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

                       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 June 30, 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 Identification Number)
Incorporation or Organization)

                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 August 12, 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 June 30, 1999 (Unaudited)................................        2

          Unaudited Consolidated Statements of Operations for the
          Six Months Ended June 30, 1998 and the Six Months Ended
          June 30, 1999................................................        3

          Unaudited Consolidated Statement of Changes in
          Stockholders' Equity at June 30, 1999........................        4

          Unaudited Consolidated Statements of Cash Flows for the
          Six Months Ended June 30, 1998 and June 30, 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..................................................       15


PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings............................................       16
ITEM 2.   Changes in Securities and Use of Proceeds....................       16

ITEM 3.   Defaults Upon Senior Securities..............................       16

ITEM 4.   Submission of Matters to a Vote of Security Holders..........       16

ITEM 5.   Other Information............................................       16

ITEM 6.   Exhibits and Reports on Form 8-K.............................       16

SIGNATURES




                                       1
<PAGE>

                                             PART 1 - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                  TV FILME, INC. AND SUBSIDIARIES
                                                    CONSOLIDATED BALANCE SHEETS

                                                                                    DECEMBER 31,             JUNE 30,
                                                                                        1998                   1999
                                                                                ---------------------   --------------------
                                                                                                            (UNAUDITED)
                                                                                              (IN THOUSANDS)
<S>                                                                             <C>                         <C>
ASSETS
Current assets:
     Cash and cash equivalents.............................                     $     57,492                $    43,071
     Accounts receivable, net..............................                            4,736                      2,732
     Supplies..............................................                            4,930                      3,545
     Prepaid expenses and other current assets.............                            2,560                      3,439
                                                                                ---------------------   --------------------
           Total current assets............................                           69,718                     52,787
Property, plant and equipment, net.........................                           50,974                     29,941
Debt issuance costs, net...................................                            4,731                      3,391
Other assets...............................................                            7,891                      5,166
                                                                                ---------------------   --------------------
           Total assets....................................                     $    133,314                $    91,285
                                                                                =====================   ====================

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
     Accounts payable......................................                     $      3,315                $     3,556
     Payroll and other benefits payable....................                            2,892                      1,643
     Accrued interest payable..............................                              751                      9,958
     Accrued liabilities and taxes payable.................                            4,533                      4,018
     Long-term debt in default - Note 4....................                               --                    140,000
                                                                                ---------------------   --------------------
          Total current liabilities........................                           11,491                    159,175
Deferred installation fees.................................                            3,590                      1,571
Long-term debt - Note 4....................................                          140,000                         --
Stockholders' equity:
     Cumulative translation adjustment.....................                           (3,877)                    (6,485)
     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)                  (108,741)
                                                                                ---------------------   --------------------
          Total stockholders' equity.......................                          (21,767)                   (69,461)
                                                                                ---------------------   --------------------
          Total liabilities and stockholders' equity.......                     $    133,314                $    91,285
                                                                                =====================   ====================

</TABLE>
                             See accompanying notes.


                                       2
<PAGE>

<TABLE>
<CAPTION>

                                                  TV FILME, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF OPERATIONS

                                                            (UNAUDITED)


                                                                       THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                            JUNE 30,                          JUNE 30,
                                                               ---------------------------------   ----------------------------
                                                                     1998              1999            1998            1999
                                                                ---------------    -------------  ------------    ------------
<S>                                                             <C>                <C>            <C>             <C>

Revenues...............................................         $   11,460         $  6,812       $  24,078       $  13,388
Operating costs and expenses:
    System operating - Note 2..........................              4,942            3,075          10,037           6,304
    Selling, general and administrative................              8,471            4,694          15,978           8,300
    Depreciation and amortization......................              5,349            3,728          10,650           7,760
                                                            ---------------    -------------    ------------    ------------
        Total operating costs and expenses.............             18,762           11,497          36,665          22,364
                                                            ---------------    -------------    ------------    ------------
        Operating loss.................................             (7,302)          (4,685)        (12,587)         (8,976)

Other income (expense):
    Interest and other expense - Note 5................             (4,727)          (4,761)         (9,449)        (10,633)
    Interest income....................................              3,053            1,788           4,744           3,931
                                                            ---------------    -------------    ------------    ------------
    Interest income (expense), net.....................             (1,674)          (2,973)         (4,705)         (6,702)
    Monetary loss......................................             (1,420)          (2,414)         (2,509)        (29,408)
                                                            ---------------    -------------    ------------    ------------
        Total other income (expense)...................             (3,094)          (5,387)         (7,214)        (36,110)
                                                            ---------------    -------------    ------------    ------------
Net loss...............................................        $   (10,396)       $ (10,072)      $ (19,801)      $ (45,086)
                                                            ===============    =============    ============    ============

Net loss per share, basic and diluted..................        $     (0.96)        $  (0.93)       $  (1.83)       $  (4.16)
                                                            ===============    =============    ============    ============
Weighted average number of shares of
    common stock and common stock
    equivalents outstanding............................             10,825           10,825          10,825          10,825
                                                            ===============    =============    ============    ============
</TABLE>

                             See accompanying notes.

                                       3
<PAGE>

<TABLE>
<CAPTION>

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

                                                            (UNAUDITED)

                                              FOR THE SIX MONTHS ENDED JUNE 30, 1999



                                       COMMON STOCK        ADDITIONAL        OTHER
                                 -------------------------   PAID-IN     COMPREHENSIVE   ACCUMULATED
                                    SHARES     PAR VALUE     CAPITAL         LOSS          DEFICIT          TOTAL
                                 ------------- ----------- ------------ ---------------- -------------  -------------
                                                            (IN THOUSANDS, EXCEPT SHARES)
<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................          --          --           --      (2,608)                 --        (2,608)
Net loss for the period........          --          --           --          --             (45,806)      (45,086)
                                 ------------- ----------- ------------ ---------------- -------------  -------------
BALANCE AT JUNE 30, 1999.......  10,824,594        $108      $45,657     $(6,485)          $(108,741)     $(69,461)
                                 ============= =========== ============ ================ =============  =============

</TABLE>
                             See accompanying notes.


                                        4
<PAGE>

<TABLE>
<CAPTION>

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

                                                            (UNAUDITED)

                                                                      SIX MONTHS ENDED JUNE 30,
                                                               ---------------------------------------
                                                                    1998                      1999
                                                               --------------            -------------

                                                                            (IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                            <C>                       <C>
Net loss.........................................              $   (19,801)              $   (45,086)
Adjustments to reconcile net loss to net cash
          used in operating activities:
      Depreciation and amortization..............                   10,836                     7,760
      Provision for losses on accounts receivable.......             4,662                       631
      Amortization of debt issuance costs........                      386                    (1,535)
      Decrease in deferred installation fees.....                   (1,471)                     (113)
      Monetary loss..............................                    2,509                    25,195
Changes in operating assets and liabilities:
      Increase in accounts receivable............                   (2,588)                     (920)
      Increase in supplies.......................                       (9)                     (167)
      Increase in prepaid expenses and other current
           assets................................                     (698)                   (1,809)
      Decrease in accrued interest receivable....                      220                         0
      (Increase) decrease in other assets........                     (810)                      746
      Decrease in pledged securities.............                    8,322                         0
      (Decrease) increase in accounts payable....                   (1,933)                    1,722
      Increase (decrease) in payroll and other benefits
           payable...............................                      817                      (634)
      Increase in accrued interest payable.......                        0                     9,207
      Increase (decrease) in accrued liabilities and
           taxes payable.........................                      131                      (131)
                                                               -----------               ------------
Net cash provided by (used for) operating activities....               573                    (5,134)
                                                               -----------               ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
      Property, plant and equipment..............                   (7,578)                   (1,731)
                                                               ------------              ------------
Net cash used in investing activities............                   (7,578)                   (1,731)
                                                               ------------              ------------

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..........                   (1,094)                   (7,556)
                                                               ------------              ------------
Net change in cash and cash equivalents..........                   (8,299)                  (14,421)
                                                               ------------              ------------
Cash and cash equivalents at beginning of period.                   80,975                    57,492
                                                               -----------               -----------
Cash and cash equivalents at end of period.......              $    72,676               $    43,071
                                                               ===========               ===========
</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,  Belem and
Campina Grande and has been awarded  licenses to operate pay television  systems
in six 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.  On August 12, 1999, the Company reached an agreement in principle
with a  committee  representing  holders of the  Company's  outstanding  12-7/8%
Senior Notes due 2004. Under the terms of the agreement in principle, the senior
noteholders  will receive a $25 million cash  payment and their  existing  notes
will be converted into (i) new Senior  Secured Notes in the aggregate  principal
amount of $35 million,  with a five year  maturity and interest of 12% per annum
(interest  payable-in-kind at the Company's option through the first 24 months),
and  (ii) 80% of the new  common  equity  of the  reorganized  company.  Current
management  will receive 15% of the new common equity,  and the existing  common
stockholders  of the  Company  will  receive  5% of  the  common  equity  of the
reorganized  company in exchange for their current stake. All outstanding  stock
options will be cancelled.  This  agreement in principle is subject to execution
of definitive  documentation,  and is to be effected  pursuant to a pre-arranged
plan which will require court approval  under Chapter 11 of the U.S.  Bankruptcy
Code.  While  the  Company  has  reached  an  agreement  in  principle  with the
noteholder  committee,  there can be no assurance that the  transaction  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 $317,000 at June 30, 1999. Charges to the allowance during
the three months ended June 30, 1999 were $332,000.

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 and six months ended
June  30,  1998  and 1999  were  approximately  $2,706,000  and  $1,933,000  and
$5,455,000 and $3,999,000, 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.


                                       6
<PAGE>

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
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 June 30,
1999,  210,000 options have expired in accordance  with their terms.  Subject to
the successful  completion of the Company's debt  restructuring (as described in
Notes 1 and 4), all outstanding options will be cancelled.

4.    LONG-TERM DEBT IN DEFAULT

         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-Intercontintental  Telecomunicacoes 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
June 30, 1999 it is unable to make any dividend payments.


                                       7
<PAGE>

         Under the  provisions  of the Senior  Note  Indenture,  the  Company is
required to make  semi-annual  interest  payments on June 15 and  December 15 of
each year to the  noteholders.  On June 15, 1999, the Company failed to make the
required interest payment, and did not make the payment within the subsequent 30
day grace period  allowable  under the terms of the  indenture,  which caused an
event of  default to occur.  While the  Company  has  reached  an  agreement  in
principle  with  a  committee  representing  holders  of  the  Senior  Notes  to
restructure  this  obligation (as described in Note 1), the  transaction has not
yet been  effected.  As a result  of this  event of  default,  the  Company  has
classified the Senior Notes as a current  liability in the accompanying  balance
sheet. The agreement in principle was reached in August 1999;  accordingly,  the
Company will write off the deferred  debt  issuance costs of $3.3 million in the
third quarter of 1999.

         The Company  believes that the Senior Notes,  as of June 30, 1999, were
trading at approximately 25% of the principal value.

5.    FOREIGN EXCHANGE CONTRACTS

         At December 31, 1998 and June 30, 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 June 30, 1999 expired in July 1999. In July 1999, the Company entered into an
additional $28.0 million of foreign  exchange  contracts which are due to expire
in September and October 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 June 30, 1999
totaled $3.1 million.

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATION
              -------------------------------------------------

         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 June 30
                                                       ---------------------------------------------------------------
                                                            1998      % of Revenue      1999        % of Revenue
                                                          --------    ------------    ---------     --------------
                                                        (In thousands, except subscriber, per share and share data)
<S>                                                    <C>               <C>        <C>                <C>

Revenue...........................................      $  11,460         100%       $   6,812          100%
Operating costs and expenses:
   System operating...............................          4,942          43%           3,075           45%
   Selling, general and administrative............          8,471          74%           4,694           69%
   Depreciation and amortization..................          5,349          47%           3,728           55%
                                                         ---------      --------      ---------        ------
        Total operating costs and expenses........         18,762         164%          11,497          169%
                                                         ---------      --------      ---------        ------
        Operating loss............................         (7,302)        (64%)         (4,685)         (69%)
Other income (expense):
   Interest and other expense.....................         (4,727)        (41%)         (4,761)         (70%)
   Interest  income...............................          3,053          27%           1,788           26%
                                                         ---------      --------       --------        ------
   Interest income (expense), net                          (1,674)        (15%)         (2,973)         (44%)
   Monetary loss..................................         (1,420)        (12%)         (2,414)         (35%)
                                                         ---------      --------      ---------        ------
         Total other income (expense).............         (3,094)        (27%)         (5,387)         (79%)
                                                         ---------      --------      ---------        ------
Net loss..........................................       $(10,396)        (91%)        (10,072)        (148%)
                                                         =========      ========      =========        ======
Net loss per share................................       $  (0.96)                    $  (0.93)
                                                         =========                    =========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................         10,825                       10,825
                                                         =========                    =========
Other Data:
   EBITDA (a).....................................      $  (1,953)                    $   (957)
                                                        ==========                    =========
   Number of subscribers at end of period ........        111,090                       74,271
                                                        ==========                    =========
   Number of operating systems at end of period...              3                            4
                                                        ==========                    =========
   Exchange rate (R $: US $) at end of period.....     1.1569 : 1                    1.7695 : 1
                                                       ===========                   ==========
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>

                                                                          Six Months Ended June 30
                                                       ---------------------------------------------------------------
                                                            1998        % of Revenue     1999         % of Revenue
                                                          -------       -------------  --------       ---------------
                                                        (In thousands, except subscriber, per share and share data)
<S>                                                    <C>                 <C>         <C>                <C>

Revenue...........................................      $  24,078            100%       $  13,388          100%
Operating costs and expenses:
   System operating...............................         10,037             42%           6,304           47%
   Selling, general and administrative............         15,978             66%           8,300           62%
   Depreciation and amortization..................         10,650             44%           7,760           58%
                                                        ----------         ---------    ---------        ------
        Total operating costs and expenses........         36,665            152%          22,364          167%
                                                        ----------         ---------    ---------        ------
         Operating loss...........................        (12,587)           (52%)         (8,976)         (68%)
Other income (expense):
  Interest and other expense......................         (9,449)           (39%)        (10,633)         (79%)
  Interest and other income.......................          4,744             20%           3,931           29%
                                                        ---------          ---------    ---------        ------
  Interest income (expense), net..................         (4,705)           (20%)         (6,702)         (50%)
  Monetary loss...................................         (2,509)           (10%)        (29,408)        (220%)
                                                        ----------         ---------    ----------       -------
      Total other income (expense), net...........         (7,214)           (30%)        (36,110)        (270%)
                                                        ----------         ---------    ----------       -------
Net loss..........................................      $ (19,801)           (82%)        (45,086)        (337%)
                                                        ==========         =========    ==========       =======
Net loss per share................................      $   (1.83)                      $   (4.16)
                                                        ==========                      ==========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................         10,825                          10,825
                                                        =========                       =========
Other Data:
   EBITDA (a).....................................      $  (1,957)                      $  (1,216)
                                                        ==========                      =========
   Number of subscribers at end of period ........        111,090                          74,271
                                                        =========                       =========
   Number of operating systems at end of period...              3                               4
                                                        =========                       =========
   Exchange rate (R $: US $) at end of period.....     1.1569 : 1                      1.7695 : 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.

         NET LOSS.  For the three  months  ended June 30,  1999  compared to the
three months ended June 30, 1998, net loss  decreased to $(10.1)  million versus
$(10.4)  million,  or 3%,  primarily  due to a 36% decrease in  operating  loss,
offset by  reductions  in interest  income and an increase in recorded  monetary
loss.  Net loss for the six months  ended June 30, 1999  increased  from $(19.8)


                                       9
<PAGE>

million to $(45.1)  million,  or 128%,  primarily due to an increase in recorded
monetary loss caused by the significant devaluation of the REAL in January 1999.

         REVENUES.  For the three  months  ended June 30,  1999  compared to the
three months ended June 30, 1998,  revenues decreased by 41%, primarily due to a
49% average  devaluation of the REAL against the U.S.  dollar.  Revenues for the
six months ended June 30, 1999 decreased by 44% compared to the six months ended
June 30, 1998,  due primarily to a 53%  devaluation of the REAL against the U.S.
dollar.  In both cases,  the revenue  decrease was partially  offset by revenues
from the Company's proprietary premium channel and high-speed Internet service.

         SYSTEM  OPERATING  EXPENSES.  For the three  months ended June 30, 1999
compared to the three  months  ended June 30, 1998,  system  operating  expenses
decreased by 38%, primarily due to a 49% average devaluation of the REAL against
the U.S.  dollar.  System  operating  expenses for the six months ended June 30,
1999 decreased by 37%, compared to the six months ended June 30, 1998, primarily
due to a 53% average  devaluation of the REAL against the U.S.  dollar.  In both
cases,  the  decrease  in system  operating  expenses  was  partially  offset by
increases  in  costs  associated  with  a  layoff  of  approximately  25% of the
Company's work force and  programming  costs,  most of which are  denominated in
U.S. dollars.

         SELLING,  GENERAL AND ADMINISTRATIVE  ("SG&A") EXPENSES.  For the three
months  ended June 30, 1999  compared to the three  months  ended June 30, 1998,
SG&A expenses decreased by 45% primarily due to a 49% average devaluation of the
REAL against the U.S. dollar.  SG&A expenses for the six month period ended June
30,  1999  decreased  by 48%  compared  to the six months  ended June 30,  1998,
primarily due to a 53% average  devaluation of the REAL against the U.S. dollar.
In both cases,  expense  reductions  in  marketing,  bank fees and bad debt were
offset by approximately  $820,000 in costs associated with the Company's attempt
to complete a debt restructuring.

         DEPRECIATION AND AMORTIZATION. For the three months ended June 30, 1999
compared to the three months ended June 30, 1998,  depreciation and amortization
decreased by 30%, primarily due to a 49% average devaluation of the REAL against
the U.S.  dollar.  Depreciation  and amortization for the six month period ended
June 30, 1999  decreased  by 27% compared to the six months ended June 30, 1998,
primarily due to a 53% average devaluation of the REAL against the U.S. dollar.

         INTEREST  AND OTHER  EXPENSE.  For the three months ended June 30, 1999
compared to the three months ended June 30, 1998,  interest expense increased by
1%.  Interest  expense  increased  for the six month  period ended June 30, 1999
increased by 13% compared to the six months ended June 30, 1998,  primarily  due
to realized losses on hedge contracts which expired in January 1999.

         INTEREST  INCOME.  For the three months ended June 30, 1999 compared to
the  three  months  ended  June 30,  1998,  interest  income  decreased  by 41%,
primarily due to a decrease in the average cash balance  between the two periods
of 50%.  Interest  income for the six month period ended June 30, 1999 decreased
by 17%  compared  to the six months  ended  June 30,  1998,  primarily  due to a
decrease in the  average  cash  balance  between the two periods of 35%. In both
cases,  the  decrease  was  partially  offset  by the  Company  holding a higher
proportion  of  its  cash  balance  in  Brazil,   which  enabled  it  to  obtain
significantly higher rates of return.

         MONETARY LOSS. Due to its net  dollar-denominated  liability  position,
the Company generates monetary losses in any reporting period in which the value
of the REAL depreciates in relation to the value of the U.S. dollar.

EVENT OF DEFAULT ON SENIOR NOTES

         Under the  provisions  of the Senior  Note  indenture,  the Company was
required to make a semi-annual  interest payment on June 15, 1999; however,  the
Company  failed to make this  payment  which caused an event of default upon the
expiration of the 30 day grace period  permitted under the indenture.  While the
Company has reached an  agreement  in  principle  with a committee  representing
holders of the Senior Notes to restructure this obligation,  the transaction has
not yet been effected and there can be no assurance that the transaction will be
completed  successfully.  The  Company  does  not  expect  to make  the past due
interest payment, or any future interest payments,  on the currently outstanding
Senior Notes.


                                       10
<PAGE>

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 June 30,  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 June 30,  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
reclassifying  its Senior Notes as a current liability (see "Event of Default on
Senior  Notes"),  the Company had negative  working  capital at June 30, 1999 of
$106.4 million.  Net cash used in operating  activities for the six months ended
June 30, 1999 was $5.1 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.  On August 12,  1999,  the  Company  reached an
agreement in principle  with a committee  representing  holders of the Company's
outstanding  12-7/8% Senior Notes due 2004.  Under the terms of the agreement in
principle,  the senior  noteholders  will receive a $25 million cash payment and
their  existing notes will be converted into (i) new Senior Secured Notes in the
aggregate  principal  amount  of $35  million,  with a five  year  maturity  and
interest of 12% per annum  (interest  payable-in-kind  at the  Company's  option
through  the  first 24  months),  and (ii) 80% of the new  common  equity of the
reorganized  company.  Current  management  will  receive  15% of the new common
equity,  and the existing common  stockholders of the Company will receive 5% of
the common  equity of the  reorganized  company in  exchange  for their  current
stake.  All  outstanding  stock  options will be  cancelled.  This  agreement in
principle  is subject to  execution of  definitive  documentation,  and is to be
effected pursuant to a pre-arranged plan which will require court approval under
Chapter  11 of the U.S.  Bankruptcy  Code.  While the  Company  has  reached  an
agreement in principle with the noteholder committee,  there can be no assurance
that the transaction will be completed successfully.

         The Company made capital  expenditures  of  approximately  $1.7 million
during the six months  ended  June 30,  1999.  Such  capital  expenditures  were
financed  with the  proceeds  from  the  Senior  Notes  offering  and from  cash
generated from the Company's operations.


                                       11
<PAGE>

         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 paid an aggregate of $5.0 million
for these seven  licenses,  and launched its operation in Campina  Grande during
the second quarter of 1999. 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  obligations  pursuant  to the
agreement  in  principle  with  the  committee  of  noteholders   and  the  cash
requirements  for its four existing systems and six new markets for at least the
next twelve months.  As of June 30, 1999, of the Company's  approximately  $43.1
million in cash and cash  equivalents,  approximately  $15.5  million  (36%) 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.

         As described in Notes 1 and 4 to the financial statements,  the Company
is in default on its Senior  Notes and has  reached an  agreement  in  principle
regarding  settlement of this obligation and a  redistribution  of the Company's
ownership  interests.  This plan will require court approval under Chapter 11 of
the U.S. Bankruptcy Code. The effect of this proposed settlement,  if finalized,
on the Company's future liquidity cannot be determined at this time.

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
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


                                       12
<PAGE>

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. 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,  effective in June 1999,  the
government  increased 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 increased the Company's net loss by
$165,000 in the second quarter 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.


                                       13
<PAGE>

         Based on its assessments,  the Company determined that it was necessary
to modify or replace  certain  hardware and software so that those  systems will
properly utilize dates beyond December 31, 1999. The Company presently  believes
it has made the necessary  modifications  or  replacements  of certain  existing
hardware  and  software  to  mitigate  the Year  2000  issue.  However,  if such
modifications  and  replacements  are not  sufficient  to mitigate the Year 2000
issue, it could have a material adverse impact on the operations of the Company.

         The  Company's  plan to  resolve  its Year  2000  issues  involved  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  100%  complete  on the  remediation  phase  and has  completed  all
necessary  reprogramming for the SMS, accounting and video transmission systems.
These systems have passed the testing  phase and no further  action is expected.
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  continues to work 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.  While the  Company has  ascertained  that the data
transmitted  to each bank is not date  sensitive and therefore  does not require
remediation,  as each bank  controls  and  dictates  its own  unique  interface,
further  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 primarily used 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  was  approximately
$100,000.  The Company used only 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 and has resolved the Year 2000 issue to the extent  possible.  However,
as stated above,  the Company may not be able to collect payments from customers
using direct debit or credit  cards.  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.


                                       14
<PAGE>

         CONTINGENCY  PLANS. The Company has contingency  plans for all critical
applications.  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 June 30, 1999 (these  contracts were entered into for purposes
other than trading purposes):

<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>

Upon expiration of the above  contracts,  the Company entered into the following
new foreign currency hedge contracts (these contracts were also entered into for
purposes other than trading purposes):

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
CONTRACT VALUE R$         EXCHANGE RATE       PREMIUM %       % CDI       CONTRACT DATE    EXPIRATION DATE
<S>                       <C>                 <C>             <C>         <C>              <C>
R$29,104,000              R$1.8190/US$1       +2.0%           100%        Jul. 13, 1999    Sept. 13, 1999
R$21,828,000              R$1.8190/US$1       +1.0%           100%        Jul. 13, 1999    Oct. 13, 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.


                                       15
<PAGE>

                           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.

         The Company  currently has  outstanding  $140 million of 12-7/8% Senior
Notes due 2004.  Under the provisions of the Senior Note Indenture,  the Company
is required to make semi-annual  interest payments on June 15 and December 15 of
each year to the  noteholders.  On June 15, 1999, the Company failed to make the
required interest payment, and did not make the payment within the subsequent 30
day grace period  allowable  under the terms of the  indenture,  which caused an
event of default to occur.  Total  arrearage  as of the date of this  report was
$9,012,500,  which  represents the amount of the unpaid interest due on June 15,
1999.

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

         No  reports on Form 8-K were filed by the  Company  during the  quarter
ended June 30, 1999.


                                       16
<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:   August 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)


                                       17
<PAGE>



                                  EXHIBIT INDEX



NO.        DESCRIPTION

27         Financial Data Schedule


                                       18