================================================================================
                       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 September 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 November 15, 1999

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<PAGE>



                                 TV FILME, INC.

                                      INDEX



PART I.       FINANCIAL INFORMATION                                    PAGE NO.

ITEM 1.   Financial Statements

          Consolidated Balance Sheets as of December 31, 1998
          and September 30, 1999 (Unaudited)........................       2

          Unaudited  Consolidated  Statements  of Operations
          for the Three and Nine Months Ended  September 30,
          1998 and the Three and Nine Months Ended
          September 30,1999 ........................................       3

          Unaudited  Consolidated  Statement  of  Changes in
          Stockholders' Equity for the Nine Months Ended
          September 30, 1999 .......................................       4


          Unaudited Consolidated Statements of Cash Flows for
          the Nine Months Ended September 30, 1998 and
          September 30, 1999........................................       5

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

ITEM 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.......................       9

ITEM 3.   Quantitative and Qualitative Disclosures About
          Market Risk...............................................      16


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............................     17

ITEM 4.   Submission of Matters to a Vote of Security Holders........     17

ITEM 5.   Other Information..........................................     17

ITEM 6.   Exhibits and Reports on Form 8-K...........................     17

SIGNATURES


                                       1
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         TV FILME, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                     DECEMBER 31,           SEPTEMBER 30,
                                                                         1998                   1999
                                                                 ---------------------   --------------------
                                                                                             (UNAUDITED)
                                                                               (IN THOUSANDS)
<S>                                                             <C>                      <C>
ASSETS
Current assets:
     Cash and cash equivalents.............................      $     57,492                 $   44,406

     Accounts receivable, net..............................             4,736                      2,164
     Supplies..............................................             4,930                      2,742
     Prepaid expenses and other current assets.............             2,560                      4,569
                                                                 ---------------------   --------------------
           Total current assets............................            69,718                     53,881
Property, plant and equipment, net.........................            50,974                     25,272
Debt issuance costs, net...................................             4,731                         --
Other assets...............................................             7,891                      4,588
                                                                 ---------------------   --------------------
           Total assets....................................      $    133,314                $   83,741
                                                                 =====================   ====================

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
     Accounts payable......................................      $      3,315                $     4,028
     Payroll and other benefits payable....................             2,892                      1,822
     Accrued interest payable..............................               751                     14,464
     Accrued liabilities and taxes payable.................             4,533                      6,947
     Long-term debt in default - Note 6....................                --                    140,000
                                                                 ---------------------   --------------------
          Total current liabilities........................            11,491                    167,261

Deferred installation fees.................................             3,590                      1,111
Long-term debt - Note 6....................................           140,000                         --

Stockholders' equity:
     Cumulative translation adjustment.....................            (3,877)                    (4,920)
     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)                  (125,476)
                                                                 ---------------------   --------------------
          Total stockholders' equity.......................           (21,767)                   (84,631)
                                                                 ---------------------   --------------------
          Total liabilities and stockholders' equity.......      $    133,314                 $   83,741
                                                                 =====================   ====================
</TABLE>
                             See accompanying notes.

                                       2
<PAGE>

                         TV FILME, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                    SEPTEMBER 30,                      SEPTEMBER 30,
                                                           ---------------------------------    ----------------------------
                                                                 1998              1999            1998            1999
                                                            ---------------    -------------    ------------    ------------

<S>                                                         <C>                <C>            <C>             <C>
Revenues...............................................         $   11,049         $  6,095       $  35,127       $  19,483
Operating costs and expenses:
    System operating - Note 2..........................              5,178            2,850          15,214           9,154
    Selling, general and administrative................              6,279            5,458          22,257          13,759
    Depreciation and amortization......................              5,845            3,443          16,496          11,202

                                                            ---------------    -------------    ------------    ------------
        Total operating costs and expenses.............             17,302           11,751          53,967          34,115
                                                            ---------------    -------------    ------------    ------------

        Operating loss.................................            (6,253)         (65,656)        (18,840)        (14,632)

Other income (expense):
    Interest and other expense - Note 7................             (4,793           (6,167)        (14,242)        (16,799)
    Interest and other income..........................              2,680            1,580           7,424           5,510
                                                            ---------------    -------------    ------------    ------------
    Interest and other income (expense), net...........            (2,113)          (4,587)         (6,818)        (11,289)
    Currency exchange loss.............................            (1,080)          (6,492)         (3,589)        (35,900)
                                                            ---------------    -------------    ------------    ------------

        Total other income (expense)...................            (3,193)         (11,079)        (10,407)        (47,189)
                                                            ---------------    -------------    ------------    ------------

Net loss...............................................         $  (9,446)       $ (16,735)      $ (29,247)      $ (61,821)
                                                            ===============    =============    ============    ============

Net loss per share, basic and diluted..................        $    (0.87)        $  (1.55)       $  (2.70)       $  (5.71)
                                                            ===============    =============    ============    ============

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>




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

                                   (UNAUDITED)

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999


<TABLE>
<CAPTION>



                                       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................          --          --           --      (1,043)                 --        (1,043)
Net loss for the period........          --          --           --          --             (61,821)      (61,821)
                                 ------------- ----------- ------------ ---------------- -------------  -------------

BALANCE AT SEPTEMBER 30, 1999..  10,824,594        $108      $45,657     $(4,920)          $(125,476)     $(84,631)
                                 ============= =========== ============ ================ =============  =============

</TABLE>










                             See accompanying notes.

                                       4
<PAGE>


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

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                     -------------------------------
                                                           1998           1999
                                                     --------------   --------------
                                                             (IN THOUSANDS)
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ..............................................   $(29,247)   $(61,821)
Adjustments to reconcile net loss to net cash
          used in operating activities:
      Depreciation and amortization ...................     16,804      10,885
      Provision for losses on accounts receivable .....      5,845       1,140
      Amortization of debt issuance costs .............      1,355       1,405
      Decrease in deferred installation fees ..........     (2,317)       (234)
      Currency exchange loss ..........................      3,589      31,687
Changes in operating assets and liabilities:
      Increase in accounts receivable .................     (3,178)     (1,253)
      (Increase) decrease in supplies .................       (233)        370
      Increase in prepaid expenses and other current ..     (1,010)     (3,098)
assets
      Decrease in accrued interest receivable .........         95        --
      (Increase) decrease in other assets .............     (1,313)        956
      Decrease in pledged securities ..................      8,322        --
      (Decrease) increase in accounts payable .........     (5,363)      2,448
      Increase (decrease) in payroll and other benefits
           payable ....................................      1,383        (349)
      Increase in accrued interest payable ............      4,506      13,713
      (Decrease)  increase in accrued liabilities and
taxes payable .........................................        (42)      2,864
                                                          --------    --------
Net cash used for operating activities ................       (804)     (1,287)
                                                          --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions:
      Property, plant and equipment ...................    (10,122)     (2,845)
                                                          --------    --------
Net cash used in investing activities .................    (10,122)     (2,845)
                                                          --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in payables to affiliates ....................       (200)       --
                                                          --------    --------
Net cash used for financing activities ................       (200)       --
                                                          --------    --------
Effect of exchange rate changes on cash ...............     (2,295)     (8,954)
                                                          --------    --------
Net change in cash and cash equivalents ...............    (13,421)    (13,086)
                                                          --------    --------
Cash and cash equivalents at beginning of period ......     80,975      57,492
                                                          --------    --------
Cash and cash equivalents at end of period ............   $ 67,554    $ 44,406
                                                          ========    ========
</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.

     As discussed in Note 6, on June 15,  1999,  the Company  failed to make the
required  interest  payment on its Senior Notes which caused an event of default
to occur. In connection therewith,  the Company 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. In addition,  the Central Bank of Brazil
must  approve  the  proposed  restructuring.  In the  process of  reviewing  the
proposed  restructuring,  the Central  Bank may examine the  original  approvals
granted when the Secured  Notes were issued and there is a risk that the Central
Bank may  impose  charges or  additional  taxes  with  respect  to the  original
transaction  relating  to the  Secured  Notes.  There can be no  assurance  that
approval  of the  restructuring  will be given or as to whether  any  charges or
taxes may be imposed. Moreover, charges or taxes imposed by the Central Bank may
result in the  restructuring  not being feasible and may have a material adverse
effect on the Company's financial condition and results of operations. While the
Company has reached an  agreement in principle  with the  noteholder  committee,
there can be no assurance that the proposed  restructuring  transaction  will be
completed successfully.

         B.  METHOD OF PRESENTATION

         The  unaudited  consolidated  financial  statements of the Company have
been prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP") for interim financial information.
The Company's reporting currency is the U.S dollar.

         In the opinion of management,  all adjustments considered necessary for
a fair presentation of the unaudited interim  consolidated  financial statements
have been  included  and are of a normal  recurring  nature.  These  statements,
however,  do not include all information and footnotes  necessary for a complete
presentation  of financial  position,  results of  operations  and cash flows in
conformity  with generally  accepted  accounting  principles.  These  statements
should  be  read  in  conjunction  with  the  Company's  consolidated  financial
statements  for the year  ended  December  31,  1998 set forth in the  Company's
Annual Report on Form 10-K filed with the  Securities  and Exchange  Commission.
The results of  operations  for the  interim  periods  presented  herein are not
necessarily indicative of the results to be expected for the full year.

         The  balance  sheet at  December  31,  1998 has been  derived  from the
audited  financial  statements  at that  date but does  not  include  all of the
information  and  footnotes   required  by  U.S.  GAAP  for  complete  financial
statements.

         As discussed  above,  the Company is in default on its Senior Notes and
has reached an agreement in principle to  restructure  its debt and equity.  The
ultimate  resolution  of  this  matter  could  affect  the   recoverability  and
classification of assets or the amounts and  classification of liabilities.  The
financial  statements do not include any  adjustments  which may result from the
ultimate resolution of this matter.

         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

                                       6
<PAGE>


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 $603,000 at September  30, 1999.  Charges to the allowance
during the three months ended September 30, 1999 were $224,000.

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 nine months ended
September 30, 1998 and 1999 were  approximately  $2,700,000  and  $1,800,000 and
$8,100,000 and $5,800,000, 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.   COMPREHENSIVE LOSS

         The  calculation  of  comprehensive  loss for the three months and nine
months ended September 30, 1998 and 1999 is as follows:

                             (In thousands)
<TABLE>
<CAPTION>

                                                                  Three Months Ended                 Nine Months Ended
                                                                    September 30,                      September 30,
                                                           ---------------------------------    ----------------------------
                                                                 1998              1999            1998            1999
                                                            ---------------    -------------    ------------    ------------

<S>                                                         <C>                <C>              <C>             <C>
Net Loss...............................................        $   (9,446)       $ (16,735)       $(29,247)       $(61,821)
Foreign currency translation adjustments...............            (1,712)           1,760          (2,678)         (1,043)
                                                            ===============    =============    ============    ============
Comprehensive loss.....................................        $  (11,158)       $ (14,975)       $(31,925)       $(62,864)
                                                            ===============    =============    ============    ============
</TABLE>

Accumulated   comprehensive  loss,   consisting  entirely  of  foreign  currency
translation   adjustments,  is $4,920  at  September  30,  1999  and  $3,877  at
December 30, 1998.

4.   CASH EQUIVALENTS

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


5.   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

                                       7
<PAGE>



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:

                               NUMBER OF          EXERCISE
           DATE                 OPTIONS             PRICE
         ---------             ---------          --------
         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


         Of the total number of options which were  exercisable  as of September
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 6), all outstanding options will be cancelled.

6.    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-Intercontinental  Telecomunica(sigma)oes
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.
Until the third  quarter  of 1999,  debt  issuance  costs were  capitalized  and
amortized  over the period of the debt under the  effective  yield  method  (see
below).

         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
September 30, 1999 it is unable to make any dividend payments.

         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 wrote 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 September 30, 1999,
were trading at approximately 25% of the principal value.

                                       8
<PAGE>

7.    FOREIGN EXCHANGE CONTRACTS

         At December  31, 1998 and  September  30,  1999,  the Company had $24.1
million and $28.0 million,  respectively,  of foreign  exchange  contracts.  The
Company  regularly enters into such contracts,  typically with a duration of six
months or less.  Of the contracts  held at September 30, 1999,  one contract for
$12.0 million  expired in October 1999 and the other  contract for $16.0 million
will expire in December 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 September 30,
1999 totaled $580,000.

8.   INCOME TAXES

     The Company has not  recognized  any future  income tax benefit for its net
operating loss carryforwards in excess of net deferred tax liabilities, as it is
more  likely  than not that it will not be able to  realize a  benefit  for such
losses in the future.  Under Brazilian law, net operating  losses may be carried
forward for an unlimited period of time.


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 September 30
                                                            1998        % OF REVENUE        1999        % OF REVENUE
                                                        ------------------------------------------------------------
                                                        (In thousands, except subscriber, per share and share data)

<S>                                                     <C>                  <C>        <C>                <C>
Revenue...........................................      $  11,049            100%       $   6,095            100%
Operating costs and expenses:
   System operating...............................          5,178             47%           2,850             47%
   Selling, general and administrative............          6,279             57%           5,458             90%
   Depreciation and amortization..................          5,845             53%           3,443             56%
                                                        ---------          ---------    ---------          ------
        Total operating costs and expenses........         17,302            157%          11,751            193%
                                                        ---------          ---------    ---------          ------
        Operating loss............................         (6,253)           (57%)         (5,656)           (93%)
Other income (expense):
   Interest and other expense.....................         (4,793)           (43%)         (6,167)          (101%)
   Interest and other income......................          2,680             24%           1,580             26%
                                                        ---------          ---------    ---------          ------
   Interest and other income (expense), net.......         (2,113)           (19%)         (4,587)           (75%)
   Currency exchange loss.........................         (1,080)           (10%)         (6,492)          (107%)
                                                        ----------         ---------    ----------         -------
         Total other income (expense).............         (3,193)           (29%)        (11,079)          (182%)
                                                        ----------         ---------    ----------         -------
Net loss..........................................      $  (9,446)           (85%)      $  (16,735)         (275%)
                                                        ==========         =========    ==========         =======

                                       9
<PAGE>


Net loss per share................................      $   (0.87)                      $   (1.55)
                                                        ==========                      ==========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................         10,825                           10,825
                                                        =========                       ==========
Other Data:
   EBITDA (a).....................................      $    (408)                      $   (2,213)
                                                        =========-                      ==========
   Number of subscribers at end of period ........         93,273                           73,162
                                                        =========                       ==========
   Number of operating systems at end of period...              3                                4
                                                        =========                       ==========
   Exchange rate (R $: US $) at end of period.....      1.1856 : 1                      1.9223 : 1
                                                        ==========                      ==========

</TABLE>
<TABLE>
<CAPTION>

                                                                       Nine Months Ended September 30
                                                        1998        % OF REVENUE        1999         % OF REVENUE
                                                        ----------------------------------------------------------
                                                        (In thousands, except subscriber, per share and share data)

<S>                                                    <C>                 <C>         <C>                 <C>
Revenue...........................................     $   35,127            100%       $  19,483            100%
Operating costs and expenses:
   System operating...............................         15,214             43%           9,154             47%
   Selling, general and administrative............         22,257             63%          13,759             71%
   Depreciation and amortization..................         16,496             47%          11,202             57%
                                                        ----------         ---------    ---------          ------
        Total operating costs and expenses........         53,967            154%          34,115            175%
                                                        ----------         ---------    ---------          ------
         Operating loss...........................        (18,840)           (54%)        (14,632)           (75%)
Other income (expense):
  Interest and other expense......................        (14,242)           (41%)        (16,799)           (86%)
  Interest and other income.......................          7,424             21%           5,510             28%
                                                        ---------          ---------    ---------          ------
  Interest and other income (expense), net........         (6,818)           (19%)        (11,289)           (58%)
  Currency exchange loss..........................         (3,589)           (10%)        (35,900)          (184%)
                                                        ----------         ---------    ----------         -------
      Total other income (expense), net...........        (10,407)           (30%)        (47,189)          (242%)
                                                        ----------         ---------    ----------         -------
Net loss..........................................      $ (29,247)           (83%)      $ (61,821)          (317%)
                                                        ==========         =========    ==========         =======
Net loss per share................................      $   (2.70)                      $   (5.71)
                                                        ==========                      ==========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................         10,825                          10,825
                                                        =========                       =========
Other Data:
   EBITDA (a).....................................      $  (2,344)                      $  (3,430)
                                                        ==========                      =========
   Number of subscribers at end of period ........         93,273                          73,162
                                                        =========                       =========
   Number of operating systems at end of period...              3                               4
                                                        =========                       =========
   Exchange rate (R $: US $) at end of period.....     1.1856 : 1                      1.9223 : 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  September  30, 1999  compared to the
three months ended  September 30, 1998,  net loss  increased to $(16.7)  million
versus $(9.4)  million,  or 77%,  primarily due to the write-off of  capitalized
bond  issuance  costs,  reduced  interest  income and an  increase  in  recorded
currency  exchange loss,  partially  offset by a decrease in operating loss. Net
loss for the nine months ended  September 30, 1999 increased to $(61.8)  million
from $(29.2)  million,  or 111%,  primarily due to the write-off of  capitalized
bond  issuance  costs,  reduced  interest  income and an  increase  in  recorded
currency exchange loss, partially offset by a decrease in operating loss.

         REVENUES. For the three months ended September 30, 1999 compared to the
three months ended September 30, 1998,  revenues decreased by 45%, primarily due
to an average  devaluation of the REAL of 62% between the periods.  Revenues for
the nine months ended  September 30, 1999  decreased by 45% compared to the nine

                                       10
<PAGE>


months ended September 30, 1998, due primarily to an average  devaluation of the
REAL of 57%  between  the  periods.  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  September 30,
1999  compared to the three months ended  September 30, 1998,  system  operating
expenses decreased by 45%,  primarily due to an average  devaluation of the REAL
of 62% between the periods.  System operating expenses for the nine months ended
September 30, 1999 decreased by 40%, compared to the nine months ended September
30, 1998, primarily due to an average devaluation of the REAL of 57% between the
periods.  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 September 30, 1999 compared to the three months ended September 30,
1998, SG&A expenses decreased by 13%, primarily due to an average devaluation of
the REAL of 62% between the  periods.  SG&A  expenses  for the nine month period
ended  September  30, 1999  decreased  by 38%  compared to the nine months ended
September 30, 1998,  primarily due to an average  devaluation of the REAL of 57%
between the periods.  In both cases, the decrease in SG&A expenses was partially
offset by increases in: costs associated with a layoff of  approximately  25% of
the Company's workforce; debt restructuring costs ($670,000 in the third quarter
of 1999 and $1.5 million during 1999);  an increase in bank charges due to a new
financial  transactions tax implemented in Brazil in July 1999; and,  additional
rents paid for office and  transmission  space in cities  where the  Company has
been awarded new licenses.

         DEPRECIATION AND AMORTIZATION. For the three months ended September 30,
1999  compared to the three months ended  September 30, 1998,  depreciation  and
amortization  decreased by 41%,  primarily due to an average  devaluation of the
REAL of 62% between the  periods.  Depreciation  and  amortization  for the nine
month  period  ended  September  30, 1999  decreased by 32% compared to the nine
months ended September 30, 1998,  primarily due to an average devaluation of the
REAL of 57% between the periods. In both cases, the decrease in depreciation and
amortization was partially offset by increases in depreciation due to additional
capitalized installation costs during the respective periods.

         INTEREST AND OTHER  EXPENSE.  For the three months ended  September 30,
1999  compared to the three months ended  September 30, 1998,  interest  expense
increased by 29%  primarily due to the  write-off of  capitalized  debt issuance
costs,  offset in part by hedge contract  gains.  Interest  expense for the nine
month  period  ended  September  30, 1999  increased by 18% compared to the nine
months ended  September 30, 1998,  primarily due to the write-off of capitalized
debt issuance costs, offset in part by hedge contract gains.

         INTEREST AND OTHER  INCOME.  For the three months ended  September  30,
1999  compared to the three months ended  September  30, 1998,  interest  income
decreased  by 41%,  primarily  due to a decrease  in the  average  cash  balance
between  the two  periods.  Interest  income  for the nine  month  period  ended
September 30, 1999 decreased by 26% compared to the nine months ended  September
30, 1998,  primarily  due to a decrease in the average cash balance  between the
two periods.  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.

         CURRENCY  EXCHANGE  LOSS. Due to its net  dollar-denominated  liability
position, the Company generates currency exchange 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 (see Notes 1 and 6),
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.


                                       11
<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 September 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 September 30, 1999
of $113.4  million.  Net cash used in operating  activities  for the nine months
ended September 30, 1999 was $1.3 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. In addition,  the Central Bank of Brazil
must  approve  the  proposed  restructuring.  In the  process of  reviewing  the
proposed  restructuring,  the Central  Bank may examine the  original  approvals
granted when the Secured  Notes were issued and there is a risk that the Central
Bank may  impose  charges or  additional  taxes  with  respect  to the  original
transaction  relating  to the  Secured  Notes.  There can be no  assurance  that
approval  of the  restructuring  will be given or as to whether  any  charges or
taxes may be imposed. Moreover, charges or taxes imposed by the Central Bank may
result in the  restructuring  not being feasible and may have a material adverse
effect on the Company's financial condition and results of operations. While the
Company has reached an  agreement in principle  with the  noteholder  committee,
there can be no assurance that the proposed  restructuring  transaction  will be
completed successfully.

         The Company made capital  expenditures  of  approximately  $2.8 million
during the nine months ended September 30, 1999. Such capital  expenditures were
financed  with the  proceeds  from  the  Senior  Notes  offering  and from  cash
generated from the Company's operations.


                                       12
<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 at that time.  However,  in
October 1999, the Company  participated  in a bidding  process for the cities of
Belo Horizonte,  Campinas, Sao Jose dos Campos and Vitoria. Based on the results
of the opening of the price and technical sections of the proposals, the Company
believes it will win the license for Belo  Horizonte,  the third largest city in
Brazil, as no other bidders  participated for this market.  The Company bid $1.7
million for this market,  which, if awarded,  is expected to be paid in December
1999. Competitors in the other three markets have apparently outbid the Company;
however, in the event any of these competitors are disqualified from the process
in its final stage,  the Company may be awarded  licenses  for these  markets as
well.

         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 September 30, 1999,  of the Company's  approximately
$44.4 million in cash and cash  equivalents,  approximately  $14.4 million (32%)
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.

                                       13
<PAGE>
         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 remain above 20% per annum.
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,
an impact on the Company's financial results.

         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.

                                       14
<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.

         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.


                                       15
<PAGE>

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  September  30, 1999 (these  contracts  were entered into for
purposes other than trading purposes):

<TABLE>
<CAPTION>

CONTRACT VALUE            EXCHANGE RATE       PREMIUM %       % CDI       CONTRACT DATE    EXPIRATION DATE
----------------------------------------------------------------------------------------------------------
<S>                       <C>                 <C>             <C>         <C>              <C>
US$12,000,000             R$1.819/US$1        +1.0%           100%        Jul.  13, 1999   Oct. 13, 1999
US$16,000,000             R$1.862/US$1        +0.5%           100%        Sept. 13, 1999   Dec. 13, 1999
----------------------------------------------------------------------------------------------------------
</TABLE>

Upon expiration of the contract first listed above, the Company entered into the
following new foreign  currency  hedge  contract (this contract was also entered
into for purposes other than trading purposes):

<TABLE>
<CAPTION>

CONTRACT VALUE            EXCHANGE RATE       PREMIUM %       % CDI       CONTRACT DATE    EXPIRATION DATE
----------------------------------------------------------------------------------------------------------
<S>                       <C>                 <C>             <C>         <C>              <C>
US$12,000,000             R$1.955/US$1        +5.0%           100%        Oct. 13, 1999    Dec. 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.



                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         None.


                                       16
<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         No defaults upon senior  securities  occurred  during the quarter ended
September  30, 1999.  An event of default  which  occurred in June 1999 has been
previously  reported in Item 3 of Part II of the Company's  Quarterly  Report on
Form 10-Q for the period ended June 30, 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

         A report on Form 8-K was  filed by the  Company  pursuant  to Item 5 on
July 29, 1999,  announcing that the Company was in negotiations with a committee
representing holders of the Company's  outstanding 12-7/8% senior notes due 2004
regarding a possible restructuring of its indebtedness.

         A report on Form 8-K was  filed by the  Company  pursuant  to Item 5 on
August 20,  1999,  announcing  that the  Company  had  reached an  agreement  in
principle with the committee  representing holders of the Company's  outstanding
12-7/8% senior notes due 2004 regarding the restructuring of its indebtedness.


                                       17
<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:   November 17, 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)


                                       18
<PAGE>


EXHIBIT INDEX



NO.                      DESCRIPTION

27                       Financial Data Schedule








                                       19