPENDENT ACCOUNTANTS ON UNAUDITED INTERIM CONSOLIDATED
                              FINANCIAL STATEMENTS




To the Board of Directors and Shareholders of Multicanal S.A.

1.   We have reviewed the accompanying interim consolidated balance sheets
     of Multicanal S.A. and its subsidiaries as of September 30, 2002 and 2001,
     and the related interim consolidated statements of operations, of cash
     flows and of changes in shareholders' equity for each of the nine-month
     periods then ended. These interim consolidated financial statements are the
     responsibility of the Company's Management.

2.   We conducted our reviews in accordance with auditing standards generally
     accepted in Argentina. A review of interim financial information consists
     principally of applying analytical procedures to financial data and making
     inquiries of persons responsible for financial and accounting matters. It
     is substantially less in scope than an audit conducted in accordance with
     generally accepted auditing standards, the objective of which is the
     expression of an opinion regarding the financial statements taken as a
     whole. Accordingly, we do not express such an opinion.

3.   Accounting principles generally accepted in Argentina require companies
     with a controlling financial interest in other companies to present both
     parent company, where investments in subsidiaries are accounted for by the
     equity method, and consolidated financial statements as primary and
     supplementary information, respectively. Because of the special purpose of
     these condensed unaudited interim consolidated financial statements, parent
     company financial statements are not included. This procedure has been
     adopted for the convenience of the reader of these condensed unaudited
     interim consolidated financial statements.

4.   Note 13 summarizes the status of the Argentine economy and describes some
     of the economic measures adopted by the National Government to confront the
     Argentine crisis, some of which may have been pending on the date of
     preparation of these financial statements. The general impact of all the
     measures adopted to date by the Government on the financial statements of
     the Company at September 30, 2002 was recognized according to the
     evaluations and estimates made by Management when preparing the financial
     statements. Actual results could differ from the evaluations and estimates
     made at the date of preparing these financial statements and those
     differences could be significant. Therefore, the Company's financial
     statements may not report all the adjustments that could result from these
     adverse conditions. At this time it is not possible to foresee the future
     development of the country's economy or its consequences on the economic
     and financial situation of the Company. Therefore, the Company's financial
     statements must be considered in the light of these circumstances.

5.   As explained in Note 7, the Company has not made scheduled payments due on
     certain Notes. The Company is renegotiating its financial obligations; at
     the date of this report, however, this process is at a preliminary stage
     and consequently, its outcome cannot be anticipated.

6.   As indicated in Note 13, the Company's losses for the nine-month period
     ended September 30, 2002 exceed 50% of its capital and 100% of its reserves
     as of September 30, 2002. Although section 206 of the Commercial Companies
     Law establishes a mandatory capital reduction in such situations, by means
     of Decree 1269/02, the National Executive suspended enforcement of this
     regulation until December 10, 2003.

7.   As reflected in the accompanying condensed unaudited interim consolidated
     balance sheet, at September 30, 2002 approximately 63% of the Company's
     consolidated assets are comprised of goodwill and other intangible assets.
     As a result of present economic conditions in Argentina, there is
     uncertainty as to whether future cash flows will be sufficient to recover
     the recorded value of intangible assets at September 30, 2002 in the normal
     course of business.

8.   The changes in economic conditions in Argentina and those of Multicanal
     S.A. described in paragraphs 4 and 5 above -if not resolved favorably-
     create substantial doubt as to the ability of the Company to continue to
     operate as a going concern. The Company has prepared the accompanying
     condensed unaudited interim consolidated financial statements applying
     accounting principles applicable to a going concern. Consequently, those
     financial statements do not include the effects of potential adjustments
     and reclassifications that might be required if the Company is not able to
     continue as a going concern and is forced to realize its assets and settle
     its liabilities, including contingent liabilities, in conditions other than
     through the normal course of business.

9.   Based on the work done and our examination of the financial statements of
     the Company and its consolidated financial statements for the years ended
     December 31, 2001 and 2000, on which we issued our qualified report dated
     March 11, 2002 due to the uncertainty as to (i) the impact of the economic
     measures issued by the National Government, (ii) the Company's capacity to
     fulfill its financial commitments, (iii) the recoverability of the
     intangible assets balance and (iv) the Company's capacity to continue
     operating as a going concern, we report that the unaudited interim
     consolidated financial statements of Multicanal S.A. at September 30, 2002
     and 2001 consider all significant facts and circumstances which are known
     to us. We have no observations to make other than those indicated in points
     4, 5, 6, 7 and 8.



Buenos Aires, Argentina                     PRICE WATERHOUSE & CO.
 November 14, 2002
                                            by /s/ Alberto E. Fandino (Partner)
                                            ----------------------------------
                                            Alberto E. Fandino


<PAGE>


Condensed from the original prepared in Spanish for publication in Argentina

                                 MULTICANAL S.A.

                  UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET

                        (At September 30, 2002 and 2001)

      (Expressed in Argentine pesos of September 30, 2002 purchasing power)

<TABLE>
<CAPTION>
                                                                                             September 30,
                                                                              -------------------- -----------------------
                                                                                     2002                   2001
                                                                              -------------------- -----------------------
                                                                                   (Unaudited)            (Unaudited)
                                 ASSETS
<S>                                                                                   <C>                   <C>
CURRENT ASSETS
Cash and banks...........................................................             94,338,982            22,978,229
Short-term investments (Note 3 (a)) .....................................                926,136           216,536,906
Trade receivables (Note 3 (b))...........................................             27,475,522            62,893,460
Receivables from related parties.........................................             12,946,141            17,622,302
Other (Note 3 (c)).......................................................             50,816,348           106,027,341
                                                                              -------------------- -----------------------
         Total current assets............................................            186,503,129           426,058,238
                                                                              -------------------- -----------------------
NON-CURRENT ASSETS
Long-term investments (Note 3 (e)).......................................             15,685,398             9,696,708
Property and equipment, net (Note 4).....................................            671,083,436           849,207,700
Goodwill and intangible assets (Note 5)..................................          1,557,826,036         1,998,818,293
Other (Note 3 (d)).......................................................             30,666,841            60,035,712
                                                                              -------------------- -----------------------
         Total non-current assets........................................          2,275,261,711         2,917,758,413
                                                                              -------------------- -----------------------
         Total assets ...................................................          2,461,764,840         3,343,816,651
                                                                              ==================== =======================
                                LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................................            113,896,001           240,921,240
Short-term bank and financial debt (Notes 3 (f) and 7)...................          2,175,651,737           440,746,475
Acquisition related debt ................................................              8,120,155             7,247,965
Taxes payable............................................................             17,660,722            46,321,785
Debt with related parties................................................              1,783,230             4,152,664
Payroll and social security..............................................              7,537,630            19,249,129
Other (Note 3 (g)).......................................................              7,790,850             9,148,603
                                                                              -------------------- -----------------------
         Total current liabilities.......................................          2,332,440,325           767,787,861
                                                                              -------------------- -----------------------
NON-CURRENT LIABILITIES
Accounts payable and accrued liabilities                                                       -             5,929,090
Taxes payable............................................................              2,291,624             5,885,128
Acquisition related debt ................................................              5,290,724               775,612
Long-term bank and financial debt (Note 7)...............................                241,251         1,314,189,166
Other (Note 3 (h)).......................................................             22,025,553            39,517,092
Provision for lawsuits and contingencies (Note 6 (c))....................             23,219,984            51,314,276
                                                                              -------------------- -----------------------
         Total non-current liabilities...................................             53,069,136         1,417,610,364
                                                                              -------------------- -----------------------
         Total liabilities...............................................          2,385,509,461         2,185,398,225
                                                                              -------------------- -----------------------
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ..........................             33,295,681            28,618,354
SHAREHOLDERS' EQUITY (as per related statement)..........................             42,959,698         1,129,800,072
                                                                              -------------------- -----------------------
         Total liabilities and shareholders' equity......................          2,461,764,840         3,343,816,651
                                                                              ==================== =======================
</TABLE>


The accompanying notes and exhibit are an integral part of these unaudited
interim consolidated financial statements.


<PAGE>

  Condensed from the original prepared in Spanish for publication in Argentina


                                 MULTICANAL S.A.
             UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
         (For the nine-month periods ended September 30, 2002 and 2001)
      (Expressed in Argentine pesos of September 30, 2002 purchasing power)

<TABLE>
<CAPTION>
                                                                                           September 30,
                                                                            --------------------------------------------
                                                                                   2002                   2001
                                                                            -------------------- -----------------------

                                                                                 (Unaudited)            (Unaudited)
<S>                                                                             <C>                      <C>
Net revenues (Note 3 (i))..............................................         463,284,542              792,403,126
Operating costs
  Direct operating expenses (Exhibit)..................................        (249,508,672)            (383,061,781)
  General and administrative expenses (Exhibit)........................         (74,076,908)            (108,601,211)
  Selling and marketing expenses (Exhibit).............................         (29,979,403)             (46,595,243)
  Depreciation and amortization........................................        (238,894,633)            (252,561,498)
                                                                            -------------------- -----------------------
Operating (loss)/gain .................................................        (129,175,074)               1,583,393
Non-operating income (expenses)
  Financial income (expenses) and holding results, net (Note 3 (j))....        (571,818,655)            (180,155,781)
  Other non-operating income (expenses), net (Note 3 (k))..............           1,444,360              303,033,941
                                                                            -------------------- -----------------------
Loss before taxes, minority interest and equity in the (losses) gains of       (699,549,369)             124,461,553
  affiliated companies.................................................
Income taxes and/or tax on minimum notional income.....................          (4,273,150)             (10,476,872)
                                                                            -------------------- -----------------------
Loss before minority interest and equity in the (losses) gains of              (703,822,519)             113,984,681
  affiliated companies.................................................
Minority interest in results of consolidated  subsidiaries.............          (9,080,802)              (3,496,880)
                                                                            -------------------- -----------------------
Loss before equity in the (losses) gains of affiliated companies.......        (712,903,321)             110,487,801
Equity in the gains (losses) of affiliated companies (Note 10).........          21,366,137               (3,125,592)
                                                                            -------------------- -----------------------
Net (loss)/ gain ......................................................        (691,537,184)             107,362,209
                                                                            ==================== =======================
</TABLE>

The accompanying notes and exhibit are an integral part of these unaudited
interim consolidated financial statements.


<PAGE>

  Condensed from the original prepared in Spanish for publication in Argentina


                                 MULTICANAL S.A.

   UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
         (For the nine-month periods ended September 30, 2002 and 2001)
      (Expressed in Argentine pesos of September 30, 2002 purchasing power
                           - except number of shares)

<TABLE>
<CAPTION>

                                                             SHAREHOLDERS' CONTRIBUTIONS
                                        -------------------------------------------------------------------------------------------
                                          Number of
                                         issued and
                                         authorized                Adjustments
                                        common shares               to capital    Additional
                                        par value Ps.    Share        (Note        paid-in      Merger     Irrevocable
                                             1          capital     2.5.(g))       capital      premium   contributions   Reserve
                                        -------------------------------------------------------------------------------------------
                                         (Unaudited)   (Unaudited)  (Unaudited) (Unaudited)   (Unaudited) (Unaudited)   (Unaudited)

                                        -------------------------------------------------------------------------------------------
<S>                                     <C>           <C>          <C>          <C>           <C>           <C>         <C>
At January 1, 2001                      365,953,227   365,953,227  473,372,669  1,059,041,398          -            -   25,810,808
Incorporation of balances
 following merger with
 Plataforma Digital S.A.                    867,810       867,810    1,051,813              - 34,143,158    4,844,221   39,112,801


Net gain for the period                           -             -            -              -          -            -            -
                                        -------------------------------------------------------------------------------------------

At September 30, 2001                   366,821,037   366,821,037  474,424,482  1,059,041,398 34,143,158    4,844,221   64,923,609
                                        ===========================================================================================
At January 1, 2002                      366,821,037   366,821,037  474,424,482  1,059,041,398 34,143,158    4,844,221   64,923,609


Net loss for the period                           -             -            -              -          -            -            -
                                        -------------------------------------------------------------------------------------------

At September 30, 2002                   366,821,037   366,821,037  474,424,482  1,059,041,398 34,143,158    4,844,221   64,923,609
                                        ===========================================================================================


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


                                                         Retained
                                                          earnings       Total
                                            Legal      (accumulated  shareholders
                                           reserve       deficit)      equity
                                         ----------------------------------------
                                         (Unaudited)   (Unaudited)    (Unaudited)

                                         ----------------------------------------
At January 1, 2001                        6,396,217    (910,555,296) 1,020,019,023
Incorporation of balances
 following merger with
 Plataforma Digital S.A.                          -     (77,600,963)     2,418,840


Net gain for the period                           -     107,362,209    107,362,209
                                         -----------  ---------------------------

At September 30, 2001                     6,396,217    (880,794,050) 1,129,800,072
                                         =========================================
At January 1, 2002                        6,396,217  (1,276,097,240    734,496,882


Net loss for the period                           -    (691,537,184)  (691,537,184)
                                         -----------------------------------------

At September 30, 2002                     6,396,217  (1,967,634,424     42,959,698
                                         =========================================


</TABLE>

The accompanying notes and exhibit are an integral part of these unaudited
interim consolidated financial statements.

<PAGE>

  Condensed from the original prepared in Spanish for publication in Argentina


                                 MULTICANAL S.A.
             UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
            (For the nine-month periods ended September 30, 2002 and
            2001) (Expressed in Argentine pesos of September 30, 2002
                                purchasing power)

<TABLE>
<CAPTION>
                                                                                                            September 30,
                                                                                                            -------------
                                                                                                     2002                   2001
                                                                                                     ----                   ----
                                                                                                  (Unaudited)          (Unaudited)
<S>                                                                                              <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Result for the period (Loss)Gain .......................................................         (691,537,184)          107,362,209
Adjustments to reconcile net loss to net cash provided by operating
  activities:
   Depreciation and disposal of fixed assets ...........................................          149,966,543           150,854,048
   Goodwill and intangible assets amortization .........................................           88,928,090           101,707,450
   Equity in the losses (gains) of affiliated companies ................................          (21,366,137)            3,125,592
   Loan restatement ....................................................................           20,104,199                     -
   Interest accrued on financial liabilities and acquisition of
   cable ...............................................................................          191,875,452           147,224,578
   Result from advanced repurchase of negotiable obligations ...........................         (423,507,729)                    -
   Result from restatement of negotiable obligations ...................................        1,009,085,324                     -
   Exchange difference on debt from purchase of cable ..................................            6,183,851                     -
   Minority interest in results of consolidated subsidiaries ...........................            9,080,802             3,496,880
   Provision for lawsuits and contingencies ............................................              435,965             6,059,722
   Provision for impairment of intangible assets .......................................            5,011,085                     -
   Result of sale of long-term investments .............................................              (25,327)         (326,939,265)
   Exchange difference in advances on purchase of investments ..........................           (3,102,518)                    -
   Result of exposure to inflation from bank and financial debt and
   acquisition related debt in Argentine pesos..........................................          (62,084,135)                    -
   Result from conversion included in purchases of cable ...............................              772,291                     -
   Result from conversion in fixed and intangible assets ...............................           (6,063,815)                    -
   Result from holding of long-term investments ........................................              (27,320)              394,647
Decrease (increase) in assets
   Trade receivables ...................................................................           44,681,472             4,586,262
   Other current assets ................................................................           46,121,378           (23,987,221)
   Other non-current assets ............................................................           11,983,899           (22,917,860)
   Receivables from related parties ....................................................            4,124,493            (1,971,269)
Increase (decrease) in liabilities
   Debt with related parties ...........................................................           (1,223,505)             (833,457)
   Other current and non-current liabilities ...........................................           (1,478,277)           (4,371,472)
   Accounts payable and accrued liabilities ............................................         (133,646,986)           23,323,394
   Payroll and social security .........................................................           (9,650,950)           (6,499,954)
   Current and non-current taxes payable ...............................................          (32,225,922)            3,602,533
   Provision for lawsuits and contingencies ............................................          (29,857,068)               91,791
   Dividends received ..................................................................              110,817                     -
                                                                                               --------------        --------------
Cash provided by operations ............................................................          172,668,788           164,308,608
                                                                                               --------------        --------------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchases of property and equipment net of proceeds from sales and disposals ...........           (8,052,106)          (37,188,832)
(Acquisitions)/Sales of cable systems and subscribers and (increase)
  decrease in goodwill and intangible assets ...........................................           (1,015,758)          326,995,710
                                                                                               --------------        --------------
Cash used in investment activities .....................................................           (9,067,864)          289,806,878
                                                                                               --------------        --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in acquisition related debt ...................................................              161,038                     -
Repayments of acquisition related debt .................................................           (3,613,279)          (10,520,960)
Borrowings of bank and financial loans .................................................                    -           411,283,394
Repayments of bank loans ...............................................................         (250,625,450)         (697,151,623)
decrease of minority  interest in consolidated subsidiaries ............................           (3,790,782)           (1,198,542)
                                                                                               --------------        --------------
Cash used in financing activities ......................................................         (257,868,473)         (297,587,731)
                                                                                               --------------        --------------
(DECREASE)/ INCREASE  IN CASH AND CASH EQUIVALENTS .....................................          (94,267,549)          156,527,755
Increase in cash and cash equivalents provided by merger ...............................                    -                44,256
Cash and cash equivalents at the beginning of period ...................................          189,532,667            82,943,124
                                                                                               --------------        --------------
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD .........................................           95,265,118           239,515,135
                                                                                               ==============        ==============

The accompanying notes and exhibit are an integral part of these unaudited
interim consolidated financial statements.
</TABLE>

<PAGE>

  Condensed from the original prepared in Spanish for publication in Argentina


                                 MULTICANAL S.A.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
         (Expressed in Argentine pesos of September 30, 2002 purchasing
                                 power) (Contd.)

NOTE 1- BUSINESS AND FORMATION OF THE COMPANY

(a)      Business

         Multicanal S.A. (the "Company" or "Multicanal"), an Argentine
         corporation formed on July 26, 1991, is in one segment of business as
         owner and operator of cable television systems.

         Since 1994, the Company has made significant investments, initially in
         the acquisition of cable systems and their subsequent development and
         expansion. These investments have been substantially financed by loans
         from financial institutions and former owners of certain acquired cable
         systems, as well as shareholders' contributions.

(b)      Formation of the Company

         On January 10, 2001 the Board of Directors authorized its Chairman to
         initiate negotiations aimed at carrying out a new corporate
         reorganization through a merger by absorption. For purposes of this
         merger, Multicanal was the absorbing company, continuing with the
         activities and operations of the absorbed companies and therefore
         remaining in existence, while Plataforma Digital S.A., Red Argentina
         S.A., Radio Satel Sociedad Anonima, Cable Espacio del Buen Ayre S.A.,
         Video Cable Norte S.A., Television por Cable S.A. and Cable Vision
         Corrientes Sociedad Anonima ("the Absorbed Companies") were the
         Absorbed Companies and therefore dissolved. This reorganization was
         carried out effective from January 1, 2001 and all operations of the
         Absorbed Companies were considered as carried out by the absorbing
         company from this date. The balance sheets that served as a basis for
         the merger were those prepared by the companies at December 31, 2000.

         On March 30, 2001, the Company's Board approved (i) the prior merger
         commitment entered into on March 20, 2001 with the Absorbed Companies
         and (ii) the Prospectus for Merger by Absorption between Multicanal
         S.A. (absorbing) and the Absorbed Companies for presentation to the
         Comision Nacional de Valores (National Securities Commission or the
         "CNV") and the Bolsa de Comercio de Buenos Aires (Buenos Aires Stock
         Exchange or "BCBA") for purposes of requesting prior approval by that
         Commission for subsequent publication in the Stock Exchange Daily
         Bulletin for the knowledge of note-holders.

         On June 22, 2001, at an Extraordinary Shareholders' Meeting, the
         Company's Shareholders approved (i) the preliminary merger agreement
         signed on March 20, 2001 with the Absorbed Companies; (ii) the special
         financial statements and the consolidated financial statements for
         merger purposes at December 31, 2000; (iii) an increase in corporate
         capital in the amount of Ps. 867,810, from Ps. 365,953,227 to Ps.
         366,821,037, by issuing 867,810 Class A ordinary registered
         non-endorsable shares with a face value of Ps. 1 each, and 5 votes per
         share which will be delivered to Grupo Clarin S.A. in exchange for
         16,303,000 ordinary registered non-endorsable shares which Grupo Clarin
         S.A. had in Plataforma Digital S.A. and (iv) the resulting amendment of
         art. 4 of the Corporate Bylaws.

         The Company has made the publications required by sect. 83 of the
         Corporations Law without any objection having been made within the time
         limitations established by law. Consequently, the deed for the prior
         merger agreement has been signed.

         As the Company takes part in the public offer regime, on April 11, 2001
         it applied for administrative approval of that process before the CNV
         as required by applicable regulations. Once the registration of the
         previous reorganization processes has been evidenced, the CNV will
         request registration with the Inspeccion General de Justicia
         (Superintendency of Corporations or the "IGJ").

NOTE 2- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

2.1. Basis of presentation of the unaudited interim consolidated financial
statements

The unaudited interim consolidated financial statements include the accounts of
Multicanal and its majority owned subsidiaries. All material intercompany
balances, transactions and profits have been eliminated. Except as explained
below, the equity method is used to account for investments in affiliates in
which the Company has an ownership interest between 20% and 50%. Investments in
affiliates in which the Company has an ownership interest of less than 20% are
accounted for under the cost method.

The unaudited interim consolidated financial statements include accounts of
Multicanal, Pem S.A. ("Pem") and the following subsidiaries:

<TABLE>
<CAPTION>
                                                                                   % of capital and votes held by
                                                                                         Multicanal and Pem
                                                                                  ---------------------------------
                                                                                           September 30,
                                                                                  ---------------- ----------------
                                                                                        2002            2001
                                                                                  ---------------- ----------------
<S>                                                                                     <C>               <C>
AVC Continente Audiovisual S.A..............................................            90.00             90.00
CV Berazategui S.A..........................................................            70.00             70.00
Delta Cable S.A.............................................................            84.00             84.00
San Lorenzo TV Cable S.A....................................................           100.00            100.00
TV Cable San Francisco S.A..................................................           100.00            100.00
Telesur Teledifusora Rio Cuarto S.A.........................................           100.00            100.00
Televisora Privada del Oeste S.A............................................            51.00             51.00
Bridge Management Holdings Corp.............................................           100.00            100.00
La Capital Cable S.A........................................................            50.00             50.00
Chaco Cable Color S.R.L. (1)................................................           100.00            100.00
Teledifusora San Miguel Arcangel S.A........................................            50.10             50.10
Tevemundo S.A...............................................................           100.00            100.00
Cable Imagen S.R.L. (1).....................................................           100.00            100.00
Television Dirigida S.A.E.C.A...............................................            89.39             89.39
Orange Producciones S.A.....................................................           100.00            100.00
Cablepar S.A................................................................           100.00            100.00
Cablevision Comunicaciones S.A.E.C.A........................................            89.81             89.81
Tres Arroyos Televisora Color S.A. .........................................            65.28             61.42
Wolves Television Sociedad Anonima..........................................           100.00            100.00
Adesol S.A..................................................................           100.00            100.00
Cable Video Sociedad Anonima................................................           100.00            100.00
Dorrego Television S.A......................................................           100.00            100.00
Cable Video Sur S.R.L.......................................................           100.00            100.00
</TABLE>

(1)  Companies in the process of being transformed from a S.R.L. to a S.A.
     (Corporation).

The interim financial data as of September 30, 2002 and 2001 and for the
nine-month periods ended September 30, 2002 and 2001 is unaudited; however, in
the opinion of the Company, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods.



<PAGE>



2.2. Recognition of the effects of inflation

The financial statements were prepared in constant currency, reflecting the
overall effects of inflation through August 31, 1995. As from that date, in
conformity with professional accounting standards and the requirements of the
control authorities, restatement of the financial statements was discontinued
until December 31, 2001. As from January 1, 2002, in accordance with Resolution
No. 3/2002 of the Professional Council in Economic Sciences of the City of
Buenos Aires ("CPCECABA") and Resolution No. 415 of the CNV on July 25, 2002,
recognition of the effects of inflation has been restored. To that end, the
restatement method established by Technical Pronouncement No. 6 of the Argentine
Federation of Professional Councils in Economic Sciences ("FACPCE") was adopted,
considering that the accounting measurements restated by the change in the
purchasing power of the currency through August 31, 1995, as well as those
arising between that date and December 31, 2001, are stated in currency as of
the latter date.

The financial statements for the nine-month period ended on September 30, 2001,
which are presented for comparative purposes, were restated into period-end
currency.

The result of exposure to the changes in the purchasing power of the currency is
shown in the statement of income as "Financial income (expenses) and holding
results, net".

2.3.  Generally Accepted Accounting Principles

The unaudited interim consolidated financial statements have been prepared in
accordance with Argentine Generally Accepted Accounting Principles ("GAAP") and
the requirements of the CNV and are presented in Argentine pesos ("Ps.").
Additionally, certain reclassifications and additional disclosures have been
included in these unaudited interim consolidated financial statements in order
to conform more closely to the form and content required by US GAAP. These
unaudited interim consolidated financial statements do not include all the
additional disclosures required by the US Securities and Exchange Commission
("SEC") or US GAAP.

Accounting principles generally accepted in Argentina require companies with
controlling financial interest in other companies to present both parent
company, where investments in subsidiaries are accounted for by the equity
method, and consolidated financial statements as primary and supplementary
information, respectively. Because of the special purpose of these unaudited
interim consolidated financial statements, parent company financial statements
are not included. This procedure has been adopted for the convenience of the
reader of the financial statements.

The preparation of the financial statements requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
balance sheet dates, and the reported amounts of revenues and expenses during
the reporting periods. Actual results may differ from these estimates.

2.4.  Comparative financial statements

Certain reclassifications have been included in the financial statements at
September 30, 2001, which are presented for comparative purposes.

2.5.  Valuation criteria

The principal valuation criteria used in the preparation of these unaudited
interim consolidated financial statements are as follows:

(a)      Foreign currency

         Assets and liabilities denominated in foreign currency are presented at
         the nominal value of the foreign currency translated to Argentine pesos
         at period-end exchange rates. Exchange differences have been included
         in the determination of income.

(b)      Short-term investments

         Publicly traded securities have been valued at their period-end market
         value. Time deposits and other highly liquid financial investments are
         carried at cost plus accrued interest. The carrying value of these
         investments approximates fair value.

(c)      Trade receivables

         Accounts receivables are stated at estimated realizable values. An
         allowance for doubtful accounts is provided in an amount considered by
         management to be sufficient to meet probable future losses related to
         uncollectible accounts.

(d)      Property and equipment

         Property and equipment acquired are presented at restated cost (Note
         2.2), less accumulated depreciation. Materials are valued at their
         weighted average cost.

         Depreciation commences in the month of acquisition or placement of the
         assets in service and is computed on a straight-line basis over the
         estimated useful lives of the assets which generally range from 5 to 50
         years. Changes to useful life estimates are recognized in depreciation.

         Improvements that extend asset lives are capitalized; other repairs and
         maintenance charges are expensed as incurred. The cost and related
         accumulated depreciation applicable to assets sold or retired are
         removed from the accounts and are recognized as a component of
         depreciation expense.

         Management considers that there has been no impairment in the carrying
         value of property and equipment.

(e)      Long-term investments

         Generally, investments in which the Company has ownership interests
         between 20% and 50% are accounted for under the equity method. Equity
         method investments are recorded at cost and adjusted to recognize the
         Company's proportional share of the investee's income or loss; the
         Company discontinues recognition of its proportional share of the
         investee's losses when the investment is reduced to zero, unless the
         Company has assumed the commitment to recognize the corresponding
         liability. Investments in which the Company had ownership below 20% are
         recorded at cost.

         The accounting criteria applied to most equity investees are similar to
         those used by the parent company. Where the accounting criteria differ,
         corresponding adjustments have been made. Management considers that
         there has been no impairment in the carrying value of the Company's
         investments.

         Financial statements which are prepared in currencies other than the
         Argentine peso have been translated into that currency in accordance
         with Technical Pronouncement No. 13 of the FACPCE
         (restate-convert-disclose method).

(f)      Goodwill and intangible assets

         Goodwill, representing the excess of cost over the fair value of net
         identifiable assets acquired, is stated at restated cost (Note 2.2) and
         is amortized on a straight-line basis over its estimated economic life,
         not exceeding 20 years.

         Purchased subscribers and other intangible assets are stated at
         restated cost (Note 2.2) and are amortized over a period of 20 years
         and 5 years, respectively.

         The goodwill and intangible assets balance at September 30, 2002 was
         adjusted to reflect its estimated recovery value by means of an
         allowance for impairment calculated by Company management on the basis
         of estimates and evaluations of information available at that date (see
         Note 14).

(g)      Shareholders' equity

         These accounts have been restated on a constant Argentine pesos basis
         (included in Adjustments to capital account) (Note 2.2.). Adjustments
         to capital and additional paid-in capital may be used to absorb
         accumulated deficits or to increase capital at the discretion of the
         shareholders. These amounts cannot be distributed in the form of cash
         dividends.

(h)      Recognition of revenues

         Revenues are recognized on an accrual basis, including revenues from
         subscriptions, which are recorded in the month the service is rendered.
         The Company's revenues are presented net of sales-related taxes, which
         include state, municipal and regulatory taxes, in addition to being
         presented net of the allowance for doubtful accounts.

(i)      Selling and marketing expenses

         Selling and marketing expenses are expensed as incurred.

(j)      Programming rights

         Programming rights pending invoicing at the period-end are estimated on
         the basis of existing agreements and other judgment criteria at that
         date.

(k)      Employee severance indemnities

         Severance indemnities are expensed when paid or when they are expected
         to have an impact on the results for the period because they represent
         a certain and quantified risk.

(l)      Income taxes

         Income taxes are those estimated to be paid for each period. In
         accordance with Argentine tax regulations, income taxes are calculated
         at the statutory rate on each entity's taxable income for the period
         (35% for each of 2002 and 2001).

(m)      Tax on minimum notional income

         In the event a company has a loss for tax purposes, current Argentine
         legislation requires the payment of a tax on minimum notional income,
         which is calculated as 1% of assets. Such payments may be utilized
         during a ten year carryforward period to offset income taxes that would
         otherwise be payable. The tax on minimum notional income, which is
         estimated to be offset within the ten following years with income tax,
         has been disclosed under Other receivables.

         In October 2001 the Company was added to the register of beneficiaries
         of the agreements to improve competitiveness and employment (Decree No.
         730/01). According to these regulations, the Company is exempt from the
         aforementioned tax for fiscal year 2001 and future years.

NOTE 3 - ANALYSIS OF CERTAIN UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET AND
         STATEMENT OF OPERATIONS ACCOUNTS

<TABLE>
<CAPTION>
                                                                                         September 30,
                                                                              -------------------------------------
                                                                                    2002               2001
                                                                              ------------------ -----------------
                                                                                 (Unaudited)        (Unaudited)
UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET
CURRENT ASSETS
<S>                                                                                     <C>           <C>
(a) Short-term investments
    Money market instruments ..................................................             57,682          12,603,769
    Time deposits .............................................................            848,266         203,905,250
    Other .....................................................................             20,188              27,887
                                                                                    --------------      --------------
                                                                                           926,136         216,536,906
                                                                                    ==============      ==============
(b) Trade receivables
       From subscriptions .....................................................         33,171,345          82,999,845
       From advertising .......................................................          9,588,954          19,919,762
         Notes receivable .....................................................            285,651                   -
       From new businesses ....................................................          1,369,795           3,378,209
         Credit cards .........................................................          3,019,107           2,065,856
         From assurance .......................................................         10,678,245          14,832,048
    Other .....................................................................            549,368           1,417,783
    Allowance for doubtful accounts (Note 6 (a))
       From subscriptions .....................................................        (23,966,945)        (50,617,815)
       From advertising .......................................................         (6,419,839)         (9,380,186)
       From new businesses ....................................................           (800,159)         (1,722,042)
                                                                                    --------------      --------------
                                                                                        27,475,522          62,893,460
                                                                                    ==============      ==============
(c) Other
    Advances to suppliers .....................................................          4,137,635           1,570,736
    Receivables from minority shareholders ....................................          2,756,910           6,348,337
    Tax advances ..............................................................          8,246,105          37,491,955
    Deposits in guarantee .....................................................            602,227             966,526
    Other receivables .........................................................         14,417,990          34,628,266
    Advances on future dividends ..............................................            135,000                   -
    Debtors in litigation .....................................................            183,957             739,693
    Prepaid expenses ..........................................................         14,044,867          17,227,089
    Advances to employees .....................................................            267,883             660,933
    Judicial deposits .........................................................          2,287,931           4,943,088
    Other .....................................................................          3,735,843           1,450,718
                                                                                    --------------      --------------
                                                                                        50,816,348         106,027,341
                                                                                    ==============      ==============
NON-CURRENT ASSETS
(d) Other
    Prepaid expenses ..........................................................         26,962,639          35,734,820
    Tax advances ..............................................................            220,934          22,472,524
    Deposits in guarantee .....................................................                  -           1,091,840
    Other .....................................................................          3,483,268             736,528
                                                                                    --------------      --------------
                                                                                        30,666,841          60,035,712
                                                                                    ==============      ==============
(e) Long-term investments
       Investments in companies carried under the equity method
           (Note 10) ..........................................................          6,789,842           3,722,653
      Advances for the purchase of companies ..................................          8,690,338           5,698,670
       Investments in companies carried at cost ...............................            205,218             275,385
                                                                                    --------------      --------------
                                                                                        15,685,398           9,696,708
                                                                                    ==============      ==============
CURRENT LIABILITIES
(f) Short-term bank and financial debt
    Overdraft facilities ......................................................             57,502             106,989
    Corporate Bonds
       Capital ................................................................      1,899,366,480         276,504,191
       Interests payable and restatements .....................................        212,956,226          52,085,437
    Loans
       Capital ................................................................         44,602,722          99,559,389
       Interests payable ......................................................         18,668,807           1,430,301
       Credits from related parties ...........................................                  -          11,060,168
                                                                                    --------------      --------------
                                                                                     2,175,651,737         440,746,475
                                                                                    ==============      ==============
(g)  Other
       Other provisions .......................................................          2,157,571           4,404,050
       Debt with minority shareholders ........................................            599,551             246,177
       Dividends payable ......................................................          2,608,984           1,232,864
       Advanced subscriptions fees ............................................                  -             153,652
       Sundry creditors .......................................................            312,409             724,578
       Other ..................................................................          2,112,335           2,387,282
                                                                                    --------------      --------------
                                                                                         7,790,850           9,148,603
                                                                                    ==============      ==============
NON-CURRENT LIABILITIES
(h)  Other
     Investments in companies carried under the equity method - Fintelco
      S.A. (Note 10) ..........................................................         21,766,825          39,258,364
     Other ....................................................................            258,728             258,728
                                                                                    --------------      --------------
                                                                                        22,025,553          39,517,092
                                                                                    ==============      ==============
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
(i)  Net revenues
    Gross sales
      From subscriptions ......................................................        485,941,104         795,830,960
      From advertising ........................................................          8,179,866          19,525,277
       Other ..................................................................          5,250,667           4,520,640
    Allowance for doubtful accounts
      From subscriptions ......................................................        (32,222,598)        (48,938,897)
      From advertising ........................................................         (1,093,363)           (789,747)
      From new business .......................................................                  -          (1,722,042)
    Direct taxes ..............................................................         (2,771,134)        (14,764,151)
Recovery from Comfer - Decree 1008/01 .........................................                  -          38,741,086
                                                                                    --------------      --------------
                                                                                       463,284,542         792,403,126
                                                                                    ==============      ==============
(j) Financial income (expenses) and holding results, net On assets
      Result of exposure to inflation .........................................       (168,622,107)                  -
      Exchange differences and results from conversion ........................         34,638,361             208,137
      Bank expenses ...........................................................           (590,534)           (852,608)
      Holding gains/short-term investments ....................................          5,113,354           1,516,729
      Interest ................................................................            397,799           1,709,995
                                                                                    --------------      --------------
                                                                                      (129,063,127)          2,582,253
                                                                                    --------------      --------------
    On liabilities
      Result of exposure to inflation .........................................        405,194,490                   -
      Interest ................................................................       (193,430,716)       (151,801,234)
      Restatements ............................................................        (20,104,199)                  -
      Result from advanced repurchase of negotiable obligations ...............        423,507,729                   -
      Exchange differences and bank expenses ..................................     (1,044,488,694)         (3,368,443)
      Tax on interest .........................................................            730,968         (11,950,270)
      Tax on debits and credits to bank current accounts ......................         (3,445,194)         (3,394,682)
      Commissions .............................................................        (11,057,328)        (12,223,405)
      Other ...................................................................            337,416                   -
                                                                                    --------------      --------------

                                                                                                          (442,755,528)
                                                                                    --------------      --------------

                                                                                                          (571,818,655)
                                                                                    ==============      ==============
(k) Other non-operating income (expenses), net
    Employee's dismissals .....................................................               (890)        (10,145,053)
    Provision for lawsuits and contingencies ..................................           (435,965)         (6,059,722)
    Uncollectibility of other receivables .....................................            (42,097)         (4,606,881)
Provision for loss of value of intangible assets ..............................         (5,011,085)                  -
    Gain on sale of investments ...............................................             25,327         326,939,265
    Other .....................................................................          6,909,070          (3,093,668)
                                                                                    --------------      --------------
                                                                                         1,444,360         303,033,941
                                                                                    ==============      ==============
</TABLE>


NOTE 4- PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                              September 30, 2002
                                                     ---------------------------------------------------------------------------
                                                        Original value        Accumulated                             Assets
                                                                              depreciation       Net book value    lives years
                                                     ---------------------------------------------------------------------------
                                                         (Unaudited)           (Unaudited)          (Unaudited)
<S>                                                    <C>                   <C>                    <C>                <C>
Installations, external wiring and
  transmission equipment ......................        1,448,075,705         (965,100,742)          482,974,963        10
Properties ....................................          120,977,346          (37,355,975)           83,621,371        50
Computer equipment ............................           64,599,487          (52,999,566)           11,599,921         5
Furniture, fixtures and tools .................           57,397,609          (50,337,556)            7,060,053        10
 Vehicles .....................................           32,278,674          (27,732,080)            4,546,594         5
Materials, net of provision for
  obsolescence of materials ...................           62,279,563                    -            62,279,563         -
Work in progress ..............................           16,104,110                    -            16,104,110         -
Advances to suppliers .........................            2,896,861                    -             2,896,861         -
                                                       --------------       --------------       --------------
         Total ................................        1,804,609,355       (1,133,525,919)          671,083,436
                                                       ==============       ==============       ==============


                                                                              September 30, 2001
                                                     ---------------------------------------------------------------------------
                                                        Original value        Accumulated                             Assets
                                                                              depreciation       Net book value    lives years
                                                     ---------------------------------------------------------------------------
                                                         (Unaudited)           (Unaudited)          (Unaudited)
Installations, external wiring and
transmission equipment ............................       1,421,993,871        (800,423,372)         621,570,499           10

Properties ........................................         120,321,575         (31,632,039)          88,689,536           50

Computer equipment ................................          63,595,525         (44,351,579)          19,243,946            5

Furniture, fixtures and tools .....................          56,056,089         (45,189,104)          10,866,985           10

Vehicles ..........................................          32,772,537         (26,414,888)           6,357,649            5
Materials, net of provision for
  obsolescence of materials .......................          66,730,035                   -           66,730,035            -

Work in progress ..................................          30,454,470                   -           30,454,470            -

Advances to suppliers .............................           5,294,580                   -            5,294,580            -
                                                          ------------------------------------------------------
         Total ....................................       1,797,218,682        (948,010,982)         849,207,700
                                                          ======================================================

</TABLE>

The unaudited interim consolidated depreciation of property and equipment for
the nine-month periods ended September 30, 2002 and 2001 amounted to Ps.
149,966,543 and Ps. 150,854,048, respectively.

NOTE 5- GOODWILL AND INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                                          September 30, 2002
                                                    ---------------------------------------------------------------
                                                                              Accumulated
                                                      Original value          amortization        Net book value
                                                    --------------------- -------------------- --------------------
                                                         (Unaudited)           (Unaudited)          (Unaudited)
<S>                                                     <C>                     <C>               <C>
Goodwill ......................................         2,683,558,737           (837,914,555)     1,845,644,182
Purchased subscribers..........................            27,851,487             (9,483,855)        18,367,632
Others.........................................            26,178,155            (10,838,429)        15,339,726
                                                    --------------------- -------------------- --------------------
         Sub-Total.............................         2,737,588,379           (858,236,839)     1,879,351,540
Allowance for impairment.......................          (335,561,669)            14,036,165       (321,525,504)
                                                    --------------------- -------------------- --------------------
         Total.................................         2,402,026,710           (844,200,674)     1,557,826,036
                                                    ===================== ==================== ====================

                                                                           September 30, 2001
                                                     ---------------------------------------------------------------
                                                                              Accumulated
                                                      Original value          amortization        Net book value
                                                     -------------------- --------------------- --------------------
                                                        (Unaudited)          (Unaudited)           (Unaudited)

Goodwill .......................................        2,679,495,068           (706,811,150)     1,972,683,918
Purchased subscribers...........................           27,851,486             (8,044,960)        19,806,526
Others..........................................           12,807,171             (6,479,322)         6,327,849
                                                  -------------------- --------------------- --------------------
         Total..................................        2,720,153,725           (721,335,432)     1,998,818,293
                                                  ==================== ===================== ====================

</TABLE>

The unaudited interim consolidated amortization of goodwill and intangible
assets for the nine-month periods ended September 30, 2002 and 2001 amounted to
Ps. 88,928,090 and Ps. 101,707,450 respectively.

NOTE 6- ALLOWANCES AND CERTAIN PROVISIONS

(a)      Allowance for doubtful accounts

<TABLE>
<CAPTION>
                                                                         September 30,
                                    -----------------------------------------------------------------------------------------
                                         2002            2001           2002           2001          2002          2001
                                    ------------------------------- ---------------------------- ----------------------------
                                           From subscriptions             From advertising            From new businesses
                                    ------------------------------- ---------------------------- ----------------------------
                                       (Unaudited)     (Unaudited)  (Unaudited)    (Unaudited)   (Unaudited)   (Unaudited)
<S>                                    <C>             <C>              <C>          <C>           <C>
Balance at the beginning of the
period............................     47,726,629      38,394,737       9,556,478    9,434,325     1,722,041             -
Increase (recorded as loss).......     32,222,598      48,938,897       1,093,363      789,747             -     1,722,042
(Write-off) (*)...................    (55,982,282)    (36,715,819)     (4,230,002)    (843,886)     (921,882)            -
                                    --------------- --------------- -------------- ------------- ------------- --------------
Balance at the end of the period..     23,966,945      50,617,815       6,419,839    9,380,186       800,159     1,722,042
                                    =============== =============== ============== ============= ============= ==============
</TABLE>

(*) Includes result of exposure to inflation.

(b)      Provision for obsolescence of materials

<TABLE>
<CAPTION>
                                                                                             September 30,
                                                                                     --------------- --------------
                                                                                          2002           2001
                                                                                     --------------- --------------
                                                                                        (Unaudited)     (Unaudited)
<S>                                                                                     <C>             <C>
Balance at the beginning of the period..........................................        11,220,567      11,365,074
Decrease........................................................................           (67,004)       (117,333)
                                                                                     --------------- --------------
Balance at the end of the period................................................        11,153,563      11,247,741
                                                                                     =============== ==============

(c)      Provision for lawsuits and contingencies

                                                                                             September 30,
                                                                                     --------------- --------------
                                                                                          2002           2001
                                                                                     --------------- --------------
                                                                                        (Unaudited)     (Unaudited)
Balance at the beginning of the period..........................................        52,641,076      45,162,754
Increase (recorded as loss).....................................................           435,965       6,059,722
(Decrease) increase of provision (*)............................................       (29,857,057)         91,800
                                                                                     --------------- --------------
Balance at the end of the period................................................        23,219,984      51,314,276
                                                                                     =============== ==============
</TABLE>

(*) Includes result of exposure to inflation.


NOTE 7- BANK AND FINANCIAL DEBT

In addition to the financial loans with local financial entities, which have
been converted into pesos and restated at the end of the period ended September
30, 2002 through application of the Reference Stabilization Coefficient ("CER")
as explained in Note 13, the Company's financial debt is as follows:

(a)  US$ 125 million 9.25% Notes due 2002 and US$ 125 million 10.50% Notes due
     2007

     The Shareholders' Ordinary and Extraordinary General Meeting held on
     October 7, 1996 approved the issuance of non-convertible unsecured
     corporate bonds for up to US$ 300,000,000 and authorized the Board of
     Directors to determine the remaining terms and conditions, including issue
     date, price, interest rate, placement and payment form and conditions.

     On October 11, 1996, filings with the CNV, the BCBA and the Mercado Abierto
     Electronico S.A. (Electronic Open Market or MAE) were made to obtain
     approval for the public issuance of the Notes, which was obtained on
     January 23, January 30, and February 5, 1997, respectively.

     On January 28, 1997, the Board of Directors of Multicanal approved the
     issuance of two series of securities, the US$ 125 million 9.25% Notes due
     2002 and the US$ 125 million 10.50% Notes due 2007 (collectively, the
     "Notes"), in each case interest to be paid semi-annually. The aggregate net
     proceeds of the issue of the Notes due 2002 and the Notes due 2007 of US$
     244,882,500, together with US$ 5,117,500 corresponding to cash generated by
     the operations, were used to repay a US$ 200 million loan facility arranged
     by The Boston Investment Group S.A., Banco Rio de la Plata S.A. and Galicia
     Capital Markets S.A. in 1995 (the "1995 Loan Facility") and to refinance
     short-term bank debt and other indebtedness. Appropriation to payment was
     effected on February 3, 1997.

     The Notes due 2002 and the Notes due 2007 contained customary affirmative
     and negative covenants, including, but not limited to, restrictions on the
     incurrence of additional debt, creation of liens on assets, disposal of
     assets, mergers and payments of dividends.

     On July 2, 1997, the Notes due 2002 and the Notes due 2007 were registered
     with the SEC and the Company made a duly registered exchange offer to
     holders of the Notes. The 30-day exchange offer, in which holders of US$
     102,900,000 aggregate principal amount of Notes due 2002 and of US$
     86,409,000 aggregate principal amount of Notes due 2007 tendered concluded
     on August 3, 1997. On September 4, 1998, the Company made a voluntary
     second 30-day exchange offer to the holders of the outstanding Notes due
     2002 and Notes due 2007, in which holders of US$ 18,575,000 aggregate
     principal amount of Notes due 2002 and US$ 37,603,000 aggregate principal
     amount of Notes due 2007 tendered.

     On June 26, 2001 the Company filed a registration application with the CNV
     for a public offering for the purchase of Notes in the amount of US$
     125,000,000 maturing on February 1, 2002, addressed to all of its holders
     and to be carried out simultaneously in Argentina and in foreign markets in
     which the Notes were originally placed. This purchase offering was subject
     to: (a) the assignment of the Company's rights in DirecTV Latin America LLC
     and of certain contractual rights relating to it, the proceeds of which
     would be used in part to purchase the Notes offered; (b) the absence,
     according to the Company's reasonable judgement, of any legal impediment,
     whether actual or threatened, including any noncompliance under an
     agreement, indenture or any other instrument or obligation, which the
     Company or one of its affiliates is a party to, to purchase the Notes
     offered; or (c) the absence of events or changes, including in the
     economic, financial, exchange or general market conditions of the United
     States of America, Argentina or any other country which, according to the
     reasonable judgement of the Company, has or may have a material adverse
     effect on the market price, the trading of or the value of the Notes to the
     Company.

     On June 28, 2001 the Board of the CNV acknowledged the procedure
     implemented by the Company for the public offering involving the purchase
     of the Notes issued by it and maturing in 2002, up to an amount of US$
     125,000,000. On July 19, 2001, due to the economic and financial conditions
     in Argentina, the Company concluded that the conditions for the
     consummation of its offer to purchase the Notes had not been met and were
     unlikely to be met and thus, the Company decided to withdraw the purchase
     offer as of that date.


(b)  Establishment of a Medium-Term Note Program of up to US$ 350,000,000

     During the Ordinary Shareholders' Meeting held on April 4, 1997, the
     Shareholders approved the establishment of a Medium-Term Note Program (the
     "Program") for the issue of unsecured corporate debt, in different
     currencies, provided that the maximum outstanding amount, after adding all
     series and classes of notes issued under the Program, does not exceed US$
     350,000,000, or an equivalent amount if any such issue is in another
     currency, at any time. On May 8, 1997, the CNV approved the public offer of
     Corporate Bonds under the abovementioned Program. On July 24, 1997, the
     abovementioned Program was approved by the BCBA.

     (i)  Issue of US$ 150 million Series C 10.50% Notes due 2018

          On March 15, 1998, the Board of Directors of Multicanal approved the
          terms and conditions for the issuance under the Program of US$ 150
          million Series C 10.50% Notes due 2018 (the "Series C Notes"). The
          Series C Notes will mature on April 15, 2018 and bear interest at the
          rate of 10.50% payable semi-annually.

          The net proceeds received by the Company from the placement, amounting
          to approximately US$ 144.3 million, were used to refinance debt
          incurred by the Company in connection with the purchase of cable
          systems, short-term bank debt, other liabilities and costs and related
          expenses.

          The Series C Notes contain customary affirmative and negative
          covenants, which are similar to those mentioned for the issue of the
          Notes due 2002 and Notes due 2007.

          On September 4, 1998, the Series C 10.50% Notes due 2018 (the "New
          Notes") were registered with the SEC and the Company made a duly
          registered 30-day exchange offer to the holders of the Series C Notes,
          in which holders of US$ 149,850,000 aggregate principal amount of
          Series C Notes tendered.

(c)  Increase in the maximum amount of notes outstanding under the Medium-Term
     Note Program

          The Company's shareholders approved, at a self-summoned Unanimous
          Ordinary Meeting held on November 24, 1997, an increase in the maximum
          aggregate amount of notes outstanding under the Medium-Term Note
          Program by US$ 200,000,000 to US$ 550,000,000. On December 2 and 22,
          1998 and February 16, 1999, the CNV, the BCBA and the MAE,
          respectively, approved the abovementioned increase.

          Subsequently, on January 19, 1999, the Company's shareholders approved
          an additional increase in the maximum aggregate amount of notes
          outstanding under the Medium-Term Note Program by US$ 500,000,000 to
          US$ 1,050,000,000. On March 31 and April 5 and 13, 1999, the CNV, the
          BCBA and the MAE, respectively, approved the abovementioned increase.

     (i)  Issue of US$ 175 million Series E Notes due 2009

          In March 1999 the Board of Directors of Multicanal approved the terms
          and conditions for the issue of the Series E Notes under the
          Medium-Term Note Program. The CNV approved the public offer of such
          Notes on March 31, 1999.

          The principal amount of the Series E Notes totals US$ 175 million and
          matures on April 15, 2009. The Series E Notes are subject to early
          repayment, in whole or in part, at the option of holders, on April 15,
          2004. If a holder exercises its early repayment option, the Series E
          Notes will be repaid at a price equal to 100% of the principal amount
          plus interest accrued thereon and unpaid and additional amounts, if
          any, which could be claimed through the repayment date. The Notes bear
          interest at the rate of 13.125%, payable semi-annually.

          The net proceeds of the issue, which amounted to US$ 170.5 million,
          were used to refinance debt incurred by the Company in connection with
          the purchase of cable systems and other short-term financial
          liabilities.

          The listing and negotiation of the Series E Notes were authorized by
          the BCBA and the MAE on April 14 and 15, 1999, respectively.

          The Series E Notes contain customary affirmative and negative
          covenants, which are similar to those mentioned for the issue of the
          Notes due 2002 and Notes due 2007.

          On September 13, 1999, the Series E Notes due 2009 were registered
          with the SEC and the Company made a duly registered 30-day exchange
          offer to the holders of the Series E Notes, in which holders of US$
          159,180,000 aggregate principal amount of Series E Notes tendered.

     (ii) Issue of US$ 150 million Series G Floating Rate Notes due 2001

          On January 17, 2000 the Board of Directors of Multicanal approved the
          terms and conditions for the issue of Series G Floating Rate Notes for
          an amount of up to US$ 200,000,000, issued under the Medium-Term Note
          Program. The Shareholders' Meeting held on February 7, 2000 confirmed
          this Board Resolution.

          The principal amount of the issue totaled US$ 150 million, which fell
          due in eighteen months as from February 18, 2000, and beared interest
          at LIBOR plus 4.5% p.a., payable monthly for the first three months
          and quarterly thereafter. On February 17, 2000 the BCBA authorized the
          listing of these Series G Notes.

          The net proceeds of the issue, which amounted to US$ 146.6 million,
          were used to refinance debt incurred by the Company, among others the
          prepayment of the principal and accrued interest due on the 1997 Loan
          Facility.

          Pursuant to the terms of the Series G Floating Rate Notes, the Company
          was required to comply with certain obligations, such as restrictions
          on: i) incurrence of additional debt, ii) issuance of liens on assets,
          and iii) disposal of assets, among other items.

          See issue of US$ 144 million Series J Floating Rate Notes (Note 7 (c)
          (iv)).

    (iii) Issue of US$ 14 million Series I 10.25% Notes due 2001

          On December 28, 2000 the Board of Directors of Multicanal approved the
          terms and conditions of Series I Notes issued under the Global Program
          for up to US$ 1,050,000,000, the public offer of which was approved by
          the CNV on March 31, 1999.

          The issue was carried out on January 11, 2001 for a total amount of
          US$ 14 million due on August 21, 2001; interest accrued from the date
          of issue at a fixed annual percentage rate of 10.25%, with final
          repayment upon maturity.

          The net proceeds from the placement, which amounted to approximately
          US$ 13.7 million plus US$ 24.6 million generated by the Company's
          ordinary course of business, were used to pay the last interest
          installment and full amortization of the Series A Floating Rate Notes.

          The Series I Notes contained similar affirmative and negative
          covenants to those contained in the Series G Floating Rate Notes (Note
          7-(c) (ii)).

          On January 9, 2001, the BCBA authorized the listing of Series I Notes.

          See description of the settlement in Note 7 (c) (iv).

     (iv) Issue of US$ 144 million Series J Floating Rate Notes due 2003

          On August 22, 2001, the Board of Directors of Multicanal approved the
          issue of US$ 144,000,000 of its Series J Floating Rate Notes under the
          Global Program for up to US$ 1,050,000,000.

          The Series J Notes were issued on August 24, 2001 in the amount of US$
          144 million, and the maturity date is August 22, 2003. The Series J
          Floating Rate Notes bear interest at the LIBO rate indicated for
          deposits in dollars on page "3,750" of the Telerate monitor plus 5.5%.
          Interest is payable on a quarterly basis.

          On August 24, 2001 the Company issued the Series J Floating Rate
          Notes, which were exchanged for the Series G and Series I Notes (the
          maturity of which was extended until August 30, 2001 with the
          unanimous consent of their holders in connection with the issuance of
          the Series J Notes). Pursuant to the terms and conditions agreed upon,
          the Company paid US$ 20,000,000 in cash to the Series G and Series I
          holders to satisfy all of the Company's obligations corresponding to
          such Notes.

          Pursuant to the terms of the Series J Floating Rate Notes, the Company
          must comply with certain covenants, including, without limitation,
          obligations that restrict: (i) indebtedness; (ii) dividend payments or
          the making of certain restricted payments; (iii) the granting of
          certain pledges, and (iv) the sale of certain assets of the Company
          and certain of its subsidiaries. In addition, the Company agreed that
          its net debt (Bank and financial debts plus Acquisition-related debt
          less Cash and cash equivalents) would not exceed US$ 700,000,000, that
          it will not invest in fixed or capital assets in excess of US$
          40,000,000 during any 12 month-period and that the balances resulting
          from the sale of its investment in DirecTV Latin America, LLC to Raven
          Media Investment, LLC would be applied to discharge financial debt.

Repurchases

During the last quarter of 2001 and in January 2002, the Company repurchased
notes issued by it for US$ 211,148,000, obtaining a discount with respect to the
face value of the Company's debt amounting to US$ 130,995,548. The result of the
purchase for the year in progress amounted to $ 423,507,729, which is recorded
under Financial income (expenses) and holding results, net in the unaudited
interim consolidated statement of operations.

Deferred Payments

On February 1, 2002, the Company deferred the payment of principal and interest
on its 9.25% Notes due 2002 and interest on its 10.50% Notes due 2007 due to the
situation of the Argentine economy and the political and social crisis that
resulted from the economic, exchange and regulatory measures described in Note
13. Subsequently on February 26, 2002, the Company deferred the payment of
interest on its Series J Floating Rate Notes due 2003.

On April 15, 2002, the Company deferred payments of interest on its Series C
10.50% Notes due in 2018, and its Series E 13.125% Notes due in 2009 due to the
worsening of the Argentine economic crisis.

On June 4, 2002, the Company announced the designation of JP Morgan Securities
Inc. as financial advisor, to assist it in designing alternative means of
discharging the deferred payments.

NOTE 8   - SHAREHOLDERS' CAPITAL

As a result of the incorporation of the equity of Plataforma Digital S.A.,
effective from January 1, 2001 (Note 1 b)), the capital stock of Multicanal, as
the absorbing company, was increased by Ps. 867,810, from Ps. 365,953,227 to Ps.
366,821,037, by the issue of 867,810 non-endorsable, registered, ordinary Class
A shares of Ps. 1 par value with five votes per share, which were delivered to
Grupo Clarin S.A. in exchange for the shares held by it in Plataforma Digital
S.A. This capital increase is pending registration.

As a result, the shares of the Company are currently held as follows:

<TABLE>
<CAPTION>
========================================= ======================================================== ===============
                                                             Number of shares
----------------------------------------- ------------------ ------------------ ------------------ ---------------
              Shareholder                      Class A            Class B             Total          % Holding
----------------------------------------- ------------------ ------------------ ------------------ ---------------
<S>                                             <C>                <C>           <C>                    <C>
Grupo Clarin S.A.                               80,679,409         21,957,194(1) 102,636,603            27.98
Multicanal Holding LLC                         119,655,068         27,909,472    147,564,540 (2)        40.23
Arte Grafico Editorial Argentino S.A.                    -        116,619,894    116,619,894            31.79
                                          ------------------ ------------------ ------------------ ---------------
Total                                          200,334,477        166,486,560    366,821,037           100.00
========================================= ================== ================== ================== ===============
</TABLE>


(1)      On March 30, 2001, the Company's Board of Directors authorized the
         granting and registering of a pledge on 4,791,503 Class B shares owned
         by Grupo Clarin S.A., as collateral for Video Cable Comunicacion S.A.'s
         deferred taxes in the amount of Ps. 2,982,126 and Ps. 3,055,166
         corresponding to investments made in Sierras de Mazan S.A. In addition,
         in line with the Administracion Federal de Ingresos Publicos (Tax
         Authority or the "AFIP") General Resolution No. 846, the Company set up
         a pledge in its favor on 4,791,503 Class B shares as collateral with
         BankBoston N.A. in favor of the AFIP.

         On January 24, 2002 the Board of Directors of the Company authorized
         the creation and registration of a security interest on (i) 367,954
         ordinary book entry Class B shares held by Grupo Clarin S.A. to secure
         tax deferrals for Ps. 463,620 made by Video Cable Comunicacion S.A. in
         Sierras de Mazan S.A.; (ii) 2,146,107 ordinary book entry Class B
         shares held by Grupo Clarin S.A. to secure tax deferrals for Ps.
         2,704,095 made by Enequis S.A. in Sierras de Mazan; and (iii) 1,299,498
         ordinary book entry Class B shares held by Grupo Clarin S.A. to secure
         Ps. 1,637,355, i.e. the total amount of the debt deferred by Cable
         Video Sociedad Anonima in Valle del Tulum. Those shares were pledged as
         collateral in favor of the AFIP through BankBoston N.A.

(2)      Of this holding, 62,333,333 shares (40,094,948 ordinary Class A shares
         and 22,238,385 ordinary Class B shares) are pledged in favor of TI
         Telefonica Internacional de Espana S.A. and 12,466,667 shares
         (6,795,580 ordinary Class A shares and 5,671,087 ordinary Class B
         shares) have been pledged to Chase as collateral for certain payment
         obligations. Notice of the lifting of this pledge was communicated to
         the Company on May 22, 2000 by Chase. On November 11, 2000 TI
         Telefonica Internacional de Espana S.A. gave notice of the assignment
         of the right to collect the price balances and the rights on the shares
         pledged in favor of Telefonica Media S.A.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

(a)  Acquisition and sale of cable systems

     (i)  Acquisition of cable systems in Paraguay

          On December 12, 1997, the Company entered into two agreements for the
          acquisition of 14 cable systems (13 in Paraguay and 1 in Clorinda,
          Argentina). The closing of the transaction was scheduled for November
          15, 1997, which was subject to the seller's compliance with certain
          conditions, including obtaining various regulatory approvals from the
          government of Paraguay, which were ultimately not obtained. The
          Company renegotiated the purchase of the subscribers, and the assets
          and liabilities of the Paraguayan companies. So far, US$ 2,300,000
          corresponding to the payment on account of the total price has been
          paid.

          The final agreement was not signed due to the seller's failure to
          comply with its obligations. The seller signed a promissory note
          amounting to US$ 2,300,000 and pledged the shares corresponding to
          certain TV systems in favor of the Company to guarantee compliance
          with the conditions for the closing of the transaction. As a result of
          the seller's non-compliance, the Company demanded payment of the
          promissory note, but the seller brought a claim demanding compliance
          with the agreement signed on December 12, 1997, reserving the right to
          determine the amount of damages, and an injunction which was resolved
          by the Paraguayan court in favor of the plaintiff. This measure
          prevents collection by the Company of the promissory note amounting to
          US$ 2,300,000.

          On June 19, 2001, the seller communicated to the court the assignment
          of rights and lawsuits in favor of Lisker S.A., for which court fees
          were paid. When the Company was informed of this assignment, it filed
          an appeal challenging the court's decision pursuant to which Lisker
          S.A. was assigned seller's rights, on the grounds that the agreement
          had an intuitu personae nature, and that the seller was restricted
          from assigning rights, according to the agreement. Through a
          resolution dated August 17, 2001, the court approved the appeal and
          revoked the rights assigned to Lisker S.A. That ruling was appealed by
          Lisker S.A., which filed an appeal of the dismissal. This appeal was
          also dismissed. Subsequently, Lisker S.A. filed an appeal with the
          Supreme Court of Justice of Paraguay claiming unconstitutionality.
          Once the complaint regarding the unconstitutional nature of the
          measure had been replied to, the case was submitted to the Attorney
          General for a ruling. To answer the requirement the Attorney General
          asked for the file on the complaint because of refusal to appeal, but
          as it has been mislaid at present the Civil and Commercial Court of
          Appeal has not yet sent it. In view of the situation an application
          will be made for the time periods to be extended and for a reply to
          the submission on the action brought for lack of constitutionality.

          On July 10, 2001 the court ordered that the evidence filed by the
          seller, which it had obtained in Buenos Aires, be removed from the
          court file and returned to it. The seller filed a motion to reverse
          this court decision and an appeal. On July 24, 2001, the court
          rejected the motion and the appeal. The seller appealed but the appeal
          was rejected by the Appellate Court in Civil and Commercial Matters,
          Room 2, on August 13, 2001.

          On September 17, 2001, the Company requested the lifting of the
          provisional remedy, which restrains it from collecting the promissory
          note for US$ 2,300,000 drawn in the name of the seller. The Court
          lifted the injunction that had prevented Multicanal from bringing
          legal action against the seller.

          The Company is unable to assure that it will collect the amount due
          once the injunction has been lifted.

     (ii) Sale of assets and rights in DirecTV Latin America, LLC.

          On August 24, 2001, the Company transferred all of its interests in
          DirecTV Latin America, LLC and certain contractual rights related
          thereto to Raven Media Investments, LLC, a company organized under the
          laws of the state of Delaware and wholly-owned by Grupo Clarin S.A.,
          for US$ 150,000,000.

          The Company received the full purchase price upon the execution of the
          transfer agreement.

          Multicanal reserved the right, subject to certain conditions, to
          indirectly repurchase the assets sold. This option expires by no later
          than November 10, 2003.

    (iii) Tres Arroyos Televisora Color S.A. trusts

          On September 7, 2001, a Trust Agreement was signed under which the
          minority shareholders transferred all of their equity interests in
          Tres Arroyos Televisora Color S.A., representing 38.58% of the stock
          capital, in favor of the trustee, Mr. Jose Maria Saenz Valiente (h).
          Multicanal was appointed the trust beneficiary so that the stock in
          trust is gradually transferred to it provided it pays Ps. 42,876 per
          month to the trustee over a 10-year period. The trust will be revoked
          if Multicanal were to fail to pay the consecutive monthly
          installments.

          Additionally, on the same date, September 7, 2001, a beneficial
          interest on the shares of Tres Arroyos Televisora Color S.A.,
          representing 38.58% of the Company's capital stock and voting rights,
          was set up in favor of Multicanal, for the earlier of 10 years or the
          Trust life.

          As of September 2002, the trustee transferred 926 shares to Multicanal
          under the Trust Agreement. The participations after the transfer are
          as follows: Multicanal owns 15,666 shares representing 65.28% of the
          capital stock and Fideicomiso Tres Arroyos Televisora Color S.A. owns
          8,334 shares representing 34.72% of the capital stock.

(b)  Litigation

     The Company is involved in litigation from time to time in the ordinary
     course of business. In Management's opinion, the lawsuits in which the
     Company is currently involved, individually and in the aggregate, are not
     expected to be resolved for amounts that would be material to the Company's
     financial condition or results of operations.

(c)  Operating licenses

     The Company's operating licenses, obtained from the Comite Federal de
     Radiodifusion (Federal Broadcasting Committee or "COMFER"), have been
     generally granted for a period of 15 years, with the option to extend the
     licenses for an additional ten-year period, counted as from expiry of the
     original term. The Company has requested the extension of the term for
     several licenses. The extension of the license is subject to approval by
     the COMFER. Management believes that the possibility of the Company not
     being able to extend its licenses in the future is remote.

     Resolution No 1111/CFR/01, published in the Official Gazette on July 17,
     2001, provided for the creation of a "Data Updating Registry for
     supplementary broadcasting service licenses". Licensees of supplementary
     broadcasting services in all the national territory must register between
     the day after publication of the aforementioned Resolution and October 15,
     2001, by filing a sworn statement. If they fail to do so, they will be
     subject to the penalties established in section 18 of Law No. 22,285.

     On October 15, 2001, the Company presented sworn statements for each of the
     licenses owned by its merged and subsidiary companies.

(d)  Pending approvals

     The Company has applied for COMFER approval of several transactions,
     including the various corporate reorganizations in which several operating
     subsidiaries were merged into the Company, certain transfers and other
     acquisitions of cable television companies. In addition, the Company has
     requested the COMFER to approve the elimination of certain headends.
     Although most of these approval petitions are pending, the Company expects
     to receive all such approvals in due course. Notwithstanding the foregoing,
     the Company can give no assurance that such approvals will be granted by
     the COMFER or any successor agency.

     The corporate reorganization made in 1998, including the merger-spin-off of
     Fintelco S.A., Video Cable Comunicacion S.A. ("VCC") and CV Inversiones
     S.A. (Note 1 (b)), are pending approval by the IGJ.

     The latest capital increase resulting from the merger by absorption of
     Plataforma Digital S.A. is pending registration with the IGJ; the
     reorganization processes previously carried out by the Company are in the
     process of registration.

(e)  Claims by COMFER

     (i)  Administrative proceedings

          The COMFER has brought administrative proceedings against the Company
          because of failure to comply with certain terms of the Broadcasting
          Act.

          As a result of these proceedings, the Company has taken part in a
          payment facilities regime established by Government Decree 1201/98, as
          amended by Decrees 644/99 and 937/99, in order to pay the penalties
          for violations of the broadcasting law that allegedly occurred prior
          to December 9, 1999. This mechanism provides for: (i) an 85% reduction
          in any fines in connection with these proceedings, and (ii) cash
          payments of the amount to be determined, or crediting of the amount to
          TELAM S.A. for use in public service campaigns run by the Federal
          Government. The COMFER notified the Company, by means of Note 2872/02,
          that the "Amount payable" amounts to $ 5,295,359. The Company intends
          to pay this amount by providing advertising time in future broadcasts.

          In addition, the Company has been notified of the imposition of fines
          in various cases due to alleged violations of the Broadcasting Act
          after December 31, 2000 in total amount of $ 9.5 million. The Company
          filed various appeals with the COMFER against the rulings by the
          entity imposing fines, and these appeals are presently pending. The
          Company cannot provide any assurance that its appeals will be
          successful.

     (ii) Demand for payment from Vidycom S.A.

          The COMFER filed a claim whereby it demanded payment from Vidycom S.A.
          ("Vidycom"), a company absorbed by Multicanal in 1995, of all the
          differences in its favor as a result of its participation in the tax
          exemption established by Resolution No. 393/93.

          The tax authorities based their rejection of the mentioned tax
          exemption on the following grounds: (a) Vidycom was asked to make
          payment on several occasions, but did not comply with COMFER's
          requirements, (b) no documentation supporting the investments
          committed by the company was provided and (c) no evidence was provided
          of the weather phenomenon as a result of which the previous
          shareholders had requested the tax exemption.

          The amount of the claim, which would be equivalent to 30% of the rate
          paid in 1994, 20% of the rate paid in 1995 and 10% of the rate paid in
          1996, plus the corresponding interest, has not yet been determined.

          According to Multicanal, there are questions of fact and of law in its
          favor which would lead COMFER to reassess its position. Consequently,
          no amount has been recorded in the financial statements at September
          30, 2002. The grounds are as follows: (a) the COMFER did not take into
          account that the notices had to be served at Multicanal's legal
          address, as it had absorbed Vidycom, a circumstance of which COMFER
          was aware, (b) although the administrative procedures had not been
          concluded, investments were made by Multicanal, and (c) the Company
          provided evidence of the contingency giving rise to the request for
          exemption.

    (iii) Claims against Intercable S.A., Parana Television por Cable S.A. and
          Canaco S.A.

          COMFER has issued resolutions notifying Intercable S.A., Parana
          Television por Cable S.A. and Canaco S.A., companies absorbed by
          Multicanal, of the rejection of the request for exemption made under
          the terms of Resolution No. 393/93 and claiming payment of the unpaid
          amount plus compensatory interest. The amount payable has not yet been
          determined, except in the case of Parana Television por Cable S.A.,
          which was $ 55,862.

          The Company, as in the case of Vidycom, believes that there are
          questions of fact and of law in favor of those companies which would
          lead COMFER to reassess its position but the Company cannot provide
          any assurance that its appeal will be successful.

     (iv) Claims against Difusora S.A.

          On April 25, 2001 COMFER notified Difusora S.A., a company absorbed by
          Multicanal, of the amount it must pay as a result of its participation
          in the payment facilities regime. The amount is Ps. 107,106, which
          will be paid with advertising time according to the option elected by
          the Company.

          In addition, on February 8, 2002, the COMFER notified Difusora S.A.
          that the "Amount to be Settled" corresponding to an action brought due
          to infringements that allegedly occurred between May 1 and December 9,
          1999 is Ps. 17,054. An application to inspect the file was presented
          in order to challenge that assessment.

(f)  Other regulatory aspects

     In February 1995, the City of Buenos Aires issued a municipal ordinance
     regulating the authorization for the installation of TV cable networks.
     Such ordinance establishes several alternatives for cable installation on
     the street, namely: by underground laying, center of city block or posting.
     The ordinance provides for a 7-year term for cable operators to adapt their
     cable networks in stages in accordance with these provisions. Although the
     Company has performed network adaptation works, it cannot ensure that the
     goals established by the ordinance can be achieved. However, based on the
     current situation, the Company's Management believes that the impact of
     these events are not likely to significantly affect the results of its
     operations. Accordingly, no provision has been recorded in this respect.

(g)  Commitments to make contributions to Fintelco S.A.

     Fintelco S.A. had a negative shareholders' equity as of September 30, 2002.
     Under the Argentine Commercial Companies Law, this could bring its
     dissolution, unless its capital is restored. Decree No. 1269/02 of the
     National Executive Branch suspended the application of the abovementioned
     regulation until December 10, 2003. The Company and Cablevision S.A. each
     hold 50% of the equity of Fintelco S.A. and, in that proportion, the
     Company has undertaken to make the contributions required to pay the
     liabilities of Fintelco S.A. and of its subsidiaries when due.

(h)  Complaints against the Supercanal Group

     The Company brought various claims against Supercanal Holding S.A. and its
     subsidiaries (the "Supercanal Group"), including an action to declare
     resolutions adopted during the Extraordinary Shareholders' Meeting of
     Supercanal Holding S.A. on January 25, 2000 to reduce capital stock of
     Supercanal Holding S.A. to Ps. 12,000 and subsequently increase capital to
     Ps. 83,012,000 null and void. The Court issued an injunction requested by
     the Company but required that the Company post bond for Ps. 22,000,000 for
     potential damages that could be assessed against the defendant, should the
     complaint be dismissed. The remedy was granted against the issue of a
     surety bond. The Court of Appeals revoked the injunction. The Company has
     filed an extraordinary appeal against that resolution, claiming it is both
     "arbitrary" and "damaging to the institution". The appeal is in the process
     of being heard, and a ruling thereon is pending.

     Other legal actions were initiated, claiming the suspension of: i) the last
     three Ordinary Shareholders' Meetings of Supercanal Holding S.A. and ii)
     the guarantees granted by Supercanal S.A. on bank loans exclusively in
     favor of the group controlling Supercanal Holding S.A. (Grupo Uno S.A. and
     affiliated companies). In addition, a claim for dissolution and liquidation
     of Supercanal Holding S.A. was brought jointly with the action for removal
     of all the members of the Board of Directors and the Surveillance
     Committee, and the dissolution of Supercanal Capital N.V.

     Supercanal Holding S.A. and other companies of the Supercanal Group filed
     for bankruptcy proceedings with the National Court of First Instance on
     Commercial Matters No. 20, Secretariat No. 40. and the procedures began on
     April 19, 2000.

     As a result of the revocation of the preliminary injunction mentioned
     above, on December 12, 2001 the Company was notified of the filing of a
     claim by Supercanal Holding S.A. for damages caused by the granting of the
     preliminary injunction that was subsequently revoked. It has been claimed
     that the suspension of the effects of the meeting held on January 25, 2000
     resulted in the cessation of payments to Supercanal Holding S.A.; the
     Company answered the complaint and rejected the liability attributed to it
     based on the fact that the cessation of payment had taken place before the
     date of the meeting that was suspended by the preliminary injunction,
     according to documentation provided by the plaintiff itself. Furthermore,
     the suspension of the meeting did not prevent capitalization of the Company
     through other means. Based on the record of the case, the Company considers
     that the claim filed should be rejected in its entirety, and the legal
     costs should be borne by the plaintiff.

     No assurance can be provided that the Company will obtain an economic or
     financial gain as a result of these actions. Presently, as a result of the
     ancillary jurisdiction of the bankruptcy proceedings of Supercanal Holding
     S.A., all the claims are brought in the abovementioned Court.

(i)  Value Added Tax. Tax Authority assessment.

     The Tax Authority notified the Company of the issuance of Resolution No.
     18/2001, under which the Tax Authority has officially assessed the tax
     debits corresponding to the monthly fiscal periods between September 1996
     and September 1998 for value added tax, as a result of income from
     advertising in the cable TV program magazine which is distributed monthly
     by the Company. Consequently, the Tax Authority resolved that the Company
     must pay: (i) Ps. 1,861,705 in this respect; (ii) Ps. 2,161,971 as
     compensatory interest and (iii) a fine of Ps. 1,489,364, equivalent to 80%
     of the value added tax allegedly omitted.

     The Company filed an appeal against this resolution with the National
     Fiscal Court, requesting it to declare the resolution unfounded, and
     invalidating the Tax Authority's official assessment, the compensatory
     interest and the fine imposed. The tax authorities has responded to the
     pleading forwarded and the case is pending ruling. Even though the Company
     has factual and legal arguments which uphold its position, we cannot give
     any assurance that the Company will obtain a favorable decision on the
     filed appeal.

NOTE 10 - LONG-TERM INVESTMENTS

Investments carried under the equity method are as follows:

<TABLE>
<CAPTION>
                                  Direct percentage
                                   participation in                                  Equity in the (losses) gains
            Company                  voting stock              Investments             of affiliated companies
-------------------------------------------------------------------------------------------------------------------
                                                                                      For the nine-month periods
                                          %                   September 30,              ended September 30,
                                 ----------------------------------------------------------------------------------
                                                           2002           2001           2002            2001
                                                      -------------------------------------------------------------
                                                         (Unaudited)    (Unaudited)    (Unaudited)     (Unaudited)
<S>                                     <C>               <C>            <C>            <C>               <C>
VER T.V. S.A. (1)............           49.00             6,789,842      3,722,653      3,484,730         585,868
Fintelco S.A.................           50.00           (21,766,825)    39,258,364     17,881,407      (3,711,460)
                                                      -------------------------------------------------------------
                                                        (14,976,983)    42,981,017     21,366,137      (3,125,592)
                                                      =============================================================
</TABLE>

(1)  At September 30, 2002 the retained earnings that represent undistributed
     earnings amount to Ps.6,630,692


NOTE 11 -EXEMPTIONS OBTAINED

By Resolution No. 1080/97 dated October 26, 1998, the COMFER released certain
subsidiaries that had merged with Multicanal from taxes payable to the COMFER
over a three-year period in an amount of up to Ps. 10,000,000 beginning
September 1, 1998 as per the following detail: first year, from September 1,
1998 through August 30, 1999, 40%; second year, from September 1, 1999 through
August 30, 2000, 45%; and third year, from September 1, 2000 through August 30,
2001, 50%.

The amount of tax charges accrued over the exemption period must be assigned to
the execution of investment and operating recovery projects. In the event of a
failure to satisfy the conditions under which the COMFER granted the exemption,
the COMFER reserved the right to unilaterally declare the annulment of the
administrative act approving the exemption, once arrears have been confirmed and
corresponding supplementary term fixed.

NOTE 12 -ANTITRUST CONSIDERATIONS

In September 1998, the Santa Fe branch of Asociacion del Consumidor ("Consumer
Association") filed with the Comision Nacional de Defensa de la Competencia (the
"National Commission for the Defense of Competition" or "CNDC") a complaint
against Multicanal and Cablevision S.A. alleging the existence of
anticompetitive practices in the city of Santa Fe. Consumer Association claims
that by dividing the subscribers, assets and liabilities of the VCC Group and
the Santa Fe Systems, the Company and Cablevision S.A. engaged in abuse of a
dominant market position and concerted actions to distribute the Santa Fe cable
market among themselves. The Company filed an answer to the complaint in which
it requests the CNDC to dismiss the complaint on the grounds of lack of a
factual basis and for failure to state a cause of action under the relevant
provisions of the Antitrust Law. The Company cannot assure that the final
decision shall be favorable to Multicanal, or that no further actions shall be
brought against the Company and/or Cablevision S.A. with respect to the division
of the VCC Group, the Bahia Blanca Systems and the Santa Fe Systems.

On January 13, 1999, the CNDC notified the Company that a complaint had been
filed by the Santa Fe commerce department alleging the existence of
anticompetitive practices by VCC in the city of Rosario, Province of Santa Fe,
prior to Multicanal's acquisition of this company. Although the Company has
filed an answer to the complaint with the CNDC, the Company cannot give any
assurance that its arguments will prevail and the final decision will be
favorable to it or that it will not be fined.

On February 18, 1999, the CNDC issued a resolution initiating an investigative
proceeding into an alleged agreement between the TV cable operating companies
VCC, Multicanal and Cablevision S.A. and those providing Television Satelital
Codificada S.A. and Tele Red Imagen S.A. channels. Such agreement is alleged to
consist of fixing of minimum prices for the trading of channels owning rights to
the broadcasting of football tournaments organized by the "Asociacion de Futbol
Argentino" in Federal Capital and Greater Buenos Aires. The investigation spans
from the year 1995 through the date of the resolution. On October 12, 1999 the
Company filed a discharge with CNDC under the terms of section 23 of the
Competition Defense Law, producing corresponding evidence. On February 10, 2000,
the submission of evidence period concluded and the case was submitted for a
ruling by the Court, by means of a resolution dated September 26, 2001 the
Commission penalized the companies with a fine, which in the case of Multicanal
amounts to $ 352,859. The resolution under which the fine was applied has been
appealed by the Company on October 8, 2002. The Company can give no assurance
that the final outcome will be favorable to it.

On March 12, 1999, the owner of a cable television operating company in the city
of Roldan, Province of Santa Fe, filed a complaint against Multicanal for
alleged anticompetitive practices in such city. Although the Company has filed
an answer to the complaint with the CNDC, the Company cannot give any assurance
that its arguments will prevail and the final decision will be favorable to it
or that it will not be fined.

In December 2001, Gigacable SA., a cable TV operator operating in certain areas
of the Provinces of Santa Fe and Corrientes, filed a complaint before the CNDC
accusing Multicanal of (i) having divided areas in which the companies provide
services with Cablevision S.A., (ii) uncompetitive practices, and (iii) selling
the subscription for a price below Multicanal S.A.'s usual price. On December 6,
2001 the Company answered the complaint.

As of the date of the issuance of the financial statements, the CNDC is
analyzing the answer filed by Multicanal. The Company cannot provide assurance
that the dispute will be settled or whether it will be fined if no agreement is
reached.

The Interior Trade and Consumer Defense Bureau of the Province of Entre Rios
filed a complaint against the CNDC for the presumed division of areas between
Multicanal and its competitors. On May 4, 1999, the Company filed a document
providing explanations in accordance with section 20 of the Competition Defense
Law, requesting that the claim be rejected. However, no assurance can be
provided that the final ruling will be in the Company's favor.

NOTE 13 - ARGENTINE ECONOMIC SITUATION AND ITS IMPACT ON THE COMPANY'S ECONOMIC
AND FINANCIAL POSITION

Argentina is immersed in a difficult economic climate. The prevailing indicators
during 2001 were a significant public debt burden, high interest rates, decrease
in savings amounts, country risk levels far above normal average and a four-year
economic recession. This situation has led to a significant decrease in products
and services consumption and an increase in the unemployment level. These
circumstances have affected the Government's ability to comply with existing
commitments and access to bank financing.

Since December 3, 2001 restrictions on cash availability and the circulation and
transfer of foreign currency abroad have been imposed. On December 21, 2001
foreign exchange trading was suspended. Subsequently, the Government deferred
payment on all external debt.

On January 6, 2002, after a political crisis that resulted in the resignation of
two presidents, the Government enacted Law N(degree) 25561 (Ley de Emergencia
Publica y Reforma del Regimen Cambiario) that introduced significant changes to
the prevailing economic policy and the amendment of the currency convertibility
law in force since March 1991. On February 3, 2002 the Government announced new
economic measures that were implemented through Decree 214 (Restructuring of the
financial system), complemented with Decree 320 and 410, and Decree 260
(Exchange Regime), that modified some of the measures included in Law N(degree)
25561. These decrees are being complemented by other regulations, some of which
are pending as of the date of issuance of these financial statements. In
addition, on April 24, 2002, the National Government entered into an agreement
with the provincial governors which, together with other changes in the national
administration, will set the basis for new measures that have not yet been
issued or fully implemented.

Some of the measures taken by the Government that were in effect as of the date
of issuance of these financial statements and their related effects on the
Company's financial position are described below.

Exchange system

On February 8, 2002 the Government issued Decree 260 under which as from
February 11, 2002 a single free floating currency system was instituted. Banco
Central de la Republica Argentina is entitled to regulate currency system
operations and has the discretion to approve certain transfers of foreign
currency abroad.

Deposits in Argentine financial entities

Decree 214 provided that, as from February 3, 2002 bank deposits denominated in
U.S. dollars or other foreign currencies will be converted to pesos at the
exchange rate of Ps. 1.4 per US$ 1 or its equivalent in such other currency.
Furthermore, there are restrictions on the availability of checking accounts and
savings accounts balances denominated in dollars and time deposit balances
denominated in pesos or dollars, which will be paid back in installment amounts
and on due dates depending on balances recorded. Commencing on February 3, 2002
an adjusting index (CER) and an interest rate will be applied to these
rescheduled deposits. The CER is a coefficient that measures the daily variation
rate obtained from the monthly evolution of the Consumer Price Index, published
by the National Institute of Statistics and Census. It is possible that part or
all of the rescheduled deposits will be converted into National Government
Bonds. If depositors do not opt to receive Government Bonds, they will receive
bonds issued by the Bank, which will observe the pre-existing conditions.

Financial debt in foreign currency

Pursuant to Decree No. 214, subject to the changes made by Decree No. 410, debts
denominated in U.S. dollars or other foreign currencies with Argentine Banks
will be converted to pesos at the exchange rate of Ps. 1 per US$ 1 or its
equivalent in such other currency. Commencing on February 3, 2002 an adjusting
index (CER) and an interest rate will be applied to these debts.

Receivables and debts not related to the financial system

Accounts receivable and payable denominated in dollars or other foreign currency
and agreements between private entities that state prices or fees in dollars or
other foreign currency were converted to pesos at an exchange rate of Ps. 1 per
US$ 1 or its equivalent in such other foreign currency, subject to certain
exceptions. An adjusting index (CER) is to be applied to these balances as from
February 3, 2002. If goods or services prices are higher or lower than amounts
paid at corresponding due dates, the parties can request a price adjustment. If
the parties involved do not reach an agreement, lawsuits or other legal action
may be initiated.

The Company is analyzing the legal effects and the scope of the conversion into
pesos of its foreign currency denominated liabilities.

Income tax

Exchange losses recorded due to devaluation are deductible for income tax
purposes over a five-year period.

Valuation of foreign currency receivables and liabilities

In accordance with Resolution No. 1/2002 of the CPCECABA and Resolution No. 392
of the CNV, the Company has recognized the effects of the devaluation in the
nine-month period ended on September 30, 2002.

The Company's management is currently defining and adopting measures to minimize
the impact of the economic situation on the results of the Company, and
analyzing the scope and effects of the exclusions from the conversion to pesos
established by Decree No. 410. In addition, the Company is analyzing
alternatives to be able to propose new conditions for settlement of debts to
suppliers, banks and holders of Notes. Although the Company's management
believes that such alternatives will be eventually formulated and proposed, we
cannot give any assurances that they will be accepted or that their
implementation will be successful.

The impact generated by Government measures adopted to date on the financial
position of the Company as of September 30, 2002 was calculated on the basis of
management's current assessments. Actual results could differ from management's
current assessments and such differences could be material. Therefore, the
Company's financial statements may not include all adjustments that might
ultimately result from these adverse conditions. Future economic developments
and related effects on the Company's financial position cannot presently be
determined. Therefore, any decision taken on the basis of these financial
statements must consider the effects of these measures and their future
development and the Company's financial statements should be read in light of
circumstances herein described.

In the period ended September 30, 2002, the Company recognized a net loss of Ps.
691,537,184 and a shortfall in consolidated working capital amounting to Ps.
2,145,937,196. Continuing adverse market conditions and their negative effect on
the Company's cash flows, coupled with limited liquidity, are likely to limit
the Company's ability to meet its obligations. All of these matters raise
substantial doubt about the Company's ability to continue as a going concern.

In addition, as a result of the loss described above the Company falls under the
terms of section 206 of the Commercial Companies Law, which establishes a
mandatory capital reduction in such situations. By means of Decree 1269/02, the
National Executive suspended enforcement of this regulation until December 10,
2003.

The financial statements have been prepared assuming that the Company will
continue as a going concern. Therefore, these financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitable operations and positive cash flows.

NOTE 14 - CHANGES IN UNAPPROPRIATED RETAINED EARNINGS AT THE BEGINNING OF THE
YEAR

On July 15, 2002, the Company filed its annual report on form 20-F with the
Securities and Exchange Commission.

Within the framework of a macroeconomic crisis in Argentina in recent months,
the Company reviewed its evaluations and estimates of the future development of
the business and the possibility of recovering its long-term assets based on
information available at that time. On the basis of those estimates and
evaluations, the Company recorded an allowance for impairment of its
consolidated intangible assets amounting to $149,392,000, thus amending the
financial statements at and for the year ended December 31, 2001 and at and for
the three month period ended March 31, 2002 previously filed by the Company.

The allowance for impairment amounts to $ 330,550,584, on a constant pesos basis
(Note 2.2.), and has been recorded in these financial statements. The
accumulated deficit as of January 1st, 2002, included in the statement of
shareholders' equity, has been restated to reflect this amount.



<PAGE>


Condensed from the original prepared in Spanish for publication in Argentina

                                 MULTICANAL S.A.

                                                                         Exhibit

INFORMATION REQUIRED BY SECTION 64, SUB-SECTION b) OF LAW No. 19550 for the
nine-month periods ended September 30, 2002 and 2001 (Consolidated) (Expressed
in Argentine pesos)

<TABLE>
<CAPTION>
===================================================================================================================
                                     Direct         Selling and      General and        Total at September 30,
                                    operating        marketing     administrative
            Caption                 expenses         expenses         expenses
                                                                                    -------------------------------
                                                                                         2002            2001
-------------------------------------------------------------------------------------------------------------------
                                    (Unaudited)    (Unaudited)       (Unaudited)      (Unaudited)     (Unaudited)
<S>                                <C>              <C>              <C>              <C>            <C>
Payroll and social security        39,402,976       18,279,108       14,076,449       71,758,533     112,870,128
Employees' dismissals                 554,329        1,918,857          207,701        2,680,887       1,669,262
Taxes rates and contributions       9,048,272          234,768        9,359,821       18,642,861      37,753,013
Insurance                              27,321                -          143,081          170,402               -
Programming rights                150,689,044                -                -      150,689,044     220,688,584
Printing and distribution of
  magazines                        13,643,178                -                -       13,643,178      22,210,049
Fees and compensation for
  services                            642,280           51,723       11,414,860       12,108,863      12,751,681
Commissions                         4,082,942           11,443       13,036,719       17,131,104      27,893,106
Overhead                            2,909,606           49,293          696,884        3,655,783       2,825,705
Personnel expenses                  2,006,171        1,169,356        1,448,052        4,623,579      11,013,941
Building expenses                     222,194                -        5,436,150        5,658,344       9,060,268
Vehicles expenses                           -                -        2,397,989        2,397,989       3,640,319
Rentals                            12,748,048                -        2,002,931       14,750,979      23,186,471
Security and surveillance              48,947            2,537        1,823,184        1,874,668       2,509,944
Representation and travel
  expenses                             61,362                -          929,879          991,241       1,851,541
Office expenses                       147,775           30,418        2,352,281        2,530,474       3,383,376
Publicity and advertising                   -        8,231,900                -        8,231,900       8,778,236
Sundry                             13,274,227                -        8,750,927       22,025,154      36,172,611
                                 ----------------------------------------------------------------------------------
Total at September 30, 2002       249,508,672       29,979,403       74,076,908      353,564,983
                                 ==================================================================================
Total at September 30, 2001       383,061,781       46,595,243      108,601,211                      538,258,235
===================================================================================================================

</TABLE>



<PAGE>


         CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2001 AND 2000
         AND FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001


                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 MULTICANAL S.A.

CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2001 AND 2000
AND FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

                                                                            Page
Report of independent accountants ...................................        F-2
Consolidated balance sheet...........................................        F-3
Consolidated statement of operations.................................        F-4
Consolidated statement of changes in shareholders' equity............        F-5
Consolidated statement of cash flows.................................        F-6
Notes to the consolidated financial statements.......................        F-7
Exhibit..............................................................       F-51


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Multicanal S.A.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity, all expressed in Argentine pesos, present fairly, in all
material respects, the financial position of Multicanal S.A. and its
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with generally accepted accounting principles in
Argentina. These consolidated financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
of the consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency. Additionally, as also
discussed in Note 1 to the consolidated financial statements, the Company has
been negatively impacted by the Argentine government's adoption of various
economic measures and by the devaluation of the Argentine peso. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Notes 1 and 17. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Accounting principles generally accepted in Argentina vary in certain important
respects from accounting principles generally accepted in the United States of
America. The application of the latter would have affected the determination of
consolidated net loss expressed in Argentine pesos for each of the three years
in the period ended December 31, 2001 and the determination of consolidated
shareholders' equity also expressed in Argentine pesos at December 31, 2001 and
2000 to the extent summarized in Note 19 to the consolidated financial
statements.

Buenos Aires, Argentina

March 8, 2002, except as to Note 17, which is as of June 28, 2002 and for
the restatement of the financial statements in constant Argentine pesos of
September 30, 2002 purchasing power, as to which the date is December 10,
2002.

 PRICE WATERHOUSE & CO.

 by/s/Alberto E. Fandino (Partner)


 ------------------------------------
 Alberto E. Fandino



<PAGE>


                                 MULTICANAL S.A.

                           CONSOLIDATED BALANCE SHEET
                            (At December 31, 2001 and
                     2000) (Expressed in Argentine pesos of
                      September 30, 2002 purchasing power)
<TABLE>

                                                                                         December 31,
                                                                                 -----------------------------
                                                                                    2001              2000
                                                                                 ------------     ------------

                                   ASSETS
CURRENT ASSETS
<S>                                                                                <C>              <C>
Cash and banks...........................................................          29,258,249       23,373,492
Short-term investments (Note 4 (a)) .....................................         160,274,418       59,569,632
Trade receivables (Note 4 (b))...........................................          72,156,994       67,479,722
Receivables from related parties.........................................          17,070,634       15,651,033
Other (Note 4 (c)).......................................................          96,937,726       81,672,000
                                                                                  -----------      -----------
         Total current assets............................................         375,698,021      247,745,879
                                                                                  -----------      -----------
NON-CURRENT ASSETS
Long-term investments (Note 4 (d)).......................................           9,115,016       15,561,174
Property and equipment, net (Note 5).....................................         808,694,147      962,872,917
Goodwill and intangible assets, net (Note 6).............................       1,644,110,059    2,092,459,048
Other (Note 4 (e)).......................................................          42,650,741       37,117,851
                                                                               --------------   --------------
         Total non-current assets........................................      2,504,569,963     3,108,010,990
                                                                               -------------     -------------
         Total assets ...................................................      2,880,267,984     3,355,756,869
                                                                               =============     =============

                                LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................................         247,542,987      223,471,207
Short-term bank and financial debt (Notes 4 (f) and 8)...................       1,688,559,672      621,660,014
Acquisition related debt (Note 9)........................................           6,917,694       11,292,648
Taxes payable............................................................          46,780,406       41,941,144
Debt with related parties................................................           3,006,735        4,986,120
Payroll and social security payable......................................          17,188,580       25,749,083
Other (Note 4 (g)).......................................................           9,269,131       13,515,646
                                                                               --------------     ------------
         Total current liabilities.......................................       2,019,265,205      942,615,862
                                                                               --------------     ------------
NON-CURRENT LIABILITIES
Taxes payable............................................................           5,397,855        6,662,399
Acquisition related debt (Note 9)........................................             222,603        7,251,889
Long-term bank and financial debt (Note 4 (h))...........................             241,251    1,271,919,278
Other (Note 4 (i)).......................................................          39,906,961       35,805,640
Provision for lawsuits and contingencies (Note 7 (c))....................          52,641,087       45,162,763
                                                                               --------------   --------------
         Total non-current liabilities...................................          98,409,757   1,366,801,969
                                                                               --------------   -------------
         Total liabilities...............................................       2,117,674,962    2,309,417,831
                                                                               --------------   -------------
COMMITMENTS AND CONTINGENCIES (Note 12)
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ..........................          28,005,661       26,320,016
                                                                               --------------   --------------
SHAREHOLDERS' EQUITY (as per related statement)..........................         734,587,361    1,020,019,022
                                                                               --------------    -------------
         Total liabilities and shareholders' equity......................       2,880,267,984    3,355,756,869
                                                                               ==============    =============
</TABLE>


        The accompanying notes and exhibit are an integral part of these
                       consolidated financial statements.


<PAGE>


                                 MULTICANAL S.A.

                      CONSOLIDATED STATEMENT OF OPERATIONS
             (For the years ended December 31, 2001, 2000 and 1999)
               (Expressed in Argentine pesos of September 30, 2002
                  purchasing power - except number of shares)
<TABLE>

                                                                            Years ended December 31,
                                                                  -------------------------------------------------
                                                                      2001               2000             1999
                                                                  -------------      -------------    -------------
<S>                                                              <C>                <C>              <C>
Net revenues (Note 4 (j)).................................       1,029,402,849      1,054,438,848    1,049,100,769
Operating costs

  Direct operating expenses (Exhibit).....................        (505,370,370)      (499,056,417)    (465,619,455)

  General and administrative expenses (Exhibit)...........        (137,005,183)      (146,740,022)    (166,579,835)

  Selling and marketing expenses (Exhibit)................         (60,222,624)       (77,554,612)     (66,286,867

  Depreciation and amortization...........................        (336,744,617)      (339,538,707)    (310,324,257)
                                                                  -------------      -------------    -------------

Operating (loss) income...................................          (9,939,945)        (8,450,910)      40,290,355

Non-operating income (expenses)
  Financial income (expenses) and holding gains, net (Note 4
  (k))....................................................        (225,503,360)      (247,656,491)    (223,271,040)

  Other non-operating income (expenses), net (Note 4 (l)).        (361,020,959)       (34,756,568)     (96,893,041)
                                                                  -------------       ------------     ------------

  Loss before gain (loss) on sale of investees,
  taxes, minority interest and
  equity in the (losses) gains of
  affiliated companies....................................        (596,464,264)      (290,863,969)    (279,873,726)

Gain (loss) on sale of investees..........................         326,939,265                  -         (863,399)

Income taxes and/or tax on minimum notional income........         (11,483,474)       (21,951,252)     (38,564,345)
                                                                   ------------       ------------     ------------

  Loss before minority interest and equity in the (losses)
  gains of affiliated companies...........................        (281,008,473)      (312,815,221)    (319,301,470)

Minority interest in results of consolidated subsidiaries.          (3,019,842)        (2,512,001)      (6,713,610)
                                                                ---------------    ---------------  ---------------

Loss before equity in the (losses) gains of affiliated
companies.................................................        (284,028,315)      (315,327,222)    (326,015,080)

Equity in the (losses) gains of affiliated companies (Note
13).......................................................          (3,822,186)        (8,532,028)      (2,448,292)
                                                                ---------------    ---------------  ---------------

Net loss .................................................        (287,850,501)      (323,859,250)    (328,463,372)
                                                                  -------------      -------------    -------------

Loss per share............................................              (0.78)              (0.88)           (0.90)
                                                                ==============     ===============  ===============

Weighted average number of shares.........................         366,821,037        365,953,227      365,953,227
                                                                   ===========        ===========      ===========

        The accompanying notes and exhibit are an integral part of these
                       consolidated financial statements.
</TABLE>


<PAGE>


                                 MULTICANAL S.A.

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
             (For the years ended December 31, 2001, 2000 and 1999)
               (Expressed in Argentine pesos of September 30, 2002
                  purchasing power - except number of shares)




<TABLE>

                                                             SHAREHOLDERS' CONTRIBUTIONS
                                        -------------------------------------------------------------------------------------------
                                           Number of
                                         issued and
                                         authorized                Adjustments
                                        common shares               to capital    Additional
                                        par value Ps.    Share        (Note        paid-in          Irrevocable     Voluntary
                                             1          capital     3.5.(k))       capital        contributions      Reserve
                                        -------------------------------------------------------------------------------------------
<S>           <C> <C>                  <C>           <C>          <C>          <C>                 <C>              <C>
  At December 31, 1998........         365,953,227   365,953,227  473,372,669  1,084,852,205                  -                -
  Net loss for the year.......                   -             -            -              -                  -                -
                                        -------------------------------------------------------------------------------------------
  At December 31, 1999........         365,953,227   365,953,227  473,372,669  1,084,852,205                  -                -
  Net loss for the year.......                   -             -            -              -                  -                -
                                        -------------------------------------------------------------------------------------------
  At December 31, 2000........         365,953,227   365,953,227  473,372,669  1,084,852,205                  -                -
  Incorporation of balances
   following merger with
   Plataforma Digital S.A.....             867,810       867,810    1,051,813     34,143,158           4,844,221      39,112,801

  Net loss for the year.......                   -             -            -              -                   -               -
                                         -------------------------------------------------------------------------------------------
  At December 31, 2001........         366,821,037   366,821,037  474,424,482  1,118,995,363           4,844,221      39,112,801




                                                           Retained
                                                             earnings       Total
                                            Legal         (accumulated  shareholders
                                           reserve          deficit)      equity
                                         ---------------------------------------------
 At December 31, 1998........            6,396,217    (258,232,674)  1,672,341,644
 Net loss for the year.......                    -    (328,463,372)  (328,463,372)

 At December 31, 1999........            6,396,217    (586,696,046)  1,343,878,272
 Net loss for the year.......                    -    (323,859,250)   (323,859,250)

 At December 31, 2000........            6,396,217    (910,555,296)  1,020,019,022
 Incorporation of balances
  following merger with
  Plataforma Digital S.A.....                    -     (77,600,963)      2,418,840

 Net loss for the year.......                    -    (287,850,501)  (287,850,501)

 At December 31, 2001........            6,396,217  (1,276,006,760)    734,587,36


</TABLE>







                  The accompanying notes and exhibit are an integral part of
these consolidated financial statements.



<PAGE>


                                 MULTICANAL S.A.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                     (For the years ended December 31, 2001,
                 2000 and 1999) (Expressed in Argentine pesos of
                      September 30, 2002 purchasing power)

<TABLE>
                                                                            Years ended December 31,
                                                                -------------------------------------------------
                                                                     2001            2000             1999
                                                                -------------------------------------------------
<S>                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year..........................................   (287,850,501)   (323,859,250)   (328,463,372)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
   Depreciation and disposal of fixed assets...................    201,032,819     204,466,857     203,332,278
   Goodwill and intangible assets amortization.................    135,711,798     136,799,415     139,372,229
   (Gain) loss on sale of investees............................   (326,939,265)              -         863,399
   Allowance for impairment....................................    330,460,113               -               -
   Equity in the losses (gains) of affiliated companies........      3,822,186       8,532,028       2,448,292
   Minority interest in results of consolidated subsidiaries...      3,019,842       2,512,001       6,713,610
   Provision for lawsuits and contingencies....................      8,743,478      12,764,179      11,306,057
   Provision for obsolescence of materials.....................              -         117,320      11,148,950
   Gain on repurchase of debt..................................     (9,337,602)              -               -
   Amortization of debt issuance costs.........................     17,415,181      13,290,121       7,618,805
   Write-off of Supercanal Group balances......................              -               -      18,496,323
   Result from holding of long-term investments................        398,874               -               -
Decrease (increase) in assets
   Trade receivables...........................................     (4,677,272)     17,622,377      14,643,388
   Other current assets........................................    (32,312,786)    (20,049,020)         29,303
   Other non-current assets....................................     (5,532,889)     11,609,371       3,373,729
   Receivables from related parties............................     (1,419,601)     (4,221,440)      7,486,661
Increase (decrease) in liabilities
   Accounts payable and accrued liabilities....................     24,016,050       7,468,805      13,395,617
   Payroll and social security.................................     (8,560,505)      5,094,001      (1,867,131)
   Other current and non-current liabilities...................     (4,250,939)      1,456,352     (15,277,744)
   Current and non-current taxes payable.......................      3,573,881     (11,726,813)     (2,094,855)
   Debt with related parties...................................     (1,979,385)     (3,208,422)    (12,400,768)
   Provision for lawsuits and contingencies....................     (1,265,154)     (7,676,628)     (5,160,789)
                                                                    -----------     -----------     -----------
Cash provided by operations....................................     44,068,323      50,991,254      74,963,982
                                                                    ----------      ----------      ----------

CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchases of property and equipment net of proceeds from sales
  and disposals................................................    (46,854,049)    (86,541,883)   (153,117,991)
(Acquisitions)/Sales of cable systems and subscribers and
  (increase) decrease in goodwill and intangible assets........    317,510,216      (7,455,677)    (13,546,922)
                                                                   -----------     ------------   -------------
Cash provided by (used in) investment activities...............    270,656,167     (93,997,560)   (166,664,913)
                                                                   -----------     ------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES
Minority interest in consolidated subsidiaries.................     (1,334,197)     (3,237,683)     (1,689,410)
Issuances of acquisition related debt..........................              -       2,548,263      23,254,763
Repayments of acquisition related debt.........................    (11,404,238)    (15,313,729)    (57,073,168)
Borrowings of bank and financial loans.........................    411,283,393     434,966,314     663,540,421
Repayments of bank loans  .....................................   (606,724,160)   (457,302,501)   (460,029,678)
                                                                  -------------   -------------   ------------
Cash (used in) provided by financing activities................   (208,179,202)    (38,339,336)    168,002,928
                                                                  -------------   -------------   ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...............    106,545,288     (81,345,642)     76,301,998
Increase in cash and cash equivalents provided by merger ......         44,255               -               -
Cash and cash equivalents at the beginning of year.............     82,943,124     164,288,766      87,986,768
                                                                   -----------     -----------     -----------
CASH AND CASH EQUIVALENTS AT THE END OF YEAR ..................    189,532,667      87,943,124     164,288,766
                                                                   ===========     ===========     ===========
</TABLE>

        The accompanying notes and exhibit are an integral part of these
                       consolidated financial statements.


<PAGE>




                                MULTICANAL, S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL
                   STATEMENTS (expressed in Argentine pesos of
                      September 30, 2002 purchasing power)

NOTE 1 - ARGENTINE ECONOMIC SITUATION AND ITS IMPACT ON THE COMPANY'S ECONOMIC
         AND FINANCIAL POSITION

Argentina is immersed in a difficult economic climate. The prevailing indicators
during 2001 were a significant public debt burden, high interest rates, decrease
in savings amounts, country risk levels far above normal average and a
three-year economic recession. This situation has led to a significant decrease
in products and services consumption and an increase in the unemployment level.
These circumstances have affected the Government's ability to comply with
existing commitments and access to bank financing.

Since December 3, 2001 restrictions on cash availability and the circulation and
transfer of foreign currency abroad have been imposed. On December 21, 2001
foreign exchange trading was suspended. Subsequently, the Government deferred
payment on all external debt.

On January 6, 2002, after a political crisis that resulted in the resignation of
two presidents, the Government enacted Law N(degree) 25561 (Ley de Emergencia
Publica y Reforma del Regimen Cambiario) that introduced significant changes to
the prevailing economic policy and the amendment of the currency convertibility
law in force since March 1991. On February 3, 2002 the Government announced new
economic measures that were implemented through Decree 214 (Restructuring of the
financial system), complemented with Decree 320 and 410, and Decree 260
(Exchange Regime), that modified some of the measures included in Law N(degree)
25561. These decrees are being complemented by other regulations, some of which
are pending as of the date of issuance of these financial statements.

Some of the measures taken by the Government that were in effect as of the date
of issuance of these financial statements and their related effects on the
Company's financial position are described below.

Exchange system

On January 6, 2002 a dual currency system was instituted. Certain transactions
that qualify under the Government's regulations (mostly import and export
transactions) would be converted at an official exchange (fixed) rate of Ps. 1.4
per US$ 1. Payment obligations for all other transactions would be converted at
the free floating market exchange rate. On January 11, 2002, Banco Nacion
Argentina published its first free market rate at Ps. 1.6 per US$ 1 (ask) and
Ps. 1.4 per US$ 1 (bid).

On February 8, 2002 the Government issued Decree 260 under which as from
February 11, 2002 a single free floating currency system was instituted. Banco
Central de la Republica Argentina is entitled to regulate currency system
operations and has the discretion to approve certain transfers of foreign
currency abroad.

Bank deposits

Decree 214 provided that, as from February 3, 2002 bank deposits denominated in
U.S. dollars or other foreign currencies will be converted to pesos at the
exchange rate of Ps. 1.4 per US$ 1 or its equivalent in such other currency.
Furthermore, there are restrictions on the availability of checking accounts and
savings accounts balances denominated in dollars and time deposit balances
denominated in pesos or dollars, which will be paid back in installment amounts
and on due dates depending on balances recorded. Commencing on February 3, 2002
an adjusting index (CER) and an interest rate will be applied to these
rescheduled deposits. In addition, the owners of these deposits can elect to
receive up to US$ 30,000 in Government bonds denominated in U.S. dollars.

Financial debt in foreign currency

Pursuant to Decree No. 214, debts denominated in U.S. dollars or other foreign
currencies with Argentine Banks will be converted to pesos at the exchange rate
of Ps. 1 per US$ 1 or its equivalent in such other currency. Commencing on
February 3, 2002 an adjusting index (CER) and an interest rate will be applied
to these debts.

On March 8, 2002 the Government issued Decree No. 410 on Reorganization of the
Financial System, which excluded public and private sector debt obligations
denominated in foreign currencies and subject to foreign laws from the scope of
Decree No. 214 providing for the conversion of all foreign currency-denominated
debt obligations into pesos.

Receivables and debts not related to the financial system

Accounts receivable and payable denominated in dollars or other foreign currency
and agreements between private entities that state prices or fees in dollars or
other foreign currency were converted to pesos at an exchange rate of Ps. 1 per
US$ 1 or its equivalent in such other foreign currency. An adjusting index (CER)
is to be applied to these balances as from February 3, 2002. If goods or
services prices are higher or lower than amounts paid at corresponding due
dates, the parties can request a price adjustment. If the parties involved do
not reach an agreement, lawsuits or other legal action may be initiated.

As established by Decree No. 410, the obligation to lend sums of money in
foreign currency subject to compliance with foreign laws is excluded for the
conversion into pesos established by Decree No. 214.

Income tax

Exchange losses recorded due to devaluation are deductible for income tax
purposes over a five-year period.

Valuation of foreign currency receivables and liabilities

In accordance with Resolution 1/02 of the Professional Council in Economic
Sciences of the Autonomous City of Buenos Aires and Resolution No. 392 of the
Comision Nacional de Valores (National Securities Commission or the "CNV"), as
of December 31, 2001 receivables and liabilities denominated in foreign
currencies were valued at the exchange rate of Ps. 1 per US$ 1 or its equivalent
in any other foreign currency.

The Company's management is currently defining and adopting measures to minimize
the impact of the economic situation on the results of the Company, and
analyzing the scope and effects of the exclusions from the conversion to pesos
established by Decree No. 410. The repurchase of Notes after year-end described
in Note 17, which reduced the Company's net debt in foreign currency by
approximately US$ 125.5 million, has limited the loss caused by the effects of
devaluation. In addition, the Company is analyzing alternatives to be able to
propose new conditions for settlement of debts to suppliers, banks and holders
of Notes. Although the Company's management believes that such alternatives will
be eventually formulated and proposed, we cannot give any assurances that they
will be accepted or that their implementation will be successful.

The impact generated by Government measures adopted to date on the financial
position of the Company as of December 31, 2001 was calculated on the basis of
management's current assessments. Actual results could differ from management's
current assessments and such differences could be material. Therefore, the
Company's financial statements may not include all adjustments that might
ultimately result from these adverse conditions. Future economic developments
and related effects on the Company's financial position cannot presently be
determined. Therefore, any decision taken on the basis of these financial
statements must consider the effects of these measures and their future
development and the Company's financial statements should be read in light of
circumstances herein described.

The Company has an accumulated deficit of Ps. 1,276,006,760 as of December 31,
2001 and a consolidated negative working capital of Ps. 1,643,567,184.
Continuing adverse market conditions and their negative effect on the Company's
cash flows, coupled with limited liquidity, are likely to limit the Company's
ability to meet its obligations. All of these matters raise substantial doubt
about the Company's ability to continue as a going concern.

The financial statements have been prepared assuming that the Company will
continue as a going concern. Therefore, these financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitable operations and positive cash flows.

NOTE 2 - BUSINESS AND FORMATION OF THE COMPANY

(a)  Business

Multicanal S.A. (the "Company" or "Multicanal"), an Argentine corporation formed
on July 26, 1991, is in one segment of business as owner and operator of cable
television systems.

During the period from 1994 through December 31, 2001, the Company has made
significant investments, initially in the acquisition of cable systems and their
subsequent development and expansion. These investments have been substantially
financed by loans from financial institutions and former owners of certain
acquired cable systems, as well as shareholders' contributions.

(b)  Formation of the Company

The Company has restructured its corporate organization on five occasions for
the purpose of rationalizing and streamlining its operations. In the initial
phases of such reorganization, through a combination of mergers and exchanges,
Multicanal absorbed 39 wholly-owned subsidiaries, and became an operating
company. In one phase, which was concluded on July 19, 1996, its shareholders
contributed substantially all of their shares of Pem S.A. ("Pem") to Multicanal,
in exchange for newly issued shares of Multicanal. As the two companies were
under common control, the exchange of shares was accounted for on a basis
substantially consistent with the pooling of interest method. In another
reorganization, which was effective July 1, 1998, the Company absorbed 25
subsidiaries through mergers.

During 1998, the Company's Board of Directors approved the merger-spin-off of
Fintelco S.A., Video Cable Comunicacion S.A. ("VCC") and CV Inversiones S.A.
("the Santa Fe Cable Systems"), in accordance with an agreement dated April 30,
1998 between Multicanal and Cablevision S.A. Pursuant to such agreement, certain
assets and liabilities of such companies were divided on the basis of their
respective book value and transferred to Multicanal and Cablevision S.A. as of
July 1, 1998.

On June 30, 1998, Multicanal and Cablevision S.A. entered into an agreement for
an exchange of shares of certain companies under joint control ("the Bahia
Blanca Cable Systems"), effective as of July 1, 1998, as a result of which
Multicanal became the holder, directly or indirectly, of 100% of Compania
Teleinversora S.A., Inversora Multivision S.A., Compania de Cable Inversora S.A.
(holding companies), Multivision S.A., Cerri Video Cable S.A., Cablevision DU-KE
S.A. and Cable Total S.A., while Cablevision S.A. obtained 100% of the capital
stock of Inversora TV Cable S.A. (a holding company) and TV Cable S.A. The
exchange was made on the basis of the companies' respective book value, as
determined in accordance with Argentine Generally Accepted Accounting Principles
("GAAP").

To comply with local regulations, the Board of Directors approved the special
balance sheets as of June 30, 1998 and the special consolidated merger balance
sheet as of the beginning of operations on July 1, 1998 after giving effect to
the merger into Multicanal of the spun-off assets and liabilities of CV
Inversiones S.A., Fintelco S.A. and VCC, and the merger agreements with certain
entities merged into Multicanal as of such date.

Multicanal and Cablevision S.A. are subject to the reporting requirements of the
CNV. Accordingly, each of them filed with the CNV a prospectus for each of the
reorganizations to obtain the CNV's approval. At present the merger and spin-off
processes are pending approval by the Inspeccion General de Justicia
(Superintendency of Corporations or the "IGJ").

In meetings held during November 1998, the Board of Directors of Multicanal
approved the Spin-off-Merger Prospectus of Multicanal and Fintelco S.A., VCC and
CV Inversiones S.A. and the Merger Prospectus of Multicanal, as acquiring
company, which have been filed with the CNV and the Bolsa de Comercio de Buenos
Aires (Buenos Aires Stock Exchange or "BCBA"). The transactions described in
those prospectuses were approved by the shareholders at the meeting held on
December 22, 1998.

In addition to the mentioned reorganization processes, on January 10, 2001 the
Board of Directors authorized its Chairman to initiate negotiations aimed at
carrying out a new corporate reorganization through a merger by absorption. For
purposes of this merger, Multicanal was the absorbing company, continuing with
the activities and operations of the absorbed companies and therefore remaining
in existence, while Plataforma Digital S.A., Red Argentina S.A., Radio Satel
Sociedad Anonima, Cable Espacio del Buen Ayre S.A., Video Cable Norte S.A.,
Television por Cable S.A. and Cable Vision Corrientes Sociedad Anonima were the
absorbed companies and therefore dissolved. This reorganization was carried out
effective from January 1, 2001 and all operations of the absorbed companies were
considered as carried out by the absorbing company from this date. The balance
sheets that served as a basis for the merger were those prepared by the
companies at December 31, 2000.

On March 30, 2001, the Company's Board approved (i) the prior merger commitment
entered into on March 20, 2001 with Radio Satel Sociedad Anonima, Cable Espacio
del Buen Ayre S.A., Television por Cable S.A., Video Cable Norte S.A., Cable
Vision Corrientes Sociedad Anonima, Plataforma Digital S.A. and Red Argentina
S.A. and (ii) the Prospectus for Merger by Absorption between Multicanal S.A.
(absorbing) and Plataforma Digital S.A., Cable Espacio del Buen Ayre S.A.,
Television por Cable S.A., Video Cable Norte S.A., Cable Vision Corrientes
Sociedad Anonima, Red Argentina S.A. and Radio Satel Sociedad Anonima (absorbed)
for presentation to the CNV and the BCBA for purposes of requesting prior
approval by that Commission for subsequent publication in the Stock Exchange
Daily Bulletin for the knowledge of note-holders.

On June 22, 2001, at an Extraordinary Shareholders' Meeting, the Company's
Shareholders approved (i) the preliminary merger agreement signed on March 20,
2001 with Radio Satel Sociedad Anonima, Cable Espacio del Buen Ayre S.A.,
Television por Cable S.A., Video Cable Norte S.A., Cable Vision Corrientes
Sociedad Anonima, Plataforma Digital S.A. and Red Argentina S.A.; (ii) the
special financial statements and the consolidated financial statements for
merger purposes at December 31, 2000; (iii) an increase in corporate capital in
the amount of Ps. 867,810, from Ps. 365,953,227 to Ps. 366,821,037, by issuing
867,810 Class A ordinary registered non-endorsable shares with a face value of
Ps. 1 each, and 5 votes per share which will be delivered to Grupo Clarin S.A.
in exchange for 16,303,000 ordinary registered non-endorsable shares which Grupo
Clarin S.A. had in Plataforma Digital S.A. and (iv) the resulting amendment of
art. 4 of the Corporate Bylaws.

The Company has made the publications required by sect. 83 of the Corporations
Law without any objection having been made within the time limitations
established by law. Consequently, the deed for the prior merger agreement has
been signed.

As the Company takes part in the public offer regime, on April 11, 2001 it
applied for administrative approval of that process before the CNV as required
by applicable regulations. Once all the documentation has been filed with the
CNV, these authorities will request registration with the IGJ.

NOTE 3 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3.1.   Basis of presentation of the consolidated financial statements

The consolidated financial statements include the accounts of Multicanal and its
majority owned subsidiaries. All material intercompany balances, transactions
and profits have been eliminated. Except as explained below, the equity method
is used to account for investments in affiliates in which the Company has an
ownership interest between 20% and 50%. Investments in affiliates in which the
Company has an ownership interest of less than 20% are accounted for under the
cost method. The consolidated financial statements include accounts of
Multicanal, Pem and the following subsidiaries:

                                                % of capital and votes held by
                                                      Multicanal and Pem
                                                --------------------------------
                                                         December 31,
                                                --------------- ----------------
                                                     2001            2000
                                                --------------- ----------------
AVC Continente Audiovisual S.A..................        90.00            90.00
CV Berazategui S.A..............................        70.00            70.00
Cable Vision Corrientes Sociedad Anonima (2)....         -              100.00
Delta Cable S.A.................................        84.00            84.00
Red Argentina S.A. (2)..........................         -              100.00
San Lorenzo TV Cable S.A........................       100.00           100.00
TV Cable San Francisco S.A......................       100.00           100.00
Telesur Teledifusora Rio Cuarto S.A.............       100.00           100.00
Televisora Privada del Oeste S.A................        51.00            51.00
Bridge Management Holdings Corp.................       100.00           100.00
La Capital Cable S.A............................        50.00            50.00
Chaco Cable Color S.R.L. (1)....................       100.00           100.00
Teledifusora San Miguel Arcangel S.A............        50.10            50.10
Tevemundo S.A...................................       100.00           100.00
Cable Imagen S.R.L. (1).........................       100.00           100.00
Television Dirigida S.A.E.C.A...................        89.39            89.39
Orange Producciones S.A.........................       100.00           100.00
Cablepar S.A....................................       100.00           100.00
Cablevision Comunicaciones S.A.E.C.A............        89.81            89.81
Tres Arroyos Televisora Color S.A...............        63.35            50.00
Wolves Television Sociedad Anonima..............       100.00           100.00
Cable Espacio del Buen Ayre S.A.(2).............         -              100.00
Video Cable Norte S.A. (2)......................         -              100.00
Television por Cable S.A. (2)...................         -              100.00
Adesol S.A......................................       100.00           100.00
Cable Video Sociedad Anonima....................       100.00           100.00
Radio Satel Sociedad Anonima (2)................         -              100.00
Dorrego Television S.A..........................       100.00             -
Cable Video Sur S.R.L. .........................       100.00             -
(1)  Companies in the process of being transformed from a S.R.L. to a S.A.
    (Corporation).
(2)  Companies merged with Multicanal as of January 1, 2001.

3.2.   Recognition of the effects of inflation

Pursuant to the requirements of the CNV and the restatement methodology
established under technical pronouncements issued by the Federacion Argentina de
Consejos Profesionales de Ciencias Economicas (Argentine Federation of
Professional Councils on Economic Sciences, or "FACPCE"), the consolidated
financial statements of the Company were stated in constant Argentine pesos
through August 31, 1995. To account for the effects of inflation in Argentina
and in accordance with Argentine GAAP, prior to September 1, 1995, the Company's
financial statements were periodically restated based on the changes in the
Indice de Precios Mayoristas Nivel General (General Wholesale Price Index, or
"WPI"). However, pursuant to resolutions of the IGJ and the CNV, Argentine
companies are not permitted to reflect the effects of inflation on their
financial statements as of any date or for any period after September 1, 1995.

Under current Argentine GAAP, financial statements are not required to be
restated to reflect the effects of inflation for any fiscal year, provided that
the change in the WPI for such year has not exceeded eight percent. As the
annualized change in the WPI since August 31, 1995 has been less than eight
percent, financial statements prepared in accordance with Argentine GAAP need
not be adjusted for inflation after that date. Financial statements that are not
restated to reflect the effects of inflation will not include the restatement of
non-monetary assets and the net gain or loss (holding gains or losses) on
exposure of monetary assets and liabilities to price level changes. In March
1992, the monetary correction system was discontinued for tax purposes in
Argentina.

3.3.   Generally Accepted Accounting Principles

The consolidated financial statements have been prepared in accordance with
Argentine GAAP and the requirements of the CNV and are presented in Argentine
pesos ("Ps."). Additionally, certain reclassifications and additional
disclosures have been included in these consolidated financial statements in
order to conform more closely to the form and content required by US GAAP. These
consolidated financial statements do not include all the additional disclosures
required by the US Securities and Exchange Commission ("SEC") or US GAAP.

Accounting principles generally accepted in Argentina require companies with
controlling financial interest in other companies to present both parent
company, where investments in subsidiaries are accounted for by the equity
method, and consolidated financial statements as primary and supplementary
information, respectively. Because of the special purpose of these consolidated
financial statements, parent company financial statements are not included. This
procedure has been adopted for the convenience of the reader of the financial
statements.

The preparation of the financial statements requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
balance sheet dates, and the reported amounts of revenues and expenses during
the reporting years. Actual results may differ from these estimates.

3.4.   Comparative financial statements

Certain reclassifications have been included in the financial statements at
December 31, 2000 and 1999, which are presented for comparative purposes.

3.5.   Valuation criteria

The principal valuation criteria used in the preparation of these consolidated
financial statements are as follows:

(a)  Foreign currency

Assets and liabilities denominated in foreign currency are presented at the
nominal value of the foreign currency translated to Argentine pesos at year-end
exchange rates, as mentioned in Note 1. Exchange differences have been included
in the determination of income.

(b)  Short-term investments

Short-term investments, comprised of publicly traded securities, have been
valued at their year-end market value. Time deposits and other highly liquid
financial investments are carried at cost plus accrued interest. The carrying
value of these investments approximates fair value.

(c)  Trade receivables

Accounts receivable are stated at estimated realizable values. An allowance for
doubtful accounts is provided in an amount considered by management to be
sufficient to meet probable future losses related to uncollectible accounts.

(d)  Property and equipment

Property and equipment acquired through August 31, 1995 (Note 3.2.) are
presented at restated cost, less accumulated depreciation. Property and
equipment acquired subsequent to August 31, 1995 are valued at cost, less
accumulated depreciation. Materials are valued at their weighted average cost.

Depreciation commences in the month of acquisition or placement of the assets in
service and is computed on a straight-line basis over the estimated useful lives
of the assets which generally range from 5 to 50 years. Changes to useful life
estimates are recognized in depreciation.

Improvements that extend asset lives are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related accumulated
depreciation applicable to assets sold or retired are removed from the accounts
and the gain or loss on disposition is recognized as a component of depreciation
expense.

Management considers that there has been no impairment in the carrying value of
property and equipment.

(e)  Long-term investments

Generally, investments in which the Company has ownership interests between 20%
and 50% are accounted for under the equity method. Equity method investments are
recorded at cost and adjusted to recognize the Company's proportional share of
the investee's income or loss; the Company discontinues recognition of its
proportional share of the investee's losses when the investment is reduced to
zero, unless the Company has assumed the commitment to recognize the
corresponding liability. Investments in which the Company had ownership below
20% are recorded at cost.

The accounting criteria applied to most equity investees are similar to those
used by the parent company. Where the accounting criteria differ, corresponding
adjustments have been made. Management considers that there has been no
impairment in the carrying value of the Company's investments.

Financial statements which are prepared in currencies other than the Argentine
peso have been translated into that currency in accordance with Technical
Pronouncement No. 13 of the FACPCE (translation-adjustment method).

(f)  Goodwill and intangible assets

Goodwill, representing the excess of cost over the fair value of net
identifiable assets acquired, is stated at cost and is amortized on a
straight-line basis over its estimated economic life, not exceeding 20 years.
The Company periodically evaluates the carrying value of goodwill if the facts
and circumstances, such as significant declines in sales, earnings or cash flows
or material adverse changes in the business climate, suggest that it may be
impaired. If any impairment is indicated as a result of such reviews, the
Company would measure it using techniques such as comparing the discounted cash
flows of the business to its book value including goodwill or by obtaining
appraisals of the related business. Goodwill on investments acquired from third
parties is amortized over a period of 20 years.

Purchased subscribers and other intangible assets are amortized over a period of
20 years and 5 years, respectively.

(g)  Selling and marketing expenses

Selling and marketing expenses are expensed as incurred.

(h)  Employee severance indemnities

Severance indemnities are expensed when paid or when they are expected to have
an impact on the results for the year because they represent a certain and
quantified risk.

(i)  Income taxes

Income taxes are those estimated to be paid for each year. In accordance with
Argentine tax regulations, income taxes are calculated at the statutory rate on
each entity's taxable income for the year (35% for each of 2001, 2000 and 1999).
The Company does not recognize deferred taxes.

(j)  Tax on minimum notional income

In the event a company has a loss for tax purposes, current Argentine
legislation requires the payment of a tax on minimum notional income, which is
calculated as 1% of assets. Such payments may be utilized during a ten year
carryforward period to offset income taxes that would otherwise be payable. The
tax on minimum notional income, which is estimated to be offset within the ten
following years with income tax, has been disclosed under Other receivables.

In October 2001 the Company was added to the register of beneficiaries of the
agreements to improve competitiveness and employment (Decree No. 730/01).
According to these regulations, the Company is exempt from the aforementioned
tax for fiscal year 2001 and future years.

(k)  Shareholders' equity

These accounts have been restated on a constant Argentine pesos basis through
August 31, 1995 (included in Adjustments to capital account) (Note 3.2.).
Adjustments to capital and additional paid-in capital may be used to absorb
accumulated deficits or to increase capital at the discretion of the
shareholders. These amounts cannot be distributed in the form of cash dividends.

(l)   Revenue recognition

Revenues are recognized on an accrual basis including revenues from
subscriptions, which are recorded in the month the service is rendered. The
Company's revenues are presented net of sales-related taxes, which include
state, municipal and regulatory taxes, in addition to being presented net of the
allowance for doubtful accounts.

(m)  Programming rights

Programming rights pending invoicing at the year-end are estimated on the basis
of existing agreements and other judgment criteria at that date.

(n)  Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash and cash equivalents investment.

NOTE 4 - ANALYSIS OF CERTAIN CONSOLIDATED BALANCE SHEET AND STATEMENT OF
         OPERATIONS ACCOUNTS

<TABLE>
                                                                        December 31,
                                                          -------------------------------------
                                                                2001               2000
                                                         --------------------------------------
CONSOLIDATED BALANCE SHEET
CURRENT ASSETS
<S>                                                                 <C>             <C>
(a)  Short-term investments
    Money market instruments.......................                 309,198         50,901,685
    Time deposits..................................             159,937,332          8,595,392

    Other..........................................                  27,888             72,555
                                                         --------------------------------------
                                                                160,274,418         59,569,632
                                                          ================== ==================
(b) Trade receivables
       From subscriptions..........................              86,371,972         83,345,446
       From advertising............................              25,231,078         18,133,178
       From new businesses.........................               4,730,261          2,846,635
    Other..........................................              14,828,843         10,983,534
    Allowance for doubtful accounts (Note 7 (a))
       From subscriptions..........................            (47,726,638)       (38,394,744)
       From advertising............................             (9,556,480)        (9,434,327)
       From new businesses.........................             (1,722,042)                  -
                                                         --------------------------------------
                                                                 72,156,994         67,479,722
                                                          ================== ==================
(c) Other
    Prepaid expenses....................................         14,308,141         19,901,871
    Receivables from minority shareholders..............          6,483,271          4,401,748
    Advances to suppliers...............................          2,917,440            797,292
    Debtors in litigation...............................            909,624            271,739
    Other receivables...................................          7,754,339          7,440,031
    Loans granted.......................................         15,181,381         17,939,787
    Dividends pending collection........................                  -          6,644,367
    Advances to be rendered.............................             33,096             56,239
    Advances to employees...............................            915,521          2,299,300
    Tax advances........................................         40,551,837         14,669,430
    Deposits in guarantee...............................            944,633          1,470,195
    Judicial deposits ..................................          5,498,994          2,901,909
    Other...............................................          1,439,449          2,878,092
                                                         --------------------------------------
                                                                 96,937,726         81,672,000
                                                         ======================================
</TABLE>


<PAGE>

<TABLE>

                                                                                         December 31,
                                                                             --------------------------------------
                                                                                    2001               2000
                                                                             --------------------------------------
<S>                                                                                   <C>                <C>
NON-CURRENT ASSETS
(d)  Long-term investments
       Investments in companies carried under the equity method
           (Note 13)........................................................          3,415,929          3,136,788
       Investments in companies carried at cost ............................            279,605          7,004,904
       Advances for the purchase of companies...............................          5,419,482          5,419,482
                                                                             --------------------------------------
                                                                                      9,115,016         15,561,174
                                                                             ======================================
(e) Other
    Prepaid expenses
         Corporate Bond's fees and other expenses...........................         28,372,602         24,403,083
         Acquisition of cable systems' fees and other expenses..............          5,412,366          5,268,993
         Advertising........................................................                  -            328,918
         Software license and maintenance cost..............................                  -            813,511
          Sundry.............................................................           675,095            607,652
    Tax advances............................................................          6,523,891            185,537
     Deposits in guarantee...................................................           951,630          1,557,522
    Advances for professional advice........................................                  -          3,501,536
     Other...................................................................           715,157            451,099

                                                                             -------------------------------------
                                                                                     42,650,741         37,117,851
                                                                             =====================================

CURRENT LIABILITIES
(f) Short-term bank and financial debt
    Loans
       Face value...........................................................         98,623,528       106,133,369
       Interests payable....................................................         1,412,171         1,909,934
    Overdraft facilities....................................................           758,553         1,180,354
    Corporate Bonds
       Face value...........................................................      1,542,751,814       470,057,124
       Interests payable....................................................         41,612,651        42,379,233
    Debt with related parties
       Face value...........................................................
                                                                                      3,318,050                 -
       Interests payable....................................................           82,905                   -
                                                                             -------------------------------------
                                                                                  1,688,559,672       621,660,014
                                                                             =====================================
(g)  Other
       Dividends payable....................................................          1,085,098           959,474
       Advanced subscriptions fees..........................................            111,803           187,837
       Debt with minority shareholders......................................            246,177                 -
       Other provisions.....................................................          4,428,252         4,642,390
       Sundry...............................................................          3,397,801         7,725,945
                                                                             -------------------------------------
                                                                                      9,269,131        13,515,646
                                                                             =====================================

</TABLE>


<PAGE>


<TABLE>
                                                                                         December 31,
                                                                             -------------------------------------
                                                                                    2001              2000
                                                                             -------------------------------------
NON-CURRENT LIABILITIES
<S>                                                                                 <C>              <C>
(h)  Long-term bank and financial debt
     Corporate Bonds (Note 11)
       Notes due 2002......................................................                -        276,504,190
       Notes due 2007......................................................                -        276,504,190
       Series C Notes due 2018.............................................                -        331,805,029
       Series E Notes due 2009.............................................                -        387,105,869
     Other..................................................................         241,251                  -
                                                                             -------------------------------------
                                                                                     241,251     1,271,919,278
                                                                             =====================================
 (i) Other
     Investments in companies carried under the equity method - Fintelco
      S.A. (Note 13)........................................................      39,648,232         35,546,912
     Other..................................................................         258,729            258,728
                                                                             -------------------------------------
                                                                                  39,906,961         35,805,640
                                                                             =====================================
</TABLE>


<TABLE>
                                                                                    December 31,
                                                                  -------------------------------------------------
                                                                         2001            2000           1999
                                                                  -------------------------------------------------
<S>                                                                   <C>            <C>             <C>

CONSOLIDATED STATEMENT OF OPERATIONS
(j)  Net revenues
    Gross sales
      From subscriptions..........................................    1,043,381,408  1,119,700,960   1,123,320,247
      From advertising............................................       27,260,860     28,919,664      37,356,034
        Other.....................................................        6,721,481      2,483,098                -

    Allowance for doubtful accounts
      From subscriptions..........................................      (68,660,072)   (47,268,425)    (54,902,772)
      From advertising............................................       (1,000,131)    (6,331,888)     (4,462,110)
      From new businesses.........................................       (1,722,042)             -               -
      Direct taxes................................................      (15,319,531)   (43,064,561)    (52,210,630)
    Recovery Comfer - Decree No. 1008/01 (*)......................       38,740,876              -               -
                                                                  -------------------------------------------------
                                                                    1,029,402,849    1,054,438,848  1,049,100,769
                                                                  =================================================
</TABLE>

(*) In accordance with Decree No. 1008/01, Multicanal was allowed to reduce
    payment obligations on account of value added taxes by the amounts
    previously paid to Comfer that were not previously applied to reduce
    payments obligations on account of value added taxes.


<PAGE>


<TABLE>
                                                                                    December 31,
                                                                  -------------------------------------------------
                                                                         2001            2000           1999
                                                                  -------------------------------------------------
<S>                                                                       <C>           <C>             <C>
(k) Financial income (expenses) and holding gains, net
    On assets
      Interest..................................................          2,468,733     2,942,790       2,477,062
      Exchange differences and results from conversion..........          1,493,777     1,662,980      (2,829,228)
            Bank expenses.......................................         (1,409,632)     (956,054)       (934,476)
      Holding gains/short-term investments......................          1,880,388     3,704,729       1,866,452
                                                                  -------------------------------------------------
                                                                          4,433,266     7,354,445         579,810
                                                                  -------------------------------------------------
    On liabilities
      Interest..................................................      (199,061,463)  (210,664,831)   (191,624,248)
      Gain on repurchase of debt................................         9,337,602              -               -
      Exchange differences and bank expenses....................        (4,748,081)    (2,743,873)     (1,329,547)
          Tax on interest.......................................       (13,450,991)   (28,312,111)    (25,736,335)
      Tax on debits and credits to bank current accounts........        (4,598,512)             -               -
      Commissions...............................................       (17,415,181)   (13,290,121)     (5,160,720)
                                                                  -------------------------------------------------
                                                                      (229,936,626)  (255,010,936)   (223,850,850)
                                                                  -------------------------------------------------
                                                                      (225,503,360)  (247,656,491)   (223,271,040)
                                                                  =================================================
(l)  Other non-operating income (expenses), net
    Allowance for impairment....................................      (330,460,113)             -              -
    Uncollectibility of other receivables.......................        (4,580,566)    (3,845,463)    (7,814,942)
        Write-off of Supercanal Group balances..................                 -              -    (18,496,323)
    Employees' dismissals ......................................       (10,145,054)    (7,382,611)   (14,570,026)
       Provision for lawsuits and contingencies.................        (8,743,478)   (12,764,179)   (11,306,057)
    Disposal of fixed assets....................................                 -     (1,727,565)   (32,380,251)
       Provision for obsolescence of materials..................                 -       (117,320)   (11,148,950)
      Sundry....................................................        (7,091,748)    (8,919,430)    (1,176,492)

                                                                  -------------------------------------------------
                                                                      (361,020,959)   (34,756,568)   (96,893,041)
                                                                  =================================================
</TABLE>


<PAGE>


NOTE 5 - PROPERTY AND EQUIPMENT, NET
<TABLE>

                                                               Year ended December 31, 2001
                                        ---------------------------------------------------------------------------
                                                                 Accumulated                               Assets
                                            Original value      depreciation         Net book value     lives years
                                        ---------------------------------------------------------------------------
<S>                                           <C>                  <C>                   <C>                <C>
Installations, external wiring and
  transmission equipment.........             1,431,698,819        (829,782,301)         601,916,518        10
Properties.......................               120,277,270         (33,017,434)          87,259,836        50
Computer equipment...............                64,092,997         (46,640,114)          17,452,883         5
Furniture, fixtures and tools....                55,458,753         (46,025,175)           9,433,578        10
 Vehicles........................                32,330,610         (26,567,328)           5,763,282         5
Materials, net of provision for
  obsolescence of materials......                65,432,191                    -          65,432,191         -
Work in progress.................                15,466,585                    -          15,466,585         -
Advances to suppliers............                 5,969,274                    -           5,969,274         -
                                        -------------------------------------------------------------
         Total...................             1,790,726,499        (982,032,352)         808,694,147
                                        =============================================================
</TABLE>


<TABLE>

                                                               Year ended December 31, 2000
                                        ---------------------------------------------------------------------------
                                                                 Accumulated                               Assets
                                            Original value      depreciation         Net book value     lives years
                                        ---------------------------------------------------------------------------
<S>                                           <C>                  <C>                   <C>                <C>

Installations, external wiring and
 transmission equipment..........             1,422,804,767        (705,216,449)         717,588,318        10
Properties.......................               115,280,775         (26,663,368)          88,617,407        50
Computer equipment...............                59,941,350         (36,159,353)          23,781,997         5
Furniture, fixtures and tools....                56,764,819         (42,700,361)          14,064,458        10
Vehicles.........................                31,743,733         (24,583,143)           7,160,590         5
Materials, net of provision for
  obsolescence of materials......                77,173,054                    -          77,173,054         -
Work in progress.................                31,345,508                    -          31,345,508         -
Advances to suppliers............                 3,141,585                    -           3,141,585         -
                                        -------------------------------------------------------------
         Total...................             1,798,195,591        (835,322,674)         962,872,917
                                        =============================================================
</TABLE>

The consolidated depreciation of property and equipment for the years ended
December 31, 2001 and 2000 amounted to Ps. 201,032,819 and Ps. 202,739,291,
respectively.



<PAGE>


NOTE 6 - GOODWILL AND INTANGIBLE ASSETS, NET

<TABLE>

                                                                     Year ended December 31, 2001
                                                    ---------------------------------------------------------------
                                                                              Accumulated
                                                       Original value        amortization        Net book value
                                                    ---------------------------------------------------------------
<S>                                                    <C>                      <C>                  <C>
Goodwill ......................................        2,658,840,158 (1)        (724,610,380)        1,934,229,778
Purchased subscribers..........................               27,851,486          (8,404,579)           19,446,907
Others.........................................               43,365,516         (22,472,029)           20,893,487
 Allowance for impairment......................            (330,460,113)                    -        (330,460,113)
                                                    ---------------------------------------------------------------
         Total.................................            2,399,597,047        (755,486,988)        1,644,110,059
                                                    ===============================================================

                                                                      Year ended December 31, 2000
                                                    ---------------------------------------------------------------
                                                                               Accumulated
                                                       Original value         amortization        Net book value
                                                    ---------------------------------------------------------------
Goodwill .......................................           2,650,587,860         (592,278,560)        2,058,309,300
                                                                     (2)
Purchased subscribers...........................              27,806,779           (6,921,338)           20,885,441
Others..........................................              39,021,736          (25,757,429)           13,264,307
                                                    ---------------------------------------------------------------
         Total..................................           2,717,416,375         (624,957,327)        2,092,459,048
                                                    ===============================================================
</TABLE>

(1)  Includes: an addition for the recording of goodwill on the purchase of
     Dorrego Television S.A. and Cable Video Sur S.R.L. for Ps. 7,184,660 and
     increase in goodwill on the purchase of Tres Arroyos Televisora Color S.A.
     for Ps. 1,067,637.
(2)  Includes: an addition for the recording of goodwill on the purchase of
     Otamendi Cable Color S.A. (a subsidiary of La Capital Cable S.A.) for Ps.
     625,386 and a decrease from adjustment to the purchase price of Telemas
     S.A. (a subsidiary of Adesol S.A.) for Ps. 68,022.


NOTE 7 - ALLOWANCES AND CERTAIN PROVISIONS

(a)  Allowance for doubtful accounts

<TABLE>

                                                                  Year ended December 31,
                                   --------------------------------------------------------------------------------------
                                       2001           2000           2001           2000          2001          2000
                                   --------------------------------------------------------------------------------------
                                         From subscriptions            From advertising           From new businesses
                                   --------------------------------------------------------------------------------------
<S>                                   <C>            <C>             <C>           <C>         <C>                   <C>

Balance at the beginning of the
year.............................     38,394,744     40,716,742      9,434,327     5,551,105            -             -
Increase (recorded as loss)......     68,660,072     47,268,425      1,000,131     6,331,888    1,722,042             -
(Write-off) Increase of allowance   (59,328,178)   (49,590,423)      (877,978)   (2,448,666)            -             -
                                   --------------------------------------------------------------------------------------
Balance at the end of the year...    47,726,638     38,394,744      9,556,480     9,434,327     1,722,042             -
                                   ======================================================================================
</TABLE>


(b)  Provision for obsolescence of materials

                                                 Year ended December 31,
                                              ------------------------------
                                                   2001           2000
                                              ------------------------------

Balance at the beginning of the year..........    11,365,077     11,301,408
Increase......................................             -        117,320
Decrease......................................     (144,508)       (53,651)
                                              ------------------------------
Balance at the end of the year................    11,220,569     11,365,077
                                              ==============================

(c)  Provision for lawsuits and contingencies

                                                 Year ended December 31,
                                              ------------------------------
                                                   2001           2000
                                              ------------------------------

Balance at the beginning of the year..........    45,162,763     40,075,212
Increase......................................     8,743,478     12,764,179
Decrease......................................   (1,265,154)    (7,676,628)
                                              ------------------------------
Balance at the end of the year................    52,641,087     45,162,763
                                              ==============================

NOTE 8 - SHORT-TERM BANK AND FINANCIAL DEBT

Short term bank and financial debt at December 31, 2001 and 2000 is comprised,
primarily, of unsecured borrowing arrangements with Argentine banks consisting
of commercial loans and overdraft. At December 31, 2001, short-term bank and
financial debt also includes loans with shareholders, the balance (US$ 103.4
million) of the US$ 125 million 9.25% Notes due 2002 (Note 11 (a)) and US$ 125
million 10.50% Notes due 2007, US$ 150 million Series C Notes due 2018, US$ 175
million Series E Notes due 2009 and US$ 144 million Series J Notes due 2003 due
to the deferral of certain payment obligations that occurred after year-end
(Notes 11 (a) and 17). At December 31, 2000 it includes the current portion of
the Series A Floating Rate Notes due 2001, US$ 150 million Series G Notes due
2001 and US$ 25 million Series H Notes due 2001 (Note 11 (b) (i) and (c) (ii)
and (iii), respectively). Short-term bank and financial debt is denominated in
Argentine pesos (Ps. 656 at December 31, 2000) and in U.S. dollars (equivalent
to Ps. 1,688,559,672 and Ps. 621,659,358 at December 31, 2001 and 2000,
respectively) with an average nominal interest annual rate of approximately
11.4% and 11.8% at December 31, 2001 and 2000, respectively. Of the outstanding
balance at December 31, 2001, Ps. 12,497,989 were due, at December 2001 and
2000, Ps. 362,113,769 and Ps. 212,433,812 fall due within 90 days, respectively,
and at December 31, 2000, Ps. 409,226,202 fall due between 91 and 365 days. As
described in Note 17, Ps. 1,313,947,914 were reclassified to current liabilities
due to the deferral of certain payment obligations.

NOTE 9 - ACQUISITION RELATED DEBT

Acquisition related debt at December 31, 2001 is comprised of U.S. dollar
denominated unsecured notes payable to former owners and shareholders of various
companies and has been incurred in connection with the acquisition of various
cable systems during the period 1994 through December 2001. Of the outstanding
balance at December 31, 2001, Ps. 183,968 were due, Ps. 1,580,962 fall due
within 90 days, Ps. 5,152,764 between 91 to 365 days and Ps. 222,603 between 1
to 2 years.

Interest rates accruing on the balance outstanding at December 31, 2001 are as
follows:

                       Annual interest rate                  Ps.
-------------------------------------------------------------------------
6% to 10%.........................................       5,152,764
Non-interest bearing..............................       1,987,533
                                                  -----------------------
                                                         7,140,297
                                                  =======================


NOTE 10 - SHAREHOLDERS' CAPITAL

Effective from August 1, 1999, Inversora Cablemar S.A. and Invercab S.A.,
holders of Company stock, were merged into Grupo Clarin S.A., which became the
new owner of the shares.

On December 27, 1999, Mrs. Ernestina L. Herrera de Noble, Mr. Hector Horacio
Magnetto, Mr. Lucio Rafael Pagliaro and Mr. Jose Antonio Aranda ("Clarin
Shareholders") registered with the Company the transfer of a total of
147,564,540 common shares of the Company to Multicanal Holding LLC, a company
jointly controlled by the Clarin Shareholders. On the same date, the Clarin
Shareholders transferred 18% of their shareholding in Multicanal Holding LLC in
favor of certain affiliates of Goldman Sachs and third parties.

In accordance with the Assignment in Guarantee and Trust Agreement dated May 13,
1998 and other related contracts, on February 4, 2000, Grupo Clarin S.A.
indirectly acquired from Banco Frances S.A. shares issued by the Company
representing 6% of its capital stock.

In addition, as a result of the incorporation of the equity of Plataforma
Digital S.A., effective from January 1, 2001 (Note 2 b)), the capital stock of
Multicanal, as the absorbing company, was increased by Ps. 867,810, from Ps.
365,953,227 to Ps. 366,821,037, by the issue of 867,810 non-endorsable,
registered, ordinary Class A shares of Ps. 1 par value with five votes per
share, which were delivered to Grupo Clarin S.A. in exchange for the shares held
by it in Plataforma Digital S.A. This capital increase is pending registration.

As a result, the shares of the Company are currently held as follows:


<TABLE>


                                                          Number of shares
                                          --------------------------------------------------------
              Shareholder                    Class A (*)       Class B (**)           Total          % Holding
------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>               <C>                  <C>
Grupo Clarin S.A.                            80,679,409  (1)    21,957,194  (3)   102,636,603          27.98
Multicanal Holding LLC                      119,655,068         27,909,472        147,564,540 (2)      40.23
Arte Grafico Editorial Argentino S.A.                 -        116,619,894        116,619,894          31.79
------------------------------------------------------------------------------------------------------------------
Total                                       200,334,477        166,486,560        366,821,037         100.00
==================================================================================================================
</TABLE>

(*)   Shares of Ps. 1 par value with five votes per share.
(**) Shares of Ps. 1 par value with one vote per share.

(1)  Of this holding, 56,100,000 shares were pledged in favor of AMI Cable
     Holdings Ltd. ("AMICH") in favor of CEI Citicorp Holdings S.A. ("CEI"). On
     March 5, 2001 Grupo Clarin S.A. repaid the amounts due in full to CEI. On
     March 19, 2001 AMICH notified the Company of the lifting of the pledge on
     the 56,100,000 shares.

(2)  Of this holding, 62,333,333 shares (40,094,948 ordinary Class A shares and
     22,238,385 ordinary Class B shares) are pledged in favor of TI Telefonica
     Internacional de Espana S.A. and 12,466,667 shares (6,795,580 ordinary
     Class A shares and 5,671,087 ordinary Class B shares) have been pledged to
     Chase as collateral for certain payment obligations. Notice of the lifting
     of this pledge was communicated to the Company on May 22, 2000 by Chase. On
     November 11, 2000 TI Telefonica Internacional de Espana S.A. gave notice of
     the assignment of the right to collect the price balances and the rights on
     the shares pledged in favor of Telefonica Media S.A.

(3)  On March 30, 2001, the Company's Board of Directors authorized the setting
     up and registering of a pledge on 4,791,503 Class B shares owned by Grupo
     Clarin S.A., as collateral for Video Cable Comunicacion S.A.'s deferred
     taxes in the amount of Ps. 2,982,126 and Ps. 3,055,166 corresponding to
     investments made in Sierras de Mazan S.A. In addition, in line with the
     Administracion Federal de Ingresos Publicos (Tax Authority or the "AFIP")
     General Resolution No. 846, the Company set up a pledge in its favor on
     4,791,503 Class B shares as collateral with BankBoston N.A.

     On January 24, 2002 the Board of Directors of the Company authorized the
     setting up and registration of a security interest on (i) 367,954 ordinary
     book entry Class B shares held by Grupo Clarin S.A. to secure tax deferrals
     for Ps. 463,620 made by Video Cable Comunicacion S.A. in Sierras de Mazan
     S.A.; (ii) 2,146,107 ordinary book entry Class B shares held by Grupo
     Clarin S.A. to secure tax deferrals for Ps. 2,704,095 made by Enequis S.A.
     in Sierras de Mazan; and (iii) 1,299,498 ordinary book entry Class B shares
     held by Grupo Clarin S.A. to secure Ps. 1,637,355, i.e. the total amount of
     the debt deferred by Cable Video Sociedad Anonima in Valle del Tulum. Those
     shares were pledged as collateral in favor of the AFIP through BankBoston
     N.A.


NOTE 11 - DESCRIPTION OF BANK AND FINANCIAL DEBT

(a)  US$ 125 million 9.25% Notes due 2002 and US$ 125 million 10.50% Notes
due 2007

The Shareholders' Ordinary and Extraordinary General Meeting held on October 7,
1996 approved the issuance of non-convertible unsecured corporate bonds for up
to US$ 300,000,000 and authorized the Board of Directors to determine the
remaining terms and conditions, including issue date, price, interest rate,
placement and payment form and conditions.

On October 11, 1996, filings with the CNV, the BCBA and the Mercado Abierto
Electronico S.A. (Electronic Open Market) were made to obtain approval for the
public issuance of the Notes, which was obtained on January 23, 1997, January
30, 1997 and February 5, 1997, respectively.

On January 28, 1997, the Board of Directors of Multicanal approved the issuance
of two series of securities, the US$ 125 million 9.25% Notes due 2002 and the
US$ 125 million 10.50% Notes due 2007 (collectively, the "Notes"), in each case
interest to be paid semi-annually. The aggregate net proceeds of the issue of
the Notes due 2002 and the Notes due 2007 of US$ 244,882,500, together with US$
5,117,500 corresponding to cash generated by the operations, were used to repay
a US$ 200 million loan facility arranged by The Boston Investment Group S.A.,
Banco Rio de la Plata S.A. and Galicia Capital Markets S.A. in 1995 (the "1995
Loan Facility") and to refinance short-term bank debt and other indebtedness.
Appropriation to payment was effected on February 3, 1997.

The Notes due 2002 and the Notes due 2007 contained customary affirmative and
negative covenants, including, but not limited to, restrictions on the
incurrence of additional debt, creation of liens on assets, disposal of assets,
mergers and payments of dividends.

On July 2, 1997, the Notes due 2002 and the Notes due 2007 were registered with
the SEC and the Company made a duly registered exchange offer to holders of the
Notes. The 30-day exchange offer, in which holders of US$ 102,900,000 aggregate
principal amount of Notes due 2002 and of US$ 86,409,000 aggregate principal
amount of Notes due 2007 tendered concluded on August 3, 1997. On September 4,
1998, the Company made a voluntary second 30-day exchange offer to the holders
of the outstanding Notes due 2002 and Notes due 2007, in which holders of US$
18,575,000 aggregate principal amount of Notes due 2002 and US$ 37,603,000
aggregate principal amount of Notes due 2007 tendered.

On June 26, 2001 the Company filed a registration application with the CNV for a
public offering for the purchase of Negotiable Obligations in the amount of US$
125,000,000 maturing on February 1, 2002, addressed to all of its holders and to
be carried out simultaneously in Argentina and in foreign markets in which the
Negotiable Obligations were originally placed. This purchase offering was
subject to: (a) the assignment of the Company's rights in DirecTV Latin America
LLC and of certain contractual rights relating to it, the proceeds of which
would be used in part to purchase the Notes offered; (b) the absence, according
to the Company's reasonable judgment, of any legal impediment, whether actual or
threatened, including any noncompliance under an agreement, indenture or any
other instrument or obligation, which the Company or one of its affiliates is a
party to, to purchase the Notes offered; or (c) the absence of events or
changes, including in the economic, financial, exchange or general market
conditions of the United States of America, Argentina or any other country
which, according to the reasonable judgment of the Company, has or may have a
material adverse effect on the market price, the trading of or the value of the
Notes to the Company

On June 28, 2001 the Board of the CNV acknowledged the procedure implemented by
the Company for the public offering involving the purchase of the Notes issued
by it and maturing in 2002, up to an amount of US$ 125,000,000. On July 19,
2001, due to the economic and financial conditions in Argentina, the Company
concluded that the conditions for the consummation of its offer to purchase the
Notes had not been met and were unlikely to be met and thus, the Company decided
to withdraw the purchase offer as of that date.

During the last quarter of 2001, using the funds provided by the sale of its
participation in DirecTV Latin America LLC in August 2001, the Company acquired
US$ 21,564,000 aggregate principal amount of 9.25% Notes due 2002 resulting in
savings on the nominal value of the Company's debt in the amount of US$
4,221,275.

(b)  Establishment of a Medium-Term Note Program of up to US$ 350,000,000

During the Ordinary Shareholders' Meeting held on April 4, 1997, the
Shareholders approved the establishment of a Medium-Term Note Program (the
"Program") for the issue of unsecured corporate debt, in different currencies,
provided that the maximum outstanding amount, after adding all series and
classes of notes issued under the Program, does not exceed US$ 350,000,000, or
an equivalent amount if any such issue is in another currency, at any time. On
May 8, 1997, the CNV approved the public offer of Corporate Bonds under the
abovementioned Program. On July 24, 1997, the abovementioned Program was
approved by the BCBA.

             (i)  Issue of US$ 150 million Series A Floating Rate Notes due 2001

                On December 12, 1997, the Board of Directors of Multicanal
                approved the issue of US$ 150,000,000 of its Series A Floating
                Rate Notes (the "FRNs") under the Program. The FRNs were
                repayable in five installments, the last of which falls due on
                January 12, 2001, and bore interest at the LIBO rate indicated
                for deposits in dollars on page "3,750" of the Telerate monitor
                increased by 2.125%. Interest on the FRNs was payable on a
                quarterly basis, except for the first, second and third periods,
                the due dates of which were February 7, March 7 and April 7,
                1998, respectively.

                Pursuant to the terms of the FRNs, the Company was required to
                comply with certain obligations, such as restrictions on: i)
                incurrence of additional debt, ii) issuance of liens on assets,
                and iii) disposal of assets, among other items.

                On January 7, 1998, the BCBA authorized the listing of the
                Company's FRNs, which were issued on such date under the
                Program.

                The net proceeds received by the Company (approximately US$
                148.5 million) were applied to cancel indebtedness incurred by
                the Company in connection with the purchase of the cable systems
                and other financial liabilities.

                On January 12, 2001 the Company paid the last interest
                installment and the total amortization of the Series A Floating
                Rate Notes issued under the Global Program with the proceeds
                from the placement of Series I Notes plus US$ 24,635,493 from
                the Company's ordinary course of business.


           (ii)  Issue of US$ 150 million Series C 10.50% Notes due 2018

                On March 15, 1998, the Board of Directors of Multicanal approved
                the terms and conditions for the issuance under the Program of
                US$ 150 million Series C 10.50% Notes due 2018 (the "Series C
                Notes"). The Series C Notes will mature on April 15, 2018 and
                bear interest at the rate of 10.50% payable semi-annually.

                The net proceeds received by the Company from the placement,
                amounting to approximately US$ 144.3 million, were used to
                refinance debt incurred by the Company in connection with the
                purchase of cable systems, short-term bank debt, other
                liabilities and costs and related expenses.

                The Series C Notes contain customary affirmative and negative
                covenants, which are similar to those mentioned for the issue of
                the Notes due 2002 and Notes due 2007.

                On September 4, 1998, the Series C 10.50% Notes due 2018 (the
                "New Notes") were registered with the SEC and the Company made a
                duly registered 30-day exchange offer to the holders of the
                Series C Notes, in which holders of US$ 149,850,000 aggregate
                principal amount of Series C Notes tendered.

(c) Increase in the maximum amount of notes outstanding under the Medium-Term
Note Program

The Company's shareholders approved, at a self-summoned Unanimous Ordinary
Meeting held on November 24, 1997, an increase in the maximum aggregate amount
of notes outstanding under the Medium-Term Note Program by US$ 200,000,000 to
US$ 550,000,000. On December 2 and 22, 1998 and February 16, 1999, the CNV, the
BCBA and the Electronic Open Market, respectively, approved the abovementioned
increase.

Subsequently, on January 19, 1999, the Company's shareholders approved an
additional increase in the maximum aggregate amount of notes outstanding under
the Medium-Term Note Program by US$ 500,000,000 to US$ 1,050,000,000. On March
31 and April 5 and 13, 1999, the CNV, the BCBA and the Electronic Open Market,
respectively, approved the abovementioned increase.

             (i) Issue of US$ 175 million Series E Notes due 2009

                In March 1999 the Board of Directors of Multicanal approved the
                terms and conditions for the issue of the Series E Notes under
                the Medium-Term Note Program. The CNV approved the public offer
                of such Notes on March 31, 1999.


                The principal amount of the Series E Notes totals US$ 175
                million and mature on April 15, 2009. The Series E Notes are
                subject to early repayment, in whole or in part, at the option
                of holders, on April 15, 2004. If a holder exercises its early
                repayment option, the Series E Notes will be repaid at a price
                equal to 100% of the principal amount plus interest accrued
                thereon and unpaid and additional amounts, if any, which could
                be claimed through the repayment date. The Notes bear interest
                at the rate of 13.125%, payable semi-annually.

                The net proceeds of the issue, which amounted to US$ 170.5
                million, were used to refinance debt incurred by the Company in
                connection with the purchase of cable systems and other
                short-term financial liabilities.

                The listing and negotiation of the Series E Notes were
                authorized by the BCBA and the Electronic Open Market on April
                14 and 15, 1999, respectively.

                The Series E Notes contain customary affirmative and negative
                covenants, which are similar to those mentioned for the issue of
                the Notes due 2002 and Notes due 2007.

                On September 13, 1999, the Series E Notes due 2009 were
                registered with the SEC and the Company made a duly registered
                30-day exchange offer to the holders of the Series E Notes, in
                which holders of US$ 159,180,000 aggregate principal amount of
                Series E Notes tendered.

           (ii) Issue of US$ 150 million Series G Floating Rate Notes due 2001

                On January 17, 2000 the Board of Directors of Multicanal
                approved the terms and conditions for the issue of Series G
                Floating Rate Notes for an amount of up to US$ 200,000,000,
                issued under the Medium-Term Note Program. The Shareholders'
                Meeting held on February 7, 2000 confirmed this Board
                Resolution.

                The principal amount of the issue totaled US$ 150 million, which
                fell due in eighteen months as from February 18, 2000, and bore
                interest at LIBOR plus 4.5% p.a., payable monthly for the first
                three months and quarterly thereafter. On February 17, 2000 the
                BCBA authorized the listing of these Series G Notes.

                The net proceeds of the issue, which amounted to US$ 146.6
                million, were used to refinance debt incurred by the Company,
                among others the prepayment of the principal and accrued
                interest due on the 1997 Loan Facility.

                The Series G Floating Rate Notes contained affirmative and
                negative covenants similar to those contained in the FRNs.

                On August 24, 2001 the Company issued the Series J Floating Rate
                Notes, which were exchanged for the Series G and Series I Notes
                (the maturity of which was extended until August 30, 2001 with
                the unanimous consent of their holders in connection with the
                issuance of the Series J Notes). Pursuant to the terms and
                conditions agreed upon, the Company paid US$ 20,000,000 in cash
                to the Series G and Series I holders to satisfy all of the
                Company's obligations corresponding to such Notes.

                See issue of US$ 144 million Series J Floating Rate Notes (Note
                11 c) (v)).

          (iii) Issue of US$ 25 million Series H Notes due 2001

                In September 2000, the Board of Multicanal approved the terms
                and conditions for the issue of US$ 25 million Series H Notes
                due 2001 under the Medium-Term Note Program of up to US$
                1,050,000,000, and were approved for public offering by the CNV
                on March 31, 1999. On September 15, 2000 the BCBA authorized the
                listing of Series H Notes and on September 18, 2000, this Series
                was authorized for listing on the Electronic Open Market.

                The principal amount of the issue totaled US$ 25 million,
                maturing on September 19, 2001. The net proceeds of the
                placement, amounting to approximately US$ 22 million, plus US$ 3
                million from the ordinary course of business of the Company,
                were used to cancel Series F Notes.

                The Series H Notes contained similar affirmative and negative
                covenants to those contained in the FRNs.

                On the due date of the Series H Notes, these bonds were redeemed
                in full.

           (iv) Issue of US$ 14 million Series I 10.25% Notes due 2001

                On December 28, 2000 the Board of Directors of Multicanal
                approved the terms and conditions of Series I Notes issued under
                the Global Program for up to US$ 1,050,000,000, the public offer
                of which was approved by the CNV on March 31, 1999.

                The issue was carried out on January 11, 2001 for a total amount
                of US$ 14 million due on August 21, 2001; interest accrued from
                the date of issue at a fixed annual percentage rate of 10.25%,
                with final repayment upon maturity.

                The net proceeds from the placement, which amounted to
                approximately US$ 13.7 million plus US$ 24.6 million generated
                by the Company's ordinary course of business, were used to pay
                the last interest installment and full amortization of the
                Series A FRNs (Note 11 b) (i)).

                The Series I Notes contained similar affirmative and negative
                covenants to those contained in the FRNs.

                On January 9, 2001, the BCBA authorized the listing of Series I
                Notes.

                See description of the settlement in Note 11 c) (ii).

            (v) Issue of US$ 144 million Series J Floating Rate Notes due 2003

                On August 22, 2001, the Board of Directors of Multicanal
                approved the issue of US$ 144,000,000 of its Series J Floating
                Rate Notes under the Global Program for up to US$ 1,050,000,000.

                The Series J Notes were issued on August 24, 2001 in the amount
                of US$ 144 million, and the maturity date is August 22, 2003.
                The Series J Floating Rate Notes bear interest at the LIBO rate
                indicated for deposits in dollars on page "3,750" of the
                Telerate monitor plus 5.5%. Interest is payable on a quarterly
                basis.

                The net proceeds from the placement, which amounted to
                approximately US$ 139.4 million, plus US$ 24.6 million generated
                by the Company in the ordinary course of business, were used to
                cancel the Series G and Series I Notes.

                Pursuant to the terms of the Series J Floating Rate Notes, the
                Company must comply with certain covenants, including, without
                limitation, obligations that restrict: (i) indebtedness; (ii)
                dividend payments or the making of certain restricted payments;
                (iii) the granting of certain pledges, and (iv) the sale of
                certain assets of the Company and certain of its subsidiaries.
                In addition, the Company agreed that its net debt (Bank and
                financial debts plus Acquisition-related debt less Cash and cash
                equivalents) would not exceed US$ 700,000,000, that it will not
                invest in fixed or capital assets in excess of US$ 40,000,000
                during any 12 month-period and that the balances resulting from
                the sale of its investment in DirecTV Latin America, LLC to
                Raven Media Investment, LLC would be applied to discharge
                financial debt.


NOTE 12 - COMMITMENTS AND CONTINGENCIES

(a)  Acquisition and sale of cable systems

(i) Acquisition of cable systems in Paraguay

On December 12, 1997, the Company entered into two agreements for the
acquisition of 14 cable systems (13 in Paraguay and 1 in Clorinda, Argentina).
The closing of the transaction was scheduled for November 15, 1997, which was
subject to the seller's compliance with certain conditions, including obtaining
various regulatory approvals from the government of Paraguay, which were
ultimately not obtained. The Company renegotiated the purchase of the
subscribers, and the assets and liabilities of the Paraguayan companies. So far,
US$ 2,300,000 corresponding to the payment on account of the total price has
been paid.

The final agreement was not signed due to the seller's failure to comply with
its obligations. The seller signed a promissory note amounting to US$ 2,300,000
and pledged the shares corresponding to certain TV systems in favor of the
Company to guarantee compliance with the conditions for the closing of the
transaction. As a result of the seller's non-compliance, the Company demanded
payment of the promissory note, but the seller brought a claim demanding
compliance with the agreement signed on December 12, 1997, reserving the right
to determine the amount of damages, and an injunction which was resolved by the
Paraguayan court in favor of the plaintiff. This measure prevents collection by
the Company of the promissory note amounting to US$ 2,300,000.

On June 19, 2001, the seller communicated to the court the assignment of rights
and lawsuits in favor of Lisker S.A., for which court fees were paid. When the
Company was informed of this assignment, it filed an appeal challenging the
court's decision pursuant to which Lisker S.A. was assigned seller's rights, on
the grounds that the agreement had an intuitu personae nature, and that the
seller was restricted from assigning rights, according to the agreement. Through
a resolution dated August 17, 2001, the court approved the appeal and revoked
the rights assigned to Lisker S.A. That ruling was appealed by Lisker S.A.,
which filed an appeal of the dismissal. This appeal was also dismissed.
Subsequently, Lisker S.A. filed an appeal with the Supreme Court of Justice of
Paraguay claiming unconstitutionality. This action is pending.

On July 10, 2001 the court ordered that the evidence filed by the seller, which
it had obtained in Buenos Aires, be removed from the court file and returned to
it. The seller filed a motion to reverse this court decision and an appeal. On
July 24, 2001, the court rejected the motion and the appeal. The seller appealed
but the appeal was rejected by the Appellate Court in Civil and Commercial
Matters, Room 2, on August 13, 2001.

On September 17, 2001, the Company requested the lifting of the provisional
remedy, which restrains it from collecting the promissory note for US$ 2,300,000
drawn in the name of the seller. The court has not yet ruled on the petition
filed by Multicanal. The Company has again requested that the remedy be lifted.

The Company cannot provide any assurance that the outcome of the request for
lifting the provisional remedy will be favorable to it.

(ii) Acquisition of 25% of Telemas S.A.

On July 15, 1999, Multicanal caused Adesol S.A. to acquire the remaining 25% of
Telemas S.A. for approximately US$ 12.4 million. On September 17, 1999,
Multicanal paid US$ 2 million; the remainder will be paid semi-annually in five
installments, the first four of which fell due and were paid on December 15,
1999, June 15 and December 15, 2000 and June 15, 2001. Additionally, according
to the contract dated July 15, 1999, an adjustment to the acquisition price of
US$ 1,000,000 should be made if it is established that the cable television
systems managed by Telemas S.A. exceed, as a whole, the number of 40,000
subscribers between May 31, 2002 and May 31, 2003. If the conditions for the
price adjustment take place, Multicanal will have to pay the US$ 1,000,000
mentioned above plus a 10% annual interest rate as from June 15, 1999.

(iii) Acquisition of Dorrego Television S.A. and Cable Video Sur S.R.L.

On October 26 and November 8, 2000, Multicanal acquired all of the capital stock
of the Dorrego Television S.A. and Cable Video Sur S.R.L. cable systems. The
total price of the transaction amounted to approximately US$ 2.6 million. Of the
total purchase price, the Company paid US$ 1.3 million in cash and US$ 0.2
million on October 17, 2001, and the remaining US$ 1.1 million in thirteen
monthly installments beginning on December 31, 2000.

(iv) Sale of Galaxy Entertainment Argentina S.A. ("GEA")

On November 10, 2000, Plataforma Digital S.A. ("Plataforma"), a company in the
process of being merged with Multicanal with effect at January 1, 2001, and
Grupo Clarin S.A. entered into a share sale agreement (the "Agreement") with
DirecTV Latin America LLC, one of the shareholders of GEA, (the "Purchaser"),
whereby Plataforma was entitled to sell its 51% participation in GEA in exchange
for a 4% investment in DirectTV Latin America LLC and a purchase option (the
"Operation"). The Operation was subject to the satisfaction of certain customary
conditions precedent for this type of transaction.

The Operation closed on April 30, 2001 and consequently Multicanal transferred
to the Purchaser its total participation in the capital stock of GEA in exchange
for a participation equivalent to 3.97% of the capital stock of the Purchaser.

(v) Sale of assets and rights in DirecTV Latin America, LLC.

On August 24, 2001, the Company transferred all of its interests in DirecTV
Latin America, LLC and certain contractual rights related thereto to Raven Media
Investments, LLC, a company organized under the laws of the state of Delaware
and wholly-owned by Grupo Clarin S.A., for US$ 150,000,000. The resulting net
income of Ps. 326,812,708 is shown in the statement of operations for the year
ended December 31, 2001 under "Gain (loss) on sale of investees".

The Company received the full purchase price upon the execution of the transfer
agreement.

Multicanal reserved the right, subject to certain conditions, to indirectly
repurchase the assets sold. The call agreement limits Raven rights to sell,
assign or transfer its interests in DirecTV Latin America, LLC. This option
expires by no later than November 10, 2003.

Pursuant to the terms of the US$ 144 million Series J Floating Rate Notes, the
Company covenanted and agreed to use the net proceeds from the sale of its
interests in DirecTV Latin America LLC, which were deposited in an account with
BankBoston N.A., solely to (a) repay, cancel, discharge or redeem the principal
amount of any of the Company's negotiable obligations of which The Bank of New
York is the trustee and which were outstanding as of August 24, 2001 and (b)
with the consent of a majority of the holders of the Series J Notes, repay,
cancel, discharge or redeem any of the Company's obligations for borrowed money
or to pay any amounts other than principal due under the Series J Notes. The
above obligations expired on February 1, 2002.

(vi) Tres Arroyos Televisora Color S.A. trust

On September 7, 2001, a Trust Agreement was signed under which the minority
shareholders transferred all of their equity interests in Tres Arroyos
Televisora Color S.A., representing 38.58% of the stock capital, in favor of the
trustee, Mr. Jose Maria Saenz Valiente (h). Multicanal was appointed the trust
beneficiary so that the stock in trust is gradually transferred to it provided
it pays Ps. 42,876 per month to the trustee over a 10-year period. The trust
will be revoked if Multicanal were to fail to pay the consecutive monthly
installments.

Additionally, on the same date, September 7, 2001, a beneficial interest on the
shares of Tres Arroyos Televisora Color S.A., representing 38.58% of the
Company's capital stock and voting rights, was set up in favor of Multicanal,
for the earlier of 10 years or the Trust life.

In December 2001, the trustee transferred 463 shares to Multicanal under the
Trust Agreement. The participations after the transfer are as follows:
Multicanal owns 15,203 shares representing 63.35% of the capital stock and
Fideicomiso Tres Arroyos Televisora Color S.A. owns 8,797 shares representing
36.65% of the capital stock.

(b)  Litigation

The Company is involved in litigation from time to time in the ordinary course
of business. In Management's opinion, the lawsuits in which the Company is
currently involved, individually and in the aggregate, are not expected to be
resolved for amounts that would be material to the Company's financial condition
or results of operations.

(c)  Operating licenses

The Company's operating licenses, obtained from the Comite Federal de
Radiodifusion (Federal Broadcasting Committee or "COMFER"), have been generally
granted for a period of 15 years, with the option to extend the licenses for an
additional ten-year period, counted as from expiry of the original term. The
Company has requested the extension of the term for several licenses. The
extension of the license is subject to approval by the COMFER. Management
believes that the possibility of the Company not being able to extend its
licenses in the future is remote.

Resolution No 1111/CFR/01, published in the Official Gazette on July 17, 2001,
provided for the creation of a "Data Updating Registry for supplementary
broadcasting service licenses". Licensees of supplementary broadcasting services
in all the national territory must register between the day after publication of
the aforementioned Resolution and October 15, 2001, by filing a sworn statement.
If they fail to do so, they will be subject to the penalties established in
section 18 of Law No. 22,285.

On October 15, 2001, the Company presented sworn statements for each of the
licenses owned by its merged and subsidiary companies.

(d)  Pending approvals

The Company has applied for COMFER approval of several transactions, including
the various corporate reorganizations in which several operating subsidiaries
were merged into the Company, certain transfers and other acquisitions of cable
television companies. In addition, the Company has requested the COMFER to
approve the elimination of certain headends. Although most of these approval
petitions are pending, the Company expects to receive all such approvals in due
course. Notwithstanding the foregoing, the Company can give no assurance that
such approvals will be granted by the COMFER or any successor agency.

The corporate reorganization made in 1998, including the merger-spin-off of
Fintelco S.A., VCC and CV Inversiones S.A. (Note 2 (b)), are pending approval by
the IGJ.

The latest capital increase resulting from the merger by absorption of
Plataforma Digital S.A. is pending registration with the IGJ; the reorganization
processes previously carried out by the Company are in the process of
registration.

Resolution No. 1110/CFR/01, published in the Official Gazette on July 16, 2001,
approved the Regulations governing requests for authorization to transfer shares
and/or units, and title to broadcasting service licenses. Additionally, the
resolution provided that licensees of broadcasting services that have already
filed applications with the COMFER for authorization to transfer shares and/or
units and title to licenses, but which have failed to comply with the notices
served by the COMFER as provided by Section 1, clause e), paragraph 9) of Law
No. 19,549, and have until December 4, 2001 to submit the missing documentation
The Company has completed the required documentation within the time limitations
established by the mentioned resolution.

(e)  Claims by COMFER

(i) Administrative proceedings

The COMFER has opened administrative proceedings against the Company for alleged
noncompliance with certain provisions of the Broadcasting Law. As a result, the
Company has filed for the benefits of the payment facilities regime established
by Federal Executive Decree No. 1201/98, as amended by Federal Executive Decrees
No. 644/99 and No. 937/99. This regime stipulates (i) an 85% reduction in any
fines in connection with these proceedings, and (ii) cash payment for fines so
determined or their offsetting by crediting such amount to TELAM S.A., to be
applied to public interest advertising campaigns by the Federal Government. The
Company has not been notified of the amount of fines for proceedings carried out
through April 30, 1999.

Subsequently, the COMFER notified the Company that several investigative
procedures had been initiated for alleged violations of the Broadcasting Law
that occurred after April 30, 1999 which, if ultimately adverse to the Company,
could result in fines. Based on information existing to date, neither the final
outcome nor the possible amounts involved in these investigative proceedings can
be presently determined. As a result, the Company has not recorded any reserves
in this respect.

Under Decree No. 762/01 published on June 14, 2001, the Federal Executive Branch
approved a new installment payment plan for fines imposed for violations of
current legal provisions relating to broadcasting, applicable to violations
which occurred from December 10, 1999 through December 31, 2000. The amount to
be settled will be the total original amount of the fines determined by COMFER.
COMFER will forgive 70% of this amount and the remaining 30% will be considered
a voluntary settlement. This latter amount can be settled as follows: a) up to
66%, by ceding advertising space and b) the rest, which must be at least 34%,
shall be paid in cash. COMFER will grant a noninterest-bearing payment plan of
up to 24 monthly installments, which cannot be less than Ps. 500 or greater than
Ps. 50,000. If the installments exceed Ps. 50,000, the installment payment plan
can be extended.

Furthermore, the new system extends the benefits of the installment payment plan
approved by Decree No. 1201 dated October 9, 1998 to cover infringements up to
and including December 9, 2000.

On July 10, 2001 the Company and certain merged subsidiaries (Circuito Cable
Vision S.A., Difusora S.A. and TV Cable S.A.) and Chaco TV Cable S.R.L. filed a
request for an extension of the installment payment plan under Decree No.
1201/98, which was approved by Decree No. 762/01.

The COMFER notified the Company of the proceedings initiated due to violations
of protection regulations concerning minors, content and some advertising.

On September 12, 2001, the Company agreed to the installment payment plan
instituted by Decree No. 762/01 to pay the fines for violating legal provisions
relating to broadcasting violations that occurred from December 10, 1999 through
December 31, 2000. The COMFER calculated the "Amount to be Settled" at Ps.
20,646,293. On October 1, 2001, the COMFER and the Company signed an
"Installment Payment Agreement" - Decree No. 762/01" under which the COMFER
forgave seventy percent (70%) of the "Amount to be Settled", as established in
point 4, Attachment I, Decree No. 762/01, and the "Voluntary Payment Amount" was
agreed at Ps. 6,193,888. It was established that from this "Voluntary Payment
Amount" sixty-six percent (66%), i.e. Ps. 4,087,966, will be settled by ceding
advertising time, and thirty-four percent (34%), i.e. Ps. 2,105,922 will be paid
in cash in forty-three non-interest bearing monthly and consecutive installments
of Ps. 48,975.

On October 3, 2001, the Ministry of the Interior, the COMFER and the Company
signed an agreement under which they agreed, pursuant to the provisions of
section 812 of the Civil Code, to change the purpose and term of the obligations
undertaken by the Company with the COMFER in the payment agreement signed on
October 1, 2001, in respect of the amount to be paid in cash. As a result of
this change the Company undertook to pay to the Ministry of the Interior the sum
previously owed to the COMFER and ceded by the latter to the Ministry of the
Interior; i.e. Ps. 2,105,922, in the form of advertising time. In the same act,
the Company agreed that the amount owed and payable in advertising time would be
in turn ceded by the Ministry of the Interior to duly registered political
parties.

Additionally, on October 25, 2001, the Company filed an appeal with the COMFER
challenging the latter's resolutions relating to fines imposed for alleged
infractions of the Broadcasting Law. The challenged fines correspond to files
for infractions incurred in January 2001 for a total amount of Ps. 1,120,000.
The filed appeal indirectly challenges the legitimacy of the Fine Grading System
on the grounds that it is confiscatory. The Company's opinion is that there are
grounds in its favor to make the COMFER review its position but the Company
cannot provide any assurance that its appeal will be successful.

After October 25, 2001 the Company filed new appeals against new rulings issued
by the authorities which established new fines.

Based on the situation described above and the applicable legal system, the
Company has not booked any provision to cover such infractions.

(ii) Demand for payment from Vidycom S.A.

The COMFER filed a claim whereby it demanded payment from Vidycom S.A.
("Vidycom"), a company absorbed by Multicanal in 1995, of all the differences in
its favor as a result of its participation in the tax exemption established by
Resolution No. 393/93.

The tax authorities based their rejection of the mentioned tax exemption on the
following grounds: (a) Vidycom was asked to make payment on several occasions,
but did not comply with COMFER's requirements, (b) no documentation supporting
the investments committed by the company was provided and (c) no evidence was
provided of the weather phenomenon as a result of which the previous
shareholders had requested the tax exemption.

The amount of the claim, which would be equivalent to 30% of the rate paid in
1994, 20% of the rate paid in 1995 and 10% of the rate paid in 1996, plus the
corresponding interest, has not yet been determined.

According to Multicanal, there are questions of fact and of law in its favor
which would lead COMFER to reassess its position. Consequently, no amount has
been recorded in the financial statements at December 31, 2001. The grounds are
as follows: (a) the COMFER did not take into account that the notices had to be
served at Multicanal's legal address, as it had absorbed Vidycom, a circumstance
of which COMFER was aware, (b) although the administrative procedures had not
been concluded, investments were made by Multicanal, and (c) the Company
provided evidence of the contingency giving rise to the request for exemption.

(iii) Claims against Intercable S.A. and Parana Television por Cable S.A.

COMFER has issued two resolutions notifying Intercable S.A. and Parana
Television por Cable S.A., companies absorbed by Multicanal, of the rejection of
the request for exemption made under the terms of Resolution No. 393/93 and
claiming payment of the unpaid amount plus compensatory interest. The amount
payable has not yet been determined.

The Company, as in the case of Vidycom, believes that there are questions of
fact and of law in favor of those companies which would lead COMFER to reassess
its position.

(iv) Claims against Difusora S.A.

On April 25, 2001 COMFER notified Difusora S.A., a company absorbed by
Multicanal, of the amount it must pay as a result of its participation in the
payment facilities regime. The amount is Ps. 107,106, which will be paid with
advertising time according to the option elected by the Company.

In addition, on February 8, 2002, the COMFER notified Difusora S.A. that the
"Amount to be Settled" corresponding to an action brought due to infringements
that allegedly occurred between May 1 and December 9, 1999 is Ps. 17,054. An
application to inspect the file was presented in order to challenge that
assessment.

(f)  Other regulatory aspects

In February 1995, the City of Buenos Aires issued a municipal ordinance
regulating the authorization for the installation of TV cable networks. Such
ordinance establishes several alternatives for cable installation on the street,
namely: by underground laying, center of city block or posting. The ordinance
provides for a 7-year term for cable operators to adapt their cable networks in
stages in accordance with these provisions. Although the Company has performed
network adaptation works, it cannot ensure that the goals established by the
ordinance can be achieved. However, based on the current situation, the
Company's Management believes that the impact of these events are not likely to
significantly affect the results of its operations. Accordingly, no provision
has been recorded in this respect.

(g)  Commitments to make contributions to Fintelco S.A.

Fintelco S.A. had a negative shareholders' equity as of November 30, 2001. Under
the Argentine Commercial Companies Law, this could bring its dissolution, unless
its capital is restored. The Company and Cablevision S.A. both hold 50% of the
equity of Fintelco S.A. and, in that proportion, the Company has undertaken to
make the contributions required to pay the liabilities of Fintelco S.A. and of
its subsidiaries when due.

(h)  Amendment to Multicanal's by-laws

At the Extraordinary Shareholders' Meeting held on December 28, 1999, it was
decided the amendment to Multicanal's by-laws to require, among other things,
that a number of corporate actions (including the incurrence of net debt in
excess of US$ 899 million) be approved by a shareholders' resolution. This
reform was approved by the IGJ on March 23, 2000.

On April 27, 2001, the Company's shareholders approved an amendment to the 13th
section of the by-laws to include the definition of the term Indebtedness. Such
amendment was introduced in order to define the scope of the term for purposes
of determining more accurately when incurred debt should be approved by a
Shareholders' Meeting. The amendment was ratified by the CNV on July 17, 2001
and registered in the IGJ on August 21, 2001 under number 10140 on the
Corporations Book 15.

(i)  Supercanal proceedings

O n April 13, 2000, the Company received notice of a mediation hearing requested
by Supercanal Holding S.A. to be held on April 28, 2000, in connection with a
claim brought against it by Supercanal Holding S.A., as seller of a cable system
in the city of Santa Fe owned by Tescorp Inc., a company acquired by Supercanal
Holding S.A. for approximately US$ 18.1 million. The Company rejected Supercanal
Holding S.A.'s claim on the grounds that Supercanal Holding S.A. had
systematically denied Multicanal's right to audit the system offered for sale.
The mediation hearing was postponed until May 10, 2000. On that date, the
parties resolved to conclude the mediation procedure. As a result, the
Supercanal Group is entitled to file the action considered necessary to protect
its interest. So far the Company has not been notified of any action initiated
by that group. No assurance can be provided that no legal action will be brought
by Supercanal Holding S.A.

(j)  Complaints against the Supercanal Group

The Company brought various claims against the Supercanal Group, including an
action to declare resolutions adopted during the Extraordinary Shareholders'
Meeting of Supercanal Holding S.A. on January 25, 2000 to reduce capital stock
of Supercanal Holding S.A. to Ps. 12,000 and subsequently increase capital to
Ps. 83,012,000 null and void. The Court issued an injunction requested by the
Company but required that the Company post bond for Ps. 22,000,000 for eventual
damages which could be caused to the defendant, should the complaint be
dismissed. The remedy was granted against the issue of a surety bond. The Court
of Appeals revoked the injunction. The Company has filed an extraordinary appeal
against that resolution, claiming it is both "arbitrary" and "damaging to the
institution". The appeal is in the process of being heard, and a ruling thereon
is pending.

Other legal actions were initiated, claiming the suspension of: i) the last
three Ordinary Shareholders' Meetings of Supercanal Holding S.A. and ii) the
guarantees granted by Supercanal S.A. on bank loans exclusively in favor of the
group controlling Supercanal Holding S.A. (Grupo Uno S.A. and affiliated
companies). In addition, a claim for dissolution and liquidation of Supercanal
Holding S.A. was brought jointly with the action for removal of all the members
of the Board of Directors and the Surveillance Committee, and the dissolution of
Supercanal Capital N.V.

Supercanal Holding S.A. and other companies of the Supercanal Group filed for
bankruptcy proceedings with the National Court of First Instance on Commercial
Matters No. 20, Secretariat No. 40. and the procedures began on April 19, 2000.

As a result of the revocation of the preliminary injunction mentioned above, on
December 12, 2001 the Company was notified of the filing of a claim by
Supercanal Holding S.A. for damages caused by the granting of the preliminary
injunction that was subsequently revoked. It has been claimed that the
suspension of the effects of the meeting held on January 25, 2000 resulted in
the cessation of payments to Supercanal Holding S.A.; the Company answered the
complaint and rejected the liability attributed to it based on the fact that the
cessation of payment had taken place before the date of the meeting that was
suspended by the preliminary injunction, according to documentation provided by
the plaintiff itself. Furthermore, the suspension of the meeting did not prevent
capitalization of the Company through other means. Based on the record of the
case, the Company considers that the claim filed should be rejected in its
entirety, and the legal costs should be borne by the plaintiff.

No assurance can be provided that the Company will obtain an economic or
financial gain as a result of these actions. Presently, as a result of the
ancillary jurisdiction of the bankruptcy proceedings of Supercanal Holding S.A.,
all the claims are brought in the abovementioned Court.

(k)  Value Added Tax.  Tax Authority assessment.

The Tax Authority notified the Company of the issuance of Resolution No.
18/2001, under which the Tax Authority has officially assessed the tax debits
corresponding to the monthly fiscal periods between September 1996 and September
1998 for value added tax, as a result of income from advertising in the cable TV
program magazine which is distributed monthly by the Company. Consequently, the
Tax Authority resolved that the Company must pay: (i) Ps. 1,861,705 in this
respect; (ii) Ps. 2,161,971 as compensatory interest and (iii) a fine of Ps.
1,489,364, equivalent to 80% of the value added tax allegedly omitted.

The Company filed an appeal against this resolution with the National Fiscal
Court, requesting it to declare the resolution unfounded, and invalidating the
Tax Authority's official assessment, the compensatory interest and the fine
imposed. Even though the Company has factual and legal arguments which uphold
its position, we cannot give any assurance that the Company will obtain a
favorable decision on the filed appeal.

NOTE 13 - LONG-TERM INVESTMENTS

Investments carried under the equity method are as follows:

<TABLE>

                            Direct
                          percentage                                 Equity in the (losses) gains of affiliated
       Company         participation in          Investments                          companies
                         voting stock
-----------------------------------------------------------------------------------------------------------------
                               %                 Year ended                          Year ended
                                                December 31,                        December 31,
                       ------------------------------------------------------------------------------------------
                                             2001          2000           2001          2000           1999
                                          ------------------------------------------------------------------------

<S>                          <C>             <C>           <C>              <C>         <C>            <C>
VER T.V. S.A. (1)............49.00           3,415,929     3,136,788        279,134     (855,188)      2,473,739

Fintelco S.A.................50.00        (39,648,232)  (35,546,912)    (4,101,320)   (7,676,840)    (4,922,031)
                                          ------------------------------------------------------------------------
                                          (36,232,303)  (32,410,124)    (3,822,186)   (8,532,028)    (2,448,292)
                                          ========================================================================
</TABLE>

(1)  At December 31, 2001 the retained earnings that represent undistributed
     earnings amount to Ps. 3,263,913.

NOTE 14 - EXEMPTIONS OBTAINED

By Resolution No. 1080/97 dated October 26, 1998, the COMFER released certain
subsidiaries that had merged with Multicanal from taxes payable to the COMFER
over a three-year period in an amount of up to Ps. 10,000,000 beginning
September 1, 1998 as per the following detail: first year, from September 1,
1998 through August 30, 1999, 40%; second year, from September 1, 1999 through
August 30, 2000, 45%; and third year, from September 1, 2000 through August 30,
2001, 50%.

The amount of tax charges accrued over the exemption period must be assigned to
the execution of investment and operating recovery projects. In the event of a
failure to satisfy the conditions under which the COMFER granted the exemption,
the COMFER reserved the right to unilaterally declare the annulment of the
administrative act approving the exemption, once arrears have been confirmed and
corresponding supplementary term fixed.

NOTE 15 - ANTITRUST CONSIDERATIONS

In September 1998, the Santa Fe branch of Asociacion del Consumidor ("Consumer
Association") filed with the Comision Nacional de Defensa de la Competencia (the
"National Commission for the Defense of Competition" or "CNDC") a complaint
against Multicanal and Cablevision S.A. alleging the existence of
anticompetitive practices in the city of Santa Fe. Consumer Association claims
that by dividing the subscribers, assets and liabilities of the VCC Group and
the Santa Fe Systems, the Company and Cablevision S.A. engaged in abuse of a
dominant market position and concerted actions to distribute the Santa Fe cable
market among themselves. The Company filed an answer to the complaint in which
it requests the CNDC to dismiss the complaint on the grounds of lack of a
factual basis and for failure to state a cause of action under the relevant
provisions of the Antitrust Law. The Company cannot assure that the final
decision shall be favorable to Multicanal, or that no further actions shall be
brought against the Company and/or Cablevision S.A. with respect to the division
of the VCC Group, the Bahia Blanca Systems and the Santa Fe Systems.

On January 13, 1999, the CNDC notified the Company that a complaint had been
filed by the Santa Fe commerce department alleging the existence of
anticompetitive practices by VCC in the city of Rosario, Province of Santa Fe,
prior to Multicanal's acquisition of this company. Although the Company has
filed an answer to the complaint with the CNDC, the Company cannot give any
assurance that its arguments will prevail and the final decision will be
favorable to it or that it will not be fined.

On February 18, 1999, the CNDC issued a resolution initiating an investigative
proceeding into an alleged agreement between the TV cable operating companies
VCC, Multicanal and Cablevision S.A. and those providing Television Satelital
Codificada S.A. and Tele Red Imagen S.A. channels. Such agreement is alleged to
consist of fixing of minimum prices for the trading of channels owning rights to
the broadcasting of football tournaments organized by the "Asociacion de Futbol
Argentino" in Federal Capital and Greater Buenos Aires. The investigation spans
from the year 1995 through the date of the resolution. On October 12, 1999 the
Company filed a discharge with CNDC under the terms of section 23 of the
Competition Defense Law, producing corresponding evidence. On February 10, 2000,
the submission of evidence period concluded and the case was submitted for a
ruling by the Court which is currently pending. The Company can give no
assurance that the final outcome will be favorable to it.

On March 12, 1999, the owner of a cable television operating company in the city
of Roldan, Province of Santa Fe, filed a complaint against Multicanal for
alleged anticompetitive practices in such city. Although the Company has filed
an answer to the complaint with the CNDC, the Company cannot give any assurance
that its arguments will prevail and the final decision will be favorable to it
or that it will not be fined.

In September 1999, the company Surcor TV S.A., a cable TV operator in the
southern area of the city of Cordoba, brought a complaint before the CNDC
against Cablevision S.A. and the Company claiming that: i) they had divided the
area in which they provide services and ii) they had engaged in monopolistic
activities. In addition, the Company alone was charged with adopting an
uncompetitive and monopolistic pricing policy as a result of its dominant
position. On November 29, 1999, the CNDC notified the Company that a claim had
been filed against it and on December 22, 1999 the Company filed its
explanations to the claims filed against it.

In December 2001, Gigacable SA., a cable TV operator operating in certain areas
of the Provinces of Santa Fe and Corrientes, filed a complaint before the CNDC
accusing Multicanal of (i) having divided areas in which the companies provide
services with Cablevision S.A., (ii) uncompetitive practices, and (iii) selling
the subscription for a price below Multicanal S.A.'s usual price. On December 6,
2001 the Company answered the complaint.

As of the date of the issuance of the financial statements, the CNDC is
analyzing the answer filed by Multicanal. The Company cannot provide assurance
that the dispute will be settled or whether it will be fined if no agreement is
reached.

The Interior Trade and Consumer Defense Bureau of the Province of Entre Rios
filed a complaint against the CNDC for the presumed division of areas between
Multicanal and its competitors. On May 4, 1999, the Company filed a document
providing explanations in accordance with section 20 of the Competition Defense
Law, requesting that the claim be rejected. However, no assurance can be
provided that the final ruling will be in the Company's favor.

NOTE 16 - TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of business and pursuant to a shareholders agreement
among the Company's shareholders, the Company purchases programming from related
parties at market prices, the amounts invoiced by such related parties to the
Company for programming were approximately Ps.111.9 million, Ps.105.7 million
and Ps.104.0 million for the years ended December 31, 2001, 2000 and 1999,
respectively. In addition, also in the ordinary course of business, the Company
places advertising in media owned by such related parties, including newspapers
and radio stations, at market prices. The related parties also purchase
advertising time from the Company, and the parties occasionally exchange
advertising space and air time with each other. In the years ended December 31,
2001, 2000 and 1999, the aggregate amounts invoiced by Multicanal to such
related parties for advertising were approximately Ps. 5.5 million, Ps. 0.2
million and Ps. 1.5 million, respectively, and the aggregate amounts invoiced by
such related parties to the Company for advertising were approximately Ps. 1.3
million, Ps. 2.6 million and Ps. 4.9 million for the years ended December 31,
2001, 2000 and 1999, respectively. Multicanal's monthly subscriber magazine is
also published by a related party, the amounts invoiced to the Company were
approximately Ps. 15.9 million, Ps. 19.7 million and Ps. 22.3 million for the
years ended December 31, 2001, 2000 and 1999, respectively. In the year ended
December 31, 2001, the aggregate amounts invoiced by Multicanal to such related
parties for new business were approximately Ps. 1.8 million. Related parties
balances at December 31, 2001 and 2000 were as follows: accounts receivable of
Ps. 12.9 million and Ps. 4.4 million at December 31, 2001 and 2000,
respectively, and accounts payable of Ps. 48.4 million and Ps. 38.0 million at
December 31, 2000 and 1999, respectively. In addition, in 2001, Multicanal
bought property owned by Grupo Clarin for a total of Ps. 1.1 million.

Additionally, the Company transferred all of its interests in DirecTV Latin
America, LLC and certain contractual rights related thereto to Raven Media
Investments, LLC, a company organized under the laws of the state of Delaware
and wholly-owned by Grupo Clarin S.A., for US$ 150,000,000, recording a gain of
Ps. 326,812,708.

At December 31, 2001, the Company has a balance of Ps. 3.3 million payable on a
loan from Grupo Clarin S.A., which has generated an interest charge of Ps. 0.2
million.

NOTE 17 - SUBSEQUENT EVENTS

In January and February 2002 the Company repurchased US$ 189,584,000 aggregate
principal amount of Notes issued by it for a total consideration of US$
62,809,727 with the proceeds from the sale of its participation in DirecTV Latin
America LLC.

Due to the situation of the Argentine economy and the political and social
crisis that resulted from the economic, exchange and regulatory measures
described in Note 1, the Company deferred the payments of certain Notes: (i) on
February 1, 2002, principal and interest on its 9.25% Notes due 2002 and
interest on 10.50% Notes due 2007, (ii) on February 26, 2002, interest on its
Series J Floating Rate Notes due 2003, and (iii) on April 15, 2002, interest on
its Series C 10.50% Notes due in 2018, and its Series E 13.125% Notes due in
2009.

The Company have engaged the services of a financial advisor to assist it in
connection with the restructuring of its debt and in due course intend to submit
proposals to its financial creditors, including the holders of its Notes, with
respect to alternative means of discharging the deferred payments, taking into
account the limitations imposed by an economy with a high degree of volatility.

As a result of the continued deterioration of the Argentine economy, the
Argentine Government's adoption of various economic measures and the devaluation
of the Argentine peso, the Company revised its business strategy. In this
connection, as management's best estimate of discounted future cash flows is
below the carrying value of goodwill, the Company recognized an impairment loss
of Ps. 330,460,113 as of December 31, 2001.

NOTE 18 -- SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
           ADOPTED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
           IN THE UNITED STATES OF AMERICA

The consolidated financial statements have been prepared in accordance with
Argentine GAAP, which differ in certain significant respects from US GAAP. The
significant differences at December 31, 2001 and 2000 and for the three years in
the period ended December 31, 2001 are reflected in the reconciliations provided
in Note 19 and principally relate to the items discussed in the following
paragraphs:

(a)  Restatement of financial statements for general price-level changes

The Argentine GAAP consolidated financial statements of the Company were
restated through August 31, 1995 and updated through August 31, 1995
price-levels to reflect the effects of inflation in accordance with specified
rules as more fully explained in Note 3.2.

In most circumstances, US GAAP do not allow for the restatement of financial
statements. Under US GAAP, account balances and transactions are generally
stated in the units of currency of the year when the transactions originated.
This accounting model is commonly known as the historical cost basis of
accounting. However, as the economy of Argentina experienced periods of
significant inflation prior to September 1995, the presentation of the
consolidated financial statements restated for general price-level changes is
substantially similar to the methodology prescribed by Accounting Principles
Board Statement ("APB") No. 3, "Financial Statements Restated for General
Price-Level Changes". This statement requires that companies operating in
hyper-inflationary environments in which inflation has exceeded 100% over the
last three years and which report in local currency, restate their financial
statements on the basis of a general price-level index. August 1993 was the
first month in which the rate of inflation in Argentina, as measured by the WPI,
was below 100% for the first time in 36 consecutive months since the release of
Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency
Translation". The US GAAP reconciliation does not reverse the effects of the
general price-level restatement included in the Argentine GAAP financial
statements through August 31, 1995.

(b)  Foreign currency translation adjustment

Under Argentine GAAP, financial statements of foreign investees have been
translated to Argentine pesos on the basis of the financial statements of such
investees expressed in the local currency of the country of origin. The method
of translation involves the translation of monetary assets and liabilities at
the exchange rate prevailing at the end of each period, and non-monetary assets
and liabilities and equity accounts on the basis of the inflation-adjusted
amounts at the exchange rate prevailing at the end of each period. The net gain
on translation is included in the Company's result of operations.

Under US GAAP, financial statements of foreign subsidiaries have been translated
into Argentine pesos following the guidelines established in SFAS 52 "Foreign
Currency Translation". The economy of certain of the Company's foreign
operations (Uruguay) was no longer considered to be highly inflationary as from
January 1999. Therefore, for each of the two years in the period ended December
31, 2001, the local currency was considered the functional currency. Assets and
liabilities of these foreign subsidiaries are translated at the exchange rates
in effect at period-end, and the statement of operations is translated at the
average exchange rates during the period. Exchange rate fluctuations on
translating foreign currency financial statements into pesos that result in
unrealized gains or losses are referred to as foreign currency translation
adjustments. Under US GAAP, cumulative translation adjustments are recorded as a
separate component of shareholders' equity. Accordingly, the reconciling
difference for this item is presented in the quantitative reconciliation in Note
19.

Additionally, account balances and transactions of certain Company's foreign
operations (Paraguay) are stated in the local currency. Under Argentine GAAP,
the financial statements of these foreign subsidiaries are restated to reflect
the effects of local inflation. Assets and liabilities are translated at the
exchange rates in effect at period-end, and the statement of operations is
translated at the average exchange rates during the period. Exchange rate
fluctuations on translating foreign currency financial statements into pesos
that result in unrealized gains or losses are referred to as foreign currency
translation adjustments. Under US GAAP, the dollar was considered the functional
currency. Accordingly, the reconciling difference for this item is presented in
the quantitative reconciliation in Note 19.

(c)  Goodwill

Under Argentine GAAP, companies acquired are recorded at their corresponding
historical costs. The difference between the carryover historical costs and the
purchase price is treated as goodwill (Note 3.5.(f)).

US GAAP requires the application of the purchase method of accounting to the
Company's acquisition transactions. Consequently, for purposes of the US GAAP
reconciliation, the fair market value of the assets and liabilities of the
acquired companies were estimated and the excess of the purchase price over the
fair value of the assets acquired and liabilities assumed is considered
goodwill. Accordingly, the reconciling difference for this item is presented in
the quantitative reconciliation in Note 19 under the items Amortization of
goodwill and Depreciation of property and equipment.

(d)  Recoverability of long-lived assets to be held and used in the business

As discussed in Note 17, management reviewed long-lived assets, primarily
property and equipment to be held and used in the business, long-term
investments and goodwill for the purposes of determining and measuring
impairment and recognized during the year ended December 31, 2001 an impairment
of Ps 330,460,113. Under US GAAP, SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" requires a
company to review assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Assets were grouped and evaluated for possible impairment at the level of cable
television systems by region. As a result of different basis of goodwill
determined on acquisition; as described in Note 18 (c), the impairment
recognized under Argentine GAAP differs from the one recognized under US GAAP.
Accordingly, the reconciling difference for this item is presented in the
quantitative reconciliation in Note 19.

(e)  Organizational and preoperating costs

Under Argentine GAAP, organizational and preoperating costs may be deferred and
amortized over the estimated period of benefit. Under US GAAP, such costs are
generally charged to operations. Accordingly, the reconciling difference for
this item is presented in the quantitative reconciliation in Note 19.

(f)  Vacation accrual

Under Argentine GAAP, there are no specific requirements governing the
recognition of accruals for vacations. The accepted practice in Argentina is to
expense vacation when taken and to accrue only the amount of vacation in excess
of normal remuneration.

Under US GAAP, vacation expense is fully accrued in the year the employee
renders service to earn such vacation. Accordingly, the reconciling difference
for this item is presented in the quantitative reconciliation in Note 19.

(g)  Non-interest bearing debt instruments

Under Argentine GAAP, non-interest bearing debt instruments are not generally
presented with an imputed rate of interest in order to recognize the economic
substance of the underlying transaction. Under US GAAP, APB No. 21 "Interest on
Receivables and Payables", such adjustment would be required.

APB No. 21 requires the imputation of a reasonable, market-based rate of
interest for non-interest bearing debt instruments over the maturity period of
the note. Additionally, the carrying value of the debt instrument is reported
net of any resulting discount or premium. As reflected in the US GAAP
reconciliation, certain non-interest bearing debt instruments for acquisition
debt were discounted at 10% which approximated the Company's weighted average
annual interest rate. Accordingly, the reconciling difference for this item is
presented in the quantitative reconciliation in Note 19 under the item
Discounting of non-interest bearing acquisition related debt.

(h)  Income taxes

Under Argentine GAAP, income tax expense is generally recognized based upon the
estimate of the current income tax liability. When income and expense
recognition for financial statements purposes does not accrue in the same period
as income and expense recognition for tax purposes, the resulting temporary
differences are not considered in the computation of income tax expense for the
year.

Under US GAAP, the liability method is used to calculate the income tax
provision. Under the liability method, deferred tax assets or liabilities are
recognized with the corresponding charge or credit to income for differences
between the financial and tax basis of assets and liabilities at each year-end.
Additionally, all available evidence, both positive and negative, should be
considered to determine whether, based on the weight of that evidence, a
valuation allowance is needed for some portion or all of a deferred tax asset.
Accordingly, the reconciling difference for this item is presented in the
quantitative reconciliation in Note 19.

(i)  Severance indemnities

US GAAP require the accrual of liability for certain post-employment benefits if
they are related to services already rendered, are related to rights that
accumulate or vest, or are likely to be paid and can be reasonably estimated and
the benefit arrangement is communicated to employees. Additionally, in the event
a benefit is paid to employees that terminate voluntarily, the related liability
is recorded at the time the employee accepts the termination offer.

As described in Note 3.5. (h), the Company expenses severance indemnities when
paid or when they should have an impact on the results for the year because they
represent a certain and quantified risk. Under Argentine law, the Company is
required to pay a minimum severance indemnity based on years of service and age
when an employee is dismissed without adequate justification. Accordingly, the
reconciling difference for this item is presented in the quantitative
reconciliation in Note 19.

(j) Equity in earnings (losses) of affiliated companies and investments in
companies carried under equity method

Under Argentine GAAP, investments in companies in which it exercises significant
influence, but not control (investments in which the Company has between 20% and
50%), are accounted for under the equity method. Under the equity method, the
investment is recorded at original cost and periodically increased (decreased)
by the investor's proportionate share of earnings (losses) of the investee and
decreased by all dividends received from the investor by the investee. The
Company applies its percentage ownership interest to the historical financial
statements of its equity method investments prepared under Argentine GAAP. For
purposes of this reconciliation, the Company has assessed the impact of US GAAP
adjustments on the Argentine GAAP financial statements of its equity investees.
The significant differences that give rise to US GAAP adjustments on equity
investees are as follows: (i) the application of SFAS No 109 "Deferred Income
Taxes", (ii) the effects on depreciation of different bases for determination of
the underlying net asset acquired, (iii) vacation accrual and (iv) foreign
exchange differences (see Note 18 (l)).

(k)  Interest capitalization

Argentine GAAP allows, but does not require, companies to capitalize interest on
self-constructed assets. The Company does not capitalize interest on projects
under construction which are of a short-term nature. Under US GAAP, the Company
would be required to capitalize interest on the qualifying self-constructed
assets. Accordingly, the reconciling difference for this item is presented in
the quantitative reconciliation in Note 19.

(l)  Foreign exchange differences

As mentioned in Note 1, all working days between December 21, 2001 and December
31, 2001 were declared exchange holidays by the Argentine Government. On January
11, 2002, when the exchange market first opened, the exchange rate was Ps. 1 to
US$ 1.4 (buying rate) and Ps. 1 to US$ 1.6 (selling rate). Under Argentine GAAP,
the Company accounted for its foreign currency assets and liabilities at an
exchange rate of Ps. 1 to US$ 1. Under US GAAP, the Company applied the guidance
set forth in the EITF D-12 "Foreign Currency Translation - Selection of the
Exchange Rate When Trading is Temporarily Suspended", that states that when
exchangeability between two currencies is temporarily lacking at the balance
sheet date, the first subsequent rate at which exchange could be made shall be
used. Accordingly, the reconciling difference for this item is presented in the
quantitative reconciliation in Note 19.

(m)  Transfer of financial assets

As explained in Note 12 (a) (v) the Company transferred all of its interests in
DirecTV Latin America, LLC and certain contractual rights related thereto to
Raven Media Investments, LLC. Under Argentine GAAP a transfer of financial
assets is recognized as a sale to the extent that contractual terms result in
the passage of title.

Under US GAAP, the existence of an agreement that constraints the transferee
right to exchange the transferred asset or gives the transferor the ability to
unilaterally cause the holder to return specific assets, preclude a transfer
subject to such a condition from being accounted for as a sale. Accordingly, the
reconciling difference for this item is presented in the quantitative
reconciliation in Note 19.

(n)  Specific pronouncement for cable television companies

Under Argentine GAAP, there are no specific pronouncements related to cable
television companies. Under US GAAP, SFAS No. 51 "Financial Reporting by Cable
Television Companies" establishes that:

     (1)  The network in each area is considered to pass through a "prematurity"
          period when it is in construction and yet partially in service. This
          period commences when transmission is made to the first subscriber and
          ends when the network for a particular area is substantially complete
          and attains the number of subscribers (penetration rate) expected for
          that specific area. During the prematurity period, SFAS No. 51
          requires that charges for capitalized costs other than those of the
          main cable television plant, interest and financing charges be
          allocated to both current and future periods based upon the ratio of
          active subscribers to the total estimated subscribers at the end of
          the prematurity period. As the Company's systems are relatively
          mature, management considers that SFAS No. 51 prematurity period
          accounting would not materially affect the financial position or the
          results of operations for the years presented.

     (2)  Hookup revenues that exceed related direct selling expenses must be
          deferred and amortized in the period in which the Company expects the
          subscriber to be connected to the system. Hookup services charged by
          the Company are not a significant component of revenues. All related
          direct selling expenses are recognized as incurred.

(o)  Extraordinary items

Under Argentine GAAP, the gain of repurchase of debt is reported as an ordinary
item. Under US GAAP, SFAS 4 "Reporting Gains and Losses from Extinguishment of
Debt" requires that a gain from the early extinguishment of debt be classified
as an extraordinary item. Accordingly, the reconciling difference for this item
is presented in the quantitative reconciliation in Note 19.

(p)  Allowance for doubtful accounts

Under Argentine GAAP, the allowance is charged against revenues whereas under US
GAAP the charge would be presented as an operating cost. As this difference has
no effect on net income/loss or on shareholders' equity, no reconciling
adjustment is presented in the US GAAP reconciliation.

(q)  Advances to suppliers

Under Argentine GAAP, funds advanced to suppliers are capitalized and included
under Property and equipment prior to purchase and specifically identified as
property or equipment items. Under US GAAP, these funds are treated as a deposit
until the actual property or equipment procured by such funds has been purchased
and specifically identified. Accordingly, such funds are generally classified as
"Other assets".

However, due to the nature of such funds and their relative immateriality to the
consolidated financial statements taken as a whole (Note 5), the quantitative
difference between Argentine and US GAAP would be a reclassification from
Property and equipment to Other assets and, accordingly, it does not affect the
reconciliation of net loss and shareholders' equity in Note 19.

(r)  Earnings per share

Argentine GAAP do not require disclosure of earnings per share. Under US GAAP,
SFAS No. 128 "Earnings per share", earnings per share have been calculated for
all periods presented based on the weighted average number of common shares
outstanding during the year (Note 19).

(s)  Disclosures about segments of an enterprise and related information

US GAAP require report information about operating segments in annual financial
statements. SFAS No. 131 "Disclosures about segments of an enterprise and
related information" establishes standards for related disclosures about
products and services, geographic areas and major customers. Multicanal is in
only one segment, cable television, and assets, revenues and earnings (losses)
from operations outside Argentina are less than 10% of consolidated assets and
operations. Accordingly, no information about segments is presented in these
consolidated financial statements.

(t)  Other income and expenses

Under Argentine GAAP certain expenses, such as those related to a employees'
dismissals and the provision for lawsuits and contingencies are included in
Other non-operating income (expenses), net (see Note 4 (l)). Under US GAAP,
these items are classified as operating expenses.

However, the quantitative difference between Argentine and US GAAP would be a
reclassification from "Other non-operating income (expenses), net" to "Direct
operating expenses", "General and administrative expenses" or "Selling and
marketing expenses", as appropriate, and, accordingly, it does not affect the
reconciliation of net loss and shareholders' equity summarized in Note 19.

NOTE 19 - RECONCILIATION OF NET LOSS AND SHAREHOLDERS' EQUITY TO US GAAP

The following is a summary of the significant adjustments to net loss for the
three years in the period ended December 31, 2001 and shareholders' equity for
the years ended December 31, 2001 and 2000, which would be required if the
financial statements had been prepared in accordance with US GAAP instead of
Argentine GAAP.
<TABLE>

                                                                             Years ended December 31,
                                                               -----------------------------------------------------
                                                                     2001              2000              1999
                                                               -----------------------------------------------------
<S>                                                                <C>              <C>               <C>
Net loss in accordance with Argentine GAAP...............          (287,850,501)    (323,859,250)     (328,463,372)
US GAAP adjustments - income (expense)
    Amortization of organizational and preoperating costs
      (Note 18 (e)) .....................................            (7,515,014)        2,850,515         1,434,937
    Deferred income taxes, net of allowance (Note 18 (h))               360,964      (65,476,095)        24,868,340
       Amortization of goodwill (Note 18 (c))............             4,349,734         4,342,910         4,341,536
        Depreciation of property and equipment
       (Note 18 (c)).....................................          (10,564,411)      (11,560,204)      (15,327,864)
     Vacation accrual (Note 18 (f))......................               940,391           510,064         (103,581)
     Discounting of non-interest bearing acquisition related
      debt (Note 18 (g)).................................             (127,095)         (179,476)       (1,779,787)
    Equity in the earnings (losses) of affiliated companies
       (Note 18 (j)) ....................................             (5,636,569)         905,797         6,990,159
    Interest capitalization (Note 18 (k))................              1,246,120        2,696,102         1,817,526
    Severance indemnities (Note 18 (i))..................            (1,008,170)        1,880,228                 -
    Foreign currency translation adjustment (Note 18 (b))                691,535      (3,052,662)         3,348,691
    Foreign exchange differences (Note 18 (l))...........        (1,015,582,606)                -                 -
    Transfer of financial assets (Note 18 (m))...........          (326,812,708)                -
    Extraordinary item (Note 18 (o)).....................            (9,337,602)                -                 -
    Impairment adjustment (Note 18 (d))..................             78,071,511                -                 -
    Minority interest in above reconciling items.........              3,433,593          254,276         1,873,172
                                                               -----------------------------------------------------
Net loss before extraordinary item.......................        (1,575,340,828)    (390,687,795)     (301,000,243)
Extraordinary gain on repurchase of debt.................              9,337,602                -                 -
                                                               -----------------------------------------------------
Net loss in accordance with US GAAP......................        (1,566,003,226)    (390,687,795)     (301,000,243)
                                                               =====================================================
Loss per share before extraordinary item.................              (4.27)             (1.06)             (0.82)
Gain per share on extraordinary gain on repurchase of debt              0.02                  -                   -
                                                               -----------------------------------------------------
Net loss per share in accordance with US GAAP............              (4.25)             (1.06)             (0.82)
                                                               =====================================================
Weighted average number of shares........................            366,821,037      365,953,227       365,953,227
</TABLE>


<PAGE>


<TABLE>
                                                                                    At December 31,
                                                                     -----------------------------------------------
                                                                             2001                    2000
                                                                     -----------------------------------------------
<S>                                                                            <C>                    <C>
Shareholders' equity in accordance with Argentine GAAP.........                734,587,361            1,020,019,022
US GAAP adjustments - increase (decrease)
    Amortization of organizational and preoperating costs
      (included in other intangible assets) (Note 18 (e))......                (9,406,162)              (1,891,147)
    Goodwill, net (Note 18 (c))................................                 16,420,473               12,070,740
    Property and equipment (Note 18 (c)).......................               (60,394,523)             (49,830,112)
    Deferred income taxes (Note 18 (h))........................                  7,579,124                7,218,160
    Discounting of non-interest bearing acquisition related debt                                       (27,435,693)
      (Note 18 (g))............................................               (27,562,787)
    Vacation accrual (Note 18 (f)).............................                (6,420,812)              (7,361,203)
    Investments in companies carried under equity method (Note 18                                         2,457,100
      (j)).....................................................                (3,179,469)
    Interest capitalization (Note 18 (k))......................                  5,759,748                4,513,629
    Severance indemnities (Note 18 (i))........................                    872,059                1,880,228
    Foreign exchange differences (Note 18 (l)).................              (998,664,845)                        -
    Transfer of financial assets (Note 18 (m)).................              (326,812,708)                        -
    Impairment adjustment (Note 18 (d))........................                 78,071,511                        -
    Minority interest in above reconciling items...............                  6,289,497                2,855,903
                                                                     -----------------------------------------------
Shareholders' equity in accordance with US GAAP................              (582,861,533)              964,496,627
                                                                     ===============================================
</TABLE>


<TABLE>

Changes in Shareholders' equity under US GAAP are as follows:
                                                                                       Years ended December 31,
                                                                                   ----------------------------------
                                                                                         2001             2000
                                                                                   ----------------------------------
<S>                                                                                     <C>            <C>
Shareholders' equity at the beginning of the year in accordance with US GAAP.....       964,496,627    1,354,348,775
Incorporation of balances following merger with Plataforma Digital S.A. .........         2,418,840                -
Foreign currency translation adjustment (Note 20 (g))............................        16,226,226          835,647
Net loss for the year in accordance with US GAAP.................................   (1,566,003,226)    (390,687,795)
                                                                                   ----------------------------------
Shareholders' equity at the end of the year in accordance with US GAAP...........     (582,861,533)      964,496,627
                                                                                   ==================================
</TABLE>


<PAGE>


NOTE 20 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS

(a)  Income taxes

The Company's deferred income taxes under US GAAP are comprised as follows:
<TABLE>

                                                                           Years ended December 31,
                                                             ------------------------------------------------------
                                                                       2001                        2000
                                                             ------------------------------------------------------
<S>                                                                        <C>                         <C>
Deferred tax assets
  Tax loss carryforwards.............................                      128,572,257                 155,435,955
  Allowance for doubtful accounts and others.........                       20,605,002                  15,467,874
  Vacation accrual...................................                        2,229,407                   2,563,519
  Provision for lawsuits and others..................                       19,196,969                  16,461,451
  Provision for obsolescence of materials............                        4,169,595                   3,977,778
  Difference between tax and accounting basis of property
    and equipment....................................                        8,630,525                           -
  Foreign exchange differences.......................                      358,612,347                           -
  Transfer of financial assets.......................                      113,823,368                           -
  Other temporary differences........................                        3,288,537                     633,962
  Less:  Valuation allowance.........................                    (632,834,387)               (160,465,449)
                                                             ------------------------------------------------------
                                                                            26,293,620                  34,075,090
                                                             ------------------------------------------------------
Deferred tax liabilities
  Difference between tax and accounting basis of property
    and equipment....................................                                -                 (9,753,177)
  Prepaid expenses...................................                     (16,698,584)                (15,479,499)
  Other temporary differences........................                      (2,015,912)                 (1,624,254)
                                                             ------------------------------------------------------
                                                                          (18,714,496)                (26,856,930)
                                                             ------------------------------------------------------
Net deferred tax assets..............................                        7,579,124                   7,218,160
                                                             ======================================================
</TABLE>

Of the outstanding balance at December 31, 2001, Ps. 22,834,408 are current.

The tax loss carryforwards at December 31, 2001 expire as follows:

Expiry date                                 Ps.
-----------------------------------------------------------
2002........................                     6,547,564
2003........................                    99,336,449
2004........................                   117,665,007
2005........................                   141,073,029
2006........................                     2,727,254
                              -----------------------------
Total.......................                   367,349,303
                              =============================
Valuation allowances are provided for future benefits to the extent their
realization is unlikely.



<PAGE>


The provision for income taxes computed in accordance with US GAAP differs from
that computed at the statutory tax rate, as follows:
<TABLE>

                                                                              Years ended December 31,
                                                                 ---------------------------------------------------
                                                                       2001             2000              1999
                                                                 ---------------------------------------------------
<S>                                                                <C>              <C>               <C>
 Income tax benefit at statutory tax rate on pretax income in
   accordance with US GAAP..............................           (544,208,251)    (106,141,157)     (100,556,483)
 Permanent differences
   Increase in valuation allowance......................             472,368,938      101,944,129        35,538,871
   Gain on sale of investees............................            (67,358,248)                -                 -

   Amortization of goodwill and intangible assets.......              45,976,723       46,359,777        47,260,742
   Impairment adjustment................................              88,336,010                -                 -
   Other................................................              15,893,202       32,360,013         4,107,777
                                                                 ---------------------------------------------------
 Income tax (benefit) expense in accordance with US GAAP
                                                                      11,008,374       74,522,762       (13,649,093)
 Tax on minimum notional income.........................                 114,137       12,904,586        27,345,097
                                                                  ---------------------------------------------------
 Income taxes and/or tax on minimum notional income in
 accordance with US GAAP ...............................              11,122,511       87,427,348        13,696,004
                                                                 ====================================================
</TABLE>

Although the Company presented pre-tax accounting losses on a consolidated basis
(net loss before income taxes), some of its subsidiaries generated taxable
income and paid income taxes.

(b)  Fair value of financial instruments

The estimated fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. The following methods and
assumptions were used to estimate the fair value of each class of financial
instrument for which it is practicable to estimate that value:

          -    The fair value of certain financial assets carried at cost,
               including cash, short-term investments, trade receivables,
               receivables from related parties and other assets is considered
               to approximate their respective carrying value.

          -    The fair value of accounts payable and accrued liabilities, taxes
               payable, debt with related parties, payroll and social security
               and other liabilities is considered to approximate their
               respective carrying value.

          -    The fair values of bank and financial debt are based on quoted
               market prices or, where quoted prices are not available, on the
               present value of future cash flows discounted at estimated
               borrowing rates for similar debt instruments.

          -    The fair values of acquisition related debt are based on the
               present value of future cash flows discounted at estimated
               borrowing rates for similar debt instruments.


<PAGE>


The estimated fair values of financial instruments are as follows:
<TABLE>

                                                                         Years ended December 31,
                                                       -------------------------------------------------------------
                                                                   2001                           2000
                                                       ------------------------------ ------------------------------
                                                          Carrying     Fair              Carrying    Fair Value
                                                           amounts       Value           amounts
                                                       --------------- -------------- -------------- ---------------
Financial assets
<S>                                                        <C>            <C>            <C>             <C>
  Cash and banks.....................................      29,258,249     29,258,249     23,373,492      23,373,492
  Short-term investments.............................     160,274,418    160,274,418     59,569,632      59,569,632
  Trade receivables..................................      72,156,994     72,156,994     67,479,722      67,479,722
  Receivables from related parties...................      17,070,634     17,070,634     15,651,033      15,651,033
  Other..............................................     139,588,467    139,588,467    118,789,851     118,789,851

Financial liabilities
  Accounts payable and accrued liabilities...........     247,542,987    247,542,987    223,471,207     223,471,207
  Bank and financial debt............................   1,688,800,923    879,171,039  1,893,579,292   1,584,675,340
  Acquisition related debt...........................       7,140,297      6,868,607     18,544,537      17,190,984
  Taxes payable......................................      52,178,261     52,178,261     48,603,543      48,603,543
  Debt with related parties..........................       3,006,735      3,006,735      4,986,120       4,986,120
  Payroll and social security........................      17,188,580     17,188,580     25,749,083      25,749,083
  Other..............................................      49,176,091     49,176,091     49,321,286      49,321,286

</TABLE>

(c) Financial instruments with off-balance sheet risk and concentrations of
credit risk

The Company has not used financial instruments to hedge its exposure to
fluctuations in foreign currency exchange or interest rates and, accordingly,
has not entered into transactions that create off-balance sheet risks associated
with such financial instruments.

Accounts receivable substantially comprise balances with a large number of
subscribers. Management does not believe significant concentrations of credit
risk exist.

(d)  Supplementary information on the statement of cash flows
<TABLE>

                                                                             Years ended December 31,
                                                                  -----------------------------------------------
                                                                       2001            2000            1999
                                                                  -----------------------------------------------
Cash payments:
<S>                                                                   <C>             <C>             <C>
  Income tax and/or tax on minimum notional income..........          19,022,469      27,456,351      32,983,931
  Interest..................................................         200,243,072     208,740,377     189,372,383
Cash and cash equivalents include:
  Cash......................................................         29,258,249      23,373,492      153,966,158
  Short-term investments (original maturity < 90 days)......         160,274,418     59,569,632       10,322,608
                                                                  -----------------------------------------------
                                                                     189,532,667      82,943,124     164,288,766
                                                                  ===============================================
Non-cash investing and financing activities
Common stock issued as a result of the merger with Plataforma
Digital S.A. ...............................................          2,418,840               -               -
                                                                  ===============================================
</TABLE>



<PAGE>



The Company has no cash balances in currency other than Argentine pesos and US
dollars. Since the exchange rates remained unchanged for the years ended
December 31, 2000, 1999 and 1998, no foreign exchange gains/losses were adjusted
for Argentine GAAP purposes.

(e) Ageing of long-term bank and financial debt and non-current acquisition
related debt under US GAAP

                                         Maturity in the       Total
                                            year 2003
                                         ----------------------------------
Long-term bank and financial debt.....     332,046,279 (1)   332,046,279
Non-current acquisition related debt..         222,603           222,603
                                         ----------------------------------
                                           332,268,882       332,268,882
                                         ==================================

     (1)  Includes Ps. 331,805,028 secured by net assets with a book value of
          Ps. 4,992,320 (Notes 12 (a) (v) and 18 (m)).

(f)  Interest expense
<TABLE>

                                                                     Years ended December 31,
                                                 ------------------------------------------------------------------
                                                         2001                  2000                  1999
                                                 ------------------------------------------------------------------
<S>                                                   <C>                   <C>                   <C>
Total interest expense under Argentine GAAP           199,061,463           210,664,831           191,624,248
Interest capitalization..........................     (1,246,120)           (2,696,102)           (1,817,526)
Discounting of non-interest bearing
  Acquisition related debt.......................       127,095               179,476              1,779,787
                                                 ------------------------------------------------------------------
Total interest expense under US GAAP............      197,942,438           208,148,205           191,586,509
                                                 ==================================================================
</TABLE>

(g)  Statement of consolidated comprehensive loss

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires that an enterprise (i) classify items of other comprehensive income
(loss) by their nature in a financial statement and (ii) display the accumulated
balance of other comprehensive income (loss) separately from retained earnings
and additional paid-in capital in the equity section of a statement of financial
position.

<TABLE>
                                                                     Years ended December 31,
                                                         2001                  2000                  1999
                                                 ------------------------------------------------------------------
<S>                                                 <C>                    <C>                   <C>
Net loss in accordance with US GAAP.............    (1,566,003,226)        (390,687,795)         (301,000,243)
                                                 ------------------------------------------------------------------
Other comprehensive income:
  Foreign currency translation adjustments .....       16,226,226              835,647             (1,187,738)
                                                 ------------------------------------------------------------------
Total other comprehensive income................       16,226,226              835,647             (1,187,738)
                                                 ------------------------------------------------------------------
Comprehensive loss..............................    (1,549,777,000)        (389,852,148)         (302,187,981)
                                                 ==================================================================
</TABLE>


<PAGE>


The accumulated balances related to each component of other comprehensive income
were as follows:
<TABLE>

                                                                   Accumulated Other          Accumulated Other
                                                                comprehensive income at    comprehensive income at
                                                                   December 31, 2001          December 31, 2000
                                                               -----------------------------------------------------
<S>                                                                    <C>                       <C>
Balance at the beginning of the year.........................          (352,092)                 (1,187,739)
                                                               -----------------------------------------------------
Other comprehensive income:
                                                               -----------------------------------------------------
  Foreign currency translation adjustments...................          16,226,226                  835,647
                                                               -----------------------------------------------------
Total other comprehensive income.............................          16,226,226                  835,647
                                                               -----------------------------------------------------
Balance at the end of the year...............................          15,874,134                 (352,092)
                                                               =====================================================
</TABLE>

(h)  Additional disclosure

                                        Years ended December 31,
                           --------------------------------------------------
                               2001               2000               1999
                           --------------------------------------------------
Advertising costs           11,165,164         25,557,209         31,276,583
                           ==================================================

NOTE 21 - IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In July 2001, the Financial Accounting Board issued its Statements No. 141 and
142 "Business Combinations" and "Goodwill and Other Intangible Assets",
respectively. SFAS No. 141 addresses financial accounting and reporting for
business combinations. All business combinations included in the scope of this
Statement are to be accounted for using one method, the purchase method. This
statement applies to all business combinations initiated after June 30, 2001.
This Statement also applies to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later.
Management does not believe the adoption of SFAS 141 will have a material impact
on Multicanal's results of operations and financial position.

SFAS No. 142 addresses financial accounting and reporting for acquired goodwill
and other intangible assets. It addresses how intangible assets that are
acquired individually or with a group of other assets (but not those acquired in
a business combination) should be accounted for in financial statements upon
their acquisition. This Statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements and also states that goodwill and
intangible assets that have indefinite use full lives will not be amortized but
rather will be tested at least annually for possible impairment. The provisions
of this Statement are required to be applied starting with fiscal years
beginning after December 15, 2001. Early application is permitted for entities
with fiscal years beginning after March 15, 2001, provided that the first
interim financial statements have not previously been issued. Management is
currently evaluating the impact that adoption of SFAS 142 will have on
Multicanal's consolidated financial statements.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
retirement costs. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development or normal use of the asset. SFAS 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of the associated
asset and this additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period through charges to
operating expense. If the obligation is settled for other than the carrying
amount of the liability, the Company will recognize a gain or loss on
settlement. SFAS 143 is required to be adopted for the fiscal year beginning
January 1, 2003. The Company has not yet assessed the impact of the adoption of
this new standard.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 retains the current requirement to
recognize an impairment loss only if the carrying amounts of long-lived assets
to be held and used are not recoverable from their expected undiscounted future
cash flows. However, goodwill is no longer required to be allocated to these
long-lived assets when determining their carrying amounts. SFAS 144 requires
that a long-lived asset to be abandoned, exchanged for a similar productive
asset, or distributed to owners in a spin-off be considered held and used until
it is disposed. SFAS 144 requires the depreciable life of an asset to be
abandoned to be revised. SFAS 144 requires all long-lived assets to be disposed
of by sale be recorded at the lower of its carrying amount or fair value less
cost to sell and to cease depreciation (amortization). Therefore, discounted
operations are no longer measured on a net realizable value basis, and future
operating losses are no longer recognized before they occur. SFAS 144 is
effective January 1, 2002. The Company has not yet assessed the impact of the
adoption of this new standard.


<PAGE>


                                 MULTICANAL S.A.
<TABLE>

                                                                                                                        Exhibit

INFORMATION REQUIRED BY SECTION 64, SUB-SECTION b) OF LAW No. 19550 for the
years ended December 31, 2001, 2000 and 1999 (Consolidated) (Expressed in
Argentine pesos)

==============================================================================================================================
          Caption                 Direct         General and      Selling and               Total at December 31,
                                operating      administrative      marketing
                                 expenses         expenses         expenses
                                                                                ----------------------------------------------
                                                                                     2001           2000            1999
------------------------------------------------------------------------------------------------------------------------------

<S>                                <C>              <C>              <C>           <C>            <C>             <C>
Payroll and social security        81,850,249       22,324,982       45,107,279    149,282,510    165,874,238     160,511,778
Employees' dismissals               1,008,311          593,880          619,104      2,221,295      5,127,810               -
Taxes rates and
contributions                      30,385,780       15,498,330            6,399     45,890,509     33,980,027      34,600,653
Programming rights                291,652,530                -                -    291,652,530    279,238,503     265,672,836
Printing and distribution
  of magazines                     29,112,617                -                -     29,112,617     31,801,661      31,571,450
Fees and compensation for
  services                            981,948       14,292,882          119,344     15,394,174     14,215,611      14,660,772
Commissions                         4,906,169       31,283,439           84,610     36,274,218     36,973,868      30,434,031
Overhead                            3,073,587          614,890           27,504      3,715,981      6,644,186       3,575,308
Security and surveillance              30,205        3,442,566            2,469      3,475,240      5,383,070       7,292,552
Representation and travel
  expenses                            230,332        2,092,559              849      2,323,740      2,808,590       3,382,505
Office expenses                       155,101        3,635,895           31,809      3,822,805      4,816,256       5,026,205
Publicity and advertising                   -                -       11,165,164     11,165,164     25,557,209      31,276,584
Building expenses                     976,708       12,223,472                -     13,200,180     13,710,956      13,715,214
Vehicles expenses                       8,156        4,774,263                -      4,782,419      6,023,345       5,457,299
Personnel expenses                  5,233,034        5,261,366        3,056,499     13,550,899     15,390,478      16,486,330
Rentals                            26,993,483        4,080,063                -     31,073,546     31,476,896      30,831,600
Sundry                             28,772,160       16,886,596            1,594     45,660,350     44,328,347      43,991,040
                             -------------------------------------------------------------------------------------------------
Total at December 31, 2001        505,370,370      137,005,183       60,222,624    702,598,177              -               -

                             -------------------------------------------------------------------------------------------------
Total at December 31, 2000        499,056,417      146,740,022       77,554,612             -     723,351,051               -
                             =================================================================================================
Total at December 31, 1999        465,619,455      166,579,835       66,286,867             -               -     698,486,157
==============================================================================================================================
</TABLE>

<PAGE>

                                    SIGNATURE




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.

                                                 MULTICANAL S.A.



Buenos Aires, Argentina, February 10, 2003       By: /s/ Adrian Meszaros
                                                     ------------------------
                                                     Adrian Meszaros
                                                     Chief Financial Officer