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

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

                                    FORM 10-Q

(Mark One)

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended March 31, 1999

                                        OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from ---------------- to ------------------


                                 TV FILME, INC.
             (Exact name of Registrant as Specified in its Charter)

                         COMMISSION FILE NUMBER: 0-28670

         DELAWARE                                                98-0160214
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                            Identification Number)

                C/O ITSA-INTERCONTINENTAL TELECOMUNICACOES LTDA.
                               SCS, QUADRA 07-BL.A
                          ED. EXECUTIVE TOWER, SALA 601
                             70.300-911 BRASILIA-DF
                                     BRAZIL
          (Address, Including Zip Code, of Principal Executive Offices)

                               011-55-61-314-9908
              (Registrant's Telephone Number, Including Area Code)

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of Common Stock, as of the latest practicable date.

              CLASS                                   OUTSTANDING 

    Common Stock, par value $0.01                     10,824,594 shares
    per share.                                        as of May 11, 1999

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


<PAGE>



                                 TV FILME, INC.

                                      INDEX



PART I.       FINANCIAL INFORMATION                                     PAGE NO.

ITEM 1.   Financial Statements

          Consolidated Balance Sheets as of December 31, 1998
          and March 31, 1999 (Unaudited).............................       2

          Unaudited Consolidated Statements of Operations for
          the Three Months Ended March 31, 1998 and the Three 
          Months Ended March 31, 1999................................       3

          Unaudited Consolidated Statement of Changes in 
          Stockholders' Equity at March 31, 1999.....................       4

          Unaudited Consolidated Statements of Cash Flows 
          for the Three Months Ended March 31, 1998 and 
          March 31, 1999.............................................       5

          Notes to Unaudited Consolidated Financial Statements.......       6

ITEM 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations........................       8

ITEM 3.   Quantitative and Qualitative Disclosures About 
          Market Risk................................................      13


PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings..........................................      14

ITEM 2.   Changes in Securities and Use of Proceeds..................      14

ITEM 3.   Defaults Upon Senior Securities............................      14

ITEM 4.   Submission of Matters to a Vote of Security Holders........      14

ITEM 5.   Other Information..........................................      14

ITEM 6.   Exhibits and Reports on Form 8-K...........................      14

SIGNATURES





                                       1
<PAGE>



                                              PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
                                              TV FILME, INC. AND SUBSIDIARIES
                                                CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,             MARCH 31,
                                                                                        1998                   1999
                                                                                ---------------------   --------------------
                                                                                                            (UNAUDITED)
                                                                                              (IN THOUSANDS)
<S>                                                                             <C>                         <C>        
ASSETS
Current assets:

     Cash and cash equivalents.............................                     $     57,492                $    44,475
     Accounts receivable, net..............................                            4,736                      3,010
     Supplies..............................................                            4,930                      3,229
     Prepaid expenses and other current assets.............                            2,560                      2,611
                                                                                ---------------------   --------------------
           Total current assets............................                           69,718                     53,325
Property, plant and equipment, net.........................                           50,974                     34,380
Debt issuance costs, net...................................                            4,731                      3,602
Other assets...............................................                            7,891                      5,323
                                                                                ---------------------   --------------------
           Total assets....................................                         $133,314                    $96,630
                                                                                =====================   ====================

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:

     Accounts payable......................................                     $      3,315                $     2,450
     Payroll and other benefits payable....................                            2,892                      1,766
     Accrued interest payable..............................                              751                      5,257
     Accrued liabilities and taxes payable.................                            4,533                      4,407
                                                                                --------------------------------------------
          Total current liabilities........................                           11,491                     13,880
Deferred installation fees.................................                            3,590                      2,016
Senior notes...............................................                          140,000                    140,000
Stockholders' equity:
     Accumulated other comprehensive loss
          cumulative translation adjustment................                           (3,877)                    (6,363)

     Preferred stock, $.01 par value, 1,000,000 shares
          authorized, no shares issued.....................                               --                         --
     Common stock, $.01 par value, 50,000,000 shares
          authorized, 10,824,594 and 10,824,594 shares
          issued and outstanding..........................                               108                        108
     Additional paid-in capital............................                           45,657                     45,657
     Accumulated deficit...................................                          (63,655)                   (98,668)
                                                                                ---------------------   --------------------
          Total stockholders' equity.......................                          (21,767)                   (59,266)
                                                                                ---------------------   --------------------
          Total liabilities and stockholders' equity.......                     $    133,314                    $96,630
                                                                                =====================   ====================
</TABLE>

                             See accompanying notes.



                                       2
<PAGE>



                         TV FILME, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED MARCH 31,
                                                                   -----------------------------------------
                                                                        1998                     1999
                                                                   ---------------          ----------------

                                                                    (In thousands, except per share data)

<S>                                                                    <C>                           <C>   
Revenues...............................................                $12,618                       $6,576
                                                                       
Operating costs and expenses:

    System operating - Note 2..........................                  5,095                        3,229 
                                                                         
    Selling, general and administrative................                  7,507                        3,606 
                                                                         
    Depreciation and amortization......................                  5,301                        4,032 
                                                                   --------------           ----------------
        Total operating costs and expenses.............                 17,903                       10,867 
                                                                   --------------           ----------------
        Operating loss.................................                 (5,285)                      (4,291)
                                                                        
Other income (expense):
    Interest and other expense ........................                 (4,722)                      (5,871)
                                                                        
    Interest income....................................                  1,691                        2,143 
                                                                         
    Monetary loss......................................                 (1,089)                     (26,994)

        Total other expense............................                 (4,120)                     (30,722)
                                                                   --------------           ----------------
Net loss...............................................                $(9,405)                    $(35,013)
                                                                   ==============           ================
Net loss per share, basic and diluted..................                $ (0.87)                     $ (3.23)
                                                                   ==============           ================
Weighted average number of shares of                                                                        
    common stock and common stock                                                                           
    equivalents........................................                 10,825                       10,825 
                                                                   ==============           ================
</TABLE>





















                             See accompanying notes.




                                       3
<PAGE>





                         TV FILME, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                   (UNAUDITED)

                    FOR THE THREE MONTHS ENDED MARCH 31, 1999



<TABLE>
<CAPTION>
                                                             ADDITIONAL        OTHER                                   
                                       COMMON STOCK            PAID-IN     COMPREHENSIVE  ACCUMULATED                 
                                    SHARES      PAR VALUE      CAPITAL         LOSS         DEFICIT          TOTAL
                                 --------------------------  ------------  ------------   -------------  -------------

                                                                    (IN THOUSANDS)

<S>                              <C>               <C>         <C>          <C>              <C>            <C>    
BALANCE AT DECEMBER 31, 1998     10,824,594        $108        $45,657      $(3,877)         $(63,655)      $21,767
Cumulative translation                                                                                                
     adjustment................          --          --             --       (2,486)               --        (2,486)
Net loss for the period........          --          --             --           --           (35,013)      (35,013)
                                 ------------- ------------  ------------  ------------   -------------  -------------
BALANCE AT MARCH 31, 1999......  10,824,594        $108        $45,657      $(6,363)         $(98,668)     $(59,266)
                                 ============= ============  ============  ============   =============  =============
</TABLE>
































                             See accompanying notes.



                                       4
<PAGE>


                         TV FILME, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED MARCH 31,
                                                          --------------------------------------------
                                                                    1998                    1999
                                                          --------------------------------------------

                                                                            (IN THOUSANDS)
<S>                                                       <C>                               <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................ $      (9,405)                    ($35,013)
Adjustments to reconcile net loss to net cash
          used in operating activities:
      Depreciation and amortization.....................          5,301                        4,032
      Provision for losses on accounts receivable.......          2,021                          162
      Authorization of debt issuance costs.......                   204                         (605)
      (Decrease) increase in deferred installation fees.           (955)                         215
      Monetary loss.....................................          1,089                       26,994
Changes in operating assets and liabilities:
      Increase in accounts receivable...................         (1,733)                        (592)
      Decrease in supplies..............................            116                          241
      Increase in prepaid expenses and other current    
          assets........................................           (428)                        (926)
      Increase in accrued interest receivable...........           (242)                           0
      Increase (decrease) in other assets...............           (367)                         238
      (Decrease) increase in accounts payable...........         (1,049)                         528
      Increase (decrease) in payroll and other benefits 
           payable......................................            118                         (547)
      Increase in accrued interest payable..............          4,506                        4,506
      Increase in accrued liabilities and taxes payable.             31                          235
                                                          --------------          -------------------
Net cash used in operating activities...................           (793)                        (532)
                                                          --------------          -------------------
                                                                                                

CASH FLOWS FROM INVESTING ACTIVITIES 
Acquisitions:
      Property, plant and equipment.....................         (4,241)                      (2,032)
                                                          --------------          -------------------
Net cash used in investing activities...................         (4,241)                      (2,032)
                                                          --------------          -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in payables to affiliates......................           (200)                           0
                                                           -------------          -------------------
Net cash used for financing activities..................           (200)                           0
                                                           -------------          -------------------
Effect of exchange rate changes on cash.................              0                      (10,453)
                                                          --------------          -------------------
Net change in cash and cash equivalents.................         (5,234)                     (13,017)
Cash and cash equivalents at beginning of period.                80,975                       57,492
                                                             ----------           -------------------
Cash and cash equivalents at end of period..............     $   75,741                      $44,475
                                                             ==========           ===================
</TABLE>






                             See accompanying notes.



                                       5
<PAGE>



                         TV FILME, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A.  COMPANY BACKGROUND

         The Company  develops,  owns and  operates  pay  television  systems in
markets in  Brazil.  Through  its  subsidiaries,  the  Company  has  established
wireless cable  operating  systems in the cities of Brasilia,  Goiania and Belem
and has been  awarded  licenses  to  operate  pay  television  systems  in seven
additional  markets in Brazil.  All significant  intercompany  transactions  and
balances have been eliminated in consolidation.

         The Company has selected a financial advisor,  BT Alex. Brown, Inc., to
assist it in  evaluating  strategic  alternatives,  including  a  possible  debt
restructuring,   and  issues   associated   with  the  Company's   debt  service
requirements.  There can be no assurance that any  transaction  will result from
this process or that any transaction pursued will be completed successfully.

         B.  METHOD OF PRESENTATION

         The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles in the United States
in U.S. dollars.  Effective January 1, 1998, the Company  determined that Brazil
ceased  to  be a  highly  inflationary  economy  under  Statement  of  Financial
Accounting  Standards No. 52.  Accordingly,  as of January 1, 1998,  the Company
began using the REAL as the functional  currency of its Brazilian  subsidiaries.
As a result,  all assets and  liabilities  are translated into dollars at period
end exchange  rates and all income and expense  items are  translated  into U.S.
dollars at the average exchange rate prevailing  during the period. In addition,
the Company  recorded a loss  associated  with  holding a net  foreign  currency
monetary liability position.

         C.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The  Company  had an  allowance  for  doubtful  accounts of $387,000 at
December  31, 1998 and  $181,000  at March 31,  1999.  Charges to the  allowance
during the three months ended March 31, 1999 were $368,000.

2.   RELATED PARTY TRANSACTIONS

         Substantially  all  programming  is supplied by a subsidiary of Tevecap
S.A.  ("Tevecap"),  a  stockholder  of the  Company,  pursuant to a  programming
contract. Amounts paid to such affiliate during the three months ended March 31,
1998 and 1999 were approximately $2,748,000 and $1,968,000, respectively.

         The Company  purchased two licenses to operate  wireless  cable systems
from  Abril S.A.  ("Abril")  for  $400,000  each,  payable in four equal  annual
installments,   which  did not  bear  interest.   The  $200,000  which  remained
outstanding as of December 31, 1997 was repaid in February 1998.

3.   STOCK OPTION PLAN

         In connection  with the  Company's  initial  public  offering in August
1996, the Board of Directors of the Company adopted and the  stockholders of the
Company approved the 1996 Stock Option Plan (such plan, as subsequently  amended
in September 1997 and October 1998, is  hereinafter  referred to as the "Plan").
The Plan  provides for the grant of stock  options to officers,  key  employees,
consultants  and  directors  of the  Company.  The Plan is  administered  by the
Compensation  Committee  of the Board  and the total  number of shares of Common
Stock  for which  options  may be  granted  pursuant  to the Plan is  1,736,432,
subject   to  certain   adjustments   reflecting   changes   in  the   Company's
capitalization.  The Plan allows the granting of incentive stock options,  which
may not have an  exercise  price  below the  greater  of par value or the market
value on the date of grant,  and  non-qualified  stock  options,  which  have no
restrictions as to exercise price other than the exercise price cannot be below


                                       6
<PAGE>

par value. All options must be exercised no later than 10 years from the date of
grant.  Options to purchase 407,000 shares of Common Stock were granted upon the
consummation  of the Company's  initial  public  offering,  297,000 of which are
exercisable at $10.00 per share, and 110,000 of which were exercisable at $11.00
per share, and which generally vest 20% per year for five years beginning on the
first anniversary of consummation of the initial public offering.

         Additional options to purchase Common Stock were granted as follows:

<TABLE>
<CAPTION>
                                                  NUMBER OF         EXERCISE
                           DATE                    OPTIONS            PRICE
                         -----------              ---------         --------

                         <S>                          <C>              <C> 
                         Dec.  1996                 10,000           $11.750
                         Feb.  1997                 10,000           $11.750
                         July  1997                 15,000           $10.125
                         Oct.  1997                308,500            $6.000
                         Dec.  1997                150,000            $5.625
                         July  1998                 10,000            $3.875
</TABLE>


         Of the total number of options which were  exercisable  as of March 31,
1999, 210,000 options have expired in accordance with their terms.

4.    LONG-TERM DEBT

         On December 20, 1996, the Company issued $140 million  principal amount
of 12-7/8% Senior Notes due December 15, 2004 (the "Senior Notes"). The proceeds
of the Senior Notes were loaned to ITSA-Intercontinental Telecomicacoes S.A. and
its  subsidiaries  ("ITSA") and evidenced by an intercompany  note.  Interest is
payable  semi-annually  in  arrears  on June 15 and  December  15 of each  year,
commencing on June 15, 1997. Of the $140 million  loaned to ITSA,  approximately
$33.5  million  was  used to  purchase  U.S.  government  securities,  scheduled
interest and principal  payments on which was in an amount sufficient to provide
for payment in full when due of the first four  scheduled  interest  payments on
the Senior Notes, the last of which occurred on December 15, 1998. Debt issuance
costs are  capitalized  and  amortized  over the  period  of the debt  under the
effective yield method.

         The Senior Notes are  redeemable  on or after  December 15, 2000 at the
option  of the  Company,  in whole or in part from  time to time,  at  specified
redemption prices declining annually to 100% of the principal amount on or after
December  15, 2003,  plus accrued  interest.  The Senior Notes  contain  certain
covenants  that,  among other things,  limit the ability of the Company to incur
additional  indebtedness and pay dividends or make certain other  distributions.
Upon a change of  control,  the Company is required to make an offer to purchase
the Senior Notes at a purchase  price equal to 101% of the  aggregate  principal
amount thereof, plus accrued and unpaid interest, if any. In accordance with the
covenants of the Senior Notes and the Company's  current  level of leverage,  at
March 31, 1999 it is unable to make any dividend payments.

         The Company  believes that the Senior Notes, as of March 31, 1999, were
trading at approximately 20% of the principal value.

5.    FOREIGN EXCHANGE CONTRACTS

         At December 31, 1998 and March 31, 1999,  the Company had $24.1 million
and $21.5 million,  respectively,  of foreign exchange contracts.  The contracts
held as of December 31, 1998 expired  January 11, 1999 and the contracts held as
of March 31, 1999 will expire in July 1999. In general,  these contracts  permit
the  Company to receive in REAIS,  at  maturity,  the dollar  equivalent  of the
contract  value  calculated  using the exchange rate as of the maturity date. At
maturity,  the Company is required to pay the contract value plus interest using
the  Brazilian  interbank  lending  rate  during the life of the  contract.  Net
contract  gains,  if any,  are  subject to a 20% tax levied in Brazil.  Realized
gains and losses are reported in "Interest and other expense."  Unrealized gains
as of March 31, 1998 totaled $3.7 million.



                                       7
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS
              -------------------------------------------------
         THIS FORM 10-Q CONTAINS FORWARD-LOOKING  STATEMENTS WHICH INVOLVE RISKS
AND  UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER  SIGNIFICANTLY FROM
THE  RESULTS  DISCUSSED  IN  THE  FORWARD-LOOKING   STATEMENTS.   THE  FOLLOWING
DISCUSSION  SHOULD  BE READ  IN  CONJUNCTION  WITH  THE  CONSOLIDATED  FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS FORM 10-Q.

RESULTS OF OPERATIONS

         Although the Company's  financial  statements are presented pursuant to
United States generally  accepted  accounting  principles in U.S.  dollars,  the
Company's transactions are consummated in both REAIS and U.S. dollars. Inflation
and  devaluation  in Brazil  have had,  and are  currently  having,  substantial
effects on the Company's results of operations and financial condition.  See "--
Inflation and Exchange Rates."

         As a result  of the  changes  in  exchange  rates  during  the  periods
presented,  the  period-to-period   comparisons  of  the  Company's  results  of
operations  are not  necessarily  meaningful and should not be relied upon as an
indication of future performance.


<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31
                                                       ---------------------------------------------------------------
                                                            1998        % OF REVENUE        1999        % OF REVENUE
                                                            ----        ------------        ----        ------------
                                                        (In thousands, except subscriber, per share and share data)

<S>                                                     <C>                  <C>       <C>                  <C> 
Revenue...........................................      $  12,618            100%      $    6,576           100%
Operating costs and expenses
   System operating...............................          5,095             40%           3,229            49%
                                                                       
   Selling, general and administrative............          7,507             59%           3,606            55%
                                                                       
   Depreciation and amortization..................          5,301             42%           4,032            61%
                                                       ----------      -----------     -----------    -----------
        Total operating costs and expenses........         17,903            142%          10,867           165%
                                                        ---------      -----------     -----------     ----------
          Operating loss...........................        (5,285)           (42)%         (4,291)          (65)%
Other income (expense):
  Interest and other expense......................         (4,722)           (37)%         (5,871)          (89)%
  Interest and other income.......................          1,691             13%           2,143            33%
Monetary loss.....................................         (1,089)            (9)%        (26,694)         (406)%
      Total other income (expense)................         (4,120)           (33)%                (30,722)         (467)%
                                                        ---------      -----------     -----------     ----------
Net loss..........................................      $  (9,405)           (75)%        (35,013)         (532)%
                                                        =========      ===========     ===========      =========
Net loss per share................................      $   (0.87)                     $    (3.23)
                                                        =========                      ===========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................         10,825                          10,825
                                                        =========                      ==========
Other Data:
   EBITDA (a).....................................     $       24                      $     (895)
                                                       ===========                     ===========
   Number of subscribers at end of period ........        112,443                          75,413
                                                         ========                      ==========
   Exchange rate (R $: US $) at end of period.....      1.137 : 1                       1.722 : 1
                                                       ==========                      ==========
</TABLE>

-------------------
(a) EBITDA is defined as  operating  loss plus  depreciation,  amortization  and
non-cash  charges.  While EBITDA  should not be  construed  as a substitute  for
operating  loss or a better  measure of liquidity  than cash flow from operating
activities,  which are  determined in accordance  with U.S. GAAP, it is included
herein to provide additional information regarding the ability of the Company to
meet its capital  expenditures,  working capital  requirements and debt service.
EBITDA,  however,  is not necessarily a measure of the Company's ability to fund
its cash needs.

                                       8
<PAGE>

         NET LOSS.  Net loss for the three months ended March 31, 1999 increased
to $(35,013)  million versus  $(9,405)  million for the three months ended March
31, 1998,  due to a 37,000  reduction in subscriber  count,  and a monetary loss
associated with the Company's net dollar-denominated monetary liability position
due to a 51% devaluation of the REAL against the U.S. dollar.

         REVENUES.  The Company's  revenues for the three months ended March 31,
1999  decreased by 48%  compared to the three  months ended March 31, 1998,  due
primarily to a 51% devaluation of the REAL against the U.S. dollar. This revenue
decrease was partially offset by revenues from the Company's proprietary premium
channel and high-speed Internet access service.

         SYSTEM  OPERATING  EXPENSES.  For the three months ended March 31, 1999
compared to the three  months ended March 31, 1998,  system  operating  expenses
decreased by 37%,  primarily due to the 51%  devaluation of the real,  offset in
part by programming costs, which are almost totally dollar-based.

         SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  Selling,  general and
administrative  ("SG&A") expenses  decreased during the three months ended March
31, 1999 by 52% over the three months ended March 31, 1998, primarily due to the
51% devaluation of the REAL against the U.S. dollar.

         DEPRECIATION AND AMORTIZATION.  Depreciation and amortization decreased
in the three  months  ended  March 31, 1999 by 24% over the three  months  ended
March 31,  1998,  primarily  due to the  reduction  in asset  values on a dollar
basis, offset in part by a higher level of assets acquired during the comparison
year.

         INTEREST INCOME AND INTEREST EXPENSE.  Interest income increased in the
three  months  ended March 31, 1999 by 27% over the three months ended March 31,
1998 primarily as a result of holding a higher  proportion of the Company's cash
in  Brazil,  which  earned  significantly  higher  rates of return  compared  to
interest income which could be earned in the U.S.  Interest expense increased by
24% in the three  months  ended March 31, 1999 over the three months ended March
31, 1998,  primarily due to realized  losses on hedge contracts which expired in
January 1999.

         MONETARY LOSS AND EXCHANGE AND TRANSLATION  LOSS. The Company generated
a monetary loss in the three months ended March 31, 1999 of $26.7 million due to
its net  dollar-denominated  monetary liability  position  throughout the period
compared to a monetary loss of $1.1 million in the months ended March 31, 1998.


LIQUIDITY AND CAPITAL RESOURCES

         The pay television business is capital intensive. From 1993 through the
first part of 1996,  the Company  raised an  aggregate  of  approximately  $16.8
million  through a series of private  equity  placements to Tevecap and Warburg,
Pincus  Investors,  L.P. In August 1996,  TV Filme  completed an initial  public
offering  with net proceeds to the Company of $24.4 million and in December 1996
TV Filme completed the sale of the Senior Notes with net proceeds to the Company
of approximately  $134.0 million. In the past, working capital requirements have
been  primarily  met by (i) venture  capital  financings,  (ii) capital  markets
financings,  (iii) vendor financing which generally  requires payment within 420
days of shipment,  some of which had been  supported by  irrevocable  letters of
credit  guaranteed by Abril and certain of its  affiliates  and (iv)  borrowings
from Abril and  certain  affiliates.  As of March 31,  1999,  the Company had no
outstanding  borrowings  from Abril and its  affiliates and the Company does not
expect to borrow from Abril or its affiliates in the future.

         As of March 31,  1999,  the  Company had no amounts  outstanding  under
letters of credit. As of January 1, 1999, the Company had import lines of credit
in the aggregate amount of $30.5 million with four commercial  banks. In January
1999,  in  conjunction  with the  devaluation  of the REAL,  all import lines of
credit were cancelled by the banks. Further import purchases by the Company will
have to be individually  negotiated with the banks.  While the Company  believes
that lines of credit,  additional  vendor financing and other credit  facilities
are available, the terms and conditions of such financing vehicles are uncertain
and may not be available on terms acceptable to the Company.  As a result of its
initial public offering and the Senior Notes offering,  the Company had positive


                                       9
<PAGE>

working  capital at March 31, 1999 of $39.4 million.  Net cash used in operating
activities for the three months ended March 31, 1999 was $0.5 million.

         On February 4, 1999, the Company  received notice from the Nasdaq Stock
Market,  Inc.  that its common  stock was  delisted,  effective  on the close of
trading that day. The delisting was a  consequence  of the Company's  failure to
meet  certain  standards  for  continued  listing on Nasdaq,  including  the net
tangible assets and minimum bid price  requirements.  The Company's common stock
was  immediately  quoted on the OTC  Bulletin  Board.  The effects of the Nasdaq
delisting include,  without limitation,  the limited release of market prices of
the common  stock,  limited news  coverage of the Company,  and  restriction  of
investors'  interest in the Company,  and may have a material  adverse effect on
the  trading  market  and prices for the common  stock,  thereby  affecting  the
Company's ability to issue additional securities or secure additional financing.
In addition, because the common stock is deemed penny stock under the Securities
Enforcement Penny Stock Reform Act of 1990, additional disclosure is required in
connection with trading in the common stock,  including delivery of a disclosure
schedule  explaining  the  nature  and  risk of the  penny  stock  market.  Such
requirements could severely limit the liquidity of the common stock.

         In order to assist the Company in  evaluating  strategic  alternatives,
including  a  possible  debt  restructuring,  and  issues  associated  with  the
Company's debt service  requirements,  the Company has selected BT Alex.  Brown,
Inc. as its financial  advisor.  There can be no assurance that any  transaction
will result from this process or that any transaction  pursued will be completed
successfully.  In addition,  there can be no assurance  that the Company will be
able to meet future cash requirements.

         The Company made capital  expenditures  of  approximately  $2.0 million
during the three  months ended March 31, 1999.  Such capital  expenditures  were
financed  with the  proceeds  from  the  Senior  Notes  offering  and from  cash
generated from the Company's operations.

         In September 1997, the Brazilian  Ministry of Communications  announced
the  bidding  process  by which  additional  pay-TV  licenses  would be  awarded
throughout  the country.  This award process  commenced in October 1997.  Due to
legal  challenges  made to the bidding process by several  bidders,  the bidding
process had been  postponed  for all  markets.  However,  on May 13,  1998,  the
Superior Justice Tribunal issued a favorable ruling allowing the bidding process
with respect to a number of the smaller markets to go forward. In July 1998, the
license process for the smaller markets was reinstated and in the fourth quarter
of 1998,  the  Company was awarded  licenses  to operate  pay-TV  systems in the
following seven cities:  Bauru,  Campina Grande,  Caruaru,  Franca, Porto Velho,
Uberaba and  Presidente  Prudente.  The Company  has paid an  aggregate  of $5.0
million for these seven licenses.  Following a favorable  ruling by the Superior
Justice  Tribunal in the fourth  quarter of 1998,  with respect to the remaining
markets,  on March 10, 1999 ANATEL  initiated the bid process for these markets.
The Company decided not to participate in this process. The Company from time to
time may selectively pursue joint ventures or acquisitions in the pay television
industry,  although it currently has no  understanding,  commitment or agreement
with respect to any such joint venture or  acquisitions.  The Company  currently
believes that its cash and internally generated funds will be sufficient to fund
its debt service  obligations and the cash  requirements  for its three existing
systems and seven new markets for at least the next twelve  months.  As of March
31,  1999,  of the  Company's  approximately  $44.5  million  in cash  and  cash
equivalents,  approximately  $16.5  million  (37%) was  invested in U.S.  dollar
denominated  securities.  In the longer term,  the  Company's  funding needs are
subject to a variety of factors,  including  its ability to obtain new financing
and/or successfully  complete a debt  restructuring,  the number and size of new
system launches or acquisitions,  the implementation of alternative transmission
technologies  and  the  offering  of  additional   telecommunications  services.
Accordingly, there can be no assurance that the Company will be able to meet its
future funding needs.

INFLATION AND EXCHANGE RATES

         Inflation  and exchange rate  variations  have had, and are expected to
continue  to  have  for  the  foreseeable  future,  substantial  effects  on the
Company's  results  of  operations  and  financial  condition.   In  periods  of
inflation,  many of the Company's expenses will tend to increase.  Generally, in
periods of  inflation,  a company is able to raise its prices to offset the rise


                                       10
<PAGE>

of its expenses and may set its prices without governmental regulation. However,
under a Brazilian law designed to reduce inflation, the prices which the Company
may  charge  to a  particular  subscriber  may not be  increased  until the next
anniversary  of the  subscriber's  initial  subscription  date  and may  only be
increased by a percentage no greater than the  percentage of the increase in the
general  inflation rate which occurred  during the  subscriber's  contract year.
Thus,  the  Company  is less  able to  offset  expense  increases  with  revenue
increases.  Accordingly,  inflation  may have a material  adverse  effect on the
Company's results of operations and financial condition.

         Generally,  inflation in Brazil has been  accompanied by devaluation of
the  Brazilian  currency  relative  to the U.S.  dollar.  The  Company  collects
substantially  all of its revenues in REAIS,  but pays certain of its  expenses,
including  a  significant  portion of its  equipment  costs,  substantially  all
interest  expense and most of its  programming  costs, in U.S.  dollars.  To the
extent the REAL depreciates at a rate greater than the rate at which the Company
is able to raise prices,  the value of the  Company's  revenues (as expressed in
U.S. dollars) is adversely affected.  This effect on the Company's revenues also
negatively impacts the Company's ability to fund U.S. dollar-based expenditures.

         As of January 1,  1998,  the  Company's  financial  statements  reflect
foreign   exchange  gains  and  losses   associated  with  monetary  assets  and
liabilities  denominated  in currencies  other than the REAL.  As a result,  the
devaluation of the REAL against the U.S.  dollar has caused,  and is expected to
cause, for the foreseeable  future, the Company to record a loss associated with
its U.S. dollar monetary  liabilities and a gain associated with its U.S. dollar
monetary assets. Given that the Company has a net U.S. dollar monetary liability
position,  the net effect of the devaluation of the REAL against the U.S. dollar
is to generate losses in the Company's financial statements. In order to protect
against a possible further devaluation of the REAL, the Company may from time to
time enter into certain foreign exchange  contracts.  See "Item 3.  Quantitative
and Qualitative Disclosures about Market Risk."


RECENT ECONOMIC EVENTS

         The economic  and  financial  turmoil in Southeast  Asia and the former
Soviet  Republics  during  1997  and  1998 has had an  impact  on many  emerging
markets, including Brazil. As a result of these events, the Brazilian government
originally took  significant  measures to protect the REAL, as well as the gains
achieved over the last several years by the REAL Plan.  Among other actions,  in
October 1997,  Brazil's Central Bank  significantly  raised short-term  interest
rates,  and, in November  1997, the Brazilian  government  announced a series of
austerity  measures,  generally  including  budget cuts,  restrictions on public
indebtedness,  tax increases,  export  incentives and  restrictions  on imports.
These measures were designed to improve the country's fiscal and current account
deficits  and relieve  pressure on the REAL.  While  short-term  interest  rates
declined  somewhat  during the second  quarter of 1998,  they returned to levels
approaching 37% per annum by the end of the year and have only recently begun to
decline. Even with rates at this level, the government continued to experience a
reduction in foreign  currency  reserves which were being used to purchase REAIS
as a means to protect the relative value of the REAL versus the U.S. dollar. Due
to the continued reduction in foreign currency reserves,  and other reasons, the
Brazilian  government sought support from the  International  Monetary Fund (the
"IMF").  On November 13, 1998, the IMF announced an aid package of more than $41
billion,  of which $14.6 billion has been made available to Brazil through April
1999.  To secure  funds from the IMF, in October 1998 the  Brazilian  government
announced  additional  austerity  measures  including  pension  plan  reform and
significant  spending cuts, which have been approved by the Brazilian  Congress.
As part of  these  additional  austerity  measures,  the  government  increased,
effective  in June 1999,  the  financial  transactions  tax (CPMF)  from 0.2% to
0.38%. This tax is levied on the value of all financial transactions,  including
bank  withdrawals,  checks,  and stock and fund  purchases.  Also,  effective in
January 1999,  the Brazilian  government  increased  the public  pension  system
contribution  by  corporations,  from 2% of revenue to 3% of revenue and for the
first time, subjected financial income,  including accrued intercompany interest
income,  to this tax. Despite these additional  austerity  measures,  in January
1999 the Brazilian government devalued the REAL and subsequently  eliminated the
established  trading band, thereby allowing the REAL to float freely against the
U.S. dollar.  These measures have had, and will have for the foreseeable future,
both  a  direct  and  indirect  impact  on  the  Company's   financial  results.
Indirectly, the austerity measures, in conjunction with high short-term interest
rates and  devaluation,  have  resulted in  tightening  of  consumer  credit and
increased  rates  of  unemployment,   causing  the  Company  to  have  increased
difficulty  in  generating  additional  sales and in reducing  rates of customer
delinquency.  Directly, these measures have reduced the Company's net revenue by
$70,000 in the first quarter

                                       11
<PAGE>

of 1999.  Soon after the 1997  austerity  measures were  initiated,  the Company
began to experience a significant  increase in customer delinquency rates which,
among  other  things,  resulted  in the  Company  significantly  increasing  its
provisions for doubtful  accounts and increasing  service  disconnections.  This
trend continued  throughout  1998, and the Company  anticipates  that this trend
will continue for the  foreseeable  future.  The Company has undertaken  several
steps to address the impact of the  deterioration in its operating  environment,
such as performing credit checks on potential new subscribers,  changing the way
it compensates its sales force to emphasize high quality sales and  implementing
cost  reduction  measures,  including a headcount  reduction.  In  addition,  as
previously  discussed  the  Company  has become  more  aggressive  in  canceling
delinquent  subscriber accounts.  There can be no assurance that the steps taken
by the Company or measures taken by the Brazilian government will be successful,
or that the  increase in  delinquent  payments and service  disconnections  will
abate.

YEAR 2000 COMPLIANCE

         GENERAL  DESCRIPTION  OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS
OF THE YEAR 2000 ON INFORMATION  TECHNOLOGY ("IT") AND NON-IT SYSTEMS.  The Year
2000 issue is the result of computer  programs  being  written  using two digits
rather than four to define the applicable  year.  Any of the Company's  computer
programs or hardware  that have  date-sensitive  software or embedded  chips may
recognize  a date using "00" as the year 1900  rather  than the year 2000.  This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions, send invoices, or engage in similar normal business activities.

         Based on recent  assessments,  the Company  determined  that it will be
required  to modify or  replace  certain  hardware  and  software  so that those
systems  will  properly  utilize  dates beyond  December  31, 1999.  The Company
presently  believes that with  modifications or replacements of certain existing
hardware and software,  the Year 2000 issue can be mitigated.  However,  if such
modifications  and replacements are not made, or are not completed  timely,  the
Year 2000 issue could have a material  adverse  impact on the  operations of the
Company.

         The  Company's  plan to  resolve  its Year  2000  issues  involves  the
following four phases: assessment,  remediation, testing and implementation.  To
date,  the Company has fully  completed its assessment of all systems that could
be  significantly  affected by the Year 2000  issue.  The  completed  assessment
indicated  that most of the Company's  significant IT systems could be affected,
particularly the Subscriber Management System ("SMS"), the accounting system and
video transmission system. However, based upon a review of the SMS and the video
transmission  system,  the Company  believes that its core  product,  television
programming,   will  not  require   remediation  to  be  Year  2000   compliant.
Accordingly,  the Company does not believe  that the Year 2000 issue  presents a
material  exposure as it relates to the  Company's  products.  In addition,  the
Company has gathered  information  about the Year 2000 compliance  status of its
significant suppliers and continues to monitor their compliance.

         STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE
FOR  COMPLETION  OF EACH  REMAINING  PHASE.  For its IT  exposures,  to date the
Company is approximately 75% complete on the remediation phase and has completed
all  necessary  reprogramming  for the SMS and video  transmission  system.  The
Company is currently  evaluating if any  reprogramming of the accounting  system
will be necessary  and expects to complete any  necessary  remediation  no later
than June 30, 1999.  Testing of the accounting system will commence  immediately
after  any  necessary  remediation  is  complete.  Other  systems,  such  as the
Company's  internal  network and electronic  mail system required no remediation
and have passed the testing phase successfully.

         NATURE AND LEVEL OF IMPORTANCE  OF THIRD PARTIES AND THEIR  EXPOSURE TO
THE YEAR 2000 ISSUE.  The  Company's  billing  system  interfaces  directly with
significant third party vendors (primarily banks) who provide electronic billing
services using credit cards and direct debits to customers'  bank accounts.  The
Company is in the process of working with third party vendors to ensure that the
Company's  systems  that  interface  directly  with third  parties are Year 2000
compliant by December 31, 1999. Each bank has a unique interface for both credit
cards and direct debit  transactions.  As a result, the Company is attempting to
create a  standard  interface  for all banks and has  offered  to  produce  this
interface  using its own  resources.  The Company is uncertain if all banks will
accept a  standard  interface  and  cannot  begin the  remediation  phase  until
determining if a single  solution can be utilized or if separate  solutions will
be required for each bank. In any event,  as each bank controls and dictates its


                                       12
<PAGE>

own unique  interface,  remediation is dependent  upon the individual  bank. The
Company  has no  means of  ensuring  that  these  interfaces  will be Year  2000
compliant and has prepared a contingency  plan in the event the  interfaces  are
not timely compliant.

         The Company has queried  its  significant  suppliers  that do not share
information  systems with the Company (external agents). To date, the Company is
not aware of any  external  agent with a Year 2000  issue that would  materially
impact the Company's  operations.  However, the Company has no means of ensuring
that  external  agents will be Year 2000  compliant.  The  inability of external
agents to complete their Year 2000 remediation process in a timely fashion could
materially  impact the Company.  The effect of non-compliance by external agents
is not determinable.

         COSTS.  The  Company  plans to  primarily  use  internal  resources  to
reprogram,  or replace,  test and implement the software and operating equipment
for Year  2000  modifications.  The  total  cost of the  Year  2000  project  is
estimated at $200,000.  To date, the Company has solely used internal,  existing
labor on the various phases of the Year 2000 project.

         RISKS.  Management of the Company believes it has an effective  program
in place to resolve the Year 2000 issue in a timely manner.  As noted above, the
Company has not yet completed all necessary phases of the Year 2000 program.  In
the event the Company does not complete any additional  phases,  the Company may
not be able to collect  payments  from  customers  using  direct debit or credit
cards and/or face delays in accounting and other management  reporting  systems.
In addition,  in the unlikely event that television program distributors are not
Year 2000  compliant,  the  Company  could be unable to receive  and  retransmit
television  programming  to its customers.  Further,  disruptions in the economy
generally resulting from Year 2000 issues could also materially adversely affect
the Company. The amount of any potential liability and/or lost revenue cannot be
reasonably estimated at this time.

         CONTINGENCY  PLANS.  The  Company  has  contingency  plans for  certain
critical applications and is working on such plans for others. These contingency
plans  involve,  among other actions,  billing all customers by invoice,  manual
workarounds and adjusting staffing as needed.


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company's primary market risk exposure is foreign currency exchange
rate risk  between  the U.S.  dollar and the  Brazilian  REAL due to the Company
having all of its operations based in Brazil,  and most of its revenues and some
of its expenses  denominated  in REAIS while  substantially  all of its debt and
many of its expenses and capital equipment needs are denominated in dollars.  In
addition, for operating purposes, the Company holds a significant portion of its
available cash in REAIS.

         The Company  manages its risk  exposure on its  available  cash held in
REAIS by purchasing,  from time to time,  foreign  currency  exchange  contracts
which have the  effect of  "locking-in"  a dollar  based  exchange  rate for the
Company's  cash held in Brazil.  The Company  believes that the cost of managing
risk exposure to its dollar-denominated debt and expenses is too high to warrant
an attempt at mitigating this risk.

         In an effort to protect against a possible devaluation of the REAL, the
Company entered into the following  foreign  currency hedge contracts which were
outstanding  as of March  31, 1999 (these  contracts  were  entered  into for
purposes other than trading purposes):


                                       13
<PAGE>

<TABLE>

--------------------------------------------------------------------------------------------------------------
<CAPTION>
CONTRACT VALUE R$         EXCHANGE RATE       PREMIUM %       % CDI       CONTRACT DATE    EXPIRATION DATE
<S>                        <C>                 <C>            <C>              <C>              <C>
R$20,000,000              R$1.3193/US$1       +0.5%           93%         Jan. 14, 1999    Jul. 13, 1999
R$17,000,000              R$1.50/US$1         +2.0%           100%        Jan. 15, 1999    Jul. 14, 1999
--------------------------------------------------------------------------------------------------------------
</TABLE>

The above  contracts  require  the Company to pay, on the  expiration  date,  an
amount equal to the calculated  interest (CDI--see below) on the contract value.
On the expiration  date,  the Company is to receive or pay an amount,  in REAIs,
calculated as follows:  the "Contract  Value R$" divided by the "Exchange  Rate"
times  (the  R$/US$  exchange  rate in  effect on the  expiration  date plus the
"Premium %") less the  "Contract  Value R$." If the Company  receives a net gain
from such a transaction,  it is required to pay 20% of the net gain in Brazilian
federal income tax.

"CDI" is the  CERTIFICADO DE DEPOSITO  INTERBANCARIO,  or the interbank  lending
rate within Brazil.

The Company has not entered into contracts for market risk sensitive instruments
for trading purposes.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

ITEM 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)  EXHIBITS

         27.      Financial Data Schedule.

         (b)  REPORTS ON FORM 8-K

         During the first quarter of 1999, the Company filed a Current Report on
Form 8-K on February 5, 1999,  pursuant to Item 5 thereof,  announcing  that the
Nasdaq Stock Market had  informed the Company that its  securities  were deleted
from listing on Nasdaq effective with the close of business on February 4, 1999.



                                       14
<PAGE>





                                   SIGNATURES

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

DATED:   May 13, 1999



                                   TV FILME, INC.
                                   ---------------------------------------------
                                   (Registrant)


                                   /S/ HERMANO STUDART LINS DE ALBUQUERQUE
                                   ---------------------------------------------
                                   Hermano Studart Lins de Albuquerque
                                   Chief Executive Officer (Principal
                                   Executive Officer)


                                   /S/ CARLOS ANDRE STUDART LINS DE ALBUQUERQUE
                                   ---------------------------------------------
                                   Carlos Andre Studart Lins de Albuquerque
                                   Acting Chief Financial Officer  (Principal
                                   Financial and Accounting Officer)



                                       15
<PAGE>



                                  EXHIBIT INDEX



NO.                      DESCRIPTION
---                      -----------
27                       Financial Data Schedule




































                                       16