<PAGE>


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

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

                                    FORM 10-Q

(Mark One)

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

         For the quarterly period ended March 31, 1998

                                       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              10,825,139 shares
         per share.                                 as of May 11, 1998

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

<PAGE>


                                 TV FILME, INC.

                                      INDEX

<TABLE>
<CAPTION>


PART I.   FINANCIAL INFORMATION                                                                        PAGE NO.
          ---------------------                                                                        --------    

ITEM 1.   Financial Statements

          <S>                                                                                             <C>  
          Consolidated Balance Sheets as of December 31, 1997
          and March 31, 1998 (Unaudited)........................................................           2

          Unaudited Consolidated Statements of Operations for the Three Months Ended
          March 31, 1997 and the Three Months Ended March 31, 1998..............................           3

          Unaudited Consolidated Statement of Changes in Stockholders' Equity
          at March 31, 1998.....................................................................           4

          Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
          March 31, 1997 and March 31, 1998.....................................................           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............................          13


PART II.  OTHER INFORMATION
          -----------------

ITEM 1.   Legal Proceedings.....................................................................          13

ITEM 2.   Changes in Securities and Use of Proceeds.............................................          13

ITEM 3.   Defaults Upon Senior Securities.......................................................          13

ITEM 4.   Submission of Matters to a Vote of Security Holders...................................          13

ITEM 5.   Other Information.....................................................................          13

ITEM 6.   Exhibits and Reports on Form 8-K......................................................          13

SIGNATURES


</TABLE>

<PAGE>






                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         TV FILME, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   December 31,             March 31,
                                                                                       1997                    1998
                                                                                --------------------   ---------------------
                                                                                                           (Unaudited)
                                                                                              (In thousands)
Assets
Current assets:
     <S>                                                                             <C>                     <C>     
     Cash and cash equivalents.............................                          $ 80,975                $ 75,741
     Accounts receivable, net..............................                             7,832                   7,544
     Supplies..............................................                             5,303                   5,187
     Prepaid expenses and other current assets.............                             3,178                   3,606
     Interest receivable...................................                               679                     921
     Pledged securities-current............................                            16,645                  16,645
                                                                                --------------------   ---------------------
           Total current assets............................                           114,612                 109,644
Property, plant and equipment, net.........................                            63,405                  61,257
Debt issuance costs, net...................................                             6,298                   5,979
Other assets...............................................                             2,082                   2,279
                                                                                --------------------   ---------------------
           Total assets....................................                          $186,397                $179,159
                                                                                ====================   =====================

Liabilities and stockholders' equity 
Current liabilities:
     Accounts payable......................................                          $ 12,724                $ 11,675
     Payroll and other benefits payable....................                             2,103                   2,221
     Accrued interest payable..............................                               751                   5,257
     Accrued liabilities and taxes payable.................                             1,111                   1,142
     Payables to affiliates-current........................                               200                      --
                                                                                --------------------   ---------------------
          Total current liabilities........................                            16,889                  20,295
Deferred installation fees.................................                             7,178                   6,416
Senior notes...............................................                           140,000                 140,000
Stockholders' equity:
     Cumulative translation adjustment.....................                                --                    (477)
     Preferred stock, $.01 par value, 1,000,000 shares
          authorized, no shares issued.....................                                --                      --
     Common stock, $.01 par value, 50,000,000 shares
          authorized, 10,825,139 and 10,825,139 shares
          issued and outstanding..........................                                108                     108
     Additional paid-in capital............................                            45,657                  45,657
     Accumulated deficit...................................                           (23,435)                (32,840)
                                                                                --------------------   ---------------------
          Total stockholders' equity.......................                            22,330                  12,448
                                                                                --------------------   ---------------------
          Total liabilities and stockholders' equity.......                          $186,397                $179,159
                                                                                ====================   =====================

</TABLE>

                             See accompanying notes.


<PAGE>




                         TV FILME, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                  ------------------------------------------
                                                                       1997                      1998
                                                                  ----------------         -----------------

                                                                    (In thousands, except per share data)

<S>                                                                     <C>                      <C>    
Revenues...............................................                 $11,180                  $12,618
Operating costs and expenses:
    System operating - Note 2..........................                   3,698                    5,095
    Selling, general and administrative................                   5,475                    7,507
    Depreciation and amortization......................                   2,304                    5,301
                                                                  ---------------          -----------------
        Total operating costs and expenses.............                  11,477                   17,903
                                                                  ---------------          -----------------
        Operating loss.................................                    (297)                  (5,285)
Other income (expense):
    Interest and other expense - Note 2................                  (4,909)                  (4,722)
    Interest income....................................                   2,948                    1,691
    Monetary loss......................................                      --                   (1,089)
    Exchange and translation loss......................                    (738)                      --
                                                                  ---------------          -----------------
        Total other expense............................                  (2,699)                  (4,120)
                                                                  ---------------          -----------------
Net loss...............................................                 $(2,996)                 $(9,405)
                                                                  ===============          =================
Net loss per share, basic and diluted..................                 $ (0.27)                 $ (0.87)
                                                                  ===============          =================
Weighted average number of shares of
    common stock and common stock
    equivalents outstanding............................                  10,984                   10,825
                                                                  ===============          =================

</TABLE>









                             See accompanying notes.


<PAGE>




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

                                   (Unaudited)

                    For the three months ended March 31, 1998


<TABLE>
<CAPTION>

                                                             Additional    Cumulative                           
                                       Common Stock            Paid-in     Translation   Accumulated 
                                  Shares       Par Value       Capital     Adjustment      Deficit           Total
                                ---------------------------  ------------  ------------  -------------   -------------

                                                                   (In thousands)

<S>                             <C>               <C>          <C>            <C>           <C>             <C>    
Balance at December 31, 1997    10,825,139        $108         $45,657        $  --         $(23,435)       $22,330

Cumulative translation
     adjustment................         --          --              --         (477)              --           (477)
Net loss for the period........         --          --              --           --           (9,405)        (9,405)
                                ------------  -------------  ------------  ------------  -------------   -------------
Balance at March 31, 1998...... 10,825,139        $108         $45,657        $(477)        $(32,840)       $12,448
                                ============  =============  ============  ============  =============   =============

</TABLE>































                             See accompanying notes.


<PAGE>



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

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                  Three Months Ended March 31,
                                                             ---------------------------------------
                                                                 1997                         1998
                                                             -------------                 ---------

                                                                         (In thousands)
Cash flows from operating activities
<S>                                                          <C>                        <C>        
Net loss..............................................       $   (2,996)                $   (9,405)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
      Depreciation and amortization...................            2,304                      5,301
      Provision for losses on accounts receivable.....              599                      2,021
      Amortization of debt issuance costs.............              191                        204
      Decrease in deferred installation fees..........              (14)                      (955)
      Monetary loss...................................               --                      1,089
Changes in operating assets and liabilities:
      Increase in accounts receivable.................           (2,183)                    (1,733)
      Increase (decrease) in supplies.................             (702)                       116
      Increase in prepaid expenses and other current
        assets........................................             (417)                      (428)
      Increase in accrued interest receivable.........             (454)                      (242)
      Decrease (increase) in other assets.............               45                       (367)
      Decrease in accounts payable....................             (831)                    (1,049)
      Increase in payroll and other benefits payable..              235                        118
      Increase in accrued interest payable............            4,570                      4,506
      Increase in accrued liabilities and taxes
        payable.......................................              363                         31
                                                             ----------                 ----------
Net cash provided by (used in) operating activities...              710                       (793)
                                                             ----------                 -----------

Cash flows from investing activities
Property, plant and equipment.........................          (10,364)                    (4,241)
                                                             ----------                 -----------
Net cash used in investing activities.................          (10,364)                    (4,241)
                                                             ----------                 -----------

Cash flows from financing activities
Debt issuance costs...................................             (328)                         0
Decrease in payables to affiliates....................             (200)                      (200)
                                                             ----------                 ----------
Net cash provided by financing activities.............             (528)                      (200)
                                                             -----------                ----------
Net change in cash and cash equivalents...............          (10,182)                    (5,234)
Cash and cash equivalents at beginning of period.               116,355                     80,975
                                                             ----------                 ----------
Cash and cash equivalents at end of period............       $  106,173                 $   75,741
                                                             ==========                 ==========

</TABLE>





                             See accompanying notes.


<PAGE>




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

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A.  COMPANY BACKGROUND

         In connection  with an initial  public  offering  (the "Initial  Public
Offering") of its common stock,  $.01 par value per share (the "Common  Stock"),
TV Filme,  Inc. (the  "Company")  was formed in April 1996 to become the holding
company of and successor to ITSA-Intercontinental  Telecomunicacoes S.A. and its
subsidiaries  ("ITSA").  The transfer of ITSA to the Company has been  accounted
for in a manner  similar to a pooling of interests.  ITSA was formed in May 1994
as a holding company for and successor to TV Filme Servicos de  Telecomunicacoes
S.A. ("TVFSA"). The transfer of TVFSA to ITSA has been accounted for in a manner
similar to a pooling of interests.

         In connection  with the Initial Public  Offering,  the Company  entered
into  a  restructuring  (the  "Restructuring")  pursuant  to  which  all  of the
preferred  stock of ITSA was converted  into common stock of ITSA,  based on the
conversion rates at the date of issuance of the preferred  stock.  Each share of
common  stock of ITSA was  exchanged  for 1,844  shares  of Common  Stock of the
Company. As all of the preferred stock of ITSA has been converted and there were
no preferred dividends paid or due as a result of the conversion,  all preferred
and common stock issuances of the  predecessor  companies have been reflected as
issuances  of Common  Stock of the  Company.  Prior to the  consummation  of the
Initial  Public  Offering and the  Restructuring,  TVFSA  operated the Company's
wireless  cable  system  in  Brasilia,  and held the  licenses  to  operate  the
Company's  wireless  cable  systems in Brasilia,  Goiania and Belem.  ITSA owned
substantially all of TVFSA, TV Filme Goiania Servicos de Telecomunicacoes  Ltda.
("TV Filme Goiania") and TV Filme Belem Servicos de Telecomunicacoes  Ltda. ("TV
Filme  Belem").  Pursuant to the  Restructuring,  (i) 51% of the voting stock of
TVFSA was  transferred  to an  entity,  all of which was owned by  certain  then
existing  shareholders  of ITSA who were or are Brazilian  nationals,  with ITSA
retaining  49% of the voting stock and 83% of the  economic  interests in TVFSA;
(ii) the  operating  assets  of the  wireless  cable  system  of  Brasilia  were
transferred from TVFSA to TV Filme Brasilia Servicos de  Telecomunicacoes  Ltda.
("TV Filme  Brasilia"),  which is  substantially  owned by ITSA; and (iii) TVFSA
entered  into  various  agreements  with ITSA and its  subsidiaries  pursuant to
which,  among other things,  TVFSA has  authorized  ITSA to operate the existing
wireless   cable  systems  under  its  current   licenses.   Subsequent  to  the
Restructuring  and the Initial Public  Offering,  the Company owns 100% of ITSA,
which holds 49% of the voting stock and 83% of the  economic  interests of TVFSA
and 100% of TV  Filme  Brasilia,  TV Filme  Goiania  and TV Filme  Belem.  As of
November 1997, the licenses to operate the existing  wireless cable systems were
transferred  from TV Filme Servicos to the respective  operating  companies,  TV
Filme Brasilia, TV Filme Goiania and TV Filme Belem.

         Accordingly,  the  consolidated  financial  statements  of the  Company
include ITSA and its subsidiaries on a historical basis since May 1994 as though
they have been part of the Company for all periods  presented.  All  significant
intercompany transactions and balances have been eliminated in consolidation.

         The Company develops, owns and operates subscription television systems
in  mid-size  markets in Brazil.  The  Company has  established  wireless  cable
operating systems in the cities of Brasilia, Goiania and Belem.

     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.  Until December 31, 1997,  amounts in Brazilian  currency were
remeasured  into U.S.  dollars in accordance  with the  methodology set forth in
Statement of Financial  Accounting Standards No. 52 ("SFAS 52") as it applies to
entities operating in highly inflationary economies.  Supplies,  property, plant
and equipment, intangibles and deferred installation fees and the related income
statement  accounts were  remeasured at exchange rates in effect when the assets
were acquired or the liabilities were incurred. All other assets and liabilities
were remeasured at period end exchange rates; all other income and expense items

<PAGE>


were  remeasured  at  average  exchange  rates  prevailing  during  the  period.
Remeasurement  adjustments  were  included in  exchange  and  translation  gains
(losses).

         Effective January 1, 1998, the Company determined that Brazil ceased to
be a highly inflationary  economy under SFAS 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.

         In management's  opinion,  all adjustments  (consisting  only of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results  for the first  three  months are not  necessarily
indicative of the results that may be expected for a full year.

     C.  NET LOSS PER SHARE

         The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128,  "Earnings Per Share" ("SFAS 128"),  for year-end 1997.  SFAS
128, which  supersedes  APB Opinion No. 15,  "Earnings Per Share," was issued in
February 1997. SFAS 128 requires dual presentation of basic and diluted earnings
per share ("EPS") for complex capital structures on the face of the statement of
operations.  Basic EPS is computed by  dividing  income or loss by the  weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution from the exercise or conversion of securities into common
stock.  The basic or diluted  EPS  measured  under  SFAS 128 are not  materially
different than if measured under APB No. 15.

     D.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The Company had an allowance  for doubtful  accounts of  $1,710,000  at
December 31, 1997 and  $2,695,000  at March 31, 1998.  Charges to the  allowance
during the three months ended March 31, 1998 were $1,036,000.

2.   RELATED PARTY TRANSACTIONS

         Substantially  all  programming  is supplied by a subsidiary of Tevecap
S.A.  ("Tevecap"),  a  stockholder  of the  Company,  pursuant to a  programming
contract. Amounts paid to such affiliate during the three months ended March 31,
1997  and 1998  were  approximately  $2,600,000  and  $2,748,000,  respectively.
Through September 1997, the Company purchased from Tevecap a program guide which
it  distributed  to its  subscribers  monthly.  Amounts  paid to Tevecap for the
program guide during the three months ended March 31, 1997 and 1998 were $53,000
and $0,  respectively.  As of October 1997, the Company no longer  purchases its
program  guide from  Tevecap  but has begun to produce  and  distribute  its own
program guide.

         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  do  not  bear  interest.   The  $200,000  which  remained
outstanding as of December 31, 1997 was repaid in February 1998.

3.   STOCK OPTION PLAN

         In connection with the Initial Public Offering,  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,  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 936,432, 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


<PAGE>


granted upon the consummation of the Initial Public  Offering,  297,000 of which
are  exercisable  at $10.00 per share and  110,000 of which are  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. Options
to purchase an additional  10,000 shares of Common Stock were granted in each of
December  1996 and  February  1997 at an  exercise  price of $11.75,  options to
purchase  15,000 shares of Common Stock were granted in July 1997 at an exercise
price of  $10.125,  options  to  purchase  308,500  shares of Common  Stock were
granted in October  1997 at an exercise  price of $6.00 per share and options to
purchase  150,000  shares of Common  Stock were  granted in December  1997 at an
exercise price of $5.625 per share.

4.   LONG-TERM DEBT

         On December 20, 1996, the Company issued $140 million  principal amount
of 12-7/8% Senior Notes due December 15, 2004 (the "Senior Notes"). The proceeds
of the Senior Notes were loaned to ITSA 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  government   securities,
scheduled interest and principal payments on which is in an amount sufficient to
provide  for  payment  in full when due of the  first  four  scheduled  interest
payments on the Senior Notes.  Debt issuance costs are capitalized and amortized
over the period of the debt under the effective yield method.

         The Senior Notes are  redeemable  on or after  December 15, 2000 at the
option  of the  Company,  in whole or in part from  time to time,  at  specified
redemption prices declining annually to 100% of the principal amount on or after
December  15, 2003,  plus accrued  interest.  The Senior Notes  contain  certain
covenants  that,  among other things,  limit the ability of the Company to incur
additional  indebtedness and pay dividends or make certain other  distributions.
Upon a change of  control,  the Company is required to make an offer to purchase
the Senior Notes at a purchase  price equal to 101% of the  aggregate  principal
amount thereof, plus accrued and unpaid interest, if any. In accordance with the
covenants of the Senior Notes and the Company's  current  level of leverage,  at
March 31, 1998 it is unable to make any dividend payments.

         The  Company  believes  that the  recorded  value of the  Senior  Notes
approximates the fair value at March 31, 1998.


<PAGE>


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

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

RESULTS OF OPERATIONS

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

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


<TABLE>
<CAPTION>

                                                                       Three Months Ended March 31
                                                      ---------------------------------------------------------------
                                                          1997        % of Revenue        1998        % of Revenue
                                                          ----        ------------        ----        ------------
                                                       (In thousands, except subscriber, per share and share data)

<S>                                                      <C>              <C>          <C>                <C> 
Revenue...........................................       $11,180          100%         $  12,618          100%
Operating costs and expenses
   System operating...............................         3,698           33%             5,095           40%
   Selling, general and administrative............         5,475           49%             7,507           59%
   Depreciation and amortization..................         2,304           21%             5,301           42%
                                                        --------     --------         ----------     --------
        Total operating costs and expenses........        11,477          103%            17,903          142%
                                                        --------     --------         ----------     --------      
         Operating loss...........................          (297)         (3)%            (5,285)        (42)%
Other income (expense):
  Interest and other expense......................        (4,909)        (44)%            (4,722)        (37)%
  Interest and other income.......................         2,948           26%             1,691           13%
Monetary loss.....................................            --           --             (1,089)         (9)%
Exchange and translation loss.....................          (738)         (7)%                --          (0)%
                                                        --------     --------         ----------      -------            
      Total other income (expense)................        (2,699)        (24)%            (4,120)        (33)%
                                                       ---------     --------         ----------      ------- 
Net loss..........................................     $  (2,996)        (27)%         $  (9,405)        (75)%
                                                       =========     ========          =========      =======
Net loss per share................................     $   (0.27)                      $   (0.87)
                                                       =========                       =========
Weighted average number of shares of
   Common stock and common stock
   Equivalents....................................        10,984                          10,825
                                                       =========                       =========
Other Data:
   EBITDA (a).....................................     $   2,007                       $      24
                                                       =========                       ========= 
   Number of subscribers at end of period ........        92,097                         112,443
                                                       =========                        ========

</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 United States 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.


<PAGE>


         REVENUES. The Company's revenues primarily consist of monthly fees paid
by  subscribers  for the  programming  package,  as well  as  installation  fees
recognized for the period,  net of sales taxes. For the three months ended March
31,  1998  compared  to the same  period  in 1997,  revenues  increased  by $1.4
million,  or  approximately  13%,  primarily due to an increase of 26,200 in the
average number of subscribers in the Company's three operating systems.

         SYSTEM  OPERATING  EXPENSES.   System  operating  expenses  consist  of
programming  costs  (including  costs  associated  with developing and producing
proprietary programming content), costs for the programming guide distributed to
subscribers,  a portion of costs of compensation  and benefits for the Company's
employees,   vehicle  rental  costs,   transmitter  site  rentals,   repair  and
maintenance  expenditures  and service  call costs.  For the three  months ended
March 31, 1998 compared with the same period in 1997, system operating  expenses
increased by  approximately  $1.4 million,  or 38%,  primarily due to additional
programming  and production  costs directly  associated with the increase in the
Company's  installed  subscriber base ($0.2 million),  costs associated with the
development of the Company's proprietary programming initiatives ($0.2 million),
higher programming guide expenses ($0.3 million) reflecting the full cost of the
programming  guide  compared  to the first  quarter  of 1997,  when the  Company
received a one-time  credit from the  publisher,  higher  salary  expense  ($0.4
million)  associated  with the  addition  of  customer  service  and  collection
personnel and higher other expenses ($0.3 million).

         SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  For the three  months
ended March 31, 1998 compared to the same period in 1997,  selling,  general and
administrative  ("SG&A") expenses  increased by approximately  $2.0 million,  or
37%,  primarily due to an increase in the provision for doubtful  accounts ($1.4
million) resulting from an increase in customer  delinquency rates and due to an
increase in  compensation  and benefits ($0.5  million)  incurred as a result of
salary  increases and headcount  increases to support the growth of the Company.
The higher customer delinquency rates also resulted in a significant increase in
service disconnections. See "- Recent Economic Events."

         DEPRECIATION AND AMORTIZATION  EXPENSES.  Depreciation and amortization
expenses consist primarily of depreciation of decoder boxes,  headend facilities
and  installation  costs.  Beginning with the first quarter of 1998, these costs
are being  capitalized  and depreciated  over a four year period.  For the three
months  ended March 31, 1998  compared to the same period in 1997,  depreciation
and  amortization  expense  increased by  approximately  $3.0 million,  or 130%,
primarily due to the Company's change in its  depreciation  schedule for decoder
boxes and installation costs from a five to a four year period and due to growth
in the number of installed  subscribers in each of the Company's three operating
systems.

         OPERATING  LOSS.  For the three month period ended March 31, 1998,  the
Company  generated  a loss  of  approximately  $5.3  million,  primarily  due to
expenses in  connection  with the  development  of the  Company's  business,  as
explained  above.  The Company may continue to generate  operating  losses as it
expands its existing systems and develops additional systems.

         INTEREST  EXPENSE.  Interest  expense  decreased  from the three  month
period  ended  March 31, 1997 to the three month  period  ended March 31,  1998,
primarily as a result of decreases is short-term borrowings of the Company.

         INTEREST INCOME.  Interest income decreased from the three month period
ended March 31, 1997 to the three month period  ended March 31, 1998,  primarily
as a result of reductions in available cash.

         MONETARY LOSS. Beginning on  January 1, 1998, in accordance  with  SFAS
52, monetary losses resulted from the  depreciation of the real against the U.S.
dollar,  which caused net losses  associated  with  dollar-denominated  monetary
assets and liabilities held by the Company's Brazilian subsidiaries.

<PAGE>

         EXCHANGE AND TRANSLATION LOSSES.  Exchange and translation losses arose
prior to  January  1, 1998 due to the  remeasurement  of  short-term  assets and
liabilities  from reais to U.S. dollars in accordance with SFAS 52 for companies
in highly inflationary economies. Unless Brazil returns to a highly inflationary
status,  the  Company  does not  believe  it will  record  future  exchange  and
translation gains or losses.

         INCOME  TAXES.  The  Company  did not have  taxable  income  during the
three-month  period ended March 31, 1998 and expects to generate  losses for the
foreseeable  future.  Brazilian  marginal  corporate tax rates are approximately
33.0%.

         NET LOSS. As explained above,  net losses in the periods  presented are
primarily  attributable to the significant  expenses incurred in connection with
the further  development  of the  Company's  business and net interest  expenses
associated with the Senior Notes.

LIQUIDITY AND CAPITAL RESOURCES

         The pay television business is a capital intensive business.  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 the 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,  (ii)  capital
markets  financings,  (iii) vendor  financing which generally  requires  payment
within 360 days of shipment,  some of which has been  supported  by  irrevocable
letters of credit  guaranteed  by Abril and certain of its  affiliates  and (iv)
borrowings from Abril and certain of its  affiliates.  As of March 31, 1998, the
Company had no  outstanding  borrowings  from Abril and its  affiliates  and the
Company does not expect to borrow from Abril or its affiliates in the future.

         As of March 31, 1998,  approximately $7.7 million was outstanding under
letters of credit with maturities ranging from 270 days to 360 days. As of March
31,  1998,  the Company had import  lines of credit in the  aggregate  amount of
$23.6 million with three commercial banks, of which  approximately $15.9 million
was available on such date. The Company currently  believes that import lines of
credit, additional vendor financing and other credit facilities are available on
acceptable  terms.  As a result of the Initial  Public  Offering  and the Senior
Notes  offering,  the Company had positive  working capital at March 31, 1998 in
the amount of $89.4 million. Net cash used in operating activities for the three
months ended March 31, 1998 was approximately $0.8 million.

         The Company made capital  expenditures of approximately $4.2 million in
the three months ended March 31, 1998. Such capital  expenditures  were financed
with the proceeds from the Senior Notes  offering and from cash  generated  from
the Company's  operations.  For the remaining  nine months of 1998,  the Company
anticipates that its aggregate  capital  expenditures in its existing  operating
markets  will be  approximately  $17.0  million.  In addition to  expanding  its
subscriber  base in its  existing  systems,  the  Company  is  seeking to launch
additional  systems. In September 1997, the Brazilian Ministry of Communications
announced  the  bidding  process by which  additional  pay-TV  licenses  will 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 markets to go forward. The status of the
bidding process with respect to the remaining  markets requires further judicial
action.  The Company  cannot predict when such judicial  action will occur.  The
Company intends to actively  pursue  licenses as they become  available for bid;
however,  there  can be no  assurance  as to the  grant of any  concessions  and
licenses and the timing of any such grants generally. The Company also from time
to time  may  selectively  pursue  joint  ventures  or  acquisitions  in the pay
television


<PAGE>

industry, although it is currently has no understanding, commitment or agreement
with respect to any such joint ventures or  acquisitions.  The Company  believes
that its cash and internally generated funds will be sufficient to fund the cash
requirements for its current  operations for at least the next twelve months. As
of March 31, 1998, of the Company's $93.3 million in cash and cash  equivalents,
$55.8  million (60%) was invested in U.S.  dollar  denominated  securities.  The
Company expects that the percentage of its cash and cash equivalents invested in
U.S. dollar denominated  securities will significantly  decrease during 1998. In
the  longer  term,  the  Company's  funding  needs are  subject  to a variety of
factors,  including 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 funding needs in the longer term.

INFLATION AND EXCHANGE RATES

         Inflation  and exchange rate  variations  have had, and may continue to
have,  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 in its  expenses  and may set its  prices  without
government   regulation.   However,  under  Brazilian  law  designed  to  reduce
inflation, the rates which the Company may charge to a particular subscriber may
not  be  increased  until  the  next  anniversary  of the  subscriber's  initial
subscription  date.  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.  Devaluation of the real may
also have an adverse effect on the Company.  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)
will be adversely affected. This effect on the Company's revenues may negatively
impact  the   Company's   ability  to  fund  U.S.   dollar-based   expenditures.
Accordingly,  devaluation of the real may have a material  adverse effect on the
Company's results of operations and financial condition.  Further, as of January
1, 1998, the Company's financial  statements will reflect foreign exchange gains
and losses  associated  with  monetary  assets and  liabilities  denominated  in
currencies  other  than the real.  See  footnote  "b.  Method  of  Presentation"
contained in the Notes to Consolidated  Financial  Statements.  As a result, the
devaluation of the real against the U.S. dollar will cause 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.

RECENT ECONOMIC LOSSES

         The economic and  financial  turmoil in Southeast  Asia during 1997 has
had an impact on many emerging  markets,  including Brazil. As a result of these
events, the Brazilian  government has taken significant  measures to protect the
real,  as well as the gains  achieved  over the last  several  years by the Real
Plan.  Among  other  actions,   on  October  27,  1997,  Brazil's  Central  Bank
significantly  raised short-term  interest rates, and, on November 10, 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,  which are having
a negative  impact on  Brazil's  economic  growth,  are  designed to improve the
country's  fiscal and current account deficits and relieve pressure on the real.
During the first quarter of 1998,  short-term  interest rates declined  somewhat
but remain  substantially higher than the rates in effect prior to the Brazilian

<PAGE>

government's  October  and  November   initiatives.   The  Brazilian  government
continues to attempt to protect its currency through various  mechanisms.  These
include  maintaining high short-term  interest rates and maintaining high levels
of import  duties on  various  products,  including  many  products  used by the
Company.  The  short-term  effect of these  policies  has been a  tightening  of
consumer  credit and increased rates of  unemployment.  Soon after the 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 has  continued  during the first quarter of
1998  and  the  Company  anticipates  that  this  trend  will  continue  for the
foreseeable future. While the Company believes these difficulties are short-term
in nature,  there can be no assurance  that the measures taken by the government
will be  successful,  or that the  increase in  delinquent  payments and service
disconnections will abate.

YEAR 2000 COMPLIANCE

     The Company has conducted an evaluation of its computer  system and network
for Year 2000 compliance.  Based on such evaluation, the Company believes that a
substantial  portion  of  its  software  and  hardware  systems  are  Year  2000
compliant.  The Company does not anticipate that it will be required to make any
significant  capital  expenditures  in order to make its remaining  systems Year
2000 compliant.

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         This requirement is not currently applicable to the Company.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         None.

ITEM 5.  OTHER INFORMATION.

         None.

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

         (a)  EXHIBITS

         27.      Financial Data Schedule.

         (b)  REPORTS ON FORM 8-K

         No  reports on Form 8-K were filed by the  Company  during the  quarter
ended March 31, 1998.



<PAGE>


                                   SIGNATURES

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

Dated:   May 13, 1998



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


                                  /s/ Hermano Studart Lins de Albuquerque
                                  ----------------------------------------------
                                  Hermano Studart Lins de Albuquerque
                                  Chief Executive Officer (Principal
                                  Executive Officer)


                                  /s/ Alvaro J. Aguirre
                                  ----------------------------------------------
                                  Alvaro J. Aguirre
                                  Chief Financial Officer (Principal Financial
                                  and Accounting Officer)

<PAGE>



                                  EXHIBIT INDEX



No.                    Description
---                    -----------

27                     Financial Data Schedule