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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   __________

                                    FORM 10-K

                FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
         SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

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

                   For the fiscal year ended December 31, 2000

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

                 For the transition period from     to

                         Commission File Number: 0-28670

                                    ITSA LTD.
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


       CAYMAN ISLANDS                                NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

              C/O ITSA - INTERCONTINENTAL TELECOMUNICACOES LTDA.
                               SCS, QUADRA 07-BL.A
                       ED. TORRE PATIO BRASIL , SALA 601
                           70.307-901 BRASILIA - DF
                                     BRAZIL
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

    Registrant's telephone number, including area code: 011-55-61-314-9904

       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par
                            value $0.01 per share

    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 by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

    Indicate by check mark whether the  registrant  has filed all  documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

[X] Yes  [ ] No

    The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 16, 2001 was approximately $2,375,106.50.

    As of April 14, 2001,  10,000,000  shares of the registrant's  Common Stock,
$0.01 par value, were outstanding.

    DOCUMENTS INCORPORATED BY REFERENCE.  None.

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


<PAGE>


                TABLE OF CONTENTS

PART

      I......................................................................1
Item
      Business...............................................................1

      Background.............................................................1

      Restructuring and Plan of Reorganization...............................2

      Company Overview.......................................................2

      Brazilian Pay Television Industry......................................3

      Brazilian Boradband Market.............................................3

      Operating Systems and the Company's Markets............................4

      New Markets............................................................6

      Mais TV Operating Model................................................6

      Programming............................................................6

      High Speed Internet Access Service.....................................7

      Operations.............................................................8

      Employees..............................................................9

      Facilities and Equipment...............................................9

      Competition...........................................................10

      Regulatory Environment................................................10

Item 2.  Properties.........................................................13

Item 3   Legal Proceedings..................................................13

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

PART II.....................................................................13

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters............................................................13

Item 6.  Selected Financial Data............................................14

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations..............................................16

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.........26

Item 8.  Financial Statements and Supplementary Data........................26

Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure...........................................41

PART III....................................................................41

Item 10.  Directors and Executive Officers of the Registrant................41

Item 11.  Executive Compensation............................................42

Item 12.  Security Ownership of Certain Beneficial Owners and
          Management........................................................44

Item 13.  Certain Relationships and Related Transactions....................45

PART IV.....................................................................45

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
          8-K...............................................................45




<PAGE>



          CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      STATEMENTS  IN  THIS  ANNUAL  REPORT  ON FORM  10-K  THAT  ARE NOT  PURELY
HISTORICAL ARE  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE  SECURITIES  ACT OF 1933 AND SECTION 21E OF THE  SECURITIES  EXCHANGE ACT OF
1934,  INCLUDING  STATEMENTS  REGARDING  THE  COMPANY'S   EXPECTATIONS,   HOPES,
INTENTIONS  OR  STRATEGIES  REGARDING  THE  FUTURE.  FORWARD-LOOKING  STATEMENTS
INCLUDE:  STATEMENTS  REGARDING THE  COMPANY'S  EXPANSION  PLANS,  THE IMPACT OF
COMPETITION,  THE START-UP OF CERTAIN OPERATIONS, THE BRAZILIAN WIRELESS AUCTION
PROCESS AND TRENDS  AFFECTING THE COMPANY'S  FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS,  INCLUDING THE COMPANY'S  ABILITY TO MEET FUTURE CASH  REQUIREMENTS.
ALL FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE BASED ON INFORMATION AVAILABLE
TO THE COMPANY (AS HEREINAFTER DEFINED) AS OF THE DATE THIS REPORT IS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, AND THE COMPANY ASSUMES NO OBLIGATION TO
UPDATE ANY SUCH  FORWARD-LOOKING  STATEMENTS.  FACTORS  THAT COULD CAUSE  ACTUAL
RESULTS  TO  DIFFER   MATERIALLY   FROM  THOSE  EXPRESSED  OR  IMPLIED  BY  SUCH
FORWARD-LOOKING  STATEMENTS  INCLUDE,  BUT ARE NOT  LIMITED  TO, THE FACTORS SET
FORTH IN "ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS OF  OPERATIONS  -- CERTAIN  FACTORS  WHICH MAY AFFECT THE  COMPANY'S
FUTURE RESULTS."

                                     PART I

ITEM 1.     BUSINESS.

      On July 21,  2000,  ITSA  Ltd.,  a Cayman  Islands  company,  became the
successor to TV Filme, Inc., a Delaware corporation,  following the successful
completion of a debt restructuring  pursuant to a plan of reorganization of TV
Filme,  Inc.  under Chapter 11 of the United States  Bankruptcy  Code.  Unless
otherwise  indicated,  ITSA Ltd.,  the  successor  company to TV Filme,  Inc.,
along with its subsidiaries,  will hereinafter be referred to as "ITSA" or the
"Company," and TV Filme,  Inc.,  the  predecessor  company to ITSA Ltd.,  will
hereinafter be referred to as "TV Filme."

      Except as otherwise noted,  financial  information has been presented in
U.S.  dollars.  The  Consolidated  Financial  Statements have been prepared in
accordance with accounting  principles generally accepted in the United States
("U.S. GAAP") in U.S. dollars.

BACKGROUND

      The  predecessor of TV Filme was founded in 1989 by certain members of the
Company's  current  senior  management  team.  In September  1989,  TV Filme was
granted a license to operate a wireless cable television system in Brasilia, the
capital of Brazil, and commenced operations in 1990 with a one channel offering.
Licenses to operate the Goiania and Belem Systems were acquired in 1994 from TVA
Sistema de  Televisao  S.A.  ("TVA  Sistema"),  a  subsidiary  of  Tevecap  S.A.
("Tevecap").

      TV Filme was  organized  in 1996 under the laws of the State of  Delaware.
Its largest  stockholders  include Warburg,  Pincus Investors,  L.P.  ("Warburg,
Pincus");  Tevecap,  one of the leading pay television  operators in Brazil; and
certain members of management and their family.

      During  1998 and the first  quarter of 1999,  TV Filme  faced  significant
challenges  that  ultimately  affected TV Filme's ability to pay interest on its
outstanding 12 7/8% senior notes due 2004 (the "Senior  Notes") issued  pursuant
to an indenture dated as of December 20, 1996 (the  "Indenture").  The Brazilian
government's  delay  in  granting  wireless  cable  television   licenses,   the
instability in emerging markets, the devaluation of the Brazilian currency,  the
REAL, and the resulting decline in consumer spending on subscription  television
in the markets in which TV Filme's subsidiaries provide services,  significantly
impacted TV Filme's  business  plan and its ability to service its  indebtedness
under the Indenture and continue as a going  concern.  While TV Filme decided to
commence  discussions with holders of the Senior Notes to pursue a comprehensive
financial  and  operational  restructuring  plan,  TV Filme  failed  to make the
required interest payment on the Senior Notes on June 15, 1999.



                                       1
<PAGE>

      The  Indenture  provided that failure to pay interest on the Senior Notes,
if not cured  within 30 days of such  failure,  constitutes  an Event of Default
under Section  6.1(b) of the  Indenture.  Section 6.2 of the Indenture  provides
that upon the  occurrence  of an Event of  Default,  holders  of at least 25% in
principal  amount  of the  outstanding  Senior  Notes  may  declare  the  unpaid
principal  of, and any accrued  interest  on, all the Senior Notes to be due and
payable immediately.

RESTRUCTURING AND PLAN OF REORGANIZATION

      On August 13, 1999,  TV Filme  reached an  agreement  in principle  with a
committee  representing  holders of TV Filme's  outstanding  Senior Notes.  This
Agreement  was  effected on July 21, 2000  pursuant  to a  pre-arranged  plan of
reorganization  which  received  court  approval  under  Chapter  11 of the U.S.
Bankruptcy  Code on April 10, 2000. In accordance  with the terms of the plan of
reorganization,  the Senior Noteholders  received a $25 million cash payment and
their  existing  notes were  converted  into (i) Secured  Notes in the aggregate
principal amount of $35 million,  due 2004, at an interest rate of 12% per annum
(interest  payable-in-kind  at the  Company's  option  through  its  first  four
interest  payments),  and (ii) 80% of the new common  equity of the  reorganized
Company.  Current  management  received  15% of the new common  equity,  and the
existing common stockholders of TV Filme received 5% of the new common equity of
the reorganized Company. All outstanding stock options were cancelled. ITSA Ltd.
(the reorganized  Company) is a newly-formed  Cayman Islands holding company and
is the  successor  issuer to TV Filme,  Inc.  pursuant  to Rule 12g-3  under the
Securities   Exchange  Act.  The  12%  Senior   Secured  Notes  were  issued  by
ITSA-Intercontinental  Telecommunicacoes Ltda., a wholly-owned subsidiary of the
Company.

      On January 26, 2000, as part of the restructuring  process, TV Filme filed
a voluntary  petition  under  Chapter 11 of the United States  Bankruptcy  Code,
together with a pre-negotiated  Plan of  Reorganization  implementing the agreed
upon restructuring and the Disclosure  Statement relating to such Plan, with the
U.S.  Bankruptcy  Court for the  District of  Delaware.  The court  approved the
Disclosure Statement on March 1, 2000. Following approval of the adequacy of the
Disclosure  Statement,  ballots  respecting  the Plan were  circulated  to those
parties entitled to vote on the Plan, and the Plan was confirmed at a hearing by
the court on April 10, 2000.  Overwhelming  majorities  of holders of TV Filme's
12-7% Senior Notes and holders of TV Filme's  common stock voted in favor of the
restructuring  set forth in the Plan.  Effectuation of the Plan was completed on
July 21, 2000,  following support from ANATEL (the Brazilian  Telecommunications
Agency) and the Central Bank of Brazil.

COMPANY OVERVIEW

      The   Company   develops,    owns   and   operates    broadband   wireless
telecommunications  systems in markets in  Brazil,  offering  video,  high-speed
Internet and data communications services. Through it subsidiaries,  the Company
has licenses in the cities of Brasilia, Goiania, Belem, Campina Grande, Caruaru,
Porto Velho,  Presidente Prudente,  Bauru, Franca,  Uberaba,  Belo Horizonte and
Vitoria, covering over 3 million households and approximately 13 million people.

      The Company offers a pre-paid  subscription video service,  called MAISTV,
which is comprised of a  self-install  kit available in retail stores in most of
the cities where the Company has operations.

      ITSA was also the first company in Brazil to launch a high-speed  Internet
access  system using the  technology of high-speed  modems.  The system,  called
LINKEXPRESS,  has been  available on a commercial  basis in the city of Brasilia
since 1998.

      The Company has all its licenses covering the frequency band from 2,500 to
2,686   MHz.   In  the  third   quarter  of  2000,   ANATEL  --  the   Brazilian
Telecommunications  Agency -- approved  and awarded  additional  spectrum to the
Company, in the frequency band of 2,170 to 2,182 MHz. Currently, with a total of
198 MHz of spectrum  available  in each  market,  the Company is able to offer a
wide range of two-way advanced communication services, including high-speed data
services and  high-speed  Internet,  to both the  residential  and the corporate
market.  The Company also owns  additional  specific  licenses,  which allow the
offering  of  voice  and  VPN  (Virtual  Private  Network)  corporate  services.
Currently,  the  Company  owns and  operates  its own NOC --  Network  Operating
Control Center -- which is located in its headquarters in Brasilia.



                                       2
<PAGE>

      Additionally,  the  Company  owns and  maintains  its  proprietary  SMS --
Services  Management System -- called Mythos,  which was developed  in-house and
customized to Brazilian  needs and  standards.  This advanced  software  package
allows the Company to have full control of every aspect of its businesses,  from
marketing to sales, customer service,  technical support,  inventory control and
billing.  The Company believes that the ability to control and customize the SMS
is a key point in quickly offering  reliable  services to the market.  Recently,
the Company has licensed its software to some third party operations in Brazil.

      In addition to satellite  competitors  that operate on a national basis in
Brazil,  hardwire  cable  providers  operate  or hold  licenses  to  operate  in
virtually all of the Company's licensed markets.

      The Company  believes  that the wireless  technology is well suited to its
current  and  potential  target  markets  and is an  attractive  alternative  to
existing  television,   Internet  and  telecommunications   services.   Wireless
telecommunications  services can be deployed more rapidly than most  alternative
technologies  and  provides  immediate  coverage  of  entire  markets,  enabling
services  to  be  delivered  to  all  potential  subscribers  that  are  in  the
unobstructed  path of the  transmission  tower.  Wireless  services often can be
deployed at a significantly  lower system capital cost per installed  subscriber
than  hardwire  cable  and other  wire-based  technologies  because  incremental
investment is generally only  undertaken in response to customer demand with the
addition  of each new  subscriber.  The Company  believes  that  subscribers  to
television,  Internet  and  telecommunication  services in Brazil are  generally
indifferent to the method of delivery of these services.

BRAZILIAN PAY TELEVISION INDUSTRY

      The pay television  industry in Brazil began in 1989 with the commencement
of UHF service in Sao Paulo.  In contrast to the U.S.,  the  Brazilian  hardwire
cable industry and wireless cable industry  began  developing  concurrently.  By
December 31, 2000,  approximately  231 hardwire  cable  licenses and 73 wireless
licenses had been issued by the Brazilian government.  The Company believes that
as of December 31,  2000,  approximately  20% of Brazilian  homes were passed by
hardwire  cable  as  compared  to over  80% in the U.S.  Brazil  is the  largest
television  market in Latin  America  with an  estimated  33 million  television
households.  As of December  31,  2000,  the Company  estimates  that there were
approximately 3.3 million pay television subscribers, representing approximately
10% of Brazilian television households.

      As of December 31, 1995, Brazilian television households viewed an average
of more than 6.5 hours of  television  per day, as compared to an average of 6.8
hours  per  day  in  the  United  States.  Viewers  prefer  Portuguese  language
programming,  including movies,  sports and "novelas" (soap operas).  The second
language of many Brazilians is English. U.S. culture generally,  and U.S. films,
shows and sports in particular, are popular with Brazilians. Programming content
for pay  television  systems  in Brazil is  offered  by the Globo  Organization,
independent  providers  and by Neo-TV,  a recently  formed  association  to help
operators negotiate and purchase programming.  In general, much of the Brazilian
programming  transmitted by pay  television  systems,  such as HBO Brazil,  ESPN
International and MTV Latino, is based on formats found in the U.S. In addition,
there are channels which include programs directly from the U.S., such as Warner
and Sony, as well as channels from Europe and other countries in Latin America.

BRAZILIAN BROADBAND MARKET

      Brazilians  were  introduced  to broadband  services  only three years ago
when, on an  experimental  basis,  TV Filme starting  operating a service called
LinkExpress in the city of Brasilia,  which  provided  one-way  Internet  access
service using high-speed modems.

      In December  2000,  ITSA Ltd.  (formerly TV Filme)  through its subsidiary
LinkExpress,  launched its two-way broadband  service.  By the end of that year,
both  one and  two-way  services,  were  being  offered  commercially  to  2,500
subscribers.

      Only  recently,  Brazilian  companies  have been  investing in  high-speed
Internet access services, using cable modem and DSL systems.



                                       3
<PAGE>

      Brasil Telecom,  Telefonica de Espana,  Telemar,  Globocabo,  TVA and Link
Express are the leading  companies  that have responded to growing market demand
for high-speed Internet access.

      Reported  estimates  indicate  that  there  are  approximately  10,000,000
Internet  users in Brazil and  100,000  subscribers  have  access to  high-speed
Internet services.

      JP Morgan  Analysts  estimate  that the growth rate of  Internet  users in
Brazil  is  approximately  38% per year from 1999 to 2004 and 23 % per year from
2005 to 2010 .  Estimates  for the growth rate of PC  installed  base is 24% per
year,  from 1999-2004 and 16% per year from 2005-2010 (see "Industry  Analysis -
Latin Telcos in the Internet Age - April 14, 2000" JP Morgan).

OPERATING SYSTEMS AND THE COMPANY'S MARKETS

      The table below provides information regarding the Company's markets as of
December 31, 2000:

<TABLE>
<CAPTION>
                         ESTIMATED      ESTIMATED     ESTIMATED    NUMBER      FULL
                           TOTAL          TOTAL          LOS         OF       LAUNCH

                        POPULATION(1) HOUSEHOLDS(1)  HOUSEHOLDS(2)CHANNELS(3)  DATE

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

OPERATING MARKETS:

<S>                       <C>            <C>           <C>           <C>     <C>
Brasilia...............   2,177,504      514,776       453,000       37      Feb.
                                                                             1994(4)

Belem.................. 1,771,417        440,651       370,000       36      Feb. 1995
Goiania................ 1,605,396        397,080       297,000       36      Jan. 1995
Campina Grande.........   523,854         99,592        80,000       36      May 1999
                        ------------- -------------- ------------
Total in Operating      6,078,171      1,452,099      1,200,000
Markets................
                        ============= ============== ============
New Markets (5)........ 7,127,553      1,765,176     1,412,000
</TABLE>
                        ============= ============== ============
-----------

(1)   Represents  the Company's  estimate of the population and the total number
      of total households within the greater  metropolitan  areas of each of its
      markets. The Company's estimates for Brasilia,  Goiania, Belem and Campina
      Grande are based on data from the 2000 Census - Preliminary Data conducted
      by the Brazilian  Institute of Geography and Statistics (IBGE) as adjusted
      to reflect estimated total household growth. Includes potential households
      which will receive the signal through the use of repeaters.

(2)   Represents the Company's  estimate of the number of LOS households  within
      the licensed  radius in each market (ranging from 15-35  kilometers)  that
      can receive an adequate signal from the Company.

(3)   Includes  six local  off-air  VHF/UHF  channels in Brasilia and five local
      off-air  VHF/UHF  channels  in each of Goiania,  Belem and Campina  Grande
      which  are  offered  to  the  Company's  subscribers  in  addition  to the
      Company's authorized channels.

(4)   Date when the Brasilia  System  increased  its channel  offering from four
      channels to eight  channels.  The Brasilia  System began  service with one
      channel in 1990.

(5)   Represents  the  eight  markets  for which the  Company  has been  awarded
      licenses to operate new MMDS systems.

      BRASILIA SYSTEM. Brasilia, the capital of Brazil, had an estimated greater
metropolitan  population of  approximately  2.2 million as of December 31, 2000.
Brasilia,  which is located in the interior of Brazil,  was  established  in the
early  1960's as a planned city when the capital of Brazil was moved from Rio de
Janeiro.  Brasilia's  generally  flat  topography is  advantageous  for wireless
technologies.  In addition, Brasilia's zoning provisions favor MMDS by requiring


                                       4
<PAGE>

that  residential  buildings be of a similar  height and located  together.  The
Company's  current 35 kilometer  coverage  territory  encompasses  approximately
514,000 households which the Company believes can be served by LOS transmission.

      The Brasilia System, launched in 1990 with one channel, increased to three
channels in July 1992, to four channels in September  1992, to eight channels in
February 1994, to 16 wireless cable channels in November 1994 and to 24 wireless
cable channels by the end of 1997. The Brasilia System  transmits at 50 watts of
power per channel  from a  transmission  tower  which is 300 feet above  average
terrain. The main competitors in the pay television area in the city of Brasilia
are  NET  Brasilia,  a  hardwire  cable  operator  and  affiliate  of the  Globo
Organization in addition to DirecTV and Sky, DTH operators. The Company believes
that,  at December  31,  2000,  it was the largest  pay  television  provider in
Brasilia based on the total number of subscribers.

      In December 1997, the Company began providing high speed Internet  access,
under the brand name of LinkExpress, to its customers in Brasilia. This service,
which uses  wireless  cable modems for delivery of access at much higher  speeds
than conventional phone line access to subscribers,  is believed to be the first
marketed  use of  cable  modem  technology  in  Brazil.  In the  first  years of
operation,  LinkExpress  offered  high-speed  Internet  access  services  with a
phone-return.  In this system,  data were transmitted to the customers using the
wireless  technology,  while  requests  from  subscribers  to the  network  were
performed with the use of phone-lines.  In the third quarter of 2000,  ANATEL --
the  Brazilian  Telecommunications  Agency -- approved  and  awarded  additional
spectrum to the Company,  in the frequency  band of 2,170 to 2,182 MHz. With the
additional  spectrum,  the  Company was able to offer  LinkExpress  in a two-way
platform.  In this new  system,  customers  transmit  and receive  data  signals
through  the  wireless  platform,  without  the use of the  telephone.  The main
competitors  in the area of  high-speed  Internet  service in  Brasilia  are NET
Brasilia and Brasil  Telecom,  the telephone  operator in the city.  See "- High
Speed Internet Access Service."

      BELEM SYSTEM. Belem, with an estimated greater metropolitan  population of
approximately  1.8 million as of  December  31,  2000,  lies at the mouth of the
Amazon River and is a major  trading port for the rich natural  resources of the
Amazon rain  forest.  The Company  launched  service in Belem in February  1995.
Although the city is relatively flat, trees block wireless cable transmission in
Belem more often than they do in Brasilia and Goiania and thus, the Belem System
requires increased utilization of signal repeaters. The Belem System reaches the
greater Belem area, including the cities of Mosqueiro,  Ananindeua, Icoaraci and
Marituba  and the islands of Outeiro and  Barcarena.  The  Company's  current 30
kilometer coverage territory encompasses  approximately 370,000 households which
the Company believes can be served by LOS transmission.

      The  Belem  System  transmits  at 50  watts of power  per  channel  from a
transmission tower which is 300 feet above average terrain. The main competitors
in the pay television area in Belem are ORM Cabo, an independent  hardwire cable
operator in addition to DirecTV and Sky,  DTH  operators.  The Company  does not
offer the high-speed  Internet service in the city of Belem,  although it may do
so in the future.

      GOIANIA  SYSTEM.  Goiania,  with an estimated  metropolitan  population of
approximately 1.6 million as of December 31, 2000, is located  approximately 100
miles  southwest  of Brasilia.  Goiania is the capital of the state Goias,  and,
like Brasilia,  its topography is favorable to LOS transmission because the city
is relatively flat. The Company launched service in Goiania in January 1995. The
Company's  current 30 kilometer  coverage  territory  encompasses  approximately
297,000 households which the Company believes can be served by LOS transmission.

      The  Goiania  System  transmits  at 50 watts of power per  channel  from a
transmission tower which is 350 feet above average terrain. The main competitors
in the pay  television  area in the city of Goiania are NET Goiania,  a hardwire
cable  operator and affiliate of the Globo  Organization  in addition to DirecTV
and Sky, DTH operators.  The Company believes that, at December 31, 2000, it was
the second largest pay  television  provider in Goiania based on total number of
subscribers.  The Company does not offer the high-speed  Internet service in the
city of Goiania, although it may do so in the future.

      CAMPINA  GRANDE SYSTEM.  Campina  Grande,  with an estimated  metropolitan
population  of  approximately  0.5 million as of December 31,  2000,  is located
approximately 80 miles west of Joao Pessoa, the capital of the state of Paraiba.
Similar to Brasilia and Goiania,  the  topography of Campina Grande is favorable
to LOS transmission. The Company launched service in Campina Grande in May 1999,
exclusively using the MAIS TV operating model (see below). The Company's current


                                       5
<PAGE>

licensed coverage radius  encompasses  approximately  80,000 households that the
Company believes can be served by LOS transmission.

      The Campina Grande system  transmits at 20 watts of power per channel from
a transmission tower that is approximately  2,500 feet above sea level. There is
currently no hardwire cable  operation in Campina  Grande.  The Company does not
offer the high speed Internet service in this city, although it may do so in the
future.

NEW MARKETS

      The  Company has been  awarded  licenses  to operate  MMDS  systems in the
following eight markets:  Bauru, Belo Horizonte,  Caruaru,  Franca, Porto Velho,
Presidente  Prudente,  Uberaba and Vitoria.  The Company  believes  that, in the
aggregate,  these eight  markets  collectively  encompass a total  population of
approximately 7.1 million, total households of approximately 1.8 million and LOS
households  of  approximately  1.4  million.  Bauru,  Belo  Horizonte,   Franca,
Presidente  Prudente and Vitoria have operating hardwire cable competitors.  The
Company  has  implemented  the  transmission  system  in the  markets  of Bauru,
Caruaru, Franca, Porto Velho, Presidente Prudente and Uberaba and the service is
commercially  available  to  customers,  although the Company has been unable to
market  its  services  aggressively.  The  Company  is  still  implementing  the
transmission system in the cities of Belo Horizonte and Vitoria.

MAIS TV OPERATING MODEL

      In May 1999,  with the launch of the Campina  Grande  system,  the Company
created and  implemented a new pay television  operating  model,  "Mais TV." The
major differences between the MAIS TV model and the previous model are:

o  Customers  choose from three to five different  programming  packages and may
   vary their choice each and every month.

o  All  services  are  offered  exclusively  on a prepaid  basis.  The  customer
   receives  a  booklet  which  is to  be  filled  out  monthly,  including  the
   programming  package  selected.  With this  information,  the  Company,  upon
   receipt  of  payment  notification  from the bank,  is able to  activate  the
   selected programming package for the customer.

o  To initiate service, the customer purchases, from either a local store or the
   Company's  local  showroom,  an  installation  kit. Prices for these kits are
   approximately  $25,  on  average.  Installation  services,  if desired by the
   customer,  may be contracted for separately,  either with the Company or with
   approved third-party installation companies.

      Based on the success of the Campina Grande launch,  the Company decided to
implement  this  new  operating  model  in each  of its  existing  (and  future)
operations.   The   Goiania   system   switched   over  to  the  new   model  in
September/October  1999 , the Brasilia  system  switched in March 2000 and Belem
system switched in July 2000.

      PROGRAMMING

      The Company  purchases  most of its  programming  from Neo-TV,  a recently
formed association to help operators negotiate and purchase programming.

      The Company also offers  selected  local  programming  to  supplement  its
channel line-up.  For example,  the Company owns the rights to televise annually
certain of the games of the Para State Soccer Championship.

      In 1997 the Company  established TV FILME Programadora to develop and sell
additional  programming  to the  Company's  three  systems  and to other  pay-TV
operations  in Brazil.  The first  channel  developed by TV FILME  Programadora,
Canal Adulto (which provides adult content  programming),  has been available in
each of the  Company's  markets  as a premium  channel  since  May  1997.  As of
December 1999, the programming  distribution  rights,  as well as the trademarks
associated with the Canal Adulto channel were sold to a third party. The Company
retained  the rights for at least five  years to  transmit  Canal  Adulto to its
subscribers.



                                       6
<PAGE>

      Beginning  in October  1997,  the  Company  also began  producing  its own
programming  guide,  called "MAISTV News",  which it distributes at no charge to
its subscribers.  The Company believes that its guide is an important  marketing
tool and it provides an efficient  way for the  operations  to interact with its
customers.

      The Company's channel offerings as of December 31, 2000 are as follows:

 CHANNEL                       DESCRIPTION
 -------                       -----------
  HBO Brazil                   Brazilian Version of HBO
  HBO Brazil 2                 HBO Brazil With a six hour time delay
  ESPN Brazil                  Brazilian Version of ESPN
  Eurochannel                  Package  of  programming  from  free TV in Europe
  Mundo                        Variety channel
  CMT Brazil****               Brazilian  version of Country Music  Television
  MTV Brazil                   Brazilian version of MTV
  RTPi **                      Radio and Television  Portugal, a free broadcast
                               channel from Portugal
  CNN International            International Version of CNN
  TNT                          Brazilian version of TNT
  Cartoon Network              Cartoon Network produced in the U. S.
  Fox                          General entertainment
  Discovery Channel            Brazilian version of Discovery Channel
  ESPN International           International version of ESPN
  Warner                       Warner channel produced in the U.S.
  Film & Arts / Bravo ****     Brazilian Verson of Bravo
  Sony                         Sony channel produced in the U.S.
  Discovery Kids               Children's version of Discovery
  People and Arts / Travel     Tourism, biography and art channel
  Channel **
  Redevida                     Catholic programming
  Cinemax                      Films and special programming
  Hallmark                     Films and special programming
  Fox Kids                     Children's version of fox
  AXN                          Brazilian version of AXN
  Canal Adulto ***             Adult programming
  Genesis*                     Evangelical programming
  Local                        Local programming
  Globo                        Local off-air channel (where available)
  SBT                          Local off-air channel (where available)
  Bandeirantes                 Local off-air channel (where available)
  Record                       Local off-air channel (where available)
  Nacional                     Local off-air channel (where available)
  Rede TV!                     Local off-air channel (where available)
  Cultura                      Local off-air channel (where available)
  Apoio                        Local off-air channel (where available)
*     Offered only in Brasilia.
**    Offered only in Belem and Goiania.
***   Offered as a premium channel.
****  Not offered in Campina Grande

HIGH SPEED INTERNET ACCESS SERVICE AND DATA COMMUNICATIONS SERVICES

      In December 1997, the Company began providing  Internet  access  services,
under the brand name Link Express,  to its customers in Brasilia.  This service,
which uses  wireless  cable modems for  delivery of access at greatly  increased
speeds to  subscribers,  is believed to be the first marketed use of cable modem
technology  in Brazil.  In the first  years of  operation,  LinkExpress  offered
high-speed  Internet access services with a phone-return.  In this system,  data
were transmitted to the customers using the wireless technology,  while requests


                                       7
<PAGE>

from  subscribers to the network were performed with the use of phone-lines.  In
the third quarter of 2000, ANATEL -- the Brazilian  Telecommunications Agency --
approved and awarded additional  spectrum to the Company,  in the frequency band
of 2,170 to 2,182 MHz.  With the  additional  spectrum,  the Company was able to
offer LinkExpress in a two-way platform. In this new system,  customers transmit
and receive data signals through the wireless  platform,  without the use of the
telephone.  Currently,  with a total of 198 MHz of  spectrum  available  in each
market,  the  Company  is  able  to  offer  a wide  range  of  two-way  advanced
communication  services,  including  high-speed  data  services  and  high-speed
Internet,  both to the  residential and the corporate  market.  The Company also
owns  additional  specific  licenses,  which allow the offering of voice and VPN
(Virtual Private Network) corporate  services.  Currently,  the Company owns and
operates its own NOC -- Network  Operating Control Center -- which is located in
its headquarters in Brasilia.

      In the  future,  the  Company  may also offer this  service in Goiania and
Belem, and in other markets, depending on market demand.

OPERATIONS

      MARKETING.  Prior to applying for a license in a potential new market, the
Company  has  historically  conducted  pre-marketing  surveys  to  evaluate  the
demographics and terrain of such market. Upon receipt of a license,  the Company
then  develops a plan  designed to manage  subscriber  growth by  maintaining  a
manageable backlog of installations.  Such backlog is maintained at a manageable
level by adjusting  installation  capacity to correspond with sales levels.  The
amount of time a subscriber  waits for the commencement of service is determined
based upon several  factors,  including  whether the  subscriber  is in a single
family home or multiple  dwelling unit and the effect of any  competition in the
market.  This  development  plan ensures that the quality of  installations  and
customer service remains high. In each market, the Company's marketing staff has
historically applied the following types of programs to attract subscribers: (i)
door-to-door  sales,  (ii)  telemarketing,  (iii)  extensive  marketing  tied to
regional events such as soccer matches,  (iv)  neighborhood  promotional  events
featuring large screen broadcasts of its channel offerings, (v) direct mailings,
(vi) television and newspaper advertisements,  (vii) prewiring arrangements with
residential housing developers and (viii) other marketing activities,  including
referral programs and promotional gifts.

      In February  1999,  the  Company  changed  its  marketing  strategy to one
focused on customer  loyalty.  The  Company  has  limited  its sales  efforts to
passive  telemarketing  and is  directing  its  marketing  expenditures  towards
customer loyalty programs such as promotional discounts at retail stores, gifts,
parties  and other items given  exclusively  to  customers.  This  approach  has
enabled it to significantly reduce expenditures, reduce churn, increase customer
loyalty  and target its sales to  prospects  who truly want the service and have
the financial  wherewithal to pay for the service. In addition,  upon the launch
of the MAIS TV model in each city, the Company  redirects its marketing  efforts
in such city toward  brand  recognition  and  awareness in order to generate the
majority of its new  installations  through sales of installation  kits at local
stores. This involves partnering with the local stores on advertising and paying
sales commissions to stores rather than having a direct sales force.

      INSTALLATION.  The  Company's  installation  package  features  a standard
rooftop  mount  linked to a small  antenna  and related  equipment,  including a
decoder,  located at the subscriber's  location.  Installations at single-family
homes require an entire  installation  package,  while  installation at multiple
dwelling units in which drop lines already have been installed require less time
and,  accordingly,  are less costly.  During 1998,  the Company  charged its new
subscribers an installation  fee typically  ranging from $5-$75.  However,  upon
launching the MAIS TV model in any given city, the Company  creates a network of
authorized  installers  in order to  reduce  direct  costs of  installation  and
expects the customer to pay for this service, or self-install the system.  While
the Company still offers  installation  service on a limited basis,  it does not
attempt to be competitive in this market and reserves this service primarily for
apartments and other large buildings where the  third-party  installation  teams
are not as qualified.  Because of this strategy,  and because  installation kits
are sold for  approximately  $25, the Company  expects to receive only a nominal
amount of revenue on future installations.

      CUSTOMER  SERVICE.  The Company  believes that  delivering  high levels of
customer service in installation and maintenance enables it to maintain customer
satisfaction.  To this end, the Company (i)  schedules  installations  promptly,
(ii) provides a customer service  hotline,  (iii) provides quick response repair
service  and  (iv)  makes  follow-up  calls  to new  subscribers  shortly  after
installation  to ensure  customer  satisfaction.  The Company seeks to instill a


                                       8
<PAGE>

customer service focus in all its employees  through ongoing training  programs.
Under the MAIS TV  model,  the  Company  still  offer  high  levels of  customer
service,  but has begun to charge the customer  for anything  other than routine
service calls.

      In the fourth quarter of 1998, the Company  decided to centralize  various
activities  in a single  service  center in  Brasilia.  Along with  centralizing
billing,   accounts  payable,  human  resources   administration  and  corporate
marketing,  the Company centralized its customer service hotline and all routing
and scheduling  functions.  This  centralization  project was completed in April
1999 and has proven to further  enhance and improve the quality of its  customer
service function.

      SUBSCRIBER MANAGEMENT SYSTEM. The Company has developed its own subscriber
management  system,  called  Mythos.  The Company  believes that its  subscriber
management  systems  enable it to deliver  superior  customer  service,  monitor
customer payment patterns and facilitate the efficient management of each of its
operating  systems.  This advanced  software  package allows the Company to have
full  control  of every  aspect  of its  businesses,  from  marketing  to sales,
customer service,  technical support, inventory control and billing. The Company
believes  that the  ability to control and  customize  the SMS is a key point in
quickly  offering  reliable  services to the market.  Recently,  the Company has
licensed its software to some third party operations in Brazil.  The Company has
nine  employees  dedicated  to the  development,  enhancement,  integration  and
maintenance of the Company's subscriber management systems.

EMPLOYEES

      As of  December  31,  2000,  the  Company  had a total  of 645  employees,
substantially  all of whom  are  employed  by  ITSA's  subsidiaries.  All of the
Company's employees,  except for Messrs. Hermano Lins and Carlos Andre Lins, are
subject  to  collective   bargaining   agreements.   The  collective  bargaining
agreements covering the employees of TV Filme Brasilia and TV Filme Goiania will
expire in June 2001. The collective bargaining agreements are with the Union for
the Employees of  Subscription  TV Industry.  Employees of TV Filme Belem and TV
Filme Campina  Grande are not covered under a collective  bargaining  agreement;
however, the Company has historically honored the terms of the TV Filme Brasilia
and TV Filme  Goiania  agreements  with its other  employees.  The  Company  has
experienced no work stoppages in its history. The Company provides its employees
with health insurance (which is not required by law in Brazil) and certain other
benefits  which it  believes  enable it to  attract  and  retain  qualified  and
motivated employees.

      In  connection  with the  change  in  marketing  strategy  implemented  in
February 1999, the Company  significantly  reduced its headcount in the areas of
sales and  installations,  and reduced  headcount in virtually  all areas of the
Company.  As a result,  the Company laid off  approximately 250 employees in the
past few years.

FACILITIES AND EQUIPMENT

      ADMINISTRATIVE FACILITIES. A centralized corporate administrative facility
is  located  in  Brasilia  to handle  training,  engineering,  computer  systems
development,  financial and  controller  functions and  strategic  planning.  In
addition,  the  Company  has  established  regional  operating  offices  in  its
Operating  Markets to coordinate sales,  billing,  general  marketing,  customer
service and certain other  administrative  functions on a regional  level.  Each
facility is connected to the Company's computer network. Beginning in the fourth
quarter of 1998, the Company began  centralizing its customer service,  billing,
accounts  payable  and certain  other  administrative  functions  for all of its
operations in Brasilia.  The centralization project was completed in April 1999.
Functions  remaining in the regional  offices  include sales,  local  marketing,
installation   and   technical   support   services,   maintenance   and   local
administrative  functions.  As new markets are launched,  the Company expects to
use the same centralized model.

      TRANSMISSION FACILITIES.  The Company's headend and transmitter facilities
are located in leased buildings at the Company's  transmission  tower sites. The
transmitting  antennas  generally are able to serve the maximum regulatory range
for its license  coverage areas.  In certain areas within the Company's  markets
that are otherwise  terrain-blocked,  the Company  utilizes signal  repeaters to


                                       9
<PAGE>

enhance signal coverage. For new markets, the Company expects to lease space for
transmission  and headend  facilities and expects to use  transmitting  antennas
which will serve the entire license coverage areas in each market.

      DIGITAL TECHNOLOGY.  The Company currently transmits its video services in
analog format.  Should  competitive  conditions  require or if the Company deems
such technology to be cost effective and practical to provide,  it may implement
digital  technology,  provided  the  Company  has  adequate  resources  for such
implementation.  For the high  speed  Internet  access  and data  communications
services,   the  Company  already  utilizes  digital   transmission  system  and
technology.

COMPETITION

      Through  its  subsidiaries,  the  Company is the only  entity  licensed to
operate wireless cable systems in each of its licensed markets.  The Company has
the authority to provide services using 198 MHz of spectrum, from 2,500 to 2,686
MHz and from 2,170 to 2,172 MHz in each such market.  The Company believes that,
as of December 31, 2000, it was the largest pay television  provider in Brasilia
based on total number of subscribers. The Company's principal competitors in the
city of Brasilia are NET Brasilia,  a hardwire  cable  operator and affiliate of
the Globo  Organization  in  addition  to DirecTV  and Sky,  DTH  operators.  In
Brasilia,  the Company also offers high speed Internet access to the residential
market and datacommunication services to the corporate market. The Company's
principal  competitors  for these  services are Brasil Telecom and NET Brasilia.
The Company  believes  that, as of December 31, 2000, it was the second  largest
pay  television  provider in Goiania based on total number of  subscribers.  The
main  competitors  in the pay  television  area in the city of  Goiania  are NET
Goiania,  a hardwire cable operator and affiliate of the Globo  Organization  in
addition  to DirecTV and Sky,  DTH  operators.  The  Company  does not offer the
high-speed Internet service in the city of Goiania, although it may do so in the
future.  The Company  believes that, as of December 31, 2000, it was the largest
pay television provider in Belem based on total number of subscribers.  The main
competitors  in the pay  television  area in Belem are ORM Cabo, an  independent
hardwire  cable  operator in addition to DirecTV  and Sky,  DTH  operators.  The
Company  does not offer the  high-speed  Internet  service in the city of Belem,
although it may do so in the future.  The Company  believes  that as of December
31, 2000 it was the largest pay TV provider in the city of Campina  Grande.  The
Company's principal competitors are Sky and DirecTV. Currently , there is no
hardwire  cable  provider in the city of Campina  Grande.  The Company  does not
offer high speed  Internet  services in this city,  although it may do so in the
future.

      In addition to other terrestrial pay television operators,  pay television
operators in Brazil face competition from several other sources,  such as direct
broadcasting  satellite systems ("DBS"),  local off-air VHF/UHF  channels,  home
videocassette recorders and out-of-home theaters. Currently, there are three DBS
providers in Brazil, "Sky," an affiliate of the Globo Organization, DirecTV, and
Tecsat,  a privately  held company in Brazil.  Competition in the pay television
industry is based upon program  offerings,  customer  service,  reliability  and
pricing. Many actual and potential competitors have greater financial, marketing
and other resources than the Company. No assurance can be given that the Company
will be able to compete successfully. See "--Brazilian Pay Television Industry,"
and "--Operating Systems and the Company's Markets."

REGULATORY ENVIRONMENT

      GENERAL.  In July 1997, the Brazilian  government  adopted Federal Law No.
9472/97,  the "General  Telecommunications  Law." Such law revoked the Brazilian
Telecommunications  Code of 1962 pursuant to which the pay  television  industry
was  subject to  regulation  by the  Ministry  of  Communications.  The  General
Telecommunications  Law  provides  that  the  newly-created   Telecommunications
National   Agency   ("ANATEL")   has   jurisdiction   over  the   regulation  of
telecommunications  services.  ANATEL has been vested  with the power to,  among
other things, revoke, modify and renew licenses within the spectrum available to
MMDS,  approve the assignment and transfer of control of such licenses,  approve
the  location  of  channels  that  comprise  MMDS  systems,  regulate  the type,
configuration  and  operation  of  equipment  used by MMDS  systems,  and impose
certain other reporting requirements on MMDS license holders and MMDS operators.

      Currently,  MMDS  license  holders  remain  subject to the  provisions  of
Presidential Decree Number 2196 ("Decree No. 2196"), issued April 8, 1997, which
regulates "Special Services"  including MMDS systems and operations.  Decree No.
2196 specifies the  competitive  procedures for the granting of concessions  and
licenses  for  the  rendering  of  Special  Services  in  Brazil.  Based  on the
provisions  of Decree No.  2196,  the  Ministry of  Communications  revised Rule


                                       10
<PAGE>

002/94,  which specifically  regulated MMDS service,  by means of Administrative
Rule 254,  dated April 16, 1997,  hereinafter  referred to as the "Revised  MMDS
Rule."

      Under the terms of the  Revised  MMDS Rule,  each  license  holder and its
affiliates may be granted  permission to operate MMDS systems in different areas
of Brazil,  provided  that,  if the  license  holder or its  affiliates  face no
competition from other pay television services,  excluding services that utilize
a  satellite  to  transmit  their  signal,  such  license  holder may be granted
licenses for (i) no more than seven municipalities with a population equal to or
exceeding  700,000  inhabitants  or (ii) no more than 12  municipalities  with a
population between 300,000 and 700,000 inhabitants. Under the Revised MMDS Rule,
ANATEL has  discretion  to alter or  eliminate  such  restrictions,  taking into
account the level of  competition  and the ownership of MMDS  providers.  As the
Company  expects to face local  competition  in most of the markets for which it
has or  expects  to  file  an  application,  it  does  not  believe  that  these
restrictions should present a substantial limitation on its ability to implement
its expansion plan.

      OWNERSHIP OF LICENSES.  Decree No. 2196  eliminated the  requirement  that
only  companies  in which  Brazilian  nationals  own at least 51% of the  voting
capital  were  eligible  to be  granted a license  to  operate  an MMDS  system.
Consequently,  under current  regulations any company  constituted in accordance
with the laws of Brazil and with a head office and management  located in Brazil
is eligible to be granted such a license. Until November 1997, TV Filme Servicos
held the licenses to operate the MMDS systems in Brasilia, Goiania and Belem. As
a result of the lifting of the 51% ownership  requirement,  in November 1997, TV
Filme  Servicos  transferred  the respective  license for Brasilia,  Goiania and
Belem to TV Filme Brasilia,  TV Filme Goiania and TV Filme Belem,  respectively.
This transfer was approved by Brazilian regulators. Licenses for the new markets
are  held  by TV  Filme  Sistemas.  Although  Decree  No.  2196  eliminated  the
requirement  discussed  above,  the General  Telecommunications  Law permits the
Executive Branch, through Presidential Decree, to impose restrictions on foreign
capital investments in telecommunications  companies. However, such restrictions
may not be imposed  retroactively with respect to outstanding  licenses.  Decree
No. 2196 also provides that licenses  shall be granted for renewable  periods of
ten or fifteen  years;  all the current  invitations  for bids for MMDS services
provide for 15-year terms.

      PRICES.  Prices  for  pay  television  and  high-speed  Internet  services
currently  in  operation  may be  freely  established  by the  system  operator,
although ANATEL may intervene in the event of abusive pricing practices.  ANATEL
may impose penalties  including fines,  suspension or revocation of a license in
the event the license  holder  fails to comply with  applicable  regulations  or
becomes  legally,  technically  or  financially  unable to provide MMDS service.
ANATEL and CADE, the Brazilian  antitrust  authority,  also may intervene to the
extent operators engage in unfair practices  intended to eliminate  competition.
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.

      LICENSE  PROCEDURES.  In  accordance  with Decree No. 2196 and the Revised
MMDS Rule, a party  interested in providing  MMDS services must file with ANATEL
an "Application for  Telecommunications  Services," which specifies the modality
of the services intended to be provided,  the geographic area where the services
are to be  provided,  the  technical  specifications  for  the  proposed  system
(including the radio frequencies to be used) and the intended  operation and the
usage of such  services.  ANATEL may, in its  discretion or whenever it receives
such an application,  publish public notices  requesting  comments by interested
parties to determine, among other things, the geographic area where the services
are to be provided and the number of concessions  to be granted.  In both cases,
interested  parties are  required to present to or file with ANATEL its comments
or  application,  as the  case  may be,  containing,  among  other  things,  the
technical  feasibility  of the proposed MMDS system and a  demonstration  of the
market  potential for the targeted area.  ANATEL will  thereafter  ascertain the
public interest in granting the concession and may decide to open the public bid
process for the granting of such licenses. The 1997 bid process for the granting
of MMDS licenses was begun as a result of the existence of numerous requests for
licenses filed by competing parties.

      In  connection  with  the  1997-98  auction  process,  ANATEL  established
specific criteria for evaluating the Applications for Telecommunication Services
filed.  The criteria  adopted  include a combination  of technical and financial
criteria.  The  following  technical  factors  are being  utilized  by ANATEL in
evaluating  the  technical  aspects of a license  application:  (i) the proposed
length of time for the installation of the transmission system, counted from the
issuance  of the  authorization  for  installation  until the  beginning  of the
service's  commercial  operation;  (ii) the number of  cultural  or  educational


                                       11
<PAGE>

channels  to be  offered;  (iii)  the  percentage  of time  dedicated  to  local
programming,  calculated on the total time used for all channels,  and excluding
the time  dedicated to the channels  referred in item (ii) above;  and, (iv) the
number  of local  community  establishments  that  would  receive  cultural  and
educational programming free of charge.

      The technical specifications, and the offer price for a license, are rated
according to certain criteria established in the Revised MMDS Rule and set forth
in the 1997 MMDS tender invitations,  as follows:  (a) in markets with less than
300,000  inhabitants,  the  technical  aspects weigh more heavily than the offer
price; (b) in markets with a population between 300,000 and 700,000 inhabitants,
the  technical  aspects  and the offer price are weighed  equally;  and,  (c) in
markets with more than 700,000 inhabitants,  the offer price weighs more heavily
than the technical  aspects.  Once an MMDS concession is granted by ANATEL,  the
license  holder is  required  to submit,  within four  months,  an  installation
proposal for its MMDS system's headend. Subsequent to approval of such proposal,
construction  will  be  required  to  be  finalized  and  commercial  operations
commenced  within  12  months;  however,  this  period  may be  extended  for an
additional 12 months, at the sole discretion of Anatel.

      In addition to qualifying under the application and bid process, a license
holder may also be required to  demonstrate  that its  proposed  signal will not
violate  interference  standards in the area of another MMDS license holder. The
Revised MMDS Rule also contains  certain other  technical  criteria  designed to
avoid interference between licensed service areas.

      TWO-WAY MMDS. In some countries, including the United States, MMDS license
holders  have been granted  additional  spectrum to provide  bi-directional,  or
"two-way,"  services  to  their  customers,   including  Internet  access,  data
transmission  and  other  advanced  telecommunications  services.  In the  third
quarter of 2000, ANATEL, the Brazilian  Telecommunications  Agency, approved and
awarded  additional  spectrum to the Company,  in the frequency band of 2,170 to
2,182 MHz.  Currently,  with a total of 198 MHz of  spectrum  available  in each
market,  the  Company  is  able  to  offer  a wide  range  of  two-way  advanced
communication  services,  including  high-speed  data  services  and  high-speed
Internet,  to both the  residential and the corporate  market.  The Company also
owns  additional  specific  licenses,  which allow the offering of voice and VPN
(Virtual Private Network) corporate  services.  Currently,  the Company owns and
operates its own NOC -- Network  Operating Control Center -- which is located in
its headquarters in Brasilia.

      OTHER LICENSES. The Company also owns two licenses for data communications
services in Brazil,  under the definition of "Limited  Services." These licenses
allow the Company to implement and operate data  communications  networks  using
wireless or cable and fiber platforms,  as well as offer special services to the
corporate market.

      OTHER  REGULATIONS.  MMDS license  holders are subject to regulation  with
respect  to the  construction,  marking  and  lighting  of  transmission  towers
pursuant to the Brazilian  Aviation  Code and certain  local zoning  regulations
affecting  construction  of  towers  and  other  facilities.  There  may also be
restrictions  imposed by local  authorities.  The pay  television and high-speed
Internet  industry also is subject to the Brazilian  Consumer Code. The Consumer
Code entitles the purchasers of goods or services to certain  rights,  including
the right to  discontinue  a service  and  obtain a refund if the  services  are
deemed to be of low quality or not rendered adequately. For instance, in case of
a suspension of the  transmission  for a given period,  the subscriber  shall be
entitled to a discount on the monthly  fees.  The Revised MMDS Rule also contain
certain  provisions  relating to  consumer  rights,  including  a provision  for
mandatory discounts in the event of interruption of service.

      Due to the regulated nature of the pay television, high-speed Internet and
data communications  industry, the adoption of new, or changes to existing, laws
or regulations or the  interpretations  thereof may impede the Company's  growth
and may otherwise  have a material  adverse  effect on the Company's  results of
operations and financial condition.

ITEM 2.  PROPERTIES.

      The Company  leases  approximately  37,000 square feet of office space for
its corporate headquarters and the Brasilia System in Brasilia. In addition, the
Company  leases  office space for the Goiania  System,  Belem System and Campina
Grande System consisting of approximately 29,000, 22,000 and 16,000 square feet,
respectively. In addition to leased office space, the Company also owns a lot in


                                       12
<PAGE>

Brasilia,  which  may,  in the  future,  be used as the site  for the  Company's
transmission  tower and offices in such city, and less than 1,500 square feet of
office space in Goiania.  The Company also leases space for transmission  towers
located in Brasilia,  Goiania,  Belem and Campina Grande.  Finally,  the Company
leases  office space and space for  transmission  towers in certain of its newly
awarded  markets.   The  Company  believes  that  office  space  and  space  for
transmission  towers is readily  available  on  acceptable  terms in the markets
where the Company operates wireless cable systems.

ITEM 3.     LEGAL PROCEEDINGS.

      On January 26, 2000, as part of its restructuring  process, TV Filme filed
a voluntary  petition  under  Chapter 11 of the United States  Bankruptcy  Code,
together with a pre-negotiated  Plan of  Reorganization  implementing the agreed
upon restructuring and the Disclosure  Statement relating to such Plan, with the
U.S.  Bankruptcy  Court for the  District of  Delaware.  The court  approved the
Disclosure Statement on March 1, 2000. Following approval of the adequacy of the
Disclosure  Statement,  ballots  respecting  the Plan were  circulated  to those
parties entitled to vote on the Plan, and the Plan was confirmed at a hearing by
the court on April 10, 2000.  Overwhelming  majorities  of holders of TV Filme's
12-7/8%  Senior  Notes and holders of TV Filme's  common stock voted in favor of
the restructuring set forth in the Plan.  Effectuation of the Plan was completed
on   July   21,   2000,   following   support   from   ANATEL   (the   Brazilian
Telecommunciations Agency) and the Central Bank of Brazil.

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

      No matters were submitted to a vote of security  holders during the fourth
quarter of 2000.

                                     PART II

ITEM 5.  MARKET FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
         MATTERS.

      From July 30, 1996 to February 4, 1999, the Company's common stock,  $0.01
par value per share (the  "Common  Stock"),  was  quoted on the Nasdaq  National
Market  ("Nasdaq")  under the symbol  "PYTV."  Effective  February 4, 1999,  the
Common Stock was delisted from Nasdaq based on the Company's inability to comply
with certain  requirements  for  continued  listing,  including the net tangible
assets and minimum bid price requirements. Following delisting, the Common Stock
has  been  listed  on  the  OTC  Bulletin  Board,  sporadically  traded  in  the
over-the-counter-market  and  reported in the "pink  sheets."  The OTC  Bulletin
board is a controlled quotation service that offers real-time quotes,  last-sale
prices and volume information in over-the-counter equity securities.

      The following  table  reflects the high and low sale prices for the Common
Stock, as reported by the OTC Bulletin Board, for the periods indicated:

                                            HIGH         LOW
                                            ----         ---
                                               (Per share)
        SUCCESSOR PERIOD ENDED DECEMBER
        -------------------------------
        31, 2000
        ----------

        Fourth Quarter 2000                $2 1/2       $1 1/32
        Third Quarter 2000                  2 9/16       1 7/8

        PREDECESSOR PERIOD ENDED JULY 20,
        --------------------------------
        2000
        ----

        Second Quarter 2000                 3/8          5/16
        First Quarter 2000                  1 1/8       11/32

        PREDECESSOR YEAR ENDED
        ----------------------
        DECEMBER 31, 1999
        -----------------

        Fourth Quarter                      3/8          1/8
        Third Quarter                      29/32         7/32
        Second Quarter                      1 5/8        1/8
        First Quarter                      13/32         1/8




                                       13
<PAGE>

      On March 31, 2001,  there were  approximately 17 stockholders of record of
the Common Stock. The Company believes that it has  approximately 947 beneficial
owners.

      The Company has never  declared or paid any cash  dividends  on the Common
Stock and does not presently  anticipate paying any cash dividends on the Common
Stock in the foreseeable future. The Company currently expects that earnings, if
any, will be retained for growth and development of the Company's business.  The
Company's ability to declare and pay dividends is (i) affected by the ability of
the Company's present and future  subsidiaries to declare and pay cash dividends
or  otherwise  transfer  funds to the  Company  since the Company  conducts  its
operations  entirely through its subsidiaries,  and (ii) restricted by the terms
of the  Indenture,  dated  as of  July  20,  2000,  among  ITSA-Intercontinental
Telecomunicacoes Ltda., as issuer, the several Guarantors named therein, and The
Bank of New York,  as trustee (the  "Indenture"),  pursuant to which the Company
issued $35 million  aggregate  principal  amount of 12% Senior Secured Notes due
2004.

      Subject to the foregoing and to any restrictions which may be contained in
future indebtedness of the Company,  the payment of cash dividends on the Common
Stock will be within the sole  discretion of the  Company's  Board of Directors,
and will depend upon the earnings,  capital  requirements and financial position
of the Company,  applicable requirements of law, general economic conditions and
other factors considered relevant by the Company's Board of Directors.

ITEM 6.  SELECTED FINANCIAL DATA.

      The  selected  consolidated  balance  sheet data as of December  31, 1996,
1997, 1998, 1999 and 2000 and the selected consolidated  statement of operations
data for each of the periods ended December 31, 1996,  1997, 1998, 1999 and 2000
are derived from, and are qualified by reference to, the Consolidated  Financial
Statements,  which have been  audited by Ernst & Young  Auditores  Independentes
S.C.,  independent  auditors.  The Consolidated  Financial  Statements have been
prepared in accordance with U.S. GAAP in U.S. dollars.  For this purpose,  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 No. 52") as it applies to entities operating
in highly inflationary economies.  Pursuant to SFAS No. 52, 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 fiscal year end exchange  rates;  and all other
income and expense items were  remeasured at average  exchange rates  prevailing
during  the  year.  Remeasuring   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.
The data  presented  below should be read in conjunction  with the  Consolidated
Financial  Statements  and  related  notes  thereto  and  "Item 7.  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
other information included elsewhere in this Report.



                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31, (1)
                                       ----------------------------------------------------------------
                                            1996        1997         1998          1999        2000
                                            ----        ----         ----          ----        ----
                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA)
STATEMENT OF OPERATIONS  DATA:
<S>                                    <C>           <C>          <C>         <C>          <C>

Revenues.............................. $   31,388    $  50,547    $  45,408    $  26,177    $  25,008
Operating costs and expenses:
  System operating.........                 9,593       17,631       19,617       11,844       10,555
  Selling, general and
    administrative....................     16,737       27,965       31,637       15,901       16,951
  Stock compensation..................         --           --           --           --        3,270
  Depreciation and
    amortization .....................      5,921       12,162       21,651       14,205       11,699
                                        ---------    ---------    ---------    ---------    ---------
    Total operating costs
      and expenses....................     32,251       57,758       72,905       41,950       42,475
                                        ---------    ---------    ---------    ---------    ---------
  Operating loss .....................       (863)      (7,211)     (27,497)     (15,773)     (17,467)
  Other income (expense) (2) .........     (1,147)     (12,045)     (12,723)     (50,797)     (20,525)
                                        ---------    ---------    ---------    ---------    ---------
  Income from continuing
    operations .......................     (2,010)     (19,256)     (40,220)     (66,570)     (37,992)
  Extraordinary item .................       --           --           --           --         88,781
                                        ---------    ---------    ---------    ---------    ---------
  Net income (loss) ..................  $  (2,010)   $ (19,256)   $ (40,220)   $ (66,570)   $  50,789
                                        =========    =========    =========    =========    =========
  Loss per share on
    continuing operations ...........       (0.19)       (1.78)       (3.72)       (6.15)       (3.60)

OTHER FINANCIAL DATA:
EBITDA(3) ...........................   $   5,330    $   5,026    $  (5,846)   $  (1,568)   $  (2,498)
Capital expenditures ................      25,225       37,082       14,062        3,593        7,400

OTHER OPERATING DATA:
Number of subscribers at
  end of year(4).....................      79,176      111,244       77,069       72,240       80,609
Average monthly revenue
  per subscriber(5) .................   $   39.63    $   37.91    $   35.39    $   27.01    $   28.06
</TABLE>
<TABLE>
<CAPTION>
                                             AS OF DECEMBER 31,
                              -------------------------------------------------
                             1996       1997       1998        1999        2000
                             ----       ----       ----        ----        ----
                                       (DOLLARS IN THOUSANDS)

<S>                       <C>        <C>          <C>       <C>         <C>
BALANCE SHEET DATA:
Working capital
  (deficit)(6) ........   $123,263   $ 97,723     58,227    (118,602)   $  1,884
Pledged securities(7)..     33,512     17,324       --          --          --
Property, plant and
  equipment, net ......     38,333     63,405     50,974      27,755      19,149
Total assets ..........    202,929    186,397    133,314      83,322      62,925
Total long-term debt ..    140,200    140,000    140,000        --        39,200
Stockholders' equity(8)     37,748     22,330    (21,767)    (91,642)     11,088
</TABLE>
-----------

(1)   The Selected Consolidated Financial Data includes (i) TV Filme Servicos on
      a historical basis and (ii) ITSA and its  subsidiaries  since May 1994 and
      the  predecessor  of ITSA on a historical  basis,  as though they had been
      part  of  the  Company  for  all  periods  presented.  See  Note  1 to the
      Consolidated Financial Statements.

(2)   Other income (expense) is comprised  primarily of foreign currency losses,
      interest expense and reorganization items.

(3)   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.  See "Item 7.
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations -- Overview."

(4)   See "Item 1.  Business-- Operating Systems and the Company's Markets."


                                       15
<PAGE>

(5)   Average   monthly   revenue  per  subscriber  is  calculated  by  dividing
      subscription  revenue for the month by the average  number of  subscribers
      for the month.

(6)   For  periods  prior to 1998,  working  capital  includes  current  portion
      of pledged securities.

(7)   The pledged  securities  were  purchased  as  collateral  for the Senior
      Notes.

(8)   The  Company  has never paid cash  dividends  on its Common  Stock.  See
      "Item 5. Market For Registrant's  Common Equity and Related  Stockholder
      Matters."

ITEM 7.     MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
            RESULTS OF OPERATIONS.

OVERVIEW

      The Notes to  Consolidated  Financial  Statements  are an integral part of
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and should be read in conjunction herewith.

      The   Company   develops,    owns   and   operates    broadband   wireless
telecommunications  systems in markets in  Brazil,  offering  video,  high-speed
Internet and data communications services. Through it subsidiaries,  the Company
has licenses in the cities of Brasilia, Goiania, Belem, Campina Grande, Caruaru,
Porto Velho,  Presidente Prudente,  Bauru, Franca,  Uberaba,  Belo Horizonte and
Vitoria, covering over 3 million households and approximately 13 million people.

      The Company offers a pre-paid  subscription video service,  called MAISTV,
which is comprised of a  self-install  kit available in retail stores in most of
the cities where the company has operations.

      ITSA was also the first company in Brazil to launch a high-speed  internet
access  system using the  technology of high-speed  modems.  The system,  called
LINKEXPRESS,  has been  available on a commercial  basis in the city of Brasilia
since 1998.

      The Company has all its licenses covering the frequency band from 2,500 to
2,686   MHz.   In  the  third   quarter  of  2000,   ANATEL  --  the   Brazilian
Telecommunications  Agency -- approved  and awarded  additional  spectrum to the
Company, in the frequency band of 2,170 to 2,182 MHz. Currently, with a total of
198 MHz of spectrum  available  in each  market,  the Company is able to offer a
wide range of two-way advanced communication services, including high-speed data
services and  high-speed  Internet,  to both the  residential  and the corporate
market.  The Company also owns  additional  specific  licenses,  which allow the
offering  of  voice  and  VPN  (Virtual  Private  Network)  corporate  services.
Currently,  the  Company  owns and  operates  its own NOC --  Network  Operating
Control Center -- which is located in its headquarters in Brasilia.

      Additionally,  the  Company  owns and  maintains  its  proprietary  SMS --
Services  Management System -- called Mythos,  which was developed  in-house and
customized to the Brazilian needs and standards.  This advanced software package
allows the Company to have full control of every aspect of its businesses,  from
marketing to sales, customer service,  technical support,  inventory control and
billing.  The Company believes that the ability to control and customize the SMS
is a key point in quickly offering  reliable  services to the market.  Recently,
the Company has licensed its software to some third party operations in Brazil.

      During 1998 and the first quarter of 1999,  the Company faced  significant
challenges that ultimately affected the Company's ability to pay interest on its
outstanding 12 7/8% senior notes due 2004 (the "Senior  Notes") issued  pursuant
to an indenture dated as of December 20, 1996 (the  "Indenture").  The Brazilian
government's  delay  in  granting  wireless  cable  television   licenses,   the
instability in emerging markets, the devaluation of the Brazilian currency,  the
REAL,  and  the  resulting  decline  in  consumer  spending  on  wireless  cable
television  in the markets in which ITSA and the  Company's  other  subsidiaries
provide  services,  significantly  impacted the Company's  business plan and its
ability to service its indebtedness  under the Indenture and continue as a going
concern.  While the Company decided to commence  discussions with holders of the


                                       16
<PAGE>

Senior Notes to pursue a comprehensive  financial and operational  restructuring
plan,  the Company  failed to make the required  interest  payment on the Senior
Notes on June 15, 1999.

      The  Indenture  provides that failure to pay interest on the Senior Notes,
if not cured  within 30 days of such  failure,  constitutes  an Event of Default
under Section  6.1(b) of the  Indenture.  Section 6.2 of the Indenture  provides
that upon the  occurrence  of an Event of  Default,  holders  of at least 25% in
principal  amount  of the  outstanding  Senior  Notes  may  declare  the  unpaid
principal  of, and any accrued  interest  on, all the Senior Notes to be due and
payable immediately.

RESTRUCTURING AND PLAN OF REORGANIZATION

      On August 13, 1999,  TV Filme  reached an  agreement  in principle  with a
committee  representing  holders of TV Filme's  outstanding  Senior Notes.  This
Agreement  was  effected on July 21, 2000  pursuant  to a  pre-arranged  plan of
reorganization  which  received  court  approval  under  Chapter  11 of the U.S.
Bankruptcy  Code on April 10, 2000. In accordance  with the terms of the plan of
reorganization,  the Senior Noteholders  received a $25 million cash payment and
their  existing  notes were  converted  into (i) Secured  Notes in the aggregate
principal amount of $35 million,  due 2004, at an interest rate of 12% per annum
(interest  payable-in-kind  at the  Company's  option  through  its  first  four
interest  payments),  and (ii) 80% of the new common  equity of the  reorganized
Company.  Current  management  received  15% of the new common  equity,  and the
existing common stockholders of TV Filme received 5% of the new common equity of
the  reorganized  Company.  All outstanding  stock options were cancelled.  ITSA
Ltd., (the reorganized Company) is a newly-formed Cayman Islands holding company
and is the successor issuer to TV Filme,  Inc.  pursuant to Rule 12g-3 under the
Securities   Exchange  Act.  The  12%  Senior   Secured  Notes  were  issued  by
ITSA-Intercontinental  Telecommunicacoes Ltda., a wholly-owned subsidiary of the
Company.

      On January 26, 2000, as part of the restructuring  process, TV Filme filed
a voluntary  petition  under  Chapter 11 of the United States  Bankruptcy  Code,
together with a pre-negotiated  Plan of  Reorganization  implementing the agreed
upon restructuring and the Disclosure  Statement relating to such Plan, with the
U.S.  Bankruptcy  Court for the  District of  Delaware.  The court  approved the
Disclosure Statement on March 1, 2000. Following approval of the adequacy of the
Disclosure  Statement,  ballots  respecting  the Plan were  circulated  to those
parties entitled to vote on the Plan, and the Plan was confirmed at a hearing by
the court on April 10, 2000.  Overwhelming  majorities  of holders of TV Filme's
12-7% Senior Notes and holders of TV Filme's  common stock voted in favor of the
restructuring  set forth in the Plan.  Effectuation of the Plan was completed on
July 21, 2000,  following support from ANATEL (the Brazilian  Telecommunications
Agency) and the Central Bank of Brazil.

      GENERAL

      Historically,  the  Company  has  generated  operating  losses,  which may
increase to the extent that  operations of  additional  systems are commenced or
acquired. As the Company continues to develop systems, positive EBITDA from more
developed  systems is expected to be partially or completely offset by corporate
overhead, negative EBITDA from less developed systems and from development costs
associated  with  establishing  new systems.  This trend is expected to continue
until the Company has a sufficiently  large  subscriber base to absorb operating
and development costs of new systems. There can be no assurance that the Company
will be able to achieve or sustain net income in the future.

      Each of the  Company's  existing  systems has required an initial  capital
investment of approximately  $1.0 million to $1.5 million to build and install a
transmission  tower,  headend  facilities and other  equipment.  These costs are
generally  depreciated  over ten years.  In addition,  each new  subscriber  has
required an average incremental  investment of approximately $450 in the case of
the video service,  which includes the cost of a decoder box, installation labor
and materials, other equipment and supplies, marketing and selling costs. In the
case of the residential  high-speed  Internet  service,  each new subscriber has
required an average incremental  investment of approximately $630 (include cable
modem).  The Company  capitalizes  installation  costs,  including  installation
labor,  decoders and other direct costs, and depreciates these costs over a four
year  period.  Prior to 1998,  these  costs  were  depreciated  over a five year
period.  The Company charges new subscribers  installation  fees which vary from
market to market,  depending on factors which include the subscriber's access to
other forms of services and whether the  installation is the first  installation
in a building.  The Company has charged  its  subscribers  an  installation  fee
typically ranging from $5 - $75 for the video service (approximately $10, net of
sales  commissions,  in markets  which have adopted the MAIS TV model ). For the


                                       17
<PAGE>

residential  high speed Internet service the Company charges an installation fee
ranging  from $45 to $80  depending  on  customer's   characteristics.  For  new
market systems,  the Company  expects to incur an initial capital  investment of
approximately  $1.5  million  each to build and  install a  transmission  tower,
headend  facilities and other  equipment.  Factoring in the $7.0 million cost of
the licenses for the new markets,  the total estimated initial  expenditures for
these markets is expected to be  approximately  $19 million.  The Company defers
installation fees, net of direct selling expenses, and is recognizing these fees
as  revenues  ratably  over a  four-year  period.  Prior  to 1998,  the  Company
recognized these fees as revenues ratably over a five-year period.

      The Company's historical  subscriber growth has resulted from the addition
of subscribers in Brasilia and from the launch of operating  systems in Goiania,
Belem and Campina Grande. In the past,  subscriber losses have resulted from the
general  economic  situation  in  Brazil,  including  the strict  tightening  of
consumer credit and increased levels of unemployment. Revenues primarily consist
of monthly fees paid by subscribers for the programming  packages,  installation
fees recognized for the period and advertising fees and revenue derived from the
provision of high speed Internet access services.  See "Item 1. Business -- High
Speed Internet Access Service and Data Communication Services." System operating
expenses include  programming costs, a portion of the costs of compensation  and
benefits for the  Company's employees, transmitter   site  rentals  and  certain
repair  and  maintenance expenditures.  Depreciation  and  amortization expenses
consist  primarily  of  depreciation  of  decoder  boxes, headend facilities and
installation costs.

      The  development  of a new system  requires  significant  expenditures,  a
substantial  portion of which are incurred  before the  realization of revenues.
These  expenditures,  together with the  associated  early  operating  expenses,
result in negative  cash flow until an adequate  revenue  generating  subscriber
base is  established.  As the subscriber  base  increases,  revenue,  as well as
certain costs such as programming  costs,  generally increase while other costs,
such as tower rental and related  maintenance costs, remain constant or increase
at  proportionately  lower levels.  Accordingly,  although costs increase in the
aggregate  as the  subscriber  base  grows,  costs as a  percentage  of revenues
decrease and operating margins should generally increase.

      Although the Company's financial statements are presented pursuant to U.S.
GAAP 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. From time to time, the Company purchases hedge contracts to
reduce the risk of having a  substantial  portion of its cash in REAIS.  See "--
Certain  Factors  Which May  Affect  the  Company's  Future  Results  -- Factors
Relating  to the  Company -- Risks  Associated  with New  Markets and Growth and
Expansion Strategy."

      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 past several years by Brazil's  economic  stabilization  plan,
the Real Plan. Among other actions,  on October 27, 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.  Even after  taking these  measures,  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 ("IMF"). On November 13, 1998, the IMF announced an aid package of
more than $41  billion.  To secure these  funds,  in October 1998 the  Brazilian
government announced additional austerity measures including pension plan reform
and  significant  spending  cuts,  which  have been  approved  by the  Brazilian
Congress.  As  part of  these  additional  austerity  measures,  the  government
increased 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, 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. These measures have had,
and will have for the foreseeable  future,  both a direct and indirect impact on
the Company's financial results.



                                       18
<PAGE>

      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 1999. 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.  Although the Company has seen some improvement
in  customer  control,  there can be no  assurance  that the steps  taken by the
Company or measures taken by the Brazilian government will be successful. If the
steps implemented by the Company and the Brazilian government are not effective,
the Company may be unable to meet future cash  requirements.  See "--  Liquidity
and Capital Resources."

      As a holding company, the Company is dependent on the receipt of dividends
and payment of intercompany obligations from its operating subsidiaries in order
to meet its cash requirements. The payment of dividends from the subsidiaries of
the Company to the Company and the payment of any  interest on or the  repayment
of any  principal  of any loans or  advances  made by the  Company to any of its
subsidiaries  may be subject  to  statutory  or  contractual  restrictions,  are
contingent on the earnings and performance of such  subsidiaries and are subject
to various business considerations.  See "Item 5. Market For Registrant's Common
Equity and Related Stockholder Matters."

RESULTS OF OPERATIONS

      Although  the  Company's  financial  statements  are  presented  in U.S.
dollars  and  pursuant  to  accounting  principles  generally  accepted in the
United States,  the Company's  transactions  are consummated in both REAIS and
U.S.  dollars.  Inflation  and  devaluation  in  Brazil  have had  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
and fresh-start  reporting,  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 of the Company.

      Effective  July 21, 2000,  the Company  emerged from Chapter 11 bankruptcy
proceedings and implemented  "fresh start accounting."  Accordingly,  all assets
and  liabilities  were restated to reflect  their  respective  fair values.  The
consolidated  financial  statements after that date are those of a new reporting
entity and are not  comparable to the  Pre-Confirmation  periods.  However,  for
purposes of this discussion,  the five months and eleven days ended December 30,
2000 have been  combined to the six months and twenty days ended July 20,  2000.
Differences  between  periods due to fresh start  accounting  are explained when
necessary.  The  following  table  is  included  solely  for use in  comparative
analysis of results of operations,  and to complement  management's  discussions
and analysis:

                                               YEAR ENDED DECEMBER 31,
                                   ---------------------------------------------
                                                 (In thousands)
                                         % OF            % OF             % OF
                                  1998   REVENUE  1999   REVENUE   2000  REVENUE
                                  ----   -------  ----   -------   ----  -------

Revenues........................ $45,408   100%  $26,177   100%  $25,008   100%
Operating costs and expenses:
System operating................  19,617    43%   11,844    45%   10,555    42%
Selling, general and
    administrative (b)..........  31,637    70%   15,901    61%   16,951    68%
Stock compensation..............      --    --        --    --     3,270    13%
Depreciation and amortization...  21,651    48%   14,205    54%   11,699    47%
                                  ------  -----   ------  -----   ------  -----
    Total operating costs
      and expenses .............  72,905   161%   41,950   160%   42,475   170%
                                  ------   ----   ------   ----   ------   ----
    Operating loss.............. (27,497)  (61%) (15,773)  (60%) (17,467)  (70%)
                                 --------  ----- --------  -----  ------   -----
Other income (expense):
  Interest expense.............. (19,592)  (43%) (22,756)  (87%) (11,793)  (47%)
  Interest income...............  11,300    25%    7,281    28%    3,306    13%
  Foreign exchange loss.........  (4,213)   (9%) (30,564) (117%)  (6,048)  (24%)
  Other financial income
  (expense).....................  (218)    1%     (34)     --      (60)     --
                                  -----    --     ----    -----    ----   -----


                                       19
<PAGE>
                                               YEAR ENDED DECEMBER 31,
                                   ---------------------------------------------
                                                 (In thousands)
                                         % OF            % OF             % OF

                                  1998   REVENUE  1999   REVENUE   2000  REVENUE
                                  ----   -------  ----   -------   ----  -------

  Interest expense.............. (19,592)  (43%) (22,756)  (87%) (11,793)  (47%)
  Interest income...............  11,300    25%    7,281    28%    3,306    13%
  Foreign exchange loss.........  (4,213)   (9%) (30,564) (117%)  (6,048)  (24%)
  Other financial income
  (expense).....................    (218)    1%     (34)    --      (60)    --
                                  -------  ----   ----    -----    -----  -----
      Total other expense....... (12,723)  (28%)(46,073) (176%)  (14,595)  (54%)
                                --------  ----- -------- ------ --------  -----
Loss before reorganization
  items and extraordinary
  item.......................... (40,220)  (89%) (61,846) (236%) (32,062) (128%)
Reorganization items:
 Reorganization
  costs........................      --    --    (4,724)  (18%)  (2,709)  (11%)
 Adjust accounts to fair
  value........................      --    --      --       --   (3,221)  (13%)
                                -------- -----   -------  ----   -------  -----
     Total  reorganization
       items..................       --    --    (4,724)  (18%)  (5,930)   (24%)
                                -------  -----   -------  -----  -------   -----
Loss before extraordinary
  item........................       --    --    (66,570) (254%) (37,992) (152%)
Extraordinary item:
   Extinguishment of debt.....      --      --     --       --    88,781  (355%)
                                -------  -----  --------  -----  -------  ------
Net income (loss)............   $(40,220) (89%) $(66,570) (254%)  50,789   203%
                                 --------  ----- -------- -----  -------   ----
Other Data:
 EBITDA(a) .....................$ (5,846)       $ (1,568)       $ (2,498)
                                  =======         =======         =======
  Number of subscribers at end
    of  period..................  77,069(b)       72,240          80.609
                                 ==========      =======          ======



      (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.

      (b) In the second half of 1998,  the Company  became  more  aggressive  in
canceling the accounts of delinquent subscribers.

      REVENUES.  The  Company's  revenues  for 2000  decreased by 4% compared to
1999,  primarily due to converting  from a post-paid to a pre-paid  subscription
model in two of the  Company's  markets,  Brasilia and Belem.  Revenues for 1999
decreased by 42% compared to 1998, due primarily to the  devaluation of the REAL
between the periods, as well as some decline in subscriber base.

      SYSTEM OPERATING EXPENSES.  System Operating Expenses decreased in 2000 by
11% compared to 1999, primarily due to reduction of programming costs related to
lower priced  packages now offered by the  Company.  For 1999  compared to 1998,
system operating  expenses decreased by 40%, primarily due to the devaluation of
the REAL between the periods, offset in part by programming costs, most of which
were  denominated  in  U.S.  dollars.   Currently,  the  programming  costs  are
denominated principally in Brazilian Reais.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  general  and
administrative  ("SG&A")  expenses  increased  in 2000 by 7%  compared  to 1999,
primarily  due to  expenses  related  to the  transition  to  the  new  pre-paid
subscription  model in the Brasilia and Belem systems and expenses  related with
the contract of soccer of Belem system.  SG&A expenses  decreased during 1999 by
35% over 1998, primarily due to the REAL devaluation.  This decrease was offset,
in part, by 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.  Depreciation and amortization decreased in
2000  by  18%  compared  to  1999,   primarily  due  to  assets  becoming  fully
depreciated.  Depreciation and amortization  decreased in 1999 by 34% over 1998,
primarily due to the devaluation in the REAL. This decrease was offset, in part,
by the extra depreciation  caused by additional  capitalized  installation costs
during the period.



                                       20
<PAGE>

      INTEREST  EXPENSE.  Interest  and other  expense  decreased in 2000 by 40%
compared to 1999,  primarily due to a decrease in liability position  associated
with TV Filme's restructuring  process.  Interest and other expense increased in
1999 by 22% over  1998,  primarily  due to the  write-off  of  capitalized  debt
issuance costs and recognized  losses  associated with loss positions on foreign
exchange currency contracts held at year end.

      INTEREST  INCOME.  Interest  and  other  income  decreased  in 2000 by 55%
compared to 1999,  primarily  due to a decrease in average cash balance  between
the two periods.  Interest and other income decreased in 1999 by 36% compared to
1998,  primarily  due to a decrease in the average cash balance  between the two
periods, 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.

      FOREIGN  EXCHANGE  LOSS.  Due  to  its  net  dollar-denominated  liability
position,  which occurred  throughout 1998, 1999 and 2000, 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.

      NET INCOME  (LOSS).  Net income (loss) for 2000 was $50.8  million  versus
($66.6) million in 1999,  primarily due to reduced interest expenses, a decrease
in  recorded  currency  exchange  loss,  a decrease  in  operating  loss and the
reorganization   and  the   extraordinary   item   associated  with  TV  Filme's
restructuring.  Net loss for 1999  increased to ($66.6)  million  versus ($40.2)
million in 1998, primarily due to the devaluation of the REAL versus the dollar,
which  caused  a $25  million  increase  in  currency  exchange  loss due to the
Company's net  dollar-denominated  monetary  liability  position.  Reductions in
operating loss due to staff cuts,  stricter accounts receivable policies and the
REAL devaluation were offset by higher net interest and other expense.

LIQUIDITY AND CAPITAL RESOURCES

      On January 26, 2000, the Company filed the Chapter 11 case and on July 21,
2000,  the Company  completed  its Plan of  Reorganization,  which  affected its
liquidity and capital resources in fiscal 2000. See "Item 1.

Business--Restructuring and Plan of Reorganization."

      As of December  31,  2000,  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.  Pursuant to the terms of a
commitment  letter  executed  by various  proposed  lenders  (including  certain
shareholders of the Company) on July 20, 2000, the Company is able to borrow, on
a secured basis,  $10,000,000 of additional  capital for use in its  operations.
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.  The  Company had a working  capital at December  31, 2000 of $1.9
million.  Net cash used in  operating  activities  for the twelve  months  ended
December 31, 2000 was $31.6 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.



                                       21
<PAGE>

      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 selected BT Alex. Brown, Inc.
(now Deutsche Bank) as its financial advisor.

      On August 13, 1999,  TV Filme  reached an  agreement  in principle  with a
committee  representing  holders of TV Filme's  outstanding  Senior Notes.  This
Agreement  was  effected on July 21, 2000  pursuant  to a  pre-arranged  plan of
reorganization  which  received  court  approval  under  Chapter  11 of the U.S.
Bankruptcy  Code on April 10, 2000. In accordance  with the terms of the plan of
reorganization,  the Senior Noteholders  received a $25 million cash payment and
their  existing  notes were  converted  into (i) Secured  Notes in the aggregate
principal amount of $35 million,  due 2004, at an interest rate of 12% per annum
(interest  payable-in-kind  at the  Company's  option  through  its  first  four
interest  payments),  and (ii) 80% of the new common  equity of the  reorganized
Company.  Current  management  received  15% of the new common  equity,  and the
existing common stockholders of TV Filme received 5% of the new common equity of
the  reorganized  Company.  All outstanding  stock options were cancelled.  ITSA
Ltd., (the reorganized Company) is a newly-formed Cayman Islands holding company
and is the successor issuer to TV Filme,  Inc.  pursuant to Rule 12g-3 under the
Securities   Exchange  Act.  The  12%  Senior   Secured  Notes  were  issued  by
ITSA-Intercontinental  Telecommunicacoes Ltda., a wholly-owned subsidiary of the
Company.

      On January 26, 2000, as part of the restructuring  process, TV Filme filed
a voluntary  petition  under  Chapter 11 of the United States  Bankruptcy  Code,
together with a pre-negotiated  Plan of  Reorganization  implementing the agreed
upon restructuring and the Disclosure  Statement relating to such Plan, with the
U.S.  Bankruptcy  Court for the  District of  Delaware.  The court  approved the
Disclosure Statement on March 1, 2000. Following approval of the adequacy of the
Disclosure  Statement,  ballots  respecting  the Plan were  circulated  to those
parties entitled to vote on the Plan, and the Plan was confirmed at a hearing by
the court on April 10, 2000.  Overwhelming  majorities  of holders of TV Filme's
12-7% Senior Notes and holders of TV Filme's  common stock voted in favor of the
restructuring  set forth in the Plan.  Effectuation of the Plan was completed on
July 21, 2000,  following support from ANATEL (the Brazilian  Telecommunications
Agency) and the Central Bank of Brazil.

      The Company made capital expenditures of approximately $7.4 million during
2000. Such capital  expenditures were financed with the proceeds from the Senior
Notes offering and from cash generated from the Company's operations.

      In September 1997, the Brazilian Ministry of Communications  announced the
bidding process by which additional pay-TV licenses would be awarded  throughout
the  country.  This  award  process  commenced  in  October  1997.  Due to legal
challenges made to the bidding process by several  bidders,  the bidding process
had been  postponed  for all markets.  However,  on May 13,  1998,  the Superior
Justice  Tribunal  issued a favorable  ruling  allowing the bidding process with
respect to a number of the  smaller  markets to go  forward.  In July 1998,  the
license process for the smaller markets was reinstated and in the fourth quarter
of 1998,  the Company was awarded  licenses to operate  wireless  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 and was successful
in wining  licenses for the markets of Belo Horizonte and Vitoria,  for which it
offered a total of approximately $2.3 million.

      As of December 31, 2000, of the Company's  approximately  $ 3.9 million in
cash and cash equivalents.   Our  sources  of  funds  have consisted principally
of invested capital,  cash flow from operations and cash remaining from the debt
outstanding.  Our uses of those funds (other than for operations) have consisted
principally of cash needs for the debt restructuring  process, which occurred in
1999 and 2000.

      In the short term,  the Company has executed a commitment  letter  between
the Company, certain of its subsidiaries and the lenders thereunder whereby such
lenders  agree  to  provide  working  capital  to the  Company  in the form of a
$10,000,000 secured revolving credit facility. The Company must give the lenders
15 days notice of its intention to implement the credit facility. Closing on the


                                       22
<PAGE>

facility  will have the effect of making the lenders  thereunder on an equal and
ratable  basis with the  holders of the  Company's  Senior  Secured  Notes.  The
facility will be guaranteed by the Company's  subsidiaries.  The credit facility
restricts the Company's  ability to, among other things,  pay  dividends,  issue
stock,  sell assets,  enter into  transactions  with affiliates and incur liens.
Borrowings  under the facility must be in an aggregate  amount of $1,000,000 and
multiples  of $100,000  in excess  thereof,  and the  Company  must give 10 days
notice of its  intention  to  borrow  under the  facility.  The loans  will bear
interest  at a rate of 15% per annum and are  payable  upon the  earlier  of one
year,  a change of control of the company or at the option of the  Company  with
ten days prior notice.

      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 future funding needs.

      The Company has  developed a business  strategy to invest in its  wireless
network on a  nationwide  basis in order to be able to offer  video,  high-speed
Internet  and  data   communications   services.   Considering  the  demand  for
telecommunications  services  in Brazil and the lack of  infrastructure  in many
markets, the Company believes it has the opportunity to offer efficient services
gaining rapid market share.

      In the area of video  delivery,  the Company intends to upgrade its system
and use digital  compression  technology  to offer as many as 100 digital  video
channels to its  subscribers  in the major  markets.  All  transmission  systems
already in place are capable of offering digital video channels, but substantial
capital  investment will be needed to upgrade  customers'  set-top  decoders and
equipment.  The Company  estimates  that,  in order to offer the  digital  video
services,  it will have to invest  approximately  $2.0  million  in the next two
years, for each of the major markets where this service will be available.

      Additionally,  the Company's strategy involves extending LinkExpress,  its
high-speed  Internet and data service,  to all other major markets.  The Company
will  focus   primarily  on  developing   its   high-speed   Internet  and  data
communications services,  serving both the residential and the corporate market.
In order to offer the  high-speed  and data  services , the Company will have to
invest in average  approximately $1.5 million in the next two years, for each of
the major markets where this service will be available.

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 in U.S. dollars.  To the extent the REAL depreciates at a rate
greater than the rate at which the Company is able to raise prices, the value of
the  Company's  revenues  (as  expressed in U.S. dollars) is adversely affected.
This  effect  on  the  Company's  revenues also negatively impacts the Company's
ability to fund U.S. dollar-based expenditures.

      As of January 1, 1998, the Company's financial  statements reflect foreign
exchange  gains and losses  associated  with  monetary  assets  and  liabilities
denominated in currencies  other than the REAL. As a result,  the devaluation of
the REAL against the U.S. dollar has caused,  and is expected to cause,  for the
foreseeable future, the Company to record a loss associated with its U.S. dollar
monetary  liabilities.  Given that the  Company has a net U.S.  dollar  monetary


                                       23
<PAGE>

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
7A. Quantitative and Qualitative Disclosures about Market Risk."

RECENT ECONOMIC EVENTS

      In August of 2000,  the Brazilian  Congress  passed and approved a new law
#9998 - August  17th,  which  establishes  a new tax to be paid monthly by every
telecommunications  operator in the country.  This tax,  called FUST -- Fundo de
Universalizacao dos Servicos de Telecommunicacoes (Fund for the Universalization
of Telecommunications  Services) -- will be calculated based on 1% (one percent)
of the total  gross  income of every  operation,  and will become  effective  on
January  2001.  This  tax  will  adversely  affect  the  Company's   results  of
operations.

      In November of 2000, the Brazilian  Congress passed and approved a new law
#10052 - November 28th, which  establishes a new tax to be paid monthly by every
telecommunications  operator in the country.  This tax,  called FUNTTEL -- Fundo
para o Desenvolvimento Tecnologico das Telecommunicacoes (Fund for Technological
Development of  Telecommunications  Sector) -- will be calculated  based on 0.5%
(half  percent) of the total gross  income of every  operation,  and will become
effective on April 2001.

FACTORS RELATING TO BRAZIL GENERALLY

      OUR BUSINESS  COULD SUFFER FROM  POLITICAL AND ECONOMIC  UNCERTAINTIES  IN
BRAZIL.  Changes in policies involving,  among other things,  tariffs,  exchange
controls,  regulatory policy and taxation,  as well as events such as inflation,
currency  devaluation,  social  instability  or  other  political,  economic  or
diplomatic  developments  could  adversely  affect  our  business,   results  of
operations and financial condition.

      GOVERNMENT  RESTRICTIONS  ON THE CONVERSION AND REMITTANCE OF FUNDS ABROAD
COULD HINDER OUR ABILITY TO OPERATE OUR BUSINESS.  The Brazilian  government has
the  authority  to restrict  the  transfer  of funds  abroad.  If the  Brazilian
government  were  to  exercise  this  power,  as it has  done in the  past,  our
subsidiaries  could be prevented from purchasing  equipment  required to be paid
for in U.S. dollars and from  transferring  funds to ITSA, which are required in
order for ITSA to make scheduled  interest  payments on its  outstanding  Notes.
Either of these events  could have a material  adverse  impact on our  business,
operating results and financial condition.

FACTORS RELATING TO THE COMPANY

      OUR  SUBSTANTIAL  LEVERAGE COULD  ADVERSELY  AFFECT OUR ABILITY TO RUN OUR
BUSINESS.  We  currently  have  a  significant  amount  of  indebtedness.   This
substantial  indebtedness  could have important  consequences.  For example,  it
could:

o  limit our ability to obtain  additional  financing in the future to refinance
   existing   indebtedness  and  for  working  capital,   capital  expenditures,
   acquisitions, and general corporate purposes or other purposes;

o  require us to dedicate a substantial portion of our cash flow from operations
   and cash and/or marketable securities on hand to the payment of principal and
   interest on our  indebtedness,  thereby  reducing funds  available for market
   expansion and additional market development;

o  hinder our ability to adjust rapidly to changing market conditions; and

o  make us more  vulnerable  to  economic  downturns,  limiting  our  ability to
   withstand  competitive  pressures and reduce our flexibility in responding to
   changing business and economic conditions.

      OUR ABILITY TO DISTRIBUTE DIVIDENDS AND MEET DEBT OBLIGATIONS IS DEPENDENT
ON OUR SUBSIDIARIES. Because we are a holding company, our ability to distribute


                                       24
<PAGE>

dividends and meet our debt  obligations  are dependent upon the earnings of our
subsidiaries  and the  distribution of those earnings to, or upon loans or other
payment of funds by the  subsidiaries  to, us. Our subsidiaries may be obligated
as  guarantors  of our debt to pay any amounts to our  creditors  or to make any
funds available to our creditors. The payment of dividends from our subsidiaries
and the payment of any  interest on or the  repayment  of any  principal  of any
loans or advances made to us by our  subsidiaries,  or by us to our subsidiaries
(1) may be subject to statutory or contractual  restriction,  (2) are contingent
upon the earnings of such  subsidiaries  and (3) are subject to various business
considerations.

      WE HAVE A HISTORY OF LOSSES AND MAY NEVER ACHIEVE  PROFITABILITY.  We have
incurred  net losses  since our  formation.  We expect that we will  continue to
incur losses from operations from the foreseeable  future.  We cannot assure you
that we will ever become profitable in the future.

      A FAILURE TO EFFECTIVELY MANAGE OUR INTERNAL GROWTH WOULD ADVERSELY AFFECT
OUR  BUSINESS.  Our growth has placed a  significant  strain on  managerial  and
operation  resources.  Any inability to manage growth effectively,  or a drop in
productivity  of our  employees  could  have a  material  adverse  effect on our
business, results of operations and financial condition.

      WE  WILL  NEED  ADDITIONAL  CAPITAL  TO  FINANCE  GROWTH.  Our  business
requires substantial investment on a continuing basis to finance:

o  debt service obligations,

o  capital  expenditures  and expenses  related to subscriber  growth and system
   development,

o  the acquisition of new wireless licenses and operations, and

o  net losses.

The amount and timing of our future  capital  requirements  will  depend  upon a
number of factors, many of which are not within our control, including:

o  the grant of new licenses,

o  programming costs,

o  backbone and infrastructure costs,

o  capital costs,

o  competitive conditions, and

o  the costs of any necessary  implementation  of  technological  innovations or
   alternative technologies.

      We can make no assurance that we will be able to obtain additional debt or
equity capital on satisfactory  terms,  or at all, to meet our future  financing
needs.  Furthermore,  the indenture under which our outstanding  debt was issued
restricts the amount of additional  indebtedness which we may incur.  Failure to
obtain any required additional  financing could adversely affect our growth and,
ultimately,  could have a material  adverse  effect on our business,  results of
operations and financial condition.

      WE ARE IN A  COMPETITIVE  BUSINESS.  We face  potential  competition  from
hardwire   cable    operators,    DBS,   local   off-air    VHF/UHF    channels,
telecommunications  operators,  home  videocassette  recorders  and  out-of-home
theaters.  Currently,  there are three DBS  providers  in Brazil and the private
telephone  companies have started offering  high-speed Internet access services,
using  DSL   technologies,   in  some  markets.   Legislative,   regulatory  and
technological developments may result in additional and significant competition.
Many of our actual and potential  competitors have greater financial,  marketing
and other  resources than we do. We cannot provide any assurance that we will be
able to compete successfully.



                                       25
<PAGE>

      OUR BUSINESS COULD SUFFER FROM CHANGES IN GOVERNMENT  REGULATION.  Changes
in the regulation of our business activities,  including decisions by regulators
affecting our operations,  could have an adverse effect on our business. Any new
regulations could have a material adverse effect on the pay television industry,
as a whole, and on us, in particular.

      WE ARE DEPENDENT ON CERTAIN KEY SUPPLIERS. We currently purchase decoders,
modems and antennas  from a limited  number of sources.  Our inability to obtain
sufficient  components as required from these sources, or to develop alternative
sources if and as required in the future,  could result in delays or  reductions
in customer  installations  which, in turn, could have a material adverse effect
on our results of operations and financial condition.

      In February  2000,  the  Company's  only  supplier  of  decoders  (General
Instruments,  recently  purchased  by Motorola)  in its four  Operating  Markets
announced that it was planning to discontinue production for this product in the
future,  and gave the Company a limited time in which to give additional  orders
for the  manufacturing  of this  product.  While the Company  has a  substantial
inventory of decoders available for use for new subscribers, the technology used
in the decoding  process is proprietary  and no other supplier  currently  could
provide the Company with additional decoders should they become necessary.  Some
recent discussions between the Company,  Motorola and several other operators in
Brazil have raised the  possibility  of Motorola  licencing its  technology  for
production of the decoders in Brazil. It is unclear if Motorola will license its
proprietary decoding technology to any other manufacturer or if it will continue
to manufacture  the decoders.  If Motorola does not continue  production of this
decoder,  or permit any other manufacturer to do so, and if the Company requires
additional  decoders for subscriber use, it could have a material adverse effect
on our results of operations and financial condition.

ITEM 7A.  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.

      The  table  below  provides  information  on  our  debt  outstanding as of
December 31, 2000.  The debt is denominated in U.S. dollars.

<TABLE>
<CAPTION>
                                                           AS OF DECEMBER 31, 2000

                                 -----------------------------------------------------------------------------
                                               EXPECTED MATURITY DATE

                                 ---------------------------------------------------
                                                                           AFTER                     FAIR
                                    2000         2001         2002         2002         TOTAL      VALUE(1)
                                    ----         ----         ----         ----         -----      --------
                                                          (U.S. DOLLARS IN MILLIONS)

<S>                              <C>            <C>          <C>           <C>          <C>
Long-term debt:
U.S. dollars                           --           --           --       39,500       39,500      39,500
                                 ---------      -------       --------    --------     --------    --------

Total long-term debt                   --           --           --       39,500       39,500      39,500
                                 ---------      -------       --------    --------     --------    --------

---------------
(1) The methodology used to determine the fair value included in the table above
is described in note 2 to the Company's consolidated financial statements.
</TABLE>

                                       26
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The following  statements  are filed as part of this Annual Report on Form
10-K:

                                                              FORM 10-K
                                                               PAGE NO.

FINANCIAL STATEMENTS:

 ITSA LTD. (SUCCESSOR TO TV FILME, INC.):
  Report of Independent Auditors.........................        28

  Consolidated Balance Sheets as of
  December 31, 1999 and 2000.............................        29

  Consolidated Statements of Operations for the years
  ended  December  31,  1998 and 1999, the six  months
  and twenty days ended July 20, 2000, and the five
  months and eleven days ended December 31, 2000..........       30

  Consolidated Statements of Changes in Stockholders'
  Equity (Deficit) for the years ended December 31, 1998
  and 1999, the six  months and twenty days ended July 20,
  2000, and the five months and eleven days ended
  December 31, 2000........................................      31

  Consolidated Statements of Cash Flows for the years
  ended December 31, 1998 and 1999, the six  months
  and twenty days ended July 20, 2000, and the five
  months and eleven days ended December 31, 2000............     32

  Notes to Consolidated Financial Statements................     33






                                       27
<PAGE>






                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
ITSA Ltd.

We have  audited  the  accompanying  consolidated  balance  sheets  of ITSA Ltd.
(successor  to TV  Filme,  Inc.)  and  subsidiaries  as  of  December  31,  2000
(Sucessor)  and December 31, 1999  (Predecessor),  and the related  consolidated
statements of operations,  changes in  stockholders'  equity  (deficit) and cash
flows for the five months and eleven days ended December 31, 2000 (Sucessor) and
for the six months and twenty  days  ended  July 20, 2000 and  the  years  ended
December 31, 1999 and 1998 (Predecessor).  These  financial  statements are  the
responsibility of the  Company's  management.  Our responsibility  is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of ITSA Ltd. and
subsidiaries   at  December   31,  2000   (Sucessor)   and   December  31,  1999
(Predecessor),  and the consolidated  results of their operations and their cash
flows for the five months and eleven days ended December 31, 2000 (Sucessor) and
for the six  months and twenty  days  ended  July 20,  2000 and the years  ended
December  31,  1999  and  1998  (Predecessor),  in  conformity  with  accounting
principles generally accepted in the United States.

                                  ERNST & YOUNG
                          Auditores Independentes S.C.



                                 Sergio Citeroni
                                     Partner

Sao Paulo, Brazil
March 14, 2001



                                       28
<PAGE>




            ITSA LTD. (SUCCESSOR TO TV FILME, INC.) AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                    PREDECESSOR    SUCCESSOR
                                                          DECEMBER 31,

                                                        1999          2000
                                                        ----          ----
                                                    (IN THOUSANDS OF US DOLLARS)

ASSETS
Current assets:

  Cash and cash equivalents ..................  $         42,175   $ 3,858
  Trade accounts receivable, less allowance of
     $651 in 1999 and $807 in 2000 ...........             1,850       795
  Prepaid expenses and other current assets ..             5,241     4,145
                                                         -------   -------
     Total current assets ....................            49,266     8,798
Property, plant and equipment, net ...........            27,755    19,149
Reorganization value in excess of amounts
  allocable to identifiable assets ...........              --      26,983
Licenses .....................................             3,323     5,111
Other assets .................................             2,978     2,884
                                                         -------   -------
        Total assets .........................           $83,322   $62,925
                                                         =======   =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  Current liabilities:
  Accounts payable ...........................   $      6,168    $   3,180
  Payroll and other benefits payable .........          1,577        1,668
  Accrued interest payable ...................         18,776          131
  Accrued liabilities ........................          1,347        1,935
  Senior Notes in default ....................        140,000         --
                                                    ---------    ---------
        Total current liabilities ............        167,868        6,914

12% Senior Secured Notes .....................           --         39,200
Deferred installation fees ...................            900          407
Provision for tax, labor proceedings
  and other...................................          6,196        5,316
Commitments and contingencies ................

Stockholders' equity (deficit):
   Preferred stock, $.01 par value,
     shares authorized - 1,000,000 in 1999 and
     none in 2000, no shares issued ..........           --           --
   Common stock, $.01 par value,
     shares authorized - 50,000,000 in 1999
     and 20,000,000 in 2000, shares issued and
     outstanding - 10,824,594 in 1999 and
     10,000,000 in 2000.......................           108          100
   Additional paid-in capital ................        45,657       24,938
   Accumulated deficit .......................      (130,225)     (12,131)
   Cumulative translation adjustment .........        (7,182)      (1,819)
                                                    ---------    ---------
     Total stockholders' equity (deficit) ....       (91,642)      11,088
                                                    ---------    ---------
     Total liabilities and stockholders'
     equity (deficit).........................      $  83,322    $  62,925
                                                    =========    =========


                             See accompanying notes.




                                       29
<PAGE>





           ITSA LTD. (SUCCESSOR TO TV FILME, INC.) AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             PREDECESSOR   SUCCESSOR
                                                             SIX MONTHS   FIVE MONTHS
                                           PREDECESSOR       AND TWENTY    AND ELEVEN
                                           YEAR ENDED        DAYS ENDED    DAYS ENDED
                                          DECEMBER 31,        JULY 20,     DECEMBER 31,
                                       1998         1999        2000        2000
                                    -------------------------------------------------
                                    (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)

<S>                                 <C>           <C>          <C>         <C>
Revenues                            $ 45,408      $26,177      $13,044     $11,964
Operating costs and expenses:
    System operating                  19,617       11,844        6,076       4,479
    Selling, general and
      administrative                  31,637       15,901        9,681       7,270
    Stock compensation                    --           --           --       3,270
    Depreciation and amortization     21,651       14,205        6,442       5,257
                                    -----------  ----------- ----------- ------------
       Total operating costs and
        expenses                      72,905       41,950       22,199      20,276
                                    -----------  ----------- ----------- ------------
       Operating loss                (27,497)     (15,773)      (9,155)     (8,312)

Other income (expense):
    Interest expense                 (19,592)     (22,756)      (9,926)     (1,867)
    Interest income                   11,300        7,281        2,895         411
    Foreign exchange loss             (4,213)     (30,564)      (3,745)    ( 2,303)
    Other                               (218)         (34)         --          (60)
                                    -----------  ----------- ----------- ------------
        Total other income
       (expense)                     (12,723)     (46,073)     (10,776)     (3,819)
                                     -----------  ----------- ----------- ------------

Loss before reorganization items
  and extraordinary item             (40,220)     (61,846)     (19,931)    (12,131)
Reorganization items:
    Reorganization costs                  --       (4,724)      (2,709)         --
    Adjust accounts to fair value         --           --       (3,221)         --
                                    -----------  ----------- ----------- ------------
       Total reorganization items         --       (4,724)      (5,930)         --

Loss before extraordinary item       (40,220)     (66,570)     (25,861)    (12,131)
Extraordinary item -
    extinguishment of debt                --           --       88,781          --

                                    -----------  ----------- ----------- ------------
Net income (loss)                    (40,220)     $(66,570)    $62,920    $(12,131)
                                    ===========  =========== =========== ============

Basic earnings (loss) per share:
  Before extraordinary item          $  (3.72)    $  (6.15)    $ (2.39)    $  (1.21)
  Extraordinary item                       --           --        8.20           --
                                    -----------  ----------- ----------- ------------
  Net income (loss)                  $  (3.72)    $  (6.15)    $   5.81    $  (1.21)
                                    ===========  =========== =========== ============

  Weighted average number of
  shares outstanding                10,824,594   10,824,594  10,824,594  10,000,000
                                    ===========  =========== =========== ============
</TABLE>



                             See accompanying notes.



                                       30
<PAGE>




           ITSA LTD. (SUCCESSOR TO TV FILME, INC.) AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                 FOR THE THREE YEARS ENDED DECEMBER 31, 2000

               (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>

                                   COMMON STOCK    ADDITIONAL             CUMULATIVE
                                ------------------- PAID-IN   ACCUMULATED TRANSLATION
                                SHARES   PAR VALUE  CAPITAL    DEFICIT    ADJUSTMENT  TOTAL
                                ------   ---------  -------    -------    ----------  -----

<S>                             <C>          <C>    <C>        <C>        <C>        <C>

PREDECESSOR BALANCE
  AT DECEMBER 31, 1997.......   10,824,594   $108   $45,657    $(23,435)  $    --    $22,330
Cumulative
  translation adjustment.....           --     --        --           --   (3,877)    (3,877)
  Net loss for the year.......          --     --        --     (40,220)       --    (40,220)
                                                                                     --------
Comprehensive loss                                                                   (44,097)
                       ----------------------------------------------------------------------

PREDECESSOR BALANCE
  AT DECEMBER 31, 1998.......    10,824,594   108    45,657     (63,655)   (3,877)    (21,767)
Cumulative
  translation adjustment.....            --    --        --           --    (3,305)    (3,305)

Net loss for the year........            --    --        --      (66,570)        --   (66,570)
                                                                                   -----------
Comprehensive loss                                                                    (69,875)
                       -----------------------------------------------------------------------

PREDECESSOR BALANCE
  AT DECEMBER 31, 1999.......    10,824,594   108    45,657     (130,225)    (7,182)  (91,642)
Cumulative
  translation adjustment.....            --     --       --            --     1,683     1,683
  Net income for the period...           --     --       --       62,920         --    62,920
                                                                                     ---------
Comprehensive income                                                                   64,603
Effect of
  reorganization and
  fresh-start
  accounting:
Cancellation of
  Predecessor                                            --
  equity.....................   (10,824,594) (108)       --           --         --      (108)
Issuance of new
  shares pursuant
  to the Plan of
  Reorganization.............    10,000,000   100    17,423           --       --       17,523
Fresh-start
  accounting
  valuation
  adjustment.................             --    --   (41,412)      67,305     5,499      31,392
                       ------------------------------------------------------------------------

SUCCESSOR BALANCE AT
 JULY 21, 2000.......            10,000,000    100    21,668            --       --     21,768
Stock compensation...........            --     --     3,270            --       --      3,270
Cumulative
  translation adjustment.....            --     --        --            --    (1,819)   (1,819)

Net loss for the  period.....            --     --        --       (12,131)      --    (12,131)
                                                                                      ---------
Comprehensive loss                                                                     (13,950)
                       ------------------------------------------------------------------------

SUCCESSOR BALANCE AT
  DECEMBER 31, 2000..           10,000,000   $100   $24,938         $(12,131) $(1,819) $11,088
                                ==========  ======= =======         ========  ======== ========
</TABLE>

                             See accompanying notes.




                                       31
<PAGE>

            ITSA LTD. (SUCCESSOR TO TV FILME, INC.) AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                          (IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>

                                                              PREDECESSOR     SUCCESSOR
                                                               SIX MONTHS     FIVE MONTHS
                                          PREDECESSOR         AND TWENTY       AND ELEVEN
                                           YEAR ENDED         DAYS ENDED      DAYS ENDED
                                           DECEMBER 31,         JULY 20,      DECEMBER 31,
                                      ----------  -----------  -----------   ------------
                                        1998         1999         2000          2000
                                      ----------  -----------  -----------   ------------
<S>                                <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES
Net income (loss)                  $   (40,220) $  (66,570)  $   62,920   $   (12,131)
Adjustments to reconcile net
income (loss) to net cash used in
operating activities:
   Depreciation and amortization        22,050      14,669        6,442         5,257
   Provision for doubtful accounts       6,674       1,337          548         1,123
   Amortization of debt issuance
     costs                               1,567       1,677           --            --
   Deferred installation fees           (3,107)       (737)        (392)          (33)
   Gain on disposal of equipment            --          --         (197)         (147)
   Foreign exchange loss                 4,213      24,553        3,745         2,303
   Adjust accounts to fair value            --          --        3,221            --
   Extinguishment of debt                   --          --      (88,781)           --
Changes in operating assets and
  liabilities:

   Accounts receivable                  (4,176)     (1,422)         626        (1,330)
   Prepaid expenses and other
     current assets                        375      (4,092)         (59)        1,409
   Accrued interest receivable             679          --           --            --
   Other assets                         (6,449)        286       (2,106)         (740)
   Pledged Securities                   16,645          --           --            --
   Accounts payable                     (9,023)      4,369          142        (3,414)
   Payroll and other benefits payable      950        (685)         738          (419)


   Accrued interest                         --      18,025      (15,074)       (1,867)
   Provision for tax, labor
     proceedings and other                  --          --           --          (357)
   Accrued liabilities                   3,522       3,403          492           958
Sale of operating loss carryforwards        --          --           --           669
                                      ----------  -----------  -----------   ------------
Net cash used in operating activities   (6,300)     (5,187)     (27,735)       (1,715)
                                      ----------  -----------  -----------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment                  (14,094)     (3,002)      (4,633)       (2,767)

Sales of equipment                          --          --          709           450
                                      ----------  -----------  -----------   ------------
Net cash used in investing
activities                            (14,062)     (3,593)      (3,924)        (2,317)

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in payables from
affiliates                                (200)         --           --            --
                                      ----------  -----------  -----------   ------------
Realized losses                            --           --      (2,161)            --
Net cash used in financing
activities                                (200)         --      (2,161)            --
                                      ----------  -----------  -----------   ------------

Effect of exchange rate changes
on cash                                 (2,889)     (7,128)        (94)          (371)

Net change in cash and cash
equivalents                            (23,483)    (15,317)     (33,914)       (4,403)
Cash and cash equivalents at
   beginning of period                  80,975      57,492       42,175         8,261

Cash and cash equivalents at end   $    57,492  $   42,175   $    8,261   $     3,858
of period                             ===========  ===========  ==========   ============

Interest paid                      $    18,025  $       --   $   25,000   $        --
                                       ----------  -----------  -----------   ------------
</TABLE>
                             See accompanying notes.


                                       32
<PAGE>
           ITSA LTD. (SUCCESSOR TO TV FILME, INC.) AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           (IN THOUSANDS OF US DOLLARS, UNLESS OTHERWISE INDICATED)

      1. COMPANY BACKGROUND

      On July 21,  2000,  ITSA  Ltd.,  a Cayman  Islands  company,  became the
successor to TV Filme, Inc., a Delaware corporation,  following the successful
completion of a debt restructuring  pursuant to a plan of reorganization of TV
Filme,  Inc.  under Chapter 11 of the United States  Bankruptcy  Code.  Unless
otherwise  indicated,  ITSA Ltd., the successor company to TV Filme, Inc., and
its  subsidiaries  will  hereinafter  be referred to as the  "Company," and TV
Filme,  Inc.,  the  predecessor  company to ITSA  Ltd.,  will  hereinafter  be
referred to as "TV Filme."

      As of July 21, 2000, the Company adopted  fresh-start  reporting (see Note
3).

      Following  financial  difficulties  in   the  years  1998  and  1999,  and
the  devaluation  of the  Brazilian  currency  (the REAL) in 1999,  among  other
factors, TV Filme selected a financial advisor to assist in evaluating strategic
alternatives  for the  restructuring  of its long term debt,  represented by the
12-7/8% Senior Notes due 2004 (the "12-7/8% Senior Notes").  On August 13, 1999,
TV Filme reached an agreement in principle with a committee representing holders
of TV Filme's  outstanding  12-7/8% Senior Notes.  On January 26, 2000, TV Filme
filed a voluntary  petition  under  Chapter 11 of the United  States  Bankruptcy
Code,  together with a pre-negotiated  Plan of Reorganization and the Disclosure
Statement relating to such Plan, with the U.S. Bankruptcy Court for the District
of  Delaware.  The court  approved  the  Disclosure  Statement on March 1, 2000.
Following approval of the Disclosure Statement, ballots respecting the Plan were
circulated  to those  parties  entitled  to vote on the  Plan,  and the Plan was
confirmed at a hearing by the court on April 10, 2000.  Effectuation of the Plan
was  completed on July 21,  2000,  following  approval of ANATEL (the  Brazilian
Telecommunications Agency) and the Central Bank of Brazil.

      In accordance  with the terms of the plan of  reorganization,  the 12-7/8%
Senior Noteholders  received a $25 million cash payment and their existing notes
were converted into (i) Secured Notes in the aggregate  principal  amount of $35
million, due 2004, at an interest rate of 12% per annum, and (ii) 80% of the new
common equity of the reorganized Company. Current management received 15% of the
new common equity, and the existing common  stockholders of TV Filme received 5%
of the new common equity of the reorganized  Company.  Shares granted to current
management have been expensed in the financial statements of the successor based
on the fair market value at that date.  They have been expensed in the period as
there are no contractual  requirements  in connection with the issuance of these
shares.  TV Filme's  stock option plan and  outstanding  stock options under the
plan were  cancelled.  ITSA Ltd.  (the  reorganized  Company) is a  newly-formed
Cayman  Islands  holding  company and is the successor  issuer to TV Filme.  The
12-7/8% Senior Notes were cancelled upon surrender. The 12% Senior Secured Notes
were issued by  ITSA-Intercontinental  Telecommunicacoes  Ltda.,  a wholly-owned
subsidiary of the Company.

      The   Company   develops,    owns   and   operates    broadband   wireless
telecommunications  systems in markets in  Brazil,  offering  video,  high-speed
Internet and data communications services. Through it subsidiaries,  the Company
has licenses in the cities of Brasilia, Goiania, Belem, Campina Grande, Caruaru,
Porto Velho,  Presidente Prudente,  Bauru, Franca,  Uberaba,  Belo Horizonte and
Vitoria, covering over 3 million households and approximately 13 million people.

      Although the economic  situation in Brazil has remained  relatively stable
in  recent  years,  a  return  to  higher  levels  of  inflation,  and  currency
fluctuations could adversely affect the Company's operations. The devaluation of
the Brazilian REAL in relation to the U.S. dollar has had significant effects on
the Company's  financial  statements.  The exchange  rate of the Brazilian  real
("R$")  to  the  U.S.  dollar  was   R$1.2087:US$1.00   at  December  31,  1998,
R$1.7890:US$1.00 at December 31, 1999 and R$1.9554:US$1.00 at December 31, 2000.
At March 14, 2001 the exchange rate was R$2.0763:US$1.00.

      The Company has projected cash operating  deficiencies  for the year 2001.
Its ability to continue operating is based on a commitment for a $10,000 secured
revolving  credit  facility on the terms and subject to the conditions set forth
in the credit agreement (see note 10).

      The Company has no material assets of its own other than the investment in
its subsidiaries.  All assets of  the  subsidiaries are  restricted.

                                       33
<PAGE>

      2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

      BASIS 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"),  "Foreign
Currency   Translation,"   as  it  applies  to  entities   operating  in  highly
inflationary economies.

      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.  Translation gain and losses are reported in the cumulative  translation
adjustment component of stockholders' equity. Foreign currency transaction gains
and losses are reported in income.

      PRINCIPLES OF CONSOLIDATION

      The consolidated  financial statements include the accounts of the Company
and its  subsidiaries.  All  intercompany  accounts and  transactions  have been
eliminated in consolidation.

      REVENUE RECOGNITION

      Revenues from subscribers for monthly  subscriptions are recognized in the
period service is rendered.

      Installation fees are recorded as deferred revenues as earned.

      USE OF ESTIMATES

      The  preparation  of financial  statements in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

      CASH EQUIVALENTS

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

      PROPERTY, PLANT AND EQUIPMENT

      Property,  plant and equipment are stated at cost. The Company capitalizes
materials,  subcontractor  costs,  labor and overhead  incurred  associated with
initial subscriber  installations.  The Company continues to depreciate the full
installation cost subsequent to any subscriber disconnections.

      Depreciation is computed on the straight-line basis using estimated useful
lives  ranging  from 5 to 10 years  for  buildings  and  leasehold  improvements
(limited  to the  shorter  of the lease term or the  useful  life),  5 years for
machinery and  equipment,  furniture  and fixtures and 4 years for  installation
costs.  Depreciation  expense  for  leased  assets  is  included in depreciation
expense.



                                       34
<PAGE>
      ADVERTISING EXPENSE

      The  Company  expenses  all  advertising  and costs as they are  incurred.
Advertising  expenses  amounted  to $2,282 in 1998,  $1,073 in 1999 and $921 and
$397 for the periods ended December 31, 1998, 1999, July 20, 2000  and  December
31, 2000, respectively.

      REORGANIZATION  VALUE IN EXCESS OF  AMOUNTS  ALLOCABLE  TO  IDENTIFIABLE
ASSETS

      The excess value recorded in conjunction  with  fresh-start  accounting is
being amortized on a straight-line basis over a period of 10 years.  Accumulated
amortization  at  December  31,  2000 was  $1,352.  The  carrying  amount of the
reorganization  value in excess of amounts  allocable to identifiable  assets is
reviewed for recoverability  based on the undiscounted cash flows of the Company
over the remaining  amortization  period.  Should the review indicate that it is
not recoverable, it would be reduced to the fair value.

      LICENSES

      Licenses are comprised of wireless and data communications licenses, which
are  amortized  on  a  straight-line  basis  over  the  period  of  the license.
Accumulated amortization was $1,105 and  $256  at  December 31, 1999  and  2000,
respectively.

      INCOME TAXES

      Income taxes are provided using the liability  method in accordance with
SFAS No. 109, "Accounting for Income Taxes."

      EARNINGS (LOSS) PER SHARE

      Basic earnings  (loss) per share is computed by dividing income or loss by
the weighted average number of common shares outstanding for the period.

      CONCENTRATIONS

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations  of credit risk,  consist primarily of cash investments and trade
receivables.  The Company   requires  no  collateral  for  accounts  receivable.
Management  believes the risk with respect to trade  receivables is mitigated to
some extent by the fact that the Company's customer base is highly  diversified.
The Company has significant  programming supplied by HBO Brasil. The Company has
entered into contracts to secure this source of programming,  with no obligation
on the Company's  part. The provision for doubtful  accounts was $6,674 in 1998,
$1,137 in 1999, and $548 and $1,123 for the periods ended July 20,
2000 and December 31, 2000, respectively.

         FINANCIAL INSTRUMENTS

         The Company's financial  instruments include cash and cash equivalents,
accounts  receivable,  accounts  payable  and  debt.  The following  methods and
assumptions  were  used  by the Company in estimating its fair value disclosures
for financial instruments:

         Cash and cash equivalents.  The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.

         Accounts receivable and accounts payable. The carrying amounts reported
in the balance sheet for accounts  receivable and accounts  payable  approximate
their fair value.

         Long-term  debt. The long term debt was trading at 20% of its principal
in 1999 and the carrying amount reported in the balance sheet approximates  fair
value in 2000.

      RECLASSIFICATIONS

      Certain prior period  amounts have been  reclassified  to conform with the
current period presentation.

      NEW ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities",  as amended,  which is required to be adopted in years
beginning  after  June  15,  2000.  Because  of  the  Company's  minimal  use of
derivatives,  management  does  not  anticipate  that  the  adoption  of the new
Statement will have a significant  effect on earnings or the financial  position
of the Company.

      In December 1999, the Securities  and  Exchange  Commission  issued  Staff
Accounting Bulleting  No. 101 (SAB 101),   "Revenue  Recognition  in   Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. The adoption
of SAB 101 did not have a material effect on the Company's consolidated results
of operations and financial position.


                                       35
<PAGE>

      3. REORGANIZATION AND FRESH-START REPORTING

      As of  July  21,  2000,  the  Company  adopted  fresh-start  reporting  in
accordance  with AICPA  Statement  of Position  90-7,  "Financial  Reporting  by
Entities in Reorganization  under the Bankruptcy Code."  Fresh-Start  Accounting
resulted  in  material  changes to the  consolidated  balance  sheet  based upon
appraised reorganization value of the Company.

      TV  Filme's  reorganization  value of  $76,184  was  based on a  valuation
performed by an independent firm using 10 year forecasted  discounted cash flows
and other  economic  measures.  The value  resulted in a greater  value than the
carrying  value of the net  assets.  As such,  the  difference  of  $31,413  was
recorded as Reorganization  value in excess of amounts allocable to identifiable
assets.

      The  effect of the plan of  reorganization  and  adoption  of  fresh-start
reporting was as follows:
<TABLE>
<CAPTION>
                                                   EXCHANGE
                                            DEBT      OF    FRESH
                          PRECONFIRMATION DISCHARGE  STOCK   START REORGANIZE
                          ------------- -------- -------- ------- ----------
<S>                          <C>        <C>       <C>      <C>       <C>
ASSETS

CURRENT ASSETS
  Cash and cash
   equivalents               $36,163    $(27,902) $   --   $   --     $8,261
  Accounts receivable,
   net                         1,380         --       --       --      1,380
  Prepaid, expense and other
   current assets              6,964                                   6,964


                          ------------- -------- -------- -------  ----------
   Total Current Assets       44,507    (27,902)      --       --     16,605

Property, plant and
equipment, net                25,369         --       --   (3,221)    22,148
Reorganization value in
  excess of amounts
  allocable to
  identifiable assets             --         --       --   31,413     31,413
Licenses                       5,638         --       --     --        5,638
Other assets                     380         --       --     --          380

                          ------------- -------- -------- -------   ----------
TOTAL ASSETS                 $75,894    $(27,902) $        $28,192   $76,184
                          ============= ========  ======== =======  ==========

LIABILITIES AND
STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

  Accounts payable            $9,908    $(2,902)  $   --   $    --    $7,006
  Payroll and other
   benefits payable            2,243         --       --        --     2,243
  Accrued interest
   payable                    28,646    (26,196)      --        --     2,450
  Accrued liabilities
   and taxes payable           7,238         --       --        --     7,238
  Senior notes in default    140,000    (140,000)     --        --       --
                          ------------- -------- -------- -------  ----------
   Total Current
    Liabilities              188,035    (169,098)     --        --    18,937

12% Senior secured notes          --     35,000       --        --    35,000
DEFERRED INSTALLATION
FEES                             479         --       --        --       479

Minority Interest                (21)        --       --         21       --

</TABLE>
                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                   EXCHANGE
                                            DEBT      OF    FRESH
                          PRECONFIRMATION DISCHARGE  STOCK   START REORGANIZE
                         ------------- -------- -------- ------- ----------z

<S>                         <C>         <C>       <C>      <C>      <C>
STOCKHOLDERS' EQUITY
(DEFICIT)
  Common stock                   108         86      (94)       --       100
  Additional paid-in
   capital                    45,657     17,329       94    (41,412)  21,668
  Accumulated deficit       (152,865)    88,781       --     64,084      --
   Cumulative
    Translation Adjustment    (5,499)        --      --       5,499       --
                          ------------- --------  --------  ------- ----------

   Total stockholders'
    equity (deficit)        (112,599)   106,196      --    28,171   21,768
                          ------------- -------- -------- ------- ----------
TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY
 (DEFICIT)                   $75,894    $(27,902)$   --    $28,192  $76,184
                          ============= ======== ======== ======= ==========
</TABLE>



      4.  PROPERTY, PLANT AND EQUIPMENT

      Property,  plant and  equipment is comprised of the  following at December
31:



                                                          PREDECESSOR  SUCCESSOR
                                                             1999      2000
                                                           ----------  ---------

Land.....................................................    $950      $855
Building and leasehold improvements......................   1,330        67
Machinery and equipment..................................  24,125     7,751
Furniture and fixtures...................................     791       234
Installation costs.......................................  39,850    13,893
                                                          --------  --------
                                                           67,046    22,800
Accumulated depreciation................................. (39,291)   (3,651)
                                                          --------  --------
                                                           $27,755  $19,149
                                                          ========  ========

       In  conjunction  with  fresh  start  accounting,   Property,  Plant   and
Equipment  were  stated at their fair  value at July 21,  2000,  and  therefore,
accumulated depreciation was reduced to zero at this time.

       Depreciation expense of $21,651 in 1998, $13,388 in 1999, and $6,371  and
$6,371 and $3,651 for the  periods ended  July 20, 2000  and  December 31,  2000
respectively is recorded in the statement of operations.

      5. 12% SENIOR SECURED NOTES

      The 12% Senior  Secured Notes  ($39,200  outstanding at December 31, 2000)
are U.S. dollar denominated and are due on December 20, 2004.  Interest payments
are due on June 20 and  December  20 of each year until  maturity.  Interest  is
payable in kind at the Company's  option  through its first four payment  dates.
The  Company  exercised  its option at December  31, 2000 and issued  additional
notes for the $4,200 interest accrued to that date. The 12% Senior Secured Notes
are  secured by all of the assets of the  Company.  In the event of a default on
the Senior Secured Notes,  25% of the lenders  thereunder may declare the unpaid
principle  or, and any accrued  interest on, all the Senior  Secured Notes to be
due and  payable  immediately.  In the event the  Company  becomes  subject to a
voluntary or  involuntary  insolvency  proceeding,  the 12% Senior Secured Notes
become immediately due and payable.


                                       37
<PAGE>
      6.  CAPITAL

      At December 31, 1999 and 2000 there were no funds available for dividends.

      7.  RELATED PARTY TRANSACTIONS

      Through 1999 substantially all programming was supplied by a subsidiary of
Tevecap  S.A.  ("Tevecap"),   a  stockholder  of  the  Company,  pursuant  to  a
programming contract. Amounts  paid to  such  affiliate  in  1998  and 1999 were
$10,607 and $7,643, respectively.

      8.  INCOME TAXES

      Income taxes are provided based upon the tax laws and rates in Brazil. All
income has been earned in Brazil and the Company is not subject to income tax in
the Cayman Islands on income earned outside of Cayman Islands.

      The income taxes  computed at Brazil's  statutory  rate are  reconciled to
income tax expense.
                                                           PERIOD ENDED

                                             PREDECESSOR             SUCCESSOR
                                      DECEMBER 31,      JULY 20,    DECEMBER 31,
                                     1998     1999       2000        2000
                                     ----     ----       ----        ----
                                          (IN THOUSANDS OF US DOLLARS)
Income taxes (benefit) at
  Brazilian statutory rate
   (34%)..........................  (13,273) $(22,648)   $21,393   ($3,013)
Benefit of losses not recorded....    1,651     3,876      4,859     3,965
Nontaxable forgiveness of debt....      --        --     (30,185)      --
Effect of change in tax rate......      --        667        --        --
Increase (decrease) in valuation
      allowance...................    11,622   18,105      3,933      (952)
                                     --------  -------     -----      -----
Tax expense.......................   $  --     $  --     $   --     $  --
                                      =====     =====     =======    ======

      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
not  assured  that it will be able to realize a benefit  for such  losses in the
future.  The net operating loss  carryforwards  amounted to $115,091 at December
31, 2000.  Under Brazilian law, net operating  losses may be carried forward for
an unlimited period of time. Use of these losses,  however, is restricted to 30%
of taxable  income in a tax period.  Future  realization  of net operating  loss
carryforwards,  if any, existing at the date of reorganization  will be recorded
as a  reduction  of  "Reorganization  value in excess of  amounts  allocable  to
identifiable assets" related to the reorganization, then to intangibles existing
at the date of reorganization and then income tax expense.

      Deferred income taxes reflect the net tax effect of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. The approximate effect of
temporary differences as of December 31, 1999 and 2000 is as follows:

                                                       PREDECESSOR   SUCCESSOR
                                                       -----------   ----------
                                                         1999          2000
                                                         ----          ----
                                                        (IN THOUSANDS OF
                                                           US DOLLARS)

Deferred tax assets
  Net operating loss carryforwards................... $38,456        39,132
  Deferred installation fees.........................     306           138
  Other..............................................   2,554         3,398
                                                      -------         -----
                                                       41,316        42,668
  Valuation allowance................................ (36,943)      (39,927)
                                                      --------      --------
                                                        4,373         2,741
Deferred tax liabilities
  Fixed assets....................................... (4,373)       (2,741)
                                                      -------    ----------
Net deferred tax assets.............................. $   --      $     --
                                                      =======     =========

                                       38
<PAGE>



      During the period ended December 31, 2000,  under  Brazilian  legislation,
the Company  sold $5,452 of  operating  loss  carryforwards  to other  Brazilian
entities for $669, which was recorded as a reduction of "Reorganization value in
excess of amounts  allocable to identifiable  assets" resulting from fresh-start
accounting.

      9.  TAX AND LABOR CONTINGENCIES

      The Company is party to certain  legal  proceedings  arising in the normal
course  of  business,  and has  made  provisions  when it  believes  that it can
reasonably  estimate  probable losses.  The Company believes that the provisions
made are  sufficient  to cover  probable  losses and does not believe there is a
reasonable possibility of any material losses in excess of the amounts provided.

      In connection with some of these proceedings the Company has made judicial
deposits which will only be released upon a favorable judgment.  The position of
such provisions for tax, labor claims and other litigations are as follows:

                                  PREDECESSOR  SUCCESSOR
                                     1999        2000
                                  ------------------------

      Tax contingencies              4,675       3,960
      Other contingencies            1,033       1,250
                                  ------------------------
                                     5,708       5,210
                                  ========================


      10.  COMMITMENTS

      The Company leases, under operating leases, office space and vehicles, and
has entered into various transmission tower rental agreements.

      Rent expense amounted to approximately  $3,508 in 1998, $2,527 in 1999 and
$847 and $677,  respectively,  for the periods  ended July 20, 2000 and December
31,  2000. A  substantial  number of these  rental  agreements  are renewed on a
continuous basis.

      Future minimum lease payments under  noncancelable  operating  leases with
initial  term of one year or more  consisted  of the  following  at December 31,
2000:

2001..........................................................    $ 1,121
2002..........................................................        736
2003..........................................................        448
2004..........................................................         45

      The  Company  has  executed  a  commitment  letter  between   the Company,
certain of its subsidiaries and the lenders thereunder whereby such lenders
agree to provide working capital to the Company in the form of a $10,000,000
secured revolving credit facility. The Company must give the lenders 15 days
notice of its intention to implement the credit facility. Closing on the
facility will have the effect of making the lenders thereunder on an equal and
ratable basis with the holders of the Company's Senior Secured Notes. The
facility will be guaranteed by the Company's subsidiaries. The credit facility
restricts the Company's ability to, among other things, pay dividends, issue
stock, sell assets, enter into transactions with affiliates and incur liens.
Borrowings under the facility must be in an aggregate amount of $1,000,000 and
multiples of $100,000 in excess thereof, and the Company must give 10 days
notice of its intention to borrow under the facility. The loans will bear
interest at a rate of 15% per annum and are payable upon the earlier of one
year, a change of control of the company or at the option of the Company with
ten days prior notice.

      11.  JUDICIAL DEPOSITS

      Judicial  deposits  are  restricted  assets of the  Company  and relate to
amounts paid to the courts and held in judicial  escrow,  pending  resolution of
related legal matters.

      The Company had $1,270 and $543 in judicial  deposits at December 31, 2000
and 1999. These deposits are classified as other non-current assets.


                                       39
<PAGE>

      12.  FINANCIAL INSTRUMENTS AND DERIVATIVES

      FOREIGN EXCHANGE CONTRACTS

      At  December  31,  1999  and  2000,  the  Company  had  $28,000  and  $--,
respectively,  of foreign exchange contracts. The contracts held at December 31,
1999 expired in February 2000.  These  contracts allow 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.  The Company recognizes realized  and
unrealized losses in the income statement in  foreign  currency  exchange  loss.
Realized and unrealized losses during the periods  ending  December   31,  1998,
1999 and July  20,  2000  and   December  31,  2000  amounted  to  $--,  $1,200,
$1,800 and $--, respectively.

ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
        ---------------------------------------------------------------------
            FINANCIAL DISCLOSURE.

      None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
          --------------------------------------------------

      The  following  table sets forth certain  information  with respect to the
persons who are members of the Board of Directors or are  executive  officers of
the Company as of December, 2001.

             NAME                        AGE                   POSITION
             ----                        ---                   --------
Hermano Studart Lins de                   38           Chief Executive Officer,
Albuquerque                                            Secretary and Director
Carlos Andre Studart Lins de              36           President, Chief
Albuquerque                                            Operating Officer,
                                                       acting Chief Financial
                                                       Officer and Director
Savio Pinheiro                            47           Director
Jared E. Abbruzzese                       47           Director
James B. Rubin                            47           Director
Steven A. Audi                            33           Director
Luciano Puccini Medeiros                  30           Director

      The business experience of each of the directors and executive officers of
the Company during the last five years is as follows:

      HERMANO  STUDART  LINS DE  ALBUQUERQUE,  one of the  co-founders  of the
Company,  has served as Chief Executive  Officer,  Secretary and a director of
the Company since its  incorporation.  Mr. Lins  received a Master's degree in
Artificial  Intelligence from the University of Sussex, England and a Bachelor
of Science degree in Electronic  Engineering  from the University of Brasilia.
Mr. Lins was a member of the MMDS  Regulation  Commission,  and is currently a
member of C-INI,  a  committee  inside  Anatel to support the  development  of
Brazil's  National  Information  Infrastructure.  Mr. Lins is also Chairman of
the Board of ITSA LTD.  Mr. Lins is the brother of Mr.  Carlos  Andre  Studart
Lins de Albuquerque.

      CARLOS ANDRE STUDART LINS DE  ALBUQUERQUE,  one of the  co-founders of the
Company, has served as President,  Chief Operating Officer and a director of the
Company since its  incorporation and as the acting Chief Financial Officer since
October  1998.  Mr.  Lins  also  served as  Treasurer  of the  Company  from its
incorporation until July 1997. Mr. Lins received a Bachelor of Science degree in
Physics  from the  University  of Brasilia  and a Bachelor of Science  degree in
Mathematics  from the University of Ceub. Mr. Lins is the brother of Mr. Hermano
Studart Lins de Albuquerque.

      SAVIO PINHEIRO has been the President of SP  Communications  and President
of the Consultative Council of ANATEL (Brazilian  Telecommunications Agency) for
the past five years.

             JARED E.  ABBRUZZESE  has been a Director of ITSA Ltd. since July
2000. Mr.  Abbruzzese is a founder and Chairman of TechOne  Capital Group LLC,
a   consulting   and   private    investment   firm   concentrating   in   the


                                       40
<PAGE>

telecommunications  and technology sectors, and is Chairman of WSNet, Inc., na
Austin-based  satellite  broadcast  company.  Mr.  Abbruzzese is also chairman
and has been a director of DualStar  Technologies  Corporation (Nasdaq:  DSTR)
since  September  1999. Mr.  Abbruzzese was the founder and served as Chairman
and Chief Executive  Officer of CAI Wireless  Systems,  Inc., an MMDS operator
located in Albany,  New York,  from  August 1991 until  CAI's  acquisition  by
WorldCom,  Inc. in August 1999. Mr.  Abbruzzese  served in such capacities for
CAI  during  CAI's 1998  Chapter 11  proceeding.  He is also a  co-founder  of
Crest  Communications LLC, a private  communications fund, and a member of the
governing board of VenInfoTel LLC, a Venezuelan telephone and cable company.

      JAMES B. RUBIN is Co-Chairman and Chief  Investment  Officer of Resurgence
Asset  Management,  L.L.C. He has managed the investment  portfolios of the firm
and its affiliates and predecessors since its inception in 1989.

      STEVEN A. AUDI is Senior Vice President of Resurgence Asset  Management,
L.L.C.  Mr. Audi joined  Resurgence  in 1997.  Mr. Audi was formerly with Bear
Stearns,  from 1992 to 1995,  as a Vice  President  and then  Director of Risk
Management and with Bankers  Trust,  from 1990 to 1992, as an Associate in the
Global  Markets  division.  Mr. Audi holds a B.S. in Economics from Ohio State
University  and a  M.B.A.  from  the  Wharton  School  at  the  University  of
Pennsylvania.

      LUCIANO  PUCCINI  MEDEIROS  received a Juris  Doctor  degree from  Candido
Mendes  University Law School in 1993.  Acting in the Mergers and  Acquisitions,
Privatizations,  Securities Law, International Business Transactions and Banking
fields,  he practiced law for with Banco Pactual S.A. from 1992 until 1997, when
he became an  Associate  at the Jones Day  Reavis  and Pogue Law  Office.  After
working as an investment  banker for Banco Pactual S.A. for one year, in 1999 he
joined  Barbosa,  Mussnich  &  Aragao  Law  Office,  where  he is  currently  an
Associate.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities  Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, certain officers and persons holding more than
10% of a registered class of the Company's equity  securities to file reports of
ownership and reports of changes in ownership  with the  Securities and Exchange
Commission (the "Commission") and any exchange on which the Company's securities
are traded.  Directors,  certain  officers and greater than 10% stockholders are
also  required by Commission  regulations  to furnish the Company with copies of
all such reports that they file. Based on the Company's review of copies of such
forms  provided to it, the Company  believes that all filing  requirements  were
complied with during the fiscal year ended December 31, 2000.

ITEM 11.  EXECUTIVE COMPENSATION.
          ----------------------

SUMMARY COMPENSATION TABLE

      The following table sets forth  information  concerning  compensation  for
services in all capacities  awarded to, earned by, or paid to, any person acting
as the Company's Chief Executive  Officer during 2000,  regardless of the amount
of compensation paid, and the other most highly  compensated  executive officers
of the Company whose  aggregate cash and cash equivalent  compensation  exceeded
$100,000 (collectively, the "Named Executive Officers"):

                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                                      LONG-TERM
                                                                     COMPENSATION
                                    ANNUAL COMPENSATION                 AWARDS
                        ----------------------------------        --------------
                                                     OTHER            SECURITIES      ALL OTHER
                                                     ANNUAL           UNDERLYING      COMPENSATION
NAME AND POSITION  YEAR  SALARY($)  BONUS ($)     COMPENSATION(1)      OPTIONS          ($)(2)
-----------------  ----  -------    ---------    ----------------     -------------     ------
<S>               <C>    <C>       <C>           <C>                          <C>        <C>

Hermano Studart
  Lins de         2000  $203,000   $50,000        $       --                   --        $6,500
Albuquerque,......
 Chief Executive
 Officer          1999   203,000                  $       --                   --         6,500
                  1998   201,748   125,000        $       --                   --         6,425
Carlos Andre
  Studart         2000  $203,000  $50,000                                      --        $6,500
  Lins de         1999   203,000                  $       --                   --         6,500
  Albuquerque,....1998   201,748  125,000         $       --                   --         6,425
  President,
  Chief
  Operating
  Officer and
  acting Chief Financial
  Officer

</TABLE>
---------------------

(1)No amounts have been reflected in this column for any Named Executive Officer
   because the aggregate  value of perquisites  and other personal  benefits for
   each officer in the specified years was below the Commission's  threshold for
   disclosure  (i.e., the lesser of $50,000 or 10% of the total of annual salary
   and bonus for such officer).

(2)Represents  Company paid life insurance  premiums.  Does  not include  common
   stock issued to COMPEX HOLDINGS, a Cayman  Islands  corporation  wholly-owned
   by  the   Company's   management,   in    connection   with   the   Company's
   reorganization. See footnote 1 to the Company's financial statements.




EMPLOYMENT AGREEMENTS

   The Company  has  entered  into  employment  agreements  with each of Messrs.
Hermano  Lins and Carlos Andre Lins,  pursuant to which Mr.  Hermano Lins serves
full time as Chief  Executive  Officer of the Company and Mr.  Carlos Andre Lins
serves full time as President and Chief  Operating  Officer of the Company.  The
minimum  annual base salary under such  agreements  for each of Messrs.  Lins is
$203,000.  In  addition,  each of Messrs.  Lins is eligible to receive an annual
bonus,  in an amount to be determined by the Board,  based on the achievement of
certain  criteria which shall be established  each year by the Board.  The bonus
for any year shall be no less than 25 percent and no greater than 120 percent of
Executive's  salary for any year.  Pursuant to each of Messrs.  Lins' employment
agreements,  if the Company  terminates the  executive's  employment for reasons
other than "cause" (as defined therein),  the Company is required to pay (i) any
compensation  accrued  and  unpaid  as of the  date  of such  termination;  (ii)
Executive's  base  salary as in effect  on the date of such  termination,  for a
period of 18 months  commencing  on such  date,  in  accordance  with  customary
payroll procedures (provided, however, that the Employer, in its discretion, may
pay such salary in a lump sum); and (iii) any  Performance  Bonus (in accordance
with Section 2(b)) that  Executive  would have earned in the year his employment
is terminated, prorated as of the date of such termination.

STOCK OPTIONS

STOCK OPTION PLAN

      All  outstanding  options were  cancelled in  connection  with the plan of
reorganization.  No options or stock  appreciation  rights were exercised by the
Named Executive Officers during fiscal 2000.



                                       42
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The  following  table  sets  forth  certain   information   regarding  the
beneficial  ownership of the Common  Stock,  as of March 29,  2001,  by (i) each
person  known to the Company to be the  beneficial  owner of more than 5% of the
Common  Stock,  (ii) each of the  Company's  directors,  (iii) each of the Named
Executive  Officers,  and (iv) all directors and executive  officers as a group.
All information  with respect to beneficial  ownership has been furnished to the
Company by the respective stockholders of the Company.

                                                  AMOUNT AND      PERCENTAGE
                                                   NATURE OF          OF
                                                  BENEFICIAL        CLASS
NAME AND ADDRESS(1)                              OWNERSHIP (2)       (2)
-------------------                              -------------    ----------

Resurgence Asset Management, L.L.C., and
 related entities(3)
   10 New King Street
   First Floor
   White Plains, New York 10604.............    3,400,914           34.0
COMPEX HOLDINGS(4)
   c/o Maples & Calder, Attorneys at Law
   Ugland House
   P.O. Box 309
   George Town
   Grand Cayman, Cayman Islands, British West
     Indies.................................    1,500,000            15.0
Various Singer Family Entities (5)
   25 Coligni Avenue
   New Rochelle, New York, 10801............     848,313              8.5
Stephen Feinberg(6)
   450 Park Avenue
   28th Floor
   New York, New York 10022.................      572,001             5.7
Hermano Albuquerque(7)......................            *             *
Carlos Andre Albuquerque(7).................            *             *
Savio Pinheiro..............................          -0-           -0-
Jerry Abbruzzese............................          -0-           -0-
James B. Rubin(8)...........................          -0-           -0-
Steven A. Audi(8)...........................          -0-           -0-
Luciano Puccini Medeiros....................          -0-           -0-
All executive officers and directors
  as a group (7 persons)(7)(8)..............            *             *

* indicates ownership of less than 1% of the
Common Stock



(1)   Unless  otherwise  indicated  above  or  in  the  footnotes  below,  the
      address  for  each  stockholder   identified  above  is  ITSA  Ltd.  c/o
      ITSA-Intercontinental  Telecomunicacoes  Ltda, SCS Quadra  07-Bl.A,  Ed.
      Executive Tower, Sala 601, 70.300-911 Brasilia-DF, Brazil.

(2)   Beneficial  ownership is determined  in  accordance  with the rules of the
      Commission.  Except as  indicated  in the  footnotes  to this table,  each
      stockholder  named in the table has sole voting and investment  power with
      respect to the shares set forth opposite such stockholder's name.

(3)   Based  on  information  contained  in  Schedule  13G  filed  jointly  by
      Resurgence  Asset  Management,   L.L.C.,   Resurgence  Asset  Management
      International,  L.L.C.,  Re/Enterprise  Asset  Management,  L.L.C.,  and
      certain  of their  related  entities  and  affiliates  (the  "Resurgence
      Entities") on February 14, 2001.  Resurgence  Asset  Management,  L.L.C.
      has sole voting and dispositive power for 1,319,200  shares,  Resurgence
      Asset Management  International,  L.L.C. has sole voting and dispositive
      power for 752,945 shares and Re/Enterprise Asset Management,  L.L.C. has
      sole voting and dispositive power for 1,251,683  shares.  The Resurgence
      Entities have, in the aggregate,  sole voting and dispositive  power for
      3,400,914 shares.  Steven A. Audi is Senior Vice President of Resurgence


                                       43
<PAGE>

      Asset  Management,  L.L.C.  and James B. Rubin is Co-Chairman  and Chief
      Investment  Officer of Resurgence Asset  Management,  L.L.C.  Resurgence
      Asset  Management,  L.L.C.,  Resurgence Asset Management  International,
      L.L.C. and Re/Enterprise Asset Management,  L.L.C. have an address of 10
      New King Street, First Floor, White Plains, New York 10604.

(4)   COMPEX HOLDINGS is a Cayman Islands  corporation,  owned entirely by the
      following  members of the  Company's  management:  Hermano  Albuquerque,
      Carlos Andre Albuquerque,  Ari Lisboa,  Geraldo C. Mello,  Carlos Souza,
      Veronica Albuquerque, Dilton Caldas and Robespierre M. Sa.

(5)   Represents  460,027  shares owned by the Gary &  Karen  Singer  Children's
      Trust,  234,286  shares owned by Romulus  Holdings,  Inc.,  149,000 shares
      owned  by  the  Second  G & K  Singer  Children's  Trust and 5,000  shares
      owned by the  Mars/Normel  Retirement   Trust.   Steven   Singer  is   the
      Executive   Vice  President of Romulus  Holdings,  Inc. and the Trustee of
      the  Gary  &  Karen  Singer  Children's Trust and the Second G & K  Singer
      Children's  Trust.  Brad  Singer is an officer of Romulus  Holdings,  Inc.
      and the Trustee of the Mars/Normel Retirement Trust.

(6)   Based on information  contained in Schedule 13G filed by Stephen  Feinberg
      on March 1,  2001.  As of July 25,  2000,  269,143  shares  were  owned by
      Cerberus  International,  Ltd., a corporation  organized under the laws of
      the Bahamas  ("International"),  and 131,429 shares were owned by Cerberus
      Institutional  Partners,  L.P., a limited partnership  organized under the
      laws of Delaware ("Institutional").  In addition, as of such date, 171,429
      shares were owned in the  aggregate by certain  private  investment  funds
      (collectively, the "Funds"). Stephen Feinberg possesses sole power to vote
      and direct the disposition of all shares of the Common Stock owned by each
      of International, Institutional and the Funds.

(7)   Does not include shares owned by COMPEX HOLDINGS.  See note 4 above.

(8)   Does not include shares owned by Resurgence  Asset  Management,  L.L.C.,
      and related entites.  See note 3 above.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      None.



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A)   1.    FINANCIAL STATEMENTS.

      The  financial  statements  are  included  in Part  II,  Item 8. of this
Report.

      2.    FINANCIAL  STATEMENT  SCHEDULES  AND  SUPPLEMENTARY  INFORMATION
REQUIRED TO BE SUBMITTED.

      All  schedules  have been  omitted  because they are  inapplicable  or the
      required information is shown in the consolidated  financial statements or
      notes.

(B) REPORTS ON FORM 8-K.

      No Current Reports on Form 8-K were filed by the Company during the fourth
quarter of 2000.

(C)   INDEX TO EXHIBITS.

      The following is a list of all Exhibits filed as part of this Report:



                                       44
<PAGE>

EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT

  *2.1     First Amended Disclosure Statement relating to the First Amended Plan
           of  Reorganization,  dated  February 29,  2000,  approved by the U.S.
           Bankruptcy  Court  for the  District  of  Delaware  on March 1,  2000
           (incorporated by reference to Exhibit 2.1 to TV Filme's Annual Report
           on Form 10-K for the year ended  December  31, 1999 ("TV Filme's 1999
           10-K").
  *2.2     First  Amended  Plan  of  Reorganization  under  Chapter  11  of  the
           Bankruptcy Code,  dated February 29, 2000  (incorporated by reference
           to Exhibit 2.2 to TV Filme's 1999 10-K).
  *2.3     Reorganization and Transfer Agreement,  dated as of July 20, 2000, by
           and between TV Filme,  Inc.,  a Delaware  corporation,  ITSA Ltd.,  a
           Cayman  Islands  corporation  (incorporated  herein by  reference  to
           Exhibit 2.1 to the  Company's  Current  Report on Form 8-K,  filed on
           August 5, 2000).
 **3.1(i)  Memorandum of Association of ITSA Ltd.
 **3.1(ii) Articles of Asssociation of ITSA Ltd.
  *3.2(i)  Certificate  of  Incorporation  of TV Filme  (incorporated  herein by
           reference to Exhibit 3.1 to TV Filme's Registration Statement on Form
           S-1,  dated May 3,  1996,  Registration  No.  333-4512  ("TV  Filme's
           S-1")).
  *3.2(ii) Amended  and  Restated  By-Laws of TV Filme  (incorporated  herein by
           reference  to Exhibit  3.1(ii) to TV Filme's Form 10-Q for the fiscal
           quarter ended June 30, 1997, File No. 0-28670).
  *4.1     Indenture,  dated as of December 20,  1996,  between TV Filme and IBJ
           Schroder Bank & Trust Company,  as Trustee (including the form of the
           Senior Notes)  (incorporated herein by reference to Exhibit 4.1 to TV
           Filme's  Registration  Statement on Form S-4, dated February 4, 1997,
           Registration No. 333-21057 ("TV Filme's S-4")).
  *4.2     Registration Rights Agreement,  dated December 20,  1996, between
           TV  Filme  and  Bear,   Stearns  &  Co.   Inc.,   BT   Securities
           Corporation,  J.P. Morgan  Securities Inc. and Alex. Brown & Sons
           Incorporated  (incorporated herein by reference to Exhibit 4.2 to
           TV Filme's S-4).
  *4.3     Purchase  Agreement,  dated  December 16,  1996, between TV Filme
           and Bear,  Stearns & Co. Inc.,  BT Securities  Corporation,  J.P.
           Morgan  Securities Inc. and Alex. Brown & Sons  Incorporated,  as
           the  Initial  Purchasers  (incorporated  herein by  reference  to
           Exhibit 4.3 to TV Filme's S-4).
  *4.4     Note,  dated  December  20, 1996,  of ITSA to TV Filme  (incorporated
           herein by reference to Exhibit 4.4 to TV Filme's S-4).
  *4.5     Note Pledge  Agreement,  dated as of December  20,  1996,  between TV
           Filme and IBJ Schroder  Bank & Trust  Company,  as  Collateral  Agent
           (incorporated herein by reference to Exhibit 4.5 to TV Filme's S-4).
  *4.6     Collateral  Pledge and Security  Agreement,  dated as of December 20,
           1996, among ITSA, TV Filme and IBJ Schroder Bank & Trust Company,  as
           Collateral Agent (incorporated  herein by reference to Exhibit 4.6 to
           TV Filme's S-4).
  *4.7     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Brasilia  Servicos  de  Telecomunicacoes   (incorporated   herein  by
           reference to Exhibit 4.7 to TV Filme's S-4).
  *4.8     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Belem Servicos de Telecomunicacoes  (incorporated herein by reference
           to Exhibit 4.8 to TV Filme's S-4).
  *4.9     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Goiania  Servicos  de   Telecomunicacoes   (incorporated   herein  by
           reference to Exhibit 4.9 to TV Filme's S-4).
  *4.10    Indenture,  dated as of July 20,  2000,  among  ITSA-Intercontinental
           Telecomunicacoes  Ltda.,  as issuer,  the  several  Guarantors  named
           therein, and The Bank of New York, as trustee (incorporated herein by
           reference to Exhibit 4.1 to the  Company's  Quarterly  Report on Form
           10-Q for the period ending June 30, 2000).
 **4.11    Supplement  No. 1 to  Indenture,  dated as of December  18, 2000,
           among  ITSA-Intercontinental  Telecomunicacoes  Ltda., as issuer,
           the several  Guarantors named therein,  and The Bank of New York,
           as trustee.
 **4.12    Note,  dated  as  of  July  20,  2000,  of  ITSA-Intercontinental
           Telecomunicacoes Ltda. to Cede & Co.


                                       45
<PAGE>

 *10.1     Stockholders  Agreement,  dated as of July 26, 1996, entered into
           by and among Warburg,  Pincus,  Tevecap,  Mrs. Maria Nise Studart
           Lins de  Albuquerque,  Mr. Hermano  Studart Lins de  Albuquerque,
           Mr.  Carlos  Andre  Studart  Lins de  Albuquerque  and Ms.  Maria
           Veronica  Studart  Lins de  Albuquerque  (incorporated  herein by
           reference to Exhibit 10.3 to TV Filme's S-4).
 *10.2     Registration  Rights  Agreement,   dated  as  of  July 26,  1996,
           entered into by and among Warburg,  Pincus,  Tevecap,  Mrs. Maria
           Nise Studart Lins de  Albuquerque,  Mr.  Hermano  Studart Lins de
           Albuquerque,  Mr. Carlos Andre Studart Lins de  Albuquerque,  Ms.
           Maria  Veronica  Studart  Lins de  Albuquerque,  Joseph  Wallach,
           Donald  Deely  Pearson  and  TV  Filme  (incorporated  herein  by
           reference to Exhibit 10.4 to TV Filme's S-4).
 *10.3     Employment Agreement,  dated as of July 26, 1996, entered into by and
           among TV Filme,  ITSA and Mr.  Hermano  Studart  Lins de  Albuquerque
           (incorporated  herein by  reference  to  Exhibit  10.5 to TV  Filme's
           S-4).+
 *10.4     Employment Agreement,  dated as of July 26, 1996, entered into by and
           among TV Filme, ITSA and Mr. Carlos Andre Studart Lins de Albuquerque
           (incorporated  herein by  reference  to  Exhibit  10.6 to TV  Filme's
           S-4).+
 *10.5     Programming  License  Agreement,  dated as of June 27, 1996,  entered
           into by and  between  TV Filme and  Tevecap  (incorporated  herein by
           reference to Exhibit 10.12 to TV Filme's S-4).
 *10.6     Master Operating  Agreement,  dated as of July 26, 1996, entered into
           by and  among TV  Filme,  ITSA and TV  Filme  Servicos  (incorporated
           herein by reference to Exhibit 10.13 to TV Filme's S-4).
 *10.7     Articles of Association of TV Filme Servicos  (incorporated herein by
           reference to Exhibit 10.14 to TV Filme's S-4).
 *10.8     Form of Indemnification  Agreement between TV Filme and the directors
           and officers  parties  thereto  (incorporated  herein by reference to
           Exhibit 10.12 to TV Filme's S-1).+
 *10.9     Restructuring  Agreement,  dated January 24, 2000 by and among TV
           Filme,  Inc.  and  Specified  Holders   (incorporated  herein  by
           reference to Exhibit 10.11 to TV Filme's 1999 10-K).
**10.10    Master  Security  Agreement  made by ITSA Ltd.,  Filme Sub, Inc.,
           ITSA-Intercontinental    Telecomunicacoes   Ltda.   and   certain
           subsidiaries  thereof  in favor of HSBC BANK USA,  as  Collateral
           Agent, dated as of July 20, 2000.
**10.11    Secured Credit  Facility  Commitment  Letter,  among the Company,
           certain of its subsidiaries,  Romulus  Holdings,  Inc., M.D. Sass
           Corporate  Resurgence  Partners L.P. and Madeleine  LLC, dated as
           of July 20, 2000.
**21       List of Subsidiaries of ITSA Ltd.
**24       Powers of Attorney (Appears on signature page).
**27       Financial Data Schedule.

 +  Management  contract or  compensatory  plan or  arrangement.
 *  Incorporated herein by reference.
**  Filed herewith.



                                       46
<PAGE>




                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) 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,  in the City of New
York, State of New York, on the 16th day of April, 2001.

                         TV FILME, INC.


                          By: /S/ HERMANO STUDART LINS DE ALBUQUERQUE
                              ---------------------------------------
                              Hermano Studart Lins de Albuquerque
                              Chief Executive Officer

      KNOWN BY ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below  constitutes and appoints  Hermano Studart Lins de Albuquerque and
Carlos Andre Studart Lins de  Albuquerque  his true and lawful  attorney-in-fact
and agent,  with full power of substitution and  resubstitution,  for him and in
his  name,  place  and  stead,  in any and all  capacities,  to sign any and all
amendments  to this Annual Report on Form 10-K,  and to file the same,  with all
exhibits  thereto  and  other  documents  in  connection  therewith,   with  the
Securities  and Exchange  Commission,  granting unto said  attorney-in-fact  and
agent,  full power and  authority to do and perform each and every act and thing
requisite  and  necessary to be done in and about the  premises,  as fully as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorney-in-fact  and  agent or  their or his  substitutes  or  substitute,  may
lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated on the 16th day of April, 2001.

                   SIGNATURE                           TITLE(S)

   /S HERMANO STUDART LINS DE ALBUQUERQUE             Chief Executive Officer,
---------------------------------------------
      Hermano Studart Lins de Albuquerque             Director and Chairman
                                                      (Principal Executive
                                                      Officer)
 /S CARLOS ANDRE STUDART LINS DE ALBUQUERQUE          President, Chief
---------------------------------------------
   Carlos Andre Studart Lins de Albuquerque           Operating Officer,
                                                      acting Chief Financial
                                                      Officer (Principal
                                                      Financial and
                                                      Accounting Officer) and
                                                      Director

             /S/ SAVIO PINHEIRO                       Director
---------------------------------------------
                Savio Pinheiro

           /S/ JARED E. ABBRUZZESE                    Director
---------------------------------------------
              Jared E. Abbruzzese


             /S/ JAMES B. RUBIN                       Director
---------------------------------------------
                James B. Rubin


             /S/ STEVEN A. AUDI                       Director
---------------------------------------------
                Steven A. Audi


        /S/ LUCIANO PUCCINI MEDEIROS                  Director
---------------------------------------------
           Luciano Puccini Medeiros



                                       47
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT

  *2.1     First Amended Disclosure Statement relating to the First Amended Plan
           of  Reorganization,  dated  February 29,  2000,  approved by the U.S.
           Bankruptcy  Court  for the  District  of  Delaware  on March 1,  2000
           (incorporated by reference to Exhibit 2.1 to TV Filme's Annual Report
           on Form 10-K for the year ended  December  31, 1999 ("TV Filme's 1999
           10-K").
  *2.2     First  Amended  Plan  of  Reorganization  under  Chapter  11  of  the
           Bankruptcy Code,  dated February 29, 2000  (incorporated by reference
           to Exhibit 2.2 to TV Filme's 1999 10-K).
  *2.3     Reorganization and Transfer Agreement,  dated as of July 20, 2000, by
           and between TV Filme,  Inc.,  a Delaware  corporation,  ITSA Ltd.,  a
           Cayman  Islands  corporation  (incorporated  herein by  reference  to
           Exhibit 2.1 to the  Company's  Current  Report on Form 8-K,  filed on
           August 5, 2000).
 **3.1(i)  Memorandum of Association of ITSA Ltd.
 **3.1(ii) Articles of Asssociation of ITSA Ltd.
  *3.2(i)  Certificate  of  Incorporation  of TV Filme  (incorporated  herein by
           reference to Exhibit 3.1 to TV Filme's Registration Statement on Form
           S-1,  dated May 3,  1996,  Registration  No.  333-4512  ("TV  Filme's
           S-1")).
  *3.2(ii) Amended  and  Restated  By-Laws of TV Filme  (incorporated  herein by
           reference  to Exhibit  3.1(ii) to TV Filme's Form 10-Q for the fiscal
           quarter ended June 30, 1997, File No. 0-28670).
  *4.1     Indenture,  dated as of December 20,  1996,  between TV Filme and IBJ
           Schroder Bank & Trust Company,  as Trustee (including the form of the
           Senior Notes)  (incorporated herein by reference to Exhibit 4.1 to TV
           Filme's  Registration  Statement on Form S-4, dated February 4, 1997,
           Registration No. 333-21057 ("TV Filme's S-4")).
  *4.2     Registration Rights Agreement,  dated December 20,  1996, between
           TV  Filme  and  Bear,   Stearns  &  Co.   Inc.,   BT   Securities
           Corporation,  J.P. Morgan  Securities Inc. and Alex. Brown & Sons
           Incorporated  (incorporated herein by reference to Exhibit 4.2 to
           TV Filme's S-4).
  *4.3     Purchase  Agreement,  dated  December 16,  1996, between TV Filme
           and Bear,  Stearns & Co. Inc.,  BT Securities  Corporation,  J.P.
           Morgan  Securities Inc. and Alex. Brown & Sons  Incorporated,  as
           the  Initial  Purchasers  (incorporated  herein by  reference  to
           Exhibit 4.3 to TV Filme's S-4).
  *4.4     Note,  dated  December  20, 1996,  of ITSA to TV Filme  (incorporated
           herein by reference to Exhibit 4.4 to TV Filme's S-4).
  *4.5     Note Pledge  Agreement,  dated as of December  20,  1996,  between TV
           Filme and IBJ Schroder  Bank & Trust  Company,  as  Collateral  Agent
           (incorporated herein by reference to Exhibit 4.5 to TV Filme's S-4).
  *4.6     Collateral  Pledge and Security  Agreement,  dated as of December 20,
           1996, among ITSA, TV Filme and IBJ Schroder Bank & Trust Company,  as
           Collateral Agent (incorporated  herein by reference to Exhibit 4.6 to
           TV Filme's S-4).
  *4.7     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Brasilia  Servicos  de  Telecomunicacoes   (incorporated   herein  by
           reference to Exhibit 4.7 to TV Filme's S-4).
  *4.8     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Belem Servicos de Telecomunicacoes  (incorporated herein by reference
           to Exhibit 4.8 to TV Filme's S-4).
  *4.9     Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme
           Goiania  Servicos  de   Telecomunicacoes   (incorporated   herein  by
           reference to Exhibit 4.9 to TV Filme's S-4).
  *4.10    Indenture,  dated as of July 20,  2000,  among  ITSA-Intercontinental
           Telecomunicacoes  Ltda.,  as issuer,  the  several  Guarantors  named
           therein, and The Bank of New York, as trustee (incorporated herein by
           reference to Exhibit 4.1 to the  Company's  Quarterly  Report on Form
           10-Q for the period ending June 30, 2000).
 **4.11    Supplement  No. 1 to  Indenture,  dated as of December  18, 2000,
           among  ITSA-Intercontinental  Telecomunicacoes  Ltda., as issuer,
           the several  Guarantors named therein,  and The Bank of New York,
           as trustee.


                                       48
<PAGE>

EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT

 **4.12    Note,  dated  as  of  July  20,  2000,  of  ITSA-Intercontinental
           Telecomunicacoes Ltda. to Cede & Co.
 *10.1     Stockholders  Agreement,  dated as of July 26, 1996, entered into
           by and among Warburg,  Pincus,  Tevecap,  Mrs. Maria Nise Studart
           Lins de  Albuquerque,  Mr. Hermano  Studart Lins de  Albuquerque,
           Mr.  Carlos  Andre  Studart  Lins de  Albuquerque  and Ms.  Maria
           Veronica  Studart  Lins de  Albuquerque  (incorporated  herein by
           reference to Exhibit 10.3 to TV Filme's S-4).
 *10.2     Registration  Rights  Agreement,   dated  as  of  July 26,  1996,
           entered into by and among Warburg,  Pincus,  Tevecap,  Mrs. Maria
           Nise Studart Lins de  Albuquerque,  Mr.  Hermano  Studart Lins de
           Albuquerque,  Mr. Carlos Andre Studart Lins de  Albuquerque,  Ms.
           Maria  Veronica  Studart  Lins de  Albuquerque,  Joseph  Wallach,
           Donald  Deely  Pearson  and  TV  Filme  (incorporated  herein  by
           reference to Exhibit 10.4 to TV Filme's S-4).
 *10.3     Employment Agreement,  dated as of July 26, 1996, entered into by and
           among TV Filme,  ITSA and Mr.  Hermano  Studart  Lins de  Albuquerque
           (incorporated  herein by  reference  to  Exhibit  10.5 to TV  Filme's
           S-4).+
 *10.4     Employment Agreement,  dated as of July 26, 1996, entered into by and
           among TV Filme, ITSA and Mr. Carlos Andre Studart Lins de Albuquerque
           (incorporated  herein by  reference  to  Exhibit  10.6 to TV  Filme's
           S-4).+
 *10.5     Programming  License  Agreement,  dated as of June 27, 1996,  entered
           into by and  between  TV Filme and  Tevecap  (incorporated  herein by
           reference to Exhibit 10.12 to TV Filme's S-4).
 *10.6     Master Operating  Agreement,  dated as of July 26, 1996, entered into
           by and  among TV  Filme,  ITSA and TV  Filme  Servicos  (incorporated
           herein by reference to Exhibit 10.13 to TV Filme's S-4).
 *10.7     Articles of Association of TV Filme Servicos  (incorporated herein by
           reference to Exhibit 10.14 to TV Filme's S-4).
 *10.8     Form of Indemnification  Agreement between TV Filme and the directors
           and officers  parties  thereto  (incorporated  herein by reference to
           Exhibit 10.12 to TV Filme's S-1).+
 *10.9     Restructuring  Agreement,  dated January 24, 2000 by and among TV
           Filme,  Inc.  and  Specified  Holders   (incorporated  herein  by
           reference to Exhibit 10.11 to TV Filme's 1999 10-K).
**10.10    Master  Security  Agreement  made by ITSA Ltd.,  Filme Sub, Inc.,
           ITSA-Intercontinental    Telecomunicacoes   Ltda.   and   certain
           subsidiaries  thereof  in favor of HSBC BANK USA,  as  Collateral
           Agent, dated as of July 20, 2000.
**10.11    Secured Credit  Facility  Commitment  Letter,  among the Company,
           certain of its subsidiaries,  Romulus  Holdings,  Inc., M.D. Sass
           Corporate  Resurgence  Partners L.P. and Madeleine  LLC, dated as
           of July 20, 2000.
**21       List of Subsidiaries of ITSA Ltd.
**24       Powers of Attorney (Appears on signature page).
**27       Financial Data Schedule.

 +  Management  contract or  compensatory  plan or  arrangement.
 *  Incorporated herein by reference.
**  Filed herewith.

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