---

# UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_________________

# FORM 20-F

||| |  | REGISTRATION STATEMENT
PURSUANT TO SECTION 12(b) OR (g) OFTHE SECURITIES EXCHANGE ACT OF 1934
|-- |  | ---------------------------------------------------------------------------------------------

# OR

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

For the fiscal year
ended December 31, 2003

# OR

||| |  | 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:  0-31247

ITSA LTD.
(Exact Name of Registrant as Specified in Its Charter)

Cayman Islands
(Jurisdiction of Incorporation or Organization)

c/o ITSA Intercontinental
Telecomunicações Ltda.
SCS, Quadra 07-Bl.A
Ed.Torre Pátio Brasil, sala 601
70.307-901 Brasília  DF
Brazil
(Address of Principal Executive Offices)

Securities
registered or to be registered pursuant to Section 12(b) of the Act:  None

Securities
registered or to be registered pursuant to Section 12(g) of the Act:  Ordinary Shares,
par value $0.01 per share

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

As
of December 31, 2003, 10,000,000 shares of the registrants Ordinary Shares, $0.01
par value, were outstanding.

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 which financial statement item the registrant has elected to follow.
Item 17 [   ] Item 18 [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

---



# TABLE OF CONTENTS

|                                                                     |   
|-------------------------------------------------------------------- | --
|PRESENTATION OF CERTAIN INFORMATION                                  | 1 
|FORWARD-LOOKING STATEMENTS                                           | 1 
|PART I                                                               | 2 
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS        | 2 
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                      | 2 
|ITEM 3. KEY INFORMATION                                              | 2 
|Selected Financial Data                                              | 2 
|Capitalization and Indebtedness                                      | 5 
|Reasons for the Offer and Use of Proceeds                            | 5 
|Risk Factors                                                         | 5 
|ITEM 4. INFORMATION ON THE COMPANY                                   | 9 
|History and Development of the Company                               | 9 
|Business Overview                                                    | 9 
|Organizational Structure                                             | 18
|Property, Plant and Equipment                                        | 18
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                 | 18
|Operating Results                                                    | 18
|Liquidity and Capital Resources                                      | 28
|Research and Development, Patents and Licenses                       | 30
|Trend Information                                                    | 30
|Off-Balance Sheet Arrangements                                       | 30
|ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                  | 31
|Directors and Senior Management                                      | 31
|Compensation                                                         | 32
|Board Practices                                                      | 32
|Employees                                                            | 33
|Share Ownership                                                      | 33
|ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS           | 34
|Major Shareholders                                                   | 34
|Related Party Transactions                                           | 35
|Interests of Experts and Counsel                                     | 35
|ITEM 8.  FINANCIAL INFORMATION                                       | 35
|Consolidated Statements and Other Information                        | 35
|Significant Changes                                                  | 38
|ITEM 9.  THE OFFER AND LISTING                                       | 38
|Offer and Listing Details                                            | 38
|Plan of Distribution                                                 | 38
|Markets                                                              | 38
|Selling Shareholders                                                 | 39
|Dilution                                                             | 39
|Expenses of the Issue                                                | 39
|ITEM 10.  ADDITIONAL INFORMATION                                     | 39
|Share Capital                                                        | 39
|Memorandum and Articles of  Association                              | 39
|Material Contracts                                                   | 43
|Exchange Controls                                                    | 43
|Taxation                                                             | 44
|Dividends and Paying Agents                                          | 48
|Statement by Experts                                                 | 48
|Documents on Display                                                 | 49
|Subsidiary Information                                               | 49
|ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 49

i

|                                                                                       |   
|-------------------------------------------------------------------------------------- | --
|ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN DEBT SECURITIES                         | 49
|PART II                                                                                | 49
|ITEM 13.  DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCES                              | 49
|ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 50
|ITEM 15.  CONTROLS AND PROCEDURES                                                      | 50
|ITEM 16.  [RESERVED]                                                                   | 50
|ITEM 16A. AUDIT COMMITTEE FINANCAL EXPERT                                              | 50
|ITEM 16B. CODE OF ETHICS                                                               | 50
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       | 50
|PART III                                                                               | 51
|ITEM 17.  FINANCIAL STATEMENTS                                                         | 51
|ITEM 18.  FINANCIAL STATEMENTS                                                         | 51
|ITEM 19.  EXHIBITS                                                                     | 51

ii

# Presentation of Certain
Information

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.

Unless
otherwise specified, data regarding population or homes in a licensed area are estimates
based on 2000 population census figures compiled by the Instituto Brasileiro de Geografia
e Estatística (IBGE) and the Companys knowledge of its markets.
There can be no assurance that the number of people or the number of households in a
specified area has not increased or decreased by a higher or lower rate than those
estimated by the IBGE since the 2000 census. Unless otherwise indicated, references to the
number of the Companys subscribers are based on Company data as of December 31,
2003. Data concerning total Multichannel Multipoint Distribution Systems
(MMDS) and cable subscribers and penetration rates represent estimates made by
the Company based on the data of Pay TV Survey, Associação Brasileira de
Telecomunicações por Assinatura (ABTA), IBGE, the Companys
knowledge of its pay television systems and public statements of other Brazilian pay
television providers. Although the Company believes such estimates are reasonable, no
assurance can be given as to their accuracy.

# Forward-Looking
Statements

Statements
in this Annual Report on Form 20-F 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 plans, the impact of
competition and trends affecting the Companys financial condition and results of
operations, including the Companys ability to meet future cash and debt service
requirements. All forward-looking statements in this Annual Report are based on
information available to the Company as of the date of this Annual Report, and the Company
assumes no obligation to update any such forward-looking statements, except as required by
law. All forward-looking statements involve risks and uncertainties. Actual results may
differ materially from those expressed or implied by such forward-looking statements as a
result of certain factors, including, but not limited to:

| | o | The
substantial indebtedness of the Company and its ability to refinance or repay this debt;
| | - | --------------------------------------------------------------------------------------------

| | o | The
availability of debt and equity financing for working capital, capital expenditures or
other purposes;
| | - | ----------------------------------------------------------------------------------------------------------

| | o | Changes
in the Company's competitive environment;
| | - | -------------------------------------------------

| | o | Changes
in laws and regulations affecting the Company and its businesses;
| | - | -------------------------------------------------------------------------

| | o | Mergers
and consolidations within the Company's industry;
| | - | ---------------------------------------------------------

| | o | Changes
in Brazilian economic conditions, including changes in interest rates, exchange rates and
the performance of                 financial markets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
advent of new communication technologies or distribution systems that may compete with
ITSA's technologies or systems;                 and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
factors set forth  in "Item 3. Key Information--D. Risk Factors."
| | - | ---------------------------------------------------------------------

1

# PART I

# Item 1.  Identity of
Directors, Senior Management and Advisers

Not
applicable.

# Item 2.  Offer Statistics
and Expected Timetable

Not
applicable.

# Item 3.  Key Information

| | A. | Selected
Financial Data.
| | -- | ------------------------

The
consolidated financial statements as of December 31, 2003 and 2002 and for the three years
in the period ended December 31, 2003 are included in this Annual Report on Form 20-F and
are hereinafter referred to as the Consolidated Financial Statements. The
selected consolidated balance sheet data as of December 31, 2003 and 2002 and the selected
consolidated statement of operations data for the year ended December 31, 2003 and 2002
were derived from, and are qualified by reference to, the Consolidated Financial
Statements, which periods have been audited by Deloitte Touche Tohmatsu, independent
auditors. The selected consolidated balance sheet data as of December 31, 2001, and the
selected consolidated statement of operations data for the year ended December 31,
2001 were derived from, and are qualified by reference to, the Consolidated Financial
Statements, which period has been audited by other independent auditors which have ceased
operations. The Consolidated Financial Statements have been prepared in accordance with
U.S. GAAP in U.S. dollars. Effective January 1, 1998, Brazil ceased to be a highly
inflationary economy using the criteria set forth in Statement of Financial Accounting
Standards No. 52 (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, in January 1998, the Company
recorded a loss associated with holding a net foreign currency monetary liability
position. 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. The data presented below should be read in
conjunction with the Consolidated Financial Statements and related notes thereto and
Item 5. Operating and Financial Review and Prospects  A. Operating
Results and other information included elsewhere in this Annual Report on
Form 20-F.

2

Set
forth below is selected financial data for the years ended December 31, 2003, 2002, 2001,
the five months and eleven days ended December 31, 2000, the six months and twenty days
ended July 20, 2000 and the year ended December 31, 1999.

|                                                                                                                                                    | Successor Company (1) | Predecessor Company (1)
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | -----------------------
|
|
|
|Statement of Operations Data:                                                                                                                       |                       |                        
|Revenues                                                                                                                                            |                       |                        
|Operating costs and expenses:                                                                                                                       |                       |                        
|System operating (exclusive of                                                                                                                      |                       |                        
|depreciation and amortization                                                                                                                       |                       |                        
|and stock compensation expense                                                                                                                      |                       |                        
|shown below)                                                                                                                                        |                       |                        
|Selling, general and
      administrative (exclusive of
      depreciation and amortization
      and stock compensation expense
      shown below) |                       |                        
|Depreciation and amortization                                                                                                                       |                       |                        
|Stock compensation                                                                                                                                  |                       |                        
|                                                                                                                                                    |                       |                        
|Total operating costs and                                                                                                                           |                       |                        
|expenses                                                                                                                                            |                       |                        
|                                                                                                                                                    |                       |                        
|Operating loss                                                                                                                                      |                       |                        
|Other income (expense)  (2)                                                                                                                         |                       |                        
|Income (loss) before reorganization
   items, extraordinary item and
   cumulative  effect of change in
   accounting principle                     |                       |                        
|Reorganization items:                                                                                                                               |                       |                        
|Reorganization costs                                                                                                                                |                       |                        
|Adjustment of accounts
      to fair value                                                                                                          |                       |                        
|                                                                                                                                                    |                       |                        
|Total reorganization items                                                                                                                          |                       |                        
|                                                                                                                                                    |                       |                        
|Income (loss) before extraordinary
   item and cumulative  effect of
   change in accounting principle                                              |                       |                        
|Extraordinary item:                                                                                                                                 |                       |                        
|Gain on extinguishment of debt                                                                                                                      |                       |                        
|                                                                                                                                                    |                       |                        
|Income (loss) before cumulative
   effect of change in accounting
   principle                                                                      |                       |                        
|Cumulative effect of change in                                                                                                                      |                       |                        
|accounting principle                                                                                                                                |                       |                        
|Income taxes                                                                                                                                        |                       |                        
|                                                                                                                                                    |                       |                        
|Net income (loss)                                                                                                                                   |                       |                        
|Basic and diluted earnings (loss) per                                                                                                               |                       |                        
|share:                                                                                                                                              |                       |                        
|Before reorganization items,
    extraordinary item and cumulative
    effect of change in accounting
    principle                                 |                       |                        
|Extraordinary item                                                                                                                                  |                       |                        
|Cumulative effect of change in
        accounting principle                                                                                         |                       |                        
|Net income (loss)                                                                                                                                   |                       |                        
|Weighted average number of shares
    outstanding during the year/period                                                                            |                       |                        

3

|                                      | Successor Company (1) | Predecessor Company (1)
|------------------------------------- | --------------------- | -----------------------
|
|
|
|Balance Sheet Data:                   |                       |                        
|Working capital (deficiency)          |                       |                        
|Property, plant and equipment, net    |                       |                        
|Total assets                          |                       |                        
|Total long-term debt                  |                       |                        
|Stockholders' equity (deficiency) (3) |                       |                        

|                                           | Successor Company (1) | Predecessor Company (1)
|------------------------------------------ | --------------------- | -----------------------
|
|
|
|Other Financial Data:                      |                       |                        
|Cash flows from operating
    activities   |                       |                        
|Cash flows from investing activities       |                       |                        
|Cash flows from financing activities       |                       |                        
|Capital expenditures                       |                       |                        
|Other Operating Data:                      |                       |                        
|Number of subscribers at end of period (4) |                       |                        
|Average monthly revenue per subscriber (5) |                       |                        

---

|(1) | The
Selected Consolidated Financial Data includes (i) TV Filme Serviços           on a
historical basis through July 20, 2000 and (ii) ITSA and its           subsidiaries
from July 21, 2000, adjusted for the effects of the plan of           reorganization of
TV Filme completed on that date. See Note 1 to the           Consolidated Financial
Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other
income (expense) is comprised primarily of foreign currency gain (loss)           and
interest expense.
|--- | -------------------------------------------------------------------------------------------------------------

|(3) | The
Company has never paid cash dividends on its Ordinary Shares. See Item           9.
The Offer and Listing  A. Offer and Listing Details.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(4) | See
Item 4. Information on the Company.
|--- | -----------------------------------------

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

Exchange Rates

Since
1999, the Central Bank of Brazil has allowed the real/U.S. dollar exchange rate to
float freely, and during that period, the real/U.S. dollar exchange rate has
fluctuated considerably. In the past, the Central Bank of Brazil has intervened
occasionally to control unstable movements in foreign exchange rates. The Company cannot
predict whether the Central Bank or the Brazilian government will continue to let the
real float freely or will intervene in the exchange rate market through a currency
band system or otherwise. The real may depreciate or appreciate substantially in
the future.

4

The
information set forth below with respect to exchange rates is based on the official
exchange rate of the Central Bank of Brazil. These rates are used by the Company in
preparation of the Consolidated Financial Statements included in this Annual Report on
Form 20-F.

|                  | Exchange Rates of reaisper U.S. $1.00(1)
|----------------- | ----------------------------------------
|
|Year Ended:       |                                         
|December 31, 1999 | 1.789000                                
|December 31, 2000 | 1.955400                                
|December 31, 2001 | 2.320400                                
|December 31, 2002 | 3.533300                                
|December 31, 2003 | 2.889200                                
|Month Ended:     
|December 31, 2003 | 2.889200                                
|January 31, 2004  | 2.940900                                
|February 29, 2004 | 2.913800                                
|March 31, 2004    | 2.908600                                
|April 30, 2004    | 2.944700                                
|May 31, 2004      | 3.128100                                

---

| | (1)
(2) | Source:  Central Bank of Brazil.
Represents
daily average exchange rate during the relevant period.
| | ------- | ---------------------------------------------------------------------------------------------------

| | B. | Capitalization
and Indebtedness.
| | -- | --------------------------------

Not applicable.

| | C. | Reasons
for the Offer and Use of Proceeds.
| | -- | ------------------------------------------

Not applicable.

| | D. | Risk
Factors.
| | -- | -------------

Set
forth below is a description of factors that may affect the Companys business,
results of operations, financial condition and share         
    price from time to time.

Factors Relating to the
Company

An
Event of Default Under the Companys Primary Indebtedness Has Occurred and is
Continuing. The Company is indebted to certain lenders for a total of
approximately $55.8 million, including principal and interest, under its secured notes in
the original aggregate principal amount of $35 million, due December 2004, at an interest
rate of 12% per annum (the 12% Senior Secured Notes). Payment of the 12%
Senior Secured Notes is guaranteed by certain subsidiaries of the Company and is secured
by all of the assets of the Company. Due to financial constraints and limited capital
resources, the Company failed to pay the interest due under the 12% Senior Secured Notes
on December 20, 2002. In January 2003, an event of default under the indenture related to
the 12% Senior Secured Notes occurred as a result of the Companys interest payment
default continuing for a period of more than 30 days. The Company subsequently failed to
make interest payments due on June 20, 2003 and December 20, 2003. Due to the financial
condition of the Company, the Company is currently unable to pay the interest due under
the 12% Senior Secured Notes and remains in default of its obligations under the related
indenture. As a result, the holders of 25% or more of the 12% Senior Secured Notes, among
other things, have the right to declare the Notes due and payable in full and to demand
the immediate payment of the Notes. In addition, the trustee under the related indenture
may pursue any available remedy by proceeding at law or in equity to collect any payment
due on the Notes. Such action may, among other things, result in the sale of the
Companys assets and the termination of the operations of the Companys
business. To date, the Company has not received any notification from the trustee
regarding the intention of the noteholders to declare the Notes due and payable in full
and to demand the immediate payment of the Notes. However, the Company can give no
assurance that the noteholders will not fully exercise

5

their rights
in the future.  The Company anticipates that it will probably not
be able to pay either the interest or the principal due under the 12% Senior Secured
Notes.

The
Report of the Companys Independent Registered Public Accounting Firm Contains an
Emphasis of a Matter Paragraph Relating to the Companys Ability to Continue as a
Going Concern. The report of the independent registered public accounting
firm on the Companys Consolidated Financial Statements for the year ended December
31, 2003 contains an explanatory paragraph stating that there is substantial doubt as to
the Companys ability to continue as a going concern. The Consolidated Financial
Statements do not include any adjustments that might result from the outcome of such
uncertainty. As set forth in the Consolidated Financial Statements, the Company has
incurred recurring losses from operations and has not been able to generate sufficient
cash flows from operations to pay accrued interest on its 12% Senior Secured Notes that
was due since December 20, 2002. At December 31, 2003, the accrued interest in default
totaled $9,103,000. As of December 31, 2003 and 2002, the Company had working capital
deficiencies of $55,263,000 and $50,549,000, respectively. As a result of the default
under the indenture related to the 12% Senior Secured Notes, $46,688,000 of the
Companys total long-term debt was classified as a current liability in the
Companys Consolidated Balance Sheet at December 31, 2003 and 2002.

Operating
losses are expected to continue in the future until such time as the Company is successful
in securing a subscriber base capable of generating a significantly higher level of
operating revenues. During 2003, the Company lost 20% of its subscriber base. However,
this loss did not have a material adverse effect on the Companys business,
as the revenues derived from these subscribers represented less than 3% of the
Companys total revenues in reais(or 10% in U.S. dollars) in 2003. In addition, the impact of the loss of these
subscribers was partially offset by a 5% average increase in monthly fees. The Company has
limited capital resources available to fund capital expenditures, to fund maturities of
debt as they become due and to support its operations until such time the Company is able
to generate significant levels of positive cash flow from operations. The Company is
therefore dependent upon obtaining additional financing to provide funds to support
operations and to fund maturities of debt as they become due. The Company continues to
evaluate alternatives for obtaining the necessary capital to fund operations and any
potential future growth. However, to date, the Company has not been able to obtain this
capital as a result of continuing financial and economic difficulties.

These
factors raise substantial doubt about the Companys ability to continue as a going
concern. The Companys management is concentrating its efforts to address the
Companys negative stockholders equity and working capital deficiency. During
2003, the Company reduced selling, general and administrative expenses through a
reorganization of the Companys internal organization, which resulted in reductions
in the number of employees and in other administrative expenses, and through the
successful renegotiation of certain supply and rental agreements. In addition, the Company
has established a Survey and Development Group to study the development of new wireless
technologies which may be implemented to add to the Companys service and product
offerings. However, the lack of sufficient capital resources has prevented the Company
from launching any potential new service. The Company can give no assurance that it will
be successful in achieving further expense reductions or otherwise addressing its negative
stockholders equity and working capital deficiency or that its developmental efforts
will result in additional service or product offerings. The failure of the Company to
obtain additional financing and to achieve the other objectives described above would have
a material adverse effect on the Companys business, results of operations and
financial condition, which may include the termination of the operations of the
Companys business.

The
Company Needs Additional Capital to Support Operations and to Fund Debt
Maturities. The Companys business requires substantial investment on
a continuing basis to finance debt service obligations, capital expenditures and expenses
related to system maintenance, development and net losses. As discussed above, the Company
is currently dependent upon obtaining additional financing to provide funds to support its
current operations and to fund current maturities of debt. The Company has no current
arrangements with respect to, or potential sources of, any additional financing, and the
Company can give no assurance that existing securityholders will provide any portion of
the Companys financing requirements. Furthermore, the indenture related to the 12%
Senior Secured Notes restricts the amount of additional indebtedness that the Company may
incur. Consequently, the Company can give no assurance that it will be able to obtain
additional debt or equity capital on satisfactory terms, or at all, to meet the
Companys current and future financing needs. Failure to obtain any required
additional

6

financing would have a material  adverse effect on the Companys
business, results of operations and financial condition, which may include the termination
of operations of the Companys business.

The
Companys Substantial Leverage Could Adversely Affect Its Ability to Run Its
Business. The Company has a significant amount of indebtedness. This
substantial indebtedness could have important consequences. For example, it could:

| | o | limit
the Companys 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
the Company to dedicate a substantial portion of its cash flow from operations and cash
and/or marketable securities on hand to the payment of principal and interest on the
Companys indebtedness, thereby reducing funds available for market expansion and
additional market development;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | hinder
the Company's ability to adjust rapidly to changing market conditions; and
| | - | ---------------------------------------------------------------------------------

| | o | make
the Company more vulnerable to economic downturns, limiting its ability to withstand
competitive pressures and reduce the Companys flexibility in responding to changing
business and economic conditions.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
Companys Debt Obligations are Subject to Foreign Exchange Risk.The
12% Senior Secured Notes are denominated in U.S. dollars, while the Company generates
revenues only in Brazilian reais. The Company also incurs a significant portion of
its equipment costs, and most of its programming costs, in U.S. dollars. Consequently, a
significant devaluation of the real against the U.S. dollar can significantly
affect the Companys ability to meet its debt obligations and fund its capital
expenditures, and could adversely affect its results of operations.

The
Company is in a Competitive Business. The Company faces potential
competition from hardwire cable operators, direct broadcast satellite systems
(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
the Companys actual and potential competitors have greater financial, marketing and
other resources than does the Company.

The
Companys Business Could Suffer from Changes in Government Regulation.
Changes in the regulation of the Companys business activities, including decisions
by regulators affecting the Companys operations, could have an adverse effect on the
Companys business.

The
Company is Dependent on Certain Key Suppliers. The Company purchases
decoders, modems and antennas from a limited number of sources. The Companys
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 the
Companys results of operations and financial condition.

In
February 2000, the Companys only supplier of decoders (General Instruments, which
has been acquired by Motorola) in its four operating markets announced that it was
planning to discontinue production for this product in the future. While the Company
projects it has a four-year inventory of decoders available, the Company is currently
evaluating new suppliers and alternatives. However, if the Company is unable to obtain any
required additional decoders for subscriber use, it could have a material adverse effect
on the Companys results of operations and financial condition.

The
Companys Ability to Distribute Dividends and Meet Debt Obligations is Dependent on
Its Subsidiaries. Because the Company is a holding company, the
Companys ability to distribute dividends and meet its debt obligations is dependent
upon the earnings of its subsidiaries and the distribution of those earnings to, or

7

upon loans or other payment of funds
by the subsidiaries to, the Company. The Companys subsidiaries may be obligated as
guarantors of the Companys debt to pay any amounts due to its creditors or to make
any funds available to its creditors. The payment of dividends from the Companys
subsidiaries and the payment of any interest on or the repayment of any principal of any
loans or advances made to the Company by its subsidiaries, or by the Company to its
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.

Factors Relating to Brazil

The
Companys Business Could Suffer from Political and Economic Uncertainties in
Brazil. The Brazilian government frequently intervenes in the Brazilian
economy and occasionally makes drastic changes in policy and regulations. The
governments actions to control inflation and other policies and regulations have
often involved, among other measures, wage and price controls, currency devaluations,
capital controls and limits on imports. The Companys business, financial condition
and results of operations may be adversely affected by changes in policy or regulation
involving tariffs and exchange controls, as well as factors such as currency fluctuations,
inflation, social instability, price instability, interest rates, liquidity of domestic
capital and lending markets, tax policy and other political, diplomatic, social and
economic developments in or affecting Brazil.

Government
Restrictions on the Conversion and Remittance of Funds Abroad Could Hinder the
Companys Ability to Operate Its 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, the Companys subsidiaries
could be prevented from purchasing equipment required to be paid for in U.S. dollars and
from transferring funds to the Company, which are required in order for the Company to
make scheduled interest payments on its outstanding 12% Senior Secured Notes. Either of
these events could have a material adverse impact on the Companys business,
operating results and financial condition.

The
Pending Tax Reform in Brazil May Result in an Increased Tax Burden Upon the Company.The Brazilian government has proposed broad tax reform bills, mainly
designed to reduce the public deficit through tax increases. It is anticipated that the
tax reforms will include, for example, the creation of a value-added tax on goods and
services which would replace six existing taxes:

| | o | Contribuiçãoo
Social sobre o Lucro Líquido (CSLL), a social contribution tax on profits;
| | - | ----------------------------------------------------------------------------------------

| | o | Imposto
sobre Produtos Industrializados (IPI), a federal tax on industrial products;
| | - | ------------------------------------------------------------------------------------

| | o | PIS,
a social contribution tax on salaries;
| | - | -------------------------------------------

| | o | COFINS,
a social contribution tax on gross revenues (operating and financial);
| | - | ------------------------------------------------------------------------------

| | o | ICMS,
a state tax on the circulation of goods and services; and
| | - | ---------------------------------------------------------------

| | o | Imposto
sobre Serviços (ISS), a municipal tax on services.
| | - | ----------------------------------------------------------

If the proposed tax reforms are enacted,
the reforms may result in a significant increase in the Companys tax burden which,
in turn, could have a material adverse effect on the Companys results of operations
and financial condition.

In
addition, in 1996, the Brazilian Congress approved Constitutional Amendment No. 12
creating a new temporary tax, the Contribuição Provisória sobre
Movimentação Financeira (CPMF). Based on this Amendment, Law No.
9,311 of October 24, 1996 (Law 9,311) was enacted, creating the CPMF tax.
Under Law No. 9,311, as amended, all financial debit and money transfers through Brazilian
bank accounts, including payments made by the Company, are subject to the assessment of
the CPMF tax. Subsequent constitutional amendments have extended the assessment of the
CPMF and have changed the tax rate. Most recently, Constitutional Amendment No. 37 of June
2001 extended the CPMF assessment until December 31, 2004 at a 0.38% rate. The
Constitutional Amendment No. 42 of December 2003 extended the CPMF assessment until
December 31, 2007 at a rate of 0.38%.

8

# Item 4.  Information on
the Company

A.   
    History and Development of the Company.

On
July 21, 2000, ITSA Ltd., a Cayman Islands company, became the successor to TV Filme, a
Delaware corporation, following the successful completion of a debt restructuring pursuant
to a plan of reorganization of TV Filme under Chapter 11 of the United States Bankruptcy
Code.

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 Brasília, the capital of Brazil, and
commenced operations in 1990 with a one channel offering. Licenses to operate the
Goiânia and Belém Systems were acquired in 1994 from TVA Sistema de
Televisão S.A., a subsidiary of Tevecap S.A. (Tevecap), one of the
leading pay television operators in Brazil.

TV
Filme was organized in 1996 under the laws of the State of Delaware. Its largest
stockholders included Warburg, Pincus Investors, L.P., Tevecap and certain members of
management and their families.

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 TV Filme Senior Notes). While TV Filme decided to commence
discussions with holders of the TV Filme Senior Notes to pursue a comprehensive financial
and operational restructuring plan, TV Filme failed to make the required interest payment
on the TV Filme Senior Notes on June 15, 1999.

On
August 13, 1999, TV Filme reached an agreement in principle with a committee representing
the holders of the TV Filme Senior Notes. This agreement was effected 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. The plan was completed on July 21, 2000, following
support from ANATEL (the Brazilian Telecommunications Agency) and the Central Bank of
Brazil. In accordance with the terms of the plan of reorganization, the TV Filme Senior
Note holders received a $25 million cash payment and their existing notes were converted
into (i) the 12% Senior Secured Notes, 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 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 Telecommunicações Ltda.,
a wholly-owned subsidiary of the Company. On March 18, 2002, the U.S. Bankruptcy
Court for the District of Delaware closed the Chapter 11 bankruptcy case involving TV
Filme.

The
Company made capital expenditures of approximately $1.2 million, $0.6 million and $2.3
million during 2003, 2002 and 2001, respectively. During 2003, 2003 and 2001, the Company
added capitalized installation of $1.0 million, $0.3 million and $1.6 million,
respectively, and acquired new equipment of approximately $0.2 million, $0.3 million and
$0.8 million, respectively.

The
Companys principal executive office is located at SCS, Quadra 07-Bl.A, Ed. Torre
Pátio Brasil, sala 601, 70.307-901 Brasília  DF, Brazil and its
telephone number is 011-55-61-314-9904.

B.     
   Business 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 its subsidiaries, the Company has licenses in the cities of Brasília,
Goiânia, Belém, Campina Grande, Caruaru, Porto Velho, Presidente Prudente,
Bauru, Franca, Uberaba, Belo Horizonte and Vitória, covering over 3 million
households and approximately 13 million people.

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

9

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 Brasília since 1998.

The
Company holds licenses covering the frequency bands from 2,170 to 2,182 MHz and from 2,500
to 2,686 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 markets. 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 Center), which is located in its
headquarters in Brasília.

Additionally,
the Company owns and maintains its proprietary SMS (Subscriber 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.

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 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 provide 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.

Each
of the Companys existing systems has required an initial capital investment of
approximately $0.5 million to $1.0 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 $200 in the case of video service, which includes the cost of a decoder box,
installation labor and materials, other equipment and supplies, and marketing and selling
costs. In the case of residential/corporate high-speed Internet service, each new
subscriber has required an average incremental investment of approximately $500 (including
a 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 $45 to $55 for video service (or
approximately $8 net of sales commissions in markets which have adopted the Mais TV
model) and from $13 to $40 for residential high-speed Internet service and from $42 to
$1,450 for corporate services.

Brazilian Pay Television
Industry

The
pay television industry in Brazil began in 1989 with the commencement of UHF service in
São Paulo. In contrast to the U.S., the Brazilian hardwire cable industry and
wireless cable industry began developing concurrently. By December 31, 2003, approximately
297 hardwire cable licenses, 10 Direct-to-Home (DTH) licenses and 100 wireless
licenses had been issued by the Brazilian government. The Company believes that as of
December 31, 2003, approximately 13% 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 39.5 million television households, according to a survey published by
the Instituto Brasileiro de Opinião Pública e Estatística, or
IBOPE. As of December 31, 2003, the Company estimates that there were approximately 3.5
million pay television subscribers, representing approximately 9 % of Brazilian television
households.

10

Brazilian
television viewers prefer Portuguese language programming, including movies, sports and
novelas (soap operas). Programming content for pay television systems in
Brazil is offered by the Globo Organization, independent providers and by Neo-TV, an
association formed 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 that 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 seven years ago when, on an experimental basis,
TV Filme starting operating a service called LinkExpress in the city of Brasília,
which provided one-way Internet access service using high-speed modems. The Company
discontinued this one-way service in November 2003, as a result of the obsolescence of
this technology.

In
December 2000, ITSA, through its subsidiary LinkExpress, launched its two-way broadband
service. By the end of 2003, the two-way services were being offered commercially to
approximately 660 residential subscribers and 312 corporate subscribers.

Reported
estimates indicate that there are approximately 12,000,000 internet users in Brazil and
1,200,000 subscribers have access to high-speed internet services. DSL technology
represents 83% of this market and cable modem 17%. (source:www.teleco.com.br/internet.asp)

Operating Systems and the
Companys Markets

The
table below provides information regarding the Companys markets as of December 31,
2003:

|                           | Estimated
Total
Population (1) | Estimated
Total
Households (1) | Estimated
LOS
Households (2)
|-------------------------- | ------------------------------ | ------------------------------ | ----------------------------
|
|Operating Markets:         |                                |                                |                             
|Brasilia                   |                                |                                |                             
|Belém                      |                                |                                |                             
|Goiânia                    |                                |                                |                             
|Campina Grande             |                                |                                |                             
|                           |                                |                                |                             
|Total in Operating Markets |                                |                                |                             
|                           |                                |                                |                             
|New Markets (3)            |                                |                                |                             
|                           |                                |                                |                             

---

|(1) | Represents
the Companys estimate of the population and the total number of
          households within the greater metropolitan areas of each of its markets. The
          Companys estimates for Brasília, Goiânia, Belém and
          Campina Grande are based on data from the 2000 Census conducted by the
Brazilian           Institute of Geography and Statistics (IBGE) as adjusted
to reflect           estimated total household growth. Includes potential households that
will           receive the signal through the use of repeaters.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | Represents
the eight markets for which the Company has been awarded licenses to           operate
new Multichannel Multipoint Distribution Systems (MMDS).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

11

Brasília
System. Brasília, the capital of Brazil, with an estimated greater
metropolitan population of approximately 2.2 million, is located in the interior of Brazil
and was established in the early 1960s as a planned city when the capital of Brazil
was moved from Rio de Janeiro. Brasílias generally flat topography is
advantageous for wireless technologies. In addition, Brasílias zoning
provisions favor wireless technology by requiring that residential buildings be of a
similar height and located together. The Companys current 35-kilometer coverage
territory encompasses approximately 453,000 households that the Company believes can be
served by LOS transmission.

The
Brasília 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 Brasília System transmits at 50 watts of
power per channel from a transmission tower that is 300 feet above average terrain. The
main competitors in the pay television area in the city of Brasília are NET
Brasília, a hardwire cable operator and affiliate of the Globo Organization, as
well as DirecTV and Sky, each of which are DTH operators. The Company believes that it is
the second largest pay television provider in Brasília 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 Brasília. In the third quarter of 2000,
ANATEL 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
competitor in the area of high-speed Internet service in Brasília is Brasil
Telecom, the telephone operator in the city. See  High Speed Internet Access
and Data Communications Services.

Belém
System. Belém, with an estimated greater metropolitan population of
approximately 1.8 million, 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 pay
television service in Belém in February 1995. Although the city is relatively
flat, trees block wireless cable transmission in Belém more often than they do in
Brasília and Goiânia and thus, the Belém System requires increased
utilization of signal repeaters. The Belém System reaches the greater Belém
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 that the Company believes can be served by
LOS transmission.

The
Belém System transmits at 50 watts of power per channel from a transmission tower
that is 300 feet above average terrain. The main competitors in the pay television area in
Belém are ORM Cabo, an independent hardwire cable operator, as well as DirecTV and
Sky. The Company does not currently offer high-speed Internet service in the city of
Belém.

Goiânia
System. Goiânia, with an estimated metropolitan population of
approximately 1.6 million, is located approximately 100 miles southwest of
Brasília. Goiânia is the capital of the state of Goiás, and like
Brasília, its topography is favorable to LOS transmission because the city is
relatively flat. The Company launched pay television service in Goiânia in January
1995. The Companys current 30-kilometer coverage territory encompasses approximately
297,000 households that the Company believes can be served by LOS transmission.

The
Goiânia System transmits at 50 watts of power per channel from a transmission tower
that is 350 feet above average terrain. The main competitors in the pay television area in
the city of Goiânia are NET Goiânia, a hardwire cable operator and affiliate
of the Globo Organization, as well as DirecTV and Sky. The Company believes that, at it is
the second largest pay television provider in Goiânia based on total number of
subscribers. The Company does not currently offer high-speed Internet service in the city
of Goiânia.

Campina
Grande System. Campina Grande, with an estimated metropolitan population of
approximately 0.5 million, is located approximately 80 miles west of João Pessoa,
the capital of the state of Paraíba. Similar to Brasília and Goiânia,
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 licensed coverage radius encompasses
approximately 80,000 households that the Company believes can be served by LOS
transmission.

12

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 currently offer high speed Internet
service in the city of Canpina Grande.

Other Markets

In
1998 and 2000, the Company was awarded licenses to operate wireless systems in the
following eight markets: Bauru, Belo Horizonte, Caruaru, Franca, Porto Velho, Presidente
Prudente, Uberaba and Vitória. 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, Porto Velho, Presidente Prudente, Uberaba and
Vitória have operating hardwire cable competitors. The Company has implemented the
transmission system in all of these markets and the service is commercially available to
customers, although the Company has been unable to market its services aggressively.

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 several 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Programming

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

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

The
Companys channel offerings as of are as follows:

|Channel      | Description                                                          
|------------ | ---------------------------------------------------------------------
|
|HBO Brazil   | Brazilian Version of HBO                                             
|HBO Brazil 2 | HBO Brazil with a three hours time delay                             
|ESPN Brazil  | Brazilian Version of ESPN                                            
|Eurochannel  | European films and special programming                               
|Mundo        | Variety channel                                                      
|Band News    | Brazilian 24 hour news channel                                       
|MTV Brazil   | Brazilian version of MTV                                             
|RTPi *       | Radio and Television Portugal, a free broadcast channel from Portugal

13

|Channel                            | Description                                  
|---------------------------------- | ---------------------------------------------
|
|CNN International                  | International Version of CNN                 
|TNT                                | Brazilian version of TNT                     
|Cartoon Network                    | Cartoon Network produced in the U. S.        
|Boomerang                          | Turner's channel for cartoons                
|Fox                                | General entertainment                        
|Discovery Channel                  | Brazilian version of Discovery Channel       
|National Geographic                | Brazilian version of National Geographic     
|ESPN International                 | International version of ESPN                
|Warner                             | Warner channel produced in the U.S.          
|E !                                | E! Entertainment channel produced in the U.S.
|Cinemax Prime                      | Films and special programming                
|Sony                               | Sony channel produced in the U.S.            
|Nickelodeon *                      | Children's channel                           
|Discovery Kids                     | Children's channel                           
|People and Arts / Travel Channel * | Tourism, biography and art channel           
|Rede Vida                          | Catholic programming                         
|Cinemax                            | Films and special programming                
|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)      
|                                  

---

High Speed Internet
Access and Data Communications Services

In
December 1997, the Company began providing Internet access services, under the brand name
LinkExpress, to its customers in Brasília. 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 from subscribers to the network were performed with the use of phone-lines. The
Company discontinued this one-way service in November 2003, as a result of the
obsolescence of this technology. In the third quarter of 2000, ANATEL 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 markets. 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 Center),
which is located in its headquarters in Brasília.

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

14

Operations

Marketing.The Company focuses its marketing strategy 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.

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 location. Installations at single-family homes require an entire
          installation package, while installations at multiple dwelling units at which
          drop lines already have been installed require less time and, accordingly, are
          less costly.

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 customer service focus in all its employees through ongoing
training programs. Under the Mais TV model, the Company still offers high levels of
customer service, but charges the customer for anything other than routine service calls.

The
Company operates a single service center located in Brasília where billing,
accounts payable, human resources administration, marketing, customer service hotline and
all routing and scheduling functions are centralized. The Company believes that operating
a centralized service center further enhances and improves 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 system enables
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
has seven employees dedicated to the development, enhancement, integration and maintenance
of the Companys subscriber management system.

Facilities and Equipment

Administrative
Facilities. A centralized corporate administrative facility is located in
Brasília to handle training, engineering, computer systems development, financial
and controller functions and strategic planning, as well as customer service, billing,
accounts payable and certain other administrative functions. In addition, the Company has
established regional operating offices in its operating markets to coordinate sales, local
marketing, installation and technical support services, maintenance and local
administrative functions.

Transmission
Facilities. The Companys head-end 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 enhance signal
coverage. For other markets, the Company expects to lease space for transmission and
head-end 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 high speed Internet access
and data communications services, the Company already utilizes digital transmission system
and technology.

15

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 it is the second largest pay television provider in Brasília
based on total number of subscribers. The Companys principal competitors in the city
of Brasília are NET Brasília, a hardwire cable operator and affiliate of the
Globo Organization, as well as DirecTV and Sky, each of which is a DTH operator. In
Brasília, the Company also offers high speed Internet access to the residential
market and data communication services to the corporate market. The Companys
principal competitor for these services is Brasil Telecom, the local telephone operator.

The
Company believes that it is thesecond largest pay television provider in
Goiânia based on total number of subscribers. The main competitors in the pay
television area in the city of Goiânia are NET Goiânia, a hardwire cable
operator and affiliate of the Globo Organization, as well as DirecTV and Sky.

The
Company believes that it is the largest pay television provider in Belém based on
total number of subscribers. The main competitors in the pay television area in
Belém are ORM Cabo, an independent hardwire cable operator, as well as DirecTV and
Sky.

The
Company believes that it is the largest pay television provider in the city of Campina
Grande. The Companys principal competitors in Campina Grande are Sky and DirecTV.
Currently, there is no hardwire cable provider in the city of Campina Grande.

In
addition to other terrestrial pay television operators, the Company faces 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.
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 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
          wireless services, 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 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.

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. Although Decree No.

16

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.       
          The system operator may freely establish prices for pay television and
          high-speed Internet services currently in operation, 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.

Two-Way
MMDS. In the third quarter of 2000, ANATEL 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 markets. 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 Center), which is located in its headquarters in Brasília.

Other
Licenses. ANATEL issued the Multimedia Communications Service, or SCM,
Regulation, Resolution No. 272 of August 9, 2001, which permits the offering of capacity
for transmission, emission and reception of multimedia information in the format of audio
signals, video, data, voice and other sounds, images, texts and other information of any
nature, to subscribers within the same area of service, using any means. The SCM is a
fixed telecommunication service rendered for the collective interest on a domestic or
international basis, excluding fixed telephone, Mass Electronic Communication Services
(Cable TV, MMDS and DTH), and Broadcast Service. According to Resolution No. 272, SCM
providers can offer their services to any residential subscriber. Therefore, pay tv
operators could request an ANATEL authorization to offer SCM and then offer high speed
cable data service, not only to their pay television subscribers, but to any user of this
service located in the licensed area of the pay television operator.

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. Restrictions imposed by local authorities may also exist. 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.

17

C. 
Organizational Structure.

The
following is a list of the Companys significant subsidiaries:

|Name                                                | Country of
Incorporation | ITSA Ownership
Interest | ITSA Voting
Interest
|--------------------------------------------------- | ------------------------ | ----------------------- | --------------------
|TV Filme Servicos de Telecomunicacoes Ltda          | Brazil                   | 100%                    | 100%                
|TV Filme Brasilia Servicos de Telecomunicacoes Ltda | Brazil                   | 100%                    | 100%                
|TV Filme Belem Servicos de Telecomunicacoes Ltda    | Brazil                   | 100%                    | 100%                
|TV Filme Goiania  Servicos de Telecomunicacoes Ltda | Brazil                   | 100%                    | 100%                
|ITSA Intercontinental Telecomunicacoes Ltda         | Brazil                   | 100%                    | 100%                
|Link Express Servicos e Telecomunicacoes Ltda       | Brazil                   | 100%                    | 100%                

D. 
Property, Plant and Equipment.

The
Company leases approximately 37,000 square feet of office space for its corporate
headquarters and the Brasília System in Brasília. In addition, the Company
leases office space for the Goiânia System, Belém System and Campina Grande
System consisting of approximately 7,182, 15,410 and 8,260 square feet, respectively. The
Company also leases space for transmission towers located in Brasília,
Goiânia, Belém 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 in which the Company operates wireless cable systems. The
Company owns most of the assets essential to its operations. The major fixed assets of the
Company are coaxial cable, converters for subscribers homes, electronic
transmission, receiving, processing and distribution equipment, microwave equipment and
antennae.

# Item 5. Operating and
Financial Review and Prospects

A. 
Operating Results.

The
following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the Consolidated Financial Statements
included elsewhere in this Form 20-F. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. The Companys actual
results may differ materially from those anticipated in these forward-looking statements
as a result of certain factors that include, but are not limited to, those set forth under
Item 3. Key Information  D. Risk Factors and elsewhere in this Form
20-F.

Overview

ITSA
Ltd., a Cayman Islands company, provides pay television services and high-speed internet
access under the Linkexpress brand name in Brazil. The Company has operations
in 12 markets in Brazil, with licenses for MMDS (broadband wireless) as well data
communications services (SCM). With its licenses, the Company has exclusive access to
almost 200 MHz of contiguous spectrum for the offering of advanced services in each market
where it operates. ITSA was the first company in Brazil to launch a high-speed Internet
access system using its wireless platform and also was the first company to offer a local
pre-paid subscription TV service. During 2003, ITSA generated over 96% of its revenue from
its pay television, high-speed internet and data communications services and advertising.

18

The
Company has generated operating losses since its inception and these losses are expected
to continue in the future until such time as the Company is successful in securing a
subscriber base capable of generating a significantly higher level of operating revenues.
The Company has limited capital resources available to fund capital expenditures, to fund
maturities of debt as they become due and to support its operations until such time the
Company is able to generate significant levels of positive cash flow from operations. The
Company is therefore dependent upon obtaining additional financing to provide funds to
support operations and fund maturities of debt as they become due. However, during 2003,
the Company generated net cash from operating activities of $1,185,000 and earned net
income of $1,758,000. This result was primarily attributable to a foreign exchange gain of
$10,355,000 and a reduction in costs and expenses of $2,410,000, resulting primarily from
the renegotiation of the Companys supply and rental contracts, off-set in part by a
provision for fiscal contingencies of $2,430,000 in Brasília and $353,000 in ITSA
Brazil. For an explanation of these provisions, see Item 8. Financial Information
 Litigation.

In
2003, the Company made capital expenditures of approximately $1.2 million, which were
primarily financed with available cash. At December 31, 2003, the Company had
approximately $4.1 million in cash and cash equivalents, working capital deficiency of
$55,263,000 and stockholders deficiency of $50,003,000.

ITSAs
Consolidated Financial Statements included in this Annual Report on Form 20-F, have been
prepared under the assumption that the Company will continue as a going
concern. The report of the independent registered public accounting firm on the
Companys Consolidated Financial Statements for the year ended December 31, 2003 and
2002 contains an explanatory paragraph stating that there is substantial doubt as to the
Companys ability to continue as a going concern. The Consolidated Financial
Statements do not include any adjustments that might result from the outcome of such
uncertainty.

For
a discussion of ITSAs financial condition, including the current default under the
12% Senior Secured Notes, see   Liquidity and Capital Resources.

Critical Accounting
Estimates

The
Companys significant accounting policies are discussed in Note 2 of the Consolidated
Financial Statements. The Companys Consolidated Financial Statement are presented in
accordance with U.S. GAAP. As part of the preparation of its financial statements, the
Company is required to make certain subjective estimates, judgments and assumptions in
applying these accounting policies that management believes are reasonable based upon the
information available at that time. These estimates, judgments and assumptions affect the
reported amounts of assets and liabilities at the dates of the Consolidated Financial
Statements and the reported amounts of revenues and expenses during the periods presented.
Critical accounting estimates require management to make assumptions about matters that
are highly uncertain at the time of the estimate and a change in these estimates may have
a material impact on the presentation of the Companys financial position or results
of operations. The significant accounting policies that management believes have and will
have an impact on the Companys business include the following:

Impairment of Long-Lived
Assets

The
Company evaluates its long-lived and identifiable intangible assets for impairment
wheneverevents or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Recoverability of assets to be held and used is
determined by a comparison of the carrying amount of the asset to the future undiscounted
net operating cash flows expected to be generated by the assets from their use and
eventual disposition. In the event that the undiscounted net operating cash flows expected
to be generated by the assets from their use and eventual disposition are lower than the
carrying amount of such assets, an impairment loss is measured by comparing the carrying
amount of such assets to their fair value. The Company has $8.1 million of property, plant
and equipment and $2.9 million in licenses. The Company considers historical experience as
well as future expectations of growth in customer numbers and in prices charged to
customers in order to determine expected cash flows. A significant reduction in actual and
estimated cash flows may have a material adverse effect on the Companys results of
operations and financial condition.

19

Depreciation of Property,
Plant and Equipment

Depreciation
of property, plant and equipment is provided using the straight-line method based on the
estimated useful lives. The application of the Companys property, plant and
equipment accounting policies also involves estimates, assumptions, and judgments by
management with respect to the estimated useful lives. Changes in circumstances, such as
technological advances, changes to the Companys business model or changes in the
Companys capital and investment strategy, can result in the actual useful lives
differing from the prior estimate. Such changes could involve an increase or decrease in
the estimated useful lives or salvage values which would impact future depreciation
expense.

Provision for Doubtful
Accounts

The
provision for doubtful accounts is established in an amount that is considered sufficient
to cover any probable losses on realization of the accounts receivable from the
Companys customers and is recorded in selling, general and administrative expenses.
The Companys accounting policy for establishing the provision is consistent with the
billing and collection process and historical experience. This provision is established
progressively as follows:

|Overdue Bills | Collection Process                                                                                | % Loss Provided For
|------------- | ------------------------------------------------------------------------------------------------- | -------------------
|1 to 30 days  | Administrative collection; disconnect services after 7 days,
 with no further revenue recognition | 5                  
|             
|             
|31 to 60 days | Administrative collection; cancelcontract after 60 days                                           | 50                 
|             
|Over 61 days  | Administrative collection; cancelcontract after 60 days                                           | 100                
|             

Adverse changes in economic
conditions in Brazil or in the regions of Brazil where the Companys services are
provided could impact the discretionary spending habits of the Companys customers
which could impact the levels of customer delinquency and ultimate collectability of the
Companys accounts receivable.

Contingent Liabilities

The
accrual for contingencies involves considerable judgment on the part of the Companys
management. As prescribed by SFAS No.5, Accounting for Contingencies, a
contingency is an existing condition, situation, or set of circumstances involving
uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved
when one or more future events occur or fail to occur.

The
Company is subject to various claims, legal and labor proceedings covering a wide range of
matters that arise in the ordinary course of its business activities. The Company accrues
reserves for legal proceedings when losses are probable and can be reasonably estimated.
The Companys judgments are based on the opinion of legal advisors. The amounts
recognized are adjusted to account for changes in circumstances for ongoing issues and the
establishment of additional accruals for emerging issues. While the Company believes that
the current level of accruals is adequate, changes in the future could impact these
determinations.

Recent Accounting
Pronouncements

In
April 2003, the Financial Accounting Standards Board (FASB) issued SFAS 149,
Amendment of Statement No. 133 on Derivative Instruments and Hedging
Activities, which amends and clarifies the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and hedging
activities under SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 149 clarifies the circumstances under which a contract with an
initial net investment meets the characteristic of a derivative as discussed in SFAS 133.
In addition, SFAS 149 clarifies when a derivative contains a financing component that

20

warrants  special  reporting  in the  statement  of cash flows.  SFAS 149 amends  certain  other  existing pronouncements, resulting in more
consistent reporting of contracts that are derivatives in their entirety or that contain
embedded derivatives that warrant separate accounting. SFAS 149 is effective for contracts
entered into or modified after June 30, 2003 and for relationships designated after June
30, 2003 and is to be applied prospectively. The adoption of SFAS 149 did not have any
impact on the Companys financial statements.

In
May 2003, FASB issued SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS 150 modifies the accounting for
certain financial instruments that, under previous guidance, issuers could account for as
equity. The statement requires that those instruments be classified as liabilities in
statements of financial position. SFAS 150 affects an issuers accounting for three
types of freestanding financial instruments, namely:

| | o | Mandatory
redeemable shares, which the issuing company is obligated to buy back in exchange for
cash or other assets.
| | - | ---------------------------------------------------------------------------------------------------------------------

| | o | Instruments, other than outstanding shares, that do or may require the issuer to buy back
some of its shares in exchange for cash or other assets. These instruments include put
options and forward purchase contracts.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Obligations that can be settled with shares, the monetary value of which is fixed, tied
solely or predominantly to a variable such as a market index, or varies inversely with the
value of the issuers shares.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SFAS
150 does not apply to features embedded in financial instruments that are not derivatives
in their entirety. In addition to its requirements for the classification and measurement
of financial instruments within its scope, SFAS 150 also requires disclosures about
alternative ways of settling those instruments and the capital structure of entities, all
of whose shares are mandatorily redeemable. SFAS 150 is effective for financial
instruments entered into or modified after May 31, 2003 and, otherwise, is effective at
the beginning of the first interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the statement and still existing
at the beginning of the interim period of adoption. Restatement is not permitted. The
adoption of SFAS 150 did not have any impact on the Companys financial statements.

In
November 2002, FASB issued Interpretation 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45). FIN 45 requires certain disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and
annual periods ending after December 15, 2002. The initial recognition and initial
measurement requirements of FIN 45 are effective prospectively for guarantees issued or
modified after December 31, 2002. The adoption of this statement did not have an
impact on the Companys financial statements.

In
January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest
Entities, an interpretation of ARB 51" (FIN 46) which provided a new
framework for identifying variable interest entities (VIEs) and determining
when a company should include the assets, liabilities, non-controlling interests and
results of activities of a VIE in its consolidated financial statements. FIN 46 was
effective immediately for VIEs created after January 31, 2003 and for VIEs in which an
enterprise obtained a variable interest after that date. For variable interests in VIEs
created before February 1, 2003, FIN 46 applied to public enterprises no later than the
beginning of the first interim or annual period beginning after June 15, 2003.

On
October 9, 2003, FASB decided to defer the implementation date of FIN 46 to the fourth
quarter instead of the third quarter. Pursuant to this deferral, public companies in the
United States of America had to complete their evaluations of VIEs that existed prior to
February 1, 2003, and the consolidation of those for which they are the primary
beneficiary for financial statements issued for the first period ending after December 15,
2003. For calendar year companies, consolidation of previously existing VIEs was required
in their December 31, 2003 financial

21

statements.    
          This deferral did not affect the implementation date for many foreign private
          issuers, which continued to be the beginning of the first annual period ending
          after December 15, 2003. In December 2003, FIN 46 was substantially revised and
          a new interpretation, FIN 46R, was issued. The key differences between FIN 46R
          and its predecessor FIN 46 include the following:

| | o | FIN 46R now scopes out many, but not all, businesses, as that term is defined in the
Interpretation. A business, assuming it is scoped out of FIN 46R, should be consolidated
with its accounting parent (if it has one) only when required by longstanding,
conventional consolidation guidance, most notably Accounting Research Bulletin No. 51,
Consolidated Financial Statements (ARB 51). Under FIN 46, any business
potentially could have been a VIE (and, if so, subject to the Interpretations unique
consolidation requirements) depending on the design of the business capital
structure and other factors. Note that an entity whose primary activity is asset-backed
financing or who acts as a single-lessee leasing entity cannot qualify for the scope
exemption in FIN 46R, even if it would otherwise be a business. If such an entity is a
VIE, it is covered by FIN 46Rs consolidation requirements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | FASB partially delayed FIN 46s effective date (for most public companies until no
later than the end of the first reporting period ending after March 15, 2004. The delay
notwithstanding, public companies must apply either FIN 46 or FIN 46R to special-purpose
entities (SPEs) no later than the end of the first reporting period ending after December
15, 2003. For many foreign private issuers, the effective date continues to be the
beginning of the first annual period ending after December 15, 2003. For SPEs created by
foreign private issuers after February 1, 2003, however, the effective date is no later
than the end of the first reporting period ending after December 15, 2003.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based
on an initial assessment of the provisions and requirements of FIN 46R, the Company
believes that the implementation of this statement will not result in any impact to the
Companys consolidated financial statements.

Inflation and Exchange
Rates

Brazilian Economic
Environment

The
Brazilian economy historically has been subject to periodic and occasionally significant
intervention by the Brazilian Government. The Government has often changed monetary,
credit, tariff, exchange rate and other policies, with the goal of influencing the
economy. The Governments actions to control inflation and effect other policies have
involved wage and price controls, as well as other interventionist measures, such as
freezing bank accounts and imposing capital controls. Although the stated intention of the
present Government is gradually to reduce governmental intervention in the economy, it
remains possible that government economic policies could adversely affect ITSAs
business and financial condition, as could the Governments response to political or
social developments.

Substantially
all of ITSAs operations and customers are located in Brazil. Accordingly, the
Companys financial condition and results of operations are substantially dependent
on Brazils economy, which has been characterized by frequent and occasionally
drastic intervention by the Brazilian government and volatile economic cycles in the past.
In 2003, the Central Bank raised Brazils base interest rate by a total of 10.0
percentage points in an effort to stabilize the currency and decrease inflationary
pressures. In the past, the Brazilian government has often changed monetary, fiscal,
taxation and other policies to influence the course of Brazils economy. The
Companys management has no control over, and cannot predict, what measures or
policies the Brazilian government may take in response to the current Brazilian economic
situation or how Brazilian government intervention and government policies will affect the
Brazilian economy and, both directly and indirectly, our operations and revenues.

On
January 1, 2003, Luiz Inácio Lula da Silva, from the Labor Party, took office
as the new President of Brazil. Generally, the economic policies of former President
Cardoso have been continued by the current administration of the Brazilian government.
Although the new government has not departed significantly from previous policies, and the
Real appreciated 18.2% against the U.S. dollar during 2003, concerns remain about
the policies of the future of the Brazilian government. While the current
administrations policies have to date not been

22

adverse to the  telecommunications  industry,  the  uncertainty  over what policies the current Brazilian
government may propose or adopt in the future may have an impact on our business and may
contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian
international securities markets and thus have an impact on our business.

In
1999, the Government decided to remove the exchange rate band that had controlled the
devaluation of the real, thus allowing the real to float freely. The
exchange rate was R$2.8892 = US$1.00 at December 31, 2003, R$3.5333 = US$1.00 at
December 31, 2002, R$2.3204 = US$1.00 at December 31, 2001, R$1.9554 = US$1.00 at
December 31, 2000, and R$1.7890 = US$1.00 and at December 31, 1999.

Devaluations
of the real in relation to the U.S. dollar, which reached 52.3% in 2002, have
significant effects on the Companys financial condition and results of operations.
The major impacts of depreciations of the real against the U.S. dollar are
discussed in the next section. The Companys exchange losses for 2002 reached US$26.6
million. In 2003, the realappreciated by 18.2% in relation to to U.S. dollar, and
as consequence the Companys exchange gain reached $10.3 million.

Effects of Inflation and
Exchange Rate Fluctuations

Prior
to the implementation of the Real Plan 1994, Brazil had for many years experienced
high and generally unpredictable rates of inflation and steady devaluation of its currency
relative to the U.S. dollar. The following table sets forth Brazilian inflation as
measured by the General Prices Index  Market, or the IGP-M, a widely
used indicator of inflation in Brazil published by Fundação Getúlio
Vargas, and the devaluation of the real against the U.S. dollar for the periods
shown:

|                                     | Year Ended December 31, |  |  |     |     
|------------------------------------ | ----------------------- |  |  | --- | ----
|
|Inflation (IGP -M index)             |                         |  |  | 8   | .7% 
|Currency (appreciation) depreciation |                         |  |  | (18 | .2)%

Inflation
and exchange rate variations have had, and may continue to have, substantial effects on
ITSAs financial condition and results of operations.

Despite
the principles adopted for translating the Company real-denominated financial
statements into U.S. dollars, significant distortions to the Companys reported
results for the affected periods may remain, as a result of the inability of accounting
conventions to fully reflect actual economic conditions during the relevant fiscal
periods. While the Companys financial records have been maintained in reais,
the Company reporting currency for all periods is the U.S. dollar.

The
Companys functional currency prior to 1998 was required to be the U.S. dollar under
SFAS 52, but in 1998, the Company changed the functional currency to the real. The
Company made this change because, in accordance with the SFAS 52, a company operating in
an environment that is not highly inflationary is not obligated to use the U.S. dollar as
its functional currency. The Brazilian economy ceased to be considered highly inflationary
as of January 1, 1998. Therefore, under SFAS 52, the Company determined its functional
currency (typically the currency in which a company generates and expends cash, based upon
factors including cash flow indicators, sales prices indicators, expense indicators,
financing indicators and management focus) to be the real. Because of the
differences between the evolution of the rates of inflation in Brazil and changes in the
rates of devaluation, as well as the effects of the change ITSAs functional
currency, amounts presented in U.S. dollars may show distortions when compared on a
period-to-period basis. Since the adoption of real as functional currency in 1998,
the devaluation of the realagainst the U.S. dollar has had the following effects
on the Company results of operations:

| | o | The translation effects of the Companys U.S. dollar transactions, primarily
represented by loans, are recorded as losses from foreign currency exchange rate, net, in
the statement of operations. The Company did not record foreign currency transaction
losses for periods during which the Company measured the results of operations using the
U.S. dollar as the functional currency.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

| | o | Any devaluation of the real against the U.S. dollar is reflected directly in
stockholders equity, through the decrease in real-denominated book value of
property, plant and equipment when translated into U.S. dollars. These foreign currency
translation effects are beyond the Companys management control.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For
further information on the presentation of ITSAs financial information, see Note 2
to the Companys Consolidated Financial Statements for the year ended December 31,
2003 included elsewhere in this Annual Report on Form 20-F. Inflation and exchange rate
variations historically have affected, and will continue to have multiple effects on, the
Companys results of operations. The Companys statements of operations
expressed in local currency are translated to U.S. dollars at the average exchange rate
for the period. The Companys operating expenses (e.g., maintenance, selling, general
and administrative expenses) is determined in reais and tends to increase with
Brazilian inflation. As expressed in U.S. dollars, these increases are typically offset at
least in part by the effect of devaluation of the real against the U.S. dollar. If
expenses in reais increase more quickly than the rate of devaluation, the
Companys operating expenses as expressed in U.S. dollars increase. Conversely, if
the rate of devaluation increases more quickly, ITSAs operating expenses as
expressed in U.S. dollars decrease. Additionally, a substantial portion of the
Companys indebtedness, capital expenditures and operating costs, including network
equipment costs and programming arrangements, are denominated in or indexed to U.S.
dollars. Any devaluation of the real against the U.S. dollar, if such devaluation
were in excess of inflation, would result in a relative increase in the expenses related
to such indebtedness and capital expenditures and in such operating expenses as compared
to revenues which are generated in reais. In such a situation, if the Company were
not able to increase its prices to match the rate of inflation, the Companys ability
to meet its debt service obligations and operating costs might be impaired. Historically,
the Company has been able to adjust prices to counteract the effects of inflation,
although there can be no assurance that it would be able to do so in the future. Another
significant effect of inflation and exchange rate variations concerns the Companys
monetary assets and liabilities denominated in reais. The value of such assets and
liabilities as expressed in U.S. dollars declines when the real devalues against
the U.S. dollar, and increases when the real appreciates against the U.S. dollar.
Many financial instruments denominated in reais are indexed according to a
contractual index. In periods of devaluation of the real, the Company reports:

| | o | Translation losses on real-denominated monetary assets, which are generally offset,
at least in part, by the aforementioned contractual indexation of real-denominated
financial instruments; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Translation gains on real-denominated monetary liabilities, which are generally
offset, at least in part, by contractual indexation of real-denominated financial
instruments. Through December 31, 1997, while the U.S. dollar was the Companys
functional currency, the Company recorded these net translation gains and losses in the
Companys statement of operations under Gain (loss) on translation, net.
As of January 1, 1998, the Companys functional currency has been the real, so
the Company has recorded these translation gains and losses directly in the
cumulative translation adjustments component of stockholders equity,
such that these gains and losses no longer offset the contractual indexation expenses and
income which are reported in the statement of operations under Financial
expenses and Financial income. Interest on indexed financial instruments
is included in the Companys statement of operations under Financial
income and Financial expenses.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations

Although
the Companys Consolidated Financial Statements are presented in U.S. dollars and
pursuant to U.S. GAAP, 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 above.

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

24

The
following table presents statements of operations, balance sheet and other operating data
derived from the Consolidated Financial Statements as a percentage of the Companys
revenues for the years ended December 31, 2003, 2002 and 2001.

|                                                                                                                         | Year Ended December 31,
|------------------------------------------------------------------------------------------------------------------------ | -----------------------
|
|
|Revenues                                                                                                                 |                        
|Operating costs and expenses:                                                                                            |                        
|System operating (exclusive of amortization                                                                              |                        
|and stock compensation expense shown below)                                                                              |                        
|Selling, general and administrative
       (exclusive of amortization and stock
       compensation expense shown below) |                        
|Depreciation and amortization                                                                                            |                        
|                                                                                                                         |                        
|Total operating costs and expenses                                                                                       |                        
|                                                                                                                         |                        
|Operating loss                                                                                                           |                        
|Other income (expense):                                                                                                  |                        
|Interest expense                                                                                                         |                        
|Interest income                                                                                                          |                        
|Foreign exchange gain (loss)                                                                                             |                        
|Other financial income (expense)                                                                                         |                        
|                                                                                                                         |                        
|Total other income (expense)                                                                                             |                        
|                                                                                                                         |                        
|Income (loss) before reorganization items,                                                                               |                        
|extraordinary  item and cumulative  effect of change                                                                     |                        
|in accounting principle                                                                                                  |                        
|Cumulative effect of change in accounting principle                                                                      |                        
|                                                                                                                         |                        
|Income taxes                                                                                                             |                        
|                                                                                                                         |                        
|Net income (loss)                                                                                                        |                        
|                                                                                                                         |                        
|Balance Sheet Data:                                                                                                      |                        
|Working capital (deficiency)                                                                                             |                        
|Property, plant and equipment, net                                                                                       |                        
|Total assets                                                                                                             |                        
|Total long-term debt                                                                                                     |                        
|Stockholders' equity (deficiency)                                                                                        |                        
|Other Operating Data:                                                                                                    |                        
|Number of subscribers at end of period                                                                                   |                        
|Average monthly revenue per subscriber                                                                                   |                        

Year Ended December 31,
2003 Compared to Year Ended December 31, 2002

Revenues.       
          The Companys revenues consist primarily of subscription revenues (which
          are principally monthly fees paid by subscribers for the Companys pay
          television programming and Internet access and data communication services and
          equipment use), installation fees and advertising revenues. The Company
          introduced its pre-paid television subscription model, Mais TV, during
          late 1999 and early 2000 in two of its principal markets, Brasília and
          Belém. Under the pre-paid subscription model, customers pay the monthly
          fee in advance of the Companys provision of the monthly services. However,
          the Company does not recognize these fees as revenues until the service is
          provided.

Monthly
subscription revenue for 2003 decreased by 10% compared to 2002, primarily due to a
decrease of 20% in the average number of subscribers. Installation revenue for 2003
decreased by 19% compared to 2002, mainly attributable to a reduction of 10% in the number
of installations. Technical assistance revenue for 2003

25

decreased by 17% compared to 2002,
primarily due to the Companys decision not to charge for some services in order to
maintain the customer in the subscriber base. Advertising revenue for 2003 decreased by
81% compared to 2002, largely due to the termination of contracts concerning the broadcast
of Beléms Soccer Championship, which resulted in a reduction of $160,000.
Other revenue for 2003 increased by 28%, or $30,000, compared to 2002. This increase was
derived from engineering consulting services provided to other multi-service operators.
Net revenues for the year ended December 31, 2003 was $14,098,000, as compared to
$15,692,000 for the previous year, a reduction of 10%.

System
Operating Expenses. System operating expenses include programming costs,
certain payroll and employee benefit costs, vehicle rentals, the costs of providing the
Mais TV magazine and other costs. System operating expenses decreased in 2003 by
30% compared to 2002, primarily due to a decrease in the average number of subscribers. In
connection with the reduction in the number of subscribers, the Company has initiated a
program of cost reductions to offset the decrease in revenues. During 2003, the Company
restructured its organization and renegotiated its supply and rental contracts. Payroll
and benefits decreased in 2003 by 7% compared to 2002, primarily due a reduction in the
number of employees, which resulted in an approximately $109,000 reduction in costs.
Programming and Mais TV magazine costs in 2003 decreased 34% and 29%, respectively,
compared to 2002, largely due to a decrease in the average number of subscribers. These
reductions totaled $2,082,000. Other costs decreased in 2003 by 36% compared to 2002. As a
result of an internal reorganization, the Company reduced maintenance costs, third party
service expenses and other miscellaneous expenses by $300,414.

Selling,
General and Administrative Expenses. Selling, general and administrative
(SG&A) expenses include certain payroll and employee benefit costs, rental
costs, advertising and promotional expenses and other administrative expenses. During
2003, SG&A expenses decreased by approximately $2,737,000 compared to 2002, primarily
due to the Companys continuing efforts to reduce these expenses. However, the result
of these efforts was off-set by a provision for fiscal contingencies of $2,430,000 in
Brasília and $353,000 in ITSA Brazil. (See Item 8. Financial Information
 Litigation.) Payroll and benefits expenses were $2,156,000 for the year ended
December, 31 2003, as compared to $2,313,000 for the prior year, a decreased of 7%,
resulting primarily from a 9% reduction in the number of employees. Bad debt expense was
$189,000 for the year ended December 31, 2003, as compared to $662,000 for the previous
year, a decrease of 71%, principally resulting from the implementation of the program to
strengthen the Companys customer credit requirements policy and to reduce the number
of days past due bills that are permitted to be outstanding before disconnecting service.

Depreciation
and Amortization. Depreciation and amortization includes depreciation of
systems, equipment, installation material and amortization of licenses. Depreciation and
amortization expense was $2,214,000 for the year ended December, 31 2003, versus
$3,028,000 in 2002. Depreciation and amortization decreased in 2003 by 27% compared to
2002, primarily due to the fact that the carrying amount in reais-denominatedassets was 11% lower at December 31, 2003 when compared to December 31, 2002.

Interest
and Other Financial Expenses. Interest and other financial expenses consist
principally of interest payable on ITSAs outstanding debt; amortization of financial
charges associated with the issuance of debt instruments; the
Contribuição Provisória sobre Movimentações
Financeiras, or CPMF, a federal tax on financial transactions levied at a rate of
0.38% on withdrawals from checking accounts; and PIS and COFINS, taxes on financial
revenues derived from short-term investments. Interest and other financial expenses
increased by 5% in 2003 compared to 2002, primarily as a result of an increase in the U.S.
dollar-denominated debt from $49,654,000 for the year ended December 31, 2002 to
$55,791,000 for the year ended December 31, 2003.

Interest
and Other Financial Income. Interest and other financial income consists of
earnings on marketable securities and short-term investments, as well as penalty and
interest payments made by the subscribers who are late in their fee payments to the
Company. Interest and other financial income increased by 29% in 2003 compared to 2002,
primarily due to higher average cash balances during 2003 as compared to 2002, which
earned higher rates of return.

Foreign
Exchange Gain. Foreign exchange gain or loss is recorded on U.S.
dollar-denominated debt as a function of the U.S. dollars appreciation or
depreciation in relation to the real. Foreign exchange gain in 2003 increased 139%,
substantially due to the appreciationof the real during this period. The
exchange rate appreciated 18% as compared to 2002.

26

Net
Income (Loss). Net income for 2003 was $1,758,000 versus a loss of
$55,375,000 in 2002, primarily due to the foreign exchange gain of $10,355,000 in 2003 and
the cumulative effect of the change in accounting principle in 2002 resulting from the
adoption on January 1, 2002 of the SFAS 142 resulting in the recognition of an impairment
loss of $20,161,000 on ERV. During 2003, the Company restructured its organization and
renegotiated its supply and rental contracts, resulting in a reduction in costs and
expenses of $2,410,000. However, the results of these efforts were off-set by a provision
for fiscal contingencies of $2,430,000 in Brasília and $353,000 in ITSA Brazil.

Year Ended December 31,
2002 Compared to Year Ended December 31, 2001

Revenues.       
          Monthly subscription revenue for 2002 decreased by 24% compared to 2001,
          primarily due to a decrease in the average number of subscribers. Installation
          revenue for 2002 decreased by 60% compared to 2001, mainly attributable to a
          reduction in the number of installations. Technical assistance revenue for 2002
          decreased by 76% compared to 2001, primarily due to the Companys decision
          not to charge for some services in order to maintain the customer in the
          subscriber base. Advertising revenue for 2002 decreased by 58% compared to 2001,
          largely due to the termination of contracts concerning the broadcast of
          Beléms Soccer Championship, which resulted in a reduction of
          $400,000. Other revenue for 2002 decreased by 87% compared to 2001. In addition,
          during 2002, the real suffered a devaluation of 52.3% when compared to
          U.S. dollar, which negatively affected the Companys revenues. Net revenues
          for the year ended December 31, 2002 was $15,692,000, as compared to $21,697,000
          for the previous year, a reduction of 28%.

System
Operating Expenses. System operating expenses decreased in 2002 by 26%
compared to 2001, primarily due a decrease in the average number of subscribers. Payroll
and benefits decreased in 2002 by 33% compared to 2001, primarily due a reduction in the
number of employees, which resulted in an approximately $510,000 reduction in costs.
Programming costs decreased in 2002 by 11% compared to 2001, largely due to a decrease in
the average number of subscribers offset by the 52.3% devaluation of the real.
Other costs decreased in 2002 by 49% compared to 2001, primarily due to the termination of
transmission rights to Beléms Soccer Championship, which resulted in a
reduction of $552,000.

Selling,
General and Administrative Expenses. SG&A expenses decreased 36% in
2002 compared to 2001, primarily due to the reorganization of the Companys internal
structure, which resulted in reductions in the number of employees and in other
administrative expenses. These actions reduced expenses by approximately $1,583,000 in
2002 as compared to 2001. Payroll and benefits expenses were $2,313,000 for the year ended
December, 31 2002, as compared to $4,313,000 for the prior year, a decreased of 45%,
resulting primarily from an 18% reduction in the number of employees. Bad debt expense was
$662,000 for year ended December 31, 2002, as compared to $1,633,000 for the previous
year, a decrease of 59%, principally due to adoption of the pre-paid subscription service
and also the implementation of the program to strengthen the Companys customer
credit requirements policy and to reduce the number of days past due bills that are
permitted to be outstanding before disconnecting service.

Depreciation
and Amortization. Depreciation and amortization expense was $3,028,000 for
the year ended December, 31 2002, versus $8,020,000 in 2001. Depreciation and amortization
decreased in 2002 by 62% compared to 2001, primarily due to the fact that the
Companys reorganization value in excess of amounts allocable to identifiable assets
was totally impaired as of January 1, 2002 and was written off in accordance with SFAS
142. See Recent Accounting Pronouncements and Estimates above.

Interest
and Other Financial Expenses. Interest and other financial expense
increased by 9% in 2002 compared to 2001, primarily as a result of an increase in the U.S.
dollar-denominated debt from $44,045,000 for the year ended December 31, 2001 to
$46,688,000 for the year ended December 31, 2002.

Interest
and Other Financial Income. Interest and other income decreased by 15% in
2002 compared to 2001, primarily due to the strong devaluation of the real against
the U.S. dollar. In reais, the Companys interest and other income increased
approximately 8%; however, this increase was offset by the appreciation of the U.S.
dollar.

27

Foreign
Exchange Loss. Foreign exchange loss in 2002 increased 330%, substantially
due to the substantial devaluation of the real against the U.S. dollar and
strengthened by the increase in the U.S. dollar-denominated debt from $44,045,000 for the
year ended December 31, 2001 to $46,688,000 for the year ended December 31, 2002.

Cumulative
Effect of Change in Accounting Principle. The Company adopted SFAS 142 as
of January 1, 2002. Under SFAS 142, the Company was required to perform an impairment
analysis of its ERV as of January 1, 2002. An impairment loss of $20,161,000 was
recognized as the cumulative effect of change in accounting principle in the
Companys consolidated statement of operations in 2002.

Net
Loss. Net loss for 2002 was $55,375,000 versus $20,359,000 in 2001,
primarily due to the cumulative effect of the change in accounting principle in 2002
resulting from the adoption on January 1, 2002 of SFAS 142 which required the recognition
of an impairment loss of $20,161,000 on ERV. During the year ended December 31, 2002, the
real suffered a substantial devaluation, when compared to U.S. dollar, a
depreciation of approximately of 52.3%. This devaluation caused a significant monetary
loss deriving from the ITSAs U.S. dollar-denominated debt.

B. 
Liquidity and Capital Resources.

|                                          | 2003 | 2002 | 2001
|----------------------------------------- | ---- | ---- | ----
|
|Cash Flows Data:                          |      |      |     
|Net cash provided by operating activities |      |      | $   
|Net cash used in investing activities     |      |      |     
|Net cash used in financing activities     |      |      |     
|Capital expenditures                      |      |      |     

During
2003, the Company generated net cash provided by operating activities of $1,185,000 and
earned net income of $1,758,000. This result was primarily attributable to a foreign
exchange gain of $10,355,000 and a reduction in costs and expenses of $2,410,000 resulting
primarily from the renegotiation of the Companys supply and rental contracts,
off-set in part by a provision for fiscal contingencies of $2,430,000 in Brasília
and $353,000 in ITSA Brazil.

Net
cash provided by operating activities in 2002 was attributed to depreciation and
amortization of $3,028,000, provision for doubtful accounts of $662,000, foreign exchange
loss of $26,596,000 and cumulative effect of change in accounting principle of
$20,161,000, which are items or adjustments that are made to reconcile the net loss to
cash provided by operating activities. In addition, an increase in accrued interest and
accounts payable of $2,584,000 in 2002 as compared to 2001, contributed to an increase in
cash flow from operating activities as compared to 2001.

Although
the Company generated net cash provided by operating activities of $962,000 during 2001,
operating losses amounted to $20,359,000. Net cash provided by operating activities in
2001 was attributed to depreciation and amortization of $8,020,000, provision for doubtful
accounts of $1,633,000 and foreign exchange loss of $6,179,000. In addition, an increase
in accounts payable and accrued liabilities of $5,773,000 in 2001 as compared to 2000 and
proceeds from the sale of operating loss carryforwards of $1,800,000 contributed to a
positive cash flow from operating activities in 2001.

The
Company made capital expenditures of approximately $1.2 million, $0.6 million and $2.3
million during 2003, 2002 and 2001, respectively. These capital expenditures were
primarily financed with available cash. As of December 31, 2003, the Company had
approximately $4.2 million in cash and cash equivalents. The Company has incurred
operating losses since inception and had a working capital and stockholders
deficiency of $55,263,000 and $50,003,000, respectively, at December 31, 2003. Operating
losses are expected to continue in the future until such time as the Company is successful
in securing a subscriber base capable of generating a significantly higher level of
operating revenues. The Company has limited capital resources available to fund capital
expenditures, to fund maturities of debt as they become due and to support its operations
until such time the Company is able to generate significant levels of positive cash flow
from operations. The Company is therefore dependent upon obtaining additional financing to
provide funds to support operations and to fund maturities of debt

28

as they become  due.  The Company has no current arrangements with respect to, or
potential sources of, any additional financing, and the Company can give no assurance that
existing securityholders will provide any portion of the Companys financing
requirements. Furthermore, the indenture related to the 12% Senior Secured Notes restricts
the amount of additional indebtedness that the Company may incur. Consequently, the
Company can give no assurance that it will be able to obtain additional debt or equity
capital on satisfactory terms, or at all, to meet the Companys current and future
financing needs. Failure to obtain any required additional financing would have a material
adverse effect on the Companys business, results of operations and financial
condition, which may include the termination of the operations of the Companys
business.

Due
to the Companys financial constraints and limited capital resources, the Company
failed to pay the interest due since December 20, 2002 under its 12% Senior Secured Notes.
In January 2003, an event of default under the indenture related to the 12% Senior Secured
Notes occurred as a result of the Companys default in the payment of this interest
continuing for a period of more than 30 days. The Company subsequently failed to make
interest payments due on June 20, 2003 and December 20, 2003. Due to the financial
condition of the Company, the Company is currently unable to pay the interest due under
the 12% Senior Secured Notes and remains in default of its obligations under the related
indenture. As a result, the holders of 25% or more of the 12% Senior Secured Notes, among
other things, have the right to declare the Notes due and payable in full and to demand
the immediate payment of the Notes. In addition, the trustee under the related indenture
may pursue any available remedy by proceeding at law or in equity to collect any payment
due on the Notes. Such action may, among other things, result in the sale of the
Companys assets and the termination of the operations of the Companys
business. To date, the Company has not received any notification from the trustee
regarding the intention of the noteholders to declare the Notes due and payable in full
and to demand the immediate payment of the Notes. However, the Company can give no
assurance that the noteholders will not fully exercise their rights in the future. The
Company anticipates that it will probably not be able to pay either the interest or the
principal due under the 12% Senior Secured Notes.

The
Companys business is capital intensive. In previous years, the Company made a
substantial amount of import purchases of equipment with the use of letters of credit
provided by banks in Brazil. As of December 31, 2003, the Company had no amounts
outstanding under letters of credit.

The
Companys Ordinary Shares are currently tradable in the over-the-counter market and
are listed on the OTC Bulletin Board. The effects of shares trading in the
over-the-counter market, as opposed to being listed on a national exchange, include,
without limitation, the limited release of market prices of the Ordinary Shares, limited
news coverage of the Company and limited investor interest in the Company. These factors
may have a significant adverse effect on the trading market and prices for the Ordinary
Shares, thereby affecting the Companys ability to issue additional securities or
secure additional financing. In addition, because the Ordinary Shares are deemed to be a
penny stock under the Securities Enforcement Penny Stock Reform Act of 1990, additional
disclosure is required in connection with trading in the Ordinary Shares, including
delivery of a disclosure schedule explaining the nature and risk of the penny stock
market. These requirements could further limit the liquidity of the Ordinary Shares.

In
developing its subscriber base, the Company initially adopted an aggressive policy of
adding new subscribers, which included relaxed customer credit requirements. Since 1997,
and especially during 1998 and 1999, Brazil has suffered economic downturns that resulted
in increases in the Companys past-due accounts. The Companys business is
affected by its customers ability to pay for the services they receive. If the
Brazilian economy worsens because of a decrease in the level of economic activity,
devaluation of the real, inflation or an increase in domestic interest rates, then
a greater portion of the Companys customers may not be able to pay their bills,
which would increase the Companys bad debts and provision for doubtful accounts. The
economic recession in the United States of America that commenced in 2001, coupled with
investor reluctance to invest in developing countries after the September 11, 2001
terrorist attacks in the U.S., contributed to bring an economic slowdown and increased
unemployment in Brazil. This is turn has led to higher interest rates and greater
devaluation. Higher interest rates and devaluation generally result in a significant
decrease in purchasing power of Brazilian consumers, resulting in a decrease in the demand
for services, such as cable television services, and higher accounts receivable
delinquency. All of the foregoing has contributed to an increase in the Companys
level of past-due accounts. Past-due balances have had a significant adverse effect on the
Companys liquidity and financial condition since increases in these balances reduce
the amount of funds available to meet its working capital, debt service and capital
expenditure requirements. To mitigate the effects of this situation, since 2000, the
Company has implemented a program to strengthen its customer credit requirements policy
and to reduce the number of days past

29

due bills that are permitted to be outstanding before
disconnecting service. See Critical Accounting Policies and Estimates above.
Furthermore, the Companys adoption of its pre-paid subscription service, Mais
TV, is also intended to minimize the level of the Companys past-due accounts and
its impact on the Companys financial condition. The Company recorded allowances for
uncollectible accounts of $1,633,000 in 2001, $662,000 in 2002 and $188,000 in 2003. These
amounts represented approximately 8.1%, 4.2% and 1.3% of net revenues in 2001, 2002 and
2003, respectively. As a result, the Company reduced its accounts receivable balance from
approximately $0.6 million at December 31, 2001 to approximately $0.4 million at
December 31, 2002, and maintained this amount at approximately $0.4 million at December
31, 2003.

C. 
Research and Development, Patents and Licenses.

During
2003, the Company created an engineering team to study the development of new wireless
technologies which may be implemented to provide additional services to customers using
the Companys existing MMDS networks.

D. 
Trend Information.

See
A. Operating Results and B. Liquidity and Capital Resources above.

E. 
Off-Balance Sheet Arrangements.

The
Company has no off-balance sheet arrangements.

F. 
Tabular Disclosure of Contractual Obligations.

The
following table summarizes the Companys significant contractual obligations at
December 31, 2003 and the effect such obligations are expected to have on the
Companys liquidity and cash flow in future periods. The table excludes amounts
already recorded on the Companys balance sheet as current liabilities at December
31, 2003.

|                            | Payments Due by Period
|--------------------------- | ----------------------
|
|
|Operating lease obligations |                       
|Total                       |                       

30

# Item 6.  Directors,
Senior Management and Employees

A. 
Directors and Senior Management.

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 31,
2003:

|Name                                     | Age | Position                                                                      
|---------------------------------------- | --- | ------------------------------------------------------------------------------
|Hermano Studart Lins de Albuquerque      | 40  | Chairman of the Board, Chief Executive Officer, Secretary andDirector         
|                                        
|Carlos Andre Studart Lins de Albuquerque | 39  | President, Chief Operating Officer, Acting Chief Financial Officer andDirector
|                                        
|James B. Rubin                           | 49  | Director                                                                      
|Steven A. Audi                           | 36  | Director                                                                      
|Luciano Puccini Medeiros                 | 33  | 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
Chairman of the Board, 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 Brasília. 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 the brother of Mr. Carlos André Studart Lins de Albuquerque.

Carlos
André 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 Brasília
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.

James
B. Rubin has been a director of the Company since June 2000. Mr. Rubin is currently
the Co-Chairman and Chief Investment Officer of Resurgence Asset Management, L.L.C. He has
managed the investment portfolios of Resurgence and its predecessors since 1989.

Steven
A. Audi has been a director of the Company since July 2000. Mr. 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 has been a director of the Company since July 2000. Mr. Medeiros
received a Juris Doctor degree from Cândido 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, Müssnich & Aragao Law Office, where he is currently an
Associate.

31

B. 
Compensation.

Summary Compensation Table

The
following table sets forth information concerning compensation in 2003 for services in all
capacities awarded to, earned by, or paid to, the Companys Chief Executive Officer
and the only other executive officer of the Company whose aggregate cash and cash
equivalent compensation in 2003 exceeded $100,000 (collectively, the Named Executive
Officers):

|Name and Position                                             | Salary ($)
|------------------------------------------------------------- | ----------
|Hermano Studart Lins de Albuquerque,                          |           
|Chief Executive Officer                                       | $203,000  
|Carlos Andre Studart Lins de Albuquerque,                    
|President, Chief Operating Officer and Acting Chief Financial
|Officer                                                       | $203,000  

Stock Options

All
outstanding options were cancelled in connection with the plan of reorganization. No
options or stock appreciation rights were granted or exercised by the Named Executive
Officers during fiscal 2003.

Employment Agreements

The
Company has entered into employment agreements with each of Messrs. Hermano Lins and
Carlos André Lins, pursuant to which Mr. Hermano Lins serves full time as Chief
Executive Officer of the Company and Mr. Carlos André 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 the
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) the
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 Company, in its discretion, may pay such salary in a lump
sum); and (iii) any bonus that the executive would have earned in the year his employment
is terminated, prorated as of the date of such termination.

C. 
Board Practices.

Duties of Directors

Under
Cayman Islands law, the Companys directors have a duty of loyalty to act honestly in
good faith with a view to promoting the Companys best interests. The Companys
directors also have a duty of care to exercise the care, diligence and skills that a
reasonably prudent person would exercise in comparable circumstances. In fulfilling their
duty of care to the Company, the Companys directors must ensure compliance with the
Companys Memorandum and Articles of Association and the class rights vested in the
holders of the Ordinary Shares under the Companys Memorandum and Articles of
Association.

Terms of Directors and
Officers

The
Companys Memorandum and Articles of Association allow the Companys
shareholders to elect duly nominated directors at an annual meeting In any such election,
the persons receiving the greatest number of votes, up to the number of directors to be
elected, shall be the directors. In addition, a director may be removed at any

32

annual or general  meeting by the  holders of a majority of the outstanding shares
entitled to vote in an election of directors. Further, the Companys directors have
the power at any time to appoint any person to become one of the Companys directors,
either to fill a vacancy or as an addition to the existing directors, except that the
total number of directors may not exceed the number fixed in accordance with the
Companys Memorandum and Articles of Association. The Companys Memorandum and
Articles of Association provide that the board of directors shall consist of seven, but a
majority of the Companys shareholders may by ordinary resolution increase or reduce
the limits on the number of directors. The term of executive officers is determined by the
Companys board of directors. There are no provisions of Cayman Islands law which
require the term of executive officers to be for a particular period.

Committees of the Board
of Directors

The
Company does not currently have a standing audit committee or compensation committee.

D.  
Employees.

The
following table sets forth the number of officers, managers and other permanent employees
of the Company as of the dates indicated.

|                    | As of December 31,
|------------------- | ------------------
|
|
|Brasília            |                   
|Belém               |                   
|Goiania             |                   
|Campina Grande      |                   
|Uberaba             |                   
|Franca              |                   
|Bauru               |                   
|Porto Velho         |                   
|Caruaru             |                   
|Presidente Prudente |                   
|Belo Horizonte      |                   
|Vitória             |                   
|                    |                   
|Total               |                   
|                    |                   

| | (*) | As of December 31, 2003, the Company employed 12 trainees; as of December 31,
                    2002, the Company employed 15 trainees; as of December 31, 2001, the Company
                    employed 14 trainees.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

E. 
Share Ownership.

See
Item 7. Major Shareholders and Related Party Transactions  A. Major
Shareholders below.

33

# Item 7. Major
Shareholders and Related Party Transactions

A. 
Major Shareholders.

The
following table sets forth certain information regarding the beneficial ownership of the
Companys ordinary shares, $0.01 par value per share (the Ordinary
Shares) as of May 31, 2004, by (i) each person known to the Company to be the
beneficial owner of more than 5% of the Ordinary Shares, (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 shareholders of the Company.

|Name and Address (1)                                          | Number of Shares (2) | Percentage
of
Class (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              
|Compex Holdings (4)                                           |                     
|c/o Maples and Calder, Attorneys at Law                       |                     
|Ugland House                                                  |                     
|P.O. Box 309                                                  |                     
|George Town                                                   |                     
|Grand Cayman, Cayman Islands, British West Indies             |                      | 1,500,000              
|Various Singer Family Entities (5)                            |                      |                        
|25 Coligni Avenue                                             |                      |                        
|New Rochelle, New York 10801                                  |                      | 848,313                
|Stephen Feinberg (6)                                          |                     
|450 Park Avenue                                               |                     
|28th Floor                                                    |                     
|New York, New York 10022                                      |                      | 572,001                
|Hermano Albuquerque (7)                                       |                      | 116,588                
|Carlos André Albuquerque (7)                                  |                      | 116,588                
|Steven A. Audi (8)                                            |                      | --                     
|James B. Rubin (8)                                            |                      | --                     
|Luciano Puccini Medeiros                                      |                      | --                     
|All executive officers and directors                          |                     
|as a group (5 persons) (7)(8)                                 |                      | 233,176                

---

| | (1) | Unless otherwise indicated above, the address for each stockholder identified
          above is ITSA Ltd. c/o ITSA-Intercontinental Telecomunicações
          Ltda, SCS Quadra 07-Bl.A, Ed. Torre Patío Brasil, Sala 601, 70.307-901
          Brasília-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 13D 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, 2002.
          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 676,685 shares and Re/Enterprise Asset
          Management, L.L.C. has sole voting and dispositive power for 1,327,943 shares.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

| |  | The Resurgence
Entities have, in the aggregate, sole voting and dispositive           power for
3,400,914 shares. James B. Rubin is Co-Chairman and Chief Investment           Officer of
Resurgence Asset Management, L.L.C. and Steven A. Audi is Senior Vice           President
of Resurgence Asset Management, L.L.C.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Compex Holdings is a Cayman Islands corporation, owned entirely by the following
          members of the Companys management: Hermano Albuquerque, Carlos
          André Albuquerque, Ari Lisboa, Geraldo C. Mello, Carlos Souza, Veronica
          Albuquerque, Dilton Caldas and Robespierre M. Sá.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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 Ordinary Shares 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 the Resurgence Entities. See note 3 above.
| | --- | ---------------------------------------------------------------------------

All
Ordinary Shares are entitled to one vote per share. To the extent known by the Company,
the Company is not directly or indirectly owned or controlled by another corporation or by
any government, and there are no arrangements that may result in a change of control of
the Company.

As
of May 31, 2004, there were approximately 18 holders of record of the Ordinary Shares. Of
these holders, approximately 10 had registered addresses in the United States and held
approximately 8,214,205 shares, or 82% of the total outstanding Ordinary Shares.

B. 
Related Party Transactions.

None.

C. 
Interests of Experts and Counsel.

Not
applicable.

# Item 8.  Financial
Information

A. 
Consolidated Statements and Other Information.

See
Item 18 for all financial statements required to be filed as part of this Annual Report on
Form 20-F.

35

Litigation

The
Company is party to certain legal proceedings arising in the normal course of business,
and based on the opinion of external legal consuel, has made provisions for probable
losses that can be reasonably estimated. 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. Under Brazilian law, in certain litigation in which monetary claims
are asserted against the Company, the Company is required to make certain deposits into an
escrow account designated by the applicable court. The amount to be deposited is
determined based on the nature and amount of the claim against the Company as well as
other factors considered by the court. In the event of a judgment favorable to the
Company, these escrowed funds will be returned to the Company. On the other hand, in the
event of an unfavorable resolution of the legal claim, these deposits will be applied as a
payment to the plaintiff in the litigation.

Judicial
deposits are comprised of the following:

|                  | December 31,
2003 | December 31,
2002
|----------------- | ----------------- | -----------------
|
|Judicial deposits |                   |                  
|                  |                   |                  
|                  |                   |                  
|                  |                   |                  

The
position of such provisions for tax, labor claims and other litigation are as follows:

|                    | December 31,
2003 | December 31,
2002
|------------------- | ----------------- | -----------------
|
|Tax contingencies   |                   |                  
|Other contingencies |                   |                  
|                    |                   |                  
|                    |                   |                  
|                    |                   |                  

Besides
the matters described above, the Company is involved as a plaintiff or defendant in a
variety of routine litigation incidental to the normal course of business. Management
believes, based on the opinion of external legal counsel, that it has adequate defenses or
insurance protection with respect to such litigation. However, the Company can give no
assurance that any losses resulting from such litigation, whether or not insured, would
not have a material adverse effect on the consolidated results of operations or financial
condition of the Company.

Judicial Tax Proceedings

Provisional Contribution on Financial Transactions  CPMF on Nominal and Simultaneos
Exchange Contracts.On July 18, 2000, the Company filed a Motion for Writ
of Mandamus for court recognition of its certain and uncontested right to convert a
foreign loan into a domestic investment by executing nominal and simultaneous exchange
contracts without assessment of the Provisional Contribution on Financial Transactions, or
CPMF. These simultaneous exchange contracts amounted to US$105,000,000 and the CPMF on
this amount would be US$315,000.

On
July 19, 2000, the request for injunctive relief was granted,eliminating the
assessment to pay the CPMF on nominal and simultaneous exchange contracts to be entered
into by ITSA. On January 7, 2004, a decision was handed down dismissing the case without
prejudiceand ruling that the government authority was without standing to figure
as defendant in the motion for writ of mandamus.

On
January 15, 2004, ITSA filed the competent civil appeal, seeking to annul/overturn this
decision. The appeal was accepted solely for remanding effects. At the moment, the case is
pending the personal summons of a Federal Government representative (National Treasury) to
submit its counterarguments.

36

On
February 5, 2004, ITSA filed a Precautionary Measure, seeking to reinstate the formerly
granted injunction. However, on February 6, 2004, a decision was rendered denying the
injunction and authorizing the court deposit. For this reason, on February 6, 2004 (30th
day after publication of the decision, pursuant to article 63, paragraph 2, of Law
9430/96), ITSA deposited with the court the amount disputed under the precautionary
measure in order to continue the suspension of the tax assessment, pursuant to article
151, II, of the Brazilian Tax Code. Based on the opinion of external legal counsel, the
Company made a provision for fiscal contingencies in its financial statements of $353,000.

Administrative Tax
Proceedings

The
Company, which in 1993 started to import a larger volume of equipment, made a formal
inquiry to the Treasury and Planning Department of the Brazilian Federal District with
respect to the imposition of the Value-Added Tax on Sales and Services (ICMS).
This inquiry resulted in the issuance of Regulatory Opinion number 14/94, which granted an
exemption from the ICMS. Subsequently, the Tax Administration, based solely on Article 54,
Decree number 16.106/94, which permits the Tax Administration to review its position at
any time whatsoever, started a review proceeding that resulted in the issuance of a new
opinion. The Tax Administration expressly recognized that during the effectiveness of
Opinion number 14/94, the Company, because of its services qualification, was
exempted from the ICMS but, as it intended to alter its qualification, concluded that the
Company should start to regularly pay the ICMS upon the revocation of Opinion number
14/94. Based on this understanding, the Sir Secretary of the Treasury Department revoked
Opinion number 14/94 in May 1996, and from that date, the Company started to regularly pay
the ICMS not only on its services, but also on its imports.

In
September 1996, the Tax Administration commenced a new inquiry regarding the levying of
the ICMS on imports. This resulted in a new opinion, which concluded that the tax was
payable retroactively, accompanied by the reasonable additions. The Company believes that
the retroactive imposition of this tax violates Article 54 of Decree 16.106/94. The
Company also believes that the imposition of fines, interest, and retroactive restatement
of the tax on the Company are penalties expressly prohibited by Article 100, sole
paragraph, of the Federal Tax Code (CTN), and Article 46, sole paragraph, of
Law number 675/94.

The
Company is waiting for the judgment of a Clarification Request submitted by virtue of the
last decision of the Administrative Court for Tax Appeals, which is the last reasonable
administrative appeal. When such a determination is issued, the Company shall decide upon
the proper legal action to be taken. Based on the opinion of external legal counsel, the
Company made a provision for fiscal contingencies in its financial statements of
$2,430,000.

Dividend Policy

The
Company has never declared or paid any cash dividends on the Ordinary Shares and does not
presently anticipate paying any cash dividends on the Ordinary Shares 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 Telecomunicações Ltda., as issuer, the several
Guarantors named therein, and The Bank of New York, as trustee, 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 Ordinary Shares will be within the sole
discretion of the Companys Board of Directors, and will depend upon the earnings,
capital requirements and financial condition of the Company, applicable requirements of
law, general economic conditions and other factors considered relevant by the
Companys Board of Directors.

37

B. 
Significant Changes.

No
significant changes have occurred since the date of the Companys Consolidated
Financial Statements included in this Annual Report on Form 20-F.

# Item 9. The Offer and
Listing

A. 
Offer and Listing Details.

From
July 30, 1996 to February 4, 1999, TV Filme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 inability to comply with certain
requirements for continued listing, including the net tangible assets and minimum bid
price requirements. Following delisting, the Common Stock and subsequently the
Companys Ordinary Shares have 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 and the
Ordinary Shares, as reported by the OTC Bulletin Board, for the periods indicated:

|                       | High  | Low  
|---------------------- | ----- | -----
|1999                   | 1.625 | 0.125
|2000                   | 2.560 | 0.310
|2001                   | 1.250 | 0.030
|2002                  
|First Quarter          | 0.040 | 0.030
|Second Quarter         | 0.030 | 0.010
|Third Quarter          | 0.010 | 0.001
|Fourth Quarter         | 0.002 | 0.001
|2003                  
|First Quarter          | 0.001 | 0.001
|Second Quarter         | 0.004 | 0.001
|Third Quarter          | 0.001 | 0.001
|Fourth Quarter         | 0.003 | 0.001
|Most recent six months
|December 2003          | 0.003 | 0.001
|January 2004           | 0.001 | 0.001
|February 2004          | 0.001 | 0.001
|March 2004             | 0.001 | 0.001
|April 2004             | 0.001 | 0.001
|May 2004               | 0.001 | 0.001

B. 
Plan of Distribution.

Not
applicable.

C. 
Markets.

See
A. Offer and Listing Details above.

38

D. 
Selling Shareholders.

Not
applicable.

E. 
Dilution.

Not
applicable.

F. 
Expenses of the Issue.

Not
applicable.

# Item 10. Additional
Information

A. 
Share Capital.

Not
applicable.

B. 
Memorandum and Articles of Association.

The
Company is incorporated as an exempted company in the Cayman Islands, and its affairs are
governed by its Memorandum and Articles of Association, the Companies Law (2002 Revision)
of the Cayman Islands (the Companies Law) and the common law of the Cayman
Islands. The following is a summary of the Companys Memorandum and Articles of
Association, including the rights and privileges pertaining to the shares of the Company.
This summary is qualified in its entirety by reference to the Companys Memorandum
and Articles of Association (see Item 19  Exhibits 1.1 and 1.2).

Registered Office

The
Companys registered office is located at the offices of Maples and Calder,
Attorneys-at-Law, Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman Islands,
British West Indies.

Objects and Purposes

Clause
3 of the Companys Memorandum of Association provides that the objects for which the
Company is established are unrestricted.

Directors

Clause
72 of the Articles of Association of the Company provides that a director (or his
alternate director in his absence) may vote with respect to any contract or transaction
with the Company in which he is interested provided that the nature of the interest of any
director or alternate director in any such transaction is disclosed by him or the
alternate director appointed by him at or prior to its consideration and any vote thereon.
Clause 66 provides that the remuneration to be paid to the directors shall be determined
by the directors. Such remuneration shall be deemed to accrue from day to day. The
directors shall also be entitled to be paid their traveling, hotel and other expenses
properly incurred by them in going to, attending and returning from meetings of the
directors, or any committee of directors, or general meetings of the Company, or otherwise
in connection with the business of the Company, or to receive a fixed allowance in respect
thereof as may be determined by the directors from time to time, or a contribution partly
of one such method and partly the other. Clause 67 provides that the directors may by
resolution award special remuneration to any director of the Company undertaking any
special work or services for, or undertaking any special mission on behalf of, the Company
other than his ordinary routine of work as a director. Any fees paid to a director who is
also counsel or solicitor to the Company, or otherwise serves in any professional capacity
shall be in addition to his remuneration as a director. The directors may exercise all
powers of the Company to borrow money without restriction. There is no mandatory
retirement age or minimum shareholding requirements for directors.

39

Shares

General.  
The Companys share capital is not divided into different classes although shares may
on issue be given such preferred, deferred or other special issue rights or restrictions
as the directors consider proper. The shares in issue, referred to herein as the Ordinary
Shares, have not been given any such rights and all are of the same class with the same
rights, entitlements and restrictions. Certificates representing the Ordinary Shares are
issued in registered form. The Ordinary Shares are not entitled to any sinking fund or
pre-emptive or redemption rights. Under Cayman Islands law, non-residents may freely hold,
vote and transfer Ordinary Shares in the same manner as Cayman Islands residents, subject
to the provisions of the Companies Law and the Companys Articles of Association. No
Cayman Islands laws or regulations restrict the export or import of capital or affect the
payment of dividends to non-residents holders of the Ordinary Shares.

Dividends.  Holders
of Ordinary Shares are, if dividends are declared, entitled to share equally in such
dividends which shall be paid according to the amounts paid or credited as paid on their
shares. There is no time limit by which, if declared dividends are unclaimed, the right of
claim shall be forfeited. No dividend or distribution shall be payable except out of the
profits of the Company realized or unrealized, or out of the share premium account or as
otherwise permitted by statute.

Voting
Rights.  Every holder of Ordinary Shares of record in person or by proxy
(at a general meeting) shall have one vote and on a poll every holder of shares (present
in person or by proxy) shall have one vote for each share registered in his name in the
Register of Members of the Company. At any general meeting, a resolution put to the vote
of the meeting shall be decided on a show of hands unless a poll is, before or on the
declaration of the result of the show of hands, demanded by the chairman of the meeting or
any other shareholder present in person or by proxy. Any holder of Ordinary Shares is
entitled to give notice of nomination of a director in the manner set forth in Clause
95(a) of the Companys Articles of Association. New directors shall be elected at the
annual meeting or a general meeting of shareholders in the manner set forth in Clause
95(b) of the Companys Articles of Association.

Liquidation.  Clause
122 of the Companys Articles of Association provides that in the event of the
Company being wound-up, if the assets available for distribution amongst the shareholders
shall be more than sufficient to repay the whole of the capital paid up at the
commencement of the winding-up, the excess shall be distributed amongst the shareholders
in proportion to the capital paid-up at the commencement of winding-up upon the shares
held by them respectively.

Further
Capital Calls.  The Companys Articles of Association
contain provisions dealing with the manner in which capital calls can be made on
shareholders, but these only apply to situations in which the shares are issued partly
paid and are subject to the specific terms of issue of such partly paid shares. The
Ordinary Shares have been issued as fully paid.

Changes
in Share Capital. Cayman Islands law provides that the share capital of the
Company may be increased in such manner as is provided for in its Articles of Association.
The Companys Articles of Association provide that the share capital may be increased
by ordinary resolution of the shareholders. The Articles of Association are permissive of
a repurchase or reduction in share capital, subject to approval by special resolution and
such additional approval as are required under the Companies Law. Any reduction of capital
would require the approval of the Grand Court of the Cayman Islands.

Shareholders Rights

Clause
12 of the Companys Articles of Association provides that the rights attached to any
class of shares may be varied by either special resolution of the shareholders of that
class (that is, a resolution passed by two-thirds majority of the shareholders present at
a properly convened and constituted shareholders meeting and entitled to vote) or by
the consent in writing of the holders of three-fourths of the issued shares of that class.

40

Shareholder Meetings

As
an exempted company, the Company is not required to hold an annual general meeting of
shareholders. If it does hold an annual general meeting, then it is required to call such
meeting on not less than ten days and not more than sixty days notice. Notice shall
be exclusive of both the day on which it is given and of the day for which it is given and
shall specify the place, day and the hour of the meeting and the general nature of the
business of the meeting. A quorum must be present when the meeting proceeds to business. A
quorum is majority of members in person or by proxy holding a majority of the outstanding
shares entitled to vote at the general meeting.

The
directors may whenever they think fit, and they shall on the requisition of members of the
Company holding at the date of deposit of the requisition not less than one-tenth of the
paid up capital of the Company entitled to vote, proceed to convene a general meeting of
the Company. The notice and quorum requirements are the same as for an annual general
meeting.

Differences in Corporate Law

The
Companies Law is modeled after that of England but does not follow recent United Kingdom
statutory enactments and differs from laws applicable to United States corporations and
their shareholders. The following paragraphs are a summary of the significant differences
between the provisions of the Companies Law applicable to the Company and the laws
applicable to companies incorporated in the United States and to their shareholders.

Mergers
and Similar Arrangements.  Cayman Islands law does not provide for
mergers as that expression is understood under United States corporate law. Mergers in the
United States generally require the approval of a majority of the outstanding common stock
of both entities involved in the proposed merger. In the Cayman Islands, however, there
are statutory provisions that facilitate the reconstruction and amalgamation of companies,
provided that the arrangement is approved by a majority of the shareholders or of each
class of shareholders, as the case may be, and creditors with whom the arrangement is to
be made and who must represent three-fourths in value of the shareholders or of each class
of shareholders or creditors, as the case may be, that are present and voting either in
person or by proxy at a meeting or meetings convened for that purpose. The convening of
the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder would have the right to express to the
court the view that the transaction ought not to be approved, the court can be expected to
approve the arrangements if it satisfies itself that:

| | o | the
parties have complied with the statutory provisions regarding majority vote;
| | - | --------------------------------------------------------------------------------

| | o | the
shareholders have been fairly represented at the meeting in question;
| | - | -------------------------------------------------------------------------

| | o | the
arrangement is one that a businessman would reasonably approve; and
| | - | -----------------------------------------------------------------------

| | o | the
arrangement is not one that would more properly be sanctioned under some other provision
of the Companies Law.
| | - | ------------------------------------------------------------------------------------------------------------------

When
a take-over offer is made and accepted by holders of 90% of the shares within four months,
the offeror may, within a two-month period require the holders of the remaining shares to
transfer these shares on the terms of the offer. An objection can be made to the Grand
Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of
fraud, bad faith or collusion.

If
the arrangement and reconstruction is approved, the dissenting shareholder would have no
rights comparable to appraisal rights, which would otherwise ordinarily be available to
dissenting shareholders of United States corporations, providing rights to receive payment
in cash for the judicially determined value of the shares.

Shareholders
Suits.  Maples and Calder, the Companys counsel as to Cayman
Islands law, has advised the Company that no significant or major reported class action or
derivative action has been brought in a Cayman Islands court. In principle, the Company
will normally be the proper plaintiff and a derivative action may not

41

be brought by a minority shareholder.
However, based on English authorities, which would in all likelihood be of persuasive
authority in the Cayman Islands, exceptions to the foregoing principle apply in
circumstances in which:

| | o | a
company is acting or proposing to act illegally or outside of its powers;
| | - | ---------------------------------------------------------------------------

| | o | the
act complained of, although not outside of its powers, could be effected only if
authorized by more than a simple majority vote;
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | o | the
individual rights of the plaintiff shareholders have been infringed or are about to be
infringed; or
| | - | --------------------------------------------------------------------------------------------------------

| | o | those
who control the company are perpetrating a "fraud on the minority."
| | - | -------------------------------------------------------------------------

Indemnification

Cayman
Islands law does not limit the extent to which a companys articles of association
may provide for indemnification of officers and directors, except to the extent that a
provision may be held by the Cayman Islands courts to be contrary to public policy, such
as to provide indemnification against civil fraud or the consequences of committing a
crime. The Companys articles of association provide for indemnification of officers
and directors for losses, damages, costs and expenses incurred in their capacities as
such, except if they acted in a willfully negligent manner or defaulted in any action
against them.

Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as amended,
may be permitted to the Companys directors, officers or persons controlling the
Company pursuant to these provisions, the Company has been informed that, in the opinion
of the Securities and Exchange Commission, this indemnification is against public policy
as expressed in the Securities Act and therefore is unenforceable.

Enforceability of Civil Liabilities

The
Company is a Cayman Islands company. The Company incorporated in the Cayman Islands
because of the following benefits associated with being a Cayman Islands company:

| | o | political
and economic stability;
| | - | ---------------------------------

| | o | an
effective judicial system;
| | - | -----------------------------

| | o | unlike
some jurisdictions which impose taxes on worldwide income, no taxation of companies based
upon profits, income, gains or appreciation;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------

| | o | the
absence of exchange control or currency restrictions; and
| | - | -------------------------------------------------------------

| | o | the
availability of professional and support services.
| | - | ------------------------------------------------------

However,
the Cayman Islands has a less developed body of securities laws than the United States and
provides less protection for investors. For example, the remedies of shareholders and
fiduciary responsibilities of the Companys directors are governed by Cayman Islands
law and are not as clearly established as under statutes or judicial precedent in
existence in jurisdictions in the United States. While there is some case law in the
Cayman Islands on these matters, it is not as developed as, for example, English law.
However, the Company believes that English case law, although not binding in the courts of
the Cayman Islands, would be regarded as persuasive. Based on English case law, the
Company believes under Cayman Islands law, the Companys directors have a duty of
loyalty to act honestly in good faith with a view to promoting the Companys best
interests. The Companys directors also have a duty of care to exercise the care,
diligence and skills that a reasonably prudent person would exercise in comparable
circumstances. In fulfilling their duty of care to us, the Companys directors must
ensure compliance with the Companys memorandum and articles of association and the
class rights vested under the Companys memorandum and articles of association in the
holders of the shares.

42

All
of the Companys assets are located outside the United States. In addition, a
majority of the Companys directors and officers are nationals and/or residents of
countries other than the United States, and all or a substantial portion of the
Companys assets and the assets of the Companys directors and officers are
located outside the United States. As a result, it may be difficult to effect service of
process within the United States upon the Company or the Companys directors and
officers or to enforce against the Company or against them judgments obtained in United
States courts, including judgments predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof.

Maples
and Calder, the Companys counsel as to Cayman Islands law, have advised the Company
that there is uncertainty regarding whether the courts of the Cayman Islands would (1)
recognize or enforce judgments of United States courts obtained against the Company or its
officers and directors predicated upon the civil liability provisions of the securities
laws of the United States or any state thereof or (2) be competent to hear original
actions brought in their jurisdiction against the Company or its officers and directors
predicated upon the securities laws of the United States or any state thereof.

There
is no statutory enforcement in the Cayman Islands of judgments obtained in the United
States. Instead, such a judgment must be enforced by action at common law. Maples and
Calder have advised the Company that a final and conclusive judgment in a federal or state
court of the United States under a sum of money is payable, other than a sum payable in
respect of taxes, fines, penalties or similar charges, may be subject to enforcement
proceedings as a debt in the Courts of the Cayman Islands under the common law doctrine of
obligation.

C.  
Material Contracts.

The
Company is not a party to any material contract other than those entered into in the
ordinary course of business.

D.  
Exchange Controls.

The
system of foreign investment in financial and capital markets in Brazil was modified by
Resolution No. 2,689 of the National Monetary Council on January 26, 2000, which
substitutes the rules of Annex IV to Resolution No. 1,289 of the National Monetary
Council.

According
to Resolution No. 2,689, the entry of foreign capital through the free-rate exchange
market, as an investment in the Brazilian financial and capital markets, will be subject
to electronic registration with the Central Bank of Brazil. Qualified foreign investors
registered with the Brazilian securities commission, the Comissão de Valores
Mobiliários (CVM) and acting through authorized custody accounts
managed by local agents may buy and sell shares on Brazilian stock exchanges without
obtaining separate certificates of registration for each transaction. However,
institutions that provide custody services must submit monthly information to the Central
Bank regarding each foreign investor as well as submit to the Central Bank or the CVM
records of transactions made by foreign investors.

The
term qualified foreign investors includes any individual or financial or
non-financial institution, resident or domiciled abroad, which:

| | o | has
a legal representative in Brazil;
| | - | -------------------------------------

| | o | fills
out a form to be kept on hand by the legal representative;
| | - | ----------------------------------------------------------------

| | o | obtains
registration with the CVM as a foreign investor; and
| | - | ------------------------------------------------------------

| | o | registers
the foreign investment with the Central Bank.
| | - | -------------------------------------------------------

The
right to convert dividend payments and proceeds from the sale of shares into foreign
currency and to remit such amounts outside Brazil is subject to restrictions under foreign
investment legislation which generally requires, among other things, that the relevant
investments be registered with the Central Bank.

43

The
restrictions on the remittance of foreign capital abroad may hinder or prevent holders of
the Ordinary Shares from converting dividends, distributions or the proceeds from any sale
of such Ordinary Shares into U.S. dollars and remitting such U.S. dollars abroad. Holders
of the Ordinary Shares could be adversely affected by delays in, or refusal to grant any,
required government approval for conversions of Brazilian currency payments and
remittances abroad of the proceeds from dividends or sales of Ordinary Shares.

Under
current Brazilian legislation, the federal government may impose temporary restrictions on
remittances of foreign capital abroad in the event of a serious imbalance or an
anticipated serious imbalance in Brazils balance of payments. For approximately six
months in 1989 and early 1990, the federal government froze all dividend and capital
repatriations held by the Central Bank that were owed to foreign equity investors in order
to conserve Brazils foreign currency reserves. These amounts were subsequently
released in accordance with federal government directives. The imbalance in Brazils
balance of payments increased during 1998, and there can be no assurances that the federal
government will not impose similar restrictions on foreign repatriations in the future.

E.  
Taxation.

The
following summary contains a description of the material Cayman Island, Brazilian and U.S.
federal income tax consequences of the acquisition, ownership and disposition of the
Ordinary Shares. This summary does not purport to be a comprehensive description of all
the tax considerations that may be relevant to a decision to purchase Ordinary Shares.
This summary is based upon the tax laws of the Cayman Islands, the tax laws of Brazil and
related regulations and on the tax laws of the United States and related regulations as in
effect on the date of this Annual Report on Form 20-F. These laws and regulations may
change in the future.

Although
there is at present no income tax treaty between Brazil and the United States, the tax
authorities of the two countries have had discussions that may culminate in such a treaty.
The Company cannot assure you, however, as to whether or when a treaty will enter into
force or how it will affect the U.S. holders of Ordinary Shares. Prospective holders of
Ordinary Shares should consult their own tax advisors as to the tax consequences of the
acquisition, ownership and disposition of Ordinary Shares in their particular
circumstances.

Cayman Islands Tax Considerations

The
Cayman Islands currently levy no taxes on individuals or corporations based upon profits,
income, gains or appreciation and there is no taxation in the nature of inheritance tax or
estate duty. There are no other taxes likely to be material to the Company levied by the
Government of the Cayman Islands except for stamp duties that may be applicable on
instruments executed in, or after execution brought within, the jurisdiction of the Cayman
Islands. The Cayman Islands are not party to any double tax treaties. There are no
exchange control regulations or currency restrictions in the Cayman Islands.

No
stamp duties are payable on the issue or transfer of shares. An agreement to transfer
shares may be subject to stamp duty if the agreement is executed in the Cayman Islands or,
if executed outside the Cayman Islands, subsequently brought into the Cayman Islands. The
Stamp Duty Law (2002 Revision) does not provide who is liable to pay stamp duty on any
document but, in practice, the person who seeks to rely on the document in any civil court
proceedings will be required to pay stamp duty in order to have the document admitted in
evidence.

Brazilian Tax
Considerations

The
following is a summary of the material Brazilian income tax consequences to ITSA in
connection with the sale and repayment of ITSAs Senior Notes including any interest
thereon to beneficial owners of the Senior Notes that are non-residents of Brazil in
connection with the purchase, ownership and disposition of the Senior Notes. This summary
is limited to ITSA and to non-residents of Brazil that have acquired the Senior Notes at
the original issue price, and does not address the issues applicable to investors who have
purchased Senior Notes at a premium or market discount. In addition, this summary is based
on the Brazilian tax regulations as presently in effect and does not take into account
future changes in such tax laws.

44

According
to article 26 of Law No. 10,833, enacted on December 29, 2003, which came into force on
February 1, 2004, capital gains realized on the disposition of assets located in Brazil by
non Brazilian residents, whether to other non-residents and whether made outside or within
Brazil, are subject to taxation in Brazil at a rate of 15%. Although ITSA believes that
the Senior Notes will not fall within the definition of assets located in Brazil for
purposes of Law 10,833, considering the general and unclear scope of Law No. 10,833 and
the absence of judicial guidance in respect thereof, ITSA is unable to predict whether
such interpretation will ultimately prevail in the courts of Brazil.

Amounts
realized on the sale or other disposition of the Senior Notes made in Brazil or to a
Brazilian resident may be subject to Brazilian withholding tax at a rate of up to 15%.

Individuals
domiciled in Brazil and Brazilian companies are taxed in Brazil on the basis of their
worldwide income (which includes earnings of Brazilian companies foreign
subsidiaries, branches and affiliates). The earnings of branches of foreign companies and
non-Brazilian residents in general are taxed in Brazil only when derived from Brazilian
sources. Interest, fees, commissions and any other income (which for the purposes of this
paragraph includes any deemed income on the difference between the issue price of the
Senior Notes and the price at which the Senior Notes are redeemed) payable by a Brazilian
obligor to an individual, company, entity, trust or organization domiciled outside Brazil
is considered derived from Brazilian sources and is therefore subject to income tax
withheld at the source. Brazilian tax laws expressly authorize the paying source to pay
the income or earnings net of taxes and, therefore, to assume the cost of the applicable
tax. The rate of withholding is 15% or such other lower rate as is provided for in an
applicable tax treaty between Brazil and such other country where the recipient of the
payment has its domicile. If the beneficiary of the payment is located in a country in
which the effective tax rate on net income is lower than 20%, the withholding rate is 25%.

Notwithstanding
the foregoing, the applicable withholding tax rate for negotiable instruments such as the
Senior Notes is reduced to zero pursuant to Resolutions 1853 of July 31, 1991 and 644 of
October 22, 1980 of the Central Bank, provided, however, that under Central Bank Circular
2661 of February 8, 1996, such withholding tax reduction has been limited to negotiable
instruments having a minimum average maturity of 96 months. As a result, since the Senior
Notes have an original average maturity of at least 96 months, such reduction applies to
payments of interest and other income with respect to the Senior Notes. With the enactment
of Law No. 9959, of January 2000, this tax benefit is no longer valid for negotiable
instruments having an average maturity of at least 96 months that were issued after
January 1, 2000. If, however, any Note is redeemed prior to December 20, 2004, such
reduction will not apply and, therefore, upon such redemption the Brazilian withholding
tax will be imposed on the amount of interest, fees and commissions paid on such Senior
Notes from the date of issue through the date of redemption. Based on the advice of its
Brazilian tax counsel, ITSA believes and intends to take the position for tax reporting
purposes that, in the event of any such early redemption to which such withholding tax
applies, interest and other income with respect to the Senior Notes will be subject to
Brazilian withholding tax at a rate of 15%.

On
February 8, 1996, the Brazilian Federal Government issued Decree No. 1,815, which imposed
a tax on Brazilian issuers with respect to foreign exchange transactions (IOF
tax) related to the entering into Brazil of proceeds resulting from foreign loans
(including the issue of securities such as the Senior Notes). The rate of IOF tax paid by
ITSA with respect to the issuance of the Senior Notes was zero, pursuant to Finance
Minister Ordinance No. 241, of October 31, 1996, since the Senior Notes were issued with a
maturity term higher than five years. Finance Minister Ordinance No. 241 was revoked by
Ordinance No. 85 on April 24, 1997 which currently sets forth the IOF tax assessment at a
rate of zero on the entering into Brazil of proceeds resulting from foreign loans.
However, under Law No. 8.894 dated June 21, 1994, such tax rate may be increased up to
25%.

On
August 15, 1996, the Brazilian Congress approved Constitutional Amendment No. 12 creating
a new temporary tax, the Contribuição Provisória sobre
Movimentação Financeira (CPMF). Based on such Amendment, Law No.
9,311 of October 24, 1996 (Law 9,311) was enacted, creating the CPMF tax.
Under Law No. 9,311, as amended, all financial debit and money transfers through Brazilian
bank accounts effected from January 23, 1997 through December 31, 1998, including payments
made by the Company with respect to the Senior Notes, were subject to the assessment of
the CPMF tax at the rate of 0.2%. Funds arising from the collection of CPMF tax should be
applied only in the public health system. On January 23, 1999, the CPMF was extinguished
and Congress approved Constitutional Amendment No. 21, on March 19, 1999, in order to
reestablish the CPMF at the rate of 0.38%, starting on June 19, 1999, for a period of one
year, and subsequently at the rate of 0.38%, for a period of two

45

years.    
          The Constitutional Amendment No. 37 of June 2001 extended the CPMF assessment
          until December 31, 2004 at a 0.38% rate. The Constitutional Amendment No. 42 of
          December 2003 extended the CPMF assessment until December 31, 2007 at a 0.38%
          rate. There is no stamp, transfer or other similar tax in Brazil with respect to
          the transfer, assignment or sale of any debt instrument outside Brazil
          (including the Senior Notes).

Finally,
in the event the payment of interest and other income related to the Senior Notes is
postponed by ITSA the applicable withholding tax rate upon such income remains zero,
pursuant to Central Bank Circular 2661 of February 8, 1996, which provides the withholding
tax rate of zero to negotiable instruments having a minimum average maturity of 96 months.
Likewise, in such event the IOF assessment remains at a 0% rate, as set forth by Finance
Minister Ordinance No. 241, of October 31, 1996, since the funds arising out from the
issuance of the Senior Notes have been kept in Brazil for a period longer than 5 years.

U.S. Federal Tax
Considerations

The
following is a general discussion of the principal U.S. federal income tax consequences of
the ownership and disposition of the Ordinary Shares that may be relevant to you if you
are a U.S. holder (as defined below) of such shares. For purposes of this discussion, a
U.S. holder is a beneficial owner of the Ordinary Shares that is, for U.S.
federal income tax purposes:

| | o | an
individual citizen or resident of the United States,
| | - | -------------------------------------------------------

| | o | a
corporation or other entity treated as a corporation  for U.S.  federal income tax
purposes  created or organized               in or under the laws of the United States or
any political subdivision thereof,
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | an
estate, the income of which is subject to U.S. federal income tax regardless of the
source of that income, or
| | - | ----------------------------------------------------------------------------------------------------------------

| | o | a
trust, if a court within the United States is able to exercise primary supervision over
the administration of the trust, and one or more U.S. persons (within the meaning of the
U.S. Internal Revenue Code of 1986, as amended (the Code)) have the authority
to control all substantial decisions of the trust.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

This
discussion does not address all of the U.S. federal income tax consequences that may be
relevant to you in light of your particular circumstances, and does not discuss any aspect
of state, local or non-U.S. tax law. Moreover, this discussion deals only with the
Ordinary Shares that you hold as capital assets and does not apply if you are subject to
special tax rules applicable to certain other holders, such as banks, insurance companies,
securities dealers, partnerships or other entities classified as partnerships for U.S.
federal income tax purposes, tax-exempt organizations, persons that hold the Ordinary
Shares as part of an integrated investment (including a straddle), persons owning
directly, indirectly or constructively 10% or more of the Companys voting stock and
persons whose functional currency is not the U.S. dollar. If a partnership
holds Ordinary Shares, the U.S. federal income tax treatment of a partner generally will
depend upon the status of the partner and upon the activities of the partnership. Partners
of partnerships holding Ordinary Shares should consult their own tax advisers. This
discussion is based on provisions of the Code, Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as now in effect,
and all of which are subject to change, possibly with retroactive effect, and to different
interpretations. The Company urges you to consult your own tax adviser as to the tax
consequences relevant to the ownership of the Ordinary Shares in light of your particular
circumstances, including the effect of any state, local or non-U.S. laws.

Taxation of Distributions

In
general, distributions with respect to the Ordinary Shares will, to the extent made from
the Companys current or accumulated earnings and profits, as determined under U.S.
federal income tax principles, constitute taxable dividends for U.S. federal income tax
purposes. If a distribution exceeds the amount of the Companys current and
accumulated earnings and profits, the excess will be treated as a non-taxable return of
capital to the

46

extent of
your tax basis in the Ordinary  Shares, and thereafter as capital gain.  As used below,
 the term  "dividend"  means a distribution  that  constitutes a dividend for U.S.
federal income tax purposes.

The
gross amount of any taxable dividend (including amounts withheld in respect of Brazilian
taxes) paid with respect to the Ordinary Shares generally will be subject to U.S. federal
income taxation as ordinary dividend income taxable at ordinary income tax rates (and not
eligible for treatment as capital gain under Section 1(h)(11) of the Code because the
Ordinary Shares are not currently readily tradeable in an established securities
market as defined in the Code) and will not be eligible for the dividends received
deduction allowed to corporations. For foreign tax credit purposes, the dividend will be
income from a source outside the United States. The limitation on foreign taxes eligible
for the credit is calculated separately with respect to specific classes of income. For
this purpose, dividends paid by the Company generally will constitute passive income.
Subject to generally applicable limitations under U.S. federal income tax law, Brazilian
withholding tax imposed on such dividends, if any, will be eligible for credit against a
U.S. holders U.S. federal income tax liability (or, at a U.S. holders
election, all foreign income taxes paid may instead be deducted in computing such
holders taxable income). The rules with respect to foreign tax credits are complex
and U.S. holders should consult their own tax advisers regarding the availability of
foreign tax credits in light of their particular circumstances.

Taxable
dividends paid in Brazilian currency will be included in your gross income as a U.S.
dollar amount calculated by reference to the exchange rate in effect on the date you
receive the dividends, whether or not actually converted into U.S. dollars. You will have
a tax basis in any distributed Brazilian currency equal to the amount included in gross
income, and any gain or loss recognized upon a subsequent disposition of such Brazilian
currency generally will be ordinary taxable income or loss. If dividends paid in Brazilian
currency are converted into U.S. dollars on the day you or the depositary, as the case may
be, receive such dividends, you generally should not be required to recognize foreign
currency gain or loss in respect of the dividend income. The Company urges you to consult
your own tax advisers regarding the treatment of any foreign currency gain or loss with
respect to Brazilian currency received by you and not converted into U.S. dollars on the
date of receipt.

Taxation of Capital Gains

In
general, gain or loss, if any, realized upon a sale or other taxable disposition of the
Ordinary Shares will be subject to U.S. federal income taxation as capital gain or loss in
an amount equal to the difference between the amount realized on the sale or other taxable
disposition and your adjusted tax basis in the Ordinary Shares. Such capital gain or loss
will be long-term capital gain or loss if at the time of sale or other taxable disposition
you held the Ordinary Shares for more than one year. Certain non-corporate U.S. holders
(including individuals) are eligible for preferential rates of U.S. federal income
taxation in respect of long-term capital gains. The deduction of capital losses is subject
to certain limitations under the Code. Gain (or loss), if any, recognized by a U.S. holder
on the sale or other taxable disposition of the Ordinary Shares generally will be treated
as U.S. source income for U.S. foreign tax credit purposes. Consequently, if a Brazilian
withholding tax is imposed on the sale or other taxable disposition of the Ordinary
Shares, a U.S. holder that does not receive significant foreign source income from other
sources may not be able to derive effective U.S. foreign tax credit benefits in respect of
such Brazilian withholding tax. The Company urges U.S. holders of the Ordinary Shares to
consult their own tax advisers regarding the application of the foreign tax credit rules
to their investment in, and disposition of, such shares.

Passive Foreign
Investment Company Rules

Special
U.S. federal income tax rules apply to U.S. persons owning shares of a passive
foreign investment company (a PFIC). A non-U.S. corporation generally
will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in
which, after applying applicable look-through rules with respect to the income and assets
of subsidiaries, either:

| | o | at
least 75% of its gross income is "passive income"; or
| | - | --------------------------------------------------------

| | o | at
least 50% of the gross value of its assets, determined under special rules, is
attributable to assets that produce passive income or are held for the production of
passive income.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47

For this purpose, passive income
generally includes, among other things, dividends, interest, rents, royalties, gains from
the disposition of passive assets and gains from commodities transactions.

Based
on the Companys estimates and analyses of its projected gross income and gross
assets, the Company does not expect the Ordinary Shares to be considered shares of a PFIC
for the Companys current fiscal year or for foreseeable future fiscal years.
However, because the determination of whether the Ordinary Shares constitute shares of a
PFIC is based upon the composition of the Companys income and assets (including,
assets held by entities in which the Company holds at least a 25% interest), and the
nature of the Companys activities, as determined from time to time, and because
there are uncertainties in the application of the relevant rules, the Company cannot
assure you that the Ordinary Shares will not be considered shares of a PFIC for any fiscal
year. Moreover, the Company will not obtain an opinion of counsel, and no ruling will be
sought from the Internal Revenue Service, regarding the Companys annual PFIC
determination. If the Ordinary Shares were shares of a PFIC for any fiscal year, U.S.
holders (including certain indirect U.S. holders) might be subject to adverse U.S. federal
income tax consequences upon a sale or other disposition of such Ordinary Shares, or upon
the receipt of certain distributions from us (including imposition of an interest charge).
A U.S. holder of shares of a PFIC may mitigate some of these adverse U.S. Federal income
tax consequences by electing to treat the PFIC as a qualified electing fund.
However, a holder of PFIC stock may not may such an election unless the PFIC provides the
holder with certain financial information with respect to the PFIC. The Company does not
anticipate that if it were to be treated as a PFIC, it would make such information
available to the holders of the Ordinary Shares.

A
U.S. holder of marketable stock in a PFIC may make a
mark-to-market election with respect to the PFIC stock, provided the PFIC
stock is regularly traded on a qualified exchange. The Ordinary Shares are not currently
regularly traded on a qualified exchange within the meaning of the PFIC rules, nor can the
Company assure you that the Ordinary Shares will ever be so traded.

If
the mark-to-market election is made, an electing U.S. holder, generally would (i) include
in gross income, entirely as ordinary income, an amount equal to the difference between
the fair market value of the PFIC stock as of the close of such taxable year and its
adjusted tax basis, and (ii) deduct as an ordinary loss the excess, if any, of the
adjusted tax basis of the PFIC stock over its fair market value at the end of the taxable
year, but only to the extent of the amount previously included in gross income as a result
of the mark-to-market election.

The
mark-to-market election is made with respect to marketable stock in a PFIC on a
shareholder-by-shareholder basis and, once made, can only be revoked with the consent of
the Internal Revenue Service. Special rules would apply if the mark-to-market election is
not made for the first taxable year in which a U.S. person owns stock of a PFIC. You
should consult with your tax advisor regarding the application of the PFIC rules to the
Ordinary Shares and the availability and advisability of making an election to avoid the
adverse U.S. federal income tax consequences of the PFIC rules should the Company be
considered a PFIC for any taxable year.

U.S. Backup Withholding
and Information Reporting

If
you are a U.S. holder of the Ordinary Shares, you may, under certain circumstances, be
subject to backup withholding (currently imposed at the rate of 28%), with
respect to certain payments to U.S. holders, such as dividends the Company pays or the
proceeds of a sale of the Ordinary Shares, unless you (i) are a corporation or (ii)
provide a correct taxpayer identification number, certifying that you are not subject to
backup withholding, and otherwise comply with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be creditable against your
U.S. federal income tax liability, provided the requisite information is furnished to the
Internal Revenue Service.

F.  
Dividends and Paying Agents.

Not
applicable.

G.  
Statement by Experts.

Not
applicable.

48

H.   Documents
on Display.

The
document referred to in this Annual Report on Form 20-F may be inspected at the Securities
Exchange Commissions public reference facilities at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 or accessed through the Commissions website at
www.sec.gov.

I.  
Subsidiary Information.

Not
applicable.

# Item 11. 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 had historically managed 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. Subsequent to February 2000, the Company has not
purchased any foreign currency exchange contracts and, as a result, no such contracts were
outstanding as of December 31, 2003, 2002 and 2001. The Company currently believes that
the cost of managing risk exposure with respect to its U.S. dollar-denominated debt and
expenses is too high to warrant an attempt at mitigating this risk.

Due
to the Companys financial constraints and limited capital resources, the Company
failed to pay the total interest due of $9.1 million on December 20, 2002, June 20, 2003
and December 20, 2003 under its 12% Senior Secured Notes. To date, the Company has not
received any notification from the trustee regarding the intention of the noteholders to
declare the Notes due and payable in full and to demand the immediate payment of the
Notes. However, as a result of the default and the right of the noteholders to demand such
payment, the Company has reclassified the total amount of the long-term debt to current
liabilities.

# Item 12. Description of
Securities Other Than Debt Securities

Not
applicable.

# PART II

# Item 13. Defaults,
Dividends Arrearages and Delinquences

Due
to the Companys financial constraints and limited capital resources, the Company
failed to pay the interest due of $2.8 million on December 20, 2002 under its 12% Senior
Secured Notes. In January 2003, an event of default under the indenture related to the 12%
Senior Secured Notes occurred as a result of the Companys default in the payment of
this interest continuing for a period of more than 30 days. The Company subsequently
failed to make interest payments due on June 20, 2003 and December 20, 2003. Due to the
financial condition of the Company, the Company is currently unable to pay the interest
due under the 12% Senior Secured Notes and remains in default of its obligations under the
related indenture. As a result, the holders of 25% or more of the 12% Senior Secured
Notes, among other things, have the right to declare the Notes due and payable in full and
to demand the immediate payment of the Notes. In addition, the trustee under the related
indenture may pursue any available remedy by proceeding at law or in equity to collect any
payment due on the Notes. Such action may, among other things, result in the sale of the
Companys assets and the termination of the operations of the Companys
business. At December 31, 2003, the total principal and accrued interest under the 12%
Senior Secured Notes totaled $55,791,000.

49

# Item 14.  Material
Modifications to the Rights of Security Holders and Use of Proceeds

None.

# Item 15. Controls and
Procedures

The
Companys Chairman and Chief Executive Officer and its President, Chief Operating
Officer and Acting Chief Financial Officer, after evaluating the effectiveness of the
Companys disclosure controls and procedures (as defined in Securities Exchange Act
Rule 13a-15(e)) as of the end of the period covered by this Annual Report on Form 20-F,
have concluded that, as of such date, the Companys disclosure controls and
procedures were effective to ensure that material information relating to the Company was
made known to them by others within the Company, particularly during the period in which
this Annual Report on Form 20-F was being prepared.

There
were no significant changes in the Companys internal controls or other factors that
could significantly affect these controls subsequent to the date the Companys
Chairman and Chief Executive Officer and its President, Chief Operating Officer and Acting
Chief Financial Officer completed their evaluation, nor were there any significant
deficiencies or material weaknesses in the Companys internal controls requiring
corrective actions.

# Item 16. [RESERVED]

# Item 16A. Audit
Committee Financial Expert

Because
the Company does not have an audit committee, its Board of Directors performs those
functions. The Companys Board of Directors has not determined that any of the
members of the Board of Directors is an audit committee financial expert. The Company has
not yet identified an appropriate candidate for this position.

# Item 16B. Code of Ethics

ITSA
has adopted a code of ethics that applies to its Chief Executive Officer and Chief Financial
Officer. A copy of the code of ethics may be requested free
of charge by e-mail addressed to the Company at itsa@itsa.com.br. No waivers, either
explicit or implicit, of provisions of the code of ethics were granted to ITSAs
Chief Executive Officer or Chief Financial Officer in 2003.

# Item 16C. Principal
Accountant Fees and Services

# Principal Accountant
Fees.

Deloitte
Touche Tohmatsu Auditores Independentes and its affiliates billed the following fees to
the Company for professional services in 2002 and 2003.

|           | Year Ended December 31,
|---------- | -----------------------
|
|Audit Fees |                        
|Total      |                        

Audit
Fees are the aggregate fees billed by Deloitte Touche Tohmatsu for the audit of the
Companys consolidated annual financial statements that are provided in connection
with regulatory filings.

---

Audit Committees
Pre-Approval Policies.

The
Companys Board of Directors currently serves as its audit committee for purposes of
the Sarbanes-Oxley Act of 2002. As a result, the Companys Board of Directors
pre-approves all audit and permitted non-audit services provided by Deloitte Touche
Tohmatsu, the Companys principal independent auditor. Management is not permitted to
engage the Companys independent auditors for any audit or non-audit service without
first obtaining the approval of the Board of Directors.

50

# PART III

# Item 17. Financial
Statements

Not applicable.

# Item 18. Financial
Statements

The
following financial statements are filed as part of this Annual Report on Form 20-F:

|                                                                                                    | Page No.
|--------------------------------------------------------------------------------------------------- | --------
|Consolidated Financial Statements:                                                                  |         
|ITSA Ltd. (successor to TV Filme, Inc.):                                                            |         
|Reports of Indepedent Registered Public Accounting Firm                                             |         
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                        |         
|Consolidated Statements of Operations for the years ended December 31, 2003, 2002                   |         
|and 2001                                                                                            |         
|Consolidated Statements of Changes in Stockholders' Equity (Deficiency) and Other                   |         
|Comprehensive Income (Loss) for the years ended December 31, 2003, 2002, 2001                       |         
|Consolidated Statements of Cash Flows for the years ended December 31, 2003,
         2002 and 2001 |         
|Notes to Consolidated Financial Statements                                                          |         

# Item 19. Exhibits

|ExhibitNumber |  | Description of Document
|------------- |  | -----------------------

|*1.1 |  | Memorandum
of  Association of ITSA Ltd.  (incorporated  herein by reference to Exhibit 3.1(i)
                  to the  Company's  Annual  Report on Form 10-K for the year ended
 December  31,  2000,  File                   No. 0-31247 ("2000 Form 10-K")).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*1.2 |  | Articles
of Association of ITSA Ltd.  (incorporated herein by reference to Exhibit 3.1(ii) to
                  the 2000 Form 10-K).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------

|*2.1 |  | 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, File No. 0-31247).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*2.2 |  | 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 (incorporated herein by
reference to Exhibit 4.11 to the 2000 Form 10-K).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*2.3 |  | Note,
dated as of July 20, 2000, of  ITSA-Intercontinental  Telecomunicacoes  Ltda. to Cede &                  Co.
(incorporated herein by reference to Exhibit 4.12 to the 2000 Form 10-K).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*4.1 |  | Employment
 Agreement,  dated as of July 20,  2000, entered into by and among ITSA Ltd., ITSA
                  Intercontinental  Telecommunicacoes  Ltda.  and  Mr.  Hermano  Studart
 Lins  de  Albuquerque                   (incorporated  herein by  reference to Exhibit
10.1 to the  Company's  Annual  Report on Form                   10-K for the year ended
December 31, 2001, File No. 0-31247 ("2001 Form 10-K")).+
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*4.2 |  | Employment
 Agreement,  dated as of July 20,  2000, entered into by and among ITSA Ltd., ITSA
                  Intercontinental  Telecommunicacoes  Ltda.  and Mr. Carlos Andre
Studart Lins de  Albuquerque                   (incorporated herein by reference to
Exhibit 10.2 to the 2001 Form 10-K ).+
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**8 |  | List
of significant subsidiaries of ITSA Ltd.
|--- |  | ---------------------------------------------

51

|ExhibitNumber |  | Description of Document
|------------- |  | -----------------------

|**12.1 |  | Certification
 of Chief  Executive  Officer  Pursuant  to Rule  13a-14(a)  of the  Securities
                  Exchange Act of 1934.
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------

|**12.2 |  | Certification
of Acting Chief Financial  Officer Pursuant to Rule 13a-14(a) of the Securities
                  Exchange Act of 1934.
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------

|**13.1 |  | Certification
 of Chief  Executive  Officer  Pursuant  to  Rule 13a-14(b)  of the  Securities
                  Exchange Act of 1934 and 18 U.S.C.  Section 1350,  as Adopted  Pursuant
to Section 906 of the                   Sarbanes-Oxley Act of 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**13.2 |  | Certification
 of Acting Chief Financial  Officer Pursuant  Rule 13a-14(b)  of the Securities
                  Exchange Act of 1934 and 18 U.S.C.  Section 1350,  as Adopted  Pursuant
to Section 906 of the                   Sarbanes-Oxley Act of 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

52

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and Management ITSA Ltd.

We have audited the accompanying
consolidated balance sheets of ITSA Ltd. (successor to TV Filme, Inc.) and subsidiaries as
of December 31, 2003 and 2002, and the related consolidated statements of operations,
changes in stockholders deficiency and comprehensive income (loss) and cash flows
for the years then ended. 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. The financial statements of ITSA Ltd. for the year ended
December 31, 2001 were audited by other auditors, who have ceased operations, whose
report, dated March 22, 2002, expressed an unqualified opinion on those statements.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (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, 2003 and 2002, and the
consolidated results of its operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Companys working capital
deficiency, recurring losses from operations and stockholders deficiency raise
substantial doubt about its ability to continue as a going concern. Managements
plans concerning these matters are also described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte Touche
Tohmatsu Auditores Independentes

São Paulo, BrazilApril 8, 2004

F-1

This
report is a copy of a previously issued report and it has not been reissued by Arthur
Andersen S.C.

# REPORT OF INDEPENDENT
AUDITORS

To ITSA Ltd.

We have audited the accompanying
consolidated balance sheet of ITSA Ltd. (successor to TV Filme, Inc.) and subsidiaries as
of December 31, 2001, and the related consolidated statements of operations, changes in
stockholders equity (deficit), other comprehensive income (loss) and cash flows for
the year then ended. 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 audit.

We conducted our audit in accordance
with auditing standards generally accepted 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 audit provides 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, 2001, and the
consolidated results of its operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.

/s/ Arthur Andersen S.C.

São Paulo, BrazilMarch 22, 2002

F-2

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

# CONSOLIDATED BALANCE SHEETS

# (In thousands of US
dollars)

|                                                              | December 31, 2003 | December 31, 2002
|------------------------------------------------------------- | ----------------- | -----------------
|Assets                                                        |                   |                  
|Current assets:                                               |                   |                  
|Cash and cash equivalents                                     |                   |                  
|Trade accounts receivable, less allowance of $498 at December |                   |                  
|31, 2003 and $354 at December 31, 2002                        |                   |                  
|Prepaid expenses and other current assets                     |                   |                  
|                                                              |                   |                  
|Total current assets                                          |                   |                  
|Property, plant and equipment, net                            |                   |                  
|Other non-current assets:                                     |                   |                  
|Accounts receivables                                          |                   |                  
|Recoverable taxes                                             |                   |                  
|Judicial deposits                                             |                   |                  
|Licenses, net                                                 |                   |                  
|Other assets                                                  |                   |                  
|                                                              |                   |                  
|Total other non-current assets                                |                   |                  
|                                                              |                   |                  
|Total assets                                                  |                   |                  
|                                                              |                   |                  
|Liabilities and stockholders' deficiency                      |                   |                  
|Current liabilities:                                          |                   |                  
|12% Senior Secured Notes                                      |                   |                  
|Accounts payable                                              |                   |                  
|Payroll and other benefits payable                            |                   |                  
|Accrued interest payable (in default)                         |                   |                  
|Accrued liabilities and taxes payable                         |                   |                  
|                                                              |                   |                  
|Total current liabilities                                     |                   |                  
|                                                              |                   |                  
|Non-current liabilities:                                      |                   |                  
|Deferred installation fees                                    |                   |                  
|Accrual for tax, labor and other                              |                   |                  
|contingencies                                                 |                   |                  
|                                                              |                   |                  
|Total non-current liabilities                                 |                   |                  
|                                                              |                   |                  
|Stockholders' deficiency:                                     |                   |                  
|Common stock, $.01 par value,                                 |                   |                  
|shares authorized - 20,000,000 at December 31, 2003 and       |                   |                  
|2002; shares issued and outstanding - 10,000,000 at           |                   |                  
|December 31, 2003 and 2002                                    |                   |                  
|Additional paid-in capital                                    |                   |                  
|Accumulated deficit                                           |                   |                  
|Accumulated other comprehensive income                        |                   |                  
|                                                              |                   |                  
|Total stockholders' deficiency                                |                   |                  
|                                                              |                   |                  
|Total liabilities and stockholders' deficiency                |                   |                  
|                                                              |                   |                  

The accompanying notes
are an integral part of the consolidated financial statements.

F-3

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

# CONSOLIDATED
STATEMENTS OF OPERATIONS

# (In thousands of US
dollars, except share and per share data)

|                                                    | Year Ended
December 31,
2003 | Year Ended
December 31,
2002 | Year Ended
December 31,
2001
|--------------------------------------------------- | ---------------------------- | ---------------------------- | ----------------------------
|Revenues                                            |                              |                              | $                           
|Operating costs and expenses:                       |                              |                             
|System operating (exclusive of depreciation         |                              |                             
|and amortization and stock compensation             |                              |                             
|expense shown below)                                |                              |                              |                             
|Selling, general and administrative                 |                              |                             
|(exclusive of depreciation and amortization         |                              |                             
|and stock compensation expense shown below)         |                              |                              |                             
|Depreciation and amortization                       |                              |                              |                             
|                                                    |                              |                              |                             
|Total operating costs and expenses                  |                              |                              |                             
|                                                    |                              |                              |                             
|Operating loss                                      |                              |                              |                             
|Other income (expense), net:                        |                              |                             
|Interest and other expenses                         |                              |                              |                             
|Interest and  other income                          |                              |                              |                             
|Foreign exchange gain (loss)                        |                              |                              |                             
|Other                                               |                              |                              |                             
|                                                    |                              |                              |                             
|Total other expenses, net                           |                              |                              |                             
|                                                    |                              |                              |                             
|Income (loss) before cumulative effect of change    |                              |                             
|in accounting principle and income taxes            |                              |                              |                             
|Cumulative effect of change in accounting principle |                              |                              |                             
|Income taxes                                        |                              |                              |                             
|                                                    |                              |                              |                             
|Net income (loss)                                   |                              |                              | $                           
|                                                    |                              |                              |                             
|Basic and diluted loss per share from cumulative    |                              |                             
|effect of change in accounting principle            |                              |                              |                             
|                                                    |                              |                              |                             
|Basic and diluted earnings (loss) per share         |                              |                              | $                           
|                                                    |                              |                              |                             
|Weighted average number of shares                   |                              |                             
|outstanding                                         |                              |                              |                             
|                                                    |                              |                              |                             

The accompanying notes
are an integral part of the consolidated financial statements.

F-4

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

# CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIENCY)

# AND COMPREHENSIVE
INCOME (LOSS)

# (In thousands of US
dollars, except share data)

|                         | Common Stock | AdditionalPaid-in | Accumulated | AccumulatedOtherComprehensive |         
|------------------------ | ------------ | ----------------- | ----------- | ----------------------------- | --------
|
|Successor Balance at     |              |                   |             |                               |         
|December 31, 2000        | 10,000,000   | $100              | $24,938     | $(12,131)                     | $(1,819)
|Net loss                 | --           | --                | --          | (20,359)                      |         
|Cumulative translation  
|adjustment               | --           | --                | --          |                               | (774)   
|                         |              |                   |             |                               |         
|Total comprehensive loss |              |                   |             |                               |         
|                         |              |                   |             |                               |         
|Successor Balance at    
|December 31, 2001        | 10,000,000   | $100              | $24,938     | $(32,490)                     | $(2,593)
|Net loss                 | --           | --                | --          | (55,375)                      |         
|Cumulative translation  
|adjustment               | --           | --                | --          |                               | 22,535  
|                         |              |                   |             |                               |         
|Total comprehensive loss |              |                   |             |                               |         
|                         |              |                   |             |                               |         
|Successor Balance at    
|December 31, 2002        | 10,000,000   | $100              | $24,938     | $(87,865)                     | $ 19,942
|Net loss                 | --           | --                | --          | 1,758                         |         
|Cumulative translation  
|adjustment               | --           | --                | --          |                               | (8,877) 
|                         |              |                   |             |                               |         
|Total comprehensive loss |              |                   |             |                               |         
|                         |              |                   |             |                               |         
|Successor Balance at     |             
|December 31, 2003        | 10,000,000   | $100              | $24,938     | $(86,107)                     | $ 11,065

The accompanying notes
are an integral part of the consolidated financial statements.

F-5

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

# CONSOLIDATED
STATEMENTS OF CASH FLOWS

# (In thousands of US
dollars)

|                                                              | Year Ended
December 31,
2003 | Year Ended
December 31,
2002 | Year Ended
December 31,
2001
|------------------------------------------------------------- | ---------------------------- | ---------------------------- | ----------------------------
|Cash flows from operating activities                          |                              |                              |                             
|Net income (loss)                                             |                              |                              | $                           
|Adjustments to reconcile net income (loss) to net             |                              |                             
|cash provided by operating activities:                        |                              |                             
|Depreciation and amortization                                 |                              |                              |                             
|Provision for doubtful accounts                               |                              |                              |                             
|Deferred installation fees                                    |                              |                              |                             
|(Gain) loss on disposal of equipment                          |                              |                              |                             
|Cumulative effect of change in accounting
       principle    |                              |                              |                             
|Foreign exchange (gain) loss                                  |                              |                              |                             
|Changes in operating assets and liabilities:                  |                              |                             
|Accounts receivable                                           |                              |                              |                             
|Prepaid expenses and other current assets                     |                              |                              |                             
|Other assets                                                  |                              |                              |                             
|Accounts payable                                              |                              |                              |                             
|Payroll and other benefits payable                            |                              |                              |                             
|Accrued interest                                              |                              |                              |                             
|Accrual for tax, labor and
       other contingencies         |                              |                              |                             
|Accrued liabilities                                           |                              |                              |                             
|Sale of operating loss carryforwards                          |                              |                              |                             
|                                                              |                              |                              |                             
|Net cash provided by operating activities                     |                              |                              |                             
|                                                              |                              |                              |                             
|Cash flows from investing activities                          |                              |                             
|Purchase of property, plant and equipment                     |                              |                              |                             
|Net cash used in investing activities                         |                              |                              |                             
|                                                              |                              |                              |                             
|Effect of exchange rate changes on cash and cash
 equivalents |                              |                              |                             
|Net change in cash and cash equivalents                       |                              |                              |                             
|Cash and cash equivalents at beginning of period              |                              |                              |                             
|                                                              |                              |                              |                             
|Cash and cash equivalents at end of period                    |                              |                              | $                           
|                                                              |                              |                              |                             

The accompanying notes
are an integral part of the consolidated financial statements.

F-6

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

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# For the years ended
December 31, 2003, 2002 and 2001 (In thousands of US dollars,
unless otherwise indicated)

1.
Principal Operations

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. On March 18, 2002, the U.S. Bankruptcy Court for the District of
Delaware closed the Chapter 11 bankruptcy case involving TV Filme, Inc. 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, 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 TV Filme Senior
Notes). On August 13, 1999, TV Filme reached an agreement in principle with a
committee representing holders of the TV Filme 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. Consummation 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 TV Filme Senior Note holders
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 (the 12% Senior Secured Notes), 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 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 Cayman Islands holding company and is the successor issuer to TV Filme. The
TV Filme Senior Notes were cancelled upon surrender. The 12% Senior Secured Notes were
issued by ITSA-Intercontinental Telecommunicações Ltda., a wholly-owned
subsidiary of the Company.

Going
Concern Issues Arising from Recurring Losses and Cash Flow Problems

As
shown in the accompanying financial statements, the Company has incurred recurring losses
from operations and has not been able to generate sufficient cash flows from operations to
pay accrued interest on its 12% Senior Secured Notes that were due on December 20, 2002,
June 20, 2003 and December 20, 2003. As of December 31, 2003 and 2002, the Company had
working capital deficiencies of $55,263 and $50,549, respectively. As a result of its
inability to pay the accrued interest on the 12% Senior Secured Notes that has been due
since December 2002, the Company is in default under the indenture related to the 12%
Senior Secured Notes. The holders of the 12% Senior Secured Notes may, at their option,
give notice to the Company that amounts are immediately due and payable. Such notification
has not yet been given to the Company. However, as a result of the default, $46,688 of

F-7

the Companys total long-term
debt has been classified as a current liability in the accompanying Balance Sheet at
December 31, 2003 and 2002.

Operating
losses are expected to continue in the future until such time as the Company is successful
in securing a subscriber base capable of generating a significantly higher level of
operating revenues. The Company has limited capital resources available to fund capital
expenditures, to fund maturities of debt as they become due and to support its operations
until such time the Company is able to generate significant levels of positive cash flow
from operations. The Company continues to evaluate alternatives for obtaining the
necessary capital to fund operations and any potential future growth. However, the Company
has not been able to obtain this capital as a result of continuing financial and economic
difficulties. The lack of sufficient capital resources has prevented the Company from
launching any potential new service. The Company can give no assurance that it will be
successful in achieving further expense reductions or otherwise addressing its negative
stockholders equity and working capital deficiency or that its developmental efforts
will result in additional service or product offerings. The failure of the Company to
obtain additional financing and to achieve the other objectives described above would have
a material adverse effect on the Companys business, results of operations and
financial condition, which may include the termination of the operations of the
Companys business.

These
factors raise substantial doubt about the Companys ability to continue as a going
concern. The Companys management is concentrating its efforts to address the
Companys negative stockholders equity and working capital deficiency. The
Company has initiated short-term actions to reduce selling, general and administrative
expenses. In the near term, the Company intends to restructure its organization and
downsize its work force, to renegotiate its supply contracts, and to create a Survey and
Development Group to provide the Company with new services and products. However, there
can be no assurance that the Company will be successful in achieving these objectives. The
accompanying financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.

Company
Operations

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 Brasília,
Goiânia, Belém, Campina Grande, Caruaru, Porto Velho, Presidente Prudente,
Bauru, Franca, Uberaba, Belo Horizonte and Vitória, covering over 3 million
households and approximately 13 million people.

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

2. Summary of Significant Accounting Policies

a)
Basis of Presentation

The
consolidated financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America 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 Statements 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, 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.

F-8

Translation  gain and losses are  reported in
accumulated other comprehensive
income (loss), a separate component of stockholders equity (deficiency). Foreign
currency transaction gains and losses are reported in income.

b)
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.

The
Companys operating subsidiaries included in the consolidated financial statements
are:

|                                                    | Ownership Interest as of
December 31,
|--------------------------------------------------- | -------------------------------------
|
|TV Filme Serviços Ltda                              |                                      
|TV Filme Brasilia Serviços de Telecomunicações Ltda |                                      
|TV Filme Goiânia Serviços de Telecomunicações Ltda  |                                      
|ITSA Intercontinental Telecomunicações Ltda         |                                      
|TV Filme Sistemas Ltda                              |                                      
|TV Filme Belém Serviços de Telecomunicações Ltda    |                                      
|Link Express Serviços e Telecomunicações Ltda       |                                      

c)
Revenue Recognition

Following
is a description of each of the Companys principal revenue streams:

Subscription
revenues

The
Company generates subscription revenues from pay television services under pre-paid
programs. Under both programs, subscription revenues are recognized when the service is
provided. Under the Companys current policies for acceptance of new customers for
pre-paid plans, a prospective customer must sign a service contract that stipulates
pricing, service period and payment terms. In addition, each prospective customer must
provide appropriate documentation, including income tax identification number
(CPF) and identification card number (RNE). Without this
documentation, the customer acceptance process cannot continue. Additionally, each
prospective customer is subject to credit verification with credit bureaus in Brazil and
verification of any history of disconnections with the Company. The Company believes that
the recognition of subscription revenues when the service is provided is consistent with
the criteria set forth in SAB 101 as follows:

| | o | persuasive
evidence of an arrangement exists;
| | - | ---------------------------------------------

| | o | delivery
has occurred or services have been rendered;
| | - | -----------------------------------------------------

| | o | the
Company's price to its customer is fixed or determinable; and
| | - | -----------------------------------------------------------------

| | o | collectibility
is reasonably assured.
| | - | -------------------------------------

Installation
fees

Pursuant
to paragraph 11 of SFAS 51, the Company defers installation fees, net of direct selling
costs incurred, and recognizes revenues over a period of four years, representing the
average life of subscribers.

Internet
access and data communication services

The
Company commenced generating high-speed internet access and data communication services in
2000. Revenues are recognized as services are provided.

F-9

Advertising

The
Company sells advertising airtime as part of its cable television programming and magazine
space in its monthly television magazine. Revenues are recognized when the service is
provided.

Other

Other
revenues were principally comprised of technical assistance fees and other, and are
recognized when the services are provided.

d)
Allowance for Doubtful Accounts Receivable

The
allowance for doubtful accounts receivable is established in an amount that is considered
sufficient to cover any probable losses on realization of the accounts receivable from the
Companys customers and the related provision is recorded in selling, general and
administrative expenses. The Companys accounting policy for establishing the
allowance is consistent with the billing and collection process and historical experience.
This allowance is established progressively as follows:

|Overdue Bills | Collection Process | % Loss Provided For                                                                          
|------------- | ------------------ | ---------------------------------------------------------------------------------------------
|1 to 30 days  |                    | Administrative collection;
disconnect service after 7 days,with no further revenuerecognition
|              |                   
|              |                   
|              |                   
|31 to 60 days |                    | Administrative collection; cancelcontract after 60 days                                      
|              |                   
|Over 61 days  |                    | Administrative collection; cancelcontract after 60 days                                      
|              |                   

e)
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.

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

f)
Use of Estimates

The
preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the amounts reported in the consolidated
financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most significant
estimates relate to allowance for doubtful accounts receivable, depreciation and useful
lives of long-lived assets, accruals and contingencies.

g)
Cash and Cash Equivalents

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

F-10

h)
Advertising Expense

The
Company expenses all advertising costs as they are incurred. Advertising expenses amounted
to $87, $268 and $884 for the periods ended December 31, 2003, 2002 and 2001,
respectively.

i) Recoverability
of Long-Lived Assets to be Held and Used in the Business

The
Company uses the provisions of SFAS No. 144 Accounting for the Impairment of
Disposal of Long-lived Assets to evaluate the need to record impairment on its
property, plant and equipment and licenses. The Company reviews the carrying value of its
long-lived assets to be held and used, whenever events and circumstances indicate that the
carrying value of an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. The carrying value of long-lived
assets is considered impaired in cases where undiscounted expected future operating cash
flows from such assets are less than their carrying value, and an impairment loss is
recognized equal to an amount by which the carrying value exceeds the fair value of the
assets. The Company has performed a review of its long-lived assets and concluded that its
ability to recover the carrying value of its long-lived assets was not impaired at
December 31, 2003. This assessment was based upon projections of future operations that
assumed certain levels of revenues, subscribers and gross margin percentages would be
achieved. There is no assurance that the Company will be successful in achieving these
levels of revenues, subscribers and gross margin percentages. If the Company is unable to
achieve such projections of future operations, it could result in a significant impairment
provision being recorded in future periods related to its investment in its long-lived
assets.

j) Reorganization
Value in Excess of Amounts Allocable to Identifiable Assets

Until
2001, the excess value recorded in conjunction with fresh-start accounting was being
amortized on a straight-line basis over a period of 10 years. Amortization expense for the
five months and eleven days ended December 31, 2000 (Successor) and for the year ended
December 31, 2001 was $1,352 and $2,099, respectively. Upon adoption of SFAS 142 on
January 1, 2002, the Company, based on an independent valuation of the Company, recorded
an impairment loss of $20,161, which was the carrying value of the excess reorganization
value at December 31, 2001. The impairment loss of $20,161 was recognized as a cumulative
effect of a change in accounting principle in the Companys consolidated statement of
operations as of January 1, 2002. In addition, a valuation allowance for 100% of the
related tax benefit of approximately $6,855 resulting from this impairment loss has been
recognized due to the current uncertainty regarding the realization of this asset.

k)
Licenses

Licenses
are comprised of wireless and data communications licenses, which are amortized on a
straight-line basis over the period of the license. Amortization expense for the years
ended December 31, 2003, 2002 and 2001 was $222, $290 and $115, respectively.

Licenses
were comprised of the following:

|                         | Successor
|------------------------ | ---------
|
|Licenses                 |          
|Accumulated amortization |          
|                         |          
|                         |          
|                         |          

Estimated
Amortization Expense:

|                          |     
|------------------------- | ----
|For year ended 12/31/2004 | $240
|For year ended 12/31/2005 | $240
|For year ended 12/31/2006 | $240
|For year ended 12/31/2007 | $220
|For year ended 12/31/2008 | $200

F-11

l)
Income Taxes

The
Company uses the asset and liability method for the recognition of deferred tax assets and
liabilities for expected future tax consequences of events that have been recognized in
the Companys financial statements or tax returns. Deferred income tax assets and
liabilities are determined for differences between financial statements tax bases of
assets and liabilities that will result in taxable or deductible amounts in the future.
The computation is based on enacted tax laws and rules applicable to periods in which the
temporary differences are expected to be recovered or settled. Valuation allowances are
established, when necessary, if it is more likely than not that deferred tax assets will
not be realized.

m)
Earnings (Loss) Per Share

Basic
and diluted earnings (loss) per common share are computed by dividing the income or loss
attributable to common stock, by the weighted average number of common stock shares
outstanding during any period. For all periods presented, the Company had no common
equivalents outstanding.

n)
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.

o)
Recoverable Taxes

The
Company also records recoverable taxes, which are generally taxes withheld at the source
and other prepaid taxes that are generally recovered by an offset to future taxes or a
refund from the applicable governmental bodies. Recoverable taxes could arise from
federal, state and municipal authorities.

p) Comprehensive
income (loss)

Comprehensive
income (loss) is recorded in accordance with SFAS No. 130, Reporting Comprehensive
Income, and presented in the statement of changes in stockholders equity
(deficiency). In the Companys case, comprehensive income (loss) comprises the
translation adjustments included in the cumulative translation adjustment component of
stockholders equity (deficiency).

q)
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:

r) Cash
and cash equivalents

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

s) Accounts
receivable and accounts payable

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

F-12

t)
Debt

The
carrying amount reported in the balance sheet for debt approximates in its fair value,
since this debt carries terms and bears interest that are similar to those being currently
offered in the market.

u)
Recent Accounting Pronouncements

In
April 2003, the Financial Accounting Standards Board (FASB) issued SFAS 149,
Amendment of Statement No. 133 on Derivative Instruments and Hedging
Activities, which amends and clarifies the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and hedging
activities under SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 149 clarifies the circumstances under which a contract with an
initial net investment meets the characteristic of a derivative as discussed in SFAS 133.
In addition, SFAS 149 clarifies when a derivative contains a financing component that
warrants special reporting in the statement of cash flows. SFAS 149 amends certain other
existing pronouncements, resulting in more consistent reporting of contracts that are
derivatives in their entirety or that contain embedded derivatives that warrant separate
accounting. SFAS 149 is effective for contracts entered into or modified after June 30,
2003 and for relationships designated after June 30, 2003 and is to be applied
prospectively. The adoption of SFAS 149 did not have any impact on the Companys
financial statements.

In
May 2003, FASB issued SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS 150 modifies the accounting for
certain financial instruments that, under previous guidance, issuers could account for as
equity. The statement requires that those instruments be classified as liabilities in
statements of financial position. SFAS 150 affects an issuers accounting for three
types of freestanding financial instruments, namely:

| | o | Mandatory
redeemable shares, which the issuing company is obligated to buy back in exchange for
cash or other assets.
| | - | ---------------------------------------------------------------------------------------------------------------------

| | o | Instruments,
other than outstanding shares, that do or may require the issuer to buy back some of its
shares in exchange for cash or other assets. These instruments include put options and
forward purchase contracts.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Obligations
that can be settled with shares, the monetary value of which is fixed, tied solely or
predominantly to a variable such as a market index, or varies inversely with the value of
the issuers shares.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SFAS
150 does not apply to features embedded in financial instruments that are not derivatives
in their entirety. In addition to its requirements for the classification and measurement
of financial instruments within its scope, SFAS 150 also requires disclosures about
alternative ways of settling those instruments and the capital structure of entities, all
of whose shares are mandatorily redeemable. SFAS 150 is effective for financial
instruments entered into or modified after May 31, 2003 and, otherwise, is effective at
the beginning of the first interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the statement and still existing
at the beginning of the interim period of adoption. Restatement is not permitted. The
adoption of SFAS 150 did not have any impact on the Companys financial statements.

F-13

In
November 2002, FASB issued Interpretation 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45). FIN 45 requires certain disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and
annual periods ending after December 15, 2002. The initial recognition and initial
measurement requirements of FIN 45 are effective prospectively for guarantees issued or
modified after December 31, 2002. The adoption of this statement did not have an impact on
the Companys financial statements.

In
January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest
Entities, an interpretation of ARB 51 (FIN 46) which provided a new
framework for identifying variable interest entities (VIEs) and determining when a company
should include the assets, liabilities, non-controlling interests and results of
activities of a VIE in its consolidated financial statements. FIN 46 was effective
immediately for VIEs created after January 31, 2003 and for VIEs in which an enterprise
obtained a variable interest after that date. For variable interests in VIEs created
before February 1, 2003, FIN 46 applied to public enterprises no later than the beginning
of the first interim or annual period beginning after June 15, 2003.

On
October 9, 2003, FASB decided to defer the implementation date of FIN 46 to the fourth
quarter instead of the third quarter. Pursuant to this deferral, public companies in the
United States of America had to complete their evaluations of VIEs that existed prior to
February 1, 2003, and the consolidation of those for which they are the primary
beneficiary for financial statements issued for the first period ending after December 15,
2003. For calendar year companies, consolidation of previously existing VIEs was required
in their December 31, 2003 financial statements. This deferral did not affect the
implementation date for many foreign private issuers, which continued to be the beginning
of the first annual period ending after December 15, 2003. In December 2003, FIN 46 was
substantially revised and a new interpretation, FIN 46R, was issued. The key differences
between FIN 46R and its predecessor FIN 46 include the following:

| | o | FIN
46R now scopes out many, but not all, businesses, as that term is defined in the
Interpretation. A business, assuming it is scoped out of FIN 46R, should be consolidated
with its accounting parent (if it has one) only when required by longstanding,
conventional consolidation guidance, most notably Accounting Research Bulletin No. 51,
Consolidated Financial Statements (ARB 51). Under FIN 46, any business
potentially could have been a VIE (and, if so, subject to the Interpretations
unique consolidation requirements) depending on the design of the business capital
structure and other factors. Note that an entity whose primary activity is asset-backed
financing or who acts as a single-lessee leasing entity cannot qualify for the scope
exemption in FIN 46R, even if it would otherwise be a business. If such an entity is a
VIE, it is covered by FIN 46Rs consolidation requirements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | FASB
partially delayed FIN 46s effective date (for most public companies until no later
than the end of the first reporting period ending after March 15, 2004. The delay
notwithstanding, public companies must apply either FIN 46 or FIN 46R to special-purpose
entities (SPEs) no later than the end of the first reporting period ending after December
15, 2003. For many foreign private issuers, the effective date continues to be the
beginning of the first annual period ending after December 15, 2003. For SPEs created by
foreign private issuers after February 1, 2003, however, the effective date is no later
than the end of the first reporting period ending after December 15, 2003.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based
on an initial assessment of the provisions and requirements of FIN 46R, the Company
believes that the implementation of this statement will not result in any impact to the
Companys consolidated financial statements.

3. Accounts Receivable, net

Accounts
receivable, net are comprised of the following:

|                                | December 31,
2003 | December 31,
2002
|------------------------------- | ----------------- | -----------------
|Monthly fee                     |                   |                  
|Installation fee                |                   |                  
|Advertising                     |                   |                  
|Other                           |                   |                  
|Allowance for doubtful accounts |                   |                  
|                                |                   |                  
|                                |                   |                  
|                                |                   |                  

F-14

4.
Prepaid Expenses and Other Current Assets

Prepaid
expenses and other current assets are comprised of the following:

|                      | December 31,        
2003 | December
31, 2002
|--------------------- | ------------------------- | -----------------
|Prepaid expenses      |                           |                  
|Advances to suppliers |                           |                  
|Other current assets  |                           |                  
|                      |                           |                  
|                      |                           |                  
|                      |                           |                  

5.
 Property, Plant and Equipment

Property,
plant and equipment are comprised of the following:

|                                    | December 31,
2003 | December
31, 2002
|----------------------------------- | ----------------- | -----------------
|Land                                |                   |                  
|Building and leasehold improvements |                   |                  
|Machinery and equipment             |                   |                  
|Furniture and fixtures              |                   |                  
|Installation costs                  |                   |                  
|                                    |                   |                  
|                                    |                   |                  
|Accumulated depreciation            |                   |                  
|                                    |                   |                  
|                                    |                   |                  
|                                    |                   |                  

Depreciation
expense of $1,991 for the period ended December 31, 2003 and $2,689 for the period ended
December 31, 2002 is recorded in the statement of operations.

F-15

6. Accrued Liabilities and Taxes Payable

Accrued
liabilities and taxes payable are comprised of the following:

|                                            | December 31,
2003 | December 31,
2002
|------------------------------------------- | ----------------- | -----------------
|Accrued Liabilities:                        |                   |                  
|Prepaid customer                            |                   |                  
|Other accrued liabilities                   |                   |                  
|                                            |                   |                  
|                                            |                   |                  
|Taxes Payable:                              |                   |                  
|COFINS                                      |                   |                  
|PIS                                         |                   |                  
|IRRF                                        |                   |                  
|ICMS                                        |                   |                  
|ISS                                         |                   |                  
|Other taxes                                 |                   |                  
|                                            |                   |                  
|                                            |                   |                  
|                                            |                   |                  
|Total accrued liabilities and taxes payable |                   |                  
|                                            |                   |                  

7.
12% Senior Secured Notes

|                           | December 31, 2003 | December 31, 2002
|-------------------------- | ----------------- | -----------------
|
|12 % Senior Notes due 2004 |                   | $  46,688        
|Accrued interest           |                   | 9,103            
|                           |                   |                  
|                           |                   | $  55,791        
|                           |                   |                  

The
12% Senior Secured Notes 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
was payable in kind at the Companys option through its first four payment dates. The
Company exercised this option through June 20, 2000. The 12% Senior Secured Notes are
secured by all of the assets of the Company.

Due
to the Companys financial constraints and limited capital resources, the Company
failed to pay the total interest due of $9.1 million on December 20, 2002, June 20, 2003
and December 20, 2003 under its 12% Senior Secured Notes. Due to the financial condition
of the Company, the Company is currently unable to pay the interest due under the 12%
Senior Secured Notes and remains in default of its obligations under the related
indenture. As a result, the holders of the 12% Senior Secured Notes, among other things,
have the right to declare the Notes due and payable in full and to demand the immediate
payment of the Notes. In addition, the trustee under the related indenture may pursue any
available remedy by proceeding at law or in equity to collect any payment due on the
Notes. Such actions may, among other things, result in the sale of the Companys
assets and the termination of the operations of the Companys business. To date, the
Company has not received any notification from the trustee regarding the intention of the
noteholders to declare the notes due and payable in full and to demand the immediate
payment of the Notes. However, as a result of the default and the right of the noteholders
to demand immediate payment, the Company has reclassified the total amount of the
long-term debt to current liabilities at December 31, 2002.

8.
Capital

At
December 31, 2003 and 2002, there were no funds available for dividends.

F-16

9.
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.

|                                             | Year Ended
December 31,
2003 | Year Ended
December 31,
2002
|-------------------------------------------- | ---------------------------- | ----------------------------
|Income taxes (benefit) at Brazilian          |                              |                             
|statutory rate (34%)                         |                              |                             
|Other permanent differences including effect |                              |                             
|of exchange variation on tax loss            |                              |                             
|carry-forward                                |                              |                             
|Permanent difference in loss on disposal of  |                              |                             
|equipment                                    |                              |                             
|Permanent difference from write-off          |                              |                             
|of ERV                                       |                              |                             
|Equity in losses of affiliates               |                              |                             
|Increase (decrease) in valuation allowance   |                              |                             
|                                             |                              |                             
|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 $67,993 at December 31, 2003. 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.

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 was as follows:

|                                 | December 31,
2003 | December 31,
2002
|-------------------------------- | ----------------- | -----------------
|Deferred tax assets              |                   |                  
|Net operating loss carryforwards |                   |                  
|Deferred installation fees       |                   |                  
|Other                            |                   |                  
|                                 |                   |                  
|                                 |                   |                  
|Valuation allowance              |                   |                  
|                                 |                   |                  
|                                 |                   |                  
|Deferred tax liabilities         |                   |                  
|Fixed assets                     |                   |                  
|                                 |                   |                  
|Net deferred tax assets          |                   |                  
|                                 |                   |                  

10.
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
based on the opinion of external legal counsel. The Company believes that the provisions
made are sufficient to cover probable losses and does not

F-17

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. Under Brazilian law, in certain litigation in which monetary
claims are asserted against the Company, the Company is required to make certain deposits
into an escrow account designated by the applicable court. The amount to be deposited is
determined based on the nature and amount of the claim against the Company as well as
other factors considered by the court. In the event of a judgment favorable to the
Company, these escrowed funds will be returned to the Company. On the other hand, in the
event of an unfavorable resolution of the legal claim, these deposits will be applied as a
payment to the plaintiff in the litigation.

Judicial
Deposits are comprised of the following:

| | December 31,
2003 | December 31,
2002
| | ----------------- | -----------------
| | Judicial deposits |                  
| |                   |                  
| |                   |                  
| |                   |                  

The
position of such provisions for tax, labor claims and other litigation are as follows:

| | December 31,
2003   | December 31,
2002
| | ------------------- | -----------------
| | Tax contingencies   |                  
| | Other contingencies |                  
| |                     |                  
| |                     |                  
| |                     |                  

Besides
the matters described above, the Company is involved as a plaintiff or defendant in a
variety of routine litigation incidental to the normal course of business. Management
believes, based on the opinion of legal counsel, that it has adequate defenses or
insurance protection with respect to such litigation. However, the Company can give no
assurance that any losses resulting from such litigation, whether or not insured, would
not have a material adverse effect on the consolidated results of operations or
consolidated financial condition of the Company.

11.  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 $583, $841 and $1,291 for the years ended December 31,
2003, 2002 and 2001, respectively. 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, 2003:

| |     
| | ----
| | 2004
| | 2005
| | 2006

12.       
          Supplementary information

Valuation
and qualifying accounts and reserves were as follows:

| | Allowance for
Doubtful Accounts | Deferred Tax
Valuation
Allowance
| | ------------------------------- | --------------------------------
| | Balance as of July 20, 2000     |                                 
| | Provision for the period        |                                 

F-18

| | Allowance for
Doubtful Accounts | Deferred Tax
Valuation
Allowance
| | ------------------------------- | --------------------------------
| | Write-off                       |                                 
| | Foreign exchange effect         |                                 
| |                                 |                                 
| | Balance as of December 31, 2000 |                                 
| | Provision for the year          |                                 
| | Write-off                       |                                 
| | Foreign exchange effect         |                                 
| |                                 |                                 
| | Balance as of December 31, 2001 |                                 
| | Provision for the year          |                                 
| | Write-off                       |                                 
| | Foreign exchange effect         |                                 
| |                                 |                                 
| | Balance as of December 31, 2002 |                                 
| | Provision for the year          |                                 
| |                                 |                                 
| | Write-off                       |                                 
| | Foreign exchange effect         |                                 
| | Balance as of December 31, 2003 |                                 
| |                                 |                                 

F-19

# SIGNATURES

The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this Annual Report on
its behalf.

|June 30, 2004 |  | ITSA LTD.By: /s/ Hermano Studart Lins de Albuquerque     
 
       Hermano Studart Lins de Albuquerque
       Chief Executive Officer
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | By: /s/ Carlos Andre Studart Lins de Albuquerque     
 
       Carlos Andre Studart Lins de Albuquerque
       Acting Chief Financial Officer
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------